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The Virtual Goods Ecosystem

        December 2010

         CONFIDENTIAL
A Word from Gridley & Company, LLC

The post Web 2.0 digital environment is creating communities and different
“realms” where users can connect with others. The biggest example is social
networks, but they also include other various platforms as well as online games. In
many of these virtual worlds, especially niche ones, users are very engaged with
their communities and activities. These activities have spawned a particular class
of assets: virtual goods. By creating a currency that users actively work for and
trade, the users become even more engaged in their virtual world. This presents an
opportunity for marketers to reach audiences and provides a way for virtual world
operators to monetize their creation. In this report, we go through the different
players in the virtual goods ecosystem.
We hope you enjoy this comprehensive industry overview and our perspectives.
Please give us a call to discuss the content of this presentation.
                                    Linda Gridley
                                  President & CEO
                            linda.gridley@gridleyco.com
     Karen Yau Smith                212-400-9710                   Pratik Patel
       Vice President                                            Vice President
karen.smith@gridleyco.com                                 pratik.patel@gridleyco.com
        212-400-9718                                              212-400-9712

                                       2
Fresh Opportunities in Virtual Goods
    • Global virtual goods market amounts to $5.5 billion; U.S. market alone expected
      to reach $2.5 billion by 2013
    • Approximately 12% of Americans have bought a virtual good at some point
      between July 2008 and July 2009, and average spending is up 14% in 2010 to $99

                                                             Virtual Goods Revenue Estimates

                           $7,000
                                                                                                                                                 $6,006
                           $6,000
                                                                                                                              $5,047
                           $5,000
                                                                                                          $4,070
                                                                                                                                                 $3,544
                           $4,000
                      $M




                                                                                     $3,107                                   $3,028
                           $3,000                                                                         $2,523
                                                                 $2,219
                           $2,000                                                    $2,020
                                            $1,325
                                                                 $1,598                                                                          $2,462
                           $1,000           $1,060                                                                            $2,019
                                                                                                          $1,547
                                                                                     $1,087
                                             $265                 $621
                                 $0
                                              2008                2009                2010                 2011                 2012             2013

                                                                                          U.S.      Non-U.S.
Source: eMarketer (August 2009), Magid Survey (May 2010)
Note: More recent figures from Inside Virtual Goods estimate the U.S. market to be $1 billion and $1.6 billion for 2009 and 2010, respectively

                                                                                             3
Recent Investments Are Legitimizing Opportunity
             • Former Disney CEO Michael Eisner invested $300,000 in seed
       /       funding in social gaming company Diversion through his
               investment company on October 18, 2010


             • Google announced acquisition of Jambool (Social Gold) for a
   /           rumored $70MM on August 13, 2010


             • Google invested $100-$200 million in Zynga in an under-the-
   /           table deal in July 2010


             • SponsorPay raised $5 million in its first round of funding, led by
               Hasso Plattner Ventures, on June 9, 2010


             • Digital River acquired FatFooGoo for $10 million on May 5,
   /           2010



                              4
Industry Perspectives on Virtual Goods
• “Monetization in virtual goods will continue to grow, and we will see the
  emergence of a select few successful platforms, as well as several popular virtual
  currencies. Once such currencies have been established, the growth of secondary
  markets and currency exchanges will most likely follow.”
                            - Vikas Gupta, Co-Founder/CEO, Social Gold by Jambool

• “Virtual goods will become a strong option for brands to drive engagement in
  social media and will become the standard for branded advertising in social
  media, finally providing clear value proposition for brands in social media and
  social gaming.”
                            - Joe Hyrkin, Entrepreneur in Residence, Trinity Ventures


• “Growth will continue to be exponential as social gaming becomes more and
  more mainstream. Everyone will make more money as the pie grows bigger for all
  of us collectively.”
                                                    - Charles Ju, Founder, Playmesh

• “We have seen companies go from nothing in the last 18-24 months to tens and
  hundreds of millions of dollars in revenues [from virtual goods].”
                                         - Jeremy Liew, Lightspeed Venture Partners

                                         5
Young Players in a Fresh Landscape


               Ad
            Networks

 Social                      Virtual
Networks                                 Platform
                            Currency
                                         Providers
                            Providers

             Game
           Developers

                                   Payment
                                  Processors



                        6
Young Players in a Fresh Landscape




                     7
Social Networks Provide Users
• Exhibited phenomenal growth within the past 5 years
    - By 2013, an estimated 52% of internet users will be regular social network visitors
• Provide consumer base, marketplace, and contextual structure for virtual goods
  transactions



              Facebook         MySpace         Friendster        hi5        Classmates.com     Bebo




                              Michael Jones
                Mark               &             Richard                        Mark          Joanna
CEO           Zuckerberg     Jason Hirschorn     Kimber      Bill Gossman      Goldston       Shields


Registered
Users        > 500,000,000     70,000,000      100,000,000   60,000,000       50,000,000     12,000,000

             About 75% of                                     Popular in
User           users are       User base       Popular in      Mexico,         User base        More
Profile       outside the    Predominantly     South East     Thailand,      Predominantly     popular
                 U.S.         within U.S.        Asia            and          within U.S.    in UK than
                                                               Portugal                        in U.S.


                                                  8
Social Networking M&A Transactions
($ in millions)
                                                                                   Implied     LTM      LTM
                                                                                  Enterprise Revenue EBITDA
Date         Acquiror                          Target                               Value    Multiple  Multiple
10/22/10     Kabam, Inc.                       WonderHill, Inc.                           NA        NA       NA
10/06/10     Beyond.com, Inc.                  Orbius, Inc.                               NA        NA       NA
09/14/10     GameHouse, Inc.                   Backstage Technologies Inc                 NA       NA        NA
09/02/10     Recruiter.com                     RecruitingBlogs.com Inc.                   NA       NA        NA
08/31/10     AOL, Inc.                         Rally Up, Inc.                             NA       NA        NA
08/30/10     Google Inc.                       SocialDeck Inc.                            NA       NA        NA
08/25/10     Undisclosed                       Meetrandom.com                           $0.2       NA        NA
08/20/10     Facebook, Inc.                    Hot Potato                                 NA       NA        NA
08/06/10     Google Inc.                       Slide, Inc.                            182.0        NA        NA
08/04/10     Black Pants, Inc.                 Diva Dirt                                  NA       NA        NA
07/21/10     NetParty, LLC                     Charlotte Young Professionals, LLC         NA       NA        NA
07/09/10     Insparisk, LLC                    AuthorizedInspector.com                    NA       NA        NA
07/08/10     Facebook, Inc.                    nextstop.com, Inc.                         NA       NA        NA
07/01/10     FertilityAuthority.com, LLC       FertileThoughts.com                        NA       NA        NA
06/16/10     Criterion Capital Partners, LLC   Bebo, Inc.                             < 10.0       NA        NA
06/08/10     Salem Web Network                 Big Jump Media, Inc.                      2.5       NA        NA
06/09/10     Vocus Inc.                        Two Cats and a Cup of Coffee              1.6       NA        NA
06/08/10     PurePhoto, Inc.                   PhotographyMentor.com, LLC                 NA       NA        NA
05/26/10     Facebook, Inc.                    Sharegrove Inc.                            NA       NA        NA
05/04/10     Trans Global Group, Inc.          RandPort, Inc.                             NA       NA        NA
03/26/10     Maverick Capital, Ltd.            Loopt, Inc.                                NA       NA        NA
03/22/10     WebMediaBrands Inc                Rotorblog.com                              NA       NA        NA
02/02/10     Ali Wing, Inc.                    The Cradle, LLC                            NA       NA        NA
12/16/09     Ontela, Inc.                      Photobucket, Inc.                          NA       NA        NA
12/09/09     MOL AccessPortal Bhd              Friendster, Inc.                         39.4       NA        NA
                                                     9
Social Networking M&A Transactions (cont’d)
($ in millions)
                                                                                  Implied     LTM     LTM
                                                                                 Enterprise Revenue EBITDA
Date         Acquiror                               Target                         Value    Multiple Multiple
12/08/09     Global Grind Digital, Inc.             CelebrityTweet                       NA       NA       NA
10/09/09     Stratus Media Group, Inc.              ProElite, Inc.                       NA       NA      NM
09/27/09     GovDelivery, Inc.                      GovLoop                              NA       NA       NA
08/26/09     Delivery Concepts, LLC                 Eats Media, LLC                      NA       NA       NA
08/19/09     MySpace, Inc.                          iLike, Inc.                      $19.5        NA       NA
07/31/09     Atrinsic, Inc.                         Shopit.com, Inc.                    2.7       NA       NA
07/28/09     Cascadia Investments, Inc.             www.phace.mobi                       NA       NA       NA
07/06/09     Match.com, LLC                         People Media L.L.C.               57.0        NA       NA
06/04/09     Cascadia Investments, Inc.             TinyTwirp.com                        NA       NA       NA
04/07/09     No Sleep Media LLC                     Limbo Inc.                           NA       NA       NA
03/09/09     Stardoll AB                            Piczo, Inc.                          NA       NA       NA
03/02/09     TuitionU.com Inc.                      GreenNote, Inc.                      NA       NA       NA
01/27/09     Digital Age Motorsports, LLC           Hot Import Nights LLC                NA       NA       NA
01/26/09     Alloy Inc.                             Takkle, Inc.                        0.7       NA       NA
01/13/09     MixMatchMusic, Ltd.                    Mix2r Media Inc.                     NA       NA       NA
12/17/08     IB3 Networks, Inc.                     MGV Communications                   NA       NA       NA
12/01/08     Six Apart Ltd.                         Pownce, Inc.                         NA       NA       NA
08/27/08     Lifetime Entertainment Services Inc.   ParentsClick Network, Inc.           NA       NA       NA
08/24/08     Amazon.com Inc.                        Tastemakers, Inc.                    NA       NA       NA
08/04/08     AOL, LLC (nka:Historic AOL LLC)        Socialthing, Inc.                    NA       NA       NA
07/30/08     Deluxe Corp.                           PartnerUp, Inc.                     3.8       NA       NA
07/20/08     CrowdFunder, Inc.                      Gubb, Inc.                          0.2       NA       NA
07/09/08     Bigstring Corp.                        Buddystumbler, Inc.                 0.1       NA       NA
03/30/08     Buzznet, Inc.                          Tagshine Corp.                       NA       NA       NA
03/24/08     Follett Corporation                    Fourteen40, Inc.                     NA       NA       NA

