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Tinder's Possible Multiple Monetization Strategies

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Tinder Analysis


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Disclosure Michael Jones Bio Long-time entrepreneur and former CEO of Myspace, Michael Jones now serves as the CEO of Science, Inc., the disruptive media, marketing and brand building company. Science Inc. nurtures successful digital businesses by bringing together the best ideas, talent, resources and financing through a centralized platform. As a serial internet entrepreneur, Jones has founded, advised, invested in and sold numerous businesses, including application platform Userplane, which he led from startup to its acquisition by AOL, Tsavo Media, Maker Studios, GoodReads, PeopleMedia and Myspace. Disclosure: Michael Jones both personally invested as well as invested through Science in Chill, Inc which was acquired by Tinder in 2015, meaning that both Jones and Science are now passive equity holders of Tinder and IAC. 2


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Tinder Breakout Scenario Core Assumptions •  Tinder in the short and long term will remain a dating service. •  Tinder will penetrate the global singles audience at an order of magnitude larger than Match ever did. This is similar to the original Myspace/Facebook position, Myspace trained a 100M user audience about social network, Facebook perfected the platform and drove to over 1B people. •  Tinder at scale will monetize simliar to… - Match with premium subscription - a game with advertising and in app transaction - or both. For this analysis we looked at revenue, growth and market assumptions and then assumed the final result was a public company – using comparable public company trading multiples around projected revenue and EBITDA. 3


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Exit Scenarios •  The US market has always seen online dating as a less desirable commerce activity, this position has prevented Yahoo, AOL, Google or Facebook to engage deeply into the business practice. •  IAC with match.com has been the only large scale valued dating property in the US •  International buyers are a possibility, and market could change its opinion on large players like Facebook owning Dating properties •  Most likely outcome is Tinder looks for a 2018 IPO and competes or compliments match.com IPO spin out. 4


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Match is a Market Leader with a 22% Market Share, 30% EBITDA, and $15.00 Revenue Per Paid Subscriber 34% 33% 33% 33% 32% 30% 30% $157 $122 2010 2011 30% $267 $237 Revenues EBITDA 30% 29% $265 2012 31% 2013 2014 EBITDA Margin Revenues Millions MATCH SEGMENT PERFORMANCE 2010-2015 $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 28% 27% EBITDA Margin MATCH REVENUE PER PAID SUBSCRIBER $17.00 $16.50 $16.00 $15.50 $15.00 $14.50 $14.00 $13.50 $13.00 $12.50 $16.04 $14.57 $15.97 $14.85 $16.39 $16.33 $15.88 $15.47 $14.99 $15.07 $14.62 $14.07 Q1-13 Q2-13 $16.24 Q3-13 Q4-13 North American Revenue Per Subscriber Source: SEC.gov! Q1-14 $14.21 Q2-14 $14.47 Q3-14 $14.81 Q4-14 International Revenue Per Subscriber 5


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Despite Garnering a Small Portion of the Singles Market MATCH.COM US SINGLES PENETRATION 2.00% 1.99% 1.99% 1.98% 1.97% 1.97% 1.97% 1.97% 1.96% 1.96% 1.96% 1.95% 1.94% 1.94% 1.93% 1.94% Q4 2013 Q1 2014 1.92% 1.91% 1.90% Q1 2013 Q2 2013 Q3 2013 Q2 2014 Q3 2014 Q4 2014 Singles Market Key Assumptions: According to Pew Research, only 9% of singles utilize online dating, and of that 9%, 22% utilize Match.com. Source: SEC.gov, Pew Research, IBIS World! 6


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Tinder Currently has 25M MAU trending toward 50M MAU by end of year TINDER 2015 EXPECTED GROWTH 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 - March April May June Monthly Users July August Monthly Change September October November December Daily Users Key Assumptions: Tinder will reach 50MM Monthly Users and reach 24MM Daily users by December 2015 7


