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DRAFT

Digital Services and Distribution Acquisition Strategy. DRAFT. Executive Summary. Grouper’s initial focus positioned it for growth during the early development of the UGV market Strong, seasoned management team Small but compelling base of content; focus on user-generated videos

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DRAFT

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  1. Digital Services and Distribution Acquisition Strategy DRAFT CONFIDENTIAL

  2. Executive Summary • Grouper’s initial focus positioned it for growth during the early development of the UGV market • Strong, seasoned management team • Small but compelling base of content; focus on user-generated videos • Easy-to-navigate interface and technology for sharing content • Emerging leaders are dictating a new set of minimum success requirements, broadening their audience, functionality, and content through acquisitions and new product introductions • Google acquires YouTube • MySpace launches MySpace Videos • Yahoo acquires JumpCut and partners with CurrentTV • Sony must acquire to continue to meet minimum threshold for audience size and breadth of content/functionality • Near-term focus on increasing audience through syndication plays and acquiring broadly appealing content and functionality • Once minimum thresholds are met, seek opportunities to build a deeper offering, including expertise in specific content verticals and targeted functionality

  3. The Current State of Market Evolution Rewards Broader Offerings Deeper Offerings Broader Offerings Tipping Point / Audience Growth Inception (2004 – 2005) (Early 2006) (Late ’06 / Early ‘07) (Late ’07 / Early ‘08) • Leaders expand to adjacent markets Market Dynamic • Multiple market entrants grow at similar rates • Leaders break-out from the pack • Market rewards players with deep content catalogs and robust technology • Larger audience • Breadth of content • Range of functionality • Larger audience • Broad offering • Brand known for an area of expertise Minimum Requirements to Compete • Content and features on-par with competitors • Single compelling characteristic • Broadest range of content • Network effect of larger audiences Areas of Differentiation • Limited differentiation • Unique piece of content • Ease-of-use • Ability to supplement broad offering with depth in specific verticals • MySpace launches videos • Google acquires YouTube Examples • Dozens of pure-play UGV sites struggle to reach a million unique users • YouTube explodes with “Lazy Sundays” • MySpace users flock to improved community features • Content verticals have not yet gained traction • Yahoo media group continues to struggle

  4. Distinct Service Categories Formed at the Outset of Digital Video Social Network User Generated Video (UGV) Aggregators Channel Promotional • Allow audience to watch and share videos created and uploaded by users • Primarily advertising based revenues • Online communities enabling interactivity between users • Primarily advertising based revenues • Aggregate video across providers for purchase • Includes sell-thru, rental, and ad-support • On-demand videos programmed in channels or on a show-by-show basis • Advertising supported, with some upsell to subscription • Short video clips promoting the site owner’s content, merchandise, and brand • May include some advertising and limited commerce capabilities

  5. Players with the Largest Audience are Broadening their Offerings, Blurring the Line Between Service Categories Original Focus Areas of Expansion Service • Aggregator • UGV – Acquired YouTube for $1.65BN • Social Network • UGV – Launched MySpace Videos • Channel – Fox Full Throttle • Store – Download-to-own Episodes • Channel (e.g., Music Videos on Yahoo! Music) • UGV Tools – Acquired JumpCut • UGV Content – CurrentTV Partnership

  6. Digital Service Acquisition Considerations Considerations Near-term Approach Sony Skill Set • Audience and 3rd party distribution currently lagging and difficult to build organically • SPE has expertise in-house to expand content and functionality • Repurposing SPE content and licensing from 3rd party partners • Grouper leading development and licensing as needed • Focus on narrow universe of significant acquisition targets • Prioritize audience / syndication • Seek partners that pair audience with broadly appealing content or functionality Potential Future Expansion M&A Landscape • Limited window for compelling acquisitions • Competitors acquiring aggressively • Valuations increasing • Point acquisitions to reinforce areas of differentiation • Targeted content • Features and functionality Phase of Market Growth • Current market phase demands broader offerings • As market matures, it will reward depth

