PROGRESS REPORT for INTERNET and SOCIAL MEDIA

December 14, 2011

PRISM

Making diffuse information about the Internet and Social Media crystal clear

IN THIS ISSUE:

Ø Twitter: Redesigned for the average user § Brands § Advertising § Location § Tweetdeck

Ø Facebook: Updated App Leads Android § Messenger Usage Stagnates § Second Stand-alone App: “Nearby”

Ø Android Passes 10 Billion Downloads § Rovio: Angry Birds in 2012

THE INFORMATION HEREIN IS ONLY FOR ACCREDITED INVESTORS AS DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1933 OR Michael Pachter INSTITUTIONAL INVESTORS. (213) 688-4474 [email protected] Wedbush Securities does and seeks to do business with companies covered Yoni Yadgaran in its research reports. Thus, investors (212) 938-9924 should be aware that the firm may have a conflict of interest that could [email protected] 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 14 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, Equity Research providing coverage across the Digital Media sector and 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 over a year ago 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 Tom Wyman Managing Director, Equity Research Managing Director, Private Shares Group Head of Research, Private Shares Group (415) 613-1454 | [email protected] (213) 688-4474 | [email protected] Twitter: @michaelpachter

Yoni Yadgaran Kevin Cohen Research Associate, Private Shares Group Director of Trading, Private Shares Group (212) 938-9924 | [email protected] (213) 688-8089 | [email protected]

Cyrus P. Pirasteh Managing Director Head of Equity Trading, Technologies & Operations (213) 688-6661 | [email protected]

About Wedbush Securities

Founded in 1955, Wedbush Securities is a leading investment firm that provides brokerage, clearing, investment banking, equities research, public finance, fixed income sales and trading, and asset management to individual, institutional and issuing clients. Wedbush currently ranks a top liquidity provider for NASDAQ, and was ranked #1 stock picker for 2010 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)

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Twitter: Redesigned

Twitter launched a redesigned format for both its web and mobile offerings. Earlier this year the company reported reaching 100 million active users, over 50% of which log-in daily, and 40% logging in only-to-read tweets. The new changes are meant to generate content discovery in an attempt to increase adoption of the service by skeptics who often aren’t aware of the utility the platform provides. Reported application speed on the new Android and iOS app has been greatly improved (All Things Digital reports a 500% increase in the last three months), with additional user interface changes including a “Connect” tab in place of a “Replies”, and a new “Discover” tab where “Direct Messages” had once been. The “At” (@) and “Hashtag” (#) symbols have been rebranded as “Connect” and “Discover”, in order to reduce confusion over terminology among less experienced users. The mobile interface now has four distinct quadrants which remain mostly consistent throughout Twitter’s multiple platforms:

Source: Company Site, Wedbush Securities

· Home: The main tab remains mostly unchanged, with a redesigned follow button, some formatting changes to how tweets are displayed, and the ability to see replies to a tweet when clicked on. Rather than a dual pane interface, tweets that include media will expand in the stream, increasing engagement and reducing friction. · Connect: Segmented into “interactions”, which shows a user what others on the platform have done in relation to their own tweets (new followers, retweets, favorited tweets and additions to lists), while the second “mentions” segment shows instances where a user’s Twitter handle has been mentioned in a tweet. · Discover: Presents relevant stories (tweets around a topic that may interests a user based on location, popularity, and connections) in an interface that includes a picture and headline text, trending topics (designated by a #hashtag), a list of suggested accounts to follow based on user habits and previous follows, and a list of friends that are not being followed based on imported contacts. A Categories segment shows which accounts are prolific for particular topics (eg. @jimcramer and @FinancialTimes under business), in addition to a dedicated stream of relevant tweets under each category which can be accessed even if the tweets contributor has not been followed. · Me: Provides access to a user’s: Direct Messages, history of tweets and retweets, who is following them, who they are following, lists that are maintained, saved searches, and other account settings.

Reviews of the app by power users express frustration over friction when switching between accounts and the additional step required when accessing Direct Messages. The overall reaction to the upgrade has generally been positive, however, as most users are pleased with the increased speed, ease of navigation and content discoverability. Throughout our coverage universe, we continue to see a common theme revolving around manipulating and reformatting content into more relevant and targeted streams. Twitter realizes the need to evolve the product beyond a simple RSS feed, and remains cognizant that the volume of data generated on its platform can overwhelm even its most experienced users.

