Lehman Aug 07 Industry

INTERNET & MEDIA GLOBAL EQUITY RESEARCH
Internet NORTH AMERICA
Lehman Brothers
SECTOR VIEW Internet Data Book
Rating: 2 - NEUTRAL August 2007
Monthly U.S. Internet Research Product
Douglas Anmuth
1.212.526.0879 The Lehman Brothers Internet Data Book provides up-to-date statistics on the Internet
danmuth@lehman.com
LBI, New York industry overall and, more specifically, on the 13 companies in our coverage universe.
The Data Book contains more than 150 figures and charts broken down into five key
Brian A. Fenske, CFA areas: 1) Introduction includes Internet and cross-media comparative valuation charts
1.212.526.7827
bfenske@lehman.com as well as key financial metrics for our covered companies, among other things; 2)
LBI, New York Broadband and Internet Usage features U.S. and global data on broadband
Ronald V. Josey penetration and relevant unique visitor and page view information for leading sites; 3)
1.212.526.4008 Online Advertising includes our projections for domestic online ad spending through
rjosey@lehman.com
LBI, New York 2011, data on overall U.S. advertising spending, and key search industry statistics,
among other metrics; 4) e-Commerce features overall online retail projections by
Vincent J. Sinisi category and data on top sites by category; and 5) Company Information and
1.212.526.9265
vsinisi@lehman.com Models includes key company-specific data for our coverage universe.
LBI, New York
! Within our coverage universe, we prefer Google and Yahoo! (both rated
1-Overweight), given their leading positions in online advertising and their
multiple legs of growth, including local search, video, behavioral targeting,
personalized search, and mobile.
! The ratings within our Internet coverage universe are:
1-Overweight: Google, Yahoo!, Harris Interactive
2-Equal weight: Blue Nile, Amazon.com, Greenfield Online, eBay, TechTarget,

Analyst Certification
I, Douglas Anmuth, hereby certify Expedia, IAC, Netflix, Overstock, Alloy
(1) that the views expressed in this
research Industry Report accurately
reflect my personal views about any
or all of the subject securities or
issuers referred to in this Industry
Report and (2) no part of my
compensation was, is or will be
directly or indirectly related to the
specific recommendations or views Lehman Brothers does and seeks to do business with companies covered in its research reports. As a result, investors
expressed in this Industry Report.
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Customers of Lehman Brothers in the United States can receive independent, third-party research on the company or
companies covered in this report, at no cost to them, where such research is available. Customers can access this
independent research at www.lehmanlive.com or can call 1-800-2LEHMAN to request a copy of this research.
Investors should consider this report as only a single factor in making their investment decision.
August 10, 2007 PLEASE SEE IMPORTANT DISCLOSURES BEGINNING ON PAGE 144
http://www.lehman.com
Lehman Brothers Internet Data Book August 2007
Table of Contents
Introduction to the Lehman Brothers Internet Data Book .............................................. 6

Industry Summary: Our Outlook for 2H07............................................................... 6
Introduction..................................................................................................... 13
Broadband and Internet Usage........................................................................... 33
Online Advertising ........................................................................................... 45
e-Commerce ................................................................................................... 65
Company Information and Models ...................................................................... 87
Table of Figures
Figure 1: Coverage Universe Comparative Valuation – Large Cap......................... 14

Figure 2: Coverage Universe Comparative Valuation – Small Cap......................... 15
Figure 3: Overall Internet Industry Comparative Valuation ..................................... 16
Figure 4: Cross-Media Comparative Valuation ................................................... 17
Figure 5: Retail and Internet Retail Comparative Valuation .................................... 17
Figure 6: Preview of Upcoming Quarter, 2007E and 2008E................................ 18
Figure 7: Internet Coverage Universe, Year-to-Date Stock Performance, 2007 .......... 19
Figure 8: Historical Annual Stock Performance.................................................... 19
Figure 9: Stock Performance Seasonality – Large Cap ......................................... 20
Figure 10: Stock Performance Seasonality – Small Cap ....................................... 21
Figure 11: Historical Average Multiples – Forward Year P/E, P/FCF, EV/EBITDA .... 22
Figure 12: Historical Average Multiples – Forward Year P/E, P/FCF, EV/EBITDA .... 23
Figure 13: Short Interest by Company, 2001–07 YTD......................................... 24
Figure 14: Short Interest by Company, 2001–07 YTD (continued) ......................... 25
Figure 15: Annual Revenue and Growth, 1998–2008E ($ in millions).................... 26
Figure 16: Quarterly Revenue and Sequential Growth, 2003–07, YTD ($ in millions) 26
Figure 17: Annual EBITDA and Growth, 1998–2008E ($ in millions) ..................... 27
Figure 18: Annual EBITDA Margins, 1998–2008E............................................. 27
Figure 19: Free Cash Flow and Growth, 1998–2008E ($ in millions) .................... 28
Figure 20: Free Cash Flow Conversion of EBITDA, 1998–2008E ......................... 28
Figure 21: Capital Expenditures and Growth, 1998–2008E ($ in millions) ............. 29
Figure 22: Capital Expenditures as a Percentage of Revenue, 1998–2008E ........... 29
Figure 23: Return on Invested Capital (ROIC), 2001–08E .................................... 30
Figure 24: Return on Equity (ROE), 2001–08E ................................................... 30
Figure 25: Share Repurchases, 1998–2007, Year to Date ($ in millions)................ 31
Figure 26: Select Recent Internet M&A .............................................................. 32
Figure 27: U.S. Households with Broadband & Broadband Penetration, 2001–08E . 34
Figure 28: U.S. Broadband Penetration, 2000–11E ........................................... 35
Figure 29: Top 22 U.S. ISPs by Subscribers, July 2007 ...................................... 35
Figure 30: Global Internet Penetration – Top 20 Countries with Most Internet Users ... 36
2 August 10, 2007

Figure 31: International Broadband Penetration – Top 20 Countries ....................... 37

Figure 32: U.S. Household Technology Adoption Forecast, 2000–11E ................... 37
Figure 33: Media Consumption Time Breakdown ............................................... 38
Figure 34: Share of Time Spent Online ............................................................. 38
Figure 35: Top 50 U.S. Web Properties by Unique Visitors, June 2006–June 2007.. 39
Figure 36: Top 50 U.S. Web Properties by Page Views, June 2006–June 2007...... 40
Figure 37: Top 50 Global Properties by Unique Visitors, June 2006–June 2007 ...... 41
Figure 38: Top 50 Global Properties by Page Views, June 2006–June 2007 .......... 42
Figure 39: Online Subscription Revenue by Category .......................................... 43
Figure 40: Online Subscription Revenue by Subscription Period and Category ......... 43
Figure 41: Online Subscription Revenue by Subscription Period, % Breakdown......... 44
Figure 42: Lehman Brothers U.S. Online Advertising Forecast, 2001–11E............... 46
Figure 43: Lehman Brothers Online Video Advertising Forecast ($ in millions) ........... 46
Figure 44: Top 10 U.S. Online Advertising Sites, 2000–10E ($ in millions) ............ 47
Figure 45: Total U.S. Advertising Spend by Medium, 2000–08E ($ in millions) ....... 48
Figure 46: Share of Total U.S. Advertising Spending by Medium, 2000–08E ......... 49
Figure 47: Total U.S. Advertising Growth by Medium, 2000–08E ........................ 49
Figure 48: Contribution to Total U.S. Advertising Growth by Medium, 2000–08E .... 50
Figure 49: Initial Year Growth Comparisons – Internet vs. Broadcast and Cable....... 50
Figure 50: U.S. Online Advertising Revenue by Quarter, 1996–10E ($ in millions) ... 51
Figure 51: U.S. Online Advertising Revenue by Format, 2000–06 ($ in millions) ...... 52
Figure 52: U.S. Online Advertising Revenue by Pricing Model, 1998–2006........... 53
Figure 53: Total U.S. Measured Media Advertising by Category and Medium......... 54
Figure 54: Total U.S. Media Advertising by Category and Medium – % Mix ........... 54
Figure 55: Top U.S. Advertisers (1–50) with Total Spend and Internet Spend ........... 55
Figure 56: Top U.S. Advertisers (51–100) with Total Spend and Internet Spend ....... 56
Figure 57: Domestic Search Share, June 2007 .................................................. 57
Figure 58: Global Search Share, June 2007 ..................................................... 57
Figure 59: Domestic Search Share – Google and Yahoo! .................................... 58
Figure 60: Domestic Search Share – Microsoft, Ask.com, and AOL........................ 58
Figure 61: U.S. Search Market Share and Growth, June 2005–June 2007 ............. 59
Figure 62: Global Search Market Share and Growth, June 2005–June 2007.......... 60
Figure 63: Lehman Brothers Partnership Matrix, Part 1........................................... 61
Figure 64: Lehman Brothers Partnership Matrix, Part 2.......................................... 62
Figure 65: Help Wanted Advertising Market Share Analysis, U.S., 1998–2011E.... 63
Figure 66: Auto Classified Advertising Market Share, U.S., 1998–2011E .............. 63
Figure 67: Real Estate Advertising Market Share Analysis, U.S., 1998–2011E ........ 63
Figure 68: U.S. E-Commerce by Category, 2003–11E ($ in millions) .................... 66
Figure 69: U.S. E-Commerce Growth Rates by Category, 2004–11E .................... 67
Figure 70: U.S. E-Commerce as a Percentage of Total U.S. Retail, 2003–11E ........ 68
Figure 71: U.S. Department of Commerce E-Commerce Data, by Quarter ............... 69
Figure 72: U.S. Department of Commerce E-Commerce Data, by Quarter ............... 69
August 10, 2007 3

Figure 73: U.S. E-Commerce as a Percentage of Total U.S. Retail, by Quarter ......... 70
Figure 74: Top U.S. Online Retailers by Revenue (1–50) ($ in millions) ................... 71
Figure 75: Top U.S. Online Retailers by Revenue (51–100) ($ in millions) ............... 72
Figure 76: Top U.S. Online Retailers’ Revenue Growth Rates (1–50) ...................... 73
Figure 77: Top U.S. Online Retailers’ Revenue Growth Rates (51–100) .................. 74
Figure 78: Top U.S. Online Retailers – Online Revenue as a Percent of Total Rev...... 75
Figure 79: Top U.S. Online Retailers – Online Revenue as a Percent of Total Rev...... 76
Figure 80: Top U.S. Online Retailers – Apparel/Accessories ................................ 77
Figure 81: Top U.S. Online Retailers – Computers/Electronics .............................. 78
Figure 82: Top U.S. Online Retailers – Media (Books/CDs/DVDs) ........................ 79
Figure 83: Top U.S. Online Retailers – Flowers/Gifts .......................................... 79
Figure 84: Top U.S. Online Retailers – Food/Drugs ............................................ 80
Figure 85: Top U.S. Online Retailers – Hardware/Home Improvement ................... 80
Figure 86: Top U.S. Online Retailers – Health/Beauty ......................................... 80
Figure 87: Top U.S. Online Retailers – Housewares/Home Furnishings................... 81
Figure 88: Top U.S. Online Retailers – Jewelry ................................................... 81
Figure 89: Top U.S. Online Retailers – Mass Merchant/Department Store............... 82
Figure 90: Top U.S. Online Retailers – Office Supplies ........................................ 82
Figure 91: Top U.S. Online Retailers – Specialty/Non-Apparel ............................. 83
Figure 92: Top U.S. Online Retailers – Sporting Goods ....................................... 83
Figure 93: Top U.S. Online Retailers – Toys-Hobbies........................................... 83
Figure 94: Top Online Retail Satisfaction Index (1–50) ......................................... 84
Figure 95: Top Online Retail Satisfaction Index (51–94) ....................................... 85
Figure 96: Yahoo! Snapshot ............................................................................ 88
Figure 97: Yahoo! Income Statement, 2004–08E............................................... 89
Figure 98: Yahoo! Revenue Analysis, 2004–08E ............................................... 90
Figure 99: Yahoo! Cash Flow Statement, 2004–08E.......................................... 91
Figure 100: Yahoo! Discounted Cash Flow Analysis ........................................... 92
Figure 101: Google Snapshot ......................................................................... 93
Figure 102: Google Income Statement, 2004–08E ............................................ 94
Figure 103: Google Revenue Analysis, 2004–08E ............................................ 95
Figure 104: Google Cash Flow Statement, 2004–08E ....................................... 96
Figure 105: Google Discounted Cash Flow Analysis ........................................... 97
Figure 106: eBay Snapshot ............................................................................. 98
Figure 107: eBay Income Statement, 2004–08E ............................................... 99
Figure 108: eBay Segment Breakdown, 2004–08E ......................................... 100
Figure 109: eBay Cash Flow Statement, 2004–08E......................................... 101
Figure 110: eBay Discounted Cash Flow Analysis ............................................ 102
Figure 111: Amazon Snapshot....................................................................... 103
Figure 112: Amazon Income Statement, 2004–08E ......................................... 104
Figure 113: Amazon Segment Analysis, 2004–08E ......................................... 105
Figure 114: Amazon Cash Flow Statement, 2004–08E .................................... 106
4 August 10, 2007

Figure 115: Amazon Discounted Cash Flow Analysis ........................................ 107

Figure 116: IAC/InterActiveCorp Snapshot ...................................................... 108
Figure 117: IAC/InterActiveCorp Income Statement, 2004–08E......................... 109
Figure 118: IAC/InterActiveCorp Segment Breakdown – Revenue/EBITA ............. 110
Figure 119: IAC/InterActiveCorp Segment Breakdown – Growth Rates/Margins ... 111
Figure 120: IAC/InterActiveCorp Segment Breakdown –Share of Revenue/EBITA .. 112
Figure 121: IAC/InterActiveCorp Cash Flow Statement, 2004–08E .................... 113
Figure 122: IAC/InterActiveCorp Sum-of-the-Parts Analysis ................................. 114
Figure 123: Expedia Snapshot....................................................................... 115
Figure 124: Expedia Income Statement, 2004–08E ......................................... 116
Figure 125: Expedia Segment Breakdown, 2004–08E ..................................... 117
Figure 126: Expedia Cash Flow Statement, 2004–08E..................................... 118
Figure 127: Netflix Snapshot ......................................................................... 119
Figure 128: Netflix Income Statement, 2004–08E............................................ 120
Figure 129: Netflix Subscriber and Revenue Analysis, 2004–08E ....................... 121
Figure 130: Netflix Cash Flow Statement, 2004–08E ....................................... 122
Figure 131: Overstock.com Snapshot.............................................................. 123
Figure 132: Overstock.com Income Statement, 2004–08E ................................ 124
Figure 133: Overstock.com Segment Breakdown, 2004–08E ............................ 125
Figure 134: Overstock.com Cash Flow Statement, 2004–08E............................ 126
Figure 135: Blue Nile Snapshot ..................................................................... 127
Figure 136: Blue Nile Income Statement, 2004–08E ........................................ 128
Figure 137: Blue Nile Cash Flow Statement, 2004–08E ................................... 129
Figure 138: Greenfield Online Snapshot.......................................................... 130
Figure 139: Greenfield Online Income Statement, 2004–08E ............................ 131
Figure 140: Greenfield Online Segment Breakdown, 2004–08E ........................ 132
Figure 141: Greenfield Online Cash Flow Statement, 2004–08E........................ 133
Figure 142: Harris Interactive Snapshot............................................................ 134
Figure 143: Harris Interactive Income Statement, Fiscal 2004–08E...................... 135
Figure 144: Harris Interactive Segment Breakdown, Fiscal 2004–08E ................. 136
Figure 145: Harris Interactive Cash Flow Statement, Fiscal 2004–08E ................. 137
Figure 146: Alloy Snapshot ........................................................................... 138
Figure 147: Alloy Revenue and EBITDA Estimates, Fiscal 2004–07E.................... 139
Figure 148: TechTarget Snapshot ................................................................... 140
Figure 149: TechTarget Income Statement, 2004–08E...................................... 141
Figure 150: TechTarget Segment Breakdown, 2004–08E ................................. 142
Figure 151: TechTarget Cash Flow Statement, 2005–08E ................................. 143
*All figures and estimates as of August 3, 2007
August 10, 2007 5

Introduction to the Lehman Brothers Internet Data Book
The Lehman Brothers Internet Data Book provides up-to-date statistics on the Internet
industry overall, and more specifically on the 13 companies in our coverage universe. The
Data Book contains more than 150 figures and charts that are broken down into five key
areas: 1) Introduction includes Internet and cross-industry comparative valuation charts in
addition to key financial metrics for our covered companies, among other things; 2)
Broadband and Internet Usage features U.S. and global data on broadband penetration
and relevant unique visitor and page view information for leading sites; 3) Online
Advertising includes our projections for domestic online ad spending through 2011, data
on overall U.S. advertising spending, and a closer look at search industry statistics, among
other metrics; 4) e-Commerce features overall online retail projections by category and
data on top sites by category; and 5) Company Information and Models includes key
company-specific data for our coverage universe.
The Data Book is intended to be a primary resource for investors looking at the Internet
space. Each month, we update the Data Book as appropriate, and add charts that we
believe are increasingly relevant. Data or charts that may be of particular interest this
month include: Figure 42, our updated U.S. online advertising forecast, which projects a
$21.6 billion market in 2007, up 28%, growing to $37 billion by 2010; Figure 49, a
chart showing how Internet ad dollars favorably compare to broadcast and cable during
each vehicle’s first 11 years; and Figures 63 and 64, the Lehman Brothers Partnership
Matrix, which highlights partnerships between advertising and search providers and major
publisher Web sites, organized by vertical. Please let us know if there is particular
information you would like us to include in future editions of the Data Book.
Industry Summary: Our Outlook for 2H07
Internet stocks rebounded during the first half of 2007 after facing a challenging 2006. In
fact, during 1H07, large-cap Internet stocks increased an average of 25% (including a
73% increase in Amazon), compared with an increase of 6% in the S&P 500 and an 8%
increase in the Nasdaq. In contrast, during 2006, large-cap Internet stocks declined 18%,
versus a 14% increase in the S&P 500 and a 10% increase in the Nasdaq. Among other
things, 1H07 was characterized by continued industry consolidation around the major
Internet companies, particularly within advertising services, with the Google-Doubleclick,
Microsoft-Aquantive, and Yahoo!-Right Media transactions being the most significant.
Innovations and product enhancements continued throughout the first half of the year across
most companies, although Yahoo!’s Panama search platform was likely the most closely
watched and most critical enhancement to debut during 1H07 within the sector.
In 2H07, we believe we will see a continuation of the trend toward consolidation of

advertising services as the major Internet publishers seek to adapt to an increasingly
fragmented online environment by gaining greater scale throughout the advertising process.
We also expect to see more strategic partnerships formed in the second half, along with
continued trends toward open platforms that enable greater customization and
monetization.
6 August 10, 2007

Key issues that we believe will impact Internet stocks in the second half of 2007
include:
1) Display Advertising Issues and the Rise of Ad Exchanges: We believe issues

surrounding the online display advertising market will remain key concerns. Since late
2006, the rapid growth in the availability of non-premium, or lower priced, display
inventory has created downward pressure on overall display advertising revenue for
major providers, particularly Yahoo! Given continued growth in page views at
Facebook and MySpace through 1H07 and efforts to better monetize their traffic, we
believe this issue will likely persist for the rest of the year. However, with the increased
fragmentation of Web usage (users visiting a wider spectrum of Web sites) we believe
Yahoo! and the other major portals remain among the few places where advertisers
can reach a large audience efficiently. Furthermore, we believe that Yahoo!’s recently
closed acquisition of Right Media, an online advertising exchange, and the pending
close of Google’s acquisition of Doubleclick, which also will operate an advertising
exchange, will help provide efficient, market-driven pricing mechanisms for non-
premium inventory, likely countering some of the pressure caused by current excess
supply. We believe that Doubleclick’s advertising exchange has the potential to
surpass Right Media in terms of impact on the overall ad market given Doubleclick’s
existing relationships with a large number of high-quality advertisers and publishers.
Initially, we believe the exchanges will act as efficient markets for mostly non-premium
display inventory, while advertising providers and publishers will likely continue to take
a more hands-on approach to selling premium advertising.
2) One-Stop Shops and Advertising Platform Buildout: Although we believe it is likely

that the online advertising space will continue to consolidate around the top Internet
properties—Google, Yahoo!, AOL, and MSN—as they race to create one-stop shops
for advertisers, we believe we will see the early benefits of the recent acquisitions as
they are integrated across each company’s platform. We believe the buildout of
advertising platforms that can serve various combinations of display/search,
premium/non-premium, or owned & operated (O&O)/network all via a single
platform will help create efficiencies for marketers, yet still allow them to implement
diverse campaigns that reach large audiences. We believe these improvements,
particularly a more synergistic approach to search-and-display advertising, could help
drive total online advertising. In addition, we believe that as the ad serving and ad
optimization tools improve due to increased investment from the parent companies,
marketers are likely to see an enhanced ROI, which could potentially lead to greater
overall advertising spending. As the online advertising market expands, we expect
continued investment by the major Internet companies in enhancing the capabilities of
their respective ad platforms, as they attempt to extend their reach outside of their
traditional O&O Web sites and control a greater share of the overall online
advertising space. We believe this was a key factor behind the recent major
acquisitions in the sector. For example, Google and Microsoft’s announced
acquisitions of Doubleclick and Aquantive, respectively, give both companies control
of a sizeable ad serving network. Yahoo!’s acquisition of Right Media could make it
August 10, 2007 7

a hub for non-premium ads across the Internet as the exchange brokers more inventory
and potentially attracts more advertisers to its marketplace.
3) Domestic Search Growth: We believe monthly domestic query growth continues to

be an important directional indicator of growth for the major search providers. As
domestic query growth decelerates, we will watch for the impact, if any, on Google
and Yahoo!’s domestic search revenue growth. In order to drive continued growth
and gain search share, we believe search providers are likely to continue investing in
products and applications in 2H07 which will drive overall usage and loyalty, with the
intention of creating a halo effect around the provider, leading to greater search
activity. Toolbars are a prime example of this as they lock to the top of a Web-
browser and provide users convenient access to search and other products offered by
that provider. According to comScore Networks, toolbar searches represented 15% of
total U.S. searches in June 2007, and accounted for nearly 25% of the total year-over-
year growth in U.S. searches. Other products and services designed to create
convenient access to search services beyond the traditional search engine home page
include widgets, mobile applications, custom search engines, and personalized
homepages. Ultimately, we believe domestic query growth has significant headroom
as long as search providers continue to improve the relevancy and usefulness of search
results, particularly in an increasingly fragmented Web. However, we are also
somewhat concerned that toolbars are currently driving a meaningful percentage of
overall search volume, potentially creating an initial boost related to the recent rash of
distribution deals.
4) Financial Engineering and Capital Structure: In 2006 Amazon and eBay initiated
their first-ever share repurchase programs as both companies took advantage of strong
balance sheets and ample free cash flow to return value to shareholders. We believe
that in 2H07, several Internet companies might further attempt to create shareholder
value through optimizing the strength of their balance sheets or potentially taking part
in asset sales or swaps. Although Expedia dramatically scaled back its tender offer
from 38% of shares to 8% of shares, and the lending market has tightened up
dramatically, we believe both Expedia and IAC will look to repurchase more shares
when financing opens up. We believe IAC might also consider asset sales or swaps,
potentially around Interval or HSN. And while Barry Diller has recently emphasized
that he has no intention of transferring control of Expedia to Liberty Media, we
continue to believe that Liberty is interested in monetizing its stakes in both Expedia
and IAC. With debt becoming increasingly common in the Internet space, we believe
eBay could also seek to optimize its capital structure by issuing debt to fund more
aggressive share repurchases.
5) Google – Is Search Enough or Will Other Drivers Materialize?: Our growth

projections for Google factor in very little beyond its existing core search business.
And we believe the growth and profitability of the core search business alone supports
a stock price above $600. However, with Google’s market cap at $160 billion and
search growth likely to decelerate, we believe investors will be focused on Google’s
8 August 10, 2007

incremental growth drivers going forward. Looking into 2H07, we will be focused on
signs of more meaningful revenue generation from newer Google initiatives including
display, YouTube, traditional media, mobile, and Google Apps. We believe display
will receive a boost from the expected 2H07 closing of the Doubleclick acquisition.
While Google will still not be a principal in display, it will gain greater scale by
leveraging Doubleclick’s publisher relationships and providing more inventory to its
base of several hundred thousand advertisers. We are also increasingly optimistic
about YouTube’s monetization capabilities given Google’s recent progress around
digital fingerprinting and particularly strong page view growth. And despite
widespread skepticism about the efficacy and user experience around 30-second pre-
rolls, the OPA recently released a study suggesting the ad format has very positive
branding effects. We continue to believe that the combination of local search and
mobile will be a key growth driver going forward and we look for the iPhone to help
accelerate Internet activity through mobile devices as it provides users with a more
computer-like online experience, robust applications (including Google Search,
Google Maps, YouTube, and Yahoo! oneSearch), and fast Internet connectivity via
Wi-Fi.
6) Yahoo! – Can Yahoo! Stabilize its Advertising Business?: We believe that Yahoo!
needs to show signs that its advertising businesses (display-and-search advertising
comprise approximately 80% of revenue) have stabilized and can deliver accelerating
growth. Specifically, we believe that yield on its display advertising needs to improve
as the company addresses pressure caused by a proliferation of non-premium inventory
across the Web. The acquisition of Right Media should ultimately help Yahoo!
improve the pricing of its own non-premium inventory and allow the company to
benefit from acting as a third-party platform for advertising partnerships in which it is
the principal. While Panama contributed 15%–20% improvements in revenue per
search (RPS) in 2Q, we will look for continued gains in search monetization through
the back half of 2H07 and into early 2008. In addition, we believe Yahoo! will
continue to need to build out its advertising network in order to maintain momentum
and augment the monetization of its own sites. Recent advertising partnerships with
eBay, Comcast, and the newspaper consortium should provide additional high-quality
inventory for Yahoo! to sell moving forward, but we believe the company must
continue to build out its network. One additional concern around Yahoo! in the back
half of 2007 is the pending expiration of the company’s distribution partnership with
AT&T in April 2008. While we believe a complete dissolution of the partnership is
unlikely, we believe that as investors increasingly focus on 2008 EBITDA estimates,
greater consideration of this partnership is warranted. We estimate that this deal
drove $150 million–$200 million in 2006 EBITDA, or roughly 7%–10% of total 2006
EBITDA. Again, while we believe AT&T values the content and services that Yahoo!
provides to AT&T broadband customers, some of this EBITDA in 2008 could
reasonably be viewed as at-risk as distribution partnerships have become more
competitive among Yahoo!, Google, and MSN.
August 10, 2007 9

7) Amazon.com – Can Amazon’s Margin Expansion Continue?: Following a strong

2Q performance which saw Amazon post pro forma operating margins of 5.7%, well
ahead of the high end of guidance, which had called for 5.3%, we believe that
margin expansion in 4Q07 and into 2008 could prove to be more challenging. The
three primary drivers of margin expansion are: 1) a return to more normalized
technology and content spending following a 50% year-over-year increase in 2006,
which was driven by new category launches (grocery, automotive, toys) and digital
investments; 2) an increase in high-margin third-party revenue in the United Kingdom,
Germany, and now Japan, where the Merchants@ program launched in early 2Q;
and 3) improved terms with suppliers as Amazon becomes a larger buyer and seller of
products across more categories. Additionally, Prime continues to drive greater user
loyalty and purchase frequency, thereby stimulating top-line growth. While 3Q
represents another favorable year-over-year comparison in terms of margins, expansion
could be more challenging in 4Q and into 2008, and profit growth will likely
decelerate. Given Amazon’s commitment to offering low prices, discounted shipping,
and extensive product selection, we believe the company will continue to try to strike
the right balance between top-line growth and profitability and between being a
principal carrier of inventory and a platform for third-party merchants.
8) IAC – Still Waiting on Ask.com Search Deal Announcement: Another remaining

catalyst in 2H07 is the pending announcement by Ask.com of either a renewal of its
search partnership with Google, or with a new provider such as MSN or Yahoo! As
a reminder, Google currently supplies Ask with sponsored links under an affiliate
agreement. The two companies originally signed a three-year deal in 2002, which
was later extended in July 2004 to last through the end of 2007. While IAC no
longer discloses Google’s revenue contribution to Ask, we note that at the time of
IAC’s acquisition of Ask in mid-2005, Google represented roughly 70% of Ask’s total
revenue, which we do not believe has materially changed. IAC has suggested in
recent calls that it expected to announce a deal this summer, well in advance of year-
end, when the Google deal expires. Ask Network’s current 5.0% share of the
domestic search market likely makes Ask the single largest domestic affiliate and we
expect competitive bidding between Google, Yahoo!, and Microsoft. IAC has also
indicated that beyond simply providing sponsored search listings across Ask.com, that
it is seeking a partner that can help Ask.com achieve better distribution. In our
December 18, 2006 note titled “Is Ask.com the Real GOOG-MySpace Winner?” we
speculated that Ask could command a three-year affiliate deal approaching $2 billion
and that Microsoft would be the likely winner. While we are now less certain that
Microsoft will win this business, we remain confident in the $2 billion figure despite
Ask’s lower overall search market share. Additionally, we believe winning Ask’s
business may be more critical to Microsoft or Yahoo! than retaining it is for Google
given that Ask now represents less than 1% of Google’s total net revenue due to the
shift in Google’s business toward Google Sites as well as the expansion of Google’s
overall affiliate network during the last few years.
10 August 10, 2007

