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Jefferies Domainfest Global 2007

Dave Liu
Dave Liu

Jefferies is a leading global investment banking firm with over 2,000 employees in more than 25 offices worldwide. It has a long track record of advising on technology transactions, having worked on 544 deals worth $72 billion globally since 1998. Notable strengths include being ranked #1 for technology M&A advisory in 2005-2006, having completed 300 public equity offerings in the last 10 years, and having one of the most powerful capital markets trading platforms in the industry. The firm provides a full suite of investment banking services to serve high growth companies throughout their corporate lifecycle.

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Jefferies Broadview A division of Jefferies & Company, Inc. Member, SIPC DOMAINfest Global 2007 Ask the Experts: Venture Capital & Technology Overview February 2007 CONFIDENTIAL DRAFT
Global Investment Banking Franchise A leading institutional brokerage and investment banking firm led by one of the most powerful capital markets trading platforms in the industry Principal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF), a holding company with an equity market capitalization of over $3.5B, $1.5B in 2005 revenue and 2,000 employees in Since 1998, Jefferies has advised over 25 offices worldwide on(1): Investment grade ratings by Standard & Poors and Moodys 544 technology transactions #1 performing investment bank by stock price(2), with over 50% employee ownership, over the globally worth approximately past 10 years $72.0 billion Since 2005 Jefferies has executed 129 equity offerings raising in excess of $30B 189 cross-border transactions 137 public-to-public transactions Boston Chicago Waltham San Francisco London Denver Stamford Paris Silicon Valley New York Investment Dealers Digest Nashville Zurich Los Angeles Jersey City Washington Israel* Tokyo 2005 Dallas Atlanta Richmond Shanghai Middle Market Houston Hong Kong New Orleans Bank of the Year Dubai Mumbai Singapore Sydney* Melbourne* Cities in blue indicate Jefferies Broadview locations * Indicates Affiliates (1) As of 12/1/2006. 1 (2) Wall Street Journal, April 2006.
Jefferies Delivers The Full Spectrum Of Products And Services To Technology Clients Investment Banking Offers A Full Suite Of Investment Banking Products And Equity Leading banking franchise focused Services To Serve High Growth Companies Throughout The Over 135 institutional on high growth companies with Corporate Lifecycle salespeople that cover over over 400 Investment Bankers (90 2,200 institutional accounts; in technology) in over 25 offices make markets in nearly 3,500 worldwide stocks g Equity Offerings Completed #2 volume trader of k in approximately 300 public equity NASDAQ and OTC stocks in an offerings in the past 10 years 2006(2); top 5 trader in nearly Eq tB Industry Capital Mergers Coverage en 1,700 NASDAQ stocks u it Markets M&A Ranked #1 in technology tm and Research y Acquisitions es M&A advisory assignments in 79 research analysts covering v 2005 and 2006(1) In Financial over 1,100 companies Sales Sponsors Private Equity Regular dialogue and relationships with over 250 Restructuring Trading financial sponsors Debt Restructuring Restructured Private Client Structured Dedicated high yield team of approximately $150B in securities Finance Services over 40 experienced senior and liabilities professionals Private Cash Placements Management Integrated sales, trading, As Asset Management research, capital markets and High se Capital Bank Yield banking functions tM Private Client Services / Cash bt Partners Lending an De Management Advisory, portfolio #1 underwriter of mid-cap ag management and customized high yield debt(3); led by team e me financial solutions that joined Jefferies from Drexel nt Burnham Lambert Jefferies Capital Partners More than $685MM in private equity Jefferies Finance LLC funds under management Commercial bank with nearly $2B in capital (1) Source: SDC. All announced North America and Western Europe technology deals with transaction value less than $1B excluding bio-tech and telecom deals. (2) Source: Autex. Ranking amongst investment banks; 1/1/2006 12/31/2006 (2006). 2 (3) Source: SDC, 1/1/06-9/30/06. Excludes split rated, mortgage and asset-backed securities. Full credit to lead manager, equal if joint.
The Investment Bank Of Choice For Growth Companies ($ in Millions) There is a hole in the Jefferies Broadviews team of 90 Bankers is one of the largest dedicated to the marketplace where the Four technology industry Horsemen have gone. Jefferies has a chance to fill it. They always had great #1 Technology M&A Advisor in 2005 and 2006 (YTD)1,2 trading and great distribution. Now theyve #2 Sales and Trading Platform for NASDAQ stocks3 got the whole puzzle. Sandy Robertson, Leading Issuer of Debt for Digital Media and Software companies founder Robertson Stephens New York Times 2006 Technology M&A League Table 1 1 2005 Technology M&A League Table 2 2006 2005 NASDAQ Trade Volume 3 3 # of # of Financial Advisor Deals Rank Financial Advisor Deals Rank Broker Rank Jefferies & Company 44 1 Jefferies & Company 55 1 UBS 1 Credit Suisse 37 2 Goldman Sachs 50 2 UBS 30 3 Citigroup 46 3 Jefferies & Company 2 JP Morgan 28 4 Morgan Stanley 41 4 Citigroup 24 5 UBS 40 5 Citigroup 3 Morgan Stanley 22 6 JPMorgan 40 5 Morgan Stanley 4 Goldman Sachs 22 6 Houlihan Lokey 38 7 Houlihan Lokey 20 8 Credit Suisse 37 8 Bear Stearns 5 Deutsche Bank 20 8 Lehman Brothers 31 9 Rothschild 20 8 Merrill Lynch 28 10 Merrill Lynch 6 (1) Source: SDC. All announced North America and Western Europe technology deals with transaction value less than $1B excluding bio-tech and telecom deals. January 1, 2006 to September 29, 2006. (2) Source: SDC. All announced North America and Western Europe technology deals with transaction value less than $1B excluding bio-tech and telecom deals. January 1, 2005 to December 31, 2005. 3 (3) Source: Autex. Ranking amongst investment banks; 1/1/2006 12/31/2006 (2006).