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Brands on Twitter

In addition to an enhancing user experience, Twitter has expanded its offering for Brands. Earlier this year, the company disclosed that 20 – 40% of users follow a brand, and one of the first ten follows by a new user is a brand. Marketers will soon be able to customize their brand’s account profile with visuals (e.g., logo and tagline) that are prominently displayed on the top of the page in larger font sizes. Other new features include the ability to promote tweets that are deemed most engaging to followers, directly to the top of a profile page. The tweet that is promoted displays any photo or video that it is linked to directly in the stream. The company will be rolling out the new brands feature together with the upgraded website and will be making the tool available to all brands for free.

Source: AllTwitter

Brands can now embed tweets on their websites by inserting a simple line of code, allowing visitors to engage with the brand’s account directly from their website by clicking the Reply, Retweet and Favorite buttons.

Source: AllTwitter

Facebook rolled out a Subscribe Button for websites, which is similar in nature to a feature that Twitter added earlier this year, allowing users to follow a brand directly from a brands site. By pressing Subscribe on a brands website, a user will begin receiving public updates from that brand directly in their newsfeed. The new button will also notify friends upon subscription, potentially instigating a chain of subscriptions due to a single user.

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Advertisers on Twitter

The company announced an early 2012 rollout of a self serve ad product that would give advertisers’ access to Twitter ads on an automated platform; eliminating the need to for a sales rep. Twitter has been testing the product with a small number of partners according to reports by All Things Digital, and access to ad products has been limited to Promoted Accounts and Promoted Tweets. The platform would provide access to SMBs who cannot afford the $100,000 or more price tag on Promoted Trends, and are often purchasing quantities in smaller denominations than what the sales force offers. We note that there is little clarity as to whether the product will be available to the general public, as opposed to the possibility that Twitter will choose to maintain a controlled environment and restrict access to only existing advertising partners. The company recently disclosed it had over 2,400 ad partners, a 300% increase from 600 in June, after having been launched in April of 2010 with only 6 partners. Engagement for Twitter ads has remained substantially higher than traditional display offerings, with conversion rates varying between 3 – 5% according to Twitter’s Chief Revenue Officer. A confidential Twitter memo published last week by Clickz shows the economics that Twitter is currently offering to prospective advertisers. The company spoke about the new in-feed Promoted Tweets product that has been used on 25% of Twitter users, allowing brands to target non-following users with tweets. The product has seen 15 times the impression volume of Twitter’s Promoted Tweets within search, while maintaining the same engagement rates. In order to be eligible for the rates offered below, Twitter required a three month, $15,000 – 25,000 commitment, and an established presence on Twitter, which the company defines as at least 50 tweets per account:

· Promoted Tweets: Introduced in 2010, the product is designed to drive conversations and spread a message. The product originally pushed a tweet to the top of search results; however Twitter recently started distributing Promoted Tweets into the top of user feeds directly. When in-feed Promoted Tweets launched in July, it only allowed brands to use the product on followers. A little over a month ago the company began allowing advertisers to target non-followers. The memo prices Promoted Tweets via auction on a Cost Per Engagement (CPE) basis. Engagements are defined as any click, add to favorites, Retweet or Reply that a targeted user does to a Promoted Tweet. Competitive pricing was estimated to be between $0.75 - 2.50. The two tweets below illustrate what a successful Promoted Tweet will often look like. AMC Theatres managed to generate a 5.5% engagement rate by providing a deal, while Best Western Hotel generated a 5% engagement rate on its campaign by offering a chance at a prize in exchange for action.

· Promoted Accounts: Allows brands to purchase placement in Twitter’s “Who to Follow” feature (with a clear indication that the account is Promoted), which suggests accounts a user isn’t currently following as potentially interesting. Relative to a Promoted Tweet, a Promoted Account is generally more valuable, considering it provides a brand with reoccurring access to its new follower for promotional tweets that can now be sent for free. Promoted Accounts can be targeted so that a brand can acquire an audience with characteristics that are most valuable to them, based on a user’s interest and country. Cost Per Follower (CPF) or the price a promoted account will pay for a converted follower, is determined through an auction, with competitive bids typically ranging in the $2.50 – 4.00 range according to the memo.

