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Investment opportunities in analytics

Evangelos Simoudis, Ph.D.

Managing Director

Trident Capitalesimoudis@tridentcap.com

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Trident Capital and its analytics investments

� Founded in 1993

� Offices in Palo Alto (HQ), Westport CT

� Six funds, $1.5B under management, $400M most recent fund

� Mustang Ventures: $50M, early-stage focus, Shanghai-based fund

� IT focus, stage agnostic, geography agnostic

� Analytics investments:� Firefly Network

� Internet Profiles (IPRO)

� Customer Analytics

� Cymfony

� RHI

� SeaTab

� AranTech

� Turn.com, vidavee (strong data analytics IP)

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Our view of the market dynamics

� SAP, Oracle and IBM will compete for the Global 2000� SAP and Oracle at the application level� IBM at the infrastructure level (unless they purchase a BI pure-play)

� Microsoft will concentrate on the SMB and on departmental sales with “fat client” offerings� This doesn’t bode well for Cognos’ and Business Objects’ growth plans� Qliktech is an interesting company to watch as they are growing

rapidly in SMB

� Pure plays (Business Objects, Cognos, SAS, et al) need to re-invent themselves, merge or get acquired� Informatica in acquisition discussions� Business Objects acquisition spree� What if SAS were to be acquired?

� Teradata’s dominance at the high end DW is being attacked (IBM, HP, Netezza, Sun/Greenplum). Some acquisitions are possible in the space

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Our view on the industry’s subsectors

�Analytic applications: In most categories (CRM, performance management, financial decision-making, pricing optimization, web analytics, etc.) leaders have been established

� Industry-specific analytics: In the data-rich industries, e.g., financial services, telco, pharma, leaders have been established (Fair Isaac, IMS Health, Dendrite, Telephia)

� Statistical analysis: No opportunities for new entrants

� Infrastructure: Change management, MDM no opportunities for new entrants, but also few opportunities for exits

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Investment theses we are pursuing

� New technologies and business models will change the price/performance of BI and decrease the deployment complexity of existing BI/DW methods� Appliances: Netezza, Datallegro

� On-demand BI: Seatab, Lucid Era

� On-demand CRM and ERP systems will necessitate the creation of a new class of SaaS-based analytic applications, e.g., sales compensation analytics

� The adoption of Web 2.0 will drive new classes of analytic applications� Analysis of new types of data from social and new media: vidavee, Critical

Metrics,

� Online advertising: media spending optimization (Widemile, Clickable)

� Personalization/recommendations (Aggregate Knowledge, Loomia, Last.fm)

� The adoption of the mobile internet will drive new classes of analytics� Mobile advertising: Enpocket

� Analytic applications: AranTech

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The attraction of BI appliances

� 30-60% savings on system TCO costs over traditional DW/BI implementations

� Savings in headcount and in necessary skills to manage the installation

� Better scalability and performance over MPP-based DW

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The attraction of on-demand BI

� Changing the price/performance of traditional BI� Quick, low risk, and inexpensive deployment� Scalable model in terms of data and users� Low-cost administration (data, reports, systems)

� Reducing the complexity of deploying BI which today inhibits thegrowth of BI within organizations

� BI for everyone. Facilitate making all type of decisions: small and big. Today’s BI tools make sense only for large-scale decision-making

� Reducing the need for a direct sales model, which due to its high costs further contributes to the price of traditional BI solutions

� Opening new markets: SMB, Global 2000 departments� Mid-market BI: 20% adoption, 12% CAGR

� Issues:1. Comfort with data leaving corporate premises2. Data integration of on-premise with off-premise data

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The size and growth of leading on-demand companies will drive the creation of new SaaS analytic applications

180011.8%$111.0MRightNow(Nasdaq: RNOW)

300082.8%$151.8MKenexa(Nasdaq: KNXA)

1300/2M150%$38.7MSuccessFactors(IPO filed 7/20/07)

530085%$76.9MNetSuite(IPO filed 7/02/07)

~32K/750K58.4%$554.8MSalesforce.com(NYSE: CRM)

LTM RevenueLTM

Rev. GrowthCustomers/Seats

Examples: xactly, Forcelogix, Cloud9 Analytics, Right90

Salesforce.com already lists 35 analytic apps partners

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Social networking market statistics

Total Unique Visitors (000)

Social Networking Site Jun-06 Jun-07 % Change

MySpace 66,401 114,147 72%

Facebook 14,083 52,167 270%

Hi5 18,098 28,174 56%

Friendster 14,917 24,675 65%

Orkut 13,588 24,120 78%

Bebo 6,694 18,200 172%

Tagged 1,506 13,167 774%

Source: comScore

Average Daily Visitors (000)