                                                           10
Social Networking M&A Transactions (cont’d)
($ in millions)
                                                                                  Implied     LTM     LTM
                                                                                 Enterprise Revenue EBITDA
Date         Acquiror                            Target                            Value    Multiple Multiple
03/13/08     AOL, LLC                            Bebo, Inc.                         $860.0        NA       NA
02/28/08     LiveUniverse.com, Inc.              Revver, Inc.                            NA       NA       NA
02/07/08     uLocate Communications, Inc. (nka:W Zync, Inc.                              NA       NA       NA
12/31/07     USA Today International Corporation BNQT                                    NA       NA       NA
12/19/07     Tiger Global Management; MYNET      Yonja, LLC                              NA       NA       NA
12/06/07     Double Eagle Holdings, Ltd.         Ultimate Social Network, Inc.          1.8       NA       NA
12/04/07     Fox Digital Media                   Beliefnet, Inc.                         NA       NA       NA
11/17/07     Penthouse Media Group, Inc.         Various, Inc.                       500.0        NA       NA
11/02/07     Microsoft Corporation               WebFives Corp.                          NA       NA       NA
10/09/07     Disaboom Inc.                       Lovebyrd.com, LLC                      0.1       NA       NA
08/28/07     BabyCenter, LLC                     Maya's Mom, Inc.                        NA       NA       NA
08/25/07     Hi-Media S.A.                       Fotolog, Inc.                        90.0        NA       NA
08/14/07     Jack 9 Entertainment, Inc.          CommunityX.net                          NA       NA       NA
07/02/07     SideStep, Inc.                      TripUp, Inc.                            NA       NA       NA
06/12/07     American Capital Strategies, Ltd.   Zencon Technologies, L.L.C.             NA       NA       NA
06/11/07     The Amergence Group                 SonicMountain, Inc.                     NA       NA       NA
05/30/07     Canvas Technology Inc.              Flektor, Inc.                           NA       NA       NA
05/30/07     MySpace, Inc.                       Photobucket, Inc.                       NA       NA       NA
05/10/07     SonicMountain, Inc.                 Odeo, Inc.                              NA       NA       NA
04/17/07     ProElite, Inc.                      MMAMix.com                              NA       NA       NA
03/09/07     NA                                  Decentral.tv Corp.                      NA       NA       NA
02/09/07     Cisco Systems, Inc.                 Five Across, Inc.                       NA       NA       NA




                                                         11
Online Games Are The Swans…
• Global population of virtual worlds expected to grow to about 640 million by 2015
• According to eMarketer, social games could generate $2.2 billion in virtual dollars
  by 2012
                                     Year                                                                       Capital
Company                            Founded      Type                           Investors                     Raised ($mm)
            www.bigfishgames.com    2002       Social        Balderton Capital, General Catalyst Partners,      $88.3
            Seattle, WA                      Networking      Salmon River Capital LLC


            www.bigpoint.net        2002       Social        GMT Communications Partners LLP, Peacock            8.2
            New York, NY                     Networking      Equity Fund


            www.gaiaonline.com      2003       MMOG          Benchmark Capital, DAG Ventures LLC,                19.9
            San Jose, CA                                     Institutional Venture Partners, Redpoint
                                                             Ventures, Sony Pictures Television Inc.,Time
                                                             Warner Investments
            www.secondlife.com      2000     Virtual World   Benchmark Capital, Catamount Ventures               19.0
            San Francisco, CA                                Management LLC, Globespan Capital Partners,
                                                             Omidyar Network
  (Linden
   Lab)
            www.playdom.com         2008       Social        Lightspeed Venture Partners, New Enterprise         76.0
            Mountain View, CA                Networking      Associates, Norwest Venture Partners

 (Disney)
            www.sulake.com          2000       Social        3i Group plc, Balderton Capital, Benchmark          35.9
            Helsinki, Finland                Networking      Capital, Elisa Oyj, Movida Group, Taivas

            www.there.com           2005     Virtual World   NA                                                  NA
            San Mateo, CA
 (Makena)
            www.zynga.com           2007       Social        Avalon Ventures, Foundry Group, Institutional      589.6
            San Francisco, CA                         12
                                             Networking      Venture Partners, Kleiner, Perkins Caufield &
                                                             Byers, Union Square Ventures
Online Gaming M&A Transactions
($ in millions)
                                                                                 Implied     LTM      LTM
                                                                                Enterprise Revenue EBITDA
Date         Acquiror                      Target                                 Value    Multiple  Multiple
10/22/10     Kabam, Inc.                   WonderHill, Inc.                             NA        NA       NA
09/14/10     GameHouse, Inc.               Backstage Technologies Inc                  NA        NA        NA
09/13/10     DeNA Global, Inc.             Gameview Studios, LLC                       NA        NA        NA
08/30/10     Google Inc.                   SocialDeck Inc.                              NA       NA        NA
08/17/10     Zynga, Inc.                   Conduit Labs, Inc.                           NA       NA        NA
08/11/10     Joytoto Company Limited       Joytoto America, Inc.                        NA       NA        NA
08/02/10     Titan Gaming, Inc.            Xfire, Inc.                                 NA        NA        NA
07/27/10     Walt Disney Co.               Playdom, Inc.                           $763.2        NA        NA
07/08/10     MTV Networks Company          Social Express, Inc.                         NA       NA        NA
06/24/10     Playdom, Inc.                 Hive7.com, Inc.                              NA       NA        NA
06/03/10     Zynga, Inc.                   Challenge Games, Inc.                        NA       NA        NA
05/18/10     Playdom, Inc.                 Acclaim Games, Inc.                          NA       NA        NA
05/12/10     ngmoco, Inc.                  Stumptown Game Machine, LLC                  NA       NA        NA
04/26/10     Playdom, Inc.                 Merscom, LLC                                 NA       NA        NA
04/20/10     News Corp.                    Irata Labs                                   NA       NA        NA
03/03/10     Playdom, Inc.                 Offbeat Creations, Inc.                      NA       NA        NA
02/24/10     hi5 Networks, Inc.            Big Six Games, Inc.                          NA       NA        NA
02/08/10     Zynga, Inc.                   Serious Business, Inc.                       NA       NA        NA
02/03/10     Almaz Capital Partners        Alawar Entertainment Inc.                 13.0        NA        NA
01/13/10     iEntertainment Network Inc.   Thriller New Media, Inc.                     NA       NA        NA
01/06/10     Cascadia Investments, Inc.    CustomFlashGames.com                         NA       NA        NA
12/03/09     Intralot SA                   CyberArts Licensing LLC                   34.3        NA        NA
12/03/09     Artix Entertainment LLC       Epic Inventions LLC                          NA       NA        NA
11/18/09     NeoEdge Networks, Inc.        Offspring                                    NA       NA        NA
11/12/09     Playdom, Inc.                 Trippert, Inc. and Green Patch, Inc.         NA       NA        NA
                                                  13
Online Gaming M&A Transactions (cont’d)
($ in millions)
                                                                                         Implied     LTM      LTM
                                                                                        Enterprise Revenue EBITDA
Date         Acquiror                               Target                                Value    Multiple  Multiple
11/09/09     Electronic Arts                        Playfish                               $391.3        NA        NA
08/24/09     Live Gamer, Inc.                       TwoFish, Inc.                               NA       NA        NA
07/28/09     Cascadia Investments, Inc.             www.phace.mobi                              NA       NA        NA
01/16/09     Sony Online Entertainment, LLC         Octopi LLC                                  NA       NA        NA
12/09/08     Infogrames Entertainment SA            Cryptic Studios, Inc.                    74.8      4.40x       NA
10/10/08     SouthPeak Interactive Corp.            Gamecock Media Group                     32.5      8.83x      NM
09/23/08     Funtank, LLC                           Candystand.com                              NA       NA        NA
08/18/08     IG Interactive Entertainment Limited   True Games Interactive, Inc.                NA       NA        NA
07/28/08     NA                                     Octopi LLC                                  NA       NA        NA
06/30/08     Mediastay North America Inc.           LSF Network, Inc., Luckysurf Assets         NA       NA        NA
04/01/08     THQ Inc.                               Elephant Entertainment, LLC                 NA       NA        NA
11/12/07     Big Fish Games, Inc.                   Thinglefin, Inc.                            NA       NA        NA
09/21/07     RealNetworks Inc.                      Game Trust, Inc.                         20.2        NA        NA
07/20/07     Finam Capital Partners                 Alawar Entertainment Inc.                   NA       NA        NA
05/15/07     Sony Online Entertainment, LLC         Sigil Games Online, Inc.                    NA       NA        NA
04/30/07     NA                                     Interplay Entertainment Corp.               NA       NA       NM