Source: Company Site

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· Promoted Trends: The memo did not indicate pricing for the Trends product, which allows a brand to promote a trend to the “Trending” section of a particular geography, and is similar in most ways to promoted accounts.

While social networks continue to develop their ad offerings and improve targeting, we note that these products are still in their infancy, with significant runway for adoption as larger ad agencies gain familiarity with new mediums like the ones Twitter offers. According to eMarketer, only 2% of ad agencies and PR firms currently advertise on Twitter, relative to 4% on Linkedin and 13% on Facebook. The same survey found that only 23% of ad agencies spent over $10,000 on social ads; a significant roadblock for Twitter considering the $15,000 minimum commitment required when purchasing Promoted Tweets. Twitter’s new ad platform has an opportunity to eliminate this barrier, which is important in the context of ad agencies having the opportunity to test the new medium in small denominations and little risk, eventually scaling if their campaigns succeed. A recent survey conducted by Lonelybrands found that 83% of ad agencies plan to increase social spend in 2012, relative to 46% planning on increasing spend on search. Currently, around 100 of Twitter’s 800 employees work with advertisers, a number that the company plans to increase with expansion in New York, London, and Tokyo.

Source: Lonelybrand We acknowledge that we believe Twitter’s user-engagement metrics will be focused on heavily as it continues efforts to monetize, however, maintaining traffic growth is also important. Twitter disclosed a 25% increase in monthly signups following the company’s iOS integration. According to Comscore, monthly page views on Twitter reached 3.7 billion in October 2011 (up 12% from October 2010), while Tweets-per-day reached 250 million according to the company.

Source: Comscore

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Location

Although Twitter has yet to expound on plans to utilize a user’s location beyond the new “relevant stories” feature, we believe that geo-targeted streams will be a significant step that Twitter may soon take. Twitter can tier feeds by geographical location in a way that would be similar to how news is currently broadcasted at the global, national, regional and personal levels. Local brands would be inclined to promote tweets to a spatially targeted audience, while users would have an additional tool to parse through their data stream. Having an international user base (over 50% of users) Twitter will need to be careful to ensure users maintain a sense of Twitter being a global platform, while still providing customized data when needed. The company currently utilizes geo-targeting on its ad platform, however, incorporating location into its user base would be harder. An example of the continued prevalence of location on Twitter is the display of a Foursquare check-in as a location on a map rather than as simply a link; a feature that was rolled out with the upgrade.

Source: Techcrunch

TweetDeck

In addition to upgrading its primary offering, Twitter rolled out an update for its desktop client, TweetDeck, which was acquired earlier this year. The client allows users to manage multiple accounts on different sites from a single interface, an important tool for power users on Facebook and Twitter. The update was coded in HTML5 rather than Adobe Air, and has been branded with the Twitter symbol in place of the similar TweetDeck logo. Most importantly, the new client no longer provides support for any service besides for Facebook and Twitter, eliminating the ability to manage services like Foursquare and Linkedin.

Source: AllTwitter, Company Site

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Facebook: Upgrades App, Leads Android Platform

Facebook’s app was the second most popular Android app for mobile users according to a recent survey by Nielsen, based on app usage for 30 days prior. Eighty percent of Android users between the ages of 18 – 24 reported using Facebook’s app, relative to 81% of users between the ages of 25 to 34. For older users in the 35 to 44 age groups, Facebook tied with Gmail as the second most popular app, with a 77% usage rate. Android Market, Google’s mobile portal for downloading apps on Android, consistently ranked most popular across age groups, with 89 – 95% user utilization rates. Facebook is the only app in the top six most popular apps on Android that is not developed by Google, with Google’s Search, Gmail, Maps and Youtube apps consistently vying for positions three through six on the list.

Source: Nielsen Last week, Facebook upgraded its Android app, with improvements that include a 200% faster photo viewing response time, and an easier-to-navigate user interface (UI) that strongly resembles the company’s iOS offering. The new app delivers a markedly improved experience, in our opinion. Reading and editing captions and comments have been made easier, and navigating through the left-hand drop-down menu reduces some of the friction previously experienced when multitasking between apps, photos and chat.

