Show me the money Web 2.0 Expo April 18 th, 2007 Jeremy Liew Partner, Lightspeed Venture Partners Lsvp.wordpress.com

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

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 3 … and cheaper than ever to run an internet company Annual Fixed CostsAssumptions Staff Costs$1.0m  8 employees  $120k fully loaded Infrastructure Costs$0.2m  $15k/month Other Costs$0.2m  Rent, Legal, etc TOTAL$1.4m SAMPLE EXPENSE BUDGET

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

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

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 6 Significant variation in revenue targeted for internet companies to breakeven versus to be public $2.8M$131M $7.0M$277M MEDIA E-COMMERCE BREAKEVENPUBLIC, $500M EV* * Based on median multiples

Media Companies

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 8 Advertising RPMs* depend on your ability to deliver a targeted audience Example 2007 Revenue March US PVs Annual US PVsRPM Myspace$271M44B524B$0.52 Facebook$150M**12B126B$1.03 Fandango$25M**50M600M$41.67 $10-40 $1-5 $ ** Facebook revenue estimate “well over $100m”, Fandango revenue estimated to be “around $50m with half from advertising and half from ticketing” 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

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 9 To reach breakeven, US traffic requirements can become quite meaningful, depending on RPMs RPM PV/Mth to reach $2.8M in revenue Sites with comparable US Traffic eHarmony239M Real237M Whitepages230M Tagged229M NFL.com49M Nextag48M Wash’ton Post47M Heavy45M Technorati12M WinAmp12M UFC.com12M Digg11M Source: Comscore, Lightspeed Analysis Not necessarily demographically targeted Not necessarily endemically targeted

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 10 US traffic requirements are even higher to reach public company levels RPM PV/Mth to reach $131M in revenue MSN13,672M Google12,476M Facebook12,179M AOL10,609M Live.com2,819M Youtube2,539M Go.com1,559M Pogo1,544M MSNBC592M Expedia522M Paypal495M Weather.com488M Source: Comscore, Lightspeed Analysis Sites with comparable US Traffic Not necessarily demographically targeted Not necessarily endemically targeted

E-Commerce Companies

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

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

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 14 Relatively few pure play e-commerce companies have achieved over $271M in annual sales so far Company2005 Revenue Amazon Newegg Overstock Netflix Drugstore Buy.com Bluenile Peapod VistaPrint Zappos $8,490M $1,300M $804M $688M $399M $345M Below $271M in 2005 but projected over $271M in 2007 Amazon.com Newegg.com Source: Internet Retailer Top 500 Guide, 2006 Edition, Goldman Sachs

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 15 In 2005, there were at least 227 companies with e-commerce revenues over $25M, but none with multiple websites in this range CompanyProducts2005 Revenue Bodybuilding.com Computer Geeks Parts Train Shoemall Cooking.com Decorative Product Source Blinds.com Shopbop Gloss.com Sheet Music Plus Supplements PC hardware Auto parts Shoes Kitchen goods Plumbing and Lighting Blinds Women’s clothing Beauty Products Sheet Music $46M $45M $44M $40M $39M $38M $34M $32M $27M Source: Internet Retailer Top 500 Guide, 2006 Edition

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

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 17 Conclusion  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