SECTOR OVERVIEW REPORT

Web 2.0: Ad-Based Online Models
April 2008
INSIDE THIS ISSUE
1. 2. 3. 4. Introduction Valuation Trends M&A Activity Private Company Financings 5. Private Company Landscape:
Health: eDiets.com, Waterfront Media, WEGO Health Music & Video: Heavy Corp, Mio.tv, Music Nation, Ripe Digital Entertainment, Ruckus Networks Special Demographic Groups: Batanga, Beyond.com, TAKKLE Search: Retrevo, Wink.com, Wize Real Estate: Relocation.com, CityRealty.com, Streeteasy, Terabitz Other: Oddcast, Imaginova, Webs.com, Multiply, Gizmoz Social Media and Communities: Digg, Friendster, Linkedin, Flixster, ClubMom, Mocospace, myyearbook.com Content Intermediaries: Voxant, NewsMarket, Critical Mention News: Going.com, The Huffington Post, Daylife, Outside.in, Expo TV

INTRODUCTION This report focuses on the varying online businesses that generate revenue primarily through advertising revenue. From online magazines, blogs, user-generated content sites, social networks, communities, game sites, and many other models, the path to profitability for these players is in aggregating an attractive demographic customer base and monetizing that through advertising. This report continues a series of reports on new and emerging Web 2.0 businesses and technologies (please see our others reports “Internet Collaboration and Communication” and “Internet Advertising and Analytics Infrastructure”). Overview
This report looks at the varying range of online adbased businesses from a “revenue viability” perspective. Though in some ways, these varying businesses may be viewed as quite different from a functional or customer usage stand-point (what does MySpace really have in common with The Knot), we believe the common challenge that these businesses all face is monetizing their traffic. We also believe, as we’ll discuss later, that the right strategy for many of these players will actually make their operating models much more similar. Ultimately, whether it is an online magazine or a social network with sub-communities and forums, the path to profitability is in aggregating customers of an attractive demographic (teen girls, wealthy middle age males), focusing on a certain subject matter (pop music, outdoor activities) and then monetizing that through highly targeted advertising. While the paths to aggregating these customers may be different, it is simply a means to an advertising end. As soon as the Internet began attracting viewers in the mid-1990’s, websites began thinking of ways to generate revenue through ads. While online advertising has trailed many traditional forms of media (print, TV, radio) in terms of ad dollars spent vs. customer viewing time, that gap has begun closing over the past few years as advertisers and online operators have become increasingly sophisticated in targeting demographic groups, developing effective tracking data, and creating ads that are effective in gaining customer attention and triggering click through traffic.

In response to the renewed belief in the viability of building commercially successful online businesses beyond e-commerce, venture capitalists have poured billions of dollars over the past few years into a wide range of online businesses, from social media sites (Myspace, Facebook, Second Life), online information (Beyond.com, CityRealty.com), and entertainment sites (emusic.com, Ruckus Networks). However, many of these sites are still struggling with their models and competing feverishly for a limited amount of ad dollars. Nearly half of the more than $15 billion spent in online advertising in 2007 was captured by the largest players (Google, Yahoo, Microsoft, and AOL). Smaller sites have had to fight for advertising revenue with an average for non-premium sites of only $1.00 or $2.00 per CPM vs. upwards of $20.00 for premium spots. While the reduction in the gap between premium and non-premium advertising will go a long way in helping smaller players increase their revenue, this also requires some significant improvements in advertising infrastructure to help the right advertisers reach the right customers on the right sites. One of our key theses is that there will be a constant tension between the large and small sites in a battle over ad dollars (as shown in the chart below reflecting the 50% share of ad dollars held by the top 4 players, and the rest held by the thousands of other smaller sites). Because it is rather easy to launch a new site, there will be a steady flow of new businesses coming online each year. However, due to the challenges in achieving sufficient scale and ad dollars, very few will achieve any meaningful revenues. Nevertheless, there will always be enough

Contact: Russell Crafton, Partner rcrafton@redcapgroup.com 212.508.7110 Janny Lee, Vice President jlee@redcapgroup.com 212.508.7105

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(Continued on page 2)

Redwood Capital 885 Third Avenue, 25th Floor • New York, NY 10022 www.redcapgroup.com

Sector Review

Web 2.0: Ad-Based Online Models

new entrants breaking through to restrain market Ease of Launch / Differentiation is Key. operate at one layer or the other, to avoid conshare of the top guys and counter any increases With advances in technology and off-the- flict with their customers, in early stage, rapin further market share concentration as a result shelf software, it is now easy and inexpensive idly evolving markets, industry structures are of acquisitions of the successful smaller players to launch a rather sophisticated website with much more fluid and we would expect to see by the large sites. extensive customer tracking information and more interesting mergers and partnerships advertising support networks. As a result, between the online players and the advertising The last section of this report provides a brief smaller sites with limited budgets can now infrastructure and analytics players supporting sample of the many online sites that generate begin to attract major advertisers. With com- them. revenue through ad-based models, including mercial viability more easily in reach, numersocial networks, online magazines, information ous new sites targeting increasingly narrow Challenges for Generating Revenue on and news sites, communities, blogs and enter- markets, topics and subject matter will conSocial Media Sites? Social networking tainment sites. In screening the literally thou- tinue to be launched. However, as shown in sites have taken a significant share of total page sands of emerging businesses that have been the chart below, only a select few will be able views in just the past few years. Importantly, formed in these areas over the past several years, to differentiate themselves sufficiently to gen- these sites also boast a much higher level of we were struck by the diversity of the business erate any material ad revenue. Investors must overall time spent on the site than other online models, approaches and tactics employed. obviously be careful in choosing their invest- models. However, social media sites have yet These sites also employ a range of activities and ments, distinguishing between simple gim- to successfully monetize their traffic. We susofferings to increase customer retention and time micks and truly unique business models with pect that greater standardization will make it spent on the site. Many online magazines have staying power. easier for larger advertisers to more easily developed a social media aspect through compurchase space across a broader swath of social munities and forums to increase customer inTightly Integrated Food Chain. As media sites. We also think that these sites will volvement. Likewise, social media sites have shown by the chart below, online models need to get more creative in how they create developed forums and sub-communities to cre- relying on advertising revenue are very closely communities and help advertisers reach those ate targeted groups with user generated postings, tied with the underlying advertising infrastruc- target groups. We think that this may cause articles, blogs, pictures and video (think of a ture. The importance of this integration is some social media sites to actually migrate user-generated online magazine). In this, we see highlighted by the number of acquisitions of their models towards online content publishers, the common path forward for both models. advertising infrastructure players by the large providing content through a user-generated online operators such as Google and Double- sourcing approach the way online publishers We hope that our discussion below of the key click. While most companies will need to provide content that they purchase or have trends and challenges facing these players will shed some light on which players are more likely Internet Advertising Food Chain to make it, and which are not.

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Key Trends and Challenges Concentration of Ad Spending—Will It Increase? There is currently a high degree of concentration in of ad spending among the top players (Google, Yahoo, AOL, MySpace and Microsoft) capturing over 50% of total Internet advertising despite capturing only 25% to 35% of page views and total minutes of usage time. While these larger sites clearly benefit from search advertising, which represents about $9 billion or 40% of total Internet advertising, another factor leading to concentration is the substantially higher CPMs paid for premium advertising on major sites relative to smaller ones. While many industry analysts expect that this concentration in ad dollars will only increase, we believe that new technologies in behavioral targeting and ad exchanges should help increase the CPM for non-premium advertising and potentially help smaller sites counter the otherwise heavy concentration in ad spending with major sites.