Social Networking Site Jun-06 Jun-07 % Change

MySpace 16,764 28,786 72%

Facebook 3,742 14,917 299%

Hi5 2,873 4,727 65%

Friendster 3,037 5,966 96%

Orkut 5,488 9,628 75%

Bebo 1,188 4,833 307%

Tagged 202 983 387%

Source: comScore

Share of Unique Visitors

North Latin Middle Asia

Social Networking Site Worldwide America America Europe East-Africa Pacific

MySpace 100% 62% 4% 25% 1% 8%

Facebook 100% 68% 2% 17% 6% 7%

Hi5 100% 15% 24% 31% 9% 21%

Friendster 100% 8% 0% 3% 1% 89%

Orkut 100% 3% 49% 5% 1% 43%

Bebo 100% 22% 1% 63% 1% 14%

Tagged 100% 23% 15% 23% 10% 29%

Source: comScore

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Online photo statistics

� Shipments of digital cameras: 2004: 74M, 2005: 94M� Penetration of digital cameras in U.S. households was 42% in 2004 and will

reach 81% in 2010� 58M U.S. households have both Internet connectivity and a digital camera� The core online photo printing market was $550M in 2006

Site Unique Visitors (000) Page Views (M)

Photobucket.com 14,729 620

Imageshack.us 10,611 67

Yahoo! Photos 10,459 243

Facebook.com Photos 9,938 2,667

Eastman Kodak 8,518 173

Flickr.com 6,925 72

webshots.com 5,790 213

AOL Pictures 5,354 90

SnapFish 4,538 102

Shutterfly.com 3,949 266

Slide.com 3,167 24

Rockyou.com 2,244 54

Pbase.com 2,004 21

TheImageHosting.com 1,773 11

SmugMug.com 1,391 51

PictureTrail.com 1,301 44

PutFile.com 1,276 12

ImageVenue.com 1,227 20

IStockPhoto.com 1,226 16

Picasa 1,126 6

Source: ComScore Networks, September 2006

photobucket.com flickr.com snapfish.com

shutterf ly.com slide.com

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Online music growth

Sources: Jupiter Research, Adams Media Research, IDPF

$2,465

0

500

1,000

1,500

2,000

2,500

3,000

2005 2006 2007 2008 2009 2010 2011

Millions

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Internet video market statistics

$4,088

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2005 2006 2007 2008 2009 2010 2011

Millions

0 500 1000 1500 2000

Video Streams

Video Streamers

Google Fox Interactive Yahoo Viacom

Time Warner Microsoft ABC Disney

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Online gaming usage (including virtual worlds)

� YoY growth rate for gamers was 79%� YoY growth for users of social networking (46%)� YoY growth for users of video streaming sites was 123%

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Mobile usage

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Analytics for new media

� ICCARUS is a new visualization service that provides a 3D real-time visualization of the data behind a social network. http://www.viddler.com/explore/rich115/videos/1/

� Promonet, an analytic application from IODA, allows music labels to track promotional MP3 downloads in real time, see which blogs & podcasts produce the most click-throughs to retailers, and promote a release and track user response http://www.iodalliance.com/promonetpro.php

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Vidavee video analytics

� Extensive data collection and presentation available through Vidavee platform

� Visual representation of user activity

�Drives editorial direction

�Identifies hot-spots

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Online advertising

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

2005 2006 2007 2008 2009 2010

Global Online Ad Revenues US Online Ad Revenues

Global Search Revenues Non Search Global Revenues

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Social networking ad spending

Source: eMarketer, February 2007 (http://www.iab.net/resources/industrystats.2007-03-29.asp)

� eMarketer estimates that marketers spent $350M on social network advertising in 2006. Spending is expected to rise 147% this year, to $865M, and to $2.15B in 2010

� Facebook will release an advertising system to target ad delivery based on profile information of its users

� MySpace dominates current social networking spending (>60% of all ad dollars on social networks as of late 06), with 4 industry categories accounting for 75% of ad impressions on MySpace (as of late 06): Retail, Entertainment, Telecom, and Web Media

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Online gaming advertising spending

Source: eMarketer, June 2007 (http://www.iab.net/resources/industrystats.2007-06-28.asp)

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Mobile ad spending

� eMarketer estimates that marketers spent $421M on mobile advertising in 2006. Spending is expected to rise 114% this year, to $878M, and to $3.415B in 2010

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Analytics can address several areas within new media advertising

� Corporations need expert advice to help with new ad formats, e.g., video, pricing models, integration of behavioral and local data

�Analytics to focus on advertising ROI optimization and click fraud detection

� Cross media campaign management, including the combination of online (webtop and mobile) with off-line channels

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Vidavee provides comprehensive analytics for video advertising

� Watermark detection

� Face detection / recognition

� Object detection / recognition

� Text in Video detection / recognition

� Voice to text word spotting

� Behavioral and contextual analysis aids� Search and retrieval� Automatic placement of ads

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Summary

�Despite the recent market consolidation, the need for BI and analytics continues to grow

� The surging investment interest by VCs to fund BI companies is driven by new data types, technologies and business models

� Building upon its past successes in the area, Trident continues to aggressively invest in BI