Source: Company Site

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Usage through Android, iOS, and Blackberry continued to grow over the last month, as Daily Active Users (DAU) increased by 10%, 5% and 13%, respectively. The 25% increase in DAUs for the iPad has outpaced other platforms, likely driven by seasonal gifting of the device ahead of the holidays and a more recent early October release of a dedicated Facebook app. MAU DAU App 11/13/2011 12/13/2011 ? 11/13/2011 12/13/2011 ? Facebook for iPhone 95.6 99.0 4% 54.8 57.3 5% Facebook for Android 77.0 84.5 10% 52.4 57.5 10% Facebook for Blackberry 1.4 1.3 -7% 0.7 0.8 13% Facebook for iPad 12.4 15.4 24% 4.4 5.5 25% Messenger for iOS 11.5 12.6 10% 3.6 3.8 6% Messenger for Android 10.9 11.2 3% 5.3 5.3 0% Source: Appdata

The company’s stand-alone Messenger app’s growth seems to have stagnated on Android and decelerated to a modest 6% DAU growth and a 10% increase in Monthly Active Users (MAU) on iOS. We believe iterations of Facebook’s core app will continue to cannibalize Messenger’s growth as performance speeds converge with the less intensively coded apps’ current performance and simplicity.

Source: Appdata

The messenger app may soon be followed by a second stand-alone app. Following Facebook’s recent $3-million (paid in Facebook shares) acquisition of the social geo-location app developer Gowalla, are reports by Engadget of a potential stand- alone app for check-ins called “Nearby.” If speculation is accurate, the app was most likely built by an internal Facebook team (as opposed to ex-Gowalla employees, given how recent the acquisition was), and will be likely assigned to the new employees for gamification / integration with the new Timeline feature that has begun to launch for regular Facebook users.

Source: Engadget

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Android: 10 Billion Downloads, Rovio

Google released statistics for its Android app platform last week, having passed ten billion downloads on the Android Market, and growing by more than one billion downloads per month. The company reported peak downloads on its platform at 9pm on Sundays, and off-peak traffic reaching a weekly low at 4am on Mondays. The US ranked fourth on a download per capita basis, following South Korea, Hong Kong and Taiwan. Google Map users navigated 12 billion miles through the app each year, having been downloaded on for Android 465 million times globally, and 47 million times in October according to Xyologic. To put things in perspective, Apple has likely passed 20 billion cumulative downloads on its App Store; having passed 18 billion downloads in the beginning of October.

Source: Google

We compared data from Xyologic’s October estimates for cumulative Android downloads with a 9 billion total android download estimate, having detracted 1 billion to compare data from one month prior, and maintaining 25.6% as the download share for games. As of October, game downloads on Android reached an estimated 2.4 billion, led by a cumulative 135 million (5.7%) and 121 million (5.1%) downloads of Rovio and Magma Mobile, respectively. The fragmented Android gaming market means that top gaming developers maintain a relatively small portion of total downloads.

Share of Cumulative Android Game Downloads Developer Downloads Share ROVIO 135 5.7% Magma Mobile 121 5.1% DROIDHEN 66 2.8% Glu Mobile 52 2.2% Zynga 37 1.6% Storm8 34 1.4% Best, Cool & Fun Games 31 1.3% DragonPlay 30 1.3% TeamLava, LLC. 26 1.1% RunnerGames 26 1.1%

Total 558 23.7% Source: Wedbush Securities, Xyologic, Google

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Rovio

The “Arcade” genre topped the games category (39% share), with 10% of total Android downloads. Rovio’s Angry Birds game leads the genre on Android, having been downloaded 135 million times. Angry Birds can be downloaded on Android devices in three free versions: Angry Birds, Angry Birds Seasons and Angry Birds Rio. The three games lead Top Free Games on Android, reaching 35% of the 35 to 44 age group according to Nielsen.