  7. Digital Service Acquisition Priorities Audience: Syndicators Audience: Destinations Breadth Depth • Companies that syndicate video to a network of online partners • Content and/or functionality with established audience • Targeted content or functionality • Sites with audience but no differentiated content Description Valuations Attractive Moderate Moderate Expensive Speed Fast Gain traction quickly Fast Gain traction quickly Slow Requires multiple acquisitions Slow Requires content and functionality deals to supplement 1st 2nd Low Priority

  8. Acquisition Candidates Content + Audience Break.com (3.3) eBaum’s World (3.0) Bolt.com (2.9) Heavy.com (2.7) Tier 1 Candidates Tier 2 Candidates Content College Humor (0.9) JibJab (0.6) SingingFool/VideoDetecitve Broadband Sports (0.1) RocketBoom(0.04) Ruckus (0.02) Revision3 (0.02) Channel 101 (0.02) Audience Syndicators PhotoBucket (12.0) Roo Media (5.8) Veoh (N/A) Brightcove (N/A) FeedRoom (N/A) Low Priority Audience Destinations DailyMotion (0.8) vidiLife (0.8) Functionality + Audience Six Apart (10.4) Image Shack (9.3) Xanga (5.5) Reunion (4.7) MetaCafe (3.1) Digg (2.1) Putfile (1.4) Friendster (1.0) Tagged (0.8) Functionality Meetup (0.7) Piczo (0.5) Text America (0.5) Imeem (0.2) VideoEgg (0.2) eyeSpot (0.2) MotionBox (0.2) Famster (N/A) Content + Functionality Pure Video (0.9) Castpost (0.2) Now Public (0.09) Bix (0.08) Blip.tv (0.06) Dave.tv (N/A)

  9. Tier 1 Acquisition Candidates • Monthly Unique Users per Nielsen Net Ratings except for Roo • Roo audience estimate is of unique streamers per ComScore

  10. Tier 2 Acquisition Candidates • Monthly Unique Users per Nielsen Net Ratings

  11. APPENDIX A – COMPANY PROFILESProfiles for Roo, Break, Heavy, Digg, Bolt, Metacafe, Bix, and PhotoBucket CONFIDENTIAL

  12. Content Partners Advertisers Sites Ingestion Engine Video Player Program Channels Ad Network and Insertion ROO Group Business Overview Entertainment Owned and Managed Partners Licensing fees, payment-per-stream and ad revenue share Lifestyle and Family News

  13. ROO Group, Inc. (NASDAQ: RGRP)

  14. ROO Group, Inc. (NASDAQ: RGRP) Key Developments Company Overview • August 1998 • • Originally incorporated as Virilitec Industries, Inc.; main business was to license and distribute a line of bioengineered virility nutritional supplements designed to enhance human male sperm count and potency; venture failed • December 2003 • • Virilitec Industries, VRLT Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Virilitec Industries, ROO Media, Jacob Roth and Bella Roth, merged • April 2004 • • Purchased 80% of Reality Group Pty Ltd, a corporation formed under the laws of Australia • May 2004 • Purchased the business and business assets of Undercover Media Pty Ltd., operating a music and entertainment site (www.undercover.com.au) • September 2004 • Purchased Bickhams Media, Inc. and the VideoDome property, an embedded video player integrated in to the ROO offering • October 2005 • • Reality Group shareholders agreed to exercise their buyback option and ROO reduces ownership of Reality Group to 51% • October 2005 • Purchased 51% of Factory 212 Pty Ltd through its subsidiary, ROO Broadcasting Limited • ROO Group is an online broadcast network and a leading global provider of digital media solutions and technology that enable the activation, marketing, and distribution of video content over the Internet and emerging broadcasting platforms such as set top boxes and mobile communication devices • Core activities include the aggregation of video content, media management, advertising, hosting, and content delivery • Proprietary technology platform and infrastructure is largely based in the United States and is designed to be accessed and maintained from satellite offices anywhere in the world via a Virtual Private Network (VPN) over the Internet • Operates a global network of individual destination portals under the brand ROO TV, that enables end users in different regions around the world to view video content over the Internet • An independent research report which tracks the video streams sent to users per month placed us as the 10th largest broadcaster of video in the world (Source: iBroadcast Stream report released November 21, 2005 prepared by AccuStream iMedia Research. ) • ComScore MediaMetrix ranks ROO Group as #10 among US streamed video sites (5.8 MM streams in July 2006) • ROO was founded in 2001 and went public in 2003 • Over 100 employees with worldwide operations in New York, Los Angeles, London and Australia