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ADVERTISING AGENCIES AD NETWORKS AD EXCHANGES

PUBLISHER AD SERVING SOFTWARE TOOLS SEARCH PLATFORMS ONLINE SITES Health Youth Social Networking Real Estate News Video & Media Wiki Pets Other TEST & MEASUREMENT

Special Demo Groups Content Intermediaries

Search

AUDIENCE & CONSUMERS (ONLINE EYEBALLS)

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Web 2.0: Ad-Based Online Models

developed internally.

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Diversity of Revenue Sources is Critical. The most successful online content or retail-focused sites are those that have pursued topics such as electronics, weddings, home appliances and other niche content that allow for revenue streams from multiple sources including advertising, affiliate relationships, direct product sales, and even subscription fees for premium services. The Knot (targeting the wedding market) is an excellent example of a business model that has been able to generate revenue from multiple angles, allowing it to maximize revenue from its target audience. While not all spaces lend themselves to an audience ready to spend big dollars (such as new brides and new car shoppers), the spaces that do have the potential to create significant value. While this report focuses on advertising-focused players, we recognize the critical importance of being able to incorporate multiple revenue streams, such as e-commerce, into a successful online model.

women in their early twenties are a decent demographic; new brides and their mothers active on The Knot’s site are a goldmine). Accordingly, the viability and revenue potential of most content sites is based on the subject matter on which they focus. It is no mystery as to why Internet Brands has focused its acquisitions of online content sites in the automotive, home and travel sectors. Audiences considering big ticket purchases command big ad dollars. Sites attracting the right demographics, such as financial sites like MarketWatch.com or The Wall Street Journal Online, also have a solid base with which to generate strong ad dollars. Other subjects (such as gardening or history sites), while interesting for many audiences may simply not be able to command high ad revenues and thus be limited in their overall potential.

zine sector is concentrated in the hands of holding companies, we expect to see ad-based Internet sites increasingly consolidated into the hands of players like Internet Brands, CNET and many other players that have even yet to emerge.

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Targeting of Key Customer Bases Critical to Business Viability. For investors and acquirers, understanding the fundamental potential of the sites’ target audience is critical. This is often more tricky than it seems and requires capturing the right parts of the target demographic at the right time (i.e. single

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Consolidation to Leverage Optimization Expertise. As the Internet continues to evolve and customer usage and behavior patterns are better understood, players with expertise in using this information will be much better positioned to build online sites and broadly market complete demographic groups to advertisers. We expect this to play a significant role in driving consolidation in the thousands of sites that operate on advertising based revenue models. Just as the traditional maga-

Low Barriers to Entry and Early Stage of Market Leads to Fragmentation for Years to Come. While most fragmented industries eventually consolidate, we suspect that the consolidation in the Internet space will be countered to a significant degree by the low barriers to entry, providing a constant supply of start-ups to maintain a certain level of fragmentation despite considerable M&A activity by larger players. It is increasingly easy, with a few million dollars, to launch a high quality online business (YouTube and Myspace started with less). In addition, Internet audiences are highly mobile and easily migrate from one site to the next. While securing a sufficient critical mass of users is a key factor to success, the barriers for competitors in launching new alternatives are often low. As a result, no matter how much consolidation occurs, we expect to see a steady flow of successful new entrants that will continue to fill the consolidation pipeline for years to come.

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Web 2.0: Ad-Based Online Models

VALUATION TRENDS
Valuations for online businesses run a rather wide range and have been subject to great volatility as investors struggle to get a handle on just how big the revenue opportunity is, and who is going to capture it. However, despite the challenges of valuation in the private market, the public markets appear to have valuations for companies relatively well aligned with growth (as shown the scatter plot below) which plots the 2008 revenue multiple vs. projected revenue growth in 2008 Google and Yahoo. In fact, in looking at the “niche content” comparables shown on the following page, the six sites with revenue under $100 million trade at higher multiples on average that the three players with revenue over $100 million.

We believe that the most important factor in valuation multiples is simply an online company’s ability to generate revenue (which is of course the most logical factor). Whether a player is large or small, we think that The public markets have also been relatively flat over the past 2 years, during 2008 and 2009, there will be an increasing focus on monetizing with most internet stocks (as shown by the indexes on the following page) traffic. Whereas the past two years were about “show me the traffic”, over giving back over the past few months, any gains they realized since mid the next two years, investors will increasingly say “show me the money”. 2006. We expect that the correction over the past several months will be relatively short-lived as most online businesses should not be overly sensi- We think this focus on revenue is already heavily reflected in public martive to the economic slowdown. In addition, the continued increase in ket stocks, as indicated by the tight correlation in the scatter plot below. online advertising should more than outweigh any short-term reductions In addition, the trading multiples for public players shown on the followcorporations make in the advertising budgets during a potential recession. ing page indicates that many companies trade at 2008 earnings multiples under 25x—the most interesting being Google trading at only 17.5 times In understanding what drives valuation, we think that its important to note earnings. Obviously investors seem to be focusing much more on near that scale is not one of the most significant factors and we have not no- term performance and earnings and less on long term possibilities. ticed any material “size premium” for larger players, perhaps apart from

Public Comparables: ‘08 Rev Multiple / ’07-08 Growth Rate

4.0x 3.5x

LN

2008 Revenue Multiple

3.0x 2.5x 2.0x TS 1.5x BN 1.0x 0.5x 0.0x 14% TK PL

IB

15%

16%

17%

18%

19%

20%

2008 Revenue Growth Rate

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Selected Public Market Comparable Companies & Trading Statistics
$ millions
Stock Price Financial and Operating Data % 52Week High Market Cap 2007E CY Revs Research Projections 2008E CY 2007E CY 2008E CY Revs EPS EPS Revenue Growth '07-'08 TEV / LTM Revs Trading Multiples TEV / 2007E Revs TEV / 2008E Revs Price / 2007E EPS Price / 2008E EPS

Company Name Internet Companies Google Yahoo!

TEV

LTM Revs

433.55 27.66

58% 81%

135,865 36,986

121,647 35,746

16,594 6,969

22,675 5,626

28,968 6,353

19.90 0.43

24.79 0.52 Mean Median

28% 13% 20% 20% 14% 23% 5% 19% 2% 12% 12% 11% 17% 15% 16% 19% 17% 14% NA NA 15% 16% 15% 12% 17% 15% 15% 15% 15% 15%

7.3x 5.1x 6.2x 6.2x 4.3x 1.9x 0.8x 0.8x 1.1x 1.6x 0.9x 2.5x 3.3x 1.9x 5.1x 3.1x 2.8x 2.5x 1.6x 3.7x 2.7x 2.7x 1.5x 0.7x 1.0x 1.1x 1.0x 2.1x 2.1x 2.1x

5.4x 6.4x 5.9x 5.9x 3.8x 1.5x 0.7x 0.6x 1.0x 1.4x 0.9x 2.2x 2.6x 1.8x 4.2x 2.6x 2.4x 1.9x 1.6x 2.3x 2.2x 2.2x 1.4x 0.6x 0.8x 0.9x 0.8x 1.9x 1.9x 1.9x

4.2x 5.6x 4.9x 4.9x 3.4x 1.2x 0.7x 0.5x 1.0x 1.2x 0.9x 2.0x 2.3x 1.5x 3.6x 2.2x 2.1x 1.7x NA NA 2.0x 2.0x 1.2x 0.5x 0.7x 0.8x 0.7x 1.6x 1.6x 1.6x

21.8x 64.9x 43.4x 43.4x 17.2x 47.6x 13.0x 833.5x 9.6x 151.7x 15.1x 18.2x 23.3x 44.4x 25.2x NM 25.5x 14.4x 25.0x -12.1x 17.5x 23.3x 29.8x -128.2x 13.7x -28.2x 13.7x 20.9x 20.9x 20.9x