With Leadership In Digital Media And Internet Investment Banking eCommerce Search September 2006 August 2006 May 2006 May 2006 May 2006 March 2006 September 2005 October 2004 has sold a majority stake to has been acquired by has been acquired by $87,000,000 $95,310,000 $87,500,000 $30,000,000 $138,000,000 Confidential $29,000,000 Confidential Initial Public Offering Initial Public Offering Follow-On Offering 144A Block Trade Initial Public Offering Sole Bookrunner Financial Advisor to the Seller Co-Manager Financial Advisor to the Seller Co-Manager Co-Manager Co-Manager Financial Advisor to the Seller Online Marketing / Lead Generation Who Have We Helped? January 2007 May 2006 Online Marketing: aQuantive, BankRate, Kelkoo, etc. March 2006 November 2005 December 2005 May 2005 March 2005 April 2004 has been acquired by eCommerce: Shutterfly, VistaPrint, etc. has sold an equity stake to has been acquired by has been acquired by $113,189,000 $207,000,000 Mobile: WiderThan, Musiwave, etc. $85,000,000 valuing the Company at $78,000,000 Confidential 180,000,000 Confidential 475,000,000 Follow-On Offering Follow-On Offering Senior Credit Facility Initial Public Offering Financial Advisor to the Seller Co-Manager Content Distribution: LimeLight, etc. Joint Bookrunner Financial Advisor to the Seller Financial Advisor to the Seller Financial Advisor Co-Manager Financial Advisor to the Seller Web Content / Services Mobile Content September 2006 July 2006 May 2006 April 2006 December 2005 July 2004 October 2006 January 2006 Motorola, Inc. has agreed to acquire has been acquired by has been acquired by has been acquired by has agreed to be acquired by has been acquired by Broadbus RealNetworks , Inc. Technologies, Inc. $75,900,000 Confidential $130,000,000 Confidential Confidential Confidential $353,500,000 115,000,000 Follow-On Offering Financial Advisor to the Buyer Financial Advisor to the Company Financial Advisor to the Seller Financial Advisor to the Seller Financial Advisor to the Seller Co-Manager Financial Advisor to the Seller Financial Advisor to Seller 4
All Major Sectors Of The Internet Continue To Experience Strong Growth And Convergence Jefferies Broadview Internet Market Taxonomy Digital Media Online Commerce Interactive Marketing Services Consumer facing Internet destinations providing Consumer facing shopping destinations that either sell Providers of technology and services focused on content and services to a community of users direct or match buyers and sellers delivering messages to consumers on behalf of Market Definition Business model is primarily advertising-supported Includes both physical (books & CDs) and non-physical advertisers and direct marketers via the Internet Advertising formats can include search, banner, rich (travel & finance) ecommerce and subscription online media, classifieds, etc. services Market Size $26 billion in 20061 $170 billion in 20062 $26 billion in 20061 Projected Growth Rate 28%1 14%2 28%1 Convergence Is The Name of the Game! Leaders: Google, Yahoo, AOL, MSN Leaders: Amazon, eBay, InterActiveCorp Leaders: aQuantive, ValueClick, Digitas Contenders: TheStreet, CNET, BankRate Contenders: Netflix, Overstock, Monster, Priceline Contenders: 24/7, Marchex, MIVA, Omniture Representative Private: FaceBook, MyFamily, Reply Private: HomeAway, Zappos, RazorGator Private: Demand Media, Exponential, VendareNetBlue Companies Median 2006E TEV / Revenue: 3.4x Median 2006E TEV / Revenue: 1.6x Median 2006E TEV / Revenue: 2.9x & Median Multiples Median 2006E TEV / EBITDA: 20x Median 2006E TEV / EBITDA: 20x Median 2006E TEV / EBITDA: 17x Median 2007E Revenue Growth: 21% Median 2007E Revenue Growth: 19% Median 2007E Revenue Growth: 21% VistaPrint, LoopNet, Gmarket, InnerWorkings, Notable IPOs WebMD, , PlanetOut, Traffic.com (Acquired) Website Pros, FastClick, Interchange, Omniture Shutterfly, eHealthInsurance NBC Universal / iVillage ValueClick / FastClick, WebClients Notable M&A Liberty Media / Provide Commerce News Corp / IGN, MySpace Experian / LowerMyBills, PriceGrabber Transactions eBay / Verisign (assets), Shopping.com, Skype Google / YouTube Publicis Groupe / Digitas 180solutions ($40MM), Demand Media ($120MM & FaceBook ($25MM), Topix.net ($15MM), PodShow RazorGator ($25MM), Glam Media ($18.5MM), Notable VC/PE $100MM), DoubleClick ($1.2B), Double Fusion ($15.5MM), Red 5 Studios ($18.5MM), BrightCove Zappos ($20MM), HomeAway ($160MM), Investments ($26MM), Right Media ($45MM), Spot Runner ($60MM), Heavy ($20MM) WrenchHead.com ($18MM) ($40MM) (1) Jefferies research. (2) eMarketer. 5
