Digital Brief 002 - Market Report Q1 2015

LUMA partners

Digital Brief002Q1 2015 Market Report

Digital Brief: The Quarterly Market Report

WithQ12015,LUMAintroducestheQuarterlyMarketReportasaregularfeatureofourDigitalBriefseries.

Everyquarterwewillpublishthisreportthatwilltrackdealactivityandmarketperformanceforthedigitalmediaindustry.Wewillhighlightdealsbysubsector,sizeandstrategicbuyeralongwithcommentaryontrendsandactivity.

Wefeltthiswasmissingastheexistingmarketreportstendtotrackbroadersectorcategoriesandareoverlyinclusiveonsmalldealsizeswhichhavetheeffectofmakingthedataunusableorworse,misleading.Finally,weincludeproprietaryLUMAdata.

Wehopeyoulikeit.

Mobile

LUMA’s Singular Focus on Digital Media

Technology

Media

Marketing MarTech

DigitalContent

AdTech

Ø LUMA’sexpertiseisattheintersectionofMedia,MarketingandTechnology

Ø Atthisintersectionexists:§ DigitalContent: contentsites,MCNs,gamepublishers,aggregators

§ AdTech: display,search,video,mobile,social,contentmarketing/native,connectedTV

§ MarTech: data,analytics,salesandmarketingautomation,email,predictivetools,commercetechnology,shoppermarketing,payments

Ø Mobile proliferationhasamajorimpactonthesemarketsandLUMAisdeeplyknowledgeableonmobile

Overall Commentary on ConsolidationØ InourinauguralDigitalBrief,wepointedoutthe

severesupply/demandimbalanceindigitalmedia(clickherebit.ly/1G8BemA)andpredictedthatthevastmajorityofstartupsintheecosystemwouldnotachieveascaledexit(definedas$100millionormore)

Ø Thedealswetrackinthisreportfallintooneoffourcategories:§ Large(over$500mm)§ Medium($100– $500mm)§ Small($20– $100mm)§ Sub$20mmexitsareconsideredtechandteamdeals,

capitulations,orundisclosed

1831 25 21 18

9

1113

1311

16

1415

1618

0

10

20

30

40

50

60

Q12014 Q22014 Q32014 Q42014 Q12015

AdTech MarTech DigitalContent

U.S. Digital Media M&A Activity by Sector

Source: LUMA Partners

Ø FastStart§ DigitalmediaM&Aisofftoa

faststartwith47acquisitions§ DigitalContentM&Aactivity

wasledbybuyersthatareacquiringtechnologiesthatarepenetratingnewconsumermarkets

Ø MoreConsolidation§ AgrowingpoolofStrategic

Buyerswillleadtomoreconsolidationwiththeirhighstockpricesandlevelsofcash

§ Competitionwillescalate,asthenumberofremainingattractivegrowthcompaniesgetssmaller

#ofTransactions

A Growing Robust Pool of Strategic Buyers

ADTECH

CRMSOFTWARE

INTERNETORIGINALS

COMMERCE

TELCO

MARKETING

MEDIA

DATA

CONSUMERINTERNET

TECHSERVICES

Right Time Decisioning of

Consumer Data

(Ad Tech and MarTech)

Ø Softwaresolutionsthatenabledecisioningofconsumerdataisacapabilitythatattractsdeeppocketedstrategicsfromawidevarietyofindustries

Ø ManycompaniesfromAdTechandMarTechhavedevelopedthesecapabilities

28 9

5 3

16

2316

1615

0

5

10

15

20

25

30

35

Q12014 Q22014 Q32014 Q42014 Q12015

+$100M <$100M

Ad Tech M&A Activity

Source: LUMA Partners; eMarketer

Ø KeyTrend– SocialAdvertising§ AdTechM&Akickedoffwith18

acquisitionsinthefirstquarter§ M&Aactivitywasledbyarange

ofbuyertypesfromGoogle,NielsentoRakuten

Ø LookingAhead– Video &ProgrammaticAdvertising§ Weexpecttoseemore

momentuminthevideomarketasdigitalvideoandTVconverge

§ ProgrammaticcapabilitieswillcontinuetoconsolidateasAdTechcompanieslooktobuildfulltechnologystacks

#ofTransactions

Ad Tech – Notable DealsAcquirer Capital

RaisedEnterprise

Value

$18.5M

Comments

$100M

$32M

NA

NA

$200M

NA

NA

ByaddingdatamanagementplatformExelate,Nielsenwillbeabletoofferclientsmediameasurementdataandprogrammaticadvertisingdata.