  15. ROO Group, Inc. (NASDAQ: RGRP) Technology and Service Overview • Core Services provided include: • ROO Video Solutions - Customized video solutions for specific customers or industry segments; platform has been designed to be flexible in accommodating various opportunities for activating video for broadcast over the Internet and accommodating emerging technologies such as wireless devices (i.e., mobile phones and PDAs) and set top boxes • ROO Syndication of Licensed Video Content - Provide a turnkey solution for customers located throughout the world to activate licensed topical video content on their web sites; • Current customers for this service include Verizon in the United States, Bulldog Broadband in the United Kingdom and News Interactive a subsidiary of News Corp • ROO’s Online Advertising Network - Through syndication clients, ROO has developed a network of web sites across which the company can sell advertising inventory • The advertising includes traditional banner ads and television-style 15 second and 30 second commercials, which can be programmed to play before and after topical video clips that are most likely to be viewed by the advertisers' chosen demographic • Syndication clients can receive a percentage of the advertising revenue generated on their websites • Recent advertisers utilizing in-stream advertising have included Microsoft, Apple, Honda, Hyundai, Target, Proctor & Gamble and Pfizer

  16. ROO Group, Inc. (NASDAQ: RGRP) NASDAQ Yearly Performance (as of 11/10/2006) Financial Overview Recent Developments Management Team • On August 18, 2006, the Company entered into a Common Stock Purchase Agreement pursuant to which the Company sold an aggregate of $5,506,250 of shares of common stock and warrants; each investor will be issued warrants to purchase a number of shares of common stock equal to 50% of the number of shares of common stock purchased • Robert Petty, CEO and Chairman of the Board, ROO Group • Robin Smyth, CFO and Executive Director, ROO Group • Steve Quinn, COO • Tristan Place, VP Sales/Strategic Partnerships • Max Moore, VP Business Development

  17. ROO Group, Inc. (NASDAQ: RGRP) Ownership Detail

  18. Comparison of Video Syndicators (1) Per comScore Video Metric (2) Per Veoh management estimate of roughly 500K streams per day

  19. Break.com Strategic Profile User Metrics • Established in 1998 as Big-Boys.com, a video-sharing site • Purchased in May 2004 by Keith Richman, co-founder of Billpoint, and changed name to Break.com • 100% owned by Richman and a few business partners – has never taken any venture financing • Generate revenue through banner ($20 CPM) and text ads only – no pre-rolls • Based in Beverly Hills, CA with 20 employees Unique Users (MM) Note: estimated to generate ~100MM streams/ month Web page views (MM) 141.2 189.2 135.4 Content Offering Time/ person(min.) 16.1 21.5 15.3 • Online entertainment network and community powered by traditional user-generated content • Content base skews toward 15-35 year old male-oriented humor, sports and racy categories • Majority of the content is original and created by users specifically for Break.com (Break doesn’t own content but takes and exclusive license to it) • Pays $250/ video for videos it wants to feature, incentivizing users to create high-quality videos (est. to spend ~$250K/ month buying user videos) Internal Break.com sources estimate uniques of approx 13MM. Partnerships • Leverages AdBrite to sell its banner and text ads • Established partnerhsip with Amp’d Mobile in Nov. 2005 to distribute videos through mobile, charging $2.99/ month for unlimited access Source: Nielsen//NetRating used for page view, time data, AdBrite; BambiBlogs.com; Break.com; Multichannel News; Amp’d Mobile; PureVideo; ComScore Video Matrix

