The h Yellow ll Page Market k i in transition i i which hi h business models can profit besides Google?

prepared for b-to-v Core Croup Internet and Mobile

St. Gallen, March 2009

Overview
1. Introduction 2. Market 3. Segments & Funding 4 Successful 4. S f l players l 5. Findings g & Discussion 6. About b-to-v

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Growth of online e-advertising despite crises

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Shift of advertising spend towards online media

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Some major brands in German online publishing

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Overview
1. Introduction 2. Market 3. Segments & Funding 4 Successful 4. S f l players l 5. Findings g & Discussion 6. About b-to-v

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Local advertising Whats the occasion?

Consumers are searching... 66% typically find what they need when searching on the Web, though 39% have trouble finding specific businesses when they are not adequately represented on the Web. 92% of Internet users have researched a product or service online, then purchased p p offline from a local business at least once. 71% of consumers feel the local business Web sites they visit are good or great. 29% feel they are fair to very bad. 82% say search engines were among the many tools they use to find local businesses. ...but small business is not capitalizing. Only 44% of small businesses have a Web site. Of those that do have a Web site, 61% spend less than three hours a week marketing their Web site. Of small businesses that have a Web site, 51% believe both the quality and ability of their site to acquire new customers is only fair or poor. 78% of f small ll b business i owners d dedicate di 10% or less of their overall budget to marketing efforts. Half of small business owners spend less than 10% of their marketing budget on Internet advertising, while 30% do no Internet advertising at all all.
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Source: Study by webvisible & Nielsen: The Great Divide 2008 (issued 2009)

This is also true for the German-speaking market

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 it is reflected by website popularity

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U.S. expects local ads shift towards digital media

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U.S. expects interim decline of local media & ad spend

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However, remaining spend will shift towards digital

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Customer survey
Private consumers Which of the following advertising resources do you turn to first to locate a local business? 50% Search Engines 24% Yellow Pages Directories 10% Internet Yellow Pages 4% Local Newspapers 3% White Pages Directories 1% Television Small business owners as consumers Which of the following advertising resources do you turn to first to locate a local business? 41% Search Engines 31% Yellow Pages Directories 9% Internet Yellow Pages 4% Local Newspapers 4% Consumer Review Web Sites 2% White Pages Directories 2% Direct Mail

Source: Study by webvisible & Nielsen: The Great Divide 2008 (issued 2009)

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Customer survey - continued

Search is the most widely used tool for finding a local business among consumers. Of those h surveyed, d 82% said id search h engines i (such as Google, Yahoo!, or MSN) were among the many tools they used when seeking a local business. business Although search clearly dominates among Internet users, consumers use search in combination with other local media. 49% Internet yellow pages 57% Yellow pages directories 82% Other search engines 53% Local newspapers 49% Television 37% Direct Mail

Source: Study by webvisible & Nielsen: The Great Divide 2008 (issued 2009)

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Further information about searches

Source: Study by webvisible & Nielsen: The Great Divide 2008 (issued 2009)

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Users like online in Europe, too

Source: FAZ (Jul 08) p. 16

Also in Germany local search is a significant market

Source: FAZ (Jul 08) p. 17

Overview
1. Introduction 2. Market 3. Segments & Funding 4 Successful 4. S f l players l 5. Findings g & Discussion 6. About b-to-v

p. 18

Segmentation overview USA (some examples)

1. Yelp: USD 31m funding from Bessemer Ventures, Benchmark Capital and DAG Ventures. Ventures Insiderpages: Acquired by Citysearch (previous USD 8.5m funding from Sequoia Capital and Softbank) Superpages.com: belongs to Idearc Media (Market Cap: USD 10m) HomeAway: USD 459m funding from Redpoint and Technology Crossover Ventures. Rocketlawyer: USD 2m fuding from Lexis Nexis Angies List: USD 66m funding from Battery Ventures, BV Capital, Lighthouse Capital, among others. Zillow.com: USD 87m funding from B Benchmark h kC Capital i l and dL Legg Mason, M among others.
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Horizonta H als

2.

3.

Vertic cals

4.

5.

Online
6.

7.

Segmentation overview Europe (some examples)

1. Gelbe Seiten: belongs to 16 regional publishers and DeTeMedien Qype: USD 13m from Wellington Partners, Partech International and Advent Ventures Quoka.de: Leading classified portal (acquired by Vorarlberger Medienhaus) Anwalt.de: Anwalt de: Portal with lawyer listings (financed by private investors) Blauarbeit.de: Auction portal for local services i (financed (fi d by b private i investors) i ) Imedo: Portal around medical issues (financed by privat investors)

Horizonta H als

2.

3.

Vertic cals

4 4. 5.

Online

6.

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Overview
1. Introduction 2. Market 3. Segments & Funding 4 Successful 4. S f l players l 5. Findings g & Discussion 6. About b-to-v

p. 21

Selected Successful Horizontal Players in Europe

Leading review portal in Europe focussing on lifestyle venues and restaurants M More than h 5m unique i users per month h Funding: Series B over EUR 8m from Wellington Partners, Partech International and Advent Ventures Financials: EUR 1.5m revenue (2008e)

Germany's second largest directory assistance provider, employing roughly 2,400 staff at10 locations in Europe. Its "11880" 11880 brand has a market share of some 37% in Germany and is also a partner for many well-known mobile providers Market Cap: EUR 150m Financials: EUR 178m sales and EBIT of EUR 31m (2008e) (in the short-term declines in classic directory assistance operations are increasingly being offset by ad ad-financed financed online local search)
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Successful local advertising player in the US

ReachLocal helps local businesses to attract customers via search engine advertising and online yellow-pages marketing Funding: USD 64m from Vantage Point Ventures and others Financials: USD 100m revenue

Integrated advertising solution for local business focussing on a) search enginge marketing and syndication of listing, b) customized websites and c) lead management through click-to-call click to call Funding: USD 25m from Bessemer Venture Partners, Draper Fisher Jurvetson Growth and Jafco Ventures Financials: USD 30m revenue

Further VC-funded players include in the US, among others,

Not yet any major specialized players in Europe!

