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SOFTWARE & SERVICES 15 OCTOBER 2009
WEB 2.O WEEKLY
DAVID SHORE, CFA, MBA 416.860.6784
david.shore@researchcapital.comDamian Wojcichowsky, CFA (Associate), 416.860.7652
VIRTUAL GOODS THAT GENERATE REAL DOLLARS
SOCIAL GAMING POTENTIALLY A $1.6 BILLION MARKET BY 2010
Based on data from
Inside Virtual Goods 
, the market for virtual goods – that is, the non-physical objects associatedwith social networks and online gaming, which are purchased and exchanged on the internet – will soon exceed $1billion, up 50% year-over-year. Zynga, maker of Farmville, is rumoured to be generating $200 million in revenue,while Playdom, maker of Café World, reportedly has generated $50 million in sales, and Playfish is rumoured to havereached the $75 million revenue level.Not coincidentally, in the past three months, gaming has become the top financing draw in our universe. Given thegains in monthly users that social networking sites that run many of these games are reporting (see ”Top 20 Games ofthe Week”), and noting the significant positive valuation impact of a rapidly growing unique user base that we havediscussed frequently in this periodical, we speculate that funds will continue to flow in the direction of thesedevelopers. Indeed, rumours abound that Electronic Arts is poised to announce the acquisition of one or more of thetop social gaming developers.
TOP 20 GAMES OF THE WEEK
MonthlyAverageWeeklyGameUsersGainChange %
Café World10,098,5848,598,277573.1  Farmville56,122,4072,422,8004.5  Pet Society19,512,235623,9273.3  (Lil) Farm Life4,737,693419,7029.7  YoVille18,917,129381,6882.1  My Fishbowl5,143,462374,5457.9  Country Story7,425,779373,3985.3  Restaurant City16,200,404321,1282.0   _ _ _ _3,761,044264,9657.6  Bejeweled Blitz7,688,337229,4113.1  Friend Facts3,467,673217,3806.7  Texas HoldEm Poker18,092,599201,3011.1  Brain Buddies5,378,231193,3443.7  Jungle Jewels900,423179,73024.9  Animal Paradise3,310,592167,2845.3  Sunshine Ranch2,030,705149,4848.0  Mobsters 2: Vendetta2,966,508135,2394.8  Friends For Sale!6,558,440107,9611.7  Hug Me3,409,953107,4553.3  Quiztastic!833,167104,03214.3 
Source. Inside Social Games 
This report has been created by Analysts that are employed by Research Capital Corporation, a Canadian Investment Dealer.For further disclosures, please see last page of this report.
www.researchcapital.comToronto 416.860.7600 Montreal 514.399.1500 Vancouver 604.662.1800 Calgary 403.265.7400 Regina 306.566.7550
 
 
 Page 2
THE WEB 2.0 UNIVERSE
Eighty-nine public Web 2.0 companies:
Our Web 2.0 universe contains 89 companies, with a combined market cap ofapproximately $70 billion (Figure 1). The median market cap for the group is $50 million, with average trailing revenue of$163 million (median $57 million). The companies are also generally profitable, with a median EBITDA margin of 12.5%.On a valuation basis, the overall average is 4.6x trailing revenue (median 1.9x) and 11.8x trailing EBITDA (median 10.0x).Twenty of the companies have more than 500 employees.