  20. Break.com Content • User-generated • Share it with friends (viae-mail) • Embed & blog it Advertising: • Banner ads – no pre-rolls or text Interactivity: • Promote to home page • Rate It • Recommend • Comment

  21. Heavy.com Strategic Profile User Metrics • Established in 1999 as a P2P digital content sharing site by Simon Asaad & David Carson • Polaris venture capital holds a 25% stake in Heavy; Polaris lead a $10MM round in January 2006 • Expected to generate ~$20MM adv. revenues in 2006, a 300% increase over 2005 (recently valued at ~$200MM – source: paidContent.org) • Ad sales and marketing conducted internally • Based in New York, NY with 20 employees Unique Users (MM) Note: estimated to generate 80-90MM streams/ month Web page views (MM) 9.3 10.4 6.6 Time/ person(min.) 1.5 1.2 1.0 Content Offering • Broadband entertainment network focused on providing high-quality content • Content base skews toward 18-34 year old male-oriented humor and racy categories • Takes full and exclusive ownership of a range of content (mix of video, animation, and games) created by Heavy and/or its partners, e.g., NBC delivered through distinct channels • Generates revenue through banner ads, pre-rolls, and branded production, e.g., Burger King videos Partnerships • Recently announced partnership with TiVo to provide content for TiVo’s VoD service • Established partnership with Verizon Wireless in April 2006 and created a channel on V-Cast subscription mobile offering • Parnter with Sony PSP, video iPod, and Virgin Mobile to distribute non-wireless mobile content Source: Nielsen//NetRating used for page view, time data, Heavy.com; Multichannel News; PureVideo; ComScore Video Matrix; paidContent.org; FT.com; VCMike’s Blog

  22. Heavy.com Advertising: • Banner ads • Pre-rolls Interactivity: • Rate It • Comment Content sharing: • Heavy/ partner produced channels • Share it with friends (via e-mail) • Blog it

  23. digg.com Strategic Profile User Metrics • Established in Nov. 2004 as an information and news sharing site by Kevin Rose • Closely held (Rose owns ~30-40%) with minimal venture financing – received $2.8MM round in Oct. 2005 to support initial growth • Expects ~$3MM in advertising revenues in 2006 (recently valued at $200MM – source: BusinessWeek, 8/2006) • Generate revenue through banner and text ads only – focused on growing audience with minimally invasive ads • Based in San Francisco, CA with ~20 employees Unique Users (MM) Note: estimated to generate 20-30MM streams/ month Web page views (MM) 6.1 4.9 11.7 Time/ person(min.) 2.2 2.1 2.5 Content Offering • Online user-driven news/ information community providing direct links to stories and video sites • Target IT professionals, developers, professional “geeks” and news junkies • Content is a mix of categorized text (primary) and video (secondary) postings from blogs, professional news sites and random Web sites • Users tag news stories they like (dig) and dislike, driving what content appears on the home page Partnerships • Leverages Federated Media to sell its banner ads • Digg.com founders started a video production company, Revision3, in Sept. 2006 • Focused on high-end humor and tech content targeted at young, tech-oriented people • Advertising model is 1950s throwback – based on sponsors named in advance of ‘shows’ by hosts Source: Nielsen//NetRating used for page view, time data, Digg.com; Multichannel News; PureVideo; ComScore Video Matrix; Federated Media; HowStuffWorks.com; BusinessWeek (8/06); Red Herring

  24. digg.com Advertising: • Limited banner and text ads • No pre-rolls (link directly to other video sites, e.g., YouTube) Content • User-posted and recommended • Share it (viae-mail) • Blog it Interactivity: • Edit It • Rate (Digg) It • Comment