40% Angry Birds Reach On Android By Age 35% 35%

30% 29%

25% 22%

20%

15%

10%

0% 18-24 25-34 35-44

Source: Wedbush Securities, Nielsen, and Android Market

Rovio, a Finnish mobile game developer with over 50 employees, was founded in 2003, and released the first version of Angry Birds in 2009. The game requires that users launch birds at animated pigs, while taking into account trajectory and physics within the game. Different birds have different characteristics, including exploding and self-duplicating birds. The game is also available on iTunes, Palm, Appup, Ovi, Google+, and the Chrome app store, in over 40 versions and 300 levels; reaching 500 million downloads across its platforms as of early November (up from 400 million in mid-October). The company reported over 200,000 years of cumulative Angry Birds play, 300 million minutes of daily use, and a total of 266 billion levels played as of November. In October, the company reported global MAUs of 130 million and DAUs of 30 million. “Mighty Eagle” Peter Vesterbacka disclosed in March that 40% of new iOS users were paying for the $1 Mighty Eagle virtual good, which allows user’s to skip difficult levels, with a single-use-per-hour limit and unlimited usage. Using Xyologic estimates for October of 6 million downloads on the iPhone, 3.4 million on the ipad, a 30% tax from Apple, and the 40% purchase rate at the $1 price point; we get to $2.63 million in monthly incremental revenue, or $31.6 million per year, from new users on a single one of its multiple platforms. When factoring in display ad revenues, monetization of existing iOS users, other platform users, paid downloads, and sales of its physical toys, revenues are most likely significantly higher. The company will be releasing four new games in 2012; one of which will reportedly utilize social elements in game play. Rovio has attempted to leverage the Angry Birds franchise by offering Angry Bird toys at retail price points ranging from $5 to $100 (over 10 million sold), and animation films (over 200 million Youtube hits). The company raised $42 million in a Series A round (at a $281million valuation according to Arctic Startup) led by Accel and Atomico Ventures in March 2011, and reportedly turned down a $2.25 billion takeover bid from Zynga.

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Social Media Cartoon of the Week

