Tvigle: Unique Opportunity to Capitalize on Explosive Growth in Russia’S Emerging Online Video Market Through Industry Leader
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Strictly private & confidential Tvigle: Unique opportunity to capitalize on explosive growth in Russia’s emerging online video market through industry leader Investor Presentation May 10, 2013 Contents Section 1 Unique Russian online video market opportunity 5 Section 2 Multidimensional business on the cutting edge of modern video 10 technology and media Section 3 Growth targets and high operating efficiency 17 Section 4 Key conclusions for investors 22 APPENDIX A Company details 2 Executive summary Opportunity to enter emerging online in-stream advertising segment through investment in leading Russian online video portal • Tvigle, the pioneer and leader in online video in Russia, is seeking an equity investment to help fund its exceptional growth potential • The CEO and founder has scaled the business, established a top-tier management team and developed a strategy to create a highly profitable leader in a rapidly developing market • Tvigle’s unique strategy has allowed the Company to grow its viewer base to more than 10 million Unique Monthly Viewers (“UVM”) and generate advertising revenue of $10 million gross* (2012) to significantly outperform Tvigle’s peers in terms of return on invested capital • The platform has significant operational leverage as online video emerges as a mass medium in Russia; – Russia’s internet audience has become the largest in Europe (55 mln. users) and is starting to actively watch content online – Each acquired Tvigle viewer will view content longer over time, driving revenue growth as the site’s user base expands – Russia’s viewer audience is converting from utilizing pirated content as legal avenues provide a much better user experience and government agencies and content providers intensify enforcement – As Tvigle grows its advertising revenue, it will gain additional leverage over advertising intermediaries and achieve a higher “percentage” of advertising spend (CPM) • Since 2011, online advertising revenue has grown 40%, demonstrating that advertisers are starting to shift a greater share of their “brand” budgets to online sources. Management expects the in-stream video advertising market to grow 100% and reach approx. $200 million in 2014. By merely maintaining its current market share in this growing environment, Tvigle will grow revenue to $40 million by 2014 and $190 million by 2017. • Tvigle has a unique video distribution model based on syndication of content through partner sites and related advertising revenue sharing arrangements. The Company has built relationships with more than 7,000 partner sites, creating a broad audience reach. • Tvigle has developed a “smart” content strategy focused on understanding users’ preferences and customizing video content to specific audience segments (i.e. women, teenagers). This allows the Company to monetize efficiently the content and differentiate from its competitors that spend significant dollars on expensive and rapidly aging video catalogues. • The Company is seeking a $20 million investment to further enhance its leadership position and execute on its identified growth strategy * Hereinafter “Gross revenue’” or revenue “in client money” refers to Revenue before media agency commission (CPM-based) and “Net revenue” – to revenue net of media agency commission (Net CPM-based) 3 Summary Tvigle investment case Key drivers of Tvigle’s success Explosive online video market growth Proven market leadership and technological advancement Online video advertising is the fastest growing segment of the rapidly With proven leadership in both audience and monetization, Tvigle is expanding online advertising market in Russia with high unreleased uniquely positioned to capitalize on the market’s explosive growth monetization potential Unique content Partnership Industry 300 100 strategy network leading team 82 250 66 80 20.00 In-stream Tvigle 200 15.00 viewers 53 60 advertising, 150 42 USD mln. 10.00 34 270 Total viewers 27 40 Online video 5.00 (incl. 100 180 audience, mln. mln.UMV partners) 20 - 50 100 IVI (TNS)* 10 20 45 audience, Monthly 0 0 Jul-11 Jul-12 Jan-11 Jan-12 Mar-11 Mar-12 Sep-11 Nov-11 Sep-12 Nov-12 2010 2011 2012 2013 2014 2015 May-11 May-12 Comprehensive strategy of transition to an online model Efficient operating model and proven investment case Tvigle is a unique multidimensional platform combining several synergetic Tvigle’s tremendous 2012 growth proves the sustainability of its model. models on the cutting edge of online video technology and media and goes Continued growth, coupled with an efficient operating structure, will drive far beyond online video on demand financial scalability. 