With Substantial Capital Chasing Relatively Few High Quality Opportunities, The Number Of $20MM+ Investments Has Increased Internet Venture Investments Greater Than $20 Million Since 1/1/06 ($Millions) Hot Sectors: Amount Raised Date Company(1) ($MM) Investor(s)(2) Next generation Dec-06 Heavy $20.00 Polaris Venture Partners, Jacobsen Investments advertising and Dec-06 Double Fusion $26.00 Norwest Venture Partners, Accel, IDG Ventures, Sedona Capital lead networks Dec-06 Nov-06 Venda BitTorrent $20.00 $20.00 Investor Growth Capital Accel, DCM Online video and Nov-06 際際滷 $20.00 Kohsla Ventures, Mayfield Fund Nov-06 HomeAway $160.00 Austin Ventures, Redpoint, American Capital, IVP, Trident Capital rich media content Oct-06 Spot Runner $40.00 WPP, CBS, Interpublic Group and distribution Oct-06 Oct-06 Jingle Networks Right Media $30.00 $45.00 Goldman Sachs, Hearst Yahoo! Sep-06 Demand Media $100.00 3i, Oak Investment Partners Organic traffic Sep-06 Handango $60.50 Institutional Venture Partners, Advanced Technology Partners (e.g., domain Aug-06 Jul-06 ChinaCars Digital Chocolate $25.00 $22.50 Goldman Sachs Group Bridgescale Partners, DN Capital, Sequoia Capital, Outlook Ventures aggregators, social Jul-06 Zillow.com $25.00 PAR Capital Management, TCV, Benchmark Capital networks) Jul-06 CinemaNow $20.30 EchoStar Communications, Index Holdings, Menlo Ventures Jul-06 CacheLogic $20.00 Amadeus Capital Partners, 3i, Pentech Ventures International (e.g., Jul-06 Jun-06 DangDang.com HomeAway $27.00 $39.00 DCM, Alto Global Investment, IDG Ventures, Rakuten, Softbank China Austin Ventures China, Korea, Jun-06 Global Market Insite $35.00 TCV, FT Ventures, Voyager Capital India) May-06 Apr-06 DemandMedia FaceBook.com $120.00 $25.00 Oak Investment Partners, Generation Partners, Spectrum Equity Investors GreyLock, Meritech Capital Mar-06 AdKnowledge $48.00 TCV Consolidation Mar-06 CoreMetrics $31.00 FT Ventures, Accel, Highland, themes Mar-06 US Auto Parts $45.00 Oak Investment Partners Feb-06 Claria $40.25 Softbank Capital, Sand Hill Capital & Rogers Communications B2B Jan-06 Jan-06 Innerworkings Webpay $50.00 $24.30 New Enterprise Associates 3i Jan-06 Revenue Science $24.00 Meritech Capital, Integral Capital, Mayfield, Mohr Davidow (1) Online marketing and domain name companies are highlighted. (2) Lead investors are in bold. 6
Venture Capital Investments In Internet And Digital Media Have Been Explosive, With Interactive Marketing Leading The Way Venture Capital Investments Since January 2005 Other Internet & eCommerce VCs continue to Digital Media 18% pour capital into 21% Internet and Digital Media at a rapid pace Approximately 2-3 deals per day since Jan 2005 Domain Names Social Media & User 9% Generated Content Total invested 19% capital in excess of $3.5 billion! Mini-bubble in certain sectors? Interactive Marketing 33% Source: Dow Jones VentureSource. 7
Internet M&A Saw A Substantial Pick-up In 2004-2005, But Activity Trailed Off Last Year Internet Media & Services M&A Transactions (2003 2006YTD) > $20MM 30 10.0x 26 Median TTM TEV / Revenue 25 6.5x 20 8.0x 19 Number of Deals 20 16 16 4.8x 5.2x 6.0x 4.1x 14 15 11 12 12 3.7x 3.1x 12 3.4x 3.4x 3.2x 4.4x 4.0x 10 2.1x 4.3x 7 5 1.7x 6 5 3.3x 2.8x 5 2.0x 5 1.9x 3 0 0.0x Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2003 2004 2005 2006 Representative Transactions (Consideration $MM) Quarter 2003 2004 2005 2006 Overture / Altavista ($140) Yahoo! / Kelkoo ($577) Interactive Corp / Ask Jeeves ($1,781) Google / DMARC Broadcasting ($670) Rank Group / Blue Square ($105) Ask Jeeves / Interactive Search ($335) Telefonica / Terra Lycos ($1,714) NBC Universal / iVillage ($657) Quarter 1 Overture / Fast Search & Transfer ($85) FindWhat / eSpotting Media ($179) Interactive Corp / Cornerstone ($720) John Fairfax / TradeMe ($466) Observations: Lasminute.com / Holiday Autos ($65) eBay / Mobile.de ($152) United Internet / Web.De ($442) EW Scripps / uSwitch ($366) MemberWorks / LavaLife ($117) New York Times / About.com ($410) Alliance Data / DoubleClick Email Mktg. ($90) M&A driven by combination of($387) USA Interactive / Lending Tree ($710) eBay / Eachnet ($224) AOL / Advertising.com Greed Fear and Holdings / Lastminute.com ($1,132) aQuantive / SBI.Razorfish ($160) Hellman & Friedman / DoubleClick ($1,206) Sabre Microsoft / Massive Gaming ($300) Viacom / Xfire ($102) Roxio /Valuation based on Build vs. Buy Quarter 2 Deutsche Telekom / T-Online ($101) Monster Worldwide / Jobpilot ($105) EW Scripps / Shopzilla ($525) DMGT / Allegran & Data Media ($86) PressPlay ($39) Monster Worldwide / Tickle ($74) eBay / Shopping.com ($521) eBay / Tradera ($48) RealNetworks / Listen.com ($36) DoubleClick / Performics ($62) Experian / LowerMyBills ($380) aQuantive / Franchise Gator ($22) Yahoo! / M&A ($1,442) Overture started off Hot from 2003 to 2005 but then Skype ($2,600) Cendant / Orbitz ($1,032) eBay / trailed off in 2006 Irish Times / MyHome.ie ($57) The Interactive Corp / Hotwire ($685) Interactive Corp / eLong ($321) News Corp / IGN Entertainment ($650) Viacom / AtomShockwave ($200) Quarter 3 Barnes & Noble / B&N.com ($328) done by mega-InternetRakuten/ /Intermix Media (GOOG, YHOO, / Grouper ($65)($25) High multiple dealsYahoo! //MusicMatch ($160) Priceline ActiveHotels ($161) companies ($580) News Corp LinkShare ($425) Sony Conde Nast / Wired.com EBAY) or Diversified MediaMedia ($137) Digitas / Modem companies (NWS, LM)E-Loan ($296) Banco Popular / WebMD / Medsite ($41) Yahoo! / 3721 Network Software ($120) M&A 2.0 phasemore to come! Currently in T-Online / Scout24 ($220) Dow Jones / MarketWatch ($462) Bet&Win.com / OnGame E-Solutions ($569) Google / YouTube ($1,650) eBay / Rent.com ($415) Experian / PriceGrabber ($485) Navteq / Traffic.com ($157) Quarter 4 Interactive Corp / Transat At Inc ($63) Cendant / eBookers ($330) Industri Kapital / WehKamp ($456) Publicis Groupe / Digitas ($1,020) Drugstore.com / International Vision ($56) eBay / MarktPlaats ($290) Liberty Media / Provide Commerce ($417) Alliance Data Systems / Abacus ($435) ValueClick / Commission Junction ($37) Marchex / NameDevelopment ($164) Yellow Pages Group / Trader Media ($379) aQuantive / Accipiter ($30) Q1 Q2 Q3 Q4 Median TTM TEV / R 8
