October 8, 2012 PRISM PROGRESS REPORT for INTERNET and SOCIAL MEDIA Making diffuse information about the Internet and Social Media crystal clear IN THIS ISSUE: . Urban Airship . Beachmint . Twitch . Rovio Michael Pachter (213) 688-4474 [email protected] Yoni Yadgaran THE INFORMATION HEREIN IS ONLY FOR (212) 938-9924 ACCREDITED INVESTORS AS DEFINED IN [email protected] RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1933 OR INSTITUTIONAL INVESTORS. Wedbush Securities does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their 1000 Wilshire Blvd, • Los Angeles, CA 90017 investment decision. Please see page 213.688.8000 • www.wedbush.com 18 of this report for analyst MEMBER NYSE/FINRA/SIPC certification and important disclosure information. WEDBUSH | PROGRESS REPORT for INTERNET and SOCIAL MEDIA ` About Wedbush Securities Private Shares Group The Private Shares Group of Wedbush Securities is a leader in providing research and trading to the rapidly growing industry of privately traded securities, with an emphasis on companies in the social media space. We assist companies in raising growth capital through traditional private placements and provide liquidity options for existing and former employees through tailored selling programs. We also work with venture capital, private equity and hedge fund investors to help them adjust their holdings in some of the most dynamic companies. We endeavor to understand the underlying industries of the private companies we trade, in order to help our clients make informed decisions about their investments. We provide discreet customized solutions for our institutional and accredited private clients through a team of professionals located in New York, Los Angeles and San Francisco. About Michael Pachter Michael Pachter is the Managing Director of Equity Research, providing coverage across the Digital Media sector, as well as the Head of Research for the Private Shares Group. He has been recognized as StarMine’s “Top Earnings Estimator” year after year and “Best on the Street” by the Wall Street Journal. Michael brings over 20 years of experience as a financial professional to the Private Shares Group, along with extensive knowledge across the social media sector in both public and private companies. Mr. Pachter holds an M.B.A. from the Anderson School at the University of California at Los Angeles, a juris doctor from Pepperdine University, an LL.M. in Taxation from the University of Florida, and a bachelor’s in Political Science from California State University, Northridge. About Yoni Yadgaran Yoni Yadgaran joined Wedbush from Bank of America Merrill Lynch. Originally covering Internet & E-commerce within Equity Research, he later moved on to help pioneer the Private Shares Group’s Research efforts. Yoni is a CFA level 3 candidate and received a B.B.A in Finance from Baruch College. Contact Wedbush Securities Private Shares Group: Michael Pachter Kevin Cohen Managing Director, Equity Research Director of Trading, Private Shares Group Head of Research, Private Shares Group (213) 688-8089 | [email protected] (213) 688-4474 | [email protected] Twitter: @michaelpachter Yoni Yadgaran Olivia Jamgotchian Research Associate, Private Shares Group Sales & Trading Associate, Private Shares Group (212) 938-9924 | [email protected] (213) 688-6625 | [email protected] Jim Edwards Cyrus P. Pirasteh Senior Research Associate, Private Shares Group Managing Director, Head of Private Shares Group (213) 688-4303 | [email protected] (213) 688-6661 | [email protected] About Wedbush Securities Founded in 1955, Wedbush Securities is a leading investment firm that provides brokerage, clearing, investment banking, equity research, public finance, fixed income sales and trading, and asset management to individual, institutional and issuing clients. Wedbush currently ranks as a top liquidity provider for the NASDAQ, and was ranked as the #1 stock picker for 2010, 2011, and again for the 1st half of 2012 by Barron’s. Headquartered in Los Angeles, with over 100 offices nationwide, Wedbush focuses on relentless service, client financial safety, continuity, and advanced technology. (www.wedbush.com) 2 | P a g e WEDBUSH | PROGRESS REPORT for INTERNET and SOCIAL MEDIA ` Urban Airship Urban Airship provides a variety of white-label content delivery and communication products for mobile app developers, allowing the integration of mobile apps with Urban Airship’s cross-platform API. Developers using the company’s service eliminate the need to code content themselves, instead using the company’s server infrastructure. This reduces the need to monitor protocol changes among supported mobile platforms, allowing a single API interface (as opposed to one for each mobile OS they support). As of April 2012, Urban Airship helped more than 65,000 active developers of over 65,000 apps that have been installed more than 750 million times. Urban Airship’s customers include