TritonDigital’sa2xtechnologywasoneofthefirstprogrammaticaudioadexchanges.Theacquisitionshowsthegrowinginterestintheaudioadmarket.

AppNexus’acquisitionofYieldex anditsindustryleadingpublishertoolswillstrengthenthecompany’spositionintheprogrammaticdirectmarket.

Rakuten willintegrateitscustomerdatawithDeepForestMedia’sdevicematchingabilitytohelpbrandsservehyper-localadsacrossalldevices.

$18.6M $122MRubiconProjectacquiredChango inordertobringkeyword,contextualtargetingandretargetingbudgetstoitspremiumadvertisingmarketplace.

Source: Capital IQ; Crunchbase

4 42 3

1

57 11 10

10

0

2

4

6

8

10

12

14

Q12014 Q22014 Q32014 Q42014 Q12015

+$100M <$100M

MarTech M&A Activity

Source: LUMA Partners

Ø KeyTrend– SocialTools§ InQ1MarTech startedtheyear

with11acquisitions§ Socialmediamanagementwasa

focusinQ1withCision acquiringViralheat andSprinklr acquiringPluck

Ø LookingAhead– Commerce§ Weexpecttoseeonlineand

offlinecommercestarttobecomemoreintegratedthisyearascompaniesbetteraddressthecustomerjourneyandbuildonthegrowingadoptionofmobilepayments

#ofTransactions

MarTech – Notable DealsAcquirer Capital

RaisedEnterprise

Value

$28M

Comments

$125MDun&BradstreetwillcombineitscommercialdatabasewithNetProspex’sprofessionalcontactdatabasetobringmorevaluetoB2Bmarketers.

Source: Capital IQ; Crunchbase

52 4 3

7

1112

11 13

11

02468101214161820

Q12014 Q22014 Q32014 Q42014 Q12015

+$100M <$100M

Digital Content M&A Activity

Source: LUMA Partners

Ø KeyTrend– PersonalFitness§ WithinDigitalContentthere

were18dealsinthefirstquarter§ FitBit andUnderArmour were

particularlyactive,acquiringpopularfitnessapplications

Ø LookingAhead– ContentDistribution§ Weexpectthedistributionof

contenttochange§ Majorsocialnetworksandvideo

platformswillexplorenewwaystoengageconsumers,impactingalltypesofcontentcreators

#ofTransactions

Digital Content – Notable DealsAcquirer Capital

RaisedEnterprise

Value

N/A

Comments

~$100MTwitteracquiredPeriscope,alive-streamingvideoapp,priortoitsofficiallaunch

Source: Capital IQ; Crunchbase

$7M $150M

$18M $475MUnderArmour’s acquisitionofMyFitnessPalofficiallyshowsthesportsweargiant’sambitiontobecomeacompletedigitalplatformforathletes.

King,themakerofCandyCrushSaga,hasacquireditsfirstU.S.-basedgamestudio,Z2,whichpublishesmobileandPCgames.

Ad Tech – Q1 2015 Stocks Performance

Note:MarketDataasof3/30/15

Ø AdTechContinuesitsFreeFall§ Thepublicmarketsarestill

confusedwiththesectorasAdTechstocksfell12%onaverage

§ TUBEandFUELledthesectordecline,fallingnearly40%together

Ø IPOActivity§ OnMarch6th,MXPTwasthefirst

AdTechcompanytogopublicsinceRUBIinQ22014

§ Attheendofthequarter,MXPTfinishednearitsfirstdayclosingprice,butbelowitsIPOpriceof$11.50