Technology IPO Market Conditions Have Started To Improve Quarterly Technology IPO issuance IPO pricing performance vs. range Tech IPO environment $2,000.0 14 10 100% 14.3% 12.5% 11.1% very similar 28.6% % pricing relative to midpoint 80% 14.3% 12.5% 22.2% 7 to that of the $1,500.0 Amount Raised ($MM) 12.5% 60.0% 14.3% 8 60% 11.1% mid 1990s $1,000.0 9 14.3% 9 before the 37.5% 57.1% 40% 20.0% dotcom 55.6% $500.0 20% 42.9% 12.5% 10.0% boom 0% 12.5% 14.3% 10.0% $0.0 Q4 '05 Q1 '06 Q2' 06 Q3' 06 Q4' 06 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Below Bottom Within Mid Top Above Sector Breakdown (LTM) Computer Average P/E multiples by Quarter Aftermarket Performance (LTM) Equip. Serv ices 28 Average aftermarket performance: 30.9% 3% 13% 50x 23 Semis 45x 43x 42x 24 29% Average P/E mulitple 40x 33x 32x 20 35x 30x 30x 29x 31x Comm. 28x 26x # of IPOs 30x 23x23x 16 Equipment 25x 18x 18x 18% 20x 17x 12 Softw are 15x 6 8 5 11% 10x EMS New Media 5x 4 1 5% 21% 0x Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 0 <-15% -15% - 0% 0% - 15% >15% Forw ard PE at filing Forw ard PE at pricing Forw ard PE at T+1 Performance in aftermarket (offer / current) Source: Dealogic / CapIQ 9
Online Marketing Services Companies Represented 30% Of NASDAQ Internet IPO Activity In 2004-06 12 Internet IPOs have been few and far between: 9 10 Totals: 2004 2005 2006 8 Marketing 6 3 3 3 Other 14 5 6 6 6 2 4 3 3 3 3 3 6 6 1 2 4 1 2 2 2 1 1 3 1 3 2 2 2 2 1 1 1 1 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Marchex (23x) Google (39x) Interchange (NA) Fastclick (18x) (47x) Website Pros Loopnet (27x) eHealth (22x) WebSideStory Shopping.com (29x) Omniture (NM) (37x) (25x) Marketing* HouseValues 2004 2005 2006 (34x) LinkTone (NA) Shanda (13x) Kongzhong (13x) PlanetOut (48x) Hurray! (9x) WebMD (46x) Traffic.com (NM) Gmarket (23x) InnerWorkings Tom Online (17x) Blue Nile (32x) eCOST.com (NA) China Finance Gravity (20x) VistaPrint (40x) Digital Music (31x) JAMDAT (28x) (30x) Odimo (NM) Group (NM) Shutterfly (48x) 51job (NA) eLong (NM) Liquidity Other* zipRealty (32x) Services (44x) Inphonic (29x) The9 (NA) * Forward P/Es at IPO are shown in parenthesis next to each companys name. 10
Industry Predictions For 2007 and Beyond Venture Capital New advertising technologies which better monetize online video / rich media Technologies that create new ad inventory (e.g., advergaming) Search technologies that optimize better than natural language search Lead generation and CPA or CPS based platforms International: China and Korea Mergers And Acquisitions Convergence between different ad units, media and agencies Diversified media continuing to invest, buy online media and technologies Technology R&D to assist in online marketing arms race International: Cross-border investment and M&A Capital Markets IPOs for many large private interactive marketing service companies Follow-on and debt offerings by public players to consolidate the market 11
Questions? David A. Liu NYSE: JEF Managing Director www.jefferies.com dliu@jefferies.com www.jefferiesbroadview.com 12

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Jefferies Domainfest Global 2007

  • 1. Jefferies Broadview A division of Jefferies & Company, Inc. Member, SIPC DOMAINfest Global 2007 Ask the Experts: Venture Capital & Technology Overview February 2007 CONFIDENTIAL DRAFT
  • 2. Global Investment Banking Franchise A leading institutional brokerage and investment banking firm led by one of the most powerful capital markets trading platforms in the industry Principal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF), a holding company with an equity market capitalization of over $3.5B, $1.5B in 2005 revenue and 2,000 employees in Since 1998, Jefferies has advised over 25 offices worldwide on(1): Investment grade ratings by Standard & Poors and Moodys 544 technology transactions #1 performing investment bank by stock price(2), with over 50% employee ownership, over the globally worth approximately past 10 years $72.0 billion Since 2005 Jefferies has executed 129 equity offerings raising in excess of $30B 189 cross-border transactions 137 public-to-public transactions Boston Chicago Waltham San Francisco London Denver Stamford Paris Silicon Valley New York Investment Dealers Digest Nashville Zurich Los Angeles Jersey City Washington Israel* Tokyo 2005 Dallas Atlanta Richmond Shanghai Middle Market Houston Hong Kong New Orleans Bank of the Year Dubai Mumbai Singapore Sydney* Melbourne* Cities in blue indicate Jefferies Broadview locations * Indicates Affiliates (1) As of 12/1/2006. 1 (2) Wall Street Journal, April 2006.