Within our coverage universe, we continue to prefer Google and Yahoo! (both rated
1-Overweight) given their leading positions in online advertising and their multiple legs of
growth, including local search, video, behavioral targeting, personalized search, and
mobile.
The ratings within our Internet coverage universe are:
1-Overweight: Google, Yahoo!, Harris Interactive
2-Equal weight: Blue Nile, Amazon.com, Greenfield Online, eBay, TechTarget, Expedia,
IAC, Netflix, Overstock, Alloy
August 10, 2007 11

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12 August 10, 2007

Introduction
August 10, 2007 13

Figure 1: Coverage Universe Comparative Valuation – Large Cap

(US$, millions except per share)
Company Yahoo! Google eBay Amazon.com Large Cap InterActiveCorp Expedia
Symbol YHOO GOOG EBAY AMZN Average IACI EXPE
LB Rating 1-Overweight 1-Overweight 2-Equal weight 2-Equal weight 2-Equal weight 2-Equal weight
Price as of 8/3/2007 $22.92 $503.00 $33.32 $76.80 $27.40 $27.68

Shares Outstanding 2006 1,419 313 1,403 422 315 358
Market Capitalization $32,527 $157,670 $46,740 $32,410 $269,346 $8,640 $9,920

Net Debt 2006 (2,787) (11,244) (3,483) (772) (1,138) (364)
Net Debt 2007 (2,885) (14,516) (4,321) (1,300) (894) 522
Net Debt 2008 (5,019) (19,391) (6,516) (2,505) (1,139) (63)
Less: Non-Consolidated Assets & Investments 6,129 1,000 60 983
Plus: Minority Interest 288
Total Enterprise Value 2006 23,610 145,426 43,197 31,638 6,519 9,843
EARNINGS PER SHARE (EPS) 1,2,3,4,5,6,7

EPS 2006 $0.73 $10.60 $1.05 $0.73 $1.61 $1.09
EPS 2007 $0.70 $15.74 $1.39 $1.29 $1.59 $1.21
EPS 2008 $0.80 $20.32 $1.64 $1.85 $1.78 $1.39
2006-2009 EPS CAGR 8% 33% 23% 49% 28% 5% 15%
P/E 2006 31.3x 47.5x 31.8x 105.1x 53.9x 17.0x 25.4x

P/E 2007 32.6x 32.0x 23.9x 59.7x 37.1x 17.2x 22.9x
P/E 2008 28.7x 24.8x 20.3x 41.5x 28.8x 15.4x 19.8x
P/E-to-Growth 3.6x 0.8x 0.9x 0.8x 1.0x 3.1x 1.3x
FREE CASH FLOW (FCF)

FCF 2006 1,267 1,678 1,732 485 550 525
FCF 2007 1,180 3,078 1,992 801 518 541
FCF 2008 1,385 4,484 2,300 1,116 585 607
2006-2009 FCF CAGR 5% 53% 15% 40% 28% 4% 8%
FCF/Share 2006 $0.89 $5.42 $1.23 $1.15 $1.74 $1.46

FCF/Share 2007 $0.83 $9.74 $1.45 $1.89 $1.71 $1.71
FCF/Share 2008 $0.97 $13.97 $1.65 $2.62 $1.95 $2.02
Price/FCF 2006 25.7x 92.8x 27.0x 66.8x 53.1x 15.7x 18.9x

P/FCF-to-Growth 4.4x 0.7x 1.4x 0.7x 1.0x NA 1.8x
FCF Yield 2006 3.9% 1.1% 3.7% 1.5% 2.5% 6.4% 5.3%
FCF Yield 2007 3.6% 1.9% 4.3% 2.5% 3.1% 6.2% 6.2%
FCF Yield 2008 4.2% 2.8% 5.0% 3.4% 3.8% 7.1% 7.3%
EBITDA
EBITDA 2006 1,906 4,621 2,290 706 956 648
EBITDA 2007 1,848 7,059 2,832 1,066 863 710
EBITDA 2008 2,162 9,596 3,338 1,395 938 790
2006-2009 EBITDA CAGR 9% 38% 19% 34% 25% 0% 11%
EV/EBITDA 2006 12.4x 31.5x 18.9x 44.8x 26.9x 6.8x 15.2x

EV/EBITDA-to-Growth 1.1x 0.4x 0.6x 0.6x 0.6x 25.2x 1.0x
REVENUE
Revenue 2006 4,560 7,296 5,970 10,711 5,919 2,238
Revenue 2007 5,020 11,531 7,453 14,248 6,321 2,584
Revenue 2008 5,593 16,133 8,889 18,015 6,725 2,852
2006-2009 Revenue CAGR 10% 42% 20% 27% 25% 5% 12%
Market Cap/Revenue 2006 7.1x 21.6x 7.8x 3.0x 9.9x 1.5x 4.4x
Notes:
1) EPS for YHOO, GOOG, IACI, EXPE, EBAY, AMZN, NFLX, TTGT are all pro forma
2) P/E and P/FCF for Yahoo! does not adjust for Yahoo! Japan
Source: Company reports, Lehman Brothers estimates
14 August 10, 2007

Figure 2: Coverage Universe Comparative Valuation – Small Cap

(US$, millions except per share) Greenfield Harris
Company Netflix Overstock.com Blue Nile TechTarget Online Interactive Alloy
Symbol NFLX OSTK NILE TTGT SRVY HPOL ALOY
LB Rating 2-Equal weight 2-Equal weight 2-Equal weight 2-Equal weight 2-Equal weight 1-Overweight 2-Equal weight
Price as of 8/3/2007 $16.57 $20.13 $81.07 $12.50 $16.08 $4.26 $8.89

Shares Outstanding 2006 71 21 17 36 26 61 14
Market Capitalization $1,171 $426 $1,352 $449 $422 $258 $127

Net Debt 2006 (400) (52) (98) (23) (37) (48) (17)
Net Debt 2007 (356) (27) (100) (93) (65) (41) (44)
Net Debt 2008 (418) (22) (136) (111) (90) (60) (44)
Less: Non-Consolidated Assets & Investments
Plus: Minority Interest
Total Enterprise Value 2006 771 374 1,253 427 385 210 110
EARNINGS PER SHARE (EPS) 1,2,3,4,5,6,7

EPS 2006 $0.82 ($5.01) $0.76 $0.23 $0.33 $0.17 NA
EPS 2007 $0.71 ($1.63) $0.90 $0.30 $0.50 $0.13 NA
EPS 2008 $0.75 ($0.61) $1.07 $0.45 $0.58 $0.19 NA
2006-2009 EPS CAGR -1% NA 20% 34% 28% 8% NA
P/E 2006 20.1x NA 107.2x 53.3x 49.1x 24.7x NA

P/E 2007 23.3x NA 89.7x 41.8x 31.9x 32.3x NA
P/E 2008 22.2x NA 75.6x 28.0x 27.8x 22.6x NA
P/E-to-Growth -30.2x NA 3.7x 0.8x 1.0x 2.7x NA
FREE CASH FLOW (FCF)

FCF 2006 63 (50) 39 11 18 23 NA
FCF 2007 12 (34) 41 12 22 19 NA
FCF 2008 22 (7) 56 18 26 20 NA
2006-2009 FCF CAGR -23% NA 19% 30% 20% -4% NA
FCF/Share 2006 $0.89 NA $2.32 $0.31 $0.69 $0.38 NA

FCF/Share 2007 $0.18 NA $2.43 $0.27 $0.82 $0.32 NA
FCF/Share 2008 $0.33 NA $3.40 $0.41 $0.96 $0.33 NA
Price/FCF 2006 18.7x NA 35.0x 40.6x 23.1x 11.1x NA

P/FCF-to-Growth -2.2x NA 1.3x 1.0x NA -3.4x NA
FCF Yield 2006 5.3% NA 2.9% 2.5% 4.3% 9.0% NA

FCF Yield 2007 1.1% NA 3.0% 2.2% 5.1% 7.4% NA
FCF Yield 2008 2.0% NA 4.2% 3.3% 6.0% 7.8% NA
EBITDA
EBITDA 2006 93 (61) 23 20 28 22 19
EBITDA 2007 87 (5) 27 24 35 19 18
EBITDA 2008 89 7 30 32 40 24 NA
2006-2009 EBITDA CAGR 1% NA 16% 25% 19% 6% NA
EV/EBITDA 2006 8.3x NA 54.8x 21.2x 13.8x 9.6x 5.8x

EV/EBITDA 2007 8.6x NA 46.6x 18.9x 10.5x 10.9x 4.6x
EV/EBITDA 2008 7.7x 70.7x 39.7x 13.9x 8.5x 7.9x NA
EV/EBITDA-to-Growth 6.9x NA 2.5x 0.5x 0.5x 1.3x NA
REVENUE
Revenue 2006 997 788 252 79 100 217 196
Revenue 2007 1,171 755 304 92 125 213 216
Revenue 2008 1,165 780 357 110 146 219 NA
2006-2009 Revenue CAGR 6% 1% 18% 18% 18% 1% NA
Market Cap/Revenue 2008 0.9x 0.6x 3.8x 5.0x 2.9x 1.1x NA
Notes:
3) EPS for NFLX is fully-taxed
4) EPS for OSTK, NILE are GAAP
5) EPS for HPOL is operational, fully-taxed, and based on calendar year
6) EPS for SRVY is GAAP, fully-taxed, and excludes one-time benefits
7) No EPS projections for ALOY until company provides more historical financial data
August 10, 2007 15

Figure 3: Overall Internet Industry Comparative Valuation

Price Market 2007E 2008E 2007E 2008E 2007E 2008E
Company Ticker 8/3/2007 Cap ($M) EV/EBITDA EV/EBITDA P/E P/E P/FCF P/FCF
Online Media & Search
Yahoo! YHOO $22.92 32,527 12.7x 9.9x 32.6x 28.7x 27.5x 23.6x
Google GOOG $503.00 157,670 20.3x 14.7x 32.0x 24.8x 51.6x 36.0x
TechTarget TTGT $12.50 449 18.9x 13.9x 41.8x 28.0x 46.1x 30.7x
Monster Worldwide MNST $34.88 4,389 16.3x 12.7x 23.1x 18.1x 18.7x 15.1x
CNET Networks CNET $7.27 1,099 13.7x 11.1x 5.2x 33.0x 22.7x 17.3x
The Knot KNOT $17.48 547 20.4x 14.3x 47.2x 32.4x -- --
RealNetworks RNWK $6.45 995 15.1x 11.4x 25.8x 49.6x 13.2x --
Bankrate RATE $39.10 714 16.1x 12.7x 29.8x 24.9x -- --
Travelzoo TZOO $19.54 298 11.0x 9.0x 16.8x 13.9x -- --
WebMD WBMD $50.83 454 34.3x 24.3x 99.7x 66.0x -- --
Marchex MCHX $12.86 388 11.1x 8.9x 24.3x 19.5x -- --
Miva MIVA $6.38 211 -- 8.5x -- 106.3x 45.6x 20.6x
Audible ADBL $11.51 279 29.6x 17.1x -- 88.5x -- --
TheStreet.com TSCM $11.24 316 16.6x 12.7x 21.6x 17.0x -- --
Looksmart LOOK $2.91 67 -- 11.3x -- -- -- --
E-Commerce
eBay EBAY $33.32 46,740 14.6x 11.9x 23.9x 20.3x 23.0x 20.2x
Amazon.com AMZN $76.80 32,410 29.4x 21.7x 59.7x 41.5x 40.7x 29.3x
IAC/InterActiveCorp IACI $27.40 8,640 7.5x 6.5x 17.2x 15.4x 16.0x 14.0x
Overstock.com OSTK $20.13 426 NA 69.1x NA NA NA NA
Blue Nile NILE $81.07 1,352 46.6x 39.7x 89.7x 75.6x 33.4x 23.8x
Netflix NFLX $16.57 1,171 8.6x 7.7x 23.3x 22.2x 89.8x 50.3x
1-800-FLOWERS.COM FLWS $8.89 225 12.1x 8.9x 37.0x 27.8x 17.6x 17.6x
FTD Group, Inc. FTD $15.85 459 8.9x 8.8x 16.0x 14.3x 13.1x 12.2x
GSI Commerce GSIC $21.71 1,007 16.8x 11.9x 28.9x 31.9x 22.4x 18.1x
Bluefly BFLY $0.99 130 -- -- -- -- -- --
Drugstore.com DSCM $2.79 265 35.0x 12.0x -- -- -- --
Redenvelope REDE $4.91 47 13.0x 5.1x -- -- -- --
Travel
Expedia EXPE $27.68 9,920 13.5x 10.8x 22.9x 19.8x 16.2x 13.7x
Priceline PCLN $61.56 2,332 14.3x 11.6x 20.3x 17.3x 27.5x 20.7x
Advertising Services
Valueclick VCLK $19.47 1,944 13.9x 11.7x 23.7x 19.5x 18.9x --
Aquantive AQNT $66.19 5,224 16.4x 12.8x 87.1x 66.9x 50.3x 41.0x
24/7 Real Media TFSM $11.76 600 18.1x 13.6x 22.6x 17.8x -- --
Webside Story WSSI $16.08 328 13.2x 10.2x 22.3x 17.5x 18.9x 13.6x
Omniture OMTR $24.19 1,187 42.3x 21.3x 302.4x 80.6x 81.4x 29.6x
Internet Services
Greenfield Online SRVY $16.08 422 10.5x 8.5x 31.9x 27.8x 19.7x 16.8x
Harris Interactive HPOL $4.26 258 10.9x 7.9x 32.3x 22.6x 13.4x 12.7x
Alloy ALOY $8.89 127 4.6x NA NA NA NA NA
Autobytel ABTL $3.12 135 8.0x 6.4x -- -- -6.8x -13.0x
Napster NAPS $2.90 131 8.0x 6.4x -- -- -- --
Earthlink ELNK $6.69 825 8.0x 7.2x -- -- -- --
United Online UNTD $12.87 859 6.2x 6.4x 11.5x 12.3x -- --
Verisign VRSN $29.25 7,105 14.3x 14.1x 30.5x 27.1x 18.9x 15.4x
Akamai AKAM $32.90 5,403 26.6x 19.4x 25.7x 19.2x 26.6x 16.5x
Digital River DRIV $44.20 1,827 13.3x 10.2x 20.4x 16.4x 12.5x 11.5x
Infospace INSP $20.07 662 13.3x 9.3x -- 167.3x -- --
Jupiter Media JUPM $6.61 238 9.5x 8.1x 50.8x 27.5x -- --
House Values SOLD $3.92 96 8.2x 9.5x -- -- 43.6x 39.2x
Move MOVE $2.97 460 18.3x 12.9x 99.0x 19.8x -- --
Vista Print VPRT $34.43 1,485 30.4x 18.8x 43.6x 29.9x -- --
Shutterfly SFLY $25.70 617 11.3x 8.1x 73.4x 58.4x -- --
Getty Images GYI $34.72 2,075 8.8x 7.9x 13.8x 12.2x 9.8x 8.7x
Inphonic INPC $3.18 118 9.1x 6.5x -- 21.2x -- --
Source: FactSet, company reports, Lehman Brothers estimates
16 August 10, 2007

Figure 4: Cross-Media Comparative Valuation

Price Market EV/EBITDA Multiple P/E Multiple FCF Multiple
Internet Ticker 8/3/07 Cap ($M) 2007E 2008E 2007E 2008E 2007E 2008E
Yahoo! YHOO $22.92 $32,527 12.7x 9.9x 32.6x 28.7x 27.5x 23.6x
Google GOOG $503.00 $157,670 20.3x 14.7x 32.0x 24.8x 51.6x 36.0x
eBay EBAY $33.32 $46,740 14.6x 11.9x 23.9x 20.3x 23.0x 20.2x
Amazon.com AMZN $76.80 $32,410 29.4x 21.7x 59.7x 41.5x 40.7x 29.3x
Internet Average 19.3x 14.5x 37.1x 28.8x 35.7x 27.3x
Entertainment*
Disney DIS $33.90 $69,987 9.3x 8.3x 17.5x 15.7x 21.0x 18.9x
News Corp NWSA $20.71 $54,539 8.2x 7.0x 18.8x 16.4x 20.6x 17.0x
Viacom VIAB $38.69 $26,492 9.8x 9.0x 16.8x 15.3x 16.3x 14.8x
Entertainment Average 9.1x 8.1x 17.7x 15.8x 19.3x 16.9x
Cable**
Comcast CMCSK $25.45 $82,134 7.6x 6.8x 36.1x 25.2x 37.3x 17.7x
Liberty Global LBTYA $42.95 $18,741 10.1x 8.5x NM 225.7x 35.4x 36.8x
Cable Average 8.9x 7.7x 36.1x 125.4x 36.3x 27.2x
Broadcasting***
CBS Corp CBS $31.57 $23,309 9.5x 8.7x 17.8x 16.2x 14.4x 13.0x
Clear Channel CCU $36.75 $18,010 11.0x 10.7x 23.8x 21.4x 18.0x 17.1x
Cox Radio CXR $13.00 $1,241 9.6x 9.2x 16.6x 16.4x 12.6x 12.9x
Citadel CDL $4.68 $581 8.2x 8.1x 7.9x 7.9x 7.8x 7.3x
Broadcasting Average 9.6x 9.2x 16.5x 15.5x 13.2x 12.6x
Newspapers****
Gannett GCI $49.09 $11,522 7.8x 8.0x 11.9x 11.5x 10.6x 10.5x
Tribune TRB $27.49 $3,216 10.1x 10.6x 19.0x 23.5x 17.1x 19.6x
New York Times NYT $22.35 $3,216 8.8x 8.6x 25.4x 22.6x 14.0x 14.4x
Dow Jones DJ $58.21 $4,877 17.0x 16.7x 41.7x 39.7x 39.2x 35.9x
Newspapers Average 10.9x 11.0x 24.5x 24.3x 20.2x 20.1x
Outdoor***
Clear Channel Outdoor CCO $25.91 $9,221 12.5x 11.3x 47.5x 40.9x 31.9x 28.5x
Lamar LAMR $57.61 $5,978 15.2x 13.5x 113.0x 74.6x -64.6x 22.8x
Outdoor Average 13.8x 12.4x 80.2x 57.8x -16.4x 25.7x
*Co-covered by Lehman Brothers Entertainment Analysts Vijay Jayant and Anthony DiClemente
**Covered by Lehman Brothers Cable and Satellite Communications Analyst Vijay Jayant
***Covered by Lehman Brothers Broadcasting Analyst Anthony DiClemente
****Covered by Lehman Brothers Publishing and Advertising Services Analyst Craig Huber
Figure 5: Retail and Internet Retail Comparative Valuation

Price Market EV/EBITDA Multiple GAAP P/E Multiple FCF Multiple
Internet Ticker 8/3/07 Cap ($M) 2007E 2008E 2007E 2008E 2007E 2008E
Bed Bath & Beyond BBBY $34.23 $9,778 10.1x 9.3x 15.9x 14.3x 13.2x 11.8x
Williams-Sonoma WSM $29.84 $3,364 8.1x 7.3x 16.6x 14.5x 10.1x 8.9x
Best Buy BBY $43.59 $21,612 8.3x 7.3x 15.8x 13.7x 11.4x 9.7x
Circuit City CC $11.17 $1,911 7.3x 5.9x 17.7x 12.4x 6.0x 4.5x
Tiffany TIF $48.63 $6,753 10.4x 9.4x 23.2x 20.3x 16.1x 14.4x
Specialty Retailing Average 8.8x 7.8x 17.8x 15.1x 11.4x 9.9x
Wal-Mart WMT $45.56 $189,985 8.0x 7.3x 14.2x 12.8x 9.3x 8.4x
Target TGT $60.58 $51,669 8.3x 7.4x 16.8x 14.7x 8.4x 7.6x
Costco COST $60.49 $27,755 9.7x 8.9x 23.6x 20.9x 15.4x 13.9x
Broadlines Average 8.6x 7.9x 18.2x 16.1x 11.0x 10.0x
Amazon.com AMZN $76.80 $32,410 29.4x 21.7x 68.8x 43.6x 40.7x 29.3x
eBay EBAY $33.32 $46,740 14.6x 11.9x 29.5x 23.8x 23.0x 20.2x
Blue Nile NILE $81.07 $1,352 46.6x 39.7x 89.7x 75.6x 33.4x 23.8x
Overstock.com OSTK $20.13 $426 NA 70.7x NA NA NA NA
Internet Average 30.2x 36.0x 62.7x 47.7x 32.4x 24.4x
Note: Retail estimates are from FactSet

Source: FactSet, company reports, Lehman Brothers estimates
August 10, 2007 17

Figure 6: Preview of Upcoming Quarter, 2007E and 2008E

($ in millions, except per share data)
Revenue EPS EBITDA
Lehman Lehman Lehman
Brothers Y/Y % First Call - 8/3/2007 Brothers Y/Y % First Call - 8/3/2007 Brothers Y/Y % First Call - 8/3/2007
Qtr Ending Year-Ago Estimate Change Low Mean High Year-Ago Estimate Change Low Mean High Year-Ago Estimate Change Low Mean High
Yahoo! September-07 $1,121 $1,222 9% $1,200 $1,242 $1,278 $0.11 $0.08 -26% $0.07 $0.08 $0.11 $474 $406 -14% $393 $422 $459
eBay September-07 $1,449 $1,816 25% $1,759 $1,815 $1,860 $0.26 $0.33 28% $0.32 $0.33 $0.34 $548 $673 23% $605 $678 $707
Google September-07 $1,864 $2,927 57% $2,855 $2,922 $2,989 $2.62 $3.90 49% $3.55 $3.75 $4.13 $1,183 $1,777 50% $1,559 $1,723 $1,878
Amazon.com September-07 $2,307 $3,157 37% $3,050 $3,126 $3,204 $0.04 $0.19 325% $0.11 $0.17 $0.21 $135 $219 62% $207 $216 $229
IAC/InterActiveCorp September-07 $1,412 $1,499 6% $1,480 $1,516 $1,561 $0.35 $0.37 5% $0.28 $0.34 $0.38 $225 $204 -9% $189 $201 $211
Expedia September-07 $614 $730 19% $643 $684 $731 $0.34 $0.37 11% $0.25 $0.29 $0.37 $193 $211 9% $190 $207 $221
Blue Nile September-07 $53 $61 15% $61 $63 $65 $0.11 $0.13 17% $0.12 $0.13 $0.17 $4 $4 12% $4 $5 $5
Netflix September-07 $256 $285 11% $284 $286 $289 $0.18 $0.13 -26% $0.11 $0.15 $0.18 $61 $70 16% $53 $70 $80
Overstock.com September-07 $157 $153 -3% $145 $156 $161 ($1.19) ($0.38) N/A ($0.45) ($0.38) ($0.27) ($15) ($2) N/A ($2) ($0) ($0)
Harris Interactive September-07 $48 NA NA $50 $51 $53 $0.02 NA NA $0.01 $0.03 $0.04 $3 NA NA $3 $5 $6
Greenfield Online September-07 $25 $31 24% $29 $30 $31 $0.07 $0.13 76% $0.08 $0.10 $0.13 $7 $8 26% $6 $8 $9
Alloy October-07 $64 $75 18% $66 $71 $75 N/A N/A N/A $0.57 $0.57 $0.57 $11 $13 22% $13 $14 $14
TechTarget September-07 $20 $23 14% $23 $23 $23 $0.05 $0.06 34% $0.05 $0.07 $0.10 $5 $5 9% $5 $6 $6
Revenue EPS EBITDA

Year-Ago Brothers Y/Y % First Call - 8/3/2007 Year-Ago Brothers Y/Y % First Call - 8/3/2007 Year-Ago Brothers Y/Y % First Call - 8/3/2007
Year Ending 2006A Estimate Change Low Mean High 2006A Estimate Change Low Mean High 2006A Estimate Change Low Mean High
Yahoo! 2007 $4,560 $5,020 10% $4,911 $5,048 $5,176 $0.52 $0.42 -19% $0.38 $0.42 $0.47 $1,906 $1,848 -3% $1,792 $1,870 $1,963
eBay 2007 $5,970 $7,453 25% $7,358 $7,457 $7,566 $1.05 $1.39 33% $1.33 $1.37 $1.40 $2,290 $2,832 24% $2,532 $2,838 $3,074
Google 2007 $7,296 $11,531 58% $11,313 $11,527 $11,765 $10.60 $15.74 48% $14.64 $15.28 $16.29 $4,621 $7,059 53% $6,297 $6,901 $7,492
Amazon.com 2007 $10,711 $14,248 33% $13,981 $14,178 $14,339 $0.45 $1.12 149% $0.96 $1.08 $1.17 $706 $1,066 51% $996 $1,054 $1,082
IAC/InterActiveCorp 2007 $5,919 $6,321 7% $6,291 $6,420 $6,569 $1.61 $1.59 -1% $1.43 $1.56 $1.75 $956 $863 -10% $799 $863 $901
Expedia 2007 $2,238 $2,584 16% $2,366 $2,490 $2,610 $1.09 $1.21 11% $0.81 $0.90 $1.21 $648 $710 10% $664 $695 $720
Blue Nile 2007 $252 $304 21% $302 $306 $318 $0.76 $0.90 19% $0.88 $0.90 $0.94 $23 $27 18% $23 $26 $29
Netflix 2007 $997 $1,171 18% $1,170 $1,179 $1,188 $0.71 $0.67 -6% $0.63 $0.69 $0.74 $234 $289 23% $256 $289 $316
Overstock.com 2007 $788 $755 -4% $695 $756 $780 ($5.01) ($1.63) N/A ($1.85) ($1.58) ($1.36) ($61) ($5) N/A ($5) $5 $15
Harris Interactive 2007 $216 $214 -1% $213 $214 $216 $0.15 $0.13 -12% $0.12 $0.13 $0.14 $22 $18 -15% $18 $20 $22
Greenfield Online 2007 $100 $125 25% $121 $122 $125 $0.33 $0.50 54% $0.43 $0.46 $0.50 $28 $35 25% $27 $32 $35
Alloy 2008 $196 $216 10% $201 $208 $216 N/A N/A N/A $0.45 $0.45 $0.45 $19 $18 -4% $18 $18 $18
TechTarget 2007 $79 $92 16% $92 $92 $92 $0.23 $0.30 28% $0.26 $0.30 $0.40 $20 $24 19% $24 $24 $24
Revenue EPS EBITDA