17.5x 52.7x 35.1x 35.1x 15.2x 34.4x 11.5x 49.3x 9.1x 16.4x 13.3x 15.0x 18.3x 36.8x 21.2x NM 18.3x 11.6x NA NA 16.4x 18.3x 23.9x 216.1x 12.0x 84.0x 23.9x 17.1x 17.1x 17.1x

Large e-Commerce eBay Amazon IAC/InterActive Corp GSI Commerce FTD Group 28.60 73.19 21.11 13.17 13.42 70% 72% 54% 45% 70% 37,979 30,507 5,868 617 400 33,299 28,739 4,943 623 673 7,672 14,835 6,373 750 632 8,722 19,320 6,703 994 659 9,940 23,847 7,031 1,178 674 1.66 1.54 1.62 0.02 1.40 1.89 2.13 1.84 0.27 1.47 Mean Median Niche Content Sites Expedia.com Priceline.com Blue Nile LoopNet Internet Brands TheKnot TheStreet Travelzoo eDiets.com 21.52 118.63 46.89 12.51 8.61 12.07 7.99 10.49 4.35 61% 92% 44% 47% 91% 50% 48% 26% 71% 6,146 4,564 739 467 375 383 243 149 109 6,676 4,643 618 359 278 277 164 127 109 2,677 1,428 319 71 90 99 65 79 30 3,041 1,761 353 85 107 114 86 81 48 3,382 2,061 407 98 128 133 98 NA NA 1.18 5.10 1.06 0.50 0.29 0.47 0.56 0.42 (0.36) 1.44 6.47 1.28 0.59 0.34 0.66 0.69 NA NA Mean Median Internet Media Netflix Real Networks DiVX 36.24 5.77 6.37 95% 66% 27% 2,218 821 222 1,832 384 81 1,205 568 85 1,353 625 98 1,561 702 114 1.21 (0.05) 0.47 1.51 0.03 0.53 Mean Median Advertising ValueClick 16.72 46% 1,638 1,384 646 739 849 0.80 0.98 Mean Median Sources: First Call mean estimates for projections; Capital IQ historical financial and operating data Price Close 3/20/2008

Subsector Relative Performance (%) vs. S&P 500
160%

140%

120%

Internet Companies Niche Content S&P 500

100%

Large e-Commerce Internet Media

80%

60% 2/8/2006

5/8/2006

8/8/2006

11/8/2006

2/8/2007

5/8/2007

8/8/2007

11/8/2007
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MERGERS & ACQUISITIONS ACTIVITY
The Internet sector, both online businesses and the underlying infrastructure, has been one of the most active areas of M&A over the past 12 months in number as well as size of deals. Microsoft’s $44b bid for Yahoo obviously eclipses all other deals but there are still a number of $1 billion plus deals (YouTube, WebEx, etc). Perhaps more significantly, the number of deals in the $20m to $100m range has been extremely robust, reflecting a broad, healthy market for acquisitions across a broad range of acquirers. Even in the worst of times, there are always a few large, consolidation plays, but only in robust markets do you see a steady flow of mid-market deals led by smaller public companies looking to continue their growth and expansion. The table below shows only a small sample of the many online acquisitions that have occurred over the past several years. Reflected in the list are both the larger transactions as well as a sample of smaller deals that show the diversity of acquirers, which includes some less obvious names such Cisco Systems and Comcast which have each made several acquisitions of online businesses. online businesses can be started and ramped with very little capital (YouTube, for example). As a result, there are literally thousands of businesses, many of which can provide good returns to their founders at exit values of only $10 to $20 million. Because of the fragmentation of the space, we expect the next several years to involve a great deal of acquisition activity around roll-ups, with companies like Internet Brands acquiring dozens of companies each year at valuations of $1 to $5 million dollars each. As these roll-ups occur, we expect that a number of mid-size players will begin to emerge, who will become key drivers of larger M&A activity down the road.

As for key trends in Internet M&A during 2008, we expect activity to continue to be strong, despite the softness in the economy. We do not believe that most larger players will be materially impacted by the economic downturn, although their lower stock prices may impact the valuations they are able to pay. We do expect acquirers to be increasingly focused on the viability of the revenue model, as its becomes increasingly apparent the generating material revenue in some online businesses such Due to limited space, we have not shown the literally hundreds of small as social networking and user-generated content sites, is not that easy. deals that reflect just how many online companies exist. Unlike some technology businesses such as telecom and enterprise infrastructure, many

Selected M&A— 2006 - present
($ in millions)
Ann Date 01/30/08 12/20/07 11/19/07 11/17/07 11/11/07 11/07/07 11/02/07 10/29/07 10/25/07 10/23/07 10/23/07 10/17/07 10/16/07 10/16/07 10/14/07 10/11/07 10/09/07 10/05/07 10/04/07 10/01/07 09/27/07 09/26/07 09/25/07 09/16/07 09/14/07 09/11/07 08/29/07 08/25/07 08/22/07 08/08/07 08/08/07 08/01/07 08/01/07 Target Audible Sidestep Ingenio AdultFriendFinder Yedda Clipmarks WebFives JobLoft.com WebShots SmartShopper BOOMj.com Optimost BarelyPolitical.com Quizilla HowStuffWorks Dotspotter Jaiku Newsvine Mozy Virtual Ubiquity Jellyfish Traffix Vault BuddyTV Fireant BuzzTracker Glimpse FotoLog Webdialogs Kaboodle Pickle.com Treehugger Club Penguin Acquirer Amazon.com Kayak AT&T Penthouse Media AOL Forbes Media Microsoft onTargetjobs American Greetings Zango Time Lending California Interwoven NextNewNetworks Viacom/MTV Discovery CBS Interactive Google MSNBC EMC Adobe Microsoft New Motion Veronis Suhler Stevenson Comcast Odeo Yahoo TheFind.com Hi-Media IBM Hearst Scripps Networks Discovery Disney Transaction Value ($m) 280.3 200.0 500.0 30.0 45.0 9.0 52.0 250.0 10.0 76.0 50.0 152.1 85.0 0.4 90.0 30.0 4.1 10.0 700.0 EV/ Revenue Details 2.7x 5.7x 1.5x 1.9x Internet-based audio entertainment Discount travel search site Live-search commerce Online adult dating site Query/search site Social bookmarking service Photo sharing site Online hospitality and retail job board Online photo and video sharing website Online comparison shopping engine Social network for the aging population and baby-boomers Web optimization software and services Site showing political music videos Social networking Online reference tool with DIY guides Celebrity oriented content site Web/SMS communication tool Social news sharing site Online data storage platform Online document collaboration tools Social shopping site Media and marketing solutions through online content Career content website Online community built around pop culture TV Online podcast and vodcast directory Online news site Fashion shopping content site Photo sharing site Web conferencing provider Social shopping site Photo sharing site Green/eco-friendly blog Social network/virtual world for children