Glu, Walgreens, Groupon, ESPN, Gannett, Future, Vevo, LivingSocial, Oracle, Macys, NBC, and ShowTime, with significant adoption of its services across entertainment, publishing, media, retail, social networking, and enterprise software verticals. Users of apps developed with Urban Airship’s suite of products have made over 19 million in-app purchases, and sent over 2.5 billion messages per month to over 100 million mobile devices, as of April 2012. The company’s services are available for developers building apps for iOS, Android, and Blackberry devices. Source: Company Info Urban Airship was launched in May 2009, is headquartered in Portland, with another office in San Francisco, and employs about 75 people. The company received $1.1 million in funding in February 2010, and another $5.4 million in November 2010, in two venture rounds that were both led by Foundry Group, True Ventures and Founders Co- op, according to a report published by The Oregonian. At the time of its second round, the company employed 17 people (up from four in February 2010), and had already signed Warner Bros., Newsweek, and The Atlantic as customers of its subscription and push notification services. In November 2011, the company received $15 million in funding in a Series C venture round led by Salesforce, Verizon, Intel Capital, Foundry Group, and True Ventures. At the time, the company had grown to over 20,000 customers, with revenue growing over 600% y-o-y, with over 6 billion push notifications sent through its platform to over 240 million app installs. The company also noted that app engagement levels were increasing by as much as 30% due to its push notification product, and that mobile sales increased by as much as 40% when customers used its product to push time-sensitive offers to mobile users. In October 2011, Urban Airship announced that it had acquired SimpleGeo, a real-time service platform which offered location-targeting tools for developers, and shortly thereafter announced that it would shut down the acquired company at the end of March 2012. The company acquired SimpleGeo for about $3.5 million, according to a report published by TechCrunch. In February 2012, the company launched Segments, which leveraged the SimpleGeo acquisition to provide geo-spatial targeting for customers who wanted to send push notifications to select users. Last week, the company launched a new iteration of its Location Messaging Service, which includes 2.5 million geo-fences that advertisers can choose from when marketing to app users. 3 | P a g e WEDBUSH | PROGRESS REPORT for INTERNET and SOCIAL MEDIA ` Services provided by Urban Airship include: In-App Purchases – Developers can offer virtual goods and other forms of monetization within their freemium apps by integrating their existing apps with Urban Airship’s API. All of the infrastructure and development necessary to facilitate in-app purchases are undertaken by Urban Airship, which significantly reduces costs and development times for smaller app developers. The company also offers developers tools to keep track of conversions so they can maximize revenue. Urban Airship hosts the content sold within an app, and facilitates single-click payments by directly integrating with the underlying OS’s app market (Google Play, Apple AppStore, BlackBerry AppWorld, Intel AppUp). Subscription Services – Developers can set different access levels for content provided by their app, with the ability to use Urban Airship to set subscription tiers and auto-renewable payment schedules. Developers can automatically update content within the app (e.g., updating a news app with daily editions) using Urban Airship’s push notification technology. Newsstand Publisher is the company’s hybrid product for newsstand app developers, which facilitates both subscriptions and one-time purchases, allowing a user to subscribe to future issues with a single in-app purchase. Push Notification – Developers can use Urban Airship’s Helium cloud service to incorporate push notification capabilities in their apps, which allows a developer to send alerts to a user through their data plan, even when the user has turned off the app. Notifications can be branded with rich media (video, photo, audio) and corporate logos. Examples of push notification use cases include updating a user when a friend has sent a message (e.g., using Facebook’s app), when there is breaking news (e.g., using CNN’s news app) and when another player challenges a user to a game (e.g., using Zynga’s Words with Friends). By enabling push notification, users benefit by receiving relevant updates in real time, while developers enhance their app’s engagement. Users can set frequencies for push notifications, and developers can set predetermined schedules to target particular subsets of their user-base by selecting specific user elements, such as inactivity (how long since a user has opened an app) and phone type.