Year-Ago Brothers Y/Y % First Call - 8/3/2007 Year-Ago Brothers Y/Y % First Call - 8/3/2007 Year-Ago Brothers Y/Y % First Call - 8/3/2007
Year Ending 2007E Estimate Change Low Mean High 2007E Estimate Change Low Mean High 2007E Estimate Change Low Mean High
Yahoo! 2008 $5,020 $5,593 11% $5,478 $5,857 $6,403 $0.42 $0.53 26% $0.35 $0.55 $0.69 $1,848 $2,162 17% $1,995 $2,254 $2,575
eBay 2008 $7,453 $8,889 19% $7,986 $8,769 $9,291 $1.39 $1.64 18% $1.54 $1.61 $1.68 $2,832 $3,338 18% $2,870 $3,395 $3,661
Google 2008 $11,531 $16,133 40% $14,798 $15,737 $17,317 $15.74 $20.32 29% $18.13 $19.62 $21.95 $7,059 $9,596 36% $7,724 $9,402 $10,657
Amazon.com 2008 $14,248 $18,015 26% $16,743 $17,646 $19,000 $1.12 $1.76 58% $1.04 $1.54 $2.02 $1,066 $1,395 31% $1,040 $1,370 $1,569
IAC/InterActiveCorp 2008 $6,321 $6,725 6% $6,702 $6,906 $7,198 $1.59 $1.78 12% $1.62 $1.81 $2.03 $863 $938 9% $936 $1,004 $1,079
Expedia 2008 $2,584 $2,852 10% $2,513 $2,720 $2,989 $1.21 $1.39 16% $0.92 $1.07 $1.39 $710 $790 11% $690 $778 $822
Blue Nile 2008 $304 $357 17% $340 $360 $384 $0.90 $1.07 19% $0.96 $1.09 $1.23 $27 $30 13% $27 $31 $36
Netflix 2008 $1,171 $1,165 -1% $1,108 $1,223 $1,361 $0.67 $0.65 -3% $0.33 $0.59 $0.80 $289 $292 1% $238 $290 $369
Overstock.com 2008 $755 $780 3% $737 $810 $847 ($1.63) ($0.61) N/A ($0.91) ($0.58) $0.00 ($5) $7 N/A $7 $14 $21
Harris Interactive 2008 $214 $217 1% $217 $227 $237 $0.13 $0.17 29% $0.13 $0.19 $0.25 $18 $23 24% $21 $24 $28
Greenfield Online 2008 $125 $146 17% $133 $138 $146 $0.50 $0.58 15% $0.54 $0.58 $0.60 $35 $40 15% $33 $38 $40
Alloy 2009 $216 N/A NA $222 $222 $222 N/A N/A N/A $0.78 $0.78 $0.78 $18 N/A NA -- -- --
TechTarget 2008 $92 $110 20% $110 $110 $111 $0.30 $0.45 49% $0.37 $0.42 $0.49 $24 $32 33% $31 $32 $32
(1) EPS estimates are Pro Forma for stock option expense for EBAY, GOOG, EXPE, IACI, and TTGT
(2) EPS estimates are GAAP for YHOO, AMZN, NFLX, NILE, OSTK, HPOL, and SRVY.
Source: Reuters, company reports, Lehman Brothers estimates
18 August 10, 2007

Figure 7: Internet Coverage Universe, Year-to-Date Stock Performance, 2007

Price as of Market QTD YTD
Company 8/3/2007 Cap. (mil) Return Return
Yahoo! $22.92 $32,527 -16% -10%
Google $503.00 $157,670 -4% 9%
eBay $33.32 $46,740 4% 11%
Amazon.com $76.80 $32,410 12% 95%
Large Cap Average -1% 26%
IAC/InterActiveCorp $27.40 $8,640 -21% -26%

Expedia $27.68 $9,920 -5% 32%
Netflix $16.57 $1,171 -15% -36%
Blue Nile $81.07 $1,352 34% 120%
Overstock.com $20.13 $426 10% 27%
Harris Interactive $4.26 $258 -20% -15%
Greenfield Online $16.08 $422 1% 12%
Alloy $8.89 $127 -11% -23%
TechTarget $12.50 $179 -3% -4%
Total Universe Average -3% 16%
NASDAQ $2,511.25 -4% 4%

S&P 500 $1,433.06 -5% 1%
Source: Yahoo! Finance
Figure 8: Historical Annual Stock Performance
Annual Stock Return

Price as of Market YTD
Company 8/3/2007 Cap ($ mil.) Return 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995
Yahoo! $22.92 $32,527 -10% -35% 4% 67% 175% -8% -41% -86% 265% 584% 510% -49% N/A
Google $503.00 $157,670 9% 11% 115% 92% N/A N/A N/A N/A N/A N/A N/A N/A N/A
eBay $33.32 $46,740 11% -30% -26% 80% 91% 1% 103% -47% 56% 410% N/A N/A N/A
Amazon.com $76.80 $32,410 95% -16% 6% -16% 179% 75% -30% -80% 42% 967% 190% N/A N/A
Large Cap Average 26% -18% 25% 44% 148% 23% 10% -71% 121% 654% N/A N/A N/A
InterActiveCorp $27.40 $8,640 -26% 31% -49% -19% 48% -16% 81% -30% 67% 29% 117% -32% 223%
Expedia $27.68 $9,920 32% -12% 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Netflix $16.57 $1,171 -36% -4% 119% -55% 396% -29% N/A N/A N/A N/A N/A N/A N/A
Blue Nile $81.07 $1,352 120% -8% 46% -3% N/A N/A N/A N/A N/A N/A N/A N/A N/A
Overstock.com $20.13 $426 27% -44% -59% 247% 53% -1% N/A N/A N/A N/A N/A N/A N/A
Harris Interactive $4.26 $258 -15% 17% -45% -5% 181% 2% -21% -72% -27% N/A N/A N/A N/A
Greenfield Online $16.08 $422 12% 144% -73% 18% N/A N/A N/A N/A N/A N/A N/A N/A N/A
Alloy $8.89 $127 -23% 0% -12% 55% -52% -49% 180% -51% 19% N/A N/A N/A N/A
TechTarget $12.50 $179 -4% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Total Universe Average 15% 4% 2% 44% 134% -3% 45% -61% 70% 497% 272% -40% 223%
NASDAQ $2,511.25 4% 10% 1% 9% 50% -32% -21% -39% 86% 40% 22% 23% 40%
S&P 500 $1,433.06 1% 14% 3% 9% 26% -23% -13% -10% 20% 27% 31% 20% 34%
August 10, 2007 19

Figure 9: Stock Performance Seasonality – Large Cap

Yahoo! Average
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q 23% -18% -10% 8% 47% 4% -48% -21% 42% 33% 65% N/A 10%
2Q -13% 2% 2% 50% 36% -20% 27% -28% 2% 70% 26% -36% 12%
3Q N/A -23% -2% -7% 8% -35% -56% -27% 4% 65% 113% 1% 4%
4Q N/A 1% 16% 11% 27% 71% 101% -67% 141% 83% 38% -20% 37%
Full Year 6% -35% 4% 67% 175% -8% -41% -86% 265% 584% 510% -49% 126%
Google Average
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q -1% -6% -6% N/A N/A N/A N/A N/A N/A N/A N/A N/A -6%
2Q 14% 8% 63% N/A N/A N/A N/A N/A N/A N/A N/A N/A 35%
3Q N/A -4% 8% 29% N/A N/A N/A N/A N/A N/A N/A N/A 11%
4Q N/A 15% 31% 49% N/A N/A N/A N/A N/A N/A N/A N/A 31%
Full Year 18% 11% 115% 92% N/A N/A N/A N/A N/A N/A N/A N/A 73%
eBay Average
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q 10% -9% -36% 7% 26% -15% 10% 41% 71% N/A N/A N/A 12%
2Q -3% -25% -11% 33% 22% 9% 89% -38% 10% N/A N/A N/A 11%
3Q N/A -3% 25% 0% 3% -14% -33% 26% -7% -5% N/A N/A -1%
4Q N/A 6% 5% 27% 20% 28% 46% -52% -11% 435% N/A N/A 56%
Full Year 12% -30% -26% 80% 91% 1% 103% -47% 56% 410% N/A N/A 71%
Amazon.com Average
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q 1% -23% -23% -18% 38% 32% -34% -12% 61% 42% N/A N/A 7%
2Q 72% 6% -3% 26% 40% 14% 38% -46% -27% 133% -11% N/A 17%
3Q N/A -17% 37% -25% 33% -2% -58% 6% 28% 12% 182% N/A 20%
4Q N/A 23% 4% 8% 9% 19% 81% -60% -5% 188% 16% N/A 28%
Full Year 83% -16% 6% -16% 179% 75% -30% -80% 42% 967% 190% N/A 132%
IAC/InterActiveCorp Average
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q 1% 4% -19% -7% 17% 16% 23% -18% 8% 6% 7% -11% 2%
2Q -8% -10% 8% -5% 47% -26% 17% -4% 12% -8% 23% -3% 5%
3Q N/A 9% -32% -27% -16% -17% -36% 1% -3% -23% 30% -22% -12%
4Q N/A 29% 12% 25% 2% 18% 52% -11% 43% 70% 27% 1% 24%
Full Year -9% 31% -34% -19% 48% -16% 40% -30% 67% 29% 117% -32% 18%
Expedia Average
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q 10% -15% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A -15%
2Q 26% -26% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A -26%
3Q N/A 5% -18% N/A N/A N/A N/A N/A N/A N/A N/A N/A -7%
4Q N/A 34% 21% N/A N/A N/A N/A N/A N/A N/A N/A N/A 27%
Full Year 39% -12% 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A -6%
S&P 500 Average

2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q 0% 4% -3% 1% -4% 0% -12% 2% 5% 14% 2% 5% 1%
2Q 6% -2% 1% 1% 15% -14% 6% -3% 7% 3% 17% -36% 0%
3Q N/A 5% 3% -2% 2% -18% -15% -1% -7% -10% 7% 2% -3%
4Q N/A 6% 2% 9% 12% 8% 10% -8% 15% 21% 2% 8% 8%
Full Year 8% 14% 3% 9% 26% -23% -13% -10% 20% 27% 31% -49% 3%
20 August 10, 2007

Figure 10: Stock Performance Seasonality – Small Cap

Netflix Average
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q -10% 7% -12% 25% 85% N/A N/A N/A N/A N/A N/A N/A 26%
2Q -16% -6% 51% 6% 25% -9% N/A N/A N/A N/A N/A N/A 13%
3Q N/A -16% 58% -57% 31% -31% N/A N/A N/A N/A N/A N/A -3%
4Q N/A 14% 4% -20% 63% 14% N/A N/A N/A N/A N/A N/A 15%
Full Year -21% -4% 119% -55% 396% -29% N/A N/A N/A N/A N/A N/A 85%
Blue Nile Average

2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q 10% -13% 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A -6%
2Q 49% -9% 18% 32% N/A N/A N/A N/A N/A N/A N/A N/A 14%
3Q N/A 13% -3% -10% N/A N/A N/A N/A N/A N/A N/A N/A 0%
4Q N/A 1% 27% -18% N/A N/A N/A N/A N/A N/A N/A N/A 4%
Full Year 87% -8% 46% -3% N/A N/A N/A N/A N/A N/A N/A N/A 11%
Overstock.com Average
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q 5% 6% -38% 55% -25% N/A N/A N/A N/A N/A N/A N/A 0%
2Q 10% -29% -17% 27% 49% 7% N/A N/A N/A N/A N/A N/A 7%
3Q N/A -18% 8% -6% 2% -58% N/A N/A N/A N/A N/A N/A -14%
4Q N/A -10% -27% 88% 33% 118% N/A N/A N/A N/A N/A N/A 41%
Full Year 26% -44% -59% 247% 53% -1% N/A N/A N/A N/A N/A N/A 39%
Harris Interactive Average

2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q 20% 30% -42% 0% 86% 18% 3% -50% N/A N/A N/A N/A 7%
2Q -11% 1% 6% -19% 18% -2% -34% -26% N/A N/A N/A N/A -8%
3Q N/A 7% -12% -2% 9% -32% -12% -7% N/A N/A N/A N/A -7%
4Q N/A -17% 1% 20% 18% 28% 32% -18% -27% N/A N/A N/A 5%
Total 6% 17% -45% -5% 181% 2% -21% -72% 27% N/A N/A N/A 10%
Greenfield Online Average

2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q 11% 2% -11% N/A N/A N/A N/A N/A N/A N/A N/A N/A -4%
2Q 0% 24% -38% N/A N/A N/A N/A N/A N/A N/A N/A N/A -7%
3Q N/A 40% -55% 9% N/A N/A N/A N/A N/A N/A N/A N/A -2%
4Q N/A 38% 8% 8% N/A N/A N/A N/A N/A N/A N/A N/A 18%
Full Year 11% 144% -73% 18% N/A N/A N/A N/A N/A N/A N/A N/A 30%
Alloy Average
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q 3% 16% -27% -12% -54% -30% 14% 6% N/A N/A N/A N/A -13%
2Q -16% -22% -13% 35% 29% -4% 64% -33% -14% N/A N/A N/A 5%
3Q N/A 13% -6% -38% -13% -42% -14% -24% 14% N/A N/A N/A -14%
4Q N/A -3% 46% 113% -7% 32% 74% -10% 21% N/A N/A N/A 33%
Full Year -12% 0% -12% 55% -52% 0% 180% -51% 19% N/A N/A N/A 17%
TechTarget Average
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
2Q -1% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A -1%
Full Year -6% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A -6%
S&P 500 Average

2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Return
1Q 0% 4% -3% 1% -4% 0% -12% 2% 5% 14% 2% 5% 1%
2Q 6% -2% 1% 1% 15% -14% 6% -3% 7% 3% 17% -36% 0%
3Q N/A 5% 3% -2% 2% -18% -15% -1% -7% -10% 7% 2% -3%
4Q N/A 6% 2% 9% 12% 8% 10% -8% 15% 21% 2% 8% 8%
Full Year 8% 14% 3% 9% 26% -23% -13% -10% 20% 27% 31% -49% 3%
August 10, 2007 21

Figure 11: Historical Average Multiples – Forward Year P/E, P/FCF, EV/EBITDA
Large Cap
Quarter Yahoo! Google eBay Amazon.com Average IAC/InterActiveCorp Expedia
1Q04 70.2x -- 48.8x 41.0x 53.3x 26.7x --
2Q04 71.4x -- 53.0x 34.8x 53.0x 26.5x --
3Q04 66.1x -- 53.1x 30.3x 49.9x 22.3x --
4Q04 78.4x 52.6x 66.2x 31.6x 57.2x 23.9x --
1Q05 52.2x 36.6x 40.2x 34.7x 40.9x 20.3x --
2Q05 47.5x 34.0x 33.2x 35.2x 37.5x 18.6x --
3Q05 45.9x 39.6x 36.7x 40.4x 40.7x 17.7x 16.5x
4Q05 51.8x 44.9x 41.8x 43.4x 45.5x 18.4x 17.6x
1Q06 34.7x 33.6x 30.9x 34.0x 33.3x 17.0x 16.3x
2Q06 34.0x 30.7x 24.6x 32.9x 30.6x 15.9x 15.7x
3Q06 32.6x 30.1x 21.1x 29.1x 28.2x 15.1x 13.9x
4Q06 33.2x 33.8x 25.5x 34.2x 31.7x 18.2x 15.8x
1Q07 30.7x 26.4x 21.4x 29.3x 26.9x 18.3x 15.7x
2Q07 29.8x 25.9x 21.3x 39.3x 29.0x 18.1x 18.5x
Average Quarterly P/FCF - Forward Year

Large Cap
1Q04 44.7x -- 47.7x 36.3x 42.9x 16.6x --
2Q04 48.8x -- 51.5x 30.3x 43.6x 16.1x --
3Q04 45.8x -- 49.7x 26.2x 40.6x 12.8x --
4Q04 58.1x 83.8x 57.4x 28.9x 57.0x 14.6x --
1Q05 42.3x 45.0x 34.8x 25.3x 36.8x 14.0x --
2Q05 37.7x 40.6x 29.0x 22.8x 32.5x 13.8x --
3Q05 36.9x 47.8x 31.7x 27.3x 35.9x 18.4x 8.7x
4Q05 50.0x 52.4x 32.1x 27.7x 40.5x 27.0x 9.2x
1Q06 33.0x 33.5x 26.4x 23.1x 29.0x 23.3x 9.0x
2Q06 29.2x 34.5x 20.9x 22.4x 26.7x 18.1x 8.5x
3Q06 30.8x 39.3x 19.6x 20.0x 28.0x 15.0x 7.8x
4Q06 28.3x 55.4x 24.4x 25.0x 33.3x 16.6x 9.1x
1Q07 27.6x 44.1x 20.4x 22.2x 28.6x 16.7x 11.0x
2Q07 26.7x 40.5x 21.3x 28.7x 29.3x 17.3x 13.4x
Average Quarterly EV/EBITDA - Forward Year

Large Cap
1Q04 23.7x -- 29.7x 31.8x 28.4x 11.4x --
2Q04 24.0x -- 32.8x 27.6x 28.1x 10.9x --
3Q04 25.3x -- 32.0x 24.0x 27.1x 7.8x --
4Q04 32.5x 29.9x 40.1x 24.6x 31.8x 8.7x --
1Q05 21.9x 20.7x 22.9x 20.3x 21.5x 7.4x --
2Q05 21.1x 21.3x 18.7x 17.4x 19.6x 7.0x --
3Q05 20.4x 24.9x 21.2x 20.2x 21.7x 7.4x 9.2x
4Q05 23.0x 26.8x 26.0x 21.7x 24.4x 7.0x 9.6x
1Q06 14.5x 19.3x 18.6x 16.7x 17.3x 7.0x 8.0x
2Q06 13.2x 17.4x 14.3x 16.0x 15.2x 6.3x 7.7x
3Q06 11.9x 16.9x 11.7x 13.8x 13.7x 6.1x 7.4x
4Q06 11.6x 20.2x 15.3x 16.3x 15.8x 7.9x 8.9x
1Q07 10.9x 15.1x 12.1x 13.2x 12.8x 8.4x 8.8x
2Q07 10.9x 15.1x 12.2x 18.8x 14.2x 8.8x 10.5x
22 August 10, 2007

Figure 12: Historical Average Multiples – Forward Year P/E, P/FCF, EV/EBITDA
Average Quarterly P/E - Forward Year

90.0x
80.0x
70.0x
60.0x
50.0x
40.0x Amazon
Yahoo!
30.0x Google
20.0x eBay
IACI
10.0x Expedia
0.0x
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
Average Quarterly P/FCF - Forward Year
90.0x
80.0x
70.0x
60.0x
50.0x
Google
40.0x
Amazon
30.0x
Yahoo!
20.0x eBay
IACI
10.0x Expedia
0.0x
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
Average Quarterly EV/EBITDA - Forward Year

45.0x
40.0x
35.0x
30.0x
25.0x
Amazon
20.0x
Google
15.0x eBay
10.0x Yahoo!
Expedia
5.0x IACI
0.0x
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
August 10, 2007 23

Figure 13: Short Interest by Company, 2001–07 YTD

(shares in millions)
Yahoo! Google eBay Amazon.com IAC/InterActiveCorp Expedia
Shares Shares Shares Shares Shares Shares Shares Shares Shares Shares Shares Shares
2007 Short Out. % Short Short Out. % Short Short Out. % Short Short Out. % Short Short Out. % Short Short Out. % Short
Jul-07 70.8 1418.2 5% 6.4 314.9 2% 30.1 1358.5 2% 40.6 413.4 10% 13.5 304.7 4% 13.5 323.7 4%
Jun-07 72.6 1418.2 5% 6.2 314.9 2% 32.5 1363.8 2% 46.2 409.7 11% 14.7 304.7 5% 14.6 323.7 5%
May-07 79.3 1418.2 6% 4.0 314.9 1% 34.0 1363.8 2% 53.9 409.7 13% 16.1 304.7 5% 15.0 323.7 5%
Apr-07 79.0 1418.2 6% 4.4 314.9 1% 35.4 1363.8 3% 48.5 409.7 12% 16.4 304.7 5% 14.8 323.7 5%
Mar-07 82.3 1442.4 6% 5.0 310.6 2% 36.7 1369.0 3% 46.6 414.7 11% 15.7 309.2 5% 13.8 340.0 4%
Feb-07 79.9 1442.4 6% 5.1 310.6 2% 32.8 1369.0 2% 46.1 414.7 11% 14.4 309.2 5% 12.2 340.0 4%
Jan-07 84.1 1442.4 6% 5.8 310.6 2% 34.5 1394.1 2% 44.9 411.9 11% 13.8 309.2 4% 13.6 340.0 4%
2006
Dec-06 78.1 1442.4 5% 6.2 310.6 2% 37.2 1394.1 3% 42.8 411.9 10% 14.6 309.2 5% 12.9 340.0 4%
Nov-06 84.3 1442.4 6% 7.4 310.6 2% 40.6 1394.1 3% 42.8 411.9 10% 13.7 309.2 4% 12.8 340.0 4%
Oct-06 77.9 1442.4 5% 7.1 310.6 2% 47.3 1394.1 3% 44.3 411.9 11% 12.5 309.2 4% 13.7 340.0 4%
Sep-06 87.2 1442.4 6% 6.6 310.6 2% 49.0 1415.4 3% 43.6 418.9 10% 14.5 309.2 5% 14.8 340.0 4%
Aug-06 92.3 1442.4 6% 5.8 310.6 2% 51.4 1415.4 4% 40.2 418.9 10% 13.2 309.2 4% 15.9 340.0 5%
Jul-06 87.7 1442.4 6% 5.8 310.6 2% 50.0 1415.4 4% 36.5 418.9 9% 14.0 309.2 5% 16.3 340.0 5%
Jun-06 81.3 1476.6 6% 6.3 310.0 2% 46.4 1410.1 3% 36.9 417.9 9% 14.7 324.3 5% 18.4 359.1 5%
May-06 78.3 1476.6 5% 4.2 310.0 1% 46.3 1410.1 3% 34.4 417.9 8% 14.1 324.3 4% 18.0 359.1 5%
Apr-06 75.8 1476.6 5% 7.2 310.0 2% 40.7 1410.1 3% 30.5 417.9 7% 13.7 324.3 4% 18.5 359.1 5%
Mar-06 73.5 1493.3 5% 4.3 304.1 1% 42.9 1406.7 3% 35.1 416.9 8% 12.1 337.3 4% 18.1 365.2 5%
Feb-06 77.7 1493.3 5% 4.9 304.1 2% 43.0 1406.7 3% 34.7 416.9 8% 11.0 337.3 3% 17.3 365.2 5%
Jan-06 82.4 1493.3 6% 7.9 304.1 3% 49.9 1393.8 4% 34.8 414.5 8% 16.4 337.3 5% 20.2 365.2 6%
2005
Dec-05 80.0 1496.9 5% 8.2 304.0 3% 51.9 1393.8 4% 37.9 414.5 9% 14.8 344.0 4% 17.9 363.6 5%
Nov-05 86.7 1496.9 6% 9.2 304.0 3% 45.7 1393.8 3% 29.6 414.5 7% 14.9 344.0 4% 16.7 363.6 5%
Oct-05 79.2 1496.9 5% 7.4 304.0 2% 38.2 1393.8 3% 29.4 414.5 7% 12.5 344.0 4% 16.7 363.6 5%
Sep-05 79.5 1486.9 5% 8.4 289.7 3% 38.7 1353.9 3% 34.8 411.9 8% 10.1 347.8 3% 17.7 353.4 5%
Aug-05 83.3 1486.9 6% 8.3 289.7 3% 40.7 1353.9 3% 37.8 411.9 9% 15.3 347.8 4% 22.1 353.4 6%
Jul-05 75.7 1486.9 5% 7.8 289.7 3% 36.7 1353.9 3% 36.8 411.9 9% 27.6 347.8 8% 0.0 353.4 0%
Jun-05 76.9 1484.2 5% 9.5 287.2 3% 39.5 1349.8 3% 36.9 410.9 9% 29.4 350.2 8% -- -- --
May-05 78.7 1484.2 5% 9.6 287.2 3% 38.4 1349.8 3% 40.6 410.9 10% 33.3 350.2 10% -- -- --
Apr-05 77.1 1484.2 5% 8.7 287.2 3% 28.3 1349.1 2% 31.0 410.9 8% 25.7 350.2 7% -- -- --
Mar-05 75.1 1477.8 5% 9.8 286.6 3% 35.2 1344.8 3% 31.8 410.6 8% 20.0 367.7 5% -- -- --
Feb-05 76.8 1477.8 5% 13.8 286.6 5% 34.4 1325.8 3% 29.4 408.1 7% 20.6 367.7 6% -- -- --
Jan-05 76.0 1477.8 5% 11.7 286.6 4% 39.6 1325.8 3% 27.0 408.1 7% 21.0 367.7 6% -- -- --
2004
Dec-04 82.3 1475.1 6% 12.1 285.9 4% 47.4 1325.8 4% 29.1 408.1 7% 22.7 347.2 7% -- -- --
Nov-04 85.3 1475.1 6% 12.4 285.9 4% 48.8 1325.8 4% 29.6 408.1 7% 22.2 347.2 6% -- -- --
Oct-04 90.5 1475.1 6% 9.2 285.9 3% 53.0 1325.8 4% 29.0 408.1 7% 22.1 347.2 6% -- -- --
Sep-04 91.0 1458.6 6% 4.1 274.7 1% 61.7 1322.0 5% 26.5 406.9 7% 24.3 366.9 7% -- -- --
Aug-04 88.2 1458.6 6% 0.0 274.7 0% 50.7 1322.0 4% 24.4 406.7 6% 20.6 366.9 6% -- -- --
Jul-04 90.1 1458.6 6% -- -- -- 55.1 1314.7 4% 29.3 406.7 7% 22.3 366.9 6% -- -- --
Jun-04 95.4 1449.7 7% -- -- -- 59.6 1314.7 5% 30.9 405.0 8% 24.6 375.3 7% -- -- --
May-04 100.8 1449.7 7% -- -- -- 55.4 1314.7 4% 32.2 405.0 8% 26.0 375.3 7% -- -- --
Apr-04 103.5 1449.7 7% -- -- -- 59.2 1308.0 5% 35.3 405.0 9% 24.6 375.3 7% -- -- --
Mar-04 96.0 1426.5 7% -- -- -- 59.4 1308.0 5% 28.1 404.3 7% 24.5 376.1 7% -- -- --
Feb-04 56.0 1426.5 4% -- -- -- 53.2 1292.0 4% 26.6 404.3 7% 24.8 376.1 7% -- -- --
Jan-04 63.0 1426.5 4% -- -- -- 67.4 1292.0 5% 34.1 403.4 8% 23.9 376.1 6% -- -- --
2003
Dec-03 63.7 1,373.0 5% -- -- -- 68.4 1292.0 5% 33.7 401.1 8% 22.8 323.5 7% -- -- --
Nov-03 63.0 1,373.0 5% -- -- -- 65.4 1292.0 5% 36.1 401.1 9% 22.9 323.5 7% -- -- --
Oct-03 77.3 1,373.0 6% -- -- -- 72.3 1284.2 6% 43.1 401.1 11% 22.9 330.7 7% -- -- --
Sep-03 78.5 1225.5 6% -- -- -- 69.4 1284.2 5% 43.2 398.9 11% 21.6 330.7 7% -- -- --
Aug-03 61.2 1220.2 5% -- -- -- 72.8 1284.2 6% 43.5 398.9 11% 25.0 330.7 8% -- -- --
Jul-03 61.8 1206.4 5% -- -- -- 81.7 1270.0 6% 43.7 397.0 11% 30.9 229.4 13% -- -- --
Jun-03 54.4 1206.4 5% -- -- -- 72.5 1270.0 6% 45.3 391.7 12% 27.6 228.8 12% -- -- --
May-03 67.9 1206.4 6% -- -- -- 79.9 1270.0 6% 51.4 391.7 13% 23.3 228.8 10% -- -- --
Apr-03 72.5 1196.7 6% -- -- -- 83.8 1258.2 7% 48.9 391.7 12% 18.6 218.4 9% -- -- --
Mar-03 63.6 1195.0 5% -- -- -- 91.8 1234.9 7% 54.2 388.2 14% 13.1 214.9 6% -- -- --
Feb-03 58.3 1181.8 5% -- -- -- 82.9 1234.9 7% 53.5 388.2 14% 8.9 214.9 4% -- -- --
Jan-03 64.4 1181.8 5% -- -- -- 82.8 1234.9 7% 50.7 381.5 13% 12.3 214.9 6% -- -- --
2002
Dec-02 54.6 1181.8 5% -- -- -- 77.8 1234.9 6% 51.3 381.5 13% 11.8 192.2 6% -- -- --
Nov-02 64.1 1181.8 5% -- -- -- 82.3 1234.9 7% 55.5 381.5 15% 12.5 192.2 6% -- -- --
Oct-02 73.2 1201.1 6% -- -- -- 87.6 1222.2 7% 52.3 381.5 14% 10.1 191.9 5% -- -- --
Sep-02 76.7 1201.1 6% -- -- -- 94.8 1127.3 8% 47.3 380.5 12% 11.0 191.8 6% -- -- --
Aug-02 84.3 1201.1 7% -- -- -- 98.5 1127.3 9% 43.7 380.5 11% 10.4 191.8 5% -- -- --
Jul-02 66.1 1195.8 6% -- -- -- 65.5 1120.8 6% 41.3 380.5 11% 8.2 191.8 4% -- -- --
Jun-02 49.3 1195.8 4% -- -- -- 60.2 1120.8 5% 42.3 375.1 11% 16.7 176.0 9% -- -- --
May-02 53.3 1195.8 4% -- -- -- 51.1 1120.8 5% 43.3 375.1 12% 5.2 174.3 3% -- -- --
Apr-02 54.5 1189.9 5% -- -- -- 51.0 1119.5 5% 41.1 375.1 11% 4.2 170.3 2% -- -- --
Mar-02 54.7 1189.9 5% -- -- -- 55.1 1117.9 5% 43.8 373.3 12% 2.1 170.6 1% -- -- --
Feb-02 66.4 1162.8 6% -- -- -- 53.4 1100.5 5% 48.3 373.3 13% 2.0 169.6 1% -- -- --
Jan-02 88.4 1139.2 8% -- -- -- 61.7 1100.5 6% 58.2 373.3 16% 1.6 157.0 1% -- -- --
2001
Dec-01 85.8 1139.2 8% -- -- -- 72.1 1100.5 7% 64.0 371.8 17% 1.9 157.0 1% -- -- --
Nov-01 75.4 1139.2 7% -- -- -- 74.4 1100.5 7% 51.9 371.8 14% 1.8 157.0 1% -- -- --
Oct-01 81.1 1145.7 7% -- -- -- 83.7 1093.1 8% 48.7 362.7 13% 2.2 156.3 1% -- -- --
Sep-01 87.9 1145.7 8% -- -- -- 62.4 1093.1 6% 50.0 362.7 14% 2.3 156.3 2% -- -- --
Aug-01 86.3 1145.7 8% -- -- -- 52.9 1093.1 5% 51.8 362.7 14% 1.7 156.3 1% -- -- --
Jul-01 84.2 1133.8 7% -- -- -- 56.9 1080.7 5% 47.9 362.7 13% 2.0 154.7 1% -- -- --
Jun-01 80.6 1133.8 7% -- -- -- 56.7 1080.7 5% 51.1 359.2 14% 1.3 154.7 1% -- -- --
May-01 79.1 1133.8 7% -- -- -- 52.6 1080.7 5% 51.3 359.2 14% 1.5 154.7 1% -- -- --
Apr-01 75.0 1131.2 7% -- -- -- 59.6 1077.8 6% 50.3 358.8 14% 1.4 157.2 1% -- -- --
Mar-01 61.9 1131.2 5% -- -- -- 48.8 1077.2 5% 49.9 358.6 14% 1.6 149.2 1% -- -- --
Feb-01 57.3 1098.7 5% -- -- -- 43.5 1071.6 4% 44.3 356.2 12% 1.7 149.2 1% -- -- --
Jan-01 69.7 1098.7 6% -- -- -- 41.6 1071.6 4% 43.3 356.2 12% 1.0 149.2 1% -- -- --
Source: FactSet
24 August 10, 2007