Sources: Capital IQ, Venturewire, Redwood Capital www.redcapgroup.com 6

Sector Review

Web 2.0: Ad-Based Online Models

Selected M&A — 2006 - present , continued
($ in millions)
Ann Date 07/26/07 07/24/07 07/23/07 07/19/07 07/17/07 07/13/07 07/02/07 06/21/07 06/12/07 06/01/07 05/30/07 05/30/07 05/30/07 05/30/07 05/22/07 05/14/07 05/10/07 05/07/07 04/19/07 04/11/07 03/20/07 03/15/07 03/02/07 03/01/07 02/09/07 01/30/07 01/24/07 01/10/07 01/08/07 11/05/06 10/31/06 10/29/06 10/09/06 09/27/06 08/23/06 06/06/06 03/03/06 02/01/06 Target Business.com UGO Twango InviteShare Mediabistro MeziMedia TripUp Rivals.com Cuts Feedburner Flektor PhotoBucket StumbleUpon Last.fm Wallstrip dpreview.com Odeo ConsumerSearch Hitwise Fandango Max Preps WebEx Tribe Insider Pages Five Across Inc. Billmonk XpressTrade StubHub MyBlogLog Traffic.com JotSpot Blogniscient YouTube Jumpcut Crackle Gmarket iVillage Quote.com Acquirer R.H. Donnelley Hearst Nokia TechCrunch Jupiter Media ValueClick SideStep Yahoo RiffTrax Google Fox Interactive Fox Interactive eBay CBS CBS Amazon SonicMountain About.com Experian Comcast CBS Cisco Cisco CitySearch/IAC Cisco Obopay optionsXpress Holdings eBay Yahoo NAVTEQ Google TopTenSources Google Yahoo Sony Pictures Yahoo NBC Universal Interactive Data Corp Transaction Value ($m) 345.0 100.0 96.8 23.0 352.0 100.0 100.0 20.0 250.0 75.0 280.0 5.0 33.0 240.0 200.0 43.0 3,200.0 13.0 37.0 310.0 10.0 168.9 1,539.0 65.0 60.0 618.6 30.0 EV/ Revenue Details 6.9x 5.3x 6.0x 7.2x 3.1x 3.4x 110.0x 5.4x 6.5x Online business search engine Media/content site Online social networking and media-sharing website Beta demo/site invitation tool Career content website Online comparison shopping website Travel-oriented social network/content sharing Social network for high school/college sports fans Online video editor Online RSS streaming services Slide show mashup site Photo sharing site Web site discovery engine Social networking/community for music information Financial video blog Reviews of digital cameras Online aggregator of pod casts Search engine to find product reviews and information Traffic data and analysis for web sites Website for movie content/reviews High school sports fan site Online Web conferencing Social networking site User-generated review site Social networking site Social payment service Internet-based futures and foreign exchange broker Online ticket marketplace Social networking functionality for bloggers Real time traffic information on the Internet Wiki application Blogs and news aggregation website Video sharing Online video editing service User-generated video communities Online marketplace Network of demographic-specific content websites Streaming quotes, information, and trading capabilities

Sources: Capital IQ, Venturewire, Redwood Capital www.redcapgroup.com 7

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Web 2.0: Ad-Based Online Models

Leading Internet Acquirers
Snapshot. Much of the M&A activity to date has been driven by a tractive acquisition currencies and financial resources over the coming handful of large players looking to consolidate their markets (see the few years, we suspect that that universe of likely buyers for most online next several pages for a list of deals by major company). However, sites will increase rather materially in the future. given that many new players are rapidly growing and will establish at-

Date Jan-08 Oct-07 Jul-07 May-07 May-07 Apr-07 Mar-07 Mar-07 Feb-07 Feb-07 Dec-06 Aug-06 Aug-06 Feb-06 Jun-05 Mar-05 Mar-05 Jul-04 Mar-04

Target TNOW Entertainment Group GiveFun.com Paciolan Systems Emma Ticketmaster Front Line Management Companies Resortquest International echomusic Insider Pages NetClub Edodo Ilike.com Biletix Connected Ventures Shoebuy.com ImproveNet Ask Jeeves Cornerstone Brands eLong (30% interest) ZeroDegrees 19

($mm) $265.0 109.1 6.0 1,780.0 715.0 200.0 -

Sector Event seating and ticketing Gift certificates Ticketing Software Ticket Marketplace Talent Mgmt Svcs. Vacation Condo and Rental Property Mgmt Svcs. Advertising Search Dating Svcs. Dating Svcs. Social Music Discovery Svcs. Ticket Marketplace Website Developer/ Manager Internet Footwear/ Apparel Retailer Home Improvement Information Svcs. Search Marketing Internet Travel Agency Internet Networking Svcs.

Date Feb-07 Feb-08 Sep-07 Sep-07 Aug-07 Jul-07 Jun-07 Apr-07 Jan-07 Dec-06 Nov-06 Nov-06 Oct-06 Sep-06 Jun-06 Dec-05 Oct-05 Aug-05 Jul-05 Jun-05 Mar-05 Mar-05 Nov-04 Oct-04 Sep-04 Jul-04 Jul-04 Mar-04

Target Maven Networks FoxyTunes Zimbra BuzzTracker BlueLithium Actionality Rivals.com Right Media MyBlogLog Wretch Bix.com Kenet Works AdInterax Jumpcut Gmarket del.icio.us Upcoming.org Alibaba.com Pixoria Dialpad Communications Landicorp Research & Developlemt Stadeon Wuf Networks Stata Labs MUSICMATCH Oddpost FareChase Kelkoo.com 28

($mm) $350.0 300.0 679.8 50.7 60.0 4,000.0 157.0 576.0

Sector Online advertising solutions Browser plugin for music controls Collaboration and messaging platform Online news site Online advertising and marketing In-game advertising and marketing Social Network for High School/College Sports Open Media Exchange for the Advertising Industry Blogging Community Weblog and Online Photo Album Svcs. User-Generated Contest Site Communication Platform for Mobile Phones Internet Advertising Software Webcast/ Multimedia Solutions Retail E-commerce Marketplace in Korea Search Internet Event Planning E-commerce Desktop Software Internet Voice Phone Svcs. Internet Software Gaming Software Software E-mail Svcs. Music Software E-mail and Internet News Search E-commerce

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Date Jul-07 Dec-06 Aug-05 Jun-05 Jun-05 Aug-04

Target MeziMedia Shopping.net Fastclick Web Marketing Holdings E-Babylon PriceRunner 6

($mm) $347.4 13.3 221.4 168.4 1.2 29.0

Sector Shopping and Content Websites Online Shopping Internet Advertising Internet Marketing Svcs. Internet Ink/ Toner Retailer Internet Comparative Shopping

Date Oct-07 Sep-07 Jul-07 Jul-07 Jul-07 Jun-07 Jun-07 Jun-07 May-07 May-07 Apr-07 Apr-07 Apr-07 Mar-07 Dec-06 Oct-06 Oct-06 Aug-06 May-06 May-06 Jan-06 Jan-06 Dec-05 Jul-05 May-05 Mar-05 Oct-04 Jul-04

Target Jaiku Zingku ImageAmerica Postini GrandCentral Communications Zenter PeakStream FeedBurner Panoramio GreenBorder Technologies Marratech Tonic Systems DoubleClick Adscape Media Endoxon JotSpot YouTube Neven Vision @Last Software Upstartle dMarc Broadcasting Reqwireless AOL (5% interest) Akwan Dodgeball.com Urchin Software Keyhole Picasa 28

($mm) $625.0 3,099.0 1,648.4 1,136.0 1,000.0 -

Sector Blogging Community Text/Picture Messaging Services Digital Mapping Cameras and Images Communications Security and Compliance Tools Web-based Voice Communications Platform Online Presentation Software High Performance Computing Software Media Distribution Community Photo Website Desktop Security Software Collaboration Software Automation Solutions for Document Management Advertising In-Game Advertising Internet Mapping Solutions Wiki Internet Video Sharing Mobile Recognition Engines for Mobile Phones 3D Design Software Software Radio Advertising Applications and Libraries for mobile Java platform Internet Access, IM and Portal Search Text-Messaging Svcs. Web-Traffic Software Digital Mapping Software Internet Photo Management

Date Feb-08 Feb-08 Nov-07 Nov-07 Jul-07 May-07 May-07 Nov-06 Aug-06 Aug-06 Jan-06 Nov-05 Oct-05 Aug-05 Aug-05 Aug-04 Jun-04