                                                          14
…And Virtual Goods Are The Golden Eggs
• Microtransactions drive the virtual goods market
   - Microtransactions expected to grow to $17.3 billion in 2015
                                                                                                              Capital
                                           Year                                                               Raised
   Company                               Founded                           Investors                          ($mm)
                   www.ariasystems.net    2002     Hummer Winblad Venture Partners, Venrock                   $14.0
                   Media, PA

                   www.come2play.com      2007     NA                                                           1.0
                   NA

                   www.dealunited.com     2007     Bertelsmann Digital Media Investments, High-Tech             6.2
                   Munich, Bavaria                 Gründerfonds Management GmbH, Sympasis Innovation
                                                   Capital GmbH, VI Partners AG

                   www.fatfoogoo.com      2006     Acquired by Digital River, Inc. on May 5, 2010; previous     NA
                   Vienna, Austria                 investors include Digital River and Gamma Capital
 (Digital River)                                   Partners


                   www.gwallet.com        2008     Adams Street Partners, LLC, Trinity Ventures                10.5
                   San Francisco, CA

                   www.getgambit.com      2007     Shopping.com                                                 NA
                   San Jose, CA
 (Kickflip)
                   www.heyzap.com         2009     Union Square Ventures, Y Combinator                         $3.7
                   San Francisco, CA


                                                        15
…And Virtual Goods Are The Golden Eggs
• Microtransactions drive the virtual goods market
   - Microtransactions expected to grow to $17.3 billion in 2015
                                                                                                        Capital
                                      Year                                                              Raised
  Company                           Founded                          Investors                          ($mm)
             www.livegamer.com       2007     Charles River Ventures, FirstMark Capital LLC, Kodiak     $36.6
             New York, NY                     Venture Partners


             www.mochimedia.com      2005     Purcahsed by Shanda Games (NasdaqGS: GAME) on Jan.         14.0
 (Shanda     San Francisco, CA                31, 2010, for $80.0MM; previous investors include Accel
 Games)                                       and Shasta Ventures



             www.peanutlabs.com      2005     BV Capital, BV Capital Management, LLC, eVenture            4.2
             San Francisco, CA                Capital Partners GmbH, LundKenner A/S

             www.playspan.com        2006     Easton Capital Investment Group, Ecosystem Ventures        48.3
             Santa Clara, CA                  LLC, Menlo Ventures, Novel TMT Ventures Limited, STIC
                                              International, STIC Investments Inc.
             www.qinteractive.com    1995     Intrepid Investments                                        NA
             Chicago, IL

             www.sometrics.com       2007     AT&T, Inc., Big Sky Partners, Greycroft, LLC, Steamboat
             Los Angeles, CA                  Ventures, LLC, The MailRoom Fund                            NA

             www.sponsorpay.com      2009     Hasso Plattner Ventures, Kite Ventures, Team Europe
             Berlin, Berlin                   Ventures                                                    4.6


                                                  16
…And Virtual Goods Are The Golden Eggs
• Microtransactions drive the virtual goods market
   - Microtransactions expected to grow to $17.3 billion in 2015
                                                                                                      Capital
                                   Year                                                               Raised
  Company                        Founded                          Investors                           ($mm)
             supersonicads.com    2008     NA                                                          $2.0
             London, UK

             www.twofish.com      2006     Rustic Canyon Partners, TriplePoint Capital LLC, Venrock     9.5
             Palo Alto, CA

             www.viximo.com       2007     North Bridge Venture Partners, Sigma Partners                9.0
             Cambridge, MA




                                                17
Virtual Goods M&A Transactions
($ in millions)
                                                                         Implied     LTM     LTM
                                                                        Enterprise Revenue EBITDA
Date              Acquiror           Target                               Value    Multiple Multiple
08/09/10          Google Inc.        Jambool, Inc.                          $70.0        NA       NA
03/09/10          InComm, Inc.       Zeev Exchange, Inc.                        NA       NA       NA
08/24/09          Live Gamer, Inc.   TwoFish, Inc.                              NA       NA       NA
07/28/09          Live Gamer, Inc.   N-Cash Co., Ltd.                           NA       NA       NA
04/21/09          PlaySpan, Inc.     Spare Change Payments, Inc.                NA       NA       NA
07/15/08          PlaySpan, Inc.     Internet Payment Solutions, Inc.           NA       NA       NA




                                            18
Platform Providers Facilitate the Process
                                                                                                                Capital
                                          Year                                                                  Raised
  Company                               Founded                            Investors                            ($mm)
                www.doubletrump.com      2006     Cedar Fund, Giza Venture Capital                                NA
                New York, NY
                www.sponsorpay.com       2009     Hasso Plattner Ventures, Kite Ventures, Team Europe            $4.6
                Berlin, Germany                   Ventures


                www.offerpalmedia.com    2007     D.E. Shaw Venture Capital, InterWest Partners, North Bridge    19.6
                Fremont, CA                       Venture Partners
                www.payvment.com          NA      NA                                                              NA


                www.rixty.com             NA      NA                                                              1.2
                San Francisco, CA

                www.srpoints.com         2007     Technology Crossover Ventures                                  48.0
                Vancouver, Canada
(Adknowledge)
                www.trialpay.com         2006     Atomico Investment Holdings Limited, Battery Ventures,         15.8
                Mountain View, CA                 Index Ventures




                                                       19
Payment Processors Power the Process
                                                                                                                     Capital
                                                   Year                                                              Raised
  Company                                        Founded                          Investors                          ($mm)
                  www.billingservicesgroup.com    2005      ABRY Partners LLC, Artemis Investment Management           NA
                  AIM: BILL                                 Ltd., CapitalSouth Partners, CapitalSouth Partners
                  San Antonio, TX                           Fund L.P., Patient Safety Technologies Inc., Waterside
                                                            Capital Corporation
                  www.paymentech.com              1985      First Data Corp.                                           NA
                  Dallas, TX
(J.P.Morgan
Chase & Co.)
                  www.daopay.com                   NA       NA                                                         NA
                  London, UK

 (DaoTec Ltd.)
                  www.orcaone.com                  NA       NA                                                         NA
                  New York, NY


                  www.paybycash.com               1998      NA                                                       $28.3
                  Charlottesville, VA
(Playspan Inc.)
                  www.paymentpin.com              2004      NA                                                         NA
                  Montreal, Canada


                  www.paypal.com                  1998      Acquired by eBay on October 3, 2002, for $1.5BN            NA
                  San Jose, CA


                  www.jambool.com                 2006      Bay Partners, Charles River Ventures, Hit Forge,           6.0
   (Google)       San Francisco, CA                         Madrona Venture Group
                                                           20
Facebook’s Push into Virtual Goods
• Facebook introduced a virtual currency / payment platform called
  Facebook Credits

• Credits are used to make purchases within the Facebook platform, e.g.
  premium items in games, virtual gifts, and other services

• Facebook gets a 30% fee for usage of Credits

• Target stores have started selling Facebook Credits gift cards nation-
  wide

• According to Sean Parker, who was founding President, Facebook
  Credits will make up a third of Facebook’s income in the next twelve
  months




                                    21
Investment Considerations
Highlights                                     Risks
 Recent investment and partnership             Monetization of virtual goods dependent
  activity in virtual goods underscore           on volume of users and scale
  potential growth in the industry
                                                Virtual payment infrastructure is still in
  – Facebook’s partnerships with PayPal          its infancy
    and Zynga
                                                Software model is still a hindrance in
 Margins are spectacular                        virtual currency adoption
                                                 – Packaged software model still persistent
                                                 – Lack of free-to-play model




                                          22
Investment Recommendations
• Virtual goods ecosystem for gaming is maturing around Facebook

    • Removes points of control for incumbents (Zynga, etc.)