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Based on Tinder’s Current Monetization Strategy and MAU Trend, Daily Revenue Per User Will Approximate $0.04 by December TINDER DAILY REVENUE PER USER $0.0500 $50 $0.0400 $40 $0.0300 $30 $0.0200 $20 $0.0100 $10 $0.0000 March April Monthly Revenue May June Monthly Revenue Change July August September October Daily Revenue Per Monthly Users November December Millions $60 Revenues $70 $0.0600 Revenue Per User $0.0700 $0 Daily Revenue Per Daily User Key Assumptions: Tinder Monthly Revenue will reach $60MM by December and Monthly Users will Reach 50MM 8


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Other Social Media Players have Proven that Monthly Active Users in Excess of 100MM are Attainable Source:http://www.thesocialmediahat.com/active-users! 9


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Match monetizes its users at an average rate of 8%, but Match targets a much smaller market than Tinder Millions MATCH.COM MONETIZATION RATE $3.00 9.20% 9.03% 9.00% $2.50 8.77% 8.75% 8.67% 8.60% $2.00 8.39% 8.40% 8.27% $1.50 8.20% 7.99% $1.00 8.80% 8.00% 7.85% 7.80% 7.60% $0.50 7.40% $0.00 Q1 2013 Q2 2013 Q3 2013 North American Paid Subscribers Q4 2013 Q1 2014 Q2 2014 InternationalPaid Subscribers Q3 2014 Q4 2014 7.20% Monetization Rates Key Assumptions: Match will revert to its long-run average mean of 8% monetization. Assumes Match.com has 40MM users. Monetization is the percentage of MAU s that are paid subscribers. Source: SEC.gov! 10


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Mobile Game Networks like Glu are Monetizing with Premium In App Transactions at an Average Rate of 2%. MOBILE GAMING MONETIZATION 70,000,000 5.00% 4.30% 60,000,000 4.50% 3.98% 4.00% 50,000,000 3.50% 3.00% 40,000,000 2.50% 30,000,000 1.83% 1.74% 20,000,000 1.33% 2.00% 1.70% 1.19% 1.50% 1.45% 1.00% 10,000,000 0 0.50% Q1 2013 Q2 2013 Q3 2013 Purchases Q4 2013 MAU Q1 2014 Q2 2014 Q3 2014 Q4 2014 0.00% Monetization Rate Key Assumptions: While gaming revenues are extremely cyclical , they have on average monetized at a rate of 2%. The assumption is that gaming revenues will revert back to 2%. Source: SEC.gov, GLU Mobile! 11


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GLU’s Mobile Games Earn on Average $0.17 in Ad Revenue per MAU 70,000,000 0.25 0.21 60,000,000 50,000,000 0.18 0.18 0.19 0.20 0.18 0.16 0.15 0.13 40,000,000 0.12 30,000,000 0.10 20,000,000 0.05 10,000,000 0 Q1 2013 Q2 2013 Q3 2013 MAU Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 0.00 Ad Revenue Per MAU Key Assumptions: Based on historical ad revenues, mobile gaming earns $0.17 per monthly active user. Source: SEC.gov, GLU Mobile! 12


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We can expect Tinder to address up to 49% of the global singles market Consumers 55 to 64 Years Old, 9.10% Consumers 65 and Older, 4.50% Consumers 18 to 24 Years Old, 15.20% Tinder’s Addressable Market, 49% of all Global Singles Consumers 45 to 54 Years Old, 12.10% Consumers 35 to 44 Years Old, 25.80% Consumers 25 to 34 Years Old, 33.30% Key Assumptions: Tinder will target the key consumer segments of 25 to 34 Years Old and 18 to 24 Year Olds. Source: IBISWorld! 13


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Recent Internet and Mobile IPOs are Trading at a Median of 7.9x Revenue TEV/TOTAL REVENUES LTM 25.0x 19.9x 20.0x 16.9x 15.0x 10.7x 10.0x 7.9x 8.3x 5.0x 3.7x 0.0x 1.1x 1.2x Onvia Inc. (NasdaqCM:ONVI) Salon Media Group Inc. (OTCPK:SLNM) 0.5x QuoteMedia Inc. Marchex, Inc. (OTCPK:QMCI) (NasdaqGS:MCHX) Facebook, Inc. (NasdaqGS:FB) Box, Inc. (NYSE:BOX) Source: Capital IQ, SEC.gov, Company Filings! Yelp, Inc. (NYSE:YELP) Twitter, Inc. (NYSE:TWTR) CoStar Group Inc. (NasdaqGS:CSGP) 14