Comparable Company Analysis > Web 2.0
Company NameLTM as ofTickerExchangeTradingCurrencyHQCurrentPriceUSD MarketCap ($m)USD LTM TotalRev ($m)USD LTM TotalEBITDA ($m)EBITDA%TEV/LTMRevenueTEV/LTMEBITDAEmployees
Accelerize New Media, Inc.6/30/2009ACLZOTCBBUSDUnited States0.6016.8 4.4 (3.7)-83.3%4.9x- 11Actoz Soft Co., Ltd.6/30/2009A052790KOSEKRWSouth Korea 16,000 115.6 108.7 25.9 23.8%0.8x3.2x NAAQ Interactive, Inc.6/30/20093838TSEJPYJapan 49,000 29.8 66.1 (2.0)-2.9%0.1x- NAAssociated Media Holdings Inc.6/30/2007ASMHOTCPKUSDUnited States0.010.6 0.1 (2.3)NM15.6x- 3Bigstring Corp.6/30/2009BSGCOTCBBUSDUnited States0.042.3 0.1 (1.5)NM-- 4Betawave Corporation6/30/2009BWAVOTCBBUSDUnited States0.082.3 9.4 (12.6)NM-- 51Beyond Commerce, Inc.6/30/2009BYOCOTCBBUSDUnited States0.146.5 11.7 (12.8)NM1.0x- 101Bright Things plc3/31/2009AIM:BGTAIMGBPUnited Kingdom0.015.9 0.0 (2.7)NM-- NABroadWebAsia Inc.9/30/2008BWBAOTCPKUSDUnited States0.032.5 0.0 (4.6)NM-- 46CDC Corp.6/30/2009CHIN.ANasdaqGSUSDHong Kong2.53268.1 361.6 25.1 6.9%0.7x10.5x 2,227Changyou.com Limited6/30/2009CYOUNasdaqGSUSDChina31.901,754.5 241.2 147.2 61.0%6.1x10.0x 628China Gateway Corporation9/30/2008CGWYOTCPKUSDUnited States0.000.0 6.7 (6.6)-98.9%0.0x- 37Chinese Gamer International6/30/2009GTSM:3083GTSMTWDTaiwan 445 1,154.1 61.6 34.7 56.3%17.6x31.2x NACLICKER Inc.5/31/2009CLKZOTCBBUSDUnited States0.010.7 2.5 (1.2)-45.8%0.3x- 22CornerWorld Corporation7/31/2009CWRLOTCBBUSDUnited States0.065.7 6.8 NM NM2.4x- 16Cyberplex Inc.6/30/2009TSX:CXTSXCADCanada174.9 89.8 9.7 10.8%0.6x5.7x NADADA SpA6/30/2009CM:DACMEURItaly7.89187.3 241.9 31.8 13.1%1.0x7.4x NADXN Holdings Bhd5/31/2009DXNKLSEMYRMalaysia0.6743.9 77.1 11.1 14.4%0.8x5.3x NADibz International, Inc.NADIBZOTCPKUSDUnited States0.000.0 NA NM NM-- NADigitalPost Interactive, Inc.6/30/2009DGLPOTCBBUSDUnited States0.064.6 1.0 (1.4)NM6.6x- 7DigitalTown, Inc.5/31/2009DGTWOTCBBUSDUnited States2.5068.4 NM (2.5)NM-- 3Dolphin Digital Media, Inc.6/30/2009DPDMOTCBBUSDUnited States0.4021.5 0.6 (3.4)NM38.6x- NAEolith Co. Ltd.12/31/2008A041060KOSEKRWSouth Korea 700 42.5 15.4 (3.6)-23.6%2.9x- NAExtensions, Inc.6/30/2009EXTIOTCPKUSDUnited States0.3515.6 NM NM NM-- 2Fluid Music Canada, Inc.6/30/2009TSX:FMNTSXCADUnited States1.3565.1 5.3 (5.1)-95.2%10.9x- NAFrogster Interactive Pictures AG6/30/2009FRGXTRAEURGermany18.0967.9 9.6 (4.5)-47.0%6.9x- NAGamania Digital Entertainment Co., Ltd.6/30/20096180GTSMTWDTaiwan49.15230.2 140.6 25.1 17.9%1.5x8.3x NAGameOn Co Ltd.6/30/20093812TSEJPYJapan 89,800 97.1 81.9 20.1 24.5%0.3x1.1x NAGeoSentric Oyj6/30/2009GEO1VHLSEEURFinland0.0565.8 5.4 (17.4)NM12.1x- 115Giant Interactive Group, Inc.6/30/2009GANYSEUSDChina71,548.9 198.5 124.1 62.5%-- 1,570GigaMedia Ltd.3/31/2009GIGMNasdaqGSUSDTaiwan4.82262.8 183.6 NM NM1.0x- 751Gravity Co., Ltd6/30/2009GRVYNasdaqGMUSDSouth Korea1.8551.4 49.1 16.6 33.9%-- 469Gree, Inc.6/30/2009TSE:3632TSEJPYJapan 4,790 2,398.1 156.0 93.7 60.1%14.6x24.3x NAGungHo Online Entertainment, Inc.6/30/20093765OSEJPYJapan 227,900 