Figure 14: Short Interest by Company, 2001–07 YTD (continued)

(shares in millions)
Netflix Blue Nile Overstock.com Harris Interactive Greenfield Online Alloy
Shares Shares Shares Shares Shares Shares Shares Shares Shares Shares Shares Shares
2007 Short Out. % Short Short Out. % Short Short Out. % Short Short Out. % Short Short Out. % Short Short Out. % Short
Jul-07 14.7 67.6 22% 2.7 15.7 17% 5.5 23.7 23% 3.9 52.7 7% 1.6 25.6 6% 0.1 14.0 1%
Jun-07 14.6 68.3 21% 2.5 15.7 16% 5.1 23.7 22% 4.2 52.7 8% 0.2 25.6 1% 0.1 14.0 1%
May-07 12.7 68.3 19% 3.1 15.7 20% 4.7 23.7 20% 4.8 52.7 9% 0.2 25.6 1% 0.1 13.8 1%
Apr-07 12.3 68.8 18% 4.0 15.7 26% 4.8 23.6 20% 3.5 58.8 6% 0.2 25.6 1% 0.1 13.6 0%
Mar-07 12.5 68.8 18% 3.6 15.8 23% 5.1 23.6 22% 3.0 58.8 5% 0.4 25.6 1% 0.1 14.7 1%
Feb-07 11.5 68.6 17% 4.1 16.0 26% 5.0 23.4 21% 2.3 58.8 4% 0.3 25.5 1% 0.1 13.5 1%
Jan-07 9.1 68.6 13% 4.1 16.0 26% 5.1 20.7 25% 1.7 59.1 3% 0.4 25.4 1% 0.1 13.5 1%
2006
Dec-06 8.5 68.5 12% 3.9 16.0 25% 5.5 20.7 27% 1.9 59.1 3% 0.4 25.4 2% 0.1 13.5 1%
Nov-06 8.7 68.5 13% 3.8 16.0 24% 5.9 20.6 28% 2.1 59.1 4% 0.5 25.4 2% 0.3 12.4 2%
Oct-06 11.1 68.2 16% 4.2 16.0 27% 6.2 20.6 30% 2.4 58.9 4% 0.4 25.4 2% 0.3 12.4 2%
Sep-06 12.0 68.1 18% 4.3 16.0 27% 6.9 20.6 33% 2.7 58.9 5% 0.5 25.4 2% 0.7 12.4 5%
Aug-06 11.3 68.1 17% 4.1 16.0 26% 7.6 20.6 37% 2.3 61.8 4% 0.6 25.4 2% 0.8 12.4 7%
Jul-06 13.5 59.5 23% 4.0 16.0 25% 6.8 20.5 33% 2.3 61.8 4% 0.9 25.3 4% 0.9 12.4 7%
Jun-06 12.9 59.5 22% 4.3 17.4 25% 8.1 20.5 39% 2.3 61.8 4% 1.7 25.3 7% 1.3 12.4 11%
May-06 12.3 59.5 21% 4.6 17.4 26% 8.0 20.5 39% 1.9 61.8 3% 1.7 25.3 7% 1.2 12.4 10%
Apr-06 14.0 55.5 25% 4.8 17.4 27% 9.1 19.4 47% 1.8 61.6 3% 1.3 25.3 5% 1.1 11.7 9%
Mar-06 15.2 55.4 27% 5.0 17.3 29% 9.6 19.4 49% 1.8 61.6 3% 1.2 25.3 5% 0.9 11.7 8%
Feb-06 15.5 54.8 28% 4.6 17.3 27% 8.9 19.3 46% 1.6 61.6 3% 1.3 25.3 5% 0.9 11.7 8%
Jan-06 13.9 54.8 25% 3.3 17.3 19% 7.9 19.3 41% 1.6 61.5 3% 1.1 25.3 4% 0.9 11.7 7%
2005
Dec-05 12.8 54.4 23% 3.1 17.3 18% 7.1 19.3 37% 1.5 61.5 2% 1.3 25.3 5% 0.9 11.7 8%
Nov-05 13.6 54.4 25% 3.9 17.3 22% 7.2 19.3 37% 1.6 61.5 3% 1.4 25.3 6% 1.1 11.7 9%
Oct-05 12.9 54.0 24% 4.3 17.5 25% 6.7 18.7 36% 1.7 61.4 3% 1.6 25.3 6% 1.0 11.7 9%
Sep-05 14.9 53.6 28% 4.5 17.5 26% 6.9 18.7 37% 1.4 61.4 2% 1.8 25.3 7% 1.0 11.7 9%
Aug-05 15.2 53.6 28% 4.4 17.5 25% 6.5 18.7 35% 1.4 61.4 2% 2.0 25.3 8% 0.9 10.8 8%
Jul-05 14.8 53.4 28% 4.6 17.6 26% 6.5 20.3 32% 1.6 61.4 3% 2.6 25.2 10% 0.9 10.8 8%
Jun-05 14.8 53.2 28% 4.2 17.6 24% 7.0 20.3 34% 2.3 61.4 4% 2.0 25.2 8% 0.9 10.8 9%
May-05 14.0 53.2 26% 3.7 17.6 21% 6.6 20.3 32% 2.4 61.4 4% 2.1 25.2 8% 1.0 10.8 10%
Apr-05 14.6 53.0 28% 2.9 17.8 16% 5.4 19.9 27% 2.3 61.5 4% 1.9 25.2 8% 1.4 10.8 13%
Mar-05 15.1 52.9 29% 2.7 17.8 15% 5.3 19.9 27% 2.3 61.5 4% 1.7 21.0 8% 1.5 10.8 14%
Feb-05 15.5 52.7 29% 2.5 17.7 14% 4.9 19.8 25% 2.1 61.5 3% 1.7 21.0 8% 1.4 10.8 13%
Jan-05 16.8 52.7 32% 2.0 17.7 11% 3.7 19.5 19% 1.8 60.6 3% 1.3 21.0 6% 1.4 10.8 13%
2004
Dec-04 19.1 52.4 36% 1.6 17.7 9% 4.1 19.5 21% 1.1 60.6 2% 1.1 21.0 5% 1.2 10.8 11%
Nov-04 19.5 52.4 37% 1.8 17.7 10% 4.1 19.5 21% 1.1 60.6 2% 0.5 16.5 3% 1.4 10.8 13%
Oct-04 21.9 52.3 42% 1.1 17.7 6% 4.4 18.3 24% 1.3 60.6 2% 0.4 16.5 2% 1.5 10.8 14%
Sep-04 18.8 52.2 36% 1.2 17.7 7% 3.7 18.3 20% 1.3 57.0 2% 0.2 16.5 1% 1.5 10.8 14%
Aug-04 18.2 52.2 35% 1.0 17.7 6% 3.3 18.3 18% 1.2 56.9 2% 0.2 16.5 1% 1.5 10.7 14%
Jul-04 19.8 52.1 38% 0.5 17.3 3% 2.7 18.0 15% 1.2 56.9 2% 0.0 16.5 0% 1.6 10.7 15%
Jun-04 20.2 51.6 39% 0.2 17.3 1% 2.3 18.0 13% 1.2 56.9 2% -- -- -- 1.7 10.7 16%
May-04 20.0 51.6 39% 0.0 17.3 0% 2.1 18.0 12% 1.1 56.1 2% -- -- -- 1.6 10.7 15%
Apr-04 19.1 51.5 37% -- -- -- 2.9 16.9 17% 0.9 56.1 2% -- -- -- 1.4 10.5 14%
Mar-04 18.7 51.5 36% -- -- -- 3.2 16.8 19% 0.8 56.1 2% -- -- -- 1.4 10.5 14%
Feb-04 12.0 49.5 24% -- -- -- 4.0 16.5 24% 1.0 56.1 2% -- -- -- 1.4 10.5 13%
Jan-04 19.0 49.5 38% -- -- -- 3.5 16.4 21% 1.2 56.1 2% -- -- -- 1.2 10.5 11%
2003
Dec-03 15.5 49.5 31% -- -- -- 3.6 16.4 22% 1.4 56.1 3% -- -- -- 1.3 10.5 12%
Nov-03 15.3 49.5 31% -- -- -- 2.9 16.4 18% 1.5 56.1 3% -- -- -- 1.2 10.3 11%
Oct-03 17.7 48.5 37% -- -- -- 2.2 16.4 13% 1.2 55.4 2% -- -- -- 1.4 10.3 13%
Sep-03 19.2 48.0 40% -- -- -- 1.6 16.4 10% 0.7 55.4 1% -- -- -- 1.2 10.3 12%
Aug-03 16.5 48.0 34% -- -- -- 1.7 16.4 10% 0.6 54.6 1% -- -- -- 1.3 10.3 12%
Jul-03 18.0 47.9 38% -- -- -- 1.9 16.4 11% 0.5 53.6 1% -- -- -- 1.4 10.3 13%
Jun-03 16.2 47.5 34% -- -- -- 1.6 16.4 10% 0.4 53.6 1% -- -- -- 1.4 10.3 14%
May-03 16.0 47.5 34% -- -- -- 1.1 16.4 7% 0.2 53.6 0% -- -- -- 1.5 10.3 15%
Apr-03 14.6 46.0 32% -- -- -- 1.3 16.4 8% 0.3 52.5 0% -- -- -- 1.6 9.9 16%
Mar-03 11.6 44.3 26% -- -- -- 1.4 16.4 9% 0.3 52.5 1% -- -- -- 1.7 9.9 17%
Feb-03 8.8 44.3 20% -- -- -- 1.1 16.3 7% 0.1 52.5 0% -- -- -- 1.5 9.9 15%
Jan-03 7.6 44.3 17% -- -- -- 0.7 14.5 5% 0.0 52.5 0% -- -- -- 1.6 9.9 16%
2002
Dec-02 6.7 44.3 15% -- -- -- 0.5 14.5 4% 0.1 52.5 0% -- -- -- 1.6 9.9 17%
Nov-02 7.7 44.3 17% -- -- -- 0.4 14.5 3% 0.2 52.5 0% -- -- -- 1.7 9.8 18%
Oct-02 7.6 41.2 18% -- -- -- 0.3 14.5 2% 0.4 52.5 1% -- -- -- 1.8 9.8 18%
Sep-02 7.2 41.2 18% -- -- -- 0.3 14.5 2% 0.7 52.1 1% -- -- -- 1.6 9.8 16%
Aug-02 5.1 41.2 12% -- -- -- 0.4 14.5 3% 0.8 52.1 1% -- -- -- 1.6 9.8 16%
Jul-02 3.4 41.2 8% -- -- -- 0.3 14.3 2% 0.7 52.1 1% -- -- -- 1.7 9.8 18%
Jun-02 1.2 41.2 3% -- -- -- 0.2 14.3 1% 0.5 52.1 1% -- -- -- 1.6 9.8 17%
May-02 0.0 41.2 0% -- -- -- 0.0 14.3 0% 0.3 52.1 1% -- -- -- 1.6 9.8 16%
Apr-02 -- -- -- -- -- -- -- -- -- 0.3 51.7 0% -- -- -- 1.3 9.7 14%
Mar-02 -- -- -- -- -- -- -- -- -- 0.2 51.7 0% -- -- -- 1.4 9.7 15%
Feb-02 -- -- -- -- -- -- -- -- -- 0.2 51.7 0% -- -- -- 0.7 9.7 7%
Jan-02 -- -- -- -- -- -- -- -- -- 0.2 51.6 0% -- -- -- 0.4 8.7 4%
2001
Dec-01 -- -- -- -- -- -- -- -- -- 0.2 51.6 0% -- -- -- 0.4 8.2 4%
Nov-01 -- -- -- -- -- -- -- -- -- 0.3 51.6 1% -- -- -- 0.5 8.9 5%
Oct-01 -- -- -- -- -- -- -- -- -- 0.8 35.2 2% -- -- -- 0.3 7.5 4%
Sep-01 -- -- -- -- -- -- -- -- -- 0.4 34.4 1% -- -- -- 0.3 6.3 5%
Aug-01 -- -- -- -- -- -- -- -- -- 0.1 34.2 0% -- -- -- 0.4 5.8 7%
Jul-01 -- -- -- -- -- -- -- -- -- 0.0 34.2 0% -- -- -- 0.4 5.8 6%
Jun-01 -- -- -- -- -- -- -- -- -- 0.0 34.2 0% -- -- -- 0.4 5.8 6%
May-01 -- -- -- -- -- -- -- -- -- 0.0 34.2 0% -- -- -- 0.2 5.4 3%
Apr-01 -- -- -- -- -- -- -- -- -- 0.0 34.2 0% -- -- -- 0.2 5.4 3%
Mar-01 -- -- -- -- -- -- -- -- -- 0.0 34.2 0% -- -- -- 0.2 5.2 4%
Feb-01 -- -- -- -- -- -- -- -- -- 0.0 34.2 0% -- -- -- 0.2 5.2 5%
Jan-01 -- -- -- -- -- -- -- -- -- 0.0 34.2 0% -- -- -- 0.1 5.2 2%
Source: FactSet
August 10, 2007 25

Figure 15: Annual Revenue and Growth, 1998–2008E ($ in millions)

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E 2008E
Yahoo! 245 592 1,110 717 953 1,473 2,590 3,696 4,560 5,020 5,593
Y/Y Growth -- 141% 88% -35% 33% 55% 76% 43% 23% 10% 11%
Google -- 0 19 86 345 939 1,961 4,024 7,296 11,531 16,133
Y/Y Growth -- NA 8585% 352% 299% 172% 109% 105% 81% 58% 40%
eBay 86 225 431 749 1,214 2,165 3,271 4,552 5,970 7,453 8,889
Y/Y Growth -- 161% 92% 74% 62% 78% 51% 39% 31% 25% 19%
Amazon.com 610 1,640 2,762 3,122 3,933 5,264 6,921 8,490 10,711 14,248 18,015
Y/Y Growth -- 169% 68% 13% 26% 34% 31% 23% 26% 33% 26%
IAC/InterActiveCorp -- -- -- -- 3,029 3,823 4,182 5,417 5,919 6,321 6,725
Y/Y Growth -- -- -- -- -- 26% 9% 30% 9% 7% 6%
Expedia -- -- -- -- -- 1,401 1,843 2,119 2,238 2,584 2,852
Y/Y Growth -- -- -- -- -- -- 32% 15% 6% 16% 10%
Netflix -- -- -- -- 153 272 506 682 997 1,171 1,165
Y/Y Growth -- -- -- -- -- 78% 86% 35% 46% 18% -1%
Blue Nile -- 14 44 49 72 129 169 203 252 304 357
Y/Y Growth -- -- 216% 10% 48% 79% 31% 20% 24% 21% 17%
Overstock.com 1 2 26 40 92 239 495 799 788 755 780
Y/Y Growth -- 214% 1291% 57% 129% 160% 107% 62% -1% -4% 3%
Harris Interactive -- 37 56 75 121 137 164 209 217 213 219
Y/Y Growth -- -- 50% 35% 60% 13% 20% 27% 4% -2% 3%
Greenfield Online -- 7 15 14 15 26 44 89 100 125 146
Y/Y Growth -- -- 107% -9% 8% 74% 72% 101% 13% 25% 17%
Alloy -- -- -- -- -- -- 184 195 196 216 --
Y/Y Growth -- -- -- -- -- -- -- 6% 0% 10% --
TechTarget -- -- -- -- 27 32 47 67 79 92 110
Y/Y Growth -- -- -- -- -- 22% 44% 43% 18% 16% 20%
Figure 16: Quarterly Revenue and Sequential Growth, 2003–07, YTD ($ in millions)
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07
Yahoo! 283 321 357 511 540 609 655 785 821 875 932 1,068 1,088 1,123 1,121 1,228 1,183
Q/Q Growth -1.0% 13.6% 11.0% 43.3% 5.7% 12.7% 7.6% 19.8% 4.6% 6.6% 6.5% 14.6% 1.8% 3.2% -0.1% 9.5% -3.7%
Google 178 215 250 296 381 423 503 654 795 890 1,049 1,290 1,531 1,671 1,864 2,230 2,539
Q/Q Growth 30.8% 20.3% 16.7% 18.1% 28.7% 11.2% 18.9% 30.0% 21.6% 12.0% 17.8% 23.0% 18.7% 9.1% 11.6% 19.6% 13.9%
eBay 476 509 531 648 756 773 806 936 1,032 1,086 1,106 1,329 1,390 1,411 1,449 1,720 1,768
Q/Q Growth 15.1% 6.9% 4.3% 22.1% 16.6% 2.3% 4.2% 16.1% 10.3% 5.3% 1.8% 20.2% 4.6% 1.5% 2.7% 18.7% 2.8%
Amazon.com 1,084 1,100 1,134 1,946 1,530 1,387 1,462 2,541 1,902 1,753 1,858 2,977 2,279 2,139 2,307 3,986 3,015
Q/Q Growth -24.2% 1.5% 3.1% 71.5% -21.4% -9.3% 5.4% 73.7% -25.1% -7.8% 6.0% 60.2% -23.4% -6.1% 7.9% 72.8% -24.4%
IAC/InterActiveCorp -- -- -- -- 1,019 976 957 1,235 1,063 1,302 1,360 1,691 1,449 1,510 1,494 1,824 1,595
Q/Q Growth -- -- -- -- NA -4.2% -2.0% 29.0% -13.9% 22.4% 4.4% 24.4% -14.3% 4.2% -1.1% 22.1% -12.6%
Expedia -- -- -- -- 413 487 504 439 485 555 585 495 494 598 614 531 551
Q/Q Growth -- -- -- -- NA 17.8% 3.5% -12.9% 10.5% 14.4% 5.3% -15.4% -0.2% 21.2% 2.6% -13.5% 3.6%
Netflix 56 63 72 81 100 120 142 144 152 164 173 193 224 239 256 277 305
Q/Q Growth 23.2% 13.5% 14.3% 12.4% 23.6% 19.9% 17.7% 1.6% 5.9% 7.6% 5.3% 11.7% 16.1% 6.8% 6.9% 8.3% 10.1%
Blue Nile 25 27 27 50 36 35 34 65 44 44 42 73 51 57 53 91 68
Q/Q Growth -18.7% 10.7% 0.7% 80.5% -27.8% -2.1% -3.2% 90.5% -31.7% -0.7% -4.2% 74.4% -30.8% 12.3% -6.4% 70.4% -25.2%
Overstock.com 29 29 58 123 82 88 103 221 166 151 168 315 178 159 157 294 158
Q/Q Growth -29.8% -1.1% 100.4% 113.1% -33.4% 7.0% 17.8% 114.0% -25.0% -9.2% 11.4% 87.8% -43.5% -10.6% -1.4% 87.4% -46.3%
Harris Interactive 32 36 32 34 33 40 39 53 51 54 49 55 52 60 48 57 57
Q/Q Growth -1.2% 11.2% -11.4% 7.2% -1.4% 18.4% -0.6% 33.7% -3.3% 6.6% -9.7% 12.0% -4.7% 14.9% -20.0% 17.8% 7.6%
Greenfield Online 5 6 7 8 9 10 12 14 15 26 23 24 22 24 25 29 27
Q/Q Growth 3.4% 29.5% 18.5% 17.5% 4.1% 18.6% 17.5% 12.9% 12.5% 72.3% -11.9% 5.8% -12.1% 13.6% 0.0% 18.5% -6.8%
Alloy -- -- -- -- 44 43 56 42 43 46 63 43 45 47 64 41 38
Q/Q Growth -- -- -- -- NA -1.7% 30.6% -25.2% 3.3% 6.6% 36.4% -31.2% 3.8% 4.2% 36.3% -35.8% -7.5%
TechTarget -- -- -- -- -- -- -- -- 13.2 19.0 16 18 15 21 20 23 18
Q/Q Growth -- -- -- -- -- -- -- -- NA 44.4% -14.2% 12.1% -18.4% 38.9% -2.2% 14.1% -20.6%
26 August 10, 2007

Figure 17: Annual EBITDA and Growth, 1998–2008E ($ in millions)

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E 2008E
Yahoo! -- 96 388 (19) 206 477 1,022 1,557 1,906 1,848 2,162
Y/Y Growth -- -- 306% -- -- 132% 114% 52% 22% -3% 17%
Google -- -- -- 38 237 638 1,280 2,624 4,621 7,059 9,596
Y/Y Growth -- -- -- -- 532% 169% 100% 105% 76% 53% 36%
eBay 18 28 84 232 440 803 1,336 1,865 2,290 2,832 3,338
Y/Y Growth -- 56% 205% 175% 90% 82% 66% 40% 23% 24% 18%
Amazon.com (52) (316) (233) 40 262 437 566 686 706 1,066 1,395
Y/Y Growth -- -- -- -- 561% 66% 30% 21% 3% 51% 31%
IAC/InterActiveCorp -- -- -- -- 314 575 631 865 956 863 938
Y/Y Growth -- -- -- -- -- 83% 10% 37% 11% -10% 9%
Expedia -- -- -- -- -- 497 598 678 648 710 790
Y/Y Growth -- -- -- -- -- -- 20% 13% -4% 10% 11%
Netflix -- -- -- -- -- 23 44 31 93 87 89
Y/Y Growth -- -- -- -- -- -- 90% -30% 204% -7% 3%
Blue Nile -- -- -- (3) 5 13 16 20 23 27 30
Y/Y Growth -- -- -- -- -- 134% 30% 21% 16% 18% 13%
Overstock.com (1) (8) (21) (10) (1) (11) (5) (21) (94) (35) (16)
Y/Y Growth -- -- -- -- -- -- -- -- -- -- --
Harris Interactive -- (13) (25) (20) 7 15 19 18 22 19 24
Y/Y Growth -- -- -- -- -- 111% 31% -10% 25% -12% 25%
Greenfield Online -- -- (39) (10) 2 4 10 22 28 35 40
Y/Y Growth -- -- -- -- -- 165% 135% 112% 28% 25% 15%
Alloy -- -- -- -- -- -- 5 17 19 18 --
Y/Y Growth -- -- -- -- -- -- -- 259% 10% -4% --
TechTarget 1 1 5 13 20 24 32
Y/Y Growth -- 45% 385% 148% 51% 19% 33%
Figure 18: Annual EBITDA Margins, 1998–2008E

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E 2008E
Yahoo! -- 16.1% 34.9% -(2.6%) 21.6% 32.4% 39.5% 42.1% 41.8% 36.8% 38.7%
Google -- -- -- 43.4% 68.7% 68.0% 65.3% 65.2% 63.3% 61.2% 59.5%
eBay 16.2% 3.5% 11.0% 24.2% 31.3% 32.1% 40.8% 41.0% 38.4% 38.0% 37.6%
Amazon.com -(8.5%) -(19.2%) -(8.4%) 1.3% 6.7% 8.3% 8.2% 8.1% 6.6% 7.5% 7.7%
IAC/InterActiveCorp -- -- -- -- 10.4% 15.0% 15.1% 16.0% 16.1% 13.6% 13.9%
Expedia -- -- -- -- -- 35.4% 32.4% 32.0% 29.0% 27.5% 27.7%
Netflix -- -- -- -- -- 8.5% 8.7% 4.5% 9.3% 7.4% 7.7%
Blue Nile -- -- -- -(7.0%) 7.5% 9.8% 9.7% 9.7% 9.1% 8.8% 8.5%
Overstock.com -(236.3%) -(456.2%) -(83.1%) -(24.7%) -1.3% -(4.7%) -(0.9%) -(2.7%) -(11.9%) -(4.6%) -(2.0%)
Harris Interactive -- -(35.7%) -(45.2%) -(26.4%) 5.8% 10.9% 11.8% 8.4% 10.1% 9.0% 10.9%
Greenfield Online -- -- -(258.2%) -(69.4%) 11.1% 16.9% 23.2% 24.5% 27.8% 27.9% 27.4%
Alloy -- -- -- -- -- -- 2.6% 8.8% 9.7% 8.5% --
TechTarget -- -- -- -- 2.9% 3.4% 11.5% 19.9% 25.4% 26.0% 28.9%
August 10, 2007 27

Figure 19: Free Cash Flow and Growth, 1998–2008E ($ in millions)