Target Perfiliate Technologies Goowy Media Yedda Quigo Technologies TACODA Systems ADTECH Advertising Third Screen Media Relegence Corp GameDaily Userplane Truveo MusicNow Weblogs Wildseed Xdrive Technologies Mailblocks Advertising.com 17

($mm) $275.0 110.0 25.0 435.0

Sector Fundraising/Marketing Network Information Sharing Platform Community Knowledge Exchange Performance-Based Marketing Solutions Advertising Solutions Advertising Solutions Mobile Advertising and Marketing Software Financial Services News Gaming Industry Newsletter Enterprise Web Applications Search Online Music Subscription Blogging Wireless Technology Storage/ Backup Svcs. Internet E-mail Svcs. Internet Marketing

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Date Jan-08 Oct-07 Jul-07 May-07 May-07 Jan-07 Apr-06 Oct-05 Sep-05 Jun-05 Jan-05 Dec-04 Nov-04 Aug-04 Aug-04 Jun-04 Jan-04

Target Fraud Sciences Corp ViA-Online Slando StumbleUpon GittiGidiyor StubHub Tradera VeriSign Payment Gateway Skype Technologies Shopping.com Kurant Rent.com Marktplaats Internet Auction Co Craigslist (25% interest) Baazee.com Mobile.de 17

($mm) $169.0 75.0 310.0 48.3 370.0 4,100.0 525.0 415.0 291.0 326.0 50.0 151.0

Sector Automated Anti-Fraud Systems Auction Management Software Online Classified Ads Web Site Discovery Engine Consumer Trading Platform in Turkey Ticket Marketplace Internet Auction Svcs. Internet Communications Software Internet Communications Software E-commerce Internet Business Software E-commerce E-commerce Internet Auction Svcs. Internet Meeting Svcs. E-commerce Internet Classifieds

Date Jan-08 Dec-07 Aug-07 Jul-07 May-07 May-07 May-07 May-07 May-07 Feb-07 Feb-07 Jan-07 Jan-07 Dec-06 Nov-06 Nov-06 Sep-06 Sep-06 Sep-06 Jun-06 Jun-06 Nov-05 Sep-05 Aug-05 Aug-05 Jul-05

Target Premiere AG Beliefnet CastUP Bronx Times Reporter Flektor Photobucket Latvijas Neatkariga Televizija TV5 Latvia Dow Jones Wurld Media Strategic Data ROO Group Moshtix Jungo The Federal Publishing Co (25 titles) Casa.it ITE Milkround Online Jamba! Hazur Radyo TV TV Plus Asserta Holdings IGN Entertainment Scout Media realestate.com.au Intermix Media 26

($mm) $421.3 11.3 5,472.8 10.0 90.5 138.0 12.2 188.0 82.3 25.0 650.0 107.0 582.0

Sector Pay Television Operator Online Community IP Streaming Media Products Newspaper Publisher Online Photo Tools Photo Sharing Site Television Broadcasting Television Broadcasting Newspaper Publisher P2P Network Internet Advertising IPTV Ticketing Software Platform Software Platforms Newspaper Publisher Portal Multiplatform Games Internet Recruiting European Wireless Content Mediation Turkish TV Operator Polish Broadcasting Svcs. Internet Real Estate Internet Gaming Online Sports Internet Real Estate Online Community

Date Jan-08 Jan-08 May-07 May-07 Feb-06 Apr-05 Mar-05 Aug-04

Target Audible Without A Box Brilliance Audio Digital Photography Review Shopbob.com Booksurge Mobipcoket.com Joyo.com 8

($mm) $280.3 3.0 75.0

Sector Audio Entertainment Online Media Tools Audio Book Publisher Digital Camera Review Site Internet Retail Store Publishing Company Software E-commerce Information Database

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Date Feb-08 Nov-07 Nov-07 Aug-07 Aug-07 Feb-07 May-06 Mar-06 Aug-05 Apr-05 Jul-04

Target Cheshi 3git.com LookSmart, FindArticles.com TechTracker OnlyLady stor-age.com Urbanbaby.com Chowhound Metacritic Windup Labs Twofold Photos 11

($mm) 20.5 $70.0

Sector Online Automotive Portal Technology Comparison Shopping Website Resource Articles Database IT System Management Publications/Products Fashion Website for Women Web Portal for Business Storage Solutions Parent-Targeted Media Company Food Websites Entertainment Reviews Internet Photo Management Internet Photo Sharing

Date Feb-08 Jan-08 Jan-07 May-06 Oct-05 Feb-05 Feb-05 May-04 Apr-04 Mar-04

Target ChinaHR.com Affinity Labs Arbeidskamerater PWP JobKorea Emailjob.com ChinaHR.com Holdings Tickle Jobpilot Military Advantage 10

($mm) $225.0 61.0 1.1 94.0 26.0 50.0 94.0 76.0 40.0

Sector Internet Recruiting Online Portal Internet Recruiting Education Directory Websites Internet Recruiting Internet Recruiting Internet Recruiting Internet Career Assessment Internet Career Portal Internet Military Portal

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PRIVATECompany Financings Private COMPANY FINANCINGS
As with M&A, the market for venture funding in the Internet sector has been extremely robust, representing one of the largest areas of new capital investment in the technology sector in 2007. Most surveys and forecasts that we have seen and our own conversations with VCs indicate that 2008 should see even further increases in funding for the space. While our list of private fundraisings (shown below) is only a small part of the hundreds of venture financings for online businesses over the past two years, we believe it provides a relatively good sample and indication of the type and level of activity. The venture capital sector is infamous for heavily over-funding hot spaces and creating too many competitors with too much money. We suspect that this dynamic is developing in many areas of the Internet. Furthermore, many of these companies are still at an early stage, as indicated by our summary below showing that almost 90% of investment dollars and financing rounds have been either A or B rounds. While many of these businesses are not overly capital intensive and may be able to make it to cash flow breakeven without additional capital, many others will need to seek larger, later stage rounds over the next year or two. As this occurs, we expect to see investors become increasingly cautious around the commercial viability of business models and suspect that most companies will have to have “proven” their revenue model before later stage capital can be secured. Finally, due to the fragmentation of the space and the benefits of scale in online models, we expect that many venture firms will look to use M&A of smaller players as a means of more rapidly growing their own portfolio companies. In fact, we expect that most M&A over the next two to three years will be comprised of private-to-private transactions involving stock exchanges as investors look to ride their investments into the future, but as part of bigger and better stories.

Selected Venture Investments Summary Statistics — 2006 - Present
# of Investments, 2006-Pres 15.0 15.0 4.0 34.0 Invested Capital, 2006-Pres 171.7 206.7 53.0 431.4 % Invested 39.8% 47.9% 12.3% 100.0% % Investments 44.1% 44.1% 11.8% 100.0% Avg Inv. Round Size 11.4 13.8 13.3 12.8

Stage A B C Total

Selected Venture Investments — 2006 - Present
Ann. Date Target 10/29/07 ViTrue Round B Amount Total Raised ($m) ($m) Investors 10.0 15.5 Comcast Interactive Capital, General Catalyst Partners, Turner Broadcasting System, Dace Ventures 25.0 Bay Area Equity Fund, DEFTA Partners, Edmond de Rothschild Venture Capital Management, 39.2 Longworth Venture Partners, Legg Mason, Allen & Company, SoftBank 7.0 VantagePoint Venture Partners 11.0 Target Description Marketing platform video online video distribution, using user-generated video and online communities Personalized video entertainment search for TV shows and listings Online community for physicians