  25. Bolt Media Strategic Profile User Metrics • Established in 1996 as a teen community, Bolt has relaunched as an online network and community focused on posting creative content and network • Focus on 18-34 year old audience • Bolt Media has also launched Bolt2.com, enabling kids, tweens, and younger teens to create content, meet people, and play games in a safe and age-appropriate environment • Based in New York, NY Unique Users (MM) Note: estimated to generate ~100MM streams/ month NA NA NA Web page views (MM) 20.9 25.0 82.4 Content Offering Time/ person(min.) 2.3 1.5 6.2 • Online entertainment network and community powered by social network aspects where creative users can upload and submit content for competition • Content base skews toward 18-34 year olds with focus on “prosumer” content • Encourages interaction/feedback through the user's content – facilitating comments and blogs Partnerships • Currently leveraging creative relationships with the Hip Hop Theater Festival • Developed significant advertising partnerships with companies such as Toyota, Coke P&G and Nike where users can enter immersive environments Source: Nielsen//NetRating used for page view, time data, Bolt.com; ComScore Video Matrix; BusinessWeek (8/06); TechCrunch.

  26. Bolt Media Content • User-generated • Embed & blog it Advertising: • Banner ads – no pre-rolls or text Interactivity: • Community • Rate It • Recommend • Comment Advertising: • Banner Ads • Video Ads

  27. Metacafe Strategic Profile User Metrics • Founded in 2004, Metacafe boasts a global audience of 17 million unique visitors (comScore Media Metrix) • A desktop client is used to upload and download the videos only about two dozen of which are newly approved each day • Revenue model based on advertising (banner ads) • Original round of funding yielded $5 MM from Benchmark Capital; Significant backing from Accel Partners and Benchmark Capital in second round, receiving $15MM in venture funding in July 2006 • Based in Tel Aviv, Israel and Palo Alto, CA Unique Users (MM) Note: estimated to generate ~100MM streams/ month NA NA NA Web page views (MM) 84.6 78.8 101.4 Time/ person(min.) 31.4 23.0 25.5 Content Offering • Online entertainment network and community powered by traditional user-generated content and high-end produced content that is licensed in • Utilizes VideoRank™ technology, allowing the site to mine and filter content • Filtering system focuses Metacafe on a smaller number of high-quality selected videos to drive a large amount of traffic • Developing revenue share with posters based on CPMs Partnerships • Currently seeking significant partners for licensing content Source: Nielsen//NetRating used for page view, time data, Metacafe.com; ComScore Video Matrix; BusinessWeek (8/06); TechCrunch.

  28. Metacafe Advertising: • Banner Ads • Video Ads Content • User-generated • Embed & blog it Interactivity: • Community • Rate It • Recommend • Comment

  29. bix.com Strategic Profile User Metrics • Formerly known as 900Seconds.com, bix.com was recently launched and operates a user-generated contest site • Mike Speiser, Co-Founder and CEO was also the Co-Founder of ePinions • Currently, the website is ad-free, depending solely on corporate-sponsored contests for revenue • Bix.com is seeking alternative revenue sources, including advertisements on its site and user-generated ringtones • Based in Palo Alto, California • Workforce of 16 employees, mostly engineers from eBay Unique Users (MM) * Bix was launched on August 8th, 2006. Forward estimates provided by Citigroup. Content Offering • Enables consumers to create their Web-based talent competitions and enter existing competitions • “Bix is a platform for creating contests online much in the mold of American Idol … The company plans to allow end-users to download their own audio clips and use them as ringtones for a small charge. Eventually the same content could be sold to others, and at that point the company is going to split the proceeds with the creators … Bix is hoping to cash in on the shift of ad-dollars to the online medium … these contests will be ideal vehicles for brand advertising.” (gigaOm) Recent Investors Geoff Ralston Source: Motngomery & Co.

