09 07 07 Web 2.0 Weekly

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Text of 09 07 07 Web 2.0 Weekly

  • 1. SOFTWARE & SERVICES 7 JULY 2009 DAVID SHORE, CFA, MBA 416.860.6784 WEB 2.O WEEKLY david.shore@researchcapital.com Arun Thomas (Associate) 416.860.7666 ADVERTISING MANAG EMENT COMPANY HI-MEDIA ACQUIRES ADLINK INTERNET MEDIA FO R $41 MILLION IS T H I S T H E BE GI N NI NG OF BA C KW A RD I NT EG R A T IO N? W e have often discussed in our various publications about the crossover of old media (TV, Radio, and Newspapers) into new media platforms such as blogs/micro-blogs, online video, online radio, mobile media, etc. Alongside this crossover, the role of the traditional advertising/media buying companies is changing rapidly. W ith the ability to target advertisements (on the new platforms) to very specific demographics and user base, the new media platform has helped create the analytics sector that provides data to media buyers or in themselves distribute advertisements through their affiliate networks using the data (or intelligence) they have amassed. W e believe that the acquisition of AdLink (an internet marketing solutions company) by a large online publisher such as Hi-Media validates the potential of a backward integration in the online media and advertising sector. W ith the sector being in the very early stages, these business models or operating models are far away from maturity. Nevertheless, we expect to see many more such partnerships or integrations in the future. A quiet week on the capital raise front: Last week being marked by holidays in both Canada and United States, it was extremely quiet on the capital raise front. Total capital raised for the first few days of July is $4 million on a single transaction. Hi-Medias acquisition of AdLink Internet Media (July 6, 2009) for $41 million was the other transaction of note. June closed with $180 million on 36 transactions. It was led by Sugar Inc. raising $16.0 million, closely followed by Tumri ($15 million), Boku ($13 million), W imba ($12 million), and Grab Networks ($12 million). The averages for the months of May (excluding the Facebook transaction) and June were $6.4 million and $4.7 million, respectively. Financing Activity Last Three Months 200.0 7.0 6.4 180.0 6.0 160.0 5.0 140.0 4.7 120.0 4.0 4.0 (US$m) (US$m) 100.0 3.0 80.0 60.0 2.0 40.0 1.0 20.0 0.0 0.0 May-09 (excl FB) Jun-09 Jul-09 Total Average Price performance for the week was mixed: The companies in our universe had a mixed stock price performance over the past week (for stocks with prices greater than $1) (Figure 6), with 22 companies showing positive returns on the week. VOIS Inc. (VOIS:OTCBB) led the group with a 30.9% return, while Tencent Holdings Ltd. (700-SEHK) had the worst return, dropping 7.4% in the week. This report has been created b y Anal ysts that are emplo yed b y Research Capital Corporation, a Canadian Investment Dealer. For further disclosures, please see last page of this report. w w w . r e s e a rc h c a p i t a l . c o m T o ro n t o 4 1 6 . 8 6 0 . 7 6 0 0 Montreal 514.399.1500 Vancouver 604.662.1800 Calgary 403.265.7400 Regina 306.566.7550
  • 2. Page 2 THE WEB 2.0 UNIVERSE Ninety public Web 2.0 companies identified: Our W eb 2.0 universe contains 90 companies, with a combined market cap of ~$53 billion (Figure 1). The average market cap for the group is ~$588 million (but a median of only $50.0 million), with average trailing revenue of $152.2 million (median $54.1 million). The companies are also generally profitable, with a median EBITDA margin of 13.2%. On a valuation basis, the overall average is 4.6x trailing revenue (median 1.4x) and 10.1x trailing EBITDA (median 9.2x). Fourteen of the companies have more than 500 employees. C omparable C ompany A nalys is > W eb 2.0 Trading Current U S D Market U S D LT M To tal US D L TM T otal E BITD A T E V/LT M TE V /L TM C om pany Nam e L TM as o f T icker E xchange Currenc y HQ Price C ap ($m) R ev ($m) E B ITDA ($m) % R evenue E BITDA E mplo yees Acce le riz e N ew Me dia, Inc. 3 /31 /200 9 AC LZ OT C B B USD U nited S ta tes 0 .50 1 3.8 4.1 (4 .4) NM 4.6x - 11 Actoz S of t C o., L td. 3 /31 /200 9 A0 527 90 K OS E KR W S o uth K orea 25 100 16 9.2 91. 0 1 9.8 21 .7% 1.5x 7. 1x NA AQ Inte ractive , Inc. 3 /31 /200 9 38 38 TSE J PY J apan 69 100 3 9.6 65. 1 4 .1 6 .3% 0.2x 2. 5x NA As s ocia ted Media H oldings Inc. 6 /30 /200 7 AS MH OT C P K USD U nited S ta tes 0 .02 0 .9 0.1 (2 .3) NM 1 9.2 x - 3 B igstring Co rp. 3 /31 /200 9 BS GC OT C B B USD U nited S ta tes 0 .03 1 .8 0.1 (2 .0) NM 4 3.2 x - 4 B e tawave Corpora tion 3 /31 /200 9 B W AV OT C B B USD U nited S ta tes 0 .10 2 .9 8.4 (1 2.6) NM - - 53 B e yond Commerce, Inc. 3 /31 /200 9 B Y OC OT C B B USD U nited S ta tes 0 .44 1 9.8 7.1 (9 .5) NM 3.5x - 69 B right T hings plc 9 /30 /200 8 AIM:B G T AIM G BP U nited K ingdom 0 .02 4 .8 0.3 (1 .8) NM 1 7.6 x - 9 B roa dW ebAs ia Inc. 9 /30 /200 8 BW BA OT C P K USD U nited S ta tes 0 .23 1 9.5 0.0 (4 .6) NM - - 46 C D C C orp. 3 /31 /200 9 C HIN .A N as da qG S USD H ong K ong 1 .43 15 1.7 389 .9 3 0.8 7 .9% 0.4x 5. 4x NA C ha ngyou. com Limite d 3 /31 /200 9 C Y OU N as da qG S USD C hina 38 .83 2,1 35.7 222 .5 13 5.1 60 .7% 8.8x 14 .4x 6 28 C hina G ate wa y C orpo ra tion