Directories - Part II

8/10/2019 Directories - Part II

1/12


2/12

Summary of directory: Rednano

Rednano

Financial & strategic value

Financial & strategic value

SIN online directory market

How to capture it / What to do

How to capture it / What to do

Focus on directory and discontinue non-core activi tiesexpected to grow to $15-45m by

2015 20% target share translates to

$5-10m online upside for SPH

in search / search-reseller and other businesses

Some services can be done by IBU Enter new businesses only based on compelling

business plan and clear competitive advantages

Financially, search-relatedbusiness is not attractive to SPH

Search market going to be big

Match investment level with the size of the opportuni ty

Reduce cost base by at least 50%

Potentially leverage 701 sou / panduan platform to moveto a leaner model ,

be dominated by Google

Search-reseller businesssizable, but unattractive due toshrinking margins

Within directory, focus on a few categories and enhancecontent and user-friendliness

Potential categories: Food, Health, Female, Home &Decor Travel ca turin a lar e share of director search

Low-medium strategic value

Some value in offering"complete" solutions toadvertisers incl. director

Embed directory function into main content verticals Add user-generated content and use editorial content in

a more focused way

78205900-05-Second Steering Committee-Long version-25Mar10-MM-vFINAL.ppt

listings

Option value with regards tolocation-based mobile plays

nves w an eye owar s op on va ue, e.g.

flexibility of platform to offer mobile services or embed

sub-sections in content verticals


3/12

Rednano consists of several business, many of which are

unattractive or overlap with other SPH operations

Directory

DirectorySearch

Search Reseller

Reseller Other

Other

Search Directory

Paid listings Editorial content

Algorithmic search Web, people, news,

maps, images Ad platform

Adsmart Rednano CAN

Campaign management SEM (reseller) SEO (workshops) eDM / mDM Rich media ads Microsite dev

Mobile directoryservices Paid listings SMS, short codes Mobile portal dev Contests

Sub-businesses

DB intentions Licensing services

Other

FY09 Revenue

734

99s

45

?

Mid-sized market wherelocal players can buildcontent advantage

Winner take alldynamics favor globalplayers

Low barriers to entry,intense competition, andlow margins

Potentially veryattractive future market

Need to build strongdirectory business first

At tract ivenessto SPH


n/a; minor duplication onnews content

n/a; minor duplication onnews content

ClickTrue (SEM, SEO) IBU (eDM/mDM, Rich

media ads, microsite)

IBU (SMS, short codes)Duplicationwith in SPH


4/12

In search, Google is breaking away from competitors both

globally, and in Singapore

Search

Google extending its global lead...Google extending its global lead... ... and locally in Singapore as well2... and locally in Singapore as well2

17 15

% share of global searches1

100

Others

80

Page views per user

11

89

780

60

Yahoo!

Baidu

Microsoft Sites33

60

Yahoo

Google

Search

6067

40

20

Google

20

Bin

SingaporeSearch

~30M

Page views(usage, sheer size)

Lighter = Aug=

0

Jul-09Jul-08

0

0.0 0.5 1.0 1.5 2.0 2.5

RMS of UVs

Rednano


1. Comscore qSearch 2009 (Search Engine Watch) search share is not an exact proxy for search revenue, but Google reported ~$24B in combined Adwords & Adsense revenue in 2009 2 Metricsfor Singapore market only, ComscoreSource: Comscore, Search Engine Watch, BCG analysis


5/12

Search advertising platform dynamics favor the leader

Search

Revenue per search iskey to search ad platform

Revenue per search iskey to search ad platform

RPS is driven by manyfactors

RPS is driven by manyfactors

Syndication deals favorthe leader

Syndication deals favorthe leader

Volume of searches Organic (ie. through own

site)

For example, if #2 playerwanted to power AOL'ssearch, it would have to offer

0.06

Revenue per search (RPS)1

0.05 Leader .partnership deals with AOL)

Ecosystem of contentpartners

Leader can share ~80% of$0.05 revenue = $0.04

#2 player must share~160% of $0.025 to match

0.04

.

ua y o searc anadvertising results

Relevance affects click-thru-rates, conversions, etc

e . revenue s are

Same dynamic holds forecosystem of smaller content

artners ie. blo s

0.02

$0.025 #2

$0.010

illustrative only1

Number of advertisers Bid density drives up

Small publishers willchoose the option thatmaximizes revenue

0.00


1. Illustrative only, exact numbers n/a. Based on BCG interviewsSource: BCG interviews

ery ew p ayers ave enoug money o uy e r wayinto competitive position


6/12

Rednano's reseller business primarily focused on search

engine marketing (SEM)

Reseller

SEM: an illustrative example

3rd party wants to improve search ad3rd party wants to improve search ad Rednano manages campaign to ensureRednano manages campaign to ensureresults; approaches Rednanoresults; approaches Rednano highest placement at lowest costhighest placement at lowest cost