    • Creates more liquid market for consumers

    • Levels playing field for newcomers – opportunity in creative game
      creation still very large

• Tremendous opportunity for virtual goods in many other areas where
  consumers will engage

    • Customer loyalty

    • Shopping

    • Health

    • Education

    • Many others


                                   23
Appendix




   24
Highly Focused Industry Expertise Underlies
Our Investment Banking Services
• Founded in 2001, headquartered in New York, NY

• Sharp focus provides valuable strategic insights and perspectives for clients
             Advertising &                            Internet Services
           Marketing Services                      • Adserving / Online Media Network
               • Advertising Agencies                               • Customer Acquisition / Affinity Marketing
               • Customer Care                                      • Content Driven Aggregation
               • Database Marketing                                 • Contextual Advertising / Search
               • Loyalty Marketing                                  • Customer / Web Analytics
               • Market Research                                    • Online Research
               • Specialty Marketing Services                       • Electronic Payments / Internet Banking
                                                      INFORMATION
               • Teleservices                                       • EC / Web Integrators
                                                           &
                                                      TECHNOLOGY
                                                           &
                 Database /                             SERVICES    Financial Technology and
            Information Services                                      Outsourcing Services
              • Data Analytics / Decisioning
                                                                      • Payment and Transaction Processing
              • Consumer / Specialty Data Providers
                                                                      • Financial Security
              • Business Data Providers
                                                                      • Financial Technology / Outsourcing
              • Financial Information Services
                                                                      • Business Process Services
              • Specialty Information Providers
                                                                      • IT Consulting / Systems Integration
              • IT Research
                                                                      • IT Outsourcing




                                                         25
About Gridley
•   Leading boutique Investment Bank specializing in Information Services

    – Comprehensive perspective on Advertising, Marketing, Financial Technology and Information Services
      trends and transactions

•   Strong industry reputation on assignments led by senior bankers

    – Sellside = Excellent strategic positioning and valuation

    – Buyside = Deep knowledge and access to emerging companies and industry trends

•   Trusted advisor and strategic matchmaker

    – Thoughtful M&A ideas – not just the logical public company combinations

    – Deliver value to buyers and sellers alike

•   Broad industry network developed over 20+ years

    – Industry leaders, hot emerging growth companies, and senior investors

    – Senior executives on Gridley Advisory Board

•   Well-known thought leader

    –   Host of leading Annual Information Services Conference and participant in industry events

    – Highly regarded quarterly newsletter – 2,200+ distribution

    – Sought after commentator and resource for the media

                                                      26
Gridley Provides Comprehensive Investment
    Banking Services

                      Client-centric Products and Services


        Industry Leaders         Emerging Growth Companies                Private Equity Firms
•   Buyside Advisory Services    •   Sellside Advisory Services     •   Buyside Advisory Services for
                                                                        Existing Portfolio & New
                                 •   Private Placement Services
•   Fairness Opinions                                                   Business Initiatives
                                 •   Buyside Advisory Services
                                                                    •   Sellside Advisory Services for
•   Corporate Divestitures
                                 •   Strategic Growth Consultants       Portfolio Companies
•   Strategic Industry and       •   Potential Board Member         •   Potential Management / Board
    Company Studies                  Introductions                      Member Introductions
                                 •   Potential Business Partner     •   Industry and Market Trends
•   Industry and Market Trends
                                     Introductions                      Presentations to Senior
    Presentations to Senior
                                                                        Management and Board of
    Management and Board of      •   Industry and Market Trends
                                                                        Directors
    Directors                        Presentations to Senior
                                     Management and Board of
                                     Directors



                                                 27
Gridley Provides Comprehensive Investment
Banking Services
                           Strategic Acquirer           Strategic
                               Targeting               Consulting
     Transaction                                                       Negotiation of
     Pricing and                                                         Issues and
     Structuring                                                       Documentation




                                     M&A AND
                                    ADVISORY
      Due Diligence                CAPABILITIES                     M&A Modeling and
                                                                       Valuation




                                                                       Board
       Fairness Opinions
                                         Other General              Presentations
                                        Advisory Services




                                                28
Leading Annual Industry Conference Showcases
Our Extensive Network of Relationships
• Bellwether event focused on our targeted industries
• Approximately 475 senior-level executives from over 300 companies
     –   Industry leaders, emerging companies, and premier private equity and debt investors
     –   Creates exceptional industry networking and exchange of ideas
• Differentiated audience and participants vs. other conferences
     –   Audience = senior industry executives, not institutional buy-side investors
     –   Speakers = leading CEOs and executives from top companies:
• Highly personalized with Gridley arranged “1-on-1”s for clients, presenters, sponsors
• Presentations by approximately 30 premier private companies and industry panels addressing
  timely topics each year




                                                         29
Event History – Track Record of Finding
Successful Companies
• 164 private companies have presented since 2004

• Approximately 60% have completed liquidity transactions




                                      30
Participation at Industry Events Extends Our
Network and Showcases Our Thought Leadership
                              Conferences with Gridley Participation
     Dec. 2010    Business Insider: IGNITION             Speaker
                                                         “How to Build a $1 Billion Content Business in Three Years or Less”
     Nov. 2010    Digital Hollywood NYC: Media           Moderator
                  Disruption                             - Private Equity and Investor Strategy Panel
                                                         - “The Technology and Entertainment Based Company: From First Round
                                                         to Implementing the Revenue Growth Target Strategy”
     Nov. 2010    ad:tech NYC 2010                       Keynote Speaker
                                                         “Digital: Taking a BIG Bite out of the Big Apple”

     Nov. 2010    Stand Up and Deliver: The              Panelist:
                  Targeting Machine Gets Tested          “I’m With the Brand: Is Ad Net Inventory Ready to Lift the Right Metrics?
     May 2010     TARGUSinfo 2010 Scoring Summit         Speaker:
                                                         “Innovation and Shareholder Value: Why You Need to Take Analytics Real
                                                         Time”
     Mar. 2010    SIIA Digital Media & Software          Speaker:
                  Investment Conference                  “How to Play Your Hand in the M&A Market”
     Feb. 2010    OnMedia NYC 2010                       Panelist:
                                                         “Pricing Private Companies: What’s the 2010 Strategy?”

     Nov. 2009    Audience is King: Targeting the        Panelist:
                  Challenges of 2010                     “Is the Long Tail Wagging? Have the Vertical Networks Lived Up to Their
                                                         Own Hype?”
     Aug. 2009    LeadsCon East                          Panelist:
                                                         “Role of Institutional Advertising in Shaping Internet Advertising”
     July 2009    Ad Network Gold Rush - Boom or         Moderator:
                  Bust?                                  “Are Verticals Standing Up?”