09/20/07 MeeVee Inc

C

3.5

09/07/07 Sermo 08/29/07 HomeTown Info 08/14/07 Doppelganger

C A A

26.7 7.0 11.0

08/13/07 Batanga 07/16/07 Healthline Networks

A B

30.0 21.0

30.0 35.0

05/15/07 Ediets.com 03/27/07 Beyond.com

C A

10.0 13.5

27.0 13.5

Web sites and marketing programs for dealer networks, distribution channels, Velocity Interactive Group, Draper Virtual environment website for youth Fisher Jurvetson, Draper Richards, focusing on various demographic Trident Capital, Greycroft, KPG interests Tudor Ventures, HIG Ventures Interactive online content for Hispanic community VantagePoint Venture Partners, Reed Health information services and content Elsevier Ventures, Kaiser Permanente Ventures, US News & World Report, Peacock Equity Fund, Prides Capital Internet-based diet and fitness programs/content and online Safeguard Scientifics Online community of websites for business professionals
Sources: Capital IQ, Venturewire, Issuer press releases

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Selected Venture Investments — 2006 - Present, continued
Ann. Date Target 02/21/07 HighEdge 02/01/07 Terabitz 01/28/07 LinkedIn 01/23/07 Sermo 01/17/07 Piczo 01/08/07 Heavy Corporation 12/28/06 Digg Inc 12/14/06 Glam Media Round A A C B A B B B Amount Total Raised ($m) ($m) Investors 11.2 10.0 12.8 9.5 11.0 20.0 8.5 18.5 11.2 Draper Fisher Jurvetson, Draper Richards, Doll Capital, Mangrove 10.0 Tudor Investment Corp 27.5 Bessemer Venture Partners, European Founders Fund 12.5 Longworth Venture Partners, SoftBank Capital 11.0 Sierra Ventures, US Venture Partners, Mangrove Capital, 33.0 Polaris Venture Partners 11.3 Greylock Partners, Omidyar Network Commons 25.1 Accel Partners, Draper Fisher Jurvetson, WaldenVC, Duff Ackerman & Goodrich, Information 14.0 Amazon.com 15.0 Gannett Co, Tribune Co, McClatchy Co 10.0 NVP Associates Target Description Online marketing platform connecting advertisers and consumers through Real estate-oriented website for users to access market research and share Social networking website for professionals Online community for physicians Online community for teenagers to share life stories Entertainment site for 18-24 year old male demographic Social content website focused on technology Owner/operator of multiple websites offering media content and online retailing Colleciton of wiki communities with websites creating free content Community news web site aggregating content from print media, Online community and social/professional networking for Indian demographic Marketing platform video online video distribution, using user-generated Provides programming, video and music content as well as userOnline community for physicians Social networking algorithms Online news site for content providers and advertisers Community website allowing users to promote, share, and create events in Online social network allowing sharing of various media Personalized video entertainment search for TV shows and listings Network of websites offering digital entertainment and content for college campuses Content search engine for blogs and other user-generated content Internet-based diet and fitness programs/content and online Mobile content publisher focused on female demographic Entertainment site for 18-24 year old male demographic Health information services and content

12/06/06 Wikia 11/05/06 Topix 11/01/06 Smart Information Worldwide 10/24/06 ViTrue 09/28/06 PodShow 09/26/06 Sermo 09/26/06 Wallop 09/20/06 Voxant 09/18/06 Eventful 08/21/06 Friendster 08/10/06 MeeVee Inc

B A A

10.0 15.0 10.0

A B A A A B B B

5.5 15.0 3.0 10.0 10.5 7.5 13.1 14.5

5.5 Comcast Interactive Capital, General Catalyst Partners, Turner 23.8 3.0 Longworth Venture Partners 10.0 Bay Partners, NVP Associates, Consor Capital 10.5 Court Square, Longworth Venture Partners, SoftBank Capital 9.6 Bay Partners, Draper Fisher Jurvetson, Omidyar Network 27.1 Benchmark Capital, Kleiner, Perkins, Caufield & Byers 21.5 Labrador Ventures, Walden VC, Edmond de Rothschild Venture Capital Mgmt, Bay Area Equity Fund 32.7 Battery Ventures, Columbia Capital, Eastward Capital, Anschutz Investment, Shelter Capital, Pinnacle 25.5 Draper Fisher Jurvetson, Mobius Venture Capital, DG Incubation 17.0 Prides Capital 18.9 Rustic Canyon Partners, US Venture Partners, -Hatch Ventures, Core 13.0 Polaris Venture Partners 14.0 VantagePoint Venture Partners, Mitsui & Co, Reed Elsevier Ventures,

08/07/06 Ruckus Network 06/01/06 Technorati 05/15/06 Ediets.com 03/28/06 LimeLife 01/30/06 Heavy Corporation 01/24/06 Healthline Networks

B

23.7

B B B A A

11.5 10.0 13.9 10.0 14.0

Sources: Capital IQ, Venturewire, Issuer press releases

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PRIVATE COMPANY LANDSCAPE
In the pages that follow, we have profiled some of the leading private online players across a number of sub-sectors. We find the range of approaches by the many online players to be quite fascinating. However, because of the early nature of the market and of these business, and because of the difficulties in predicting consumer behavior, only time will tell which models and approaches become a success. In the meantime, we hope that the profiled companies below provide an interesting survey of the many players in the online ad-based universe. Sectors Covered:

• • • • • •

Health: eDiets.com, Waterfront Media, WEGO Health Music & Video: Heavy Corp, Mio.tv, Music Nation, Ripe Digital Entertainment, Ruckus Networks Special Demographic Groups: Batanga, Beyond.com, TAKKLE Search: Retrevo, Wink.com, Wize Real Estate: CityRealty.com, Relocation.com, Streeteasy, Terabitz Other: Gizmoz, Imaginova, Multiply, Oddcast, Webs.com

Social Media and Communities: ClubMom, Digg, Flixster, Friendster, Linkedin, Mocospace, myyearbook.com

• •

Content Intermediaries: Critical Mention, NewsMarket, Voxant News: Daylife, Expo TV, Going.com, The Huffington Post, Outside.in,

Health

Stephen Rattner - CEO www.ediets.com 1000 Corporate Drive Suite 600 Fort Lauderdale, FL 33334

eDiets.com, Inc. engages in the development and marketing of Internet-based diet and fitness programs in North America and Europe. It offers online diet, fitness, and recipe programs. The company provides diet plans according to an individual’s weight goals and food and cooking preferences, and includes the related shopping lists and recipes. It offers interactive online information, communities, education, and telephone and online support to subscribers of diet plans. The company also provides meal delivery service, which includes breakfast, lunch, and dinner, as well as snacks. eDiets.com also sells advertising throughout its content assets, including diet, fitness, and healthy lifestyleoriented Web sites.

Benjamin Wolin - CEO www.waterfrontmedia.com 45 Main Street, Suite 800 Brooklyn, NY 11201

Waterfront Media is an online health company that operates a network of health, diet, fitness and pregnancy Web sites, including its flagship EverydayHealth.com. Waterfront Media's other sites include SouthBeachDiet.com by Dr. Arthur Agatston; JillianMichaels.com, the online fitness program from co-host of The Biggest Loser; as well as MyOptimumHealth Plan.com, Dr. Andrew Weil's online program, and WhatToExpect.com based on the best-selling pregnancy and parenting guide, "What to Expect When You're Expecting" by Heidi Murkoff. The company also has partnerships with the ABC Television Network, the Food Network, Random House, and HarperCollins, among others.

Jack Barrette - CEO www.wegohealth.com 20 University Road Suite 450 Cambridge, MA 02138

WEGO Health identifies, ranks and organizes helpful health and wellness content online. The company offers wellbeing news and articles, medical reference content databases, and online therapeutic remedial imagery and graphics. They combine the knowledge of health experts with hundreds of volunteer reviewers who have a deep, personal connection to a health condition, continually scan the Web to assess the best content.