  • 3. Jefferies Delivers The Full Spectrum Of Products And Services To Technology Clients Investment Banking Offers A Full Suite Of Investment Banking Products And Equity Leading banking franchise focused Services To Serve High Growth Companies Throughout The Over 135 institutional on high growth companies with Corporate Lifecycle salespeople that cover over over 400 Investment Bankers (90 2,200 institutional accounts; in technology) in over 25 offices make markets in nearly 3,500 worldwide stocks g Equity Offerings Completed #2 volume trader of k in approximately 300 public equity NASDAQ and OTC stocks in an offerings in the past 10 years 2006(2); top 5 trader in nearly Eq tB Industry Capital Mergers Coverage en 1,700 NASDAQ stocks u it Markets M&A Ranked #1 in technology tm and Research y Acquisitions es M&A advisory assignments in 79 research analysts covering v 2005 and 2006(1) In Financial over 1,100 companies Sales Sponsors Private Equity Regular dialogue and relationships with over 250 Restructuring Trading financial sponsors Debt Restructuring Restructured Private Client Structured Dedicated high yield team of approximately $150B in securities Finance Services over 40 experienced senior and liabilities professionals Private Cash Placements Management Integrated sales, trading, As Asset Management research, capital markets and High se Capital Bank Yield banking functions tM Private Client Services / Cash bt Partners Lending an De Management Advisory, portfolio #1 underwriter of mid-cap ag management and customized high yield debt(3); led by team e me financial solutions that joined Jefferies from Drexel nt Burnham Lambert Jefferies Capital Partners More than $685MM in private equity Jefferies Finance LLC funds under management Commercial bank with nearly $2B in capital (1) Source: SDC. All announced North America and Western Europe technology deals with transaction value less than $1B excluding bio-tech and telecom deals. (2) Source: Autex. Ranking amongst investment banks; 1/1/2006 12/31/2006 (2006). 2 (3) Source: SDC, 1/1/06-9/30/06. Excludes split rated, mortgage and asset-backed securities. Full credit to lead manager, equal if joint.
  • 4. The Investment Bank Of Choice For Growth Companies ($ in Millions) There is a hole in the Jefferies Broadviews team of 90 Bankers is one of the largest dedicated to the marketplace where the Four technology industry Horsemen have gone. Jefferies has a chance to fill it. They always had great #1 Technology M&A Advisor in 2005 and 2006 (YTD)1,2 trading and great distribution. Now theyve #2 Sales and Trading Platform for NASDAQ stocks3 got the whole puzzle. Sandy Robertson, Leading Issuer of Debt for Digital Media and Software companies founder Robertson Stephens New York Times 2006 Technology M&A League Table 1 1 2005 Technology M&A League Table 2 2006 2005 NASDAQ Trade Volume 3 3 # of # of Financial Advisor Deals Rank Financial Advisor Deals Rank Broker Rank Jefferies & Company 44 1 Jefferies & Company 55 1 UBS 1 Credit Suisse 37 2 Goldman Sachs 50 2 UBS 30 3 Citigroup 46 3 Jefferies & Company 2 JP Morgan 28 4 Morgan Stanley 41 4 Citigroup 24 5 UBS 40 5 Citigroup 3 Morgan Stanley 22 6 JPMorgan 40 5 Morgan Stanley 4 Goldman Sachs 22 6 Houlihan Lokey 38 7 Houlihan Lokey 20 8 Credit Suisse 37 8 Bear Stearns 5 Deutsche Bank 20 8 Lehman Brothers 31 9 Rothschild 20 8 Merrill Lynch 28 10 Merrill Lynch 6 (1) Source: SDC. All announced North America and Western Europe technology deals with transaction value less than $1B excluding bio-tech and telecom deals. January 1, 2006 to September 29, 2006. (2) Source: SDC. All announced North America and Western Europe technology deals with transaction value less than $1B excluding bio-tech and telecom deals. January 1, 2005 to December 31, 2005. 3 (3) Source: Autex. Ranking amongst investment banks; 1/1/2006 12/31/2006 (2006).