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E 2008E
Yahoo! -- -- -- 57 226 382 850 1,292 1,267 1,180 1,385
Y/Y Growth -- -- -- -- 294% 69% 122% 52% -2% -7% 17%
Google -- -- -- 18 118 219 658 1,621 1,678 3,078 4,484
Y/Y Growth -- -- -- -- 555% 85% 201% 146% 3% 83% 46%
eBay (7) (24) 50 193 341 509 992 1,574 1,732 1,992 2,300
Y/Y Growth -- -- -- 282% 77% 49% 95% 59% 10% 15% 15%
Amazon.com 3 (378) (265) (170) 135 346 477 570 485 801 1,116
Y/Y Growth -- -- -- -- -179% 156% 38% 19% -15% 65% 39%
IAC/InterActiveCorp -- -- -- -- -- -- 348 702 550 518 585
Y/Y Growth -- -- -- -- -- -- -- 102% -22% -6% 13%
Expedia -- -- -- -- 404 598 749 807 525 541 607
Y/Y Growth -- -- -- -- -- 48% 25% 8% -35% 3% 12%
Netflix -- -- -- -- -- 25 35 25 63 12 22
Y/Y Growth -- -- -- -- -- -- 41% -29% 153% -80% 79%
Blue Nile -- -- -- 3 16 16 28 30 39 41 56
Y/Y Growth -- -- -- -- 380% 4% 71% 8% 28% 5% 39%
Overstock.com -- -- (26) (12) 1 (16) 16 (50) (50) (34) (7)
Y/Y Growth -- -- -- -- -- -- -- -- -- -- --
Harris Interactive -- -- -- -- -- 12 12 17 23 19 20
Y/Y Growth -- -- -- -- -- -- -4% 43% 37% -20% 5%
Greenfield Online -- -- -- (13) (0) 3 3 17 18 22 26
Y/Y Growth -- -- -- -- -- -- -3% 511% 10% 19% 19%
Alloy -- -- -- -- -- -- -- -- -- -- --
Y/Y Growth -- -- -- -- -- -- -- -- -- -- --
TechTarget -- -- -- -- -- -- 5 9 11 12 18
Y/Y Growth -- -- -- -- -- -- -- 80% 20% 7% 53%
Figure 20: Free Cash Flow Conversion of EBITDA, 1998–2008E

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E 2008E
Yahoo! -- -- -- -- 110% 80% 83% 83% 66% 64% 64%
Google -- -- -- 48% 50% 34% 51% 62% 36% 44% 47%
eBay -- -- 60% 83% 78% 63% 74% 84% 76% 70% 69%
Amazon.com -- -- -- -- 52% 79% 84% 83% 69% 75% 80%
IAC/InterActiveCorp -- -- -- -- -- -- 55% 81% 58% 60% 62%
Expedia -- -- -- -- -- 120% 125% 119% 81% 76% 77%
Netflix -- -- -- -- -- 107% 79% 81% 67% 14% 25%
Blue Nile -- -- -- -- 292% 130% 171% 153% 169% 151% 185%
Overstock.com -- -- -- -- -- -- -- -- -- -- --
Harris Interactive -- -- -- -- -- 83% 61% 96% 106% 97% 81%
Greenfield Online -- -- -- -- -- 64% 26% 76% 65% 62% 64%
Alloy -- -- -- -- -- -- -- -- -- -- --
TechTarget -- -- -- -- -- -- 96% 69% 55% 49% 57%
28 August 10, 2007

Figure 21: Capital Expenditures and Growth, 1998–2008E ($ in millions)

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E 2008E
Yahoo! -- -- 94 86 52 117 246 409 689 648 777
Y/Y Growth -- -- -- -9% -40% 128% 109% 67% 69% -6% 20%
Google -- -- -- 13 37 177 319 838 1,903 2,484 3,307
Y/Y Growth -- -- -- -- 185% 375% 80% 163% 127% 31% 33%
eBay 13 87 50 59 139 365 293 338 515 527 606
Y/Y Growth -- 581% -43% 20% 133% 163% -20% 16% 52% 2% 15%
Amazon.com 28 287 135 50 39 46 89 203 216 241 265
Y/Y Growth -- 913% -53% -63% -22% 17% 94% 128% 6% 12% 10%
IAC/InterActiveCorp -- -- -- -- -- -- 168 241 251 220 249
Y/Y Growth -- -- -- -- -- -- -- 44% 4% -12% 13%
Expedia -- -- -- -- -- 46 53 52 93 101 111
Y/Y Growth -- -- -- -- -- -- 16% -2% 77% 9% 10%
Netflix -- -- -- -- 27 64 118 139 197 288 268
Y/Y Growth -- -- -- -- -- 140% 83% 18% 42% 46% -7%
Blue Nile -- -- -- 1 1 4 2 1 2 5 3
Y/Y Growth -- -- -- -- -16% 254% -48% -42% 78% 157% -34%
Overstock.com -- 1 3 2 2 7 9 45 23 3 4
Y/Y Growth -- -- 301% -49% 5% 284% 30% 412% -48% -87% 25%
Harris Interactive -- -- -- -- -- 2 6 6 3 6 7
Y/Y Growth -- -- -- -- -- -- 183% 5% -48% 87% 26%
Greenfield Online -- -- -- 2 1 1 4 7 5 7 7
Y/Y Growth -- -- -- -- -38% 11% 188% 94% -27% 27% 3%
Alloy -- -- -- -- -- -- -- -- -- -- --
Y/Y Growth -- -- -- -- -- -- -- -- -- -- --
TechTarget -- -- -- -- -- -- 2 2 1 3 3
Y/Y Growth -- -- -- 22% -41% 133% 2%
Figure 22: Capital Expenditures as a Percentage of Revenue, 1998–2008E

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E 2008E
Yahoo! -- -- 8.5% 12.0% 5.4% 8.0% 9.5% 11.1% 15.1% 12.9% 13.9%
Google -- -- -- 15.1% 10.8% 18.8% 16.3% 20.8% 26.1% 21.5% 20.5%
eBay 14.8% 38.7% 11.5% 7.9% 11.4% 16.9% 9.0% 7.4% 8.6% 7.1% 6.8%
Amazon.com 4.6% 17.5% 4.9% 1.6% 1.0% 0.9% 1.3% 2.4% 2.0% 1.7% 1.5%
IAC/InterActiveCorp -- -- -- -- -- -- 4.0% 4.5% 4.2% 3.5% 3.7%
Expedia -- -- -- -- -- 3.3% 2.9% 2.5% 4.1% 3.9% 3.9%
Netflix -- -- -- -- 17.6% 23.7% 23.3% 20.4% 19.8% 24.6% 23.0%
Blue Nile -- -- -- 2.4% 1.4% 2.7% 1.1% 0.5% 0.8% 1.6% 0.9%
Overstock.com -- 44.4% 12.8% 4.2% 1.9% 2.8% 1.8% 5.6% 3.0% 0.4% 0.5%
Harris Interactive -- -- -- -- -- 1.4% 3.4% 2.8% 1.4% 2.7% 3.2%
Greenfield Online -- -- -- 13.4% 7.7% 4.9% 8.2% 8.0% 5.2% 5.3% 4.7%
Alloy -- -- -- -- -- -- -- -- -- -- --
TechTarget 3.8% 3.2% 1.6% 3.2% 2.7%
August 10, 2007 29

Figure 23: Return on Invested Capital (ROIC), 2001–08E

2001 2002 2003 2004 2005 2006 2007E 2008E
Yahoo! NA 2% 5% 6% 8% 6% 4% 5%
Google -- -- 27% 29% 23% 21% 20% 21%
eBay 6% 9% 10% 13% 12% 10% 13% 14%
Amazon.com NA 8% 19% 22% 18% 15% 22% 25%
IAC/InterActiveCorp -- -- -- 1% 2% 2% 3% 3%
Expedia -- -- -- 2% 3% 3% 5% 6%
Netflix -- -- 4% 14% 3% 12% 8% 7%
Blue Nile -- -- -- 34% 14% 17% 36% 62%
Overstock.com -- NA NA NA NA NA NA NA
Harris Interactive NA NA 6% 6% 3% 4% 3% 5%
Greenfield Online -- -- 8% 3% 2% 2% 2% 2%
Alloy -- -- -- -- -- -- -- --
TechTarget -- -- -- -- 5% 10% 8% 10%
ROIC = ((Operating Income + One Time Items) x (1 - tax rate))

(Average Debt + Average Shareholders' Equity)
Figure 24: Return on Equity (ROE), 2001–08E

2001 2002 2003 2004 2005 2006 2007E 2008E
Yahoo! NA 5% 7% 9% 11% 8% 6% 7%
Google -- -- 28% 26% 25% 23% 22% 24%
eBay 7% 9% 11% 13% 13% 11% 14% 15%
Amazon.com NA NA NA NA NA 56% 75% 62%
IAC/InterActiveCorp -- -- -- 2% 4% 3% 4% 4%
Expedia -- -- -- 2% 3% 4% 6% 7%
Netflix -- -- 6% 16% 5% 15% 11% 9%
Blue Nile -- -- -- 35% 16% 20% 42% 74%
Overstock.com -- NA NA NA NA NA NA NA
Harris Interactive NA NA 6% 8% 3% 5% 4% 6%
Greenfield Online -- -- 94% 10% 11% 6% 8% 9%
Alloy -- -- -- -- -- -- -- --
TechTarget -- -- -- -- 10% 7% 4% 6%
ROE = (Net Income + Tax Adjusted One Time Items)

Average Shareholders' Equity
30 August 10, 2007

Figure 25: Share Repurchases, 1998–2007, Year to Date ($ in millions)

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 YTD
(1)
Yahoo! -- -- -- 60.0 100.0 -- -- 388.0 2,778.0 1,013.0
Google -- -- -- -- -- -- -- -- -- --
eBay -- 1.4 0.4 0.1 0.1 0.1 0.0 -- 1,666.5 677.5
Amazon.com -- -- -- -- -- -- -- -- 252.0 248.0
IAC/InterActiveCorp -- 6.6 125.5 -- -- 1,400.0 426.9 1,797.0 999.7 288.2
(2)
Expedia -- -- -- -- -- -- -- -- 288.3 660.0
Netflix -- -- -- -- -- -- -- -- -- 30.2
Blue Nile -- -- -- -- -- -- -- 17.4 57.4 13.5
Overstock.com -- -- -- -- -- -- -- 65.2 -- --
(3)
Harris Interactive -- -- -- 0.8 0.9 -- -- -- 17.5 40.8
Greenfield Online -- -- -- -- -- -- -- -- -- --
(4)
Alloy -- -- -- -- -- 3.0 -- -- -- --
TechTarget -- -- -- -- -- -- -- -- -- --
Notes:
(1) Yahoo! share repurchase totals include open market purchases as well as structured stock transactions that settle during that calendar year.
(2) Expedia YTD 2007 repurchases include tender offer which company completed on Jan. 19, for 30M shares @ $22.00 per share.
(3) Harris Interactive's fiscal year ends June 30.
(4) Alloy's fiscal year ends January 31.
August 10, 2007 31

Figure 26: Select Recent Internet M&A

Announced Acquisition Acquirer Business Type Total Consideration Payment Method
7/16/07 MeziMedia ValueClick Comparison Shopping $100M $100M in cash

7/9/07 Postini Google Communications security & compliance $625M $625M in cash
7/3/07 GrandCentral Google Web-calling Service NA NA
6/1/07 Feedburner Google Web reader for blogs and RSS feeds NA NA
5/30/07 StumbleUpon eBay Internet content discovery $75M NA
5/30/07 Photobucket MySpace Photo and video sharing services NA NA
5/23/07 Brilliance Audio Amazon Audiobook Publisher NA NA
5/18/07 Aquantive Microsoft Online Advertising Services $6B Cash
5/17/07 24/7 Real Media WPP Group Online Advertising Services $649M Cash
5/16/07 ADTECH A.G. AOL Online advertising management & serving NA NA
5/15/07 Third Screen Media AOL Mobile advertising network NA NA
5/14/07 dPreview.com Amazon.com Online Publisher of Digital Camera Reviews NA NA
5/7/07 ConsumerSearch.com New York Times Co. Online Publisher of Meta-Reviews $33M $33M in cash
4/30/07 Right Media Yahoo! Online Advertsising Exchange $680M ($720M including Oct. 20% stake) $680M=50/50 Cash/Stock; $40M Cash
4/13/07 DoubleClick Google Online Advertising Services $3.1B $3.1B in cash
4/12/07 Red Swoosh Akamai Peer-to-peer Content Delivery $15M $15M in stock
4/11/07 Fandango Comcast Onlline Movie Tickets NA NA
3/22/07 Tabloo HP Web-based Printing Software NA NA
3/18/07 AdScape Media Google In-Game Advertising NA NA
3/15/07 WebEx Cisco Collaborative Business Applications $2.9B $2.9B in cash
3/14/07 TellMe Networks Microsoft Voice-based Services/Technology NA NA
3/5/07 Utah Street Networks Cisco Social Networking Software NA NA
2/8/07 Five Across Cisco Social Networking Software NA NA
1/10/07 StubHub eBay Online Event Ticket Marketplace $310M $310M in cash
12/28/06 Abacus Alliance Data Systems Online Data Analytics $435M $435M in cash
12/20/06 Digitas Publicis Online Marketing/Advertising Services $1.3 billion $1.3 billion in cash
12/4/06 Shopping.net ValueClick Comparison Shopping $13M $13M in cash
10/9/06 YouTube Google Online Video & User Generated Content $1.65 billion $1.65 billion in stock
8/15/06 CollegeHumor.com InterActiveCorp Online Content NA 51% stake and full voting control
8/9/06 Atom Entertainment Viacom Online Games & Video $200M NA
7/26/06 BuyCostumes.com Liberty Interactive e-Commerce NA NA
6/5/06 Wedding Channel The Knot Online Content $78M $57.9 million in cash, 1.15M shares
5/30/06 Open List Marchex Content Aggregation $13M NA
4/24/06 Tradera eBay Online Auctions (Sweden) $52M $52M in cash
3/16/06 Uswitch Scripps, E.W. Comparison Service $366M $366M in cash
3/6/06 iVillage NBC Universal Online Content $600M $600M in cash
1/30/06 Shoebuy InterActiveCorp e-Commerce NA NA
1/17/06 dMarc Broadcasting Google Advertising Services $102M + up to $1.136B add'l $102M in cash
12/14/05 PriceGrabber GUS Comparison Shopping $485M NA
12/9/05 del.icio.us Yahoo! Tagging/Bookmarking NA NA
12/5/05 Provide Commerce Liberty e-Commerce $477M $477M in cash
10/6/05 Weblogs AOL-Time Warner Blog Network NA NA
9/12/05 Skype eBay VOIP $2.5B + up to $1.4B add'l $1.3B in cash, $1.2B in stock
9/8/05 IGN Entertainment News Corp Online Content - Video Games $650M $650M in cash
9/6/05 LinkShare Rakuten Affiliate Marketing $425M $425M in cash
8/11/05 Fastclick ValueClick Online Advertising Services $133M $133M in stock
7/18/05 Intermix (MySpace) News Corp Social Networking $580M $580M in cash
7/14/05 Bookings BV Priceline Online Travel $133M $133M in cash
6/20/05 NeoPets Viacom Online Content/Entertainment $160M $160M in cash?
6/13/05 E-Babylon ValueClick e-Commerce $143M $122M in cash, 1.8M shares of VCLK
6/13/05 Web Marketing Holdings ValueClick Online Advertising Services $15M $15M in cash
6/6/05 Shopzilla Scripps, E.W. Comparison Shopping $525M $525M in cash
6/1/05 Shopping.com eBay Comparison Shopping $480M $480M in cash
5/15/05 lastminute.com Sabre Online Travel GBP577M GBP577M in cash
4/7/05 Ciao AG Greenfield Online Online Surveys & Comp. Shopping $154M $74M in cash, 3.95M SRVY shares
3/21/05 AskJeeves InterActiveCorp Search Engine ~$2.26B at closing ~ 88M IACI shares
3/20/05 Flickr Yahoo! Online Photo Sharing NA NA
3/1/05 Cornerstone Brands InterActiveCorp Catalog Retailer $720M $720M in cash
2/17/05 About.com NY Times Online Content $410M $410M in cash
12/17/04 Rent.com eBay Online Real Estate $415M $415M in cash
11/15/04 MarketWatch Dow Jones Online Content - Financial News $453M $453M in cash
9/21/04 Active Hotels Priceline Online Travel $161M $161M in cash
9/14/04 MusicMatch Yahoo! Entertainment/Subscriptions $160M $160M in cash
8/3/04 PriceRunner ValueClick Comparison Shopping $29M NA
7/22/04 Service Magic InterActiveCorp Local NA NA
6/24/04 Advertising.com AOL-Time Warner Online Advertising Services $435M $435M in cash
32 August 10, 2007

Broadband and Internet Usage
August 10, 2007 33

Figure 27: U.S. Households with Broadband & Broadband Penetration, 2001–08E
(in millions) 2001 2002 2003 2004 2005 2006 2007E 2008E
Total U.S. Households 108.2 109.3 111.3 112.4 113.6 114.8 116.1 117.3
Total PC Households 61.1 65.7 70.6 74.8 77.2 79.5 82.3 84.7
% of U.S. Households 56% 60% 63% 67% 68% 69% 71% 72%
Total Online Homes 54.8 60.9 66.8 71.1 73.7 76.2 81.5 86.3
% of U.S. Households 51% 56% 60% 63% 65% 66% 70% 74%
% of PC Households 90% 93% 95% 95% 95% 96% 99% 102%
Total Narrowband 44.2 43.4 38.6 33.5 29.4 23.2 18.7 14.8
% change 15% -2% -11% -13% -12% -21% -19% -21%
Total Cable Broadband 7.2 11.6 16.4 21.0 24.5 29.6 34.2 37.2
% change 95% 61% 41% 28% 17% 21% 15% 9%
Total DSL Broadband 3.2 5.1 9.5 13.7 16.3 22.6 28.3 34.1
% change 129% 59% 86% 44% 19% 39% 25% 20%
Other Broadband 0.2 0.8 2.3 2.9 3.5 0.8 0.3 0.3
% change 100% 300% 188% 26% 21% -78% -61% 0%
Total Broadband 10.6 17.5 28.2 37.6 44.3 53 62.8 71.6

% change 104% 65% 61% 33% 18% 20% 18% 14%
Share of Online Homes
Narrowband 81% 71% 58% 47% 40% 30% 23% 17%
Broadband 19% 29% 42% 53% 60% 70% 77% 83%
Share of Broadband Homes
Cable 68% 66% 58% 56% 55% 56% 54% 52%
DSL 30% 29% 34% 36% 37% 43% 45% 48%
Other 2% 5% 8% 8% 8% 1% 0% 0%
Source: Veronis Suhler, PQ Media, Kagan Worldwide Media, Lehman Brothers estimates, company reports
34 August 10, 2007

Figure 28: U.S. Broadband Penetration, 2000–11E
90 80%
80
US Broadband Households (MM)
70%
70
60%
60
50%
50
40%
40
30%
30
20%
20
10 10%
0 0%
2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E 2011E
US Broadband Households % of Total US Households
Source: Forrester Research, July 2006
Figure 29: Top 22 U.S. ISPs by Subscribers, July 2007

Rank ISP U.S. Subscribers (millions) Market Share
1 SBC (AT&T) 17.0 17.0%
2 Comcast 12.1 12.1%
3 AOL 11.9 12.0%
4 Verizon 7.4 7.4%
5 Road Runner 7.3 7.3%
6 EarthLink 5.3 5.3%
7 Charter 2.5 2.5%
8 Qwest 2.3 2.3%
9 United Online 2.2 2.2%
10 Cablevision 2.1 2.1%
11 Embarq 1.1 1.1%
12 Windstream (formerly ALLTEL and Valor) 0.7 0.7%
13 Insight BB 0.7 0.7%
14 Mediacom 0.6 0.6%
15 Covad 0.5 0.5%
16 Citizens 0.5 0.5%
17 CenturyTel 0.4 0.4%
18 Hughes DIRECWAY 0.3 0.3%
19 LocalNet 0.3 0.3%
20 Cincinnati Bell 0.2 0.2%
21 First Communications 0.2 0.2%
-- Other U.S. ISPs 24.3 24.4%
Total 99.8 100.0%
Note: List does not include MSN or RCN numbers. RCN reports Revenue Generating Units (RGUs), not subscribers.
Source: ISP Planet, July 2007
August 10, 2007 35

Figure 30: Global Internet Penetration – Top 20 Countries with Most Internet Users
(numbers in millions)
(numbers in millions) Internet % Users
Rank Country or Region Internet Users Population Penetration of World
1 United States 211.1 302.0 69.9% 18.9%
2 China 137.0 1,317.4 10.4% 12.3%
3 Japan 86.3 128.6 67.1% 7.7%
4 Germany 50.5 82.5 61.2% 4.5%
5 India 40.0 1,129.7 3.5% 3.6%
6 United Kingdom 37.6 60.4 62.3% 3.4%
7 Korea (South) 34.1 51.3 66.5% 3.1%
8 Brazil 32.1 186.8 17.2% 2.9%
9 France 30.8 61.4 50.3% 2.8%
10 Italy 30.8 59.5 51.7% 2.8%
11 Russia 23.7 143.4 16.5% 2.1%
12 Canada 22.0 32.4 67.8% 2.0%
13 Mexico 20.2 106.5 19.0% 1.8%
14 Spain 19.8 45.0 43.9% 1.8%
15 Indonesia 18.0 224.5 8.0% 1.6%
16 Turkey 16.0 75.9 21.1% 1.4%
17 Vietnam 14.9 85.0 17.5% 1.3%
18 Australia 14.7 21.0 70.2% 1.3%
19 Taiwan 14.5 23.0 63.0% 1.3%
20 Argentina 13.0 38.2 34.0% 1.2%
TOP 20 Countries 867.1 4,174.5 20.8% 77.8%

Rest of the World 247.1 2,400.2 10.3% 22.2%
Total World - Users 1,114.3 6,574.7 16.9% 100.0%
Source: Internet World Stats (http://www.internetworldstats.com/top20.htm), compiled from various sources including Nielsen/NetRatings & ITU, March 2007, CNNIC
36 August 10, 2007

Figure 31: International Broadband Penetration – Top 20 Countries

Broadband Subscribers Total Broadband
Rank Country Per 100 Inhabitants Subscribers (millions)
1 Denmark 31.9 1.7
2 Netherlands 31.8 5.2
3 Iceland 29.7 0.1
4 Korea 29.1 14.0
5 Switzerland 28.5 2.1
6 Norway 27.7 1.3
7 Finland 27.2 1.4
8 Sweden 26.0 2.3
9 Canada 23.8 7.7
10 Belgium 22.5 2.4
11 United Kingdom 21.6 13.0
12 Luxembourg 20.4 0.1
13 France 20.3 12.7
14 Japan 20.2 25.8
15 United States 19.6 58.1
16 Australia 19.2 3.9
17 Austria 17.3 1.4
18 Germany 17.1 14.1
19 Spain 15.3 6.7
20 Italy 14.8 8.6
Source: OECD December 2006
Figure 32: U.S. Household Technology Adoption Forecast, 2000–11E

2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E 2011E
PC 63% 65% 66% 67% 70% 77% 80% 82% 84% 84% 85% 85%
Mobile phone 54% 53% 58% 62% 71% 76% 79% 82% 84% 86% 87% 87%
Internet 57% 61% 64% 64% 67% 71% 73% 76% 78% 79% 79% 80%
Digital still camera 10% 16% 21% 26% 40% 51% 58% 65% 70% 74% 76% 77%
Broadband 6% 10% 15% 19% 30% 40% 49% 57% 62% 65% 67% 68%
Multi-PC households 21% 22% 24% 25% 32% 36% 41% 47% 53% 57% 60% 62%
Camera phone -- -- -- 3% 13% 25% 40% 57% 68% 75% 78% 79%
Video game console 38% 32% 33% 35% 37% 37% 38% 39% 40% 41% 42% 44%
Laptop -- 13% 15% 16% 23% 29% 36% 42% 48% 51% 53% 54%
MP3 player 2% 3% 4% 5% 10% 20% 28% 34% 37% 39% 40% 40%
Home network -- -- -- -- 9% 16% 25% 33% 40% 46% 50% 52%
HDTV -- -- -- -- 14% 17% 22% 30% 38% 45% 50% 54%
DVR -- 1% 2% 4% 6% 12% 20% 29% 38% 45% 51% 55%
PDA 6% 6% 8% 11% 14% 15% 15% 15% 15% 16% 17% 17%
Satellite radio -- -- 2% 4% 6% 9% 12% 17% 21% 24% 26% 27%
US households 105.5 106.6 107.8 108.9 110.1 111.3 112.4 113.7 114.9 116.1 117.3 118.6
Source: Forrester Research
August 10, 2007 37

Figure 33: Media Consumption Time Breakdown
Radio, 19%
Video or DVD, 11%
Video Games, 3%
Magazines, 6%
Newspapers, 9%
TV, 33%
Internet, 19%
Source: Forrester Research, July 2006
Figure 34: Share of Time Spent Online, December 2003–December 2006 and January 2007–April 2007
Activity Dec-03 Dec-04 Dec-05 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07
Content 34% 38% 36% 44% 46% 46% 47% 47%
Communications 44% 39% 41% 33% 34% 34% 33% 33%
Commerce 18% 19% 19% 18% 16% 16% 16% 15%
Search 4% 4% 5% 5% 5% 5% 5% 5%
Total 100% 100% 100% 100% 100% 100% 100% 100%
Source: Online Publishers Association
38 August 10, 2007