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Music & Video

Simon Assaad - CEO David Carson - CEO www.heavy.com 330 West 38th Street Suite 1102 New York, NY 10018

Heavy Corporation provides online consumer video services for males. It also operates a video advertising network that provides brand advertisers with publishers and bloggers who use video ad units. The company enables its clients to share, editorialize, and create their own content, as well as provides a library of programming, including various staples.

Manuel Garcia-Duran CEO www.mio.tv

Mio.tv is a Hispanic community oriented interactive entertainment network with video programming, games, VoIPbased voice and video phone and a suite of office tools packaged within a media player. The company produces a large majority of its own content, and licenses the rest through exclusive contracts.

Daniel Klaus - CEO www.musicnation.com 134 Fifth Avenue 3rd Floor Brooklyn, NY 11011

Music Nation is an online community for music and artists, providing tools for bands, new content, interviews, competitions and contracts. Allows users to create artist profile pages to upload videos, mp3s, photos, slideshows, and other content to attract fans.

Ryan Magnussen - CEO www.ripedigital.com 1790 Broadway, 12th Floor NY, NY 10019

Ripe Digital Entertainment provides Video On Demand digital entertainment distribution, advertising and production. RDE aggregates and creates short-form video programming targeted at young adult audiences for simultaneous distribution over cable, broadband and wireless platforms.

Michael Bebel - CEO www.ruckusnetwork.com 12901 Worldgate Drive 7th Floor Herndon, VA 20170

Ruckus Network provides online digital entertainment services to universities in the United States. It offers national, local, and campus-based programming; music; films; and programming interests for college students to connect with one another on their campus. The company also provides college professors and libraries the access to multimedia content for classroom use. Ruckus Network also serves various agencies, marketers, and media outlets.

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Special Demographic Groups

Rafael Urbina - CEO www.batanga.com 2121 Ponce de Leone Boulevard Suite 820 Coral Gables, FL 33134

Batanga, a subsidiary of Hispanic Media Group, operates as an advertising vehicle on the Internet. The company offers music, sports, auto, film, fashion, and news content through its Web sites. It develops interactive content for the US Hispanic online consumer content; and provides integrated marketing solutions, including content production and product integration. The company is based in Coral Gables, Florida.

Beyond.com is an online community of various Web sites for business professionals, corporations, and vertical communities. It provides search and network tools for various stages of career, business, and life. The company’s product and service categories include careers and recruitment, HR technologies, education, search engines, life management, www.beyond.com and networking. It also provides career services, including advanced job search and search alert functions; upgraded 1060 First Avenue Suite 100 resume posting features, including personal Web site and portfolio; resume writing assistance, and resume distribuKing of Prussia, PA 19406 tion services; industry resources, including magazines, videos, articles, and blogs; career consulting; continuing education resources; and professional personality assessments. Richard Milgram - CEO

David Birnbaum - CEO www.takkle.com 45 Main Street Suite 816 Brooklyn, NY 11201

TAKKLE is a social network for high school sports, allowing users to post photos and videos, share stats and schedules, and a whole lot more with others throughout the TAKKLE community. TAKKLE is a place where students, athletes, coaches, and fans can share their passion for sports.

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Search

Vipin Jain - CEO www.retrevo.com 440 N Wolfe Rd Sunnyvale, CA 94805

Retrevo operates a web site that makes finding, buying and using electronics fun, with a vision is to simplify and enhance people's digital lifestyle. Our real-time independent Web service aggregates, comprehends and summarizes important information on electronics products from experts, users, PDF manuals and other web pages and presents answers in easily digestible and actionable form that average consumers can understand and use to find, buy or use electronics products.

Michael Tanne - CEO www.wink.com 5150 El Camino Real Los Altos, CA 94022

Wink.com is a online people search with more than 200 million people profiles from across the Web, including social networks and other online communities. The website allows users to find people from all walks of life, manage individual web presences and stay connected

Tom Patterson - CEO www.wize.com 430 First Ave N, Suite 740 Minneapolis, MN 55401

Wize provides a website for gathering information and opinions from the Web to inform consumers about potential purchases. Wize offers an algorithm that aggregates data and opinions from a variety of sites to give a product a normalized rating from 1 to 100 to determine overall satisfaction.

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Real Estate

Daniel Levy - CEO www.cityrealty.com 568 Broadway, Suite 802 NY, NY 10012

CityRealty.com helps apartment buyers and renters navigate the New York City real estate market. The website seeks to understand individual buyers' tastes and preferences, then matches them with a broker that specializes in the neighborhoods or types of properties the buyer is looking for.

Greg Hebner - CEO www.relocation.com 80 Broad St, Suite 1900 NY, NY 10004

Relocation.com helps consumers compare, connect and learn about products and services from hundreds of providers across categories such as moving, truck rental, storage, mortgage, real estate and insurance, serving hundreds of thousands of families that move each month.

Michael Smith - CEO www.streeteasy.com

Streeteasy is a real estate website focused on the NYC area. It offers information for home shoppers such as public school information, market data, stats and trends, details about neighbors and neighborhoods, building and neighborhood photos, and more. It also operates as a Web community, with owners, buyers and sellers sharing information on discussion boards.

Ashfaq Munshi - CEO www.terabitz.com 5 Palo Alto Square Suite 220 Palo Alto, CA 94306

Terabitz is a real estate website offering customizable information for users to make informed decisions about real estate purchases. Every user can customize, store, and share their real estate data and content to fit their own personal needs. Terabitz enables more than just a single comprehensive source for property listings - it also allows integration of unlimited local neighborhood information, market research, schools, restaurants, crime and safety statistics, service providers, financial tools, and more.

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Other

Eyal Gever - CEO www.gizmoz.com 470 Park Avenue South North Wing 11th Floor New York, NY 10016

Gizmoz offers consumers character-based visual expression for use across their digital environments. The Gizmoz service allows users to create, customize, animate and share lifelike, 3D talking characters that enable individuals to put a unique face and voice to their digital communications. Gizmoz characters can be fashioned either as a selfportrait starting from a single personal photo, or created using images from the Gizmoz library, all in just a matter of minutes. The result is a customized digital character that can be used to deliver personalized, lip-synched messages in video clips and other forms of original content.

Daniel Stone - CEO www.imaginova.com 470 Park Avenue South 9th Floor NY, NY 10016

Imaginova is focused on building a rapidly growing network of media and commerce brands that are delivered primarily online. Imaginova owns and creates proprietary, world-class editorial, video and software to power our content brands and to support blue chip advertising programs. The Imaginova Network of advertiser-supported content Web sites, led by LiveScience, Space.com, Aviation.com and Newsarama.com, delivers original, engaging and entertaining editorial and multimedia content to a community of millions of engaged, curious and well-informed users. Imaginova’s content is syndicated to major news portals including Yahoo!, MSNBC, AOL and FoxNews.com.

Peter Pezaris - CEO www.multiply.com 6001 Park of Commerce Boulevard, Suite 300 Boca Raton, FL 33487

Multiply provides a personal customizable website and tools for sharing and discussing digital photo albums, videos, music, blogs, restaurant and movie reviews, and calendar events with friends. Multiply keeps track of who knows whom in users’ social network, allowing them to automatically notify these people when users put a new photo album, video or anything else on Multiply, by creating a thread on the Multiply Inbox and giving access to all of the people users choose.