3rd party typically starts with a goal ie. 1000 clicks and 10 conversions

Campaign manager then uses various tools to help3rd party achieve those goals

At minimum, reseller will manage key words, design

and test ads, & optimize performance More sophisticated campaign managers will optimize

services


Source: Yahoo, Clicktrue business model presentation, BCG analysis


7/12

Reseller revenues driving largest portion of Rednano revenue

Reseller

30%33%

8%

4%

% of total

Directory

SearchOthers

$782

100 1% 0%1%

$129 $1,183

26%

60

62%69%

55%

Reseller

40

20

11%

0

YTD FY10FY08 FY09


Source: SPH finance, BCG analysis


8/12

Unfortunately, reseller revenues generate very small margins

Reseller

Rednano gross revenue artificiallyrossed u b advertisin ex ense

Rednano gross revenue artificiallyrossed u b advertisin ex ense

What remains is a relatively unattractivebusiness

What remains is a relatively unattractivebusiness

Net revenue driven by management fees and revshare from partners

For Rednano, on a weighted avg basis, the twore resent ~20% of adex1

452540

600

YTD (Jan '10) 000's SGD

$88K represents net revenue; when costs areadded, business is likely to be unprofi table400

ore an o e nano s o a rese errevenues generated by 701 Search2

701 Search is the largest customer

No management fees earned by Rednano88

200

Margins are small and getting smaller On a fully burdened cost basis, reseller business

likely upside down3

New entrants creating pricing pressure

0

GrossRevenue

Adex NetRevenue


1. Reflects weighted average management fee. No fee is collected from 701 Search which decreases avg. Typical rev shares range from 12-18% for Yahoo. Though Rednano believes it receives

rev share from Google, both SPH finance and Google website state that no rev shares are provided to resellers 2. SPH finance 3. Assuming ~$200k in net revenue on an annualized basis, this isbarely enough to cover the cost of 3-4 heads. As another point of reference, Clicktrue operated at ~10% margin in FY07 & FY08.Source: Rednano, SPH finance, BCG analysis


9/12

Directory advertising likely to be a modest opportunity in

Singapore...

Directory

BCG believes total online directory1 ad marketwil l reach ~$45M in Singapore by 2015

BCG believes total online directory1 ad marketwill reach ~$45M in Singapore by 2015 Methodology and key assumptionsMethodology and key assumptions

S$ M

Singapore directional advertisingrevenue (2008-2013E)

Print Yellow page print revenue ~$49M (2008)3

Other players (ie. Greenbook, eGuide, etc)~$40M in print2

100

118

105

CAGR(08-15)CAGR(08-15)

- growt rate ase on e ow pagegroup's print revenue historical growth3

Online Yellow page internet revenue $5M (2008)4

90

73

50

Print -3% Assume IYP accounts for 40% share in 2008 ,

total online pure directory market ~$12.5M Local search and pure internet players:

Google 2008 revenue $38M6, assume 5%7

from directional search $2M

15

45

0

Online

2015E2008

17% Pure internet players: Hungrygowhere:


10/12

...but given size of prize, SPH will have to reduce investment

Directory

Across scenarios, SPH online directoryrevenue will be limited

Across scenarios, SPH online directoryrevenue will be limited

Limited top line will require a large reductionin cost to achieve breakeven by FY12

Limited top line will require a large reductionin cost to achieve breakeven by FY12

15Revenue ($M SGD)

13.4

15Cost ($M SGD)

10

10.5

9.6

8.2

6.0

10

137%

6.3

.

7.6

4.16.0

3.01.1 1.5

0

5

0.60.30.3

4.1

0

5

1.2

3.4

1.21.9

3.7

FY11FY10 FY12FY09

Est. director rev er YTD run-rate 3

Est. directory rev (per Rednano 3 yr plan)2

FY09 FY11FY10 FY12

Re d cost to break even assume 3 r lan rev

Total Rednano cost base (per 3 yr plan)

2% 5% 12% 21%2% 3% 6% 14%Implied shr.1


1. per BCG market size estimates 2. per Rednano 3 year plan 3. Assumes FY10 YTD performance through January is grossed up on a straight line basis. FY11 and FY12 assumed to grow perRednano FY09-FY12 CAGR 4. ~20% represents proxy for reasonable business for SPH.

Reqd cost to break even (assume YTD run-rate rev)Est. total revenue (both methods)


11/12

Thus, SPH should consider " investment light" options for the

directory business

Directory

Option 1: No-fril lsdirectory

Option 1: No-fril lsdirectory

Option 2: Enhanced/focused directory

Option 2: Enhanced/focused directory

Option 3: Specialized pureplay

Option 3: Specialized pureplay

Sample players

Basic directory listings Name, address, telephone,

Enhanced directory l istings No frills + company description +

Topic specific directory (ie. food) Enhanced directory +

?

experience map

Compete based on depth andbreadth of l ist in s

reviews and rankings

Focus on limited set of categories

Compete through variety of means Enhanced content

Robust reviews (UGC) Supplemented w/ editorial

content

Compete through specialization S ecialized content

Focus on content (editorial,UGC, or combo)

Supplement with enhancedlistings

Multiple sources of traffic

Provide robust listings Surround with specialized

content - UGC, suppl. w/editorial

Multiple sources of traffic

Bases ofcom et it ion , ,

partner Focused user experience

Can be both standalone andembedded experience, butmust be focused, unique &

, ,

partner Focused vertical experience

Typically focused on onekey topic

User experience optimized


Biz model Primarily paid listings

Paid li stings & advertising

Primarily advertising


12/12

Each option evaluated across three key criteria

Directory

Key questionsKey questionsNo frills

directoryNo frills

directory

Enhanced /focuseddirectory

Enhanced /focuseddirectory

Specializedpure play

Specializedpure play

User experience

Does it meet / exceed consumerexpectations? Is it inline with market trends? Does it enhance ex erience on

other SPH properties?

Does it leverage SPH content?ompara ve

advantage

(ie. 701 platform)?

Can SPH maintain comparativeadvantage?

Option value

Is it scalable (ie. geo, content)? Does it enable other business

models? Does it preserve future option


value?

Directories - Part II

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