GCV Presentation, 21 May 2013 Charles Searle 15 Years of Investing in the Internet.
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Transcript of GCV Presentation, 21 May 2013 Charles Searle 15 Years of Investing in the Internet.
5
Our history – growing organically…
1915 1985 1994 1997 2004
(listed)
listed
Embracing changes in technology along the way
7
Some early strategic insights…
Transition to electronic media
Potential of internet identified
early
Emerging market opportunity
Term BRIC coined in 2001
* First Satellite TV operator ex-USA
* First internet investment in 1995
(Yahoo founded in 1994, AOL earlier…)
* MIH investing in China since 1996
Global platform operator
Pay-TV e-CommerceI-
Media
DTT DTH Classifieds e-Tail Payments
South Africa
Sub-Saharan
Africa
Central & EEU
Latam
Africa &
Middle East
South-east Asia
Type
Form
atGeo
graphy
8
10
• Enter early, establish leadership, build barriers to entry
• Less competition from foreign multinationals – as focused on own domestic markets
• Ride the economic growth story
• But, emerging market competitive advantage is largely over….
Rationale for investing in emerging markets
11
MIH in SA MIH in China & SE Asia
• M-Web ISP -
1997
• China -
1998
• Thailand -
1999
• Indonesia -
2000
History of initial Naspers internet investing
12
Mistakes made and lessons learnt
• Expat management teams… • Expensive products…
• Big budget marketing strategies…
• Shareholder control issues…
• Just too early in some markets…
13
Investment in Tencent - 2001
• Change in MIH investment strategy
• Key strategic strengths identified early
- Outstanding local management team
- Instant Messaging always on
- could expand into many directions ?
- Solved certain needs at that time
- e.g. Mobile QQ acted as SMS interconnection gateway between rival mobile networks
- Technology, long-term focus
- Ability to bring in new talent to complement founders
Facts and figures
- US$32m initial investment (50%)
- US$69bn market
- 825m monthly active QQ users
- 32,000 staff; 65%
engineers
14
“Halo” effects …
• Tencent success created a “halo” effect…
• Series of investments in Mail.ru in Russia followed …another great story!
• But…
- Limited social media opportunities elsewhere
- “Halo” effects don’t last forever
- Where to now ???
- US$6bn market cap
- Naspers/MIH : 28%
15
e-Commerce to dominate the internet
Sources: Morgan Stanley, PWC
Billion US$
Global Total Asia Pac North America China EMEA Japan Lat Am0
100
200
300
400
500
600 Online Shopping
Online Advertising
Online Gaming
Movie Box Office Sales
13x19x
6x
16
(fashion, shoes, etc.)
e-Commerce: strategy pivot
Paymentplatforms
Portals
Instant messaging and e-mail
Social networking
Mobile value-addedservices
Online games
E-commerce
Community
Lead-generation
B2C
(price-comparison etc.)
Other
Vertical e-tail
Marketplace(facilitation)
Classifieds(free, paid)
Payments
e-Commerce
General e-tail
e-Commerce now our core focus
17
Growing through acquisitions: M&A activity
Total acquisition spend (US$m)
Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Sep 12 -
500
1,000
1,500
2,000
2,500
3,000
3,110
214 517
754
260
Other
~US$5bn to date
377
Subsequent acquisitions
18
Growing through development spend
Mar 09 Mar 10 Mar 11 Mar 12 Sep 11 Sep 12 -
500
1,000
1,500
2,000
272 268
575
1,725
550
1,031
Development spend (ZARm)
3yr C
AGR 85%
87%
19
e-Commerce: revenue growth
Revenue (ZARm)
Mar 09 Mar 10 Mar 11 Mar 12 Sep 11 Sep 12 -
1,000
2,000
3,000
4,000
5,000
6,000
1,981 2,713
3,684
5,736
2,478
3,991
3yr C
AGR 42%
61%
20
e-Commerce: revenue breakdown
Revenue by type
Marketplace (34%)
e-Tail (35%)
Lead generation (11%)
CEEU (71%)
Latin America (18%)
Africa & Middle East (7%)
Revenue by geography
21
e-Commerce: value creation
0 1 2 3 4 5 6 7 8 9 10 11 120
20
40
60
80
100
120
140
160
180
200
Revenue Cost
Time
Am
ount
e-Commerce value creation over time
Value creationValue
Losses
22
A few lessons learnt…
• Local entrepreneurs…
• Skin in the game…
• What problems being solved ?
• Focus long-term and build scale…
• Share experiences…
• Be prepared to pivot every decade or so….