     April 2009   Mobile Marketing                       Panelist:
                                                         “Resolved: Sorry, It’s Still Not Ready”


                                                    31
More than 2,200 Senior Industry Executives
Read Our Quarterly Newsletter
                                     • Highly respected quarterly newsletter
                                       on industry trends and corporate
                                       finance / M&A activity – The Compass
                                         – Broad, targeted reach: over 2,200 industry
                                           CEO’s and CFO’s, investors, and financial
                                           sponsors

                                         – One of the top investment banking
                                           generated publications in the industry

                                         – Less than 25 opt-out requests since initial
                                           publication in Q1 2003
                                                           The Compass Readership

                                     3,000                                               +23.7%




                                                                                                                    Annual Growth
                                     2,500                                   +26.7%                         2,548
                                                                   +29.3%
                                                                                                  2,350
                                     2,000
                           Readers
                                                          +47.6%
                                                                                       1,900
                                     1,500      +31.0%
                                                                             1,500

                                     1,000                         1,160

                                                         786
                                      500     600

                                        0
                                             2003   2004       2005         2006      2007     2008       7/30/09


                      32
The Media Also Seeks Out Our Insights on
Industry Trends and Transactions




                     33
Selected Recent Gridley Transactions
• Gridley clients include industry leaders and premier emerging growth companies

• Gridley provides strategic advisory work in addition to the transactions listed below

         $20,500,000            Undisclosed                   Undisclosed                   Undisclosed               Undisclosed                       Undisclosed                    Undisclosed




           Acquired by            Acquired by                    Acquired                      Acquired                 Acquired by                        Acquired                       Acquired
      The Dolan Company        WPP Group plc                 FetchBack Inc.              M3 Mobile Marketing      MDC Partners Inc.                       Pepperjam                 Silverlign Group Inc.
             Advisor                Advisor                       Advisor                      Advisor                    Advisor                           Advisor                        Advisor




         $20,000,000                                         $157,000,000                   Undisclosed                 Undisclosed                      Undisclosed                    Undisclosed
                                $367,000,000
                                                                                                                                                        Email Business of
                                                                                                                                                                                    Ad serving Business of




          Investment by           Acquired by                    Acquired                      Acquired by               Acquired by                         Sold to                        Sold to
        TZP Group LLC        Roper Industries, Inc.          e-Dialog, Inc.                 WPP Group plc             Quest Software              One to One Interactive, Inc.            Aegis plc
        Placement Agent                                                                         Advisor                    Advisor                           Advisor
                                   Advisor                        Advisor                                                                                                                  Advisor




         Undisclosed            $113,189,337                  $17,450,000                   Undisclosed                Undisclosed                      $138,000,000                    Undisclosed
                                                        PrePay Intelligent Network
                                                      Solutions (INS) Business Unit of




             Sold to           Secondary Offering               Acquired by                   Acquired by                Acquired by                        Acquired                      Acquired by
     Parthenon Capital LLC                                       Verisign                Schulman, Ronca, &     ISIS Equity Partners, Inc.           Modem Media, Inc.           Valassis Communications Inc
                                                                                           Bucuvalas, Inc.
            Advisor               Co-Manager             Issued Fairness Opinion               Advisor                     Advisor                          Advisor                        Advisor




                                $58,000,000                  Undisclosed                    $55,200,000                Undisclosed                       Undisclosed
                                                      Advisory Communications                                  Marketing One to One, Inc. d/b/a
                                                      Systems, Inc. (ACS) d/b/a




                                   Acquired                    Acquired by                                               Acquired by                        Acquired by
                                                                                          Follow-On Offering
                              Performics, Inc.               ARAG Group                                         Carlson Marketing Group            Alliance Data Systems, Inc.
                                   Advisor                       Advisor                      Co-Manager                   Advisor                           Advisor




                                                                                              34
Gridley & Company LLC
10 East 53rd Street, 24th Floor
    New York, NY 10022
      212.400.9720 tel
      212.400.9717 fax
     Twitter: @gridleyco
     www.gridleyco.com




