Monetization Across the US & China: Where to InvestHany NadaManaging Partner, GGV Capital

Ad Gap ?An Investors perspective….

2015 US Advertising Market

• Total Ad Spend $190B• US Population 320M

• 81% Urban

• GDP $17.5T• GDP/capita $55k• Consumption/capita $32k

$70B

$53B

$17B

TVInternetNewspaperRadioMagazinesOutdoorOther

*McKinsey and World Bank

2015 China Advertising Market

• Total Ad Spend $68B• China Population 1.4B

• 55% Urban

• GDP $10.4T• GDP/Capita $8k• Consumption/capita $2.5k

$23B

$21B

$9B

TVInternetNewspaperRadioOutdoorOther

*McKinsey and World Bank

The Ad GapUS$190BHeavy TV and internet$55k$32k (60% of GDP)$595 per cap

China$68B (36% of US)Heavy TV and internet$8k (15% of US)$2k (6% of US)$48 per cap (8% of US)

Ad SpendMix

GDP/CapitaConsumption/User

Ad Spend per User

The Ad Gap (urban to urban)US$190B$68k$45k$733 per cap

China$71B (36% of US)$13k (20% of US)$4.5k (10% of US)$88 per cap (12% of US)

Ad SpendUrban GDP/CapitaConsumption/Cap

Ad Spend per Cap

Online?!? Ad Gap ?An Investors perspective….

US: Desktop & Mobile Ad Spend

2013 2014 2015E 2016E 2017E 2018E 2019E

$32.44 $31.58 $29.89$26.59 $24.96 $25.17 $25.35

$10.67

$19.15

$28.72

$40.50

$49.81

$57.78

$65.87

US Digital Ad Spending ($ Billions)

Desktop Mobile (Includes Tablet)

Mobile ad spend in the US will exceed $28B and overtake desktop ad spend in 2016 as Desktop stalls and declines .

Source: eMarketer, March 2015.

China: Ad SpendMobile ad Spend continues to accelerate, In Billions $

Source: eMarketer, March 2015.

2013 2014 2015 2016 2017 2018 2019 -

20

40

60

80

100

120

Total Ad Spend Digital Spend Mobile Spend

The Internet Ad GapUS280M (88% of pop)

203M$57B$28B$205$137

China700M (50% of pop)

680M$26B (52% of US)$14B (50% of US)$37 (18% of US)$21 (15% of US)

Internet PopulationMobile Users

Internet Ad SpendMobile Ad

$/Internet User$/Mobile user

Other Methods of Monetization

Standard Monetization

Advertising Subscriptions MicrotransactionsSubscriber for serviceBrand or Direct Marketing Virtual Item or service

micro pay per item

Advertising has had a long rich history in the US while Microtransactions models were perfected by Chinese game companies.

Business Models of US & China Leaders

Advertising Subscriptions Microtransactions

Advertising Subscriptions Microtransactions

Note (1) Value Added Services (VAS) = in-app transactions such as virtual currency/gifts and non-subscription digital transactions or fees of any kind.Note (2) Reflects dominant (>90% of revenue) business model for each company shown. Logos are shown in more than 1 category if company derives material revenue from multiple business models.

US: Comparing Quarterly ARPU

Advertising Subscriptions MicrotransactionsQ2 2015 Subscription

Revenue per Subscriber

Q2 2015

$0.00 $10.00 $20.00 $30.00

$15.20

$23.97

$24.21

$26.52

Spotify Total Revenue / SubscriberHulu Rev / SubscriberHulu Sub Rev / SubscriberPandora Sub Rev / Subscriber

Sources: SEC Filings, Company website, press releases, GGV estimates of average subscription price (if more than 1 price).Note: Quarterly subscriber count used is average of current quarter and prior quarter (estimated mid-point of quarter).Note: Excludes Hulu in the “Advertising” section even >50% of its revenue comes from advertising because it did not report MAU figures.