Figure 35: Top 50 U.S. Web Properties by Unique Visitors, June 2006 – June 2007 (in thousands)
Rank Web Property Jun-2006 Jul-2006 Aug-2006 Sep-2006 Oct-2006 Nov-2006 Dec-2006 Jan-2007 Feb-2007 Mar-2007 Apr-2007 May-2007 Jun-2007
1 Yahoo! Sites 128,671 129,439 131,250 129,724 129,603 129,932 131,443 129,153 128,559 131,227 131,392 130,526 133,093
Y/Y growth 9% 9% 8% 5% 4% 4% 3% 2% 7% 6% 3% 0% 3%
2 Google Sites 102,802 103,860 107,989 107,365 109,721 108,280 112,845 113,434 114,694 118,492 119,640 120,010 123,601
Y/Y growth 29% 26% 26% 23% 22% 19% 21% 21% 21% 14% 10% 15% 20%
3 Time Warner Network 120,606 121,068 121,595 120,276 120,291 119,684 120,980 117,229 117,942 123,321 124,443 122,659 123,379
Y/Y growth 2% 2% 2% 1% 3% 5% 4% 1% 7% 6% 4% 3% 2%
4 Microsoft Sites 117,679 117,791 119,089 119,376 118,028 116,979 116,506 114,936 114,155 118,716 115,605 113,916 116,824
Y/Y growth 5% 5% 4% 4% 2% 1% 0% -1% 3% 2% -4% -4% -1%
5 Fox Interactive Media 13,300 13,079 72,107 70,858 71,346 73,831 73,273 74,831 77,969 80,098 80,789 82,260 83,598
Y/Y growth 12% 13% 501% 342% 474% 565% 505% 459% 461% 346% 370% 283% 529%
6 eBay 77,752 75,814 80,164 78,991 80,820 83,021 84,266 80,681 79,559 80,154 79,167 79,428 81,224
Y/Y growth 21% 23% 20% 13% 16% 15% 13% 16% 19% 13% 4% 2% 4%
7 Amazon Sites 49,040 46,788 48,570 49,498 51,299 52,619 56,766 50,886 48,905 49,980 48,914 51,567 53,285
Y/Y growth 22% 11% 13% 15% 15% 5% -1% 7% 15% 6% 1% 7% 9%
8 Ask Network 52,339 52,061 53,816 54,842 55,548 54,539 55,572 49,103 48,722 46,346 47,926 50,068 52,600
Y/Y growth 31% 32% 34% 32% 27% 27% 31% 13% 13% -5% -11% -8% 0%
9 Wikipedia Sites 27,295 28,121 31,038 35,057 38,897 39,142 38,585 42,880 43,656 47,011 49,632 48,743 47,031
Y/Y growth 271% 190% 198% 158% 149% 126% 123% 134% 122% 84% 66% 55% 72%
10 Apple Inc. 31,099 31,102 31,582 31,873 32,309 33,797 39,416 38,634 36,767 27,317 38,789 41,909 44,114
Y/Y growth 82% 78% 74% 67% 60% 49% 41% 42% 51% 2% 35% 36% 42%
11 New York Times Digital 38,132 38,133 38,276 40,523 43,049 42,664 39,242 40,137 39,769 41,464 43,127 43,603 42,718
Y/Y growth 31% 30% 20% 20% 22% 26% 14% 15% 14% 14% 9% 8% 12%
12 Viacom Digital N/A 30,767 31,988 35,115 36,602 39,618 40,042 37,303 39,128 39,724 39,514 40,462 42,212
Y/Y growth - - - - - - - - - - - - -
13 Weather Channel, The 36,296 35,021 34,619 33,293 34,065 32,215 32,606 35,433 37,374 36,189 39,555 38,496 39,865
Y/Y growth 30% 16% 28% 19% 21% 22% 7% 36% 34% 13% 13% 8% 10%
14 Adobe Sites 26,842 30,122 29,063 26,402 25,349 25,348 25,851 26,267 26,035 26,842 29,477 28,458 36,441
Y/Y growth 107% 141% 115% 102% 96% 108% 14% 6% 19% 6% 5% 8% 36%
15 CNET Networks 28,284 30,468 31,771 28,744 28,980 31,636 31,969 30,764 29,881 30,984 30,789 30,954 31,023
Y/Y growth -9% -1% 3% -3% 1% 7% 2% 4% 13% 7% 3% 7% 10%
16 Gorilla Nation 25,275 26,448 25,976 24,499 25,223 24,881 25,449 23,708 29,098 28,852 28,573 29,547 30,721
Y/Y growth 41% 28% 25% 22% 24% 17% 14% 8% 40% 26% 19% 26% 22%
17 AT&T, Inc. 25,554 25,190 26,319 27,230 24,206 21,884 23,833 28,627 27,391 27,349 26,608 26,975 29,992
Y/Y growth 23% 27% 4% 36% 23% 15% -9% 16% 23% 14% 4% 4% 17%
18 Target Corporation 23,484 23,394 25,408 22,835 24,257 33,185 34,325 24,015 23,038 25,123 25,064 26,013 28,323
Y/Y growth 19% 14% 15% 10% 11% 22% 10% 15% 16% 18% 7% 12% 21%
19 Expedia Inc 28,760 29,724 27,765 22,995 22,510 21,391 19,429 25,377 25,060 27,039 24,435 25,212 28,238
Y/Y growth 10% 14% -15% -18% -22% -16% -13% -2% -1% -2% -11% -9% -2%
20 FACEBOOK.COM 13,752 14,365 14,782 13,341 15,108 16,695 19,105 18,961 16,737 20,896 23,042 26,649 27,965
Y/Y growth - - 79% 56% 59% 51% 54% 57% 59% 62% 85% 89% 103%
21 Wal-Mart 25,279 26,550 26,049 24,971 27,125 43,038 44,120 27,031 25,125 25,679 28,362 27,796 27,922
Y/Y growth 12% 17% 14% 9% 15% 23% 16% 16% 20% 18% 16% 7% 10%
22 Monster Worldwide 29,473 28,409 26,110 24,828 24,527 23,677 23,078 24,976 22,794 23,515 22,062 24,879 25,825
Y/Y growth 4% 3% -12% -4% -1% 7% -6% -8% -5% -12% -22% -17% -12%
23 United Online, Inc 25,735 26,788 29,513 26,461 27,385 25,420 23,290 24,461 24,773 24,277 23,548 21,430 24,199
Y/Y growth 65% 48% -12% -8% -5% -6% -17% -9% 0% -10% -23% -20% -6%
24 Verizon Communications Corp. 35,282 36,605 37,997 34,252 34,038 33,268 34,481 22,648 21,265 23,251 21,903 23,669 23,876
Y/Y growth 13% 14% 15% 5% 8% 9% 8% -33% -34% -33% -38% -35% -32%
25 Disney Online 26,652 25,879 24,851 23,377 25,140 24,814 25,049 25,005 21,959 20,183 19,626 20,127 23,443
Y/Y growth - - - - - - - - - - -11% -6% -12%
26 Bank of America 23,263 23,500 23,449 22,305 21,849 21,256 22,674 23,130 21,695 21,848 21,843 21,414 23,240
Y/Y growth 23% 19% 19% 18% 13% 9% 10% 0% 3% 2% -5% -7% 0%
27 Photobucket.com LLC 13,878 15,551 14,572 14,729 15,065 15,639 16,735 17,620 16,751 17,978 19,020 21,168 22,873
Y/Y growth 174% 157% 140% 148% 162% 180% 182% 181% 133% 93% 88% 93% 65%
28 CRAIGSLIST.ORG 13,064 13,804 14,612 13,803 14,327 14,268 14,075 15,251 15,991 17,793 18,934 20,581 22,529
Y/Y growth 94% 99% 100% 57% 74% 77% 73% 68% 88% 87% 69% 75% 72%
29 CBS Corporation 20,508 20,855 24,512 26,398 24,002 25,193 23,164 22,587 23,045 26,815 21,952 21,951 21,838
Y/Y growth - - - - - - - - 23% 7% 0% 0% 6%
30 CareerBuilder LLC 21,019 20,802 20,657 21,831 22,642 16,774 13,919 21,077 20,834 20,823 20,750 21,266 21,723
Y/Y growth 27% 44% 41% 17% 39% 27% 14% -1% 6% 0% -1% -5% 3%
31 Superpages.com Network - - - - - - - 16,884 15,236 21,727 19,970 20,956 21,426
Y/Y growth - - - - - - - - - - - - -
32 Shopzilla.com Sites 18,865 18,602 19,708 20,414 22,087 22,387 22,902 19,801 16,744 17,532 19,040 19,137 21,417
Y/Y growth 24% 14% 18% 20% 19% 14% -1% -4% -10% -10% -5% -6% 14%
33 Lycos Sites 23,560 23,688 25,803 25,706 26,540 23,093 22,598 24,178 22,341 22,387 22,584 21,540 20,900
Y/Y growth -7% -10% -2% 0% 2% -10% -8% 0% -5% -10% -3% -12% -11%
34 Yellowpages.com Network - - - - 11,471 10,742 16,168 16,148 16,274 18,122 17,750 19,826 19,340
Y/Y growth - - - - - - - - - - - - -
35 Comcast Corporation 17,151 17,644 18,417 17,798 17,172 18,113 18,716 17,698 16,986 18,342 18,302 17,860 19,267
Y/Y growth 6% 7% 10% 12% 6% 7% 11% 5% 1% -5% 9% 6% 12%
36 ARTISTdirect Network 14,527 16,959 16,645 15,745 14,865 14,544 15,484 14,049 13,842 14,677 16,910 19,168 19,157
Y/Y growth 45% 54% 42% 42% 40% 42% 39% 28% 31% 14% 13% 32% 32%
37 Real.com Network 21,301 20,854 20,904 20,476 20,013 21,593 20,663 18,532 18,032 18,988 18,795 18,684 19,130
Y/Y growth -5% -7% -3% -2% 5% 13% -3% -6% 5% 0% -20% -23% -10%
38 Travelport - - - - - - - 19,720 19,160 19,925 18,507 18,973 19,119
Y/Y growth - - - - - - - - - - - - -
39 Glam Media 1,432 2,353 2,581 3,294 3,025 3,841 7,994 7,010 8,410 10,048 12,221 17,299 19,075
Y/Y growth - - - - - - - - - - 2526% 3638% 1232%
40 Gannett Sites 19,757 19,661 20,586 20,453 20,133 20,236 18,167 18,671 18,619 20,724 20,630 19,262 18,999
Y/Y growth 3% 1% 3% -2% -4% 0% -4% -3% -1% 1% -1% -4% -4%
41 ESPN 17,742 17,336 17,850 20,385 20,349 18,576 17,095 16,209 15,207 19,199 17,689 17,572 17,473
Y/Y growth 20% 16% 7% 9% 16% 11% 8% -3% -15% 3% 1% 9% -2%
42 Cox Enterprises Inc. 16,268 17,126 17,606 14,425 15,013 14,431 14,420 16,245 15,709 16,187 16,433 16,185 17,370
Y/Y growth 20% 18% 21% 6% 7% 11% 15% 7% 9% 7% -2% -6% 7%
43 WebMD Health 13,432 13,735 14,778 14,268 15,049 15,051 13,552 17,076 16,466 17,801 16,883 16,578 17,127
Y/Y growth 23% 24% 27% 23% 25% 38% 33% 27% 26% 22% 16% 9% 28%
44 WhitePages 15,656 16,450 16,358 14,086 14,863 15,087 16,688 16,636 15,314 17,212 16,788 17,741 16,727
Y/Y growth 29% 25% 27% 9% 8% 15% 11% 23% 19% 24% 10% 19% 7%
45 Weatherbug Property 15,842 16,016 16,064 15,398 15,156 15,586 16,006 14,696 15,025 15,474 16,394 15,714 16,375
Y/Y growth -19% -16% -11% -9% -9% -5% -3% -7% -2% 3% 4% -2% 3%
46 Citysearch 13,717 13,878 14,785 12,773 12,556 11,737 11,304 12,891 12,878 15,000 15,934 15,007 15,737
Y/Y growth 32% -4% 72% -11% -22% -25% -29% -23% -15% 1% 8% -1% 15%
47 iVillage.com: The Womens Network 14,330 15,227 14,931 14,257 17,686 14,389 13,545 15,529 15,149 15,536 16,979 17,116 15,544
Y/Y growth 1% -2% 4% 7% 13% 3% 4% 7% 13% 4% 6% 13% 8%
48 Oversee.net Network - - - - - - - - - - 14,762 15,172 15,518
Y/Y growth - - - - - - - - - - - - -
49 The Mozilla Organization 8,212 7,436 9,674 10,086 7,020 11,128 10,948 7,725 10,878 12,495 7,933 10,112 15,457
Y/Y growth - - - - - - - - - - 20% 25% 88%
50 Ticketmaster 14,577 14,190 15,186 14,224 14,333 14,010 13,314 14,313 15,666 15,810 14,768 15,382 15,393
Y/Y growth - - -25% -30% -31% -30% 10% 17% 24% 8% -1% 3% 6%
Total Internet 172,907 173,191 173,407 173,428 173,258 173,686 174,199 175,559 175,653 177,372 178,079 177,487 178,839
Y/Y growth 4% 3% 3% 2% 2% 2% 2% 3% 5% 3% 4% 3% 3%
Note: MySpace.com is included in Fox Interactive Media as of August 2006.
Source: comScore Networks
August 10, 2007 39

Figure 36: Top 50 U.S. Web Properties by Page Views, June 2006 – June 2007 (in millions)
1 Fox Interactive Media 293 275 33,781 35,651 38,701 39,529 41,450 40,431 42,901 44,432 44,765 45,134 48,088
Y/Y growth -10% -16% 10228% 10800% 11732% 11985% 12573% 12261% 13016% 13484% 9014% 9680% 16298%
2 Yahoo! Sites 39,680 37,691 39,725 39,878 41,605 38,052 35,927 35,629 34,863 36,282 37,490 36,232 34,927
Y/Y growth -5% -10% -5% -5% -1% -9% -14% -15% -17% -13% 1% -5% -12%
3 Microsoft Sites 19,266 19,492 20,262 18,721 19,345 17,877 17,968 18,138 17,603 18,788 18,086 20,335 20,418
Y/Y growth -9% -8% -5% -12% -9% -16% -15% -15% -17% -12% -15% 2% 6%
4 Google Sites 10,154 10,267 10,061 10,264 11,296 11,848 13,387 13,696 14,349 15,716 16,450 18,425 19,089
Y/Y growth 71% 73% 69% 73% 90% 99% 125% 130% 141% 164% 67% 88% 88%
Y/Y growth -47% -47% -44% -46% -49% -50% -51% -53% -51% -48% 4% 3% 6%
6 FACEBOOK.COM 6,093 6,108 6,463 7,161 9,437 9,039 9,064 10,360 10,779 12,179 14,997 15,841 14,785
Y/Y growth - - - - - - - - - - 110% 143% 143%
7 eBay 11,488 11,196 10,728 10,972 10,615 11,197 11,043 9,317 9,758 10,754 9,910 8,761 8,998
Y/Y growth 16% 13% 8% 11% 7% 13% 11% -6% -2% 8% -24% -30% -22%
8 CRAIGSLIST.ORG 2,822 3,122 3,388 3,173 3,351 2,790 3,021 4,229 4,209 5,346 5,696 5,378 5,904
Y/Y growth 91% 111% 129% 114% 126% 89% 104% 186% 184% 261% 114% 88% 109%
9 Viacom Digital - 3,428 3,356 3,182 3,018 3,617 3,527 2,229 2,493 2,427 2,506 2,521 3,222
Y/Y growth - - - - - - - - - - - - -
10 Comcast Corporation 2,269 2,316 2,459 2,514 2,629 2,650 2,831 2,685 2,847 3,116 3,063 2,996 3,068
Y/Y growth -35% -34% -30% -28% -25% -25% -19% -24% -19% -11% 21% 30% 35%
11 Photobucket.com LLC 770 683 767 620 555 689 755 782 764 824 1,141 1,666 1,912
Y/Y growth 213% 178% 212% 153% 126% 181% 208% 218% 211% 236% 195% 219% 148%
12 AT&T, Inc. 1,038 1,024 1,068 1,021 880 824 856 1,660 1,555 1,678 1,672 1,725 1,818
Y/Y growth 21% 20% 25% 19% 3% -4% 0% 94% 82% 96% 92% 80% 75%
13 Amazon Sites 1,793 1,569 1,564 1,436 1,461 1,848 2,063 1,576 1,352 1,532 1,580 1,589 1,678
Y/Y growth 39% 22% 21% 11% 13% 43% 60% 22% 5% 19% -7% -4% -6%
14 Ask Network 1,874 1,804 1,863 1,784 1,757 1,681 1,711 1,499 1,434 1,450 1,483 1,606 1,675
Y/Y growth 0% -4% -1% -5% -7% -11% -9% -20% -24% -23% -26% -13% -11%
15 United Online, Inc 991 1,000 1,211 1,119 1,046 1,049 1,291 1,218 1,238 1,352 1,294 1,180 1,235
Y/Y growth 9% 10% 33% 23% 15% 15% 41% 34% 36% 48% 4% 18% 25%
16 Bank of America 1,256 1,230 1,238 1,139 1,212 1,203 1,224 1,223 1,201 1,229 1,148 1,152 1,223
Y/Y growth 31% 28% 29% 18% 26% 25% 27% 27% 25% 28% -8% -6% -3%
17 EA Online 1,353 1,431 1,564 1,496 1,499 1,475 1,213 1,257 1,267 1,412 1,149 1,182 1,219
Y/Y growth -65% -63% -60% -61% -61% -62% -69% -67% -67% -63% -15% -10% -10%
18 Cox Enterprises Inc. 907 981 1,019 911 937 797 831 1,004 906 950 910 912 991
Y/Y growth 24% 34% 39% 24% 28% 9% 13% 37% 24% 30% -23% -5% 9%
19 Verizon Communications Corp. 1,150 1,176 1,254 1,169 1,175 1,127 1,153 997 995 1,068 978 895 920
Y/Y growth 20% 22% 30% 22% 22% 17% 20% 4% 3% 11% -18% -22% -20%
20 ESPN 948 691 787 1,068 1,149 940 960 765 687 1,043 920 854 899
Y/Y growth -14% -37% -28% -3% 4% -15% -13% -31% -38% -5% -18% 30% -5%
21 Disney Online 1,536 1,468 1,272 1,101 991 1,076 1,067 992 945 726 655 715 879
Y/Y growth - - - - - - - - - - -38% -27% -43%
22 Wikipedia Sites 381 376 452 461 496 597 579 578 598 701 817 846 826
Y/Y growth 578% 570% 706% 722% 783% 963% 930% 930% 966% 1148% 125% 104% 117%
23 Weatherbug Property 759 778 746 669 631 605 631 642 682 752 723 726 808
Y/Y growth -24% -22% -26% -33% -37% -40% -37% -36% -32% -25% -3% -10% 6%
24 Wal-Mart 851 796 745 769 853 1,452 1,443 754 734 724 769 744 778
Y/Y growth 26% 18% 10% 14% 26% 115% 113% 12% 8% 7% -1% -11% -9%
25 Earthlink 934 881 951 1,083 1,028 918 1,001 881 789 929 821 755 742
Y/Y growth 31% 24% 34% 52% 45% 29% 41% 24% 11% 31% -2% -9% -21%
26 Gorilla Nation 559 621 614 562 552 435 427 404 556 529 523 578 705
Y/Y growth 68% 86% 84% 69% 66% 31% 28% 21% 67% 59% 6% 20% 26%
27 Expedia Inc 999 921 832 615 628 527 493 762 790 942 712 672 704
Y/Y growth 55% 43% 29% -5% -2% -18% -23% 18% 23% 46% -16% -21% -29%
28 JPMorgan Chase Property 623 584 602 554 600 587 653 595 650 697 713 691 660
Y/Y growth 42% 34% 38% 27% 37% 34% 50% 36% 49% 59% 8% 11% 6%
29 Target Corporation 596 548 597 485 578 789 797 515 505 598 528 549 620
Y/Y growth 33% 22% 33% 8% 29% 76% 77% 15% 12% 33% -14% -8% 4%
30 MLB.COM* 483 427 380 324 235 151 186 128 181 339 655 627 608
Y/Y growth - - - - - - - - - - 39% 54% 26%
31 CBS Corporation 713 626 867 1,083 1,001 951 740 453 513 751 696 640 603
Y/Y growth - - - - - - - - - - 2% -6% -15%
32 Weather Channel, The 844 759 683 664 662 592 599 771 591 510 578 551 600
Y/Y growth 41% 27% 14% 11% 11% -1% 0% 29% -1% -15% -22% -33% -29%
33 CNET Networks 933 864 770 616 657 707 644 615 532 561 568 560 579
Y/Y growth -45% -49% -54% -63% -61% -58% -62% -63% -68% -67% -42% -45% -38%
34 Wells Fargo 604 547 602 574 555 489 491 506 495 588 560 546 571
Y/Y growth 9% -2% 8% 3% 0% -12% -12% -9% -11% 6% -7% -3% -5%
35 Monster Worldwide 716 717 659 604 568 538 492 615 483 532 530 531 527
Y/Y growth -18% -18% -25% -31% -35% -39% -44% -30% -45% -39% -26% -24% -26%
36 Gannett Sites 431 449 481 427 479 482 429 445 445 493 493 479 518
Y/Y growth -7% -3% 4% -8% 3% 4% -8% -4% -4% 6% -1% 11% 20%
37 New York Times Digital 471 497 536 501 560 560 481 503 462 508 569 509 508
Y/Y growth -4% 1% 9% 2% 14% 14% -2% 2% -6% 3% -2% 4% 8%
38 Sprint Nextel Corporation 482 460 503 489 491 494 487 485 483 479 461 452 500
Y/Y growth 192% 179% 205% 196% 198% 200% 195% 194% 193% 191% -2% -3% 4%
39 Apple Inc. 403 378 386 461 455 489 702 517 440 452 418 526 478
Y/Y growth - - - - - - - - - - 20% 37% 18%
40 Citigroup 759 724 755 635 581 519 563 625 580 552 509 482 476
Y/Y growth 43% 37% 43% 20% 10% -2% 6% 18% 9% 4% -25% -34% -37%
41 Glam Media 8 22 35 38 34 46 53 66 85 101 130 373 460
Y/Y growth - - - - - - - - - - 5886% 21479% 5630%
42 Limitedbrands 436 332 298 239 271 349 492 426 391 430 363 435 442
Y/Y growth - - - - - - - - - - 2% 22% 2%
43 JCPenney Sites 473 520 534 569 525 818 766 530 538 630 491 495 439
Y/Y growth 8% 19% 22% 30% 20% 87% 76% 21% 23% 44% 2% 9% -7%
44 CareerBuilder LLC 462 464 553 450 465 356 329 426 414 439 449 406 432
Y/Y growth 25% 25% 49% 21% 25% -4% -11% 15% 12% 18% 14% -11% -6%
45 Washington Mutual 441 400 407 377 353 310 390 362 401 501 421 450 431
Y/Y growth - - - - - - - - - - 12% 15% -2%
46 Travelport - - - - - - - 376 393 437 333 402 392
Y/Y growth - - - - - - - - - - - - -
47 UPS Sites 334 276 326 355 335 326 365 356 338 365 340 394 392
Y/Y growth - - - - - - - - - - 15% 16% 17%
48 Ticketmaster 416 379 374 373 355 364 301 364 388 409 421 383 366
Y/Y growth - - - - - - - - - - -6% -18% -12%
49 E.W. Scripps 388 386 357 362 354 431 439 520 447 387 324 346 348
Y/Y growth -16% -14% -16% -13% -15% -9% -3% -18% -6% -8% -16% -9% -10%
50 Capital One 372 400 402 359 368 328 370 370 374 393 343 306 345
Y/Y growth -4% 8% 2% -13% -13% -16% -11% 1% 28% 24% -5% -15% -7%
Total Internet : Total Audience 492,975 487,353 501,260 462,186 469,359 454,212 451,044 441,144 456,035 473,502 471,849 459,025 473,831
Y/Y growth 14% 12% 16% 7% 8% 5% 4% 2% 5% 9% -1% -5% -4%
Note: MySpace.com is included in Fox Interactive Media as of August 2006
40 August 10, 2007

Figure 37: Top 50 Global Properties by Unique Visitors, June 2006 – June 2007 (in thousands)
1 Google Sites 453,963 460,977 468,297 467,498 470,108 475,713 494,170 502,464 503,033 528,005 527,572 536,401 544,783
Y/Y growth 14% 15% 12% 11% 9% 9% 13% 12% 13% 13% 12% 18% 20%
2 Microsoft Sites 499,540 506,239 506,047 505,479 502,979 501,720 508,659 510,320 507,317 526,999 520,238 528,078 529,156
Y/Y growth 7% 7% 5% 5% 4% 3% 5% 4% 5% 4% 3% 5% 6%
3 Yahoo! Sites 480,933 482,104 481,977 480,641 475,467 475,262 476,761 467,832 458,985 476,256 467,642 469,826 471,924
Y/Y growth 13% 12% 9% 8% 5% 5% 5% 2% 1% 1% -1% -2% -2%
Y/Y growth 0% 1% -2% -4% -1% -1% 19% 18% 18% 21% 20% 20% 21%
5 eBay 256,653 241,593 239,081 237,327 239,130 250,848 251,423 248,854 248,558 256,270 248,006 258,678 264,732
Y/Y growth 10% 2% -3% -4% -4% -1% 0% -1% 2% 0% -4% -1% 3%
6 Wikipedia Sites 127,982 126,745 138,641 154,848 164,048 171,945 164,675 189,003 192,176 212,171 208,906 217,464 208,120
Y/Y growth 140% 108% 110% 110% 99% 105% 107% 99% 93% 82% 71% 60% 63%
7 Fox Interactive Media 27,155 28,427 121,944 117,789 124,496 130,401 135,730 139,821 140,500 151,203 147,760 151,369 163,546
Y/Y growth 3% 6% 339% 303% 347% 393% 457% 440% 390% 336% 313% 278% 502%
8 Amazon Sites 129,320 131,286 134,943 133,518 138,220 143,957 151,033 149,817 143,084 149,643 136,655 141,578 145,947
Y/Y growth 15% 16% 12% 9% 8% 7% 8% 11% 11% 7% 1% 5% 13%
9 Apple Inc. 92,211 92,535 94,243 94,909 94,338 98,641 111,131 116,520 111,877 109,988 115,262 120,982 123,554
Y/Y growth - - - - - - - - 37% 23% 29% 27% 34%
10 Adobe Sites 95,831 102,898 100,591 95,196 92,483 98,298 100,421 101,810 98,748 105,955 101,133 103,165 121,966
Y/Y growth 5% 15% 9% 5% -3% 3% 8% 2% 1% -1% -5% 3% 27%
11 CNET Networks 84,651 89,400 91,782 84,259 93,403 100,782 114,940 118,717 116,394 129,384 119,865 121,423 116,579
Y/Y growth -11% -5% -5% -10% 1% 7% 24% 26% 33% 32% 33% 39% 38%
12 Ask Network 111,864 115,012 115,465 112,768 112,932 110,924 113,881 108,870 108,663 111,427 110,553 113,954 115,655
Y/Y growth 6% 11% 5% 0% -2% -2% 3% -9% -4% -6% -9% -4% 3%
13 Viacom Digital - 53,598 54,833 65,799 68,088 75,482 76,171 76,389 76,625 83,358 81,344 85,522 88,655
Y/Y growth - - - - - - - - - - - - -
14 Lycos Sites 87,434 88,933 93,087 91,126 90,686 85,001 83,724 90,208 86,581 87,426 79,110 80,728 77,518
Y/Y growth - - - - - - - - -8% -14% -14% -14% -11%
15 The Mozilla Organization 29,986 27,727 35,043 36,831 28,896 44,793 46,464 37,613 49,812 61,918 39,759 47,129 70,851
Y/Y growth 51% 51% 84% 119% 93% 196% 220% 129% 146% 243% 59% 64% 136%
16 Gorilla Nation 48,960 51,742 51,991 48,181 49,664 52,256 54,886 55,606 65,240 68,628 65,883 67,909 67,789
Y/Y growth 22% 29% 27% 15% 12% 18% 26% 15% 39% 34% 33% 43% 38%
17 New York Times Digital 61,835 62,526 64,035 65,542 70,121 70,569 68,010 72,180 70,984 75,057 68,485 68,225 66,230
Y/Y growth 23% 24% 16% 12% 16% 21% 20% 16% 16% 14% 6% 3% 7%
18 Terra Networks 46,414 50,517 49,881 46,712 47,893 54,177 61,678 63,086 58,645 60,337 59,445 63,256 63,021
Y/Y growth -8% -3% -7% -13% -12% 1% 9% 12% 9% 4% 9% 32% 36%
19 TENCENT Inc. 57,485 57,714 54,236 52,346 54,084 56,483 57,819 55,816 53,175 60,175 59,473 57,381 61,970
Y/Y growth - - - - - - - - - - - - 8%
20 France Telecom 29,959 30,966 31,739 40,057 54,041 53,896 50,607 53,336 51,442 65,010 62,199 65,093 60,847
Y/Y growth 121% 124% 118% 166% 254% 254% 250% 254% 258% 348% 593% 577% 103%
21 SINA Corporation 63,087 62,508 58,832 56,934 57,260 58,192 58,450 57,491 54,191 60,480 57,520 58,803 60,729
Y/Y growth - - - - - - - - - - - -8% -4%
22 Baidu.com Inc. - - - - - - - 56,465 52,724 59,226 58,595 58,958 60,062
Y/Y growth - - - - - - - - - - - - -
23 Expedia Inc 57,450 64,335 60,587 50,986 50,184 46,383 42,847 55,141 51,579 58,498 54,307 55,638 59,551
Y/Y growth -15% -8% -12% -20% -21% -17% -9% -8% -6% -6% -11% -5% 4%
24 Real.com Network 67,391 68,532 66,197 64,386 62,576 64,365 62,146 60,537 57,684 62,042 59,122 56,571 55,532
Y/Y growth -12% -10% -16% -14% -13% -11% -12% -17% -14% -15% -24% -27% -18%
25 Lycos Europe Sites 36,674 34,773 36,815 36,879 36,863 38,049 36,268 38,463 36,570 48,507 54,190 56,649 53,649
Y/Y growth -28% -30% -29% -18% -23% -23% -20% -15% -18% 6% 29% 33% 46%
26 Sony Online 52,293 54,802 54,235 53,812 53,256 60,673 63,600 61,600 57,666 61,096 59,963 58,318 53,393
Y/Y growth 2% 7% 0% -1% -2% 7% 10% 8% 8% 3% 5% 1% 2%
27 Oversee.net Network - - - - - - - - - - 48,769 51,536 52,733
Y/Y growth - - - - - - - - - - - - -
28 FACEBOOK.COM 14,083 14,961 15,471 14,132 16,335 18,586 22,753 24,840 24,782 32,115 38,764 47,208 52,167
Y/Y growth - - - - - - - - 129% 145% 204% 235% 270%
Y/Y growth -3% 14% -2% -19% -18% -26% -27% -25% -31% -30% -33% -36% -30%
30 Weather Channel, The 46,495 44,477 44,427 41,014 40,883 38,430 39,004 42,775 45,097 43,813 47,014 48,864 49,897
Y/Y growth 28% 14% 19% 8% 6% 2% -1% 11% 16% -2% 0% 8% 7%
31 ARTISTdirect Network 34,531 41,581 41,343 38,667 37,107 37,331 40,556 40,703 39,964 45,077 45,424 50,599 49,041
Y/Y growth 29% 53% 46% 36% 31% 28% 35% 34% 34% 32% 26% 47% 42%
32 Sohu.com Inc. 53,114 53,139 47,717 43,761 43,248 43,378 44,466 42,901 40,214 43,466 43,033 43,611 48,465
Y/Y growth - - - - - - - - - - - -18% -9%
33 NetEase.com Inc. 49,964 49,351 43,215 43,598 40,955 42,012 41,832 41,370 40,654 44,260 43,331 43,507 46,648
Y/Y growth - - - - - - - - - - - -16% -7%
34 BBC Sites 45,081 43,389 43,043 43,774 42,734 43,703 43,979 48,402 46,354 47,579 46,357 47,364 45,615
Y/Y growth 15% -1% 5% 5% 0% 3% 8% 11% 6% 0% 2% 1% 1%
35 Disney Online 41,354 45,254 43,353 39,298 42,066 40,633 42,764 44,287 41,056 43,240 40,238 43,841 43,772
Y/Y growth 24% 32% 17% 11% 16% 12% 14% 13% 10% 11% -1% 15% 6%
36 Connexus 52,404 53,629 53,537 48,110 48,743 49,746 47,092 47,562 39,140 42,484 39,244 42,465 42,422
Y/Y growth - - - - - - - - -41% -36% -39% -28% -19%
37 WordPress - - - - - - - - - - - 37,980 41,898
Y/Y growth - - - - - - - - - - - - -
38 Alibaba.com Corporation - 46,047 42,720 38,501 40,565 42,556 45,518 36,901 33,972 38,824 36,952 36,991 40,152
Y/Y growth - - - - - - - - - - - - -
39 eMule (App) 29,268 31,491 31,672 31,050 32,342 34,214 36,020 37,432 37,192 38,952 37,383 38,139 39,363
Y/Y growth 24% 27% 18% 14% 15% 14% 24% 25% 23% 29% 24% 27% 34%
40 Six Apart Sites 25,959 26,512 27,617 26,753 27,596 30,334 30,602 32,562 33,388 38,539 38,989 40,391 38,582
Y/Y growth - - - - - - - - 29% 31% 52% 48% 49%
Y/Y growth -27% -26% -20% -16% -13% -12% -15% -16% -14% -17% -21% -17% -5%
42 T-Online Sites 34,738 35,939 36,170 35,174 35,611 36,232 35,542 36,262 35,095 37,072 36,586 38,393 37,835
Y/Y growth -5% 0% -1% 0% -3% -3% 2% -2% -1% -6% 1% -1% 9%
43 Nokia 20,309 18,677 19,019 19,321 18,583 36,294 38,984 37,152 35,339 38,034 35,390 36,790 37,744
Y/Y growth - - - - - - - - 74% 88% 101% 79% 86%
44 Bolt Media 39,522 38,237 33,865 31,326 31,246 32,310 39,123 42,957 41,363 39,175 33,004 33,730 36,823
Y/Y growth 34% 18% 6% 7% -3% 1% 16% 26% 16% 5% -11% -13% -7%
45 Rakuten Inc 37,656 39,689 38,676 39,058 37,831 35,863 36,106 38,227 36,677 37,720 35,767 37,113 35,908
Y/Y growth 1% 4% -3% -2% -5% -9% -12% -10% -5% -7% -12% -7% -5%
46 Vivendi 31,384 33,469 32,188 31,664 31,725 32,743 34,828 34,800 33,479 33,893 33,325 35,689 35,806
Y/Y growth 3% 2% -6% -4% -5% -4% 3% 2% 4% -3% -1% 7% 14%
47 Photobucket.com LLC 19,234 22,023 21,120 20,741 22,292 23,590 26,088 27,194 27,706 29,836 29,972 33,695 34,630
Y/Y growth - - - - - - - - - 93% 88% 100% 80%
48 Iliad/Free.fr Sites 35,562 34,594 33,860 33,903 33,851 34,743 34,852 36,986 34,519 37,262 34,203 35,466 34,387
Y/Y growth 3% 4% -2% -4% -5% -5% 0% 1% -7% -7% -11% -7% -3%
49 CBS Corporation 25,904 26,417 30,016 31,557 28,471 28,907 27,285 27,794 29,176 31,800 26,370 26,209 34,358
Y/Y growth - - - - - - 0% 6% 14% 0% -6% -7% 33%
50 LiveUniverse - - - - - - - 20,566 26,564 32,705 31,624 31,583 33,876
Y/Y growth - - - - - - - - - - - - -
Total Internet 712,976 717,773 722,727 726,749 730,868 736,072 740,984 746,934 739,835 762,736 766,188 771,997 778,310
Y/Y growth 11% 12% 13% 14% 14% 15% 16% 17% 10% 10% 10% 9% 9%
August 10, 2007 41