292.0 119.5 26.6 22.2%2.2x9.7x NAHanbitSoft, Inc.6/30/2009A047080KOSEKRWSouth Korea 4,150 76.1 60.7 1.4 2.3%1.0x44.3x NAIAC/InterActiveCorp.6/30/2009IACINasdaqGSUSDUnited States19.042,520.9 1,392.3 52.7 3.8%0.6x14.8x 3,200IAS Energy, Inc.4/30/2009IASA.EOTCBBUSDCanada0.117.7 0.0 (0.6)NM-- NAiseemedia Inc.3/31/2009IEETSXVCADCanada0.157.1 1.6 (5.0)NM3.9x- NAJumbuck Entertainment Limited6/30/2009ASX:JMBASXAUDAustralia0.3816.2 16.7 7.2 42.8%0.6x1.4x 79KAB Distribution Inc.6/30/2009TSX:KABTSXCADCanada 0 0.6 67.9 4.0 5.8%-- NAKingsoft Co. Ltd.6/30/20093888SEHKHKDChina 8 1,070.8 139.1 61.4 44.2%7.7x17.4x 2,463Lingo Media Corporation6/30/2009TSXV:LMTSXVCADCanada0.819.3 1.2 (1.9)NM7.0x- NALiveWorld Inc.6/30/2009LVWDOTCPKUSDUnited States0.041.3 10.6 (0.1)-1.2%0.0x- NALookSmart, Ltd.6/30/2009LOOKNasdaqGMUSDUnited States1.1619.9 56.8 (4.4)-7.8%-- 90Magnitude Information Systems Inc.6/30/2009MAGYOTCBBUSDUnited States0.015.0 0.1 (2.5)NM-- 14Mixi, Inc.6/30/20092121TSEJPYJapan658000.001,133.8 136.8 46.2 33.8%7.4x21.9x NAModern Times Group Mtg AB6/30/2009MTG BOMSEKSweden326.503,089.9 1,971.4 302.9 15.4%1.9x12.1x 2,969MOKO.mobi Limited6/30/2009MKBASXAUDAustralia0.085.8 0.7 (2.4)NM6.9x- NAMyriad Group AG6/30/2009MYRNSWXCHFSwitzerland4.54194.6 63.0 3.4 5.4%3.0x- 405NEOWIZ Games Corporation12/31/2008A095660KOSEKRWSouth Korea38900.00687.2 207.3 55.7 26.8%3.3x12.2x NANetDragon WebSoft, Inc.6/30/2009777SEHKHKDChina 5 341.0 89.3 25.7 28.7%2.2x7.6x 3,109Netease.com Inc.6/30/2009NTESNasdaqGSUSDChina39.995,175.8 472.4 297.4 63.0%-- 3,109NeuLion Incorporated6/30/2009TSX:NLNTSXCADCanada0.9094.4 21.5 (13.0)-60.3%3.9x- 237NeXplore Corporation6/30/2009NXPCOTCPKUSDUnited States139.0 1.7 (13.3)NM25.3x- NANgi Group Inc.6/30/20092497TSEJPYJapan27510.0038.1 93.0 6.9 7.4%-- NANorthgate Technologies Limited6/30/2009590057BSEINRIndia36.9026.8 82.9 (41.5)-50.0%0.3x- NAOpen Text Corp.6/30/2009OTEXNasdaqGSUSDCanada40.552,276.8 785.7 205.1 26.1%2.9x11.2x 3,411Openwave Systems Inc.6/30/2009OPWVNasdaqGSUSDUnited States2.67222.9 191.7 4.9 2.6%0.6x23.3x 590Perfect World Co., Ltd.6/30/2009PWRDNasdaqGSUSDChina44.102,168.9 255.6 142.2 55.6%0.7x1.2x 2,096PNI Digital Media Inc.6/30/2009TSXV:PNTSXVCADCanada1.8056.6 21.0 2.3 11.0%2.6x23.6x NAQuepasa Corp.6/30/2009QPSAOTCBBUSDUnited States 1 17.6 0.2 (10.6)NM-- 74OAO RBC Information Systems12/31/2007RBCIRTSUSDRussia1.60222.0 157.4 20.6 13.1%0.0x0.4x NAShanda Interactive Entertainment Ltd.6/30/2009SNDANasdaqGSUSDChina49.163,306.3 629.0 296.7 47.2%-- 3,124Shutterfly, Inc.6/30/2009SFLYNasdaqGSUSDUnited States16.14410.9 218.6 27.3 12.5%1.6x12.7x 514SK Communications Co., Ltd.12/31/2008A066270KOSEKRWSouth Korea8460.00296.9 192.7 12.5 6.5%1.5x23.7x NASNAP Interactive, Inc.6/30/2009STVIOTCBBUSDUnited States 0 3.8 3.5 0.9 27.0%0.6x2.3x 11SNM Global Holdings9/30/2008SNMNOTCPKUSDUnited States0.000.0 2.0 (0.7)-34.8%1.1x- 33Social Media Ventures Inc.12/31/2008SMVIOTCPKUSDUnited States00.0 0.1 (0.1)-60.6%4.5x- NASocialwise, Inc.6/30/2009SCLWOTCBBUSDUnited States0.6127.0 