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

1/2/15 1/16/15 1/30/15 2/13/15 2/27/15 3/13/15 3/27/15

MM TUBE RUBI TRMR MXPT YUME FUEL CRTO NASDAQ

MarTech – Q1 2015 Stocks Performance

Ø MarTech AlsoFalls§ MarTech stocksfellonaverage9

percentduringQ1butgrew13%asasector,drivenbystronggainsfromCRM

§ Despitestronggrowthnumbers,weakrevenueforecastsaredisappointingWallStreet

Ø BrightSpots§ Inits1st fullquarterasapublic

companyHUBSgrewover20%andover30%sinceitsIPO

§ CRMcontinuestogrowrevenuesatastoundingratesandthestockpriceisbeingrewarded(upover10%inQ1)

Note:MarketDataasof3/30/15

-30%

-20%

-10%

0%

10%

20%

30%

1/2/15 1/16/15 1/30/15 2/13/15 2/27/15 3/13/15 3/27/15

CRM MKTO HUBS BV CTCT

DWRE JIVE MRIN LPSN NASDAQ

Key Startup Financings to WatchLead

InvestorCapital Raised CommentsValuation

Premji Invest

$60MSeriesC

$1B

$1B

$700M

$600M

$52M

$200MSeriesE

$15B

Investorsbelievethetimeisrightformobilelivestreaming videototakeoffandbecomeanewcommunicationtoolfromthepopularityofMeerkat.

InsideSales’s latestroundoffinancingrepresentsinvestors’risinginterestinbigdataandpredictiveanalyticschanginghowsalesteamsexecutedeals.

StrategicinvestorsarebettingonCyanogen,aGoogleservices-freeversionofAndroid,tobethethethirdleadingmobileOSinthemarket.

Mobileappsearchengine,Quixey,ispioneering“deeplinking”whichenablesuserstodiscoverandnavigatethroughcontentfromoneapptoanother.

Snapchat’s visionofbecomingamediacompanyisquicklytakingshape.LargepublisherslikeESPNandYahooarehostingoriginalcontentonitsplatform.

Dataminr,areal-timesocialanalyticscompany,hasraisedmoneytoexpanditsserviceintofinance,government,andotherenterpriseverticals.

Source: Crunchbase

$60MSeriesD

$80MSeriesC

$130MSeriesD

$12MSeriesB

LUMA’s Recent M&A DealsØ LUMAActivity

§ LUMAannouncedtheYieldexsaletoAppNexus which,followingtheiSocket saletoRubicon,wasthesecondscaledtransactionintheautomatedguaranteedadtechcategory

Ø ALookAhead§ Wehaveneverbeenbusierand

anticipateariseinthenumberofdealscoupledwithanincreaseinthesizeofdealsasindustryconsolidationcontinuesorevenaccelerates

LUMA’s Differentiated Value Proposition

Ø LUMAhasdevelopedadifferentiatedvaluepropositionbasedon:§ Focus§ Expertise§ ObjectiveCredibility§ Trust§ Performance

Ø LUMAhasbuiltadifferentiatedglobalbrand

Ø Weleverageourbrandtooptimizefinancialandstrategicobjectivesofselectqualityclients

LUMA partners

LUMA’s Differentiated Strategic ApproachØ Ratherthanpitchinventory,LUMAoptimizesoutcomesforqualitygrowth

companiesbymakingmatcheswithstrategicbuyers

Ø ThisapproachmakesLUMAanexcellentchoiceifcompaniesreceiveinboundinterest

ExistingAssets

IndustryTrends

CompetitiveLandscape Strategy Capabilities

Build

Acquire

PartnerTarget

Selection

DueDiligence

InitialApproach

NegotiateTransaction

CloseTransactionIntegration

GeoorSizeFilter

LUMA partners

Actsasconsultanttostrategic

decisionmakers

Actsasbankertotarget

company

A"Valua'on"Framework"for"the"Ad"Tech"Sector"

Color by Numbers:

May$2014$

DISCLAIMER: LUMA Securities, a wholly-owned subsidiary of LUMA Partners, has acted as co-managing underwriter for and may pursue underwriting or other advisory assignments with companies mentioned in this report or in the sector.!!

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CorporateTeach-ins

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BUYERS

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