Source: BusinessWeek

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Headlines in Social Media

· Amazon Prime Instant Video Now Streaming Glee, Sons Of Anarchy: http://tcrn.ch/syfziU · Amazon will give you $5 if you use its Price Check app this weekend: http://engt.co/toSEaI · Badoo Got 130 Million People Meeting Each Other and $100M In Revenue : http://tcrn.ch/rpMBXg · EA, Playfish developing 'the hell out of SimCity' for Facebook: http://aol.it/rEWSSP · EA: PopCap splits mobile Bejeweled Blitz into separate products to embrace freemium model: http://bit.ly/vhVrUf · Fab.com Raises $40 Million and Continues to Grow: http://bit.ly/rS4V6O http://bit.ly/ukaBCD · Facebook Confirms Reorg, Names Five Product Heads: http://dthin.gs/sJQUIc · Facebook doubled its advertising market share from 2009 to 2010: http://zd.net/vyqNjO · Facebook For Android Gets An Overhaul, Now Looks Just As Good As Its iPhone App: http://bit.ly/vAnG8q http://bit.ly/uNhJEW · Facebook Quietly Offering Downstream Conversion Tracking To Its Favorite Advertisers: http://bit.ly/s2DQ3c · Facebook Takes Another Stab At Twitter With New 'Subscribe' Button For Websites: http://bit.ly/su4Hob · Facebook Takes Crucial Step Toward Hiring Thousands More Employees: http://bit.ly/vb1ADl · Facebook Tests .edu-Exclusive Groups: http://tcrn.ch/vEg5dB · Facebook Will Launch Subscribe Plug-In For Websites: http://bit.ly/sjyk9q · Facebook: App-Happy with Android: The Most Popular Android Apps by Age: http://bit.ly/vKwXVA · Facebook: Millions Of People Became Facebook “Developers” Just For Timeline Access: http://bit.ly/vwHEM6 · Facebook: New 'Adware' Apps Bug Facebook, Google: http://on.wsj.com/vjBJBU http://on.wsj.com/sGZ86t · Facebook’s Furious Five? Meet Its New Product Princes and Their Domains: http://dthin.gs/u73ECL · Flipboard iPhone app launch takes down entire service: http://bit.ly/uz1Bjg · Foursquare Hits 15 Million Users, Or Rather, 15 Million People You Can Avoid by Downloading foursquare: http://bit.ly/rPQQHX · Google Controls 44 Percent Of Global Online Advertising: http://bit.ly/tgaU4I · Google Goes Wild With Android Market Stats: http://tcrn.ch/vWJ9qo · Google: YouTube Acquires RightsFlow To Help Artists License Music: http://tcrn.ch/v43SGL · Google’s News Reader — Now Called Currents — Finally Coming: http://dthin.gs/uVQFqJ · Google+ for iOS adds search, full res photo uploads, and a new icon: http://bit.ly/svGcqM · Google+ Is Coming To Gmail & Contacts, Including An Automatically Updated Address Book: http://tcrn.ch/tRcf7z · Google's Eric Schmidt sees Google TV embedded in most new TVs by summer of 2012: http://engt.co/v8mcYd · GREE Releases New Details on Upcoming Unified Gaming Platform: http://bit.ly/vNC2s6 · Groupon In Talks To Acquire Clever Sense, The Startup Behind ‘Alfred’: http://tcrn.ch/svubir · Groupon releases online scheduling tool for merchants and phone-phobic patrons: http://bit.ly/v4nw4e · Klarna Raises A Whopping $155 Million From DST And General Atlantic: http://tcrn.ch/ujdM76 · LivingSocial closes $176 million round: http://bit.ly/ujctTj http://read.bi/vyelTU · Microsoft could charge for Skype video archiving and authentication: http://zd.net/vpUfDh · Netflix and Verizon may be in acquisition talks: http://bit.ly/vMmJbz · OnLive launches cloud gaming app for tablets and phones, prices Universal Controller at $49.99: http://bit.ly/v06AXM · Plum District Scores $20 Million and Buys Two Companies for Mom-Focused Daily Deals Site: http://dthin.gs/tdTi0j · Raptr: MOST PLAYED GAMES OF 2011 (Report): http://bit.ly/rEAM7L · Rdio adds private listening options for Facebook and last.fm: http://bit.ly/vBlOra · Reid Hoffman and Matt Cohler Team Up to Give Edmodo $15M: http://dthin.gs/vkpj5E · Rovio: Angry Birds 'social' game (and three others) is in the works for 2012: http://aol.it/sitQMv · SOASTA: Cloud-Based App Testing Platform Raises $12 Million: http://tcrn.ch/sxXTcd · Spotify Launches Spotify Radio: http://tcrn.ch/s7zm7t http://spoti.fi/vFeFBT · Square Mobile Payment Readers With Smartphone Upgrades: http://tcrn.ch/sJvQJt · Square: Richard Branson’s Investment In Square Was $3 Million: http://tcrn.ch/vrJbtz · Starbucks apps account for 26M mobile payments and $110M in card reloads: http://bit.ly/vZFAD7 · StumbleUpon's Mobile Growth Rockets 800%; Company Unveils Major Redesign With 250 Brand Partners: http://bit.ly/u2cZX7 · Tagged Acquires Topicmarks To Improve Friend Suggestions With Natural Language Processing: http://tcrn.ch/vSKRDe · Twitter Announces Redesign, New Features: http://on.wsj.com/ruCzpW http://dthin.gs/sYYZy1 · US Virtual Goods Market To Hit $2.9 Billion In 2012, With Facebook Games Maturing: http://bit.ly/t6eirc · Zynga And Facebook Entering ForestVille?: http://bit.ly/rRc2TV · Zynga says can double number of paid players: http://reut.rs/rCpsC1 · Zynga: From castles to card games: a rundown of Zynga’s biggest titles: http://bit.ly/spEbRY · Zynga: How Zynga grew from gaming outcast to $9 billion social game powerhouse: http://bit.ly/tlhtZT

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Covered Companies Mentioned in this Report (priced intraday December 14, 2011)

COMPANY TICKER RATING PRICE PRICE TARGET APPLE AAPL OUTPERFORM $380.42 $535 ELECTRONIC ARTS ERTS OUTPERFORM $20.44 $29 GROUPON GRPN NEUTRAL $21.56 $22 NETFLIX NFLX UNDERPERFORM $69.77 $45 UBISOFT ENTERTAINMENT UBI.FP NEUTRAL €4.93 €7 PANDORA P OUTPERFORM $10.28 $14

IMPORTANT DISCLOSURES

The information contained herein is intended for accredited investors as defined in Rule 501 of Regulation D under the Securities Act of 1933 or institutional investors. WEDBUSH SECURITIES Wedbush 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 investment decision.

The analysts responsible for preparing research reports do not receive compensation based on specific investment banking activity. The analysts receive compensation that is based upon various factors including WS’ total revenues, a portion of which are generated by WS’ investment banking activities.

ANALYST CERTIFICATION I, Michael Pachter, certify that the views expressed in this report accurately reflect my personal opinion and that I have not and will not, directly or indirectly, receive compensation or other payments in connection with my specific recommendations or views contained in this report.