            35

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The Virtual Goods Ecosystem

  • 1. The Virtual Goods Ecosystem December 2010 CONFIDENTIAL
  • 2. A Word from Gridley & Company, LLC The post Web 2.0 digital environment is creating communities and different “realms” where users can connect with others. The biggest example is social networks, but they also include other various platforms as well as online games. In many of these virtual worlds, especially niche ones, users are very engaged with their communities and activities. These activities have spawned a particular class of assets: virtual goods. By creating a currency that users actively work for and trade, the users become even more engaged in their virtual world. This presents an opportunity for marketers to reach audiences and provides a way for virtual world operators to monetize their creation. In this report, we go through the different players in the virtual goods ecosystem. We hope you enjoy this comprehensive industry overview and our perspectives. Please give us a call to discuss the content of this presentation. Linda Gridley President & CEO linda.gridley@gridleyco.com Karen Yau Smith 212-400-9710 Pratik Patel Vice President Vice President karen.smith@gridleyco.com pratik.patel@gridleyco.com 212-400-9718 212-400-9712 2
  • 3. Fresh Opportunities in Virtual Goods • Global virtual goods market amounts to $5.5 billion; U.S. market alone expected to reach $2.5 billion by 2013 • Approximately 12% of Americans have bought a virtual good at some point between July 2008 and July 2009, and average spending is up 14% in 2010 to $99 Virtual Goods Revenue Estimates $7,000 $6,006 $6,000 $5,047 $5,000 $4,070 $3,544 $4,000 $M $3,107 $3,028 $3,000 $2,523 $2,219 $2,000 $2,020 $1,325 $1,598 $2,462 $1,000 $1,060 $2,019 $1,547 $1,087 $265 $621 $0 2008 2009 2010 2011 2012 2013 U.S. Non-U.S. Source: eMarketer (August 2009), Magid Survey (May 2010) Note: More recent figures from Inside Virtual Goods estimate the U.S. market to be $1 billion and $1.6 billion for 2009 and 2010, respectively 3
  • 4. Recent Investments Are Legitimizing Opportunity • Former Disney CEO Michael Eisner invested $300,000 in seed / funding in social gaming company Diversion through his investment company on October 18, 2010 • Google announced acquisition of Jambool (Social Gold) for a / rumored $70MM on August 13, 2010 • Google invested $100-$200 million in Zynga in an under-the- / table deal in July 2010 • SponsorPay raised $5 million in its first round of funding, led by Hasso Plattner Ventures, on June 9, 2010 • Digital River acquired FatFooGoo for $10 million on May 5, / 2010 4
  • 5. Industry Perspectives on Virtual Goods • “Monetization in virtual goods will continue to grow, and we will see the emergence of a select few successful platforms, as well as several popular virtual currencies. Once such currencies have been established, the growth of secondary markets and currency exchanges will most likely follow.” - Vikas Gupta, Co-Founder/CEO, Social Gold by Jambool • “Virtual goods will become a strong option for brands to drive engagement in social media and will become the standard for branded advertising in social media, finally providing clear value proposition for brands in social media and social gaming.” - Joe Hyrkin, Entrepreneur in Residence, Trinity Ventures • “Growth will continue to be exponential as social gaming becomes more and more mainstream. Everyone will make more money as the pie grows bigger for all of us collectively.” - Charles Ju, Founder, Playmesh • “We have seen companies go from nothing in the last 18-24 months to tens and hundreds of millions of dollars in revenues [from virtual goods].” - Jeremy Liew, Lightspeed Venture Partners 5
  • 6. Young Players in a Fresh Landscape Ad Networks Social Virtual Networks Platform Currency Providers Providers Game Developers Payment Processors 6
  • 7. Young Players in a Fresh Landscape 7
  • 8. Social Networks Provide Users • Exhibited phenomenal growth within the past 5 years - By 2013, an estimated 52% of internet users will be regular social network visitors • Provide consumer base, marketplace, and contextual structure for virtual goods transactions Facebook MySpace Friendster hi5 Classmates.com Bebo Michael Jones Mark & Richard Mark Joanna CEO Zuckerberg Jason Hirschorn Kimber Bill Gossman Goldston Shields Registered Users > 500,000,000 70,000,000 100,000,000 60,000,000 50,000,000 12,000,000 About 75% of Popular in User users are User base Popular in Mexico, User base More Profile outside the Predominantly South East Thailand, Predominantly popular U.S. within U.S. Asia and within U.S. in UK than Portugal in U.S. 8
  • 9. Social Networking M&A Transactions ($ in millions) Implied LTM LTM Enterprise Revenue EBITDA Date Acquiror Target Value Multiple Multiple 10/22/10 Kabam, Inc. WonderHill, Inc. NA NA NA 10/06/10 Beyond.com, Inc. Orbius, Inc. NA NA NA 09/14/10 GameHouse, Inc. Backstage Technologies Inc NA NA NA 09/02/10 Recruiter.com RecruitingBlogs.com Inc. NA NA NA 08/31/10 AOL, Inc. Rally Up, Inc. NA NA NA 08/30/10 Google Inc. SocialDeck Inc. NA NA NA 08/25/10 Undisclosed Meetrandom.com $0.2 NA NA 08/20/10 Facebook, Inc. Hot Potato NA NA NA 08/06/10 Google Inc. Slide, Inc. 182.0 NA NA 08/04/10 Black Pants, Inc. Diva Dirt NA NA NA 07/21/10 NetParty, LLC Charlotte Young Professionals, LLC NA NA NA 07/09/10 Insparisk, LLC AuthorizedInspector.com NA NA NA 07/08/10 Facebook, Inc. nextstop.com, Inc. NA NA NA 07/01/10 FertilityAuthority.com, LLC FertileThoughts.com NA NA NA 06/16/10 Criterion Capital Partners, LLC Bebo, Inc. < 10.0 NA NA 06/08/10 Salem Web Network Big Jump Media, Inc. 2.5 NA NA 06/09/10 Vocus Inc. Two Cats and a Cup of Coffee 1.6 NA NA 06/08/10 PurePhoto, Inc. PhotographyMentor.com, LLC NA NA NA 05/26/10 Facebook, Inc. Sharegrove Inc. NA NA NA 05/04/10 Trans Global Group, Inc. RandPort, Inc. NA NA NA 03/26/10 Maverick Capital, Ltd. Loopt, Inc. NA NA NA 03/22/10 WebMediaBrands Inc Rotorblog.com NA NA NA 02/02/10 Ali Wing, Inc. The Cradle, LLC NA NA NA 12/16/09 Ontela, Inc. Photobucket, Inc. NA NA NA 12/09/09 MOL AccessPortal Bhd Friendster, Inc. 39.4 NA NA 9
  • 10. Social Networking M&A Transactions (cont’d) ($ in millions) Implied LTM LTM Enterprise Revenue EBITDA Date Acquiror Target Value Multiple Multiple 12/08/09 Global Grind Digital, Inc. CelebrityTweet NA NA NA 10/09/09 Stratus Media Group, Inc. ProElite, Inc. NA NA NM 09/27/09 GovDelivery, Inc. GovLoop NA NA NA 08/26/09 Delivery Concepts, LLC Eats Media, LLC NA NA NA 08/19/09 MySpace, Inc. iLike, Inc. $19.5 NA NA 07/31/09 Atrinsic, Inc. Shopit.com, Inc. 2.7 NA NA 07/28/09 Cascadia Investments, Inc. www.phace.mobi NA NA NA 07/06/09 Match.com, LLC People Media L.L.C. 57.0 NA NA 06/04/09 Cascadia Investments, Inc. TinyTwirp.com NA NA NA 04/07/09 No Sleep Media LLC Limbo Inc. NA NA NA 03/09/09 Stardoll AB Piczo, Inc. NA NA NA 03/02/09 TuitionU.com Inc. GreenNote, Inc. NA NA NA 01/27/09 Digital Age Motorsports, LLC Hot Import Nights LLC NA NA NA 01/26/09 Alloy Inc. Takkle, Inc. 0.7 NA NA 01/13/09 MixMatchMusic, Ltd. Mix2r Media Inc. NA NA NA 12/17/08 IB3 Networks, Inc. MGV Communications NA NA NA 12/01/08 Six Apart Ltd. Pownce, Inc. NA NA NA 08/27/08 Lifetime Entertainment Services Inc. ParentsClick Network, Inc. NA NA NA 08/24/08 Amazon.com Inc. Tastemakers, Inc. NA NA NA 08/04/08 AOL, LLC (nka:Historic AOL LLC) Socialthing, Inc. NA NA NA 07/30/08 Deluxe Corp. PartnerUp, Inc. 3.8 NA NA 07/20/08 CrowdFunder, Inc. Gubb, Inc. 0.2 NA NA 07/09/08 Bigstring Corp. Buddystumbler, Inc. 0.1 NA NA 03/30/08 Buzznet, Inc. Tagshine Corp. NA NA NA 03/24/08 Follett Corporation Fourteen40, Inc. NA NA NA 10
  • 11. Social Networking M&A Transactions (cont’d) ($ in millions) Implied LTM LTM Enterprise Revenue EBITDA Date Acquiror Target Value Multiple Multiple 03/13/08 AOL, LLC Bebo, Inc. $860.0 NA NA 02/28/08 LiveUniverse.com, Inc. Revver, Inc. NA NA NA 02/07/08 uLocate Communications, Inc. (nka:W Zync, Inc. NA NA NA 12/31/07 USA Today International Corporation BNQT NA NA NA 12/19/07 Tiger Global Management; MYNET Yonja, LLC NA NA NA 12/06/07 Double Eagle Holdings, Ltd. Ultimate Social Network, Inc. 1.8 NA NA 12/04/07 Fox Digital Media Beliefnet, Inc. NA NA NA 11/17/07 Penthouse Media Group, Inc. Various, Inc. 500.0 NA NA 11/02/07 Microsoft Corporation WebFives Corp. NA NA NA 10/09/07 Disaboom Inc. Lovebyrd.com, LLC 0.1 NA NA 08/28/07 BabyCenter, LLC Maya's Mom, Inc. NA NA NA 08/25/07 Hi-Media S.A. Fotolog, Inc. 90.0 NA NA 08/14/07 Jack 9 Entertainment, Inc. CommunityX.net NA NA NA 07/02/07 SideStep, Inc. TripUp, Inc. NA NA NA 06/12/07 American Capital Strategies, Ltd. Zencon Technologies, L.L.C. NA NA NA 06/11/07 The Amergence Group SonicMountain, Inc. NA NA NA 05/30/07 Canvas Technology Inc. Flektor, Inc. NA NA NA 05/30/07 MySpace, Inc. Photobucket, Inc. NA NA NA 05/10/07 SonicMountain, Inc. Odeo, Inc. NA NA NA 04/17/07 ProElite, Inc. MMAMix.com NA NA NA 03/09/07 NA Decentral.tv Corp. NA NA NA 02/09/07 Cisco Systems, Inc. Five Across, Inc. NA NA NA 11