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Recent Internet and Mobile IPOs are Trading at a Median of 33.9x EBITDA (Excluding Yelp) TEV/EBITDA LTM - Latest 140.0x 127.8x 120.0x 100.0x 80.0x 60.0x 40.0x 39.9x 33.9x 20.0x 11.3x 0.0x Onvia Inc. (NasdaqCM:ONVI) 10.5x 0 Salon Media Group Inc. (OTCPK:SLNM) 0 QuoteMedia Inc. Marchex, Inc. (OTCPK:QMCI) (NasdaqGS:MCHX) Facebook, Inc. (NasdaqGS:FB) 0 Box, Inc. (NYSE:BOX) Yelp, Inc. (NYSE:YELP) 0 Twitter, Inc. (NYSE:TWTR) 0 Ancestry.com LLC CoStar Group Inc. (NasdaqGS:CSGP) Key Assumptions: Although EBITDA multiples within the internet and mobile space are highly volatile, industry players with strong earnings streams and conservative valuations have EBITDA multiples between 10 and 20 times. Source: Capital IQ, SEC.gov, Company Filings! 15


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..if Tinder Monetizes at Rates Similar to Match.com, Enterprise Value Could be in Excess of $2B by 2019 Tinder Assumptions Match.com •  125MM MAU by 2019 •  0.20% monetization rate •  8% monetization rate •  $9.99/ subscriber •  $15 / subscriber TINDER MONETIZES LIKE MATCH-BASE CASE ENTERPRISE VALUE •  40MM MAU •  FY 2015 revenue-$100MM •  FY 2016 revenue-$133MM •  FY 2017 Revenue-$200MM •  FY 2018 Revenue-$280MM •  FY 2019 Revenue-$364MM •  EBITDA Margin: 30% $1,800,000,000 $1,638,000,000 $1,600,000,000 $1,400,000,000 $1,260,000,000 $1,200,000,000 $1,000,000,000 $900,000,000 $800,000,000 $600,000,000 $599,999,999 $450,314,235 $400,000,000 $200,000,000 $0 2015 2016 Enterprise Value 2017 2018 Average Monthly Users 2019 EBITDA Enterprise Value Sensitivities EV#EBITDA#Multiple 10.00 12.50 15.00 17.50 20.00 2015 $300,209,490 $375,261,863 $450,314,235 $525,366,608 $600,418,980 2016 $399,999,999 $499,999,999 $599,999,999 $699,999,998 $799,999,998 2017 $600,000,000 $750,000,000 $900,000,000 $1,050,000,000 $1,200,000,000 Source: Capital IQ, SEC.gov, Company Filings! 2018 $840,000,000 $1,050,000,000 $1,260,000,000 $1,470,000,000 $1,680,000,000 2019 $1,092,000,000 $1,365,000,000 $1,638,000,000 $1,911,000,000 $2,184,000,000 16


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..if Tinder Monetizes its 125MM MAU at a Rate of Only 1.25%, Revenues Could be in Excess of $2.2bn by 2019 and over 10B EV. Tinder Assumptions TINDER MONETIZES LIKE MATCH-UPSIDE CASE ENTERPRISE VALUE Match.com •  125MM MAU by 2019 •  40MM MAU •  1.25% paid to subscription •  8% monetization rate •  $9.99/ subscriber •  $15 / subscriber •  FY 2015 revenue $134MM •  FY 2017 Revenue $809MM •  FY 2018 Revenue $1,439MM •  FY 2019 Revenue $2,248MM •  EBITDA Margin: 30% $10,114,875,000 $10,000,000,000 FY 2016 revenue $360MM •  $12,000,000,000 $8,000,000,000 $6,473,520,000 $6,000,000,000 $3,641,355,000 $4,000,000,000 $1,618,380,000 $2,000,000,000 $606,892,500 $0 2015 2016 Enterprise Value 2017 Average Monthly Users 2018 2019 EBITDA Enterprise Value Sensitivities EV#EBITDA#Multiple 10.00 12.50 15.00 17.50 20.00 2015 $404,595,000 $505,743,750 $606,892,500 $708,041,250 $809,190,000 2016 $1,078,920,000 $1,348,650,000 $1,618,380,000 $1,888,110,000 $2,157,840,000 2017 $2,427,570,000 $3,034,462,500 $3,641,355,000 $4,248,247,500 $4,855,140,000 Source: Capital IQ, SEC.gov, Company Filings! 2018 $4,315,680,000 $5,394,600,000 $6,473,520,000 $7,552,440,000 $8,631,360,000 2019 $6,743,250,000 $8,429,062,500 $10,114,875,000 $11,800,687,500 $13,486,500,000 17