Adi Sideman - CEO www.oddcast.com 134 W 37th St, 7th Floor NY, NY 10018

Oddcast develops and distributes speaking avatar products for the Enterprise, small and medium business and consumer markets. Oddcast's avatar platform enables consumers to personalize online communications and selfexpression and businesses to increase conversion and sales. Their products are Web-based and can be delivered to any device including browsers, mobile devices, radio and TV.

Haroon Mohktarzada - CEO Webs.com, formerly Freewebs, is a social media company comprising both social publishing and social applications. The company creates social publishing properties and social applications that allow people around the world to tell www.webs.com their stories and to connect in a dynamic way. 1100 Wayne Avenue Suite 801 Silver Spring, MD 20910

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Social Media and Communities

Michael Sanchez - CEO www.clubmom.com 303 Park Avenue South Suite 1046 New York, NY 10010

ClubMom is an online destination for moms to connect and share the information. It offers MomAnswers, a place for moms to ask questions and get answers from other moms on topics, such as pregnancy, teenagers, cooking, and relationships; ClubMom Scrapbook to share the photos with family, friends, and other members; and ClubMom Rewards, a loyalty program that rewards moms for shopping online through the ClubMom online mall or participating in partner programs and promotions.

Jay Adelson - CEO www.digg.com 135 Mississippi Street 3 3rd Floor San Francisco, CA 94107

Digg offers a website for people to discover and share content from anywhere on the web. All of the content on Digg is user submitted, and is voted on by the community, with the opportunity for a highly popular article to appear on the front page of the site. Digg also provides a forum for users to discuss the articles.

Joe Greenstein - CEO www.flixster.com 208 Utah Street San Francisco, CA 94109

Flixster is a community website for movie fans, where users can share opinions about and discover new movies. The Flixster movie community includes movie ratings and showtimes, movie reviews, movie layouts, movie pics & posters, movie news, video clips, movie fan clubs, actor profiles and fan clubs, celebrity news, celebrity photos, celebrity layouts, and movie quizzes.

Kent Lindstrom - CEO www.friendster.com 568 Howard Street San Francisco, CA 94105

Friendster operates as an online social network. It allows people to stay connected to friends while sharing and discovering media, including pictures, music, video, and blogs. With more than 60 million members worldwide, Friendster is focused on helping people stay in touch with friends and discover new people and things that are important to them. Online adults, 18 and up, choose Friendster to connect with friends, family, school, groups, activities and interests.

Dan Nye - CEO www.linkedin.com 2029 Stierlin Court Mountain View, CA 94303

LinkedIn is an online network of more than 20 million experienced professionals from around the world, representing 150 industries. When users join, they create a profile that summarizes their professional accomplishments, allowing them find and be found by former colleagues, clients, and partners. Users can add more connections by inviting trusted contacts to join LinkedIn and connect.

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Social Media and Communities

Justin Siegel - CEO www.mocospace.com 186 South Street Boston, MA 02111

MocoSpace.com operates as a mobile and online social networking community, with two million members and serving one billion pageviews a month (from mobile phones). Its services include chat, instant messages, forums, find and invite friends, blogs, reviews, relationships, photos, and videos.

Geoff Cook - CEO www.myyearbook.com 6 Harbourton Ridge Drive Pennington, NJ 08534

myyearbook.com is a social networking site for teens. It is an online yearbook for the digital age young people, teens, college students, and young professionals gather to socialize. myYearbook gives its users the ability to upload and share music, videos, and documents with an online storage feature called My Locker. Keeping it around the school theme, you can view a friend's 'locker' and listen to their music.

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Content Intermediaries

Sean Morgan - CEO www.criticalmention.com 1776 Broadway 24th Floor New York, NY 10019

Critical Mention, Inc. provides Web-based television search and broadcast monitoring service that allows users to search, track, and view critical information from television news. Its platform, CriticalTV, provides real-time monitoring and email alerts for organizations that require up-to-the-minute news about their company, customers, and competitors. The company also provides video syndication services to Web publishers. It serves clients in corporate communications, financial services, professional services, nonprofit, and government sectors, as well as Fortune 500 companies.

Shoba Purushothaman - CEO www.thenewsmarket.com 6 E 32nd St, 6th Floor NY, NY 10016

The NewsMarket enables PR, marketing and other content creators to manage and distribute video to targeted audiences. Whether clients need to reach the media, bloggers, consumers or investors or whether there hours of video or just five minutes, The NewsMarket simplifies outreach and distribution.

Marcien Jenckes - CEO www.voxant.com 1851 Alexander Bell Dr, Suite 350 Reston, VA 20191

Voxant offers an online network that delivers premium, fully-licensed content to the millions of niche websites and enthusiast communities that are on the Web today. Voxant offers a solution for content providers who have been trying to reach the online audience solely through their own branded sites and/or the major portals, and for advertisers who want access to the more than 50 percent of Web viewers who spend the majority of their time on niche sites where passionate audiences amass around specific issues and topics.

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News

Upendra Shardanand - CEO Daylife is a news site and distribution platform, provides news online. It gathers and analyzes news from the Web, and organizes it into news content on Daylife.com, as well as through the Daylife API. The company offers news on www.daylife.com politicians, celebrities, and environmental topics, as well as photos, blog posts, and video feeds. It enables developers and publishers to develop news applications, as well as to add content and context for their news. 444 Broadway, 5th floor New York, NY 10013

Daphne Kwon - CEO www.expotv.com 15 West 18th Street 10th Floor New York, NY 10011

Provides informative video-based consumer product reviews. It covers various categories of products, including kitchen, consumer electronics, entertainment, and travel products. The company’s Videopinions are distributed online and television through its broadband Web site, as well as via partnerships with video portals; e-commerce destinations; and digital cable homes.

Evan Schumacher - CEO www.going.com 8 Winter Street 6th Floor Boston, MA 02108

Going.com operates a Web site to discover and share various events in various cities in the United States. It provides a place to share events, such as parties, concerts, and happy hours; to join a group or chat with or find people with similar interests; to tag photos; and to post and promote events; track and print guestlists; sell tickets; and email.

Betsy Morgan - CEO
www.thehuffingtonpost.com

P.O. Box 447 Herndon, VA 20172

The Huffington Post online news site and group blog. Its services include an ongoing open competition for usergenerated Web projects that involves reviewing entries, recruit new contestants, provide tech support and encouragement to current contestants, and manage monthly prize fulfillment. The company also operates a news and commentary Web site focusing on politics. In addition, it provides daily brief email highlighting top news stories. Further, the company provides community tools to commenting and managing community interaction with the blog and news; develops and manages strategy for comment moderation and reader feedback; and provides tech support for contributors and outreaches for recruiting new contributors.

Steven Johnson - CEO www.outside.in 39 Lincoln Place Brooklyn, NY 11217
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Outside.in provides online services for sharing and exploring information about neighborhoods. It operates a Web site, www.outsidein.com, which enables users to access news and opinions in their neighborhood; find out the inside scoop on local places or events, such as schools, new real estate developments, playgrounds, and bars; and meet new neighbors and share their local knowledge with them.

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Web 2.0: Ad-Based Online Models

Redwood Capital Group is an investment banking firm serving the technology, communications and media industries. The firm focuses on mergers & acquisitions and corporate finance advisory, private equity and asset management.
United States 885 Third Avenue, 25th Floor New York, NY 10022 Telephone: Fax: +1 212 508 7100 +1 212 508 7102 United Kingdom 28 Bruton Street London W1 6QW Telephone: Fax: +44 (0)20 7659 5480 +44 (0)20 7659 5526

_________________________ Copyright 2008 Redwood Capital Group LLC. This report is published solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy any security. The information herein is based on sources we believe to be reliable but is not guaranteed by us and we assume no liability for its use. Any opinions expressed herein are statements of our judgment on this date and are subject to change without notice.
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