  • 12. Online Games Are The Swans… • Global population of virtual worlds expected to grow to about 640 million by 2015 • According to eMarketer, social games could generate $2.2 billion in virtual dollars by 2012 Year Capital Company Founded Type Investors Raised ($mm) www.bigfishgames.com 2002 Social Balderton Capital, General Catalyst Partners, $88.3 Seattle, WA Networking Salmon River Capital LLC www.bigpoint.net 2002 Social GMT Communications Partners LLP, Peacock 8.2 New York, NY Networking Equity Fund www.gaiaonline.com 2003 MMOG Benchmark Capital, DAG Ventures LLC, 19.9 San Jose, CA Institutional Venture Partners, Redpoint Ventures, Sony Pictures Television Inc.,Time Warner Investments www.secondlife.com 2000 Virtual World Benchmark Capital, Catamount Ventures 19.0 San Francisco, CA Management LLC, Globespan Capital Partners, Omidyar Network (Linden Lab) www.playdom.com 2008 Social Lightspeed Venture Partners, New Enterprise 76.0 Mountain View, CA Networking Associates, Norwest Venture Partners (Disney) www.sulake.com 2000 Social 3i Group plc, Balderton Capital, Benchmark 35.9 Helsinki, Finland Networking Capital, Elisa Oyj, Movida Group, Taivas www.there.com 2005 Virtual World NA NA San Mateo, CA (Makena) www.zynga.com 2007 Social Avalon Ventures, Foundry Group, Institutional 589.6 San Francisco, CA 12 Networking Venture Partners, Kleiner, Perkins Caufield & Byers, Union Square Ventures
  • 13. Online Gaming M&A Transactions ($ in millions) Implied LTM LTM Enterprise Revenue EBITDA Date Acquiror Target Value Multiple Multiple 10/22/10 Kabam, Inc. WonderHill, Inc. NA NA NA 09/14/10 GameHouse, Inc. Backstage Technologies Inc NA NA NA 09/13/10 DeNA Global, Inc. Gameview Studios, LLC NA NA NA 08/30/10 Google Inc. SocialDeck Inc. NA NA NA 08/17/10 Zynga, Inc. Conduit Labs, Inc. NA NA NA 08/11/10 Joytoto Company Limited Joytoto America, Inc. NA NA NA 08/02/10 Titan Gaming, Inc. Xfire, Inc. NA NA NA 07/27/10 Walt Disney Co. Playdom, Inc. $763.2 NA NA 07/08/10 MTV Networks Company Social Express, Inc. NA NA NA 06/24/10 Playdom, Inc. Hive7.com, Inc. NA NA NA 06/03/10 Zynga, Inc. Challenge Games, Inc. NA NA NA 05/18/10 Playdom, Inc. Acclaim Games, Inc. NA NA NA 05/12/10 ngmoco, Inc. Stumptown Game Machine, LLC NA NA NA 04/26/10 Playdom, Inc. Merscom, LLC NA NA NA 04/20/10 News Corp. Irata Labs NA NA NA 03/03/10 Playdom, Inc. Offbeat Creations, Inc. NA NA NA 02/24/10 hi5 Networks, Inc. Big Six Games, Inc. NA NA NA 02/08/10 Zynga, Inc. Serious Business, Inc. NA NA NA 02/03/10 Almaz Capital Partners Alawar Entertainment Inc. 13.0 NA NA 01/13/10 iEntertainment Network Inc. Thriller New Media, Inc. NA NA NA 01/06/10 Cascadia Investments, Inc. CustomFlashGames.com NA NA NA 12/03/09 Intralot SA CyberArts Licensing LLC 34.3 NA NA 12/03/09 Artix Entertainment LLC Epic Inventions LLC NA NA NA 11/18/09 NeoEdge Networks, Inc. Offspring NA NA NA 11/12/09 Playdom, Inc. Trippert, Inc. and Green Patch, Inc. NA NA NA 13
  • 14. Online Gaming M&A Transactions (cont’d) ($ in millions) Implied LTM LTM Enterprise Revenue EBITDA Date Acquiror Target Value Multiple Multiple 11/09/09 Electronic Arts Playfish $391.3 NA NA 08/24/09 Live Gamer, Inc. TwoFish, Inc. NA NA NA 07/28/09 Cascadia Investments, Inc. www.phace.mobi NA NA NA 01/16/09 Sony Online Entertainment, LLC Octopi LLC NA NA NA 12/09/08 Infogrames Entertainment SA Cryptic Studios, Inc. 74.8 4.40x NA 10/10/08 SouthPeak Interactive Corp. Gamecock Media Group 32.5 8.83x NM 09/23/08 Funtank, LLC Candystand.com NA NA NA 08/18/08 IG Interactive Entertainment Limited True Games Interactive, Inc. NA NA NA 07/28/08 NA Octopi LLC NA NA NA 06/30/08 Mediastay North America Inc. LSF Network, Inc., Luckysurf Assets NA NA NA 04/01/08 THQ Inc. Elephant Entertainment, LLC NA NA NA 11/12/07 Big Fish Games, Inc. Thinglefin, Inc. NA NA NA 09/21/07 RealNetworks Inc. Game Trust, Inc. 20.2 NA NA 07/20/07 Finam Capital Partners Alawar Entertainment Inc. NA NA NA 05/15/07 Sony Online Entertainment, LLC Sigil Games Online, Inc. NA NA NA 04/30/07 NA Interplay Entertainment Corp. NA NA NM 14
  • 15. …And Virtual Goods Are The Golden Eggs • Microtransactions drive the virtual goods market - Microtransactions expected to grow to $17.3 billion in 2015 Capital Year Raised Company Founded Investors ($mm) www.ariasystems.net 2002 Hummer Winblad Venture Partners, Venrock $14.0 Media, PA www.come2play.com 2007 NA 1.0 NA www.dealunited.com 2007 Bertelsmann Digital Media Investments, High-Tech 6.2 Munich, Bavaria Gründerfonds Management GmbH, Sympasis Innovation Capital GmbH, VI Partners AG www.fatfoogoo.com 2006 Acquired by Digital River, Inc. on May 5, 2010; previous NA Vienna, Austria investors include Digital River and Gamma Capital (Digital River) Partners www.gwallet.com 2008 Adams Street Partners, LLC, Trinity Ventures 10.5 San Francisco, CA www.getgambit.com 2007 Shopping.com NA San Jose, CA (Kickflip) www.heyzap.com 2009 Union Square Ventures, Y Combinator $3.7 San Francisco, CA 15
  • 16. …And Virtual Goods Are The Golden Eggs • Microtransactions drive the virtual goods market - Microtransactions expected to grow to $17.3 billion in 2015 Capital Year Raised Company Founded Investors ($mm) www.livegamer.com 2007 Charles River Ventures, FirstMark Capital LLC, Kodiak $36.6 New York, NY Venture Partners www.mochimedia.com 2005 Purcahsed by Shanda Games (NasdaqGS: GAME) on Jan. 14.0 (Shanda San Francisco, CA 31, 2010, for $80.0MM; previous investors include Accel Games) and Shasta Ventures www.peanutlabs.com 2005 BV Capital, BV Capital Management, LLC, eVenture 4.2 San Francisco, CA Capital Partners GmbH, LundKenner A/S www.playspan.com 2006 Easton Capital Investment Group, Ecosystem Ventures 48.3 Santa Clara, CA LLC, Menlo Ventures, Novel TMT Ventures Limited, STIC International, STIC Investments Inc. www.qinteractive.com 1995 Intrepid Investments NA Chicago, IL www.sometrics.com 2007 AT&T, Inc., Big Sky Partners, Greycroft, LLC, Steamboat Los Angeles, CA Ventures, LLC, The MailRoom Fund NA www.sponsorpay.com 2009 Hasso Plattner Ventures, Kite Ventures, Team Europe Berlin, Berlin Ventures 4.6 16
  • 17. …And Virtual Goods Are The Golden Eggs • Microtransactions drive the virtual goods market - Microtransactions expected to grow to $17.3 billion in 2015 Capital Year Raised Company Founded Investors ($mm) supersonicads.com 2008 NA $2.0 London, UK www.twofish.com 2006 Rustic Canyon Partners, TriplePoint Capital LLC, Venrock 9.5 Palo Alto, CA www.viximo.com 2007 North Bridge Venture Partners, Sigma Partners 9.0 Cambridge, MA 17
  • 18. Virtual Goods M&A Transactions ($ in millions) Implied LTM LTM Enterprise Revenue EBITDA Date Acquiror Target Value Multiple Multiple 08/09/10 Google Inc. Jambool, Inc. $70.0 NA NA 03/09/10 InComm, Inc. Zeev Exchange, Inc. NA NA NA 08/24/09 Live Gamer, Inc. TwoFish, Inc. NA NA NA 07/28/09 Live Gamer, Inc. N-Cash Co., Ltd. NA NA NA 04/21/09 PlaySpan, Inc. Spare Change Payments, Inc. NA NA NA 07/15/08 PlaySpan, Inc. Internet Payment Solutions, Inc. NA NA NA 18
  • 19. Platform Providers Facilitate the Process Capital Year Raised Company Founded Investors ($mm) www.doubletrump.com 2006 Cedar Fund, Giza Venture Capital NA New York, NY www.sponsorpay.com 2009 Hasso Plattner Ventures, Kite Ventures, Team Europe $4.6 Berlin, Germany Ventures www.offerpalmedia.com 2007 D.E. Shaw Venture Capital, InterWest Partners, North Bridge 19.6 Fremont, CA Venture Partners www.payvment.com NA NA NA www.rixty.com NA NA 1.2 San Francisco, CA www.srpoints.com 2007 Technology Crossover Ventures 48.0 Vancouver, Canada (Adknowledge) www.trialpay.com 2006 Atomico Investment Holdings Limited, Battery Ventures, 15.8 Mountain View, CA Index Ventures 19
  • 20. Payment Processors Power the Process Capital Year Raised Company Founded Investors ($mm) www.billingservicesgroup.com 2005 ABRY Partners LLC, Artemis Investment Management NA AIM: BILL Ltd., CapitalSouth Partners, CapitalSouth Partners San Antonio, TX Fund L.P., Patient Safety Technologies Inc., Waterside Capital Corporation www.paymentech.com 1985 First Data Corp. NA Dallas, TX (J.P.Morgan Chase & Co.) www.daopay.com NA NA NA London, UK (DaoTec Ltd.) www.orcaone.com NA NA NA New York, NY www.paybycash.com 1998 NA $28.3 Charlottesville, VA (Playspan Inc.) www.paymentpin.com 2004 NA NA Montreal, Canada www.paypal.com 1998 Acquired by eBay on October 3, 2002, for $1.5BN NA San Jose, CA www.jambool.com 2006 Bay Partners, Charles River Ventures, Hit Forge, 6.0 (Google) San Francisco, CA Madrona Venture Group 20
  • 21. Facebook’s Push into Virtual Goods • Facebook introduced a virtual currency / payment platform called Facebook Credits • Credits are used to make purchases within the Facebook platform, e.g. premium items in games, virtual gifts, and other services • Facebook gets a 30% fee for usage of Credits • Target stores have started selling Facebook Credits gift cards nation- wide • According to Sean Parker, who was founding President, Facebook Credits will make up a third of Facebook’s income in the next twelve months 21