  30. bix.com Content • Contest featuring user-generated content Advertising: • Sponsored Contests

  31. Photobucket Strategic Profile User Metrics • Founded in 2003 and managed by Alex Welch • Named fasting growing site of 2005 by Nielsen/Netratings and now has over 25 million users • The site features free sharing and publishing of online images, graphic art and videos that can be directly linked from Photobucket to any site • Revenues based on subscription for premiere products and banner advertising • Based in Palo Alto, California and has workforce of 25 Unique Users (MM) Web page views (MM) 453.8 522.3 375.8 Time/ person(min.) 12.1 11.6 8.4 Ranking Among Photo Sites Content Offering • Popular sites offers subscriber based services for uploading and sharing photos • Reliable service that enables efficient sharing and publishing of visual digital content online • Images and videos can be directly linked form Photobucket to an site, including MySpace, eBay, LiveJournal, Xanga, Friendster, and Neopets Source: Citigorup Corporate and Investment Bank.1. ComScore MediaMetric. September 2006.

  32. Photobucket Advertising: • Banner Ads Content • Slideshows and sharing • Premiere product bundles

  33. APPENDIX B(Alternative Strategic Frameworks) CONFIDENTIAL

  34. Market Evolution: Observations and Hypothesis • Multiple market entrants grow at a similar rate • Players refine offerings to “good enough” status and focus on a small base of content and/or functionality Inception (2004 – 2005) • Leading destination sites emerge based on differentiated feature or piece of content • YouTube explodes as users discover “Lazy Sundays” • MySpace users flock to improved community features • Successful followers begin to build audience through partners/syndication • Grouper grows through Yahoo links and Friendster partnership • BrightCove, Veoh, and Roo build successful syndicator businesses Rapid Growth (Early 2006) • Leaders broaden offerings through acquisition and product extensions • MySpace launches video • Google acquires YouTube • Succesful followers continue to invest in audience and broaden offerings • Laggards focus on narrow vertical offerings, hoping to differentiate and find audience Breadth (Late ’06 / Early ’07) • Leaders build or acquire to create depth in specific verticals • Targeted offerings that have found an audience are acquired at a premium or survive on a smaller scale • Targeted offerings with smaller audiences languish or exit Depth (Late ’07 / Early ’08)

  35. Audience: Syndicators Audience: Destinations Acquisition Candidates Breadth Depth Content College Humor (0.9) JibJab (0.6) RocketBoom(0.04) Revision3 (0.02) Channel 101 (0.02) Audience + Content Break.com (3.3) eBaum’s World (3.0) Bolt.com (2.9) Heavy.com (2.7) AddictingClips (1.9) Putfile (1.4) DailyMotion (0.8) vMix (0.8) vidiLife (0.8) ManiaTV (0.6) Revver (0.5) Vimeo (0.5) PhotoBucket (12.0) Roo Media (5.8) Veoh (N/A) Brightcove (N/A) Feedroom (N/A) Functionality Meetup (0.7) Piczo (0.5) Text America (0.5) Imeem (0.2) eyeSpot (0.2) Audience+Functionality Six Apart (10.4) Image Shack (9.3) Xanga (5.5) Reunion (4.7) MetaCafe (3.1) Digg (2.1) Friendster (1.0) Tagged (0.8) Content + Functionality Pure Video (0.9) Bix (0.08) Blip.tv (0.06) Dave.tv (N/A) 1st 2nd Avoid

  36. Digital Service Acquisition Priorities Broad Audience + Content High Priority May require significant investment Audience - Syndicators High Priority High-value opportunities Deep Lower Priority Potential for small acquisitions to address specific demographics Audience - Destination Site Avoid Pureplay destination sites generally overvalued Broad Audience + Functionality High Priority May require significant investment Deep Content + Functionality Lower Priority Potential for small to medium acquisitions Deep Lower Priority Potential for small acquisitions to round-out feature set

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