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Tinder has the potential to monetize like a game and if its able to earn only $0.03 per DAU, it will be worth over $4.9bn by 2019 Tinder Assumptions TINDER MONETIZES LIKE A GAME-BASE CASE ENTERPRISE VALUE GLU •  $0.03 R/DAU •  $0.08 R/DAU •  100MM DAU by 2019 •  5.25MM DAU •  FY 2015 revenue $273MM •  FY 2016 revenue $411MM •  FY 2017 Revenue $548MM •  FY 2018 Revenue $821MM •  FY 2019 Revenue $1,095MM •  $6,000,000,000 EBITDA Margin: 30% $4,927,500,000 $5,000,000,000 $4,000,000,000 $3,695,625,000 $3,000,000,000 $2,463,750,000 $1,847,812,500 $2,000,000,000 $1,231,875,000 $1,000,000,000 $0 2015 2016 Enterprise Value 2017 Average Daily Users 2018 2019 EBITDA Enterprise Value Sensitivities EV#EBITDA#Multiple 10.00 12.50 15.00 17.50 20.00 2015 $821,250,000 $1,026,562,500 $1,231,875,000 $1,437,187,500 $1,642,500,000 2016 $1,231,875,000 $1,539,843,750 $1,847,812,500 $2,155,781,250 $2,463,750,000 2017 $1,642,500,000 $2,053,125,000 $2,463,750,000 $2,874,375,000 $3,285,000,000 Source: Capital IQ, SEC.gov, Company Filings! 2018 $2,463,750,000 $3,079,687,500 $3,695,625,000 $4,311,562,500 $4,927,500,000 2019 $3,285,000,000 $4,106,250,000 $4,927,500,000 $5,748,750,000 $6,570,000,000 18


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..if Tinder is able to monetize at a rate similar to GLU, at Tinder’s current Revenue Per DAU of $0.12, its revenues will be in excess of $4.3bn by 2019 Tinder Assumptions GLU •  $0.12 R/DAU •  100MM DAU by 2019 •  5.25MM DAU TINDER MONETIZES LIKE A GAME-UPSIDE CASE ENTERPRISE VALUE •  $0.08 R/DAU •  •  FY 2016 revenue $575MM •  FY 2017 Revenue $913MM •  FY 2018 Revenue $1,643MM •  FY 2019 Revenue $4,380MM •  EBITDA Margin: 30% $25,000,000,000 FY 2015 revenue $273MM $19,710,000,000 $20,000,000,000 $15,000,000,000 $10,000,000,000 $7,391,250,000 $5,000,000,000 $0 $4,106,250,000 $2,463,750,000 $1,231,875,000 2015 2016 Enterprise Value 2017 2018 Average Daily Users 2019 EBITDA Enterprise Value Sensitivities EV#EBITDA#Multiple 10.00 12.50 15.00 17.50 20.00 2015 $821,250,000 $1,026,562,500 $1,231,875,000 $1,437,187,500 $1,642,500,000 2016 $1,642,500,000 $2,053,125,000 $2,463,750,000 $2,874,375,000 $3,285,000,000 2017 $2,737,500,000 $3,421,875,000 $4,106,250,000 $4,790,625,000 $5,475,000,000 Source: Capital IQ, SEC.gov, Company Filings! 2018 $4,927,500,000 $6,159,375,000 $7,391,250,000 $8,623,125,000 $9,855,000,000 2019 $13,140,000,000 $16,425,000,000 $19,710,000,000 $22,995,000,000 $26,280,000,000 19