Disclosure information regarding historical ratings and price targets is available at http://www.wedbush.com/ResearchDisclosure/DisclosureQ311.pdf

INVESTMENT RATING SYSTEM Outperform: Expect the total return of the stock to outperform relative to the median total return of the analyst’s (or the analyst’s team) coverage universe over the next 6-12 months. Neutral: Expect the total return of the stock to perform in-line with the median total return of the analyst’s (or the analyst’s team) coverage universe over the next 6-12 months. Underperform: Expect the total return of the stock to underperform relative to the median total return of the analyst’s (or the analyst’s team) coverage universe over the next 6-12 months.

The Investment Ratings are based on the expected performance of a stock (based on anticipated total return to price target) relative to the other stocks in the analyst’s coverage universe (or the analyst’s team coverage).*

Rating Distribution Investment Banking Relationships (as of September 30, 2011) (as of September 30, 2011) Outperform:59% Outperform:10% Neutral: 35% Neutral: 2% Underperform: 6% Underperform: 0%

The Distribution of Ratings is required by FINRA rules; however, WS’ stock ratings of Outperform, Neutral, and Underperform most closely conform to Buy, Hold, and Sell, respectively. Please note, however, the definitions are not the same as WS’ stock ratings are on a relative basis.

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Capital Markets Disclosures as of December 14, 2011

Company Disclosure Electronic Arts 1 Apple 1 Groupon 1 Ubisoft Netflix 1 Pandora 1

Research Disclosure Legend 1. WS makes a market in the securities of the subject company. 2. WS managed a public offering of securities within the last 12 months. 3. WS co-managed a public offering of securities within the last 12 months. 4. WS has received compensation for investment banking services within the last 12 months. 5. WS provided investment banking services within the last 12 months. 6. WS is acting as financial advisor. 7. WS expects to receive compensation for investment banking services within the next 3 months. 8. WS provided non-investment banking securities-related services within the past 12 months. 9. WS has received compensation for products and services other than investment banking services within the past 12 months. 10. The research analyst, a member of the research analyst’s household, any associate of the research analyst, or any individual directly involved in the preparation of this report has a long position in the common stocks. 11. WS or one of its affiliates beneficially own 1% or more of the common equity securities.

Private securities may involve a high degree of risk and are intended for sophisticated investors who are capable of understanding and assuming the risks involved.

Private securities may have a high level of volatility. High volatility investments may experience sudden and large drop in their value causing losses that may equal your original investment.

Private securities are illiquid and may not be readily realizable and it may be difficult to sell or realize those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed.

Investors should obtain advice from their own financial advisor and only make investment decisions on the basis of the investor’s own objectives, experience, risk tolerance, and resources.

The information herein is based on sources that we consider reliable, but its accuracy is not guaranteed. The information contained herein is not a representation by this corporation, nor is any recommendation made herein based on any privileged information.

This information is not intended to be or should it be relied upon as a complete record or analysis; neither is it an offer nor a solicitation of an offer to sell or buy any security mentioned herein.

This firm, Wedbush Securities, its affiliates, officers, employees, members of their families, or any one or more of them, and its discretionary and advisory accounts, may have a position in any security discussed herein or in related securities and may make, from time to time, purchases or sales thereof in the open market or otherwise.

The information and expressions of opinion contained herein are subject to change without further notice.

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WEDBUSH | PROGRESS REPORT for INTERNET and SOCIAL MEDIA

The herein mentioned securities may be sold to or bought from customers on a principal basis by this firm.

Any reference to past performance is not a guarantee of future results.

Supporting documentation will be furnished upon request for any claims, comparisons, recommendation, statistics or other technical data. Additional information with respect to the information contained herein may be obtained upon request.

Applicable disclosure information is also available upon request by contacting the Business Conduct Department at (213) 688- 8090. You may also submit a written request to the following: Business Conduct Department, 1000 Wilshire Blvd., Los Angeles, CA 90017.

RESEARCH DEPT. • (213) 688-4505 • www.wedbush.com EQUITY TRADING Los Angeles (213) 688-4470 / (800) 421-0178 * EQUITY SALES Los Angeles (800) 444-8076 CORPORATE HEADQUARTERS (213) 688-8000

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