Q2 2015 Advertising Revenue per Active User

Q2 2015

$0.00 $2.00 $4.00 $6.00 $8.00 $10.00

$0.61

$1.59

$2.07

$2.61

$2.91

$8.63

Facebook Ad Rev / Active User (US & Canada)Pandora Ad Rev / Active UserFacebook Ad Rev / Active User (Worldwide)Yahoo Ad Rev / Mobile Monthly ActiveTwitter Ad Rev / Monthly Active UserZynga Ad Rev / Monthly Unique User

Q2 2015 VAS Revenue per User

Q2 2015

$0.00 $1.00 $2.00 $3.00

$1.46

$2.62

Zynga VAS Rev / Monthly Unique UsersKing Rev / Monthly Unique Users

In the US, not surprisingly, subscription-based models as represented by Spotify, Netflix and Hulu have the highest ARPUs, at about $100/user/year ($25/quarter). Ad ARPUs are typically <$12/user/year (<$3/quarter), with the exception of Facebook’s US/Canada user base, which is worth over $34

($8.63/quarter).

US: Median Yearly ARPU

Advertising Subscriptions Microtransactions

$100-$150$12-$15 $10-$50

The most predictable revenue per user is Subscription but its hard to get subscribers

In China, ARPU of paid users for commerce or value-added services on content platforms is very high, ranging from about $24/user/year ($6/quarter) to over $400/year ($116/quarter) for YY’s dating subscription product, far exceeding the same monetization model in the US. Advertising ARPU, except on Baidu, lags significantly behind US platforms. Subscription ARPU is also understandably lower given the lower price points vs. US online video platforms.

1

$0.00 $1.00 $2.00 $3.00 $4.00 $5.00

$0.36

$0.43

$0.68

$0.72

$0.76

$4.03

Baidu Ad Rev / Mobile Search MAUTencent Ad Rev / QQ MAUSina Ad Rev / MAUSohu Ad Rev / MAUNetease Ad Rev / Est. Email MAUYouku Ad Rev / MAU

China: Comparing ARPU by ModelAdvertising Subscriptions Microtransactions

Q2 2015 Subscription Revenue per Subscriber

Q2 2015 Advertising Revenue per Active User

Q2 2015 VAS Revenue per User

(1)

Source: SEC, Company reports, Comscore, GGV traffic estimates based on historical performance.Note: Value Added Services (VAS) = in-app transactions such as virtual currency/gifts and non-subscription digital transactions or fees of any kind.Note: Quarterly subscriber count used is average of current quarter and prior quarter (estimated mid-point of quarter.Note: (1) Figures are from Q4 2014 as email registration figures have not been reported for 2015.

1

$0.00 $100.00

$7.04

$7.04

$9.38

$29.17

YY Subs & Broadcasting Revenue / Paid Users in CategoryYY Quarterly Equivalent of Monthly Sub FeeYouku Quarterly Equivalent of Monthly Sub FeeIQiyi Quarterly Equivalent of Monthly Sub Fee

1

$0.00 $50.00 $100.00 $150.00

$5.94 $26.58 $26.97

$53.55 $67.00$68.90

$115.73

YY Dating VAS / SubsYY Games VAS / SubsYY Online Music & Entertainment VAS / SubsTencent MMPORG ARPUTencent Casual Games ARPUTencent Wechat/QQ Games ARPUSohu Game Rev / Changyou MAU

China: Median Yearly ARPU

Advertising Subscriptions Microtransactions

$30-$70$3-$7 $100-$400

Which would you choose

A Monetization Eco-System

18

Minnows

Segmentation + Tools = Data you can act on to maximize your revenue potential

DolphinsWhales

Give Whales special Access Reward Dolphins to keep them engaged and loyal

Monetize Minnows by allowing them to extend

fan base

Kickstarter breakdownWhales- 48% of raise

949 Fans/4% of baseRange of contribution $300-$10,000Signed album+ book+ surprise gift“Veblen” Goods

Dolphins- 49% of raise13k Fans/ % of baseOffers: $25-$125“positional goods”

Minnows- 3% of raise 11k Fans/45% of base Offers: Free-$5 Facilitates Dolphins and Whales

$540k

$550k

$37k

949 Fans4%

13k Fans 51%

11k Fans 45%

Questions

• Does E-commerce have a negative effect on advertising? • Does data make brand advertisers behave like direct marketers?• What is the effect of RTB platforms on CPMs? • In an ROI world, do we need humans?• If you are starting a digital media company today, what monetization

method would you choose ?