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..if Tinder has Premium Subscription Revenue, Converts 0.20% of all Users and Game-Like Ad Revenue of $0.03 per DAU, its Revenues Could be in excess of $1.1bn by 2019 Tinder Assumptions •  $0.03 R/DAU •  100 MM DAU by 2019 •  125MM MAU by 2019 •  0.20% paid to subscription •  $9.99/ subscriber •  FY 2015 revenue-$306MM •  FY 2016 revenue-$411MM •  FY 2017 Revenue-$611MM •  FY 2018 Revenue-$896MM •  FY 2019 Revenue-$1,185MM •  PREMIUM SUBSCRIPTION AND GAME LIKE AD REVENUEBASE CASE ENTERPRISE VALUE EBITDA Margin: 30% $6,000,000,000 $5,333,625,000 $5,000,000,000 $4,031,718,750 $4,000,000,000 $3,000,000,000 $2,747,812,500 $1,985,859,374 $2,000,000,000 $1,374,220,485 $1,000,000,000 $0 2015 Enterprise Value 2016 2017 Average Monthly Users 2018 EBITDA 2019 Average Daily Users Enterprise Value Sensitivities EV#EBITDA#Multiple 10.00 12.50 15.00 17.50 20.00 2015 $916,146,990 $1,145,183,738 $1,374,220,485 $1,603,257,233 $1,832,293,980 2016 $1,323,906,249 $1,654,882,811 $1,985,859,374 $2,316,835,936 $2,647,812,498 2017 $1,831,875,000 $2,289,843,750 $2,747,812,500 $3,205,781,250 $3,663,750,000 Source: Capital IQ, SEC.gov, Company Filings! 2018 $2,687,812,500 $3,359,765,625 $4,031,718,750 $4,703,671,875 $5,375,625,000 2019 $3,555,750,000 $4,444,687,500 $5,333,625,000 $6,222,562,500 $7,111,500,000


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..if Tinder has Premium Subscription Revenue, Converts 1.25% of all Users and Game-Like Ad Revenue at Rates of $0.09 per DAU its Revenues will be in Excess of $5.5bn by 2019 Tinder Assumptions •  $0.09 R/DAU •  100MM DAU by 2019 •  125MM MAU by 2019 •  1.25% paid to subscription •  $9.99/ subscriber •  FY 2015 revenue-$340MM •  FY 2016 revenue-$770MM •  FY 2017 Revenue-$1,494MM •  FY 2018 Revenue-$2,670MM •  FY 2019 Revenue-$5,533MM •  PREMIUM SUBSCRIPTION AND GAME LIKE AD REVENUE-UPSIDE CASE ENTERPRISE VALUE EBITDA Margin: 30% $30,000,000,000 $24,897,375,000 $25,000,000,000 $20,000,000,000 $15,000,000,000 $12,016,957,500 $10,000,000,000 $6,721,042,500 $5,000,000,000 $3,466,192,500 $1,530,798,750 $0 2015 Enterprise Value 2016 2017 Average Monthly Users 2018 EBITDA 2019 Average Daily Users Enterprise Value Sensitivities EV#EBITDA#Multiple 10.00 12.50 15.00 17.50 20.00 2015 $1,020,532,500 $1,275,665,625 $1,530,798,750 $1,785,931,875 $2,041,065,000 2016 $2,310,795,000 $2,888,493,750 $3,466,192,500 $4,043,891,250 $4,621,590,000 2017 $4,480,695,000 $5,600,868,750 $6,721,042,500 $7,841,216,250 $8,961,390,000 Source: Capital IQ, SEC.gov, Company Filings! 2018 $8,011,305,000 $10,014,131,250 $12,016,957,500 $14,019,783,750 $16,022,610,000 2019 $16,598,250,000 $20,747,812,500 $24,897,375,000 $29,046,937,500 $33,196,500,000


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Science Media Michael Jones @mjones


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