0.0 (5.6)NM-- NASohu.com Inc.6/30/2009SOHUNasdaqGSUSDChina65.382,506.3 485.1 209.6 43.2%4.1x9.5x 3,197Spark Networks, Inc.6/30/2009LOVAMEXUSDUnited States 2 49.8 50.5 10.8 21.3%0.9x4.5x 183SpectrumDNA, Inc.6/30/2009SPXAOTCBBUSDUnited States 0 6.8 0.1 (2.5)NM-- 7 Tencent Holdings Ltd.6/30/2009700SEHKHKDChina 138 32,300.4 1,391.6 680.3 48.9%25.6x- 6,421 The Parent Company8/2/2008KIDS.QOTCPKUSDUnited States0.010.2 112.0 (13.5)-12.0%0.2x- 347 The9 Limited12/31/2008NCTYNasdaqGSUSDChina7.40185.7 250.6 85.5 34.1%-- 1,626 TheStreet.com, Inc.3/31/2009TSCMNasdaqGMUSDUnited States3.0894.3 67.0 1.9 2.9%0.4x15.3x 310 Tree.Com, Inc.6/30/2009TREENasdaqGMUSDUnited States8.1087.5 216.6 (0.7)-0.3%0.4x- 700Uniserve Communications Corp.5/31/2009TSXV:USSTSXVCADCanada0.040.9 17.1 (0.2)-1.0%0.2x- NAUnited Online Inc.6/30/2009UNTDNasdaqGSUSDUnited States8.99753.7 949.8 203.2 21.4%1.1x5.0x 1,469UOMO Media, Inc7/31/2009UOMOOTCBBUSDCanada09.5 0.8 (0.4)-54.2%12.6x- NAValueClick Inc.6/30/2009VCLKNasdaqGSUSDUnited States141,193.1 563.6 99.0 17.6%1.9x10.7x 1,189VOIS, Inc.6/30/2009VOISOTCBBUSDUnited States03.7 0.0 (1.0)NM-- 4Webzen Inc.6/30/2009WZENNasdaqGMUSDSouth Korea2.6331.2 23.2 2.3 9.9%-- 328Wizzard Software Corporation6/30/2009WZEAMEXUSDUnited States0.4321.7 5.3 (4.5)-84.9%4.3x- 110Worlds.com Inc.6/30/2009WDDDOTCBBUSDUnited States0.105.2 0.1 (0.7)NM-- 1Wyndstorm CorporationNAWYNDOTCPKUSDUnited States0.101.8 NA NM NM-- NAXING AG6/30/2009O1BC XTRAEURGermany36.90284.9 58.9 17.0 28.8%3.9x13.7x 246YD Online Corp.12/31/2007A052770KOSEKRWSouth Korea8130.00102.1 57.4 12.4 21.6%1.9x9.0x NAYnk Korea Inc.12/31/2008A023770KOSEKRWSouth Korea3750.0016.8 11.9 1.3 10.5% - - NAHigh32,300.41,971.4680.363.0%38.6x44.3x6,421Low0.00.0-41.5-98.9% - - 1
Average788.0163.139.06.1%4.6x11.8x936
Median49.857.41.712.5%1.9x10.0x246
 
Figure 1. Web 2.0 Universe Summary Source. Capital IQ 
 
 Page 3
CAPITAL MARKETS ACTIVITY (M&A AND FINANCING)
October off to a decent start:
Total transaction value in the Web 2.0 universe for October is $89.5 million. This week hasbrought 10 financings to the sector, bringing the total for October to 12 transactions averaging $9.0 million each – inlinewith the September average. The largest transaction in the week was a $22.5 million financing of PopCap Games, anonline gaming developer. The biggest deal in the month is Yext at $25 million. In comparison, total capital raised inSeptember was $232.8 million, averaging $9.0 million (26 deals); August was $208.5 million, averaging $7.7 million (27deals); and July (35 deals) $191.4 million, averaging $5.5 million.
Financing Activity Last Twelve Months
9.77.06.57.16.66.214.64.95.57.99.09.07.00.050.0100.0150.0200.0250.0300.0350.0400.0Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09
   (   U   S   $  m   )
0.02.04.06.08.010.012.014.016.0
   (   U   S   $  m   )
TotalAverage*May-09 includes $200m FB investment
 
Figure 2. Financings, Last Twelve Months Source. Company reports 
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