  • 22. Investment Considerations Highlights Risks  Recent investment and partnership  Monetization of virtual goods dependent activity in virtual goods underscore on volume of users and scale potential growth in the industry  Virtual payment infrastructure is still in – Facebook’s partnerships with PayPal its infancy and Zynga  Software model is still a hindrance in  Margins are spectacular virtual currency adoption – Packaged software model still persistent – Lack of free-to-play model 22
  • 23. Investment Recommendations • Virtual goods ecosystem for gaming is maturing around Facebook • Removes points of control for incumbents (Zynga, etc.) • Creates more liquid market for consumers • Levels playing field for newcomers – opportunity in creative game creation still very large • Tremendous opportunity for virtual goods in many other areas where consumers will engage • Customer loyalty • Shopping • Health • Education • Many others 23
  • 24. Appendix 24
  • 25. Highly Focused Industry Expertise Underlies Our Investment Banking Services • Founded in 2001, headquartered in New York, NY • Sharp focus provides valuable strategic insights and perspectives for clients Advertising & Internet Services Marketing Services • Adserving / Online Media Network • Advertising Agencies • Customer Acquisition / Affinity Marketing • Customer Care • Content Driven Aggregation • Database Marketing • Contextual Advertising / Search • Loyalty Marketing • Customer / Web Analytics • Market Research • Online Research • Specialty Marketing Services • Electronic Payments / Internet Banking INFORMATION • Teleservices • EC / Web Integrators & TECHNOLOGY & Database / SERVICES Financial Technology and Information Services Outsourcing Services • Data Analytics / Decisioning • Payment and Transaction Processing • Consumer / Specialty Data Providers • Financial Security • Business Data Providers • Financial Technology / Outsourcing • Financial Information Services • Business Process Services • Specialty Information Providers • IT Consulting / Systems Integration • IT Research • IT Outsourcing 25
  • 26. About Gridley • Leading boutique Investment Bank specializing in Information Services – Comprehensive perspective on Advertising, Marketing, Financial Technology and Information Services trends and transactions • Strong industry reputation on assignments led by senior bankers – Sellside = Excellent strategic positioning and valuation – Buyside = Deep knowledge and access to emerging companies and industry trends • Trusted advisor and strategic matchmaker – Thoughtful M&A ideas – not just the logical public company combinations – Deliver value to buyers and sellers alike • Broad industry network developed over 20+ years – Industry leaders, hot emerging growth companies, and senior investors – Senior executives on Gridley Advisory Board • Well-known thought leader – Host of leading Annual Information Services Conference and participant in industry events – Highly regarded quarterly newsletter – 2,200+ distribution – Sought after commentator and resource for the media 26
  • 27. Gridley Provides Comprehensive Investment Banking Services Client-centric Products and Services Industry Leaders Emerging Growth Companies Private Equity Firms • Buyside Advisory Services • Sellside Advisory Services • Buyside Advisory Services for Existing Portfolio & New • Private Placement Services • Fairness Opinions Business Initiatives • Buyside Advisory Services • Sellside Advisory Services for • Corporate Divestitures • Strategic Growth Consultants Portfolio Companies • Strategic Industry and • Potential Board Member • Potential Management / Board Company Studies Introductions Member Introductions • Potential Business Partner • Industry and Market Trends • Industry and Market Trends Introductions Presentations to Senior Presentations to Senior Management and Board of Management and Board of • Industry and Market Trends Directors Directors Presentations to Senior Management and Board of Directors 27
  • 28. Gridley Provides Comprehensive Investment Banking Services Strategic Acquirer Strategic Targeting Consulting Transaction Negotiation of Pricing and Issues and Structuring Documentation M&A AND ADVISORY Due Diligence CAPABILITIES M&A Modeling and Valuation Board Fairness Opinions Other General Presentations Advisory Services 28
  • 29. Leading Annual Industry Conference Showcases Our Extensive Network of Relationships • Bellwether event focused on our targeted industries • Approximately 475 senior-level executives from over 300 companies – Industry leaders, emerging companies, and premier private equity and debt investors – Creates exceptional industry networking and exchange of ideas • Differentiated audience and participants vs. other conferences – Audience = senior industry executives, not institutional buy-side investors – Speakers = leading CEOs and executives from top companies: • Highly personalized with Gridley arranged “1-on-1”s for clients, presenters, sponsors • Presentations by approximately 30 premier private companies and industry panels addressing timely topics each year 29
  • 30. Event History – Track Record of Finding Successful Companies • 164 private companies have presented since 2004 • Approximately 60% have completed liquidity transactions 30
  • 31. Participation at Industry Events Extends Our Network and Showcases Our Thought Leadership Conferences with Gridley Participation Dec. 2010 Business Insider: IGNITION Speaker “How to Build a $1 Billion Content Business in Three Years or Less” Nov. 2010 Digital Hollywood NYC: Media Moderator Disruption - Private Equity and Investor Strategy Panel - “The Technology and Entertainment Based Company: From First Round to Implementing the Revenue Growth Target Strategy” Nov. 2010 ad:tech NYC 2010 Keynote Speaker “Digital: Taking a BIG Bite out of the Big Apple” Nov. 2010 Stand Up and Deliver: The Panelist: Targeting Machine Gets Tested “I’m With the Brand: Is Ad Net Inventory Ready to Lift the Right Metrics? May 2010 TARGUSinfo 2010 Scoring Summit Speaker: “Innovation and Shareholder Value: Why You Need to Take Analytics Real Time” Mar. 2010 SIIA Digital Media & Software Speaker: Investment Conference “How to Play Your Hand in the M&A Market” Feb. 2010 OnMedia NYC 2010 Panelist: “Pricing Private Companies: What’s the 2010 Strategy?” Nov. 2009 Audience is King: Targeting the Panelist: Challenges of 2010 “Is the Long Tail Wagging? Have the Vertical Networks Lived Up to Their Own Hype?” Aug. 2009 LeadsCon East Panelist: “Role of Institutional Advertising in Shaping Internet Advertising” July 2009 Ad Network Gold Rush - Boom or Moderator: Bust? “Are Verticals Standing Up?” April 2009 Mobile Marketing Panelist: “Resolved: Sorry, It’s Still Not Ready” 31
  • 32. More than 2,200 Senior Industry Executives Read Our Quarterly Newsletter • Highly respected quarterly newsletter on industry trends and corporate finance / M&A activity – The Compass – Broad, targeted reach: over 2,200 industry CEO’s and CFO’s, investors, and financial sponsors – One of the top investment banking generated publications in the industry – Less than 25 opt-out requests since initial publication in Q1 2003 The Compass Readership 3,000 +23.7% Annual Growth 2,500 +26.7% 2,548 +29.3% 2,350 2,000 Readers +47.6% 1,900 1,500 +31.0% 1,500 1,000 1,160 786 500 600 0 2003 2004 2005 2006 2007 2008 7/30/09 32
  • 33. The Media Also Seeks Out Our Insights on Industry Trends and Transactions 33
  • 34. Selected Recent Gridley Transactions • Gridley clients include industry leaders and premier emerging growth companies • Gridley provides strategic advisory work in addition to the transactions listed below $20,500,000 Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Acquired by Acquired by Acquired Acquired Acquired by Acquired Acquired The Dolan Company WPP Group plc FetchBack Inc. M3 Mobile Marketing MDC Partners Inc. Pepperjam Silverlign Group Inc. Advisor Advisor Advisor Advisor Advisor Advisor Advisor $20,000,000 $157,000,000 Undisclosed Undisclosed Undisclosed Undisclosed $367,000,000 Email Business of Ad serving Business of Investment by Acquired by Acquired Acquired by Acquired by Sold to Sold to TZP Group LLC Roper Industries, Inc. e-Dialog, Inc. WPP Group plc Quest Software One to One Interactive, Inc. Aegis plc Placement Agent Advisor Advisor Advisor Advisor Advisor Advisor Undisclosed $113,189,337 $17,450,000 Undisclosed Undisclosed $138,000,000 Undisclosed PrePay Intelligent Network Solutions (INS) Business Unit of Sold to Secondary Offering Acquired by Acquired by Acquired by Acquired Acquired by Parthenon Capital LLC Verisign Schulman, Ronca, & ISIS Equity Partners, Inc. Modem Media, Inc. Valassis Communications Inc Bucuvalas, Inc. Advisor Co-Manager Issued Fairness Opinion Advisor Advisor Advisor Advisor $58,000,000 Undisclosed $55,200,000 Undisclosed Undisclosed Advisory Communications Marketing One to One, Inc. d/b/a Systems, Inc. (ACS) d/b/a Acquired Acquired by Acquired by Acquired by Follow-On Offering Performics, Inc. ARAG Group Carlson Marketing Group Alliance Data Systems, Inc. Advisor Advisor Co-Manager Advisor Advisor 34
  • 35. Gridley & Company LLC 10 East 53rd Street, 24th Floor New York, NY 10022 212.400.9720 tel 212.400.9717 fax Twitter: @gridleyco www.gridleyco.com 35