Figure 38: Top 50 Global Properties by Page Views, June 2006 – June 2007 (in millions)
1 Google Sites 84,365 91,598 86,215 85,372 91,241 94,873 106,264 119,796 120,477 141,384 137,240 148,150 150,149
Y/Y growth 50% 64% 44% 37% 41% 38% 64% 67% 62% 63% 61% 74% 78%
2 Yahoo! Sites 116,401 116,016 113,905 113,038 114,009 105,029 99,242 102,996 99,543 109,887 107,055 106,530 105,776
Y/Y growth 16% 9% 3% 1% 4% -2% -5% -6% -6% -7% -8% -7% -9%
3 Microsoft Sites 74,675 76,919 76,405 71,833 75,125 74,400 73,524 76,540 78,825 85,938 80,655 84,508 83,223
Y/Y growth 10% 4% 0% -9% -6% -7% -2% -5% 5% 2% 2% 12% 11%
4 Fox Interactive Media 379 368 35,876 37,497 40,895 42,096 45,483 45,637 48,152 51,732 50,143 51,760 54,114
Y/Y growth 27% -15% 7649% 7424% 11041% 11800% 15353% 11201% 11253% 8608% 7526% 8520% 14180%
5 TENCENT Inc. 25,616 29,431 26,450 17,088 15,653 21,880 21,598 19,917 26,487 31,390 31,208 32,224 39,950
Y/Y growth - - - - - - - - - - - - 56%
6 eBay 34,508 34,308 33,673 34,462 34,576 36,003 32,829 33,395 34,546 35,169 31,069 30,872 29,497
Y/Y growth 20% 5% -2% 2% 0% 3% 2% -5% -2% -13% -18% -23% -15%
7 FACEBOOK.COM 5,993 6,118 6,459 7,438 10,052 10,126 10,745 13,771 15,500 20,049 26,655 29,882 29,075
Y/Y growth - - - - 198% 126% 124% 173% 177% 191% 271% 355% 385%
8 NHN Corporation - - - - - - - 23,235 21,006 21,770 22,287 24,123 22,183
Y/Y growth - - - - - - - - - - - - -
Y/Y growth 40% -8% -7% -11% -10% -12% -11% -15% -10% -12% -5% -10% -3%
10 SINA Corporation 14,618 14,680 12,840 10,326 10,391 11,644 9,986 9,950 10,685 9,493 8,853 8,519 12,893
Y/Y growth - - - - - - - - - - - -20% -12%
11 Lycos Sites 20,920 21,858 19,690 16,267 16,222 14,168 13,500 15,721 14,836 13,393 11,815 12,763 12,616
Y/Y growth - - - - - - - - -35% -41% -45% -37% -40%
12 FRIENDSTER.COM 2,333 2,398 2,917 2,957 3,645 3,816 4,496 4,683 4,938 6,081 6,402 8,990 9,507
Y/Y growth - - - - 30% 45% 66% 77% 84% 140% 230% 311% 308%
13 Baidu.com Inc. - - - - - - - 5,489 6,006 7,210 6,925 7,684 9,053
Y/Y growth - - - - - - - - - - - - -
14 Sohu.com Inc. 12,182 11,856 9,515 8,367 7,867 8,383 7,380 6,641 6,755 7,142 6,762 7,084 8,575
Y/Y growth - - - - - - - - - - - -32% -30%
15 HI5.COM 4,452 4,325 3,953 3,411 3,520 3,951 4,539 5,746 5,985 6,842 7,280 7,192 6,779
Y/Y growth 69% 44% 21% 1% 0% 11% 17% 35% 54% 65% 65% 51% 52%
16 Alibaba.com Corporation - 5,429 4,565 3,840 3,432 4,159 4,190 3,347 3,209 4,820 4,888 6,014 6,684
Y/Y growth - - - - - - - - - - - - -
17 CRAIGSLIST.ORG 2,874 3,262 3,423 3,106 3,218 2,852 2,962 4,001 4,026 5,347 5,789 5,529 6,011
Y/Y growth - - - - 102% 80% 46% 98% 112% 122% 115% 93% 109%
18 Viacom Digital - 4,670 4,910 3,937 3,987 4,447 4,853 4,087 4,289 4,240 4,645 4,569 5,358
Y/Y growth - - - - - - - - - - - - -
19 NetEase.com Inc. 9,955 10,134 8,955 7,634 5,664 6,472 6,050 5,629 4,429 5,629 4,469 4,473 5,038
Y/Y growth - - - - - - - - - - - -56% -49%
20 France Telecom 4,495 4,173 3,590 4,045 4,607 4,276 3,834 4,093 4,052 4,661 4,080 4,374 4,120
Y/Y growth 566% 502% 414% 489% 479% 488% 443% 529% 526% 688% 1125% 1109% -8%
21 Terra Networks 4,007 4,146 3,975 4,396 4,232 3,919 4,172 4,357 4,059 4,421 4,267 4,513 4,109
Y/Y growth 8% 11% 6% 15% -2% -7% 7% 14% -4% 4% 10% 6% 3%
22 United-Internet Sites 4,868 5,093 4,898 4,928 4,775 4,729 4,247 4,524 3,801 4,312 3,866 3,849 3,911
Y/Y growth 33% 31% 3% 11% 5% -2% -11% -11% -28% -28% -25% -28% -20%
23 Amazon Sites 3,552 3,476 3,542 3,403 3,656 4,280 4,633 3,984 3,699 3,963 3,389 3,430 3,655
Y/Y growth 21% 2% -3% -5% -5% -3% -8% -7% -3% -5% -12% -6% 3%
24 Wikipedia Sites 1,662 1,708 1,824 2,085 2,383 2,703 2,400 2,924 3,093 3,673 3,454 3,730 3,530
Y/Y growth 214% 176% 166% 180% 183% 199% 169% 160% 157% 157% 128% 103% 112%
25 T-Online Sites 5,414 5,193 4,919 4,569 4,112 3,887 3,320 4,081 3,540 3,571 3,279 3,213 3,406
Y/Y growth 24% 13% 4% -5% -13% -19% -23% -20% -32% -31% -26% -32% -37%
26 Rakuten Inc 3,003 3,183 3,079 3,163 3,079 2,973 2,850 3,359 3,302 3,513 3,384 3,152 3,260
Y/Y growth 0% -3% -8% 4% -5% -6% -16% -3% -3% -7% -9% -9% 9%
27 XUNLEI.COM 909 974 810 450 789 1,288 1,804 1,625 1,707 1,950 1,768 2,140 3,096
Y/Y growth - - - - - - - - 394% 88% 257% 296% 241%
28 Ask Network 2,898 2,841 2,777 2,678 2,567 2,515 2,505 2,337 2,325 2,501 2,405 2,581 2,612
Y/Y growth 17% -10% -19% -21% -20% -20% -10% -20% -17% -17% -26% -16% -10%
29 CNET Networks 1,848 1,764 1,623 1,386 1,905 1,950 2,150 2,054 2,156 2,448 2,350 2,542 2,283
Y/Y growth -17% -32% -42% -45% -20% -22% 0% -12% -2% 12% 12% 23% 24%
30 FC2.COM 1,348 1,252 1,221 1,290 1,093 1,174 1,517 1,905 1,931 2,230 1,946 2,092 2,116
Y/Y growth - - - 82% 31% 27% 54% 100% 106% 83% 45% 59% 57%
31 Photobucket.com LLC 831 824 916 764 734 840 879 984 973 1,087 1,319 1,841 2,025
Y/Y growth - - - - - - - - 150% 126% 150% 181% 144%
32 BBC Sites 2,051 1,914 1,901 1,849 1,869 1,930 1,986 2,186 2,122 2,322 2,129 2,184 2,015
Y/Y growth 24% 0% -2% 1% 2% 0% 7% 9% 6% 2% 5% 8% -2%
33 AT&T, Inc. 1,044 1,043 1,107 1,045 897 819 849 1,652 1,559 1,682 1,617 1,680 1,731
Y/Y growth - - - - - - - - 72% 82% 75% 71% 66%
34 DAILYMOTION.COM 64 97 172 241 333 464 555 609 710 980 1,254 1,411 1,720
Y/Y growth - - - - - - - - 2935% 2093% 1916% 2137% 2601%
35 EA Online 1,639 1,777 1,895 1,761 1,761 1,751 1,696 1,710 1,739 1,821 1,498 1,545 1,587
Y/Y growth - - - - - - - - - - - -19% -3%
36 Disney Online 1,708 1,957 1,826 1,460 1,533 1,492 1,599 1,715 1,645 1,505 1,380 1,365 1,499
Y/Y growth - - - - - - - - 13% 0% -12% -3% -12%
37 HSBC 1,394 1,410 1,402 1,271 1,071 1,107 1,108 1,148 1,157 1,374 1,358 1,435 1,489
Y/Y growth - - - - - - - - -12% -8% 1% 1% 7%
38 ESPN 1,670 1,217 1,272 1,636 1,632 1,548 1,816 1,675 1,377 1,767 1,555 1,516 1,471
Y/Y growth - - - - - - - - -13% -20% -17% 29% -12%
39 Lycos Europe Sites 1,003 940 936 1,079 963 2,006 1,803 1,959 1,758 2,199 1,301 1,352 1,344
Y/Y growth - - -35% -22% -30% 36% 34% 47% 38% 50% -2% 12% 34%
40 MercadoLibre 1,055 1,237 1,626 1,410 1,261 1,248 1,269 1,512 1,252 1,437 1,445 1,467 1,315
Y/Y growth - - - - - - - - 43% 56% 69% 40% 25%
Y/Y growth - - - - - - - - -42% -35% -25% -24% -27%
Y/Y growth - - - - - - - - 20% 26% -2% 12% 18%
43 Expedia Inc 1,412 1,492 1,382 1,088 1,104 930 852 1,329 1,269 1,471 1,257 1,203 1,254
Y/Y growth - - - - - - - - -5% -4% -13% -14% -11%
44 Bank of America 1,268 1,234 1,251 1,152 1,214 1,188 1,237 1,263 1,234 1,262 1,162 1,158 1,234
Y/Y growth - - - - - - - - 12% 5% -7% -6% -3%
45 Youku - - - - - - - - 338 303 423 450 1,169
Y/Y growth - - - - - - - - - - - - -
46 Gorilla Nation 778 851 839 777 825 698 737 727 926 991 990 984 1,089
Y/Y growth - - - - - - - - 32% 28% 25% 39% 40%
47 Karstadt-Quelle 470 536 584 559 737 816 647 608 540 652 842 991 1,034
Y/Y growth - - - - - - - - - 35% 90% 114% 120%
48 NTT Group - - - - - - - - - - 1,106 1,082 1,030
Y/Y growth - - - - - - - - - - - - -
49 Groupe PPR 1,217 1,083 1,061 1,083 1,081 1,167 1,060 1,137 935 1,074 910 1,059 1,028
Y/Y growth - - - - - - - - - -12% -23% -15% -16%
50 Iliad/Free.fr Sites 1,007 992 908 996 1,040 1,107 1,069 1,244 1,169 1,195 987 993 1,011
Y/Y growth - - - - - - - - 7% -2% -17% -8% 0%
Total Internet : Total Audience 1,844,144 1,888,200 1,826,439 1,692,545 1,733,290 1,750,309 1,727,060 1,811,672 1,838,417 2,009,919 1,925,110 1,944,666 1,975,534
Y/Y growth 22% 13% 5% -2% -2% -2% 0% 2% 7% 5% 5% 6% 7%
42 August 10, 2007

Figure 39: Online Subscription Revenue by Category

($ in millions)
2001 2002 2003 2004 2005
Entertainment/Lifestyle 112.0 227.5 217.6 413.5 573.8
Y/Y Growth 103% -4% 90% 39%
Personals/Dating 72.0 302.1 449.5 469.5 503.4
Y/Y Growth 320% 49% 4% 7%
Business Content/Investment 214.3 292.0 334.1 312.9 320.3
Y/Y Growth 36% 14% -6% 2%
Research 57.9 106.6 108.6 115.1 152.3
Y/Y Growth 84% 2% 6% 32%
Personal Growth 24.7 44.3 90.7 96.5 117.3
Y/Y Growth 79% 105% 6% 22%
Games 46.5 72.0 73.0 88.8 108.4
Y/Y Growth 55% 1% 22% 22%
General News 51.8 70.0 87.5 87.9 78.7
Y/Y Growth 35% 25% 0% -10%
Community-Made Directories 46.1 91.1 87.0 70.5 65.4
Y/Y Growth 98% -5% -19% -7%
Sports 10.0 30.3 38.2 52.8 51.3
Y/Y Growth 203% 26% 38% -3%
Greeting Cards 2.1 36.2 40.6 43.4 45.7
Y/Y Growth 1624% 12% 7% 5%
Credit Help 32.4 40.4 36.6 27.1 28.4
Y/Y Growth 25% -9% -26% 5%
Total Online Content Spending 669.8 1,312.5 1,563.4 1,778.0 2,045.0
Y/Y Growth 96% 19% 14% 15%
Figure 40: Online Subscription Revenue by Subscription Period and Category

($ in millions)
2001 2002 2003 2004 2005
Monthly Annual Other Total Monthly Annual Other Total Monthly Annual Other Total Monthly Annual Other Total Monthly Annual Other Total
Entertainment/Lifestyle 89.6 16.8 5.6 112.0 102.4 109.2 15.9 227.5 87.3 114.2 16.1 217.6 261.3 126.5 25.6 413.5 353.5 191.1 29.3 573.8
Y/Y Growth 14% 550% 184% 103% -15% 5% 1% -4% 199% 11% 59% 90% 35% 51% 14% 39%
Personals/Dating 38.9 15.8 17.3 72.0 178.2 87.6 36.3 302.1 256.7 144.7 48.1 449.5 306.6 89.7 73.2 469.5 357.4 92.1 53.9 503.4
Y/Y Growth 358% 453% 110% 320% 44% 65% 33% 49% 19% -38% 52% 4% 17% 3% -26% 7%
Business Content/Investment 40.7 158.6 15.0 214.3 84.7 186.9 20.4 292.0 146.7 162.4 25.1 334.1 147.4 145.8 19.7 312.9 159.5 138.7 22.1 320.3
Y/Y Growth 108% 18% 36% 36% 73% -13% 23% 14% 0% -10% -21% -6% 8% -5% 12% 2%
Research 9.3 48.6 0.0 57.9 35.2 66.1 5.3 106.6 52.0 48.2 8.4 108.6 55.4 53.6 6.1 115.1 78.1 68.1 6.1 152.3
Y/Y Growth 280% 36% NA 84% 48% -27% 57% 2% 6% 11% -27% 6% 41% 27% 0% 32%
Personal Growth 4.7 19.8 0.2 24.7 21.7 15.9 6.6 44.3 53.1 29.0 8.6 90.7 61.4 25.8 9.4 96.5 85.5 23.2 8.6 117.3
Y/Y Growth 363% -19% 2590% 79% 144% 82% 30% 105% 16% -11% 9% 6% 39% -10% -9% 22%
Games 44.6 1.9 0.0 46.5 51.1 18.0 2.9 72.0 44.7 24.7 3.5 73.0 53.4 31.9 3.6 88.8 84.8 20.3 3.4 108.4
Y/Y Growth 15% 868% NA 55% -12% 37% 22% 1% 19% 29% 1% 22% 59% -36% -5% 22%
General News 48.7 3.1 0.0 51.8 55.3 10.5 4.2 70.0 64.5 17.8 5.3 87.5 69.3 13.6 5.0 87.9 59.7 14.6 4.5 78.7
Y/Y Growth 14% 238% NA 35% 17% 69% 25% 25% 7% -23% -5% 0% -14% 7% -10% -10%
Community-Made Directories 2.8 34.1 9.2 46.1 15.5 61.9 13.7 91.1 22.4 53.1 11.6 87.0 14.6 43.3 12.6 70.5 12.8 36.7 16.0 65.4
Y/Y Growth 460% 82% 48% 98% 44% -14% -15% -5% -35% -18% 9% -19% -13% -15% 26% -7%
Sports 2.4 6.1 1.5 10.0 15.8 10.3 4.2 30.3 19.7 14.5 4.0 38.2 25.7 22.0 5.1 52.8 21.0 26.5 3.8 51.3
Y/Y Growth 557% 69% 183% 203% 25% 41% -5% 26% 30% 52% 28% 38% -18% 20% -26% -3%
Greeting Cards 1.0 1.1 0.0 2.1 10.9 22.8 2.5 36.2 22.7 15.6 2.4 40.6 22.1 19.1 2.2 43.4 26.0 18.0 1.7 45.7
Y/Y Growth 1024% 1911% NA 1624% 109% -32% -7% 12% -2% 22% -6% 7% 18% -6% -22% 5%
Credit Help 3.9 28.5 0.0 32.4 8.1 30.7 1.6 40.4 6.7 26.9 3.0 36.6 4.1 21.7 1.4 27.1 3.2 24.2 1.1 28.4
Y/Y Growth 108% 8% NA 25% -18% -12% 86% -9% -39% -20% -55% -26% -22% 12% -22% 5%
Total 286.5 334.4 48.8 669.8 578.8 620.0 113.7 1,312.5 776.3 651.2 135.9 1,563.4 1,021.1 593.0 163.9 1,778.0 1,241.3 653.4 150.3 2,045.0
Y/Y Growth 102% 85% 133% 96% 34% 5% 20% 19% 32% -9% 21% 14% 22% 10% -8% 15%
August 10, 2007 43

Figure 41: Online Subscription Revenue by Subscription Period, % Breakdown

2001 2002 2003 2004 2005
Monthly Annual Other Total Monthly Annual Other Total Monthly Annual Other Total Monthly Annual Other Total Monthly Annual Other Total
Entertainment/Lifestyle 80% 15% 5% 100% 45% 48% 7% 100% 40% 53% 7% 100% 63% 31% 6% 100% 62% 33% 5% 100%
Personals/Dating 54% 22% 24% 100% 59% 29% 12% 100% 57% 32% 11% 100% 65% 19% 16% 100% 71% 18% 11% 100%
Business Content/Investment 19% 74% 7% 100% 29% 64% 7% 100% 44% 49% 8% 100% 47% 47% 6% 100% 50% 43% 7% 100%
Research 16% 84% 0% 100% 33% 62% 5% 100% 48% 44% 8% 100% 48% 47% 5% 100% 51% 45% 4% 100%
Personal Growth 19% 80% 1% 100% 49% 36% 15% 100% 59% 32% 10% 100% 64% 27% 10% 100% 73% 20% 7% 100%
Games 96% 4% 0% 100% 71% 25% 4% 100% 61% 34% 5% 100% 60% 36% 4% 100% 78% 19% 3% 100%
General News 94% 6% 0% 100% 79% 15% 6% 100% 74% 20% 6% 100% 79% 16% 6% 100% 76% 19% 6% 100%
Community-Made Directories 6% 74% 20% 100% 17% 68% 15% 100% 26% 61% 13% 100% 21% 61% 18% 100% 20% 56% 24% 100%
Sports 24% 61% 15% 100% 52% 34% 14% 100% 52% 38% 11% 100% 49% 42% 10% 100% 41% 52% 7% 100%
Greeting Cards 46% 54% 0% 100% 30% 63% 7% 100% 56% 38% 6% 100% 51% 44% 5% 100% 57% 39% 4% 100%
Credit Help 12% 88% 0% 100% 20% 76% 4% 100% 18% 74% 8% 100% 15% 80% 5% 100% 11% 85% 4% 100%
Total 43% 50% 7% 100% 44% 47% 9% 100% 50% 42% 9% 100% 57% 33% 9% 100% 61% 32% 7% 100%
44 August 10, 2007

Online Advertising
August 10, 2007 45

Figure 42: Lehman Brothers U.S. Online Advertising Forecast, 2001–11E ($ in millions)
(in millions) 2001 2002 2003 2004 2005 2006 2007E 2008E 2009E 2010E 2011E
Display Advertising $5,351 $3,907 $3,198 $3,754 $4,264 $5,373 $6,609 $7,964 $9,317 $10,715 $12,054
% Y/Y growth -28% -27% -18% 17% 14% 26% 23% 21% 17% 15% 13%
% of total 75% 65% 44% 39% 34% 32% 31% 30% 29% 29% 29%
% of total growth NA NA NA 24% 17% 26% 26% 26% 26% 28% 29%
Search $285 $902 $2,543 $3,850 $5,142 $6,799 $8,805 $11,094 $13,313 $15,443 $17,512
% Y/Y growth 253% 216% 182% 51% 34% 32% 30% 26% 20% 16% 13%
% of total 4% 15% 35% 40% 41% 40% 41% 41% 42% 42% 42%
% of total growth NA NA 131% 55% 44% 38% 43% 44% 43% 43% 44%
Classifieds $1,141 $902 $1,235 $1,733 $2,132 $3,059 $3,824 $4,627 $5,367 $6,011 $6,612
% Y/Y growth 102% -21% 37% 40% 23% 43% 25% 21% 16% 12% 10%
% of total 16% 15% 17% 18% 17% 18% 18% 17% 17% 16% 16%
% of total growth NA NA 27% 21% 14% 21% 16% 15% 14% 13% 13%
Lead Generation/E-mail $357 $301 $291 $289 $1,004 $1,648 $2,340 $3,136 $3,982 $4,779 $5,448
% Y/Y growth -37% -16% -3% -1% 247% 64% 42% 34% 27% 20% 14%
% of total 5% 5% 4% 3% 8% 10% 11% 12% 12% 13% 13%
% of total growth NA NA -1% 0% 25% 15% 15% 15% 16% 16% 14%
Total Online Advertising $7,134 $6,010 $7,267 $9,626 $12,542 $16,879 $21,577 $26,820 $31,980 $36,948 $41,627
% Y/Y growth -12% -16% 21% 32% 30% 35% 28% 24% 19% 16% 13%
Total U.S. Advertising $234,185 $239,595 $248,764 $268,552 $278,101 $291,779 $301,297 $315,681 $326,494 $341,145 $351,872
% Y/Y growth -6% 2% 4% 8% 4% 5% 3% 4% 3% 4% 4%
Online as a % of Total 3% 3% 3% 4% 5% 6% 7% 8% 10% 11% 12%
Note: Total U.S. Advertising figures through 2011 are from Lehman Brothers U.S. Media & Internet research team
Source: Interactive Advertising Bureau (IAB), PricewaterhouseCoopers (PwC), Lehman Brothers estimates.
Figure 43: Lehman Brothers Online Video Advertising Forecast ($ in millions)

2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E
U.S. Online Video Ad Spend $3 $29 $96 $225 $394 $669 $1,091 $1,669 $2,387
Y/Y Growth 866.7% 231.0% 134.4% 75.0% 70.0% 63.0% 53.0% 43.0%
Total U.S. Online Ad Spend $6,010 $7,267 $9,626 $12,542 $16,879 $21,577 $26,820 $31,980 $36,948
Y/Y Growth 20.9% 32.5% 30.3% 34.6% 27.8% 24.3% 19.2% 15.5%
% of Total U.S. Online Ad Spend 0.0% 0.4% 1.0% 1.8% 2.3% 3.1% 4.1% 5.2% 6.5%
Source: Lehman Brothers estimates, Veronis Suhler Stevenson
46 August 10, 2007

Figure 44: Top 10 U.S. Online Advertising Sites, 2000–10E ($ in millions)