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Overview
1. Introduction 2. Market 3. Segments & Funding 4 Successful 4. S f l players l 5. Findings g & Discussion 6. About b-to-v

p. 24

Is this an attractive industry?

Threat of new entrants: High as large international players with i d industry f focus, l large offline ffli players l with ih industry focus and well-known brands, are likely to enter the market with relatively low barriers to entry (only costs) Bargaining power of buyer: Medium but growing by the day as buyers get more sophisticated and will cease to accept high prices for simple ads; buyers will note that not everybody can have a fully optimized search engine position Threat of substitutes: Medium to high as buyers are aware that they could advertise their company on Google, Yahoo!, KennstDuEinen etc. Bargaining power of suppliers: Medium but decreasing as buyers will put f forward d that h many other h suppliers li are available Rivalry high as generalists and specialists have already occupied most of the attractive niches and will continue to battle for customers based on additional services and price

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Blueprint of an attractive invest

Core competences and success factors (and indicators towards promising investments): Focus on execution, i.e. sales towards long tail (call-center based, standardized service portfolio, high degree of automatization), compare to KennstDuEinen Known or at least self-explanatory brand name, if possible with a history (and somewhat credentials) from the offline world, e.g. GoYellow Strategic focus f of f a horizontal business model: Only attractive f for established player suffering from poor management Strategic focus of a vertical vertical business model: Attractive with exceptional execution and focus on markets with premium leads (e.g. finance, law), most likely in large yet immature markets like Spain

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Food for discussion

Will all business directories be killed by Google in the long-run? so, what would be their defense strategy given their strong brand awareness? If so

M&A (last acquisitions: billiger.de, dialo) More comprehensive local avertising solutions (compare stronger SEM offerings with partners, activities of GoYellow Media)

Given that Google relies on partners for the acquisition of local SMEs as this activity does not scale enough for Google itself how do efficient sales activities look like?

Experiences of successful online sales approaches Experiences with outbound call centers (conversion rates) Experiences with street sales representatives representatives, etc etc.

Should vertical players extend their service offerings through closer g services (SEM, ( , SEO, , customized website)? ) If collaboration with online marketing so, should they build these know-how in-house or outsource it?
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Overview
1. Introduction 2. Market 3. Segments & Funding 4 Successful 4. S f l players l 5. Findings g & Discussion 6. About b-to-v

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b-to-v at a glance
At the heart of what we do is the b-to-v Investorenkreis, an exclusive circle of entrepreneurial investors from Europe b-to-v renders exclusive services to members of the b-to-v Investorenkreis, e.g. it g of investment opportunities, pp , supports pp the enables the confidential sharing processing and structuring of deals, and helps to manage and control investments Admission to the b-to-v Investorenkreis is granted only to candidates who have proven their business acumen, investment expertise, and personal integrity Our approach gives entrepreneurs the unique opportunity to discuss their ventures and financing needs with senior entrepreneurs, benefit from their experience their networks, experience, networks and receive funding from them

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Cornerstones of the b-to-v Investorenkreis

The b-to-v Investorenkreis has 54 members Members come from various industry backgrounds (e (e.g. g high tech tech, internet internet, telecom, clean tech), and have

founded > 100 companies and have invested in > 1000 deals sold > 300 realized > 100 IPOs

In sum, th I the members b annual l direct di t equity it investments i t t volume l amounts t t to EUR 20-25m

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Co-Authors

Florian Schweitzer (Partner) co-founded b-to-v and built its network of private investors esto s s since ce 2000. 000. He e studied stud ed Business us ess Administration at the University of St.Gallen.

Alexander Stoeckel (Investment Manger) holds an MBA from the University of Oxford. Prior to b-to-v, , he worked as fundof-fund manager and as executive management assistant.

Sven Eppert (Investment Manager) studied Business Administration at the Catholic University Eichsttt Eichsttt-Ingolstadt Ingolstadt and the Warsaw School of Economics. Prior to b-to-v, he worked in asset management t and d in i consulting. lti
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b-to-v overview
BrainsToVentures AG Blumenaustr. 36 / P.O. Box 142 CH-9004 St. Gallen Contact T: +41 T 41 71 242 2000 F: +41 71 242 2001 www.b-to-v.com info@b-to-v.com Dr. Jan Bomholt, Partner and co-founder Dr. Christian Schtz, Partner Florian Schweitzer, Partner and co-founder Christoph Schweizer, Partner

Dedicated people Core personnel p.a. (average) g Deal flow p Deals done p.a. (average) Investment strategy Geographical preferences Financing stages Most recent Exits

54 members of the Investorenkreis 8 investment professionals 1,500 business p plans 20 Opportunity driven Europe, USA and Asia Early stage, expansion stage, and later stage, as well as MBI and MBO projects Three IPOs (XING, Codfarmers, Fidor) and three trade sales (Cycleon, myBet, Plazes)

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