  • 5. With Leadership In Digital Media And Internet Investment Banking eCommerce Search September 2006 August 2006 May 2006 May 2006 May 2006 March 2006 September 2005 October 2004 has sold a majority stake to has been acquired by has been acquired by $87,000,000 $95,310,000 $87,500,000 $30,000,000 $138,000,000 Confidential $29,000,000 Confidential Initial Public Offering Initial Public Offering Follow-On Offering 144A Block Trade Initial Public Offering Sole Bookrunner Financial Advisor to the Seller Co-Manager Financial Advisor to the Seller Co-Manager Co-Manager Co-Manager Financial Advisor to the Seller Online Marketing / Lead Generation Who Have We Helped? January 2007 May 2006 Online Marketing: aQuantive, BankRate, Kelkoo, etc. March 2006 November 2005 December 2005 May 2005 March 2005 April 2004 has been acquired by eCommerce: Shutterfly, VistaPrint, etc. has sold an equity stake to has been acquired by has been acquired by $113,189,000 $207,000,000 Mobile: WiderThan, Musiwave, etc. $85,000,000 valuing the Company at $78,000,000 Confidential 180,000,000 Confidential 475,000,000 Follow-On Offering Follow-On Offering Senior Credit Facility Initial Public Offering Financial Advisor to the Seller Co-Manager Content Distribution: LimeLight, etc. Joint Bookrunner Financial Advisor to the Seller Financial Advisor to the Seller Financial Advisor Co-Manager Financial Advisor to the Seller Web Content / Services Mobile Content September 2006 July 2006 May 2006 April 2006 December 2005 July 2004 October 2006 January 2006 Motorola, Inc. has agreed to acquire has been acquired by has been acquired by has been acquired by has agreed to be acquired by has been acquired by Broadbus RealNetworks , Inc. Technologies, Inc. $75,900,000 Confidential $130,000,000 Confidential Confidential Confidential $353,500,000 115,000,000 Follow-On Offering Financial Advisor to the Buyer Financial Advisor to the Company Financial Advisor to the Seller Financial Advisor to the Seller Financial Advisor to the Seller Co-Manager Financial Advisor to the Seller Financial Advisor to Seller 4
  • 6. All Major Sectors Of The Internet Continue To Experience Strong Growth And Convergence Jefferies Broadview Internet Market Taxonomy Digital Media Online Commerce Interactive Marketing Services Consumer facing Internet destinations providing Consumer facing shopping destinations that either sell Providers of technology and services focused on content and services to a community of users direct or match buyers and sellers delivering messages to consumers on behalf of Market Definition Business model is primarily advertising-supported Includes both physical (books & CDs) and non-physical advertisers and direct marketers via the Internet Advertising formats can include search, banner, rich (travel & finance) ecommerce and subscription online media, classifieds, etc. services Market Size $26 billion in 20061 $170 billion in 20062 $26 billion in 20061 Projected Growth Rate 28%1 14%2 28%1 Convergence Is The Name of the Game! Leaders: Google, Yahoo, AOL, MSN Leaders: Amazon, eBay, InterActiveCorp Leaders: aQuantive, ValueClick, Digitas Contenders: TheStreet, CNET, BankRate Contenders: Netflix, Overstock, Monster, Priceline Contenders: 24/7, Marchex, MIVA, Omniture Representative Private: FaceBook, MyFamily, Reply Private: HomeAway, Zappos, RazorGator Private: Demand Media, Exponential, VendareNetBlue Companies Median 2006E TEV / Revenue: 3.4x Median 2006E TEV / Revenue: 1.6x Median 2006E TEV / Revenue: 2.9x & Median Multiples Median 2006E TEV / EBITDA: 20x Median 2006E TEV / EBITDA: 20x Median 2006E TEV / EBITDA: 17x Median 2007E Revenue Growth: 21% Median 2007E Revenue Growth: 19% Median 2007E Revenue Growth: 21% VistaPrint, LoopNet, Gmarket, InnerWorkings, Notable IPOs WebMD, , PlanetOut, Traffic.com (Acquired) Website Pros, FastClick, Interchange, Omniture Shutterfly, eHealthInsurance NBC Universal / iVillage ValueClick / FastClick, WebClients Notable M&A Liberty Media / Provide Commerce News Corp / IGN, MySpace Experian / LowerMyBills, PriceGrabber Transactions eBay / Verisign (assets), Shopping.com, Skype Google / YouTube Publicis Groupe / Digitas 180solutions ($40MM), Demand Media ($120MM & FaceBook ($25MM), Topix.net ($15MM), PodShow RazorGator ($25MM), Glam Media ($18.5MM), Notable VC/PE $100MM), DoubleClick ($1.2B), Double Fusion ($15.5MM), Red 5 Studios ($18.5MM), BrightCove Zappos ($20MM), HomeAway ($160MM), Investments ($26MM), Right Media ($45MM), Spot Runner ($60MM), Heavy ($20MM) WrenchHead.com ($18MM) ($40MM) (1) Jefferies research. (2) eMarketer. 5
