Show me the money Web 2 0 Expo

Show me the money Web 2. 0 Expo April 18 th, 2007 Jeremy Liew Partner, Lightspeed Venture Partners www. Lightspeedvp. com Lsvp. wordpress. com

Its cheaper than ever to start an internet company… Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners $ ‘ 000 s Source: Carsonified. com/SXSW Presentation 2

… and cheaper than ever to run an internet company Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners SAMPLE EXPENSE BUDGET Annual Fixed Costs Staff Costs $1. 0 m Assumptions § 8 employees §$120 k fully loaded Infrastructure Costs $0. 2 m §$15 k/month Other Costs $0. 2 m §Rent, Legal, etc TOTAL $1. 4 m 3

As a result, getting to breakeven isn’t too hard… Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners Media $ '000 s Revenue E-Commerce % $ '000 s % 2, 800 100% 7, 000 100% 1, 400 50%* 4, 900 70% 0% 700 10% 1, 000 36% 1, 000 14% Infrastructure Costs 200 7% 200 3% Other Costs 200 7% 200 3% - 0% Cost of Goods Marketing Staff Costs EBITDA * Assumes ad sales by an ad network or ad rep firm - 4

…but you still need to be big to be public Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners PUBLIC COMPANY ’ 07 REV MULTIPLES REVENUE NEEDED FOR $500 M EV* MEDIA E-COMMERCE * Assumed minimum public company scale to sustain meaningful trading volume and analyst coverage Source: Goldman Sachs Research, March 25, 2007, Lightspeed Analysis 5

Significant variation in revenue targeted for internet companies to breakeven versus to be public Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners BREAKEVEN PUBLIC, $500 M EV* MEDIA $2. 8 M $131 M E-COMMERCE $7. 0 M $277 M * Based on median multiples 6

Media Companies

Advertising RPMs* depend on your ability to deliver a targeted audience Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners March Annual US PVs Example 2007 Revenue $0. 50 - 2 Myspace $271 M 44 B 524 B $0. 52 $1 -5 Facebook $150 M** 12 B 126 B $1. 03 Fandango $25 M** 50 M 600 M $41. 67 $10 -40 RPM Source: Myspace, Merrill Lynch; Facebook, MSNBC; Fandango, Techcrunch; Traffic, Comscore; Lightspeed Analysis * RPM = Revenue per thousand pageviews, taking into account multiple ad units and all forms of advertising: CPM, CPC and lead gen ** Facebook revenue estimate “well over $100 m”, Fandango revenue estimated to be “around $50 m with half from 8 advertising and half from ticketing”

To reach breakeven, US traffic requirements can become quite meaningful, depending on RPMs Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners • e. Harmony • Real • Whitepages • Tagged • NFL. com • Nextag • Wash’ton Post • Heavy 49 M 48 M 47 M 45 M • Technorati • Win. Amp • UFC. com • Digg Source: Comscore, Lightspeed Analysis 239 M 237 M 230 M 229 M Not necessarily demographically targeted Sites with comparable US Traffic 12 M 12 M 11 M Not necessarily endemically targeted RPM PV/Mth to reach $2. 8 M in revenue 9

US traffic requirements are even higher to reach public company levels Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners • MSN • Google • Facebook • AOL • Live. com • Youtube • Go. com • Pogo 2, 819 M 2, 539 M 1, 559 M 1, 544 M • MSNBC • Expedia • Paypal • Weather. com Source: Comscore, Lightspeed Analysis 13, 672 M 12, 476 M 12, 179 M 10, 609 M Not necessarily demographically targeted Sites with comparable US Traffic 592 M 522 M 495 M 488 M Not necessarily endemically targeted RPM PV/Mth to reach $131 M in revenue 10

E-Commerce Companies

Many e-commerce niches are large enough to support $7 M in revenue, our illustrative breakeven level Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners Allheart. com – nursing apparel Hats. com – hats Figleaves. com – lingerie Ridegear. com – motorcycle gear Source: Internet Retailer Top 500 Guide, 2006 Edition 12

There are three ways to get to over $271 M in ecommerce revenues, public company type levels Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners § One online store with >$271 M in revenue § 5 -10 online stores, each with $25 -50 M in revenue § 100+ online stores, each with up to $3 M in average revenue 13

Relatively few pure play e-commerce companies have achieved over $271 M in annual sales so far Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners Company 2005 Revenue Amazon $8, 490 M Newegg $1, 300 M Overstock $804 M Netflix $688 M Drugstore $399 M Buy. com Amazon. com $345 M Below $271 M in 2005 but Peapod projected over Vista. Print $271 M in 2007 Source: Internet Retailer Top 500 Guide, 2006 Edition, Goldman Sachs Newegg. com Bluenile 14

In 2005, there were at least 227 companies with e-commerce revenues over $25 M, but none with multiple websites in this range Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners Company Products Bodybuilding. com Supplements $46 M Computer Geeks PC hardware $45 M Parts Train Auto parts $45 M Shoemall Shoes $44 M Cooking. com Kitchen goods $40 M Decorative Product Source Plumbing and Lighting $39 M Blinds. com Blinds $34 M Shopbop Women’s clothing $32 M Gloss. com Beauty Products $27 M Source: Internet Retailer Top 500 Guide, 2006 Edition 2005 Revenue $38 M 15

A number of companies have taken a portfolio approach, building large numbers of stores Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners Company Sample Websites (not exhaustive) CSN Stores adirondack-furniture-direct. com, allairbeds. com, bedrooms. com, csnbunkbeds. com, everysafe. com Home Décor Products homeclick. com, absolutehome. com, barbeques. com, knobsandthings. com, poolclick. com Mercantila Pilates-exercise-direct. com, Rowingmachines. com, sofabed-store. com, tennis-ball-machine-guide. com Netshops Aquariumsdirect. com, croquet. com, daybeds. com, hammocks. com, justglobes. com, potracksgalore. com Source: Internet Retailer Top 500 Guide, 2006 Edition, Company websites 16

Conclusion Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners § Easier than ever to start a consumer internet company Not too hard to get to cash flow breakeven § For long term value creation, plan A can’t be “get bought by Google” § Need to have a roadmap to be an independent public company Requires real scale Revenue sometimes lags costs when you are growing May need venture capital to bridge the gap 17