140.0 43% 46% 48% 60% Syndication 38% 120.0 36% 31% of content 28% 26% 40% High 100.0 17% operating Tvigle.ru Access to 80.0 20% leverage cheap traffic -5% 60.0 116.6 0% Connected -24% Tvigle platform Partner sites 40.0 -28% 77.0 devices -20% 20.0 4.6 9.9 21.0 42.0 0.0 -40% Video Opportunity 2012B 2013F 2014F 2015F 2016F 2017F to cross-sell publishing Net revenue, mln. USD Gross profit margin EBITDA margin 4 Section 1 Unique Russian online video market opportunity Russian online video: initial steps to a booming market Growth of online video audience in Russia, 2010-2015 Key drivers of Russian online video market growth 88% • 90 90% With the largest internet audience in Europe (55 mln. users in 2011) CAGR: 25% 80 80% 85% actively seeking new online experiences, Russia is one of the fastest 70 Online video 74% 80% growing online video markets in the world 60 audience, 75% mln. 50 68% • Although television remains the key medium for professional 70% 40 63% 82 Share of total content, Russians are switching to online properties for time 65% 30 60% 66 Russian 53 flexibility and search convenience 20 42 60% internet 34 audience, % 10 27 55% • Tvigle focuses on AVOD (video free for viewer containing ads) 0 50% business model due to 2010 2011 2012 2013 2014 2015 – High quality and competition from Russian free-to-air television Source: POF, J’Son & Partners, ComScore Video Metrix – Consumers unwillingness to pay for content “Lessons” from the booming US online video market • As US market proved, users’ conversion to online video is a TV audience is starting Video viewership growth fundamental trend with a lot of unreleased monetization potential: outpaces ad spend to convert online – Growth of video online audience and engagement substantially -0.6% $6,000 600 outpaces the growth of ad spend even on mature markets 2010 $5,000 500 44.6 44.3 50.0 $4,000 400 – The next wave of TV viewers shifting online will drive even more 40.0 2011 $3,000 300 explosive market growth 30.0 $2,000 200 20.0 +73% $1,000 100 • Russia has a very sophisticated internet audience that rapidly 10.0 1.3 2.3 $- 0 0.0 2006 2008 2010 adopts new technologies and media consumption hours watched hours watched Ad spend online per year, $mln. on TV online Videos watched per year, bln. Source: ComScore Video Metrix Russia is a fast growing internet audience, with 55 mln. users rapidly converting to online video As other mature markets have shown, users’ shift to watching video online is a fundamental trend with a lot of unreleased monetization potential Section 1: Unique Russian online video market opportunity 6 In-stream: fastest growing online advertising segment with 2x annual growth rate In-stream advertising market vs. online advertising growth Opportunity to benefit from arising in-stream advertising market 4,500 4,250 300 • In-stream advertising is expanding to follow the rapid growth in 4,000 3,500 250 3,500 270 online video viewership 3,000 2,700 200 • Total The market started developing actively in 2010 and is already the 2,500 1,950 180 150 Online fastest growing segment of online advertising with a 100% annual 2,000 advertsing 1,420 growth rate 1,500 100 In-stream advertising 1,000 100 • The major contributors to this growth are: 50 500 45 – Growing internet penetration (15% CAGR) and users’ - 0 20 2011 2012 2013 2014 2015 engagement is leading to an increase in online advertising spend Source: UBS, J’Son & Partners, Management estimation – Advertisers’ switch from traditional media (print and TV) to online, which ensures nationwide reach but remains significantly cheaper Russian advertising market split by media, 2010 - 2015 – Formation of online video portal as a new medium for Outdoor Other 7.5 bln. 10% 2% professional content broadcasting, making it more attractive for Outdoor Other Radio USD 13% 3% 5% advertisers as compared to other online properties Radio – Gradual conversion from static formats of online advertising to in- 5% TV stream, enabling higher growth as compared to both display and TV Internet Internet 51% 55% 11% 22% context advertising segments Print • Management expects in-stream ad revenue in Russia to grow by 13% Print 10% 100% annually and reach $200 mln*. by 2014, up from $45 mln. in 2010: $7 bln. 2015: $15 bln. 2012 Source: ZenithOptimedia, Video International : * In client money : Following the growth of online video viewership, the emerging in-stream advertising market has become the fastest developing segment of online advertising. Driven by advertisers’ conversion from traditional media and static online formats, the market is expected to grow by 100% annually to reach $200 mln. in 2014 Section 1: Unique Russian online video market opportunity 7 Proven platform to capitalize on the market growth Tvigle and partners’ audience, UMV mln. Proven market leadership 18.00 • Tvigle pioneered professional online video broadcasting in Russia in 16.00 Tvigle