  • 7. With Substantial Capital Chasing Relatively Few High Quality Opportunities, The Number Of $20MM+ Investments Has Increased Internet Venture Investments Greater Than $20 Million Since 1/1/06 ($Millions) Hot Sectors: Amount Raised Date Company(1) ($MM) Investor(s)(2) Next generation Dec-06 Heavy $20.00 Polaris Venture Partners, Jacobsen Investments advertising and Dec-06 Double Fusion $26.00 Norwest Venture Partners, Accel, IDG Ventures, Sedona Capital lead networks Dec-06 Nov-06 Venda BitTorrent $20.00 $20.00 Investor Growth Capital Accel, DCM Online video and Nov-06 際際滷 $20.00 Kohsla Ventures, Mayfield Fund Nov-06 HomeAway $160.00 Austin Ventures, Redpoint, American Capital, IVP, Trident Capital rich media content Oct-06 Spot Runner $40.00 WPP, CBS, Interpublic Group and distribution Oct-06 Oct-06 Jingle Networks Right Media $30.00 $45.00 Goldman Sachs, Hearst Yahoo! Sep-06 Demand Media $100.00 3i, Oak Investment Partners Organic traffic Sep-06 Handango $60.50 Institutional Venture Partners, Advanced Technology Partners (e.g., domain Aug-06 Jul-06 ChinaCars Digital Chocolate $25.00 $22.50 Goldman Sachs Group Bridgescale Partners, DN Capital, Sequoia Capital, Outlook Ventures aggregators, social Jul-06 Zillow.com $25.00 PAR Capital Management, TCV, Benchmark Capital networks) Jul-06 CinemaNow $20.30 EchoStar Communications, Index Holdings, Menlo Ventures Jul-06 CacheLogic $20.00 Amadeus Capital Partners, 3i, Pentech Ventures International (e.g., Jul-06 Jun-06 DangDang.com HomeAway $27.00 $39.00 DCM, Alto Global Investment, IDG Ventures, Rakuten, Softbank China Austin Ventures China, Korea, Jun-06 Global Market Insite $35.00 TCV, FT Ventures, Voyager Capital India) May-06 Apr-06 DemandMedia FaceBook.com $120.00 $25.00 Oak Investment Partners, Generation Partners, Spectrum Equity Investors GreyLock, Meritech Capital Mar-06 AdKnowledge $48.00 TCV Consolidation Mar-06 CoreMetrics $31.00 FT Ventures, Accel, Highland, themes Mar-06 US Auto Parts $45.00 Oak Investment Partners Feb-06 Claria $40.25 Softbank Capital, Sand Hill Capital & Rogers Communications B2B Jan-06 Jan-06 Innerworkings Webpay $50.00 $24.30 New Enterprise Associates 3i Jan-06 Revenue Science $24.00 Meritech Capital, Integral Capital, Mayfield, Mohr Davidow (1) Online marketing and domain name companies are highlighted. (2) Lead investors are in bold. 6
  • 8. Venture Capital Investments In Internet And Digital Media Have Been Explosive, With Interactive Marketing Leading The Way Venture Capital Investments Since January 2005 Other Internet & eCommerce VCs continue to Digital Media 18% pour capital into 21% Internet and Digital Media at a rapid pace Approximately 2-3 deals per day since Jan 2005 Domain Names Social Media & User 9% Generated Content Total invested 19% capital in excess of $3.5 billion! Mini-bubble in certain sectors? Interactive Marketing 33% Source: Dow Jones VentureSource. 7
  • 9. Internet M&A Saw A Substantial Pick-up In 2004-2005, But Activity Trailed Off Last Year Internet Media & Services M&A Transactions (2003 2006YTD) > $20MM 30 10.0x 26 Median TTM TEV / Revenue 25 6.5x 20 8.0x 19 Number of Deals 20 16 16 4.8x 5.2x 6.0x 4.1x 14 15 11 12 12 3.7x 3.1x 12 3.4x 3.4x 3.2x 4.4x 4.0x 10 2.1x 4.3x 7 5 1.7x 6 5 3.3x 2.8x 5 2.0x 5 1.9x 3 0 0.0x Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2003 2004 2005 2006 Representative Transactions (Consideration $MM) Quarter 2003 2004 2005 2006 Overture / Altavista ($140) Yahoo! / Kelkoo ($577) Interactive Corp / Ask Jeeves ($1,781) Google / DMARC Broadcasting ($670) Rank Group / Blue Square ($105) Ask Jeeves / Interactive Search ($335) Telefonica / Terra Lycos ($1,714) NBC Universal / iVillage ($657) Quarter 1 Overture / Fast Search & Transfer ($85) FindWhat / eSpotting Media ($179) Interactive Corp / Cornerstone ($720) John Fairfax / TradeMe ($466) Observations: Lasminute.com / Holiday Autos ($65) eBay / Mobile.de ($152) United Internet / Web.De ($442) EW Scripps / uSwitch ($366) MemberWorks / LavaLife ($117) New York Times / About.com ($410) Alliance Data / DoubleClick Email Mktg. ($90) M&A driven by combination of($387) USA Interactive / Lending Tree ($710) eBay / Eachnet ($224) AOL / Advertising.com Greed Fear and Holdings / Lastminute.com ($1,132) aQuantive / SBI.Razorfish ($160) Hellman & Friedman / DoubleClick ($1,206) Sabre Microsoft / Massive Gaming ($300) Viacom / Xfire ($102) Roxio /Valuation based on Build vs. Buy Quarter 2 Deutsche Telekom / T-Online ($101) Monster Worldwide / Jobpilot ($105) EW Scripps / Shopzilla ($525) DMGT / Allegran & Data Media ($86) PressPlay ($39) Monster Worldwide / Tickle ($74) eBay / Shopping.com ($521) eBay / Tradera ($48) RealNetworks / Listen.com ($36) DoubleClick / Performics ($62) Experian / LowerMyBills ($380) aQuantive / Franchise Gator ($22) Yahoo! / M&A ($1,442) Overture started off Hot from 2003 to 2005 but then Skype ($2,600) Cendant / Orbitz ($1,032) eBay / trailed off in 2006 Irish Times / MyHome.ie ($57) The Interactive Corp / Hotwire ($685) Interactive Corp / eLong ($321) News Corp / IGN Entertainment ($650) Viacom / AtomShockwave ($200) Quarter 3 Barnes & Noble / B&N.com ($328) done by mega-InternetRakuten/ /Intermix Media (GOOG, YHOO, / Grouper ($65)($25) High multiple dealsYahoo! //MusicMatch ($160) Priceline ActiveHotels ($161) companies ($580) News Corp LinkShare ($425) Sony Conde Nast / Wired.com EBAY) or Diversified MediaMedia ($137) Digitas / Modem companies (NWS, LM)E-Loan ($296) Banco Popular / WebMD / Medsite ($41) Yahoo! / 3721 Network Software ($120) M&A 2.0 phasemore to come! Currently in T-Online / Scout24 ($220) Dow Jones / MarketWatch ($462) Bet&Win.com / OnGame E-Solutions ($569) Google / YouTube ($1,650) eBay / Rent.com ($415) Experian / PriceGrabber ($485) Navteq / Traffic.com ($157) Quarter 4 Interactive Corp / Transat At Inc ($63) Cendant / eBookers ($330) Industri Kapital / WehKamp ($456) Publicis Groupe / Digitas ($1,020) Drugstore.com / International Vision ($56) eBay / MarktPlaats ($290) Liberty Media / Provide Commerce ($417) Alliance Data Systems / Abacus ($435) ValueClick / Commission Junction ($37) Marchex / NameDevelopment ($164) Yellow Pages Group / Trader Media ($379) aQuantive / Accipiter ($30) Q1 Q2 Q3 Q4 Median TTM TEV / R 8
  • 10. Technology IPO Market Conditions Have Started To Improve Quarterly Technology IPO issuance IPO pricing performance vs. range Tech IPO environment $2,000.0 14 10 100% 14.3% 12.5% 11.1% very similar 28.6% % pricing relative to midpoint 80% 14.3% 12.5% 22.2% 7 to that of the $1,500.0 Amount Raised ($MM) 12.5% 60.0% 14.3% 8 60% 11.1% mid 1990s $1,000.0 9 14.3% 9 before the 37.5% 57.1% 40% 20.0% dotcom 55.6% $500.0 20% 42.9% 12.5% 10.0% boom 0% 12.5% 14.3% 10.0% $0.0 Q4 '05 Q1 '06 Q2' 06 Q3' 06 Q4' 06 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Below Bottom Within Mid Top Above Sector Breakdown (LTM) Computer Average P/E multiples by Quarter Aftermarket Performance (LTM) Equip. Serv ices 28 Average aftermarket performance: 30.9% 3% 13% 50x 23 Semis 45x 43x 42x 24 29% Average P/E mulitple 40x 33x 32x 20 35x 30x 30x 29x 31x Comm. 28x 26x # of IPOs 30x 23x23x 16 Equipment 25x 18x 18x 18% 20x 17x 12 Softw are 15x 6 8 5 11% 10x EMS New Media 5x 4 1 5% 21% 0x Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 0 <-15% -15% - 0% 0% - 15% >15% Forw ard PE at filing Forw ard PE at pricing Forw ard PE at T+1 Performance in aftermarket (offer / current) Source: Dealogic / CapIQ 9
  • 11. Online Marketing Services Companies Represented 30% Of NASDAQ Internet IPO Activity In 2004-06 12 Internet IPOs have been few and far between: 9 10 Totals: 2004 2005 2006 8 Marketing 6 3 3 3 Other 14 5 6 6 6 2 4 3 3 3 3 3 6 6 1 2 4 1 2 2 2 1 1 3 1 3 2 2 2 2 1 1 1 1 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Marchex (23x) Google (39x) Interchange (NA) Fastclick (18x) (47x) Website Pros Loopnet (27x) eHealth (22x) WebSideStory Shopping.com (29x) Omniture (NM) (37x) (25x) Marketing* HouseValues 2004 2005 2006 (34x) LinkTone (NA) Shanda (13x) Kongzhong (13x) PlanetOut (48x) Hurray! (9x) WebMD (46x) Traffic.com (NM) Gmarket (23x) InnerWorkings Tom Online (17x) Blue Nile (32x) eCOST.com (NA) China Finance Gravity (20x) VistaPrint (40x) Digital Music (31x) JAMDAT (28x) (30x) Odimo (NM) Group (NM) Shutterfly (48x) 51job (NA) eLong (NM) Liquidity Other* zipRealty (32x) Services (44x) Inphonic (29x) The9 (NA) * Forward P/Es at IPO are shown in parenthesis next to each companys name. 10
  • 12. Industry Predictions For 2007 and Beyond Venture Capital New advertising technologies which better monetize online video / rich media Technologies that create new ad inventory (e.g., advergaming) Search technologies that optimize better than natural language search Lead generation and CPA or CPS based platforms International: China and Korea Mergers And Acquisitions Convergence between different ad units, media and agencies Diversified media continuing to invest, buy online media and technologies Technology R&D to assist in online marketing arms race International: Cross-border investment and M&A Capital Markets IPOs for many large private interactive marketing service companies Follow-on and debt offerings by public players to consolidate the market 11
  • 13. Questions? David A. Liu NYSE: JEF Managing Director www.jefferies.com dliu@jefferies.com www.jefferiesbroadview.com 12