2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E
TOTAL U.S. ONLINE ADVERTISING $8,087 $7,134 $6,010 $7,267 $9,626 $12,542 $16,157 $20,287 $24,667 $28,608 $32,345
% Y/Y growth 75% -12% -16% 21% 32% 30% 29% 26% 22% 16% 13%
1. Google $19 $52 $230 $589 $1,176 $2,220 $3,726 $5,201 $6,632 $7,989 $9,147
% Y/Y growth -- 170% 345% 156% 100% 89% 68% 40% 28% 20% 14%
% share 0% 1% 4% 8% 12% 18% 23% 26% 27% 28% 28%
2. Yahoo! $837 $496 $631 $984 $1,689 $2,290 $2,822 $3,297 $3,849 $4,326 $4,767
% Y/Y growth -- -41% 27% 56% 72% 36% 23% 17% 17% 12% 10%
% share 10% 7% 10% 14% 18% 18% 17% 16% 16% 15% 15%
3. AOL $1,779 $1,427 $1,161 $669 $854 $1,136 $1,603 $1,955 $2,268 $2,540 $2,794
% Y/Y growth -- -20% -19% -42% 28% 33% 41% 22% 16% 12% 10%
% share 22% 20% 19% 9% 9% 9% 10% 10% 9% 9% 9%
4. eBay * $238 $370 $490 $638 $840 $1,082 $1,421 $1,729 $1,972 $2,201 $2,344
% Y/Y growth -- 55% 32% 30% 32% 29% 31% 22% 14% 12% 7%
% share 3% 5% 8% 9% 9% 9% 9% 9% 8% 8% 7%
5. MSN $458 $496 $600 $837 $1,024 $1,136 $1,241 $1,403 $1,596 $1,770 $1,919
% Y/Y growth -- 8% 21% 40% 22% 11% 9% 13% 14% 11% 8%
% share 6% 7% 10% 12% 11% 9% 8% 7% 6% 6% 6%
6. Monster Worldwide $296 $413 $310 $320 $448 $583 $771 $913 $1,060 $1,187 $1,294
% Y/Y growth -- 40% -25% 3% 40% 30% 32% 19% 16% 12% 9%
% share 4% 6% 5% 4% 5% 5% 5% 5% 4% 4% 4%
7. InterActiveCorp ** $136 $107 $103 $136 $292 $418 $544 $703 $829 $928 $1,002
% Y/Y growth -- -21% -4% 33% 115% 43% 30% 29% 18% 12% 8%
% share 2% 1% 2% 2% 3% 3% 3% 3% 3% 3% 3%
8. Gannett $75 $71 $91 $131 $201 $300 $375 $431 $485 $534 $576
% Y/Y growth -- -5% 28% 44% 53% 50% 25% 15% 12% 10% 8%
% share 1% 1% 2% 2% 2% 2% 2% 2% 2% 2% 2%
9. CareerBuilder *** $45 $63 $54 $80 $141 $248 $334 $376 $414 $445 $471
% Y/Y growth -- 39% -13% 48% 76% 75% 35% 13% 10% 7% 6%
% share 1% 1% 1% 1% 1% 2% 2% 2% 2% 2% 1%
10. New York Times **** $87 $77 $94 $115 $151 $203 $269 $321 $366 $406 $443
% Y/Y growth -- -11% 21% 23% 31% 34% 33% 19% 14% 11% 9%
% share 1% 1% 2% 2% 2% 2% 2% 2% 1% 1% 1%
Market Share Summary

1. Google 0% 1% 4% 8% 12% 18% 23% 26% 27% 28% 28%
2. Yahoo! 10% 7% 10% 14% 18% 18% 17% 16% 16% 15% 15%
3. AOL 22% 20% 19% 9% 9% 9% 10% 10% 9% 9% 9%
4. eBay 3% 5% 8% 9% 9% 9% 9% 9% 8% 8% 7%
5. MSN 6% 7% 10% 12% 11% 9% 8% 7% 6% 6% 6%
6. Monster Worldwide 4% 6% 5% 4% 5% 5% 5% 5% 4% 4% 4%
7. InterActiveCorp 2% 1% 2% 2% 3% 3% 3% 3% 3% 3% 3%
8. Gannett 1% 1% 2% 2% 2% 2% 2% 2% 2% 2% 2%
9. CareerBuilder 1% 1% 1% 1% 1% 2% 2% 2% 2% 2% 1%
10. New York Times 1% 1% 2% 2% 2% 2% 2% 2% 1% 1% 1%
Market Share of Current Top 10 49% 50% 63% 62% 71% 77% 81% 80% 79% 78% 77%
Note: Top 10 rankings based on estimated 2006 positions
* eBay advertising revenue includes listing fees and advertising revenue

** InterActiveCorp historical figures include Ask.com revenue prior to July 2005 acquisition
*** CareerBuilder revenue shown excludes revenue allocated directly to the contributing newspaper websites (approximately 50%)
**** New York Times historical figures include About.com revenue prior to February 2005 acquisition
Source: Interactive Advertising Bureau (IAB), PricewaterhouseCoopers (PwC), Lehman Brothers estimates, company reports
August 10, 2007 47

Figure 45: Total U.S. Advertising Spend by Medium, 2000–08E ($ in millions)

2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007E 2008E
Direct Mail $44,591 $44,725 $46,067 $48,370 $52,191 $55,218 $58,647 $62,459 $66,519
% Change 7.2% 0.3% 3.0% 5.0% 7.9% 5.8% 6.2% 6.5% 6.5%
Broadcast TV $44,802 $38,881 $42,068 $41,932 $46,264 $44,293 $46,880 $46,816 $49,885
% Change 12.0% -13.2% 8.2% -0.3% 10.3% -4.3% 5.8% -0.1% 6.6%
Newspapers $48,670 $44,305 $44,102 $44,939 $46,712 $47,407 $46,611 $43,336 $41,583
% Change 5.1% -9.0% -0.5% 1.9% 3.9% 1.5% -1.7% -7.0% -4.0%
Cable TV $15,455 $15,736 $16,297 $18,814 $21,527 $23,654 $25,025 $26,816 $28,841
% Change 23.0% 1.8% 3.6% 15.4% 14.4% 9.9% 5.8% 7.2% 7.5%
Internet $8,087 $7,134 $6,012 $7,267 $9,626 $12,542 $16,879 $21,577 $26,820
% Change 75.0% -11.8% -15.7% 20.9% 32.5% 30.3% 34.6% 27.8% 24.3%
Radio $19,848 $18,369 $19,409 $19,603 $20,013 $20,071 $20,143 $19,858 $19,660
% Change 12.3% -7.5% 5.7% 1.0% 2.1% 0.3% 0.4% -1.4% -1.0%
Yellow Pages $13,704 $14,384 $14,709 $14,906 $15,486 $15,970 $16,289 $16,632 $16,965
% Change 6.9% 5.0% 2.3% 1.3% 3.9% 3.1% 2.0% 2.1% 2.0%
Magazines $12,370 $11,095 $10,995 $11,435 $12,247 $12,847 $13,168 $13,497 $13,835
% Change 8.2% -10.3% -0.9% 4.0% 7.1% 4.9% 2.5% 2.5% 2.5%
Outdoor $5,235 $5,193 $5,232 $5,504 $5,834 $6,301 $6,805 $7,248 $7,683
% Change 8.3% -0.8% 0.8% 5.2% 6.0% 8.0% 8.0% 6.5% 6.0%
Business Papers $4,915 $4,468 $3,976 $4,004 $4,072 $4,170 $4,195 $4,195 $4,195
% Change 10.6% -9.1% -11.0% 0.7% 1.7% 2.4% 0.6% 0.0% 0.0%
Miscellaneous $32,083 $29,895 $30,730 $31,990 $34,645 $35,692 $37,321 $38,655 $40,039
% Change 1.7% -6.8% 2.8% 4.1% 8.3% 3.0% 4.6% 3.6% 3.6%
GRAND TOTAL ($ millions) $249,760 $234,185 $239,597 $248,764 $268,617 $278,166 $291,964 $301,090 $316,023
% Change 9.6% -6.2% 2.3% 3.8% 8.0% 3.6% 5.0% 3.1% 5.0%
GDP REAL ($ billions) 9,817 9,891 10,049 10,321 10,756 11,049 11,415 11,666 11,958
Real GDP - % Change 3.7% 0.8% 1.6% 2.7% 4.2% 2.7% 3.3% 2.2% 2.5%
Nominal GDP ($ billions) 9,817 10,128 10,470 10,971 11,734 12,456 13,247 13,935 14,660
% Change 5.9% 3.2% 3.4% 4.8% 7.0% 6.1% 6.3% 5.2% 5.2%
Source: Advertising Age by Robert J. Coen, McCann-Erickson Inc; Newspaper Association of America; Radio Advertising Bureau; Simba Information; Outdoor Advertising
Association of America; Interactive Advertising Bureau (IAB); Lehman Brothers
48 August 10, 2007

Figure 46: Share of Total U.S. Advertising Spending by Medium, 2000–08E

2000 2001 2002 2003 2004 2005 2006 2007(E) 2008(E)
Direct Mail 17.9% 19.1% 19.2% 19.4% 19.4% 19.9% 20.1% 20.7% 21.0%
Broadcast TV 17.9% 16.6% 17.6% 16.9% 17.2% 15.9% 16.1% 15.5% 15.8%
Newspapers 19.5% 18.9% 18.4% 18.1% 17.4% 17.0% 16.0% 14.4% 13.2%
Cable TV 6.2% 6.7% 6.8% 7.6% 8.0% 8.5% 8.6% 8.9% 9.1%
Internet 3.2% 3.0% 2.5% 2.9% 3.6% 4.5% 5.8% 7.2% 8.5%
Radio 7.9% 7.8% 8.1% 7.9% 7.5% 7.2% 6.9% 6.6% 6.2%
Yellow Pages 5.5% 6.1% 6.1% 6.0% 5.8% 5.7% 5.6% 5.5% 5.4%
Magazines 5.0% 4.7% 4.6% 4.6% 4.6% 4.6% 4.5% 4.5% 4.4%
Outdoor 2.1% 2.2% 2.2% 2.2% 2.2% 2.3% 2.3% 2.4% 2.4%
Business Papers 2.0% 1.9% 1.7% 1.6% 1.5% 1.5% 1.4% 1.4% 1.3%
Miscellaneous 12.8% 12.8% 12.8% 12.9% 12.9% 12.8% 12.8% 12.8% 12.7%
GRAND TOTAL 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Figure 47: Total U.S. Advertising Growth by Medium, 2000–08E

2000 2001 2002 2003 2004 2005 2006 2007(E) 2008(E)
Direct Mail 7.2% 0.3% 3.0% 5.0% 7.9% 5.8% 6.2% 6.5% 6.5%
Broadcast TV 12.0% -13.2% 8.2% -0.3% 10.3% -4.3% 5.8% -0.1% 6.6%
Newspapers 5.1% -9.0% -0.5% 1.9% 3.9% 1.5% -1.7% -7.0% -4.0%
Cable TV 23.0% 1.8% 3.6% 15.4% 14.4% 9.9% 5.8% 7.2% 7.5%
Internet 75.0% -11.8% -15.7% 20.9% 32.5% 30.3% 34.6% 27.8% 24.3%
Radio 12.3% -7.5% 5.7% 1.0% 2.1% 0.3% 0.4% -1.4% -1.0%
Yellow Pages 6.9% 5.0% 2.3% 1.3% 3.9% 3.1% 2.0% 2.1% 2.0%
Magazines 8.2% -10.3% -0.9% 4.0% 7.1% 4.9% 2.5% 2.5% 2.5%
Outdoor 8.3% -0.8% 0.8% 5.2% 6.0% 8.0% 8.0% 6.5% 6.0%
Business Papers 10.6% -9.1% -11.0% 0.7% 1.7% 2.4% 0.6% 0.0% 0.0%
Miscellaneous 1.7% -6.8% 2.8% 4.1% 8.3% 3.0% 4.6% 3.6% 3.6%
GRAND TOTAL 9.6% -6.2% 2.3% 3.8% 8.0% 3.6% 5.0% 3.1% 5.0%
August 10, 2007 49

Figure 48: Contribution to Total U.S. Advertising Growth by Medium, 2000–08E

2000 2001 2002 2003 2004 2005 2006 2007(E) 2008(E)
Direct Mail 13.6% -0.9% 24.8% 25.1% 19.2% 31.7% 24.9% 41.8% 27.2%
Broadcast TV 21.9% 38.0% 58.9% -1.5% 21.8% -20.6% 18.7% -0.7% 20.6%
Newspapers 10.9% 28.0% -3.8% 9.1% 8.9% 7.3% -5.8% -35.9% -11.7%
Cable TV 13.2% -1.8% 10.4% 27.5% 13.7% 22.3% 9.9% 19.6% 13.6%
Internet 15.8% 6.1% -20.7% 13.7% 11.9% 30.5% 31.4% 51.5% 35.1%
Radio 9.9% 9.5% 19.2% 2.1% 2.1% 0.6% 0.5% -3.1% -1.3%
Yellow Pages 4.0% -4.4% 6.0% 2.1% 2.9% 5.1% 2.3% 3.8% 2.2%
Magazines 4.3% 8.2% -1.8% 4.8% 4.1% 6.3% 2.3% 3.6% 2.3%
Outdoor 1.8% 0.3% 0.7% 3.0% 1.7% 4.9% 3.7% 4.8% 2.9%
Business Papers 2.2% 2.9% -9.1% 0.3% 0.3% 1.0% 0.2% 0.0% 0.0%
Miscellaneous 2.5% 14.0% 15.4% 13.7% 13.4% 11.0% 11.8% 14.6% 9.3%
Total National 73.9% 63.2% 56.9% 68.5% 69.1% 61.5% 76.0% 97.2% 82.4%
Total Local 26.1% 36.8% 43.1% 31.5% 30.9% 38.5% 24.0% 2.8% 17.6%
GRAND TOTAL ($ millions) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Figure 49: Initial Year Growth Comparisons – Internet Advertising vs. Broadcast and Cable Television
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
Broadcast 358 1,012 2,162 2,787 3,698 5,030 6,557 7,885 8,188 8,859 9,766
Y/Y Growth 183% 114% 29% 33% 36% 30% 20% 4% 8% 10%
Cable 147 295 499 745 1,190 1,580 1,853 2,080 2,490 3,180 3,654
Y/Y Growth 101% 69% 49% 60% 33% 17% 12% 20% 28% 15%
Internet 55 267 907 1,920 4,621 8,087 7,134 6,010 7,267 9,626 12,542
Y/Y Growth 385% 240% 112% 141% 75% -12% -16% 21% 32% 30%
Source: Interactive Advertising Bureau (IAB), PricewaterhouseCoopers LLP, Universal McCann
50 August 10, 2007

Figure 50: U.S. Online Advertising Revenue by Quarter, 1996–10E ($ in millions)

$ Rev Q/Q Growth Y/Y Growth $ Rev Q/Q Growth Y/Y Growth $ Rev Q/Q Growth Y/Y Growth
1Q96 30 NA NA 1Q01 1,872 -12% -3% 1Q06 3,848 7% 37%
2Q96 52 74% NA 2Q01 1,848 -1% -12% 2Q06 4,061 6% 36%
3Q96 76 46% NA 3Q01 1,773 -4% -10% 3Q06 4,186 3% 33%
4Q96 110 45% NA 4Q01 1,641 -7% -23% 4Q06 4,784 14% 33%
Total 1996 267 NA Total 2001 7,134 -12% Total 2006E 16,879 35%
1Q97 130 18% 333% 1Q02 1,520 -7% -19% 1Q07 4,864 2% 26%
2Q97 214 66% 313% 2Q02 1,458 -4% -21%
3Q97 227 6% 200% 3Q02 1,451 -1% -18%
4Q97 336 48% 205% 4Q02 1,580 -9% -4%
Total 1997 907 239% Total 2002 6,010 -16% Total 2007E 21,577 28%
1Q98 351 5% 171% 1Q03 1,632 3% 7%
2Q98 423 20% 97% 2Q03 1,660 2% 14%
3Q98 491 16% 116% 3Q03 1,793 8% 24%
4Q98 656 34% 95% 4Q03 2,182 22% 38%
Total 1998 1,920 112% Total 2003 7,267 21% Total 2008E 26,820 24%
1Q99 693 6% 97% 1Q04 2,230 2% 37%
2Q99 934 35% 121% 2Q04 2,369 6% 43%
3Q99 1,217 30% 148% 3Q04 2,333 -2% 30%
4Q99 1,777 46% 171% 4Q04 2,694 15% 24%
1Q00 1,922 8% 177% 1Q05 2,802 4% 25%
2Q00 2,091 9% 123% 2Q05 2,985 7% 26%
3Q00 1,951 -7% 60% 3Q05 3,147 5% 35%
4Q00 2,123 9% 19% 4Q05 3,608 15% 34%
Source: Interactive Advertising Bureau (IAB), Lehman Brothers estimates
August 10, 2007 51

Figure 51: U.S. Online Advertising Revenue by Format, 2000–06 ($ in millions)

Online Advertising Revenue by Format
2000 2001 2002 2003 2004 2005 2006
Search 82 285 902 2,543 3,850 5,142 6,799
Display Related 6,970 5,351 3,907 3,198 3,754 4,264 5,373
Classifieds 574 1,141 902 1,235 1,733 2,132 3,059
E-mail 246 193 240 218 193 251 338
Lead Generation/Referrals 328 164 60 73 96 753 1,310
Total 8,200 7,134 6,010 7,267 9,626 12,542 16,879
Online Advertising Revenue by Format - % Mix

2000 2001 2002 2003 2004 2005 2006
Search 1% 4% 15% 35% 40% 41% 40%
Display Related 85% 75% 65% 44% 39% 34% 32%
Classifieds 7% 16% 15% 17% 18% 17% 18%
E-mail 3% 3% 4% 3% 2% 2% 2%
Lead Generation/Referrals 4% 2% 1% 1% 1% 6% 8%
Total 100% 100% 100% 100% 100% 100% 100%
Online Advertising Revenue by Format - % Growth

2000 2001 2002 2003 2004 2005 2006
Search -- 248% 216% 182% 51% 34% 32%
Display Related -- -23% -27% -18% 17% 14% 26%
Classifieds -- 99% -21% 37% 40% 23% 43%
E-mail -- -22% 25% -9% -12% 31% 35%
Lead Generation/Referrals -- -50% -63% 21% 32% 682% 74%
Total -- -13% -16% 21% 32% 30% 35%
Note: Total dollar amounts differ slightly from reported historical numbers because the above totals are driven by percentage mix.
Source: Interactive Advertising Bureau (IAB)
52 August 10, 2007

Figure 52: U.S. Online Advertising Revenue by Pricing Model, 1998–2006 ($ in millions)
Online Advertising Revenue by Pricing Models
1998 1999 2000 2001 2002 2003 2004 2005 2006
Performance 77 322 820 856 1,262 2,689 3,947 5,142 7,933
CPM 941 1,840 3,526 3,424 2,705 3,125 4,043 5,769 8,102
Hybrid 902 2,438 3,854 2,854 2,043 1,453 1,636 1,630 844
Total 1,920 4,600 8,200 7,134 6,010 7,267 9,626 12,542 16,879
Online Advertising Revenue by Pricing Models - % Mix

1998 1999 2000 2001 2002 2003 2004 2005 2006
Performance 4% 7% 10% 12% 21% 37% 41% 41% 47%
CPM 49% 40% 43% 48% 45% 43% 42% 46% 48%
Hybrid 47% 53% 47% 40% 34% 20% 17% 13% 5%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100%
Online Advertising Revenue by Pricing Models - % Growth

1998 1999 2000 2001 2002 2003 2004 2005 2006
Performance -- 319% 155% 4% 47% 113% 47% 30% 54%
CPM -- 96% 92% -3% -21% 16% 29% 43% 40%
Hybrid -- 170% 58% -26% -28% -29% 13% 0% -48%
Total -- 140% 78% -13% -16% 21% 32% 30% 35%
Source: Interactive Advertising Bureau (IAB)
August 10, 2007 53

Figure 53: Total U.S. Measured Media Advertising by Category and Medium, 2006 ($ in millions)
Rank Measured Media U.S. Measured Media Breakout 2006
2006 2005 Category 2006 % Chg. Magazine Biz Pub Newspaper Outdoor TV Cable Nets Radio Internet
1 1 Automobile 19,799.0 -5.7 2,089.2 85.5 5,024.5 343.8 8,637.0 1,348.0 1,543.8 727.2
2 2 Retail 19,114.0 2.0 1,992.5 105.4 6,763.2 387.4 5,420.0 1,039.7 2,148.4 1,257.5
3 3 Telecom,internet,ISP 10,950.2 9.6 681.5 217.2 2,172.6 278.4 4,061.7 1,269.7 774.6 1,494.7
4 5 Medicine & remedies 9,192.9 9.0 2,730.1 56.4 279.5 22.7 4,038.7 1,382.0 304.1 379.3
5 6 General services 8,702.0 10.4 698.3 335.2 2,270.8 583.5 2,302.8 454.2 1,319.5 737.7
6 4 Financial services 8,689.0 2.1 927.9 260.9 1,891.3 245.2 2,224.3 932.3 725.0 1,481.9
7 7 Food, beverages & candy 7,225.0 -1.2 1,892.3 104.9 50.3 76.5 3,190.3 1,450.8 326.3 133.7
8 8 Personal care 5,732.0 1.2 2,347.5 40.2 29.4 13.5 2,345.5 796.7 53.9 105.5
9 10 Airlines, hotels, car rental 5,415.6 -1.3 1,233.7 250.5 1,412.9 331.9 876.1 515.4 342.9 452.2
10 9 Movie, video & music 5.379.9 -3.6 239.0 78.1 1,028.3 91.8 2,447.0 1,047.4 258.7 189.7
11 11 Restaurants 5,291.5 4.5 132.9 2.1 183.8 240.2 3,339.1 810.6 534.2 48.5
12 12 Media 5,050.5 2.5 1,527.3 216.8 1,269.0 246.5 266.1 67.2 741.1 716.4
13 16 Government, politics, religion 3,510.6 43.0 342.7 43.8 530.1 148.9 1,585.9 238.6 465.0 155.6
14 13 Insurance 3,446.2 19.2 220.4 57.2 385.9 113.3 1,499.7 635.0 383.6 151.2
15 15 Real estate 3,132.3 20.3 363.0 17.8 1,894.1 258.2 251.8 77.2 138.4 131.7
16 14 Apparel 2,911.7 6.8 2,105.2 81.1 59.6 28.7 353.4 223.4 20.8 39.4
17 17 Computers, software 2,509.8 13.5 451.3 714.6 226.4 49.2 381.8 167.7 62.8 456.0
18 19 Home Furnishings, appliances, electronics 2,213.6 7.6 882.4 187.3 114.1 17.0 551.6 307.8 68.8 84.6
19 18 Beer, wine & liquor 2,099.9 -4.9 505.4 14.8 54.2 163.9 734.4 340.5 225.7 61.0
20 21 Education 1,942.4 8.5 153.2 229.1 342.4 74.6 544.9 166.9 157.7 273.7
21 20 Home supplies & cleaners 1,938.0 4.0 358.3 9.5 5.8 2.6 978.5 525.9 27.6 29.8
22 22 Toys & games 1,253.4 -2.9 97.0 82.6 7.5 3.3 286.8 607.9 8.3 159.9
23 23 Hardware & home building 1,028.3 -1.3 368.0 151.5 103.8 8.6 169.1 168.8 32.2 26.3
24 25 Sporting goods 562.3 5.8 374.2 1.9 28.2 5.0 86.0 48.1 5.5 13.5
25 24 Gas & oil 524.0 -3.7 104.2 7.8 70.1 34.5 149.1 73.6 72.9 11.8
26 26 Pet food & pet care 490.1 -1.0 149.6 1.9 3.2 0.1 209.5 98.1 6.6 21.3
27 27 Office equipment 334.2 -8.5 102.1 43.0 25.1 2.2 94.1 36.4 20.9 10.4
28 28 Shipping & freight 326.8 -8.9 33.1 32.9 14.2 3.2 147.1 41.7 43.4 11.2
29 29 Cigarettes & tobacco 155.6 0.1 105.2 4.7 1.6 0.5 31.2 5.7 0.5 6.2
Direct response advertising 6,461.6 5.4 2,347.1 139.0 493.7 1.9 1,154.0 2,121.1 69.8 135.0
Miscellaneous 4,306.4 2.0 952.2 944.4 1,285.2 54.2 356.3 275.2 171.9 266.9
Total 149,688.7 3.6 26,506.7 4,518.1 28,020.8 3,831.3 48,713.8 17,273.5 11,054.9 9,769.8
Source: Advertising Age
Figure 54: Total U.S. Measured Media Advertising by Category and Medium – % Mix, 2006 ($ in millions)
Rank Measured Media U.S. Measured Media Breakout in % terms 2006
2006 2005 Category 2006 % Chg. Magazine Biz Pub Newspaper Outdoor TV Cable Nets Radio Internet
1 1 Automobile 19,799.0 -5.7 10.55% 0.43% 25.38% 1.74% 43.62% 6.81% 7.80% 3.67%
2 2 Retail 19,114.0 2.0 10.42% 0.55% 35.38% 2.03% 28.36% 5.44% 11.24% 6.58%
3 3 Telecom,internet,ISP 10,950.2 9.6 6.22% 1.98% 19.84% 2.54% 37.09% 11.60% 7.07% 13.65%
4 4 Medicine & remedies 9,192.9 9.0 29.70% 0.61% 3.04% 0.25% 43.93% 15.03% 3.31% 4.13%
5 5 General services 8,702.0 10.4 8.02% 3.85% 26.10% 6.71% 26.46% 5.22% 15.16% 8.48%
6 6 Financial services 8,689.0 2.1 10.68% 3.00% 21.77% 2.82% 25.60% 10.73% 8.34% 17.05%
7 7 Food, beverages & candy 7,225.0 -1.2 26.19% 1.45% 0.70% 1.06% 44.16% 20.08% 4.52% 1.85%
8 8 Personal care 5,732.0 1.2 40.95% 0.70% 0.51% 0.24% 40.92% 13.90% 0.94% 1.84%
9 9 Airlines, hotels, car rental 5,415.6 -1.3 22.78% 4.63% 26.09% 6.13% 16.18% 9.52% 6.33% 8.35%
10 10 Movie, video & music 5.379.9 -3.6 4.44% 1.45% 19.11% 1.71% 45.48% 19.47% 4.81% 3.53%
11 11 Restaurants 5,291.5 4.5 2.51% 0.04% 3.47% 4.54% 63.10% 15.32% 10.10% 0.92%
12 12 Media 5,050.5 2.5 30.24% 4.29% 25.13% 4.88% 5.27% 1.33% 14.67% 14.18%
13 13 Government, politics, religion 3,510.6 43.0 9.76% 1.25% 15.10% 4.24% 45.17% 6.80% 13.25% 4.43%
14 14 Insurance 3,446.2 19.2 6.40% 1.66% 11.20% 3.29% 43.52% 18.43% 11.13% 4.39%
15 15 Real estate 3,132.3 20.3 11.59% 0.57% 60.47% 8.24% 8.04% 2.46% 4.42% 4.20%
16 16 Apparel 2,911.7 6.8 72.30% 2.79% 2.05% 0.99% 12.14% 7.67% 0.71% 1.35%
17 17 Computers, software 2,509.8 13.5 17.98% 28.47% 9.02% 1.96% 15.21% 6.68% 2.50% 18.17%
18 18 Home Furnishings, appliances, electronics 2,213.6 7.6 39.86% 8.46% 5.15% 0.77% 24.92% 13.90% 3.11% 3.82%
19 19 Beer, wine & liquor 2,099.9 -4.9 24.07% 0.70% 2.58% 7.81% 34.97% 16.22% 10.75% 2.90%
20 20 Education 1,942.4 8.5 7.89% 11.79% 17.63% 3.84% 28.05% 8.59% 8.12% 14.09%
21 21 Home supplies & cleaners 1,938.0 4.0 18.49% 0.49% 0.30% 0.13% 50.49% 27.14% 1.42% 1.54%
22 22 Toys & games 1,253.4 -2.9 7.74% 6.59% 0.60% 0.26% 22.88% 48.50% 0.66% 12.76%
23 23 Hardware & home building 1,028.3 -1.3 35.79% 14.73% 10.09% 0.84% 16.44% 16.42% 3.13% 2.56%
24 24 Sporting goods 562.3 5.8 66.55% 0.34% 5.02% 0.89% 15.29% 8.55% 0.98% 2.40%
25 25 Gas & oil 524.0 -3.7 19.89% 1.49% 13.38% 6.58% 28.45% 14.05% 13.91% 2.25%
26 26 Pet food & pet care 490.1 -1.0 30.52% 0.39% 0.65% 0.02% 42.75% 20.02% 1.35% 4.35%
27 27 Office equipment 334.2 -8.5 30.55% 12.87% 7.51% 0.66% 28.16% 10.89% 6.25% 3.11%
28 28 Shipping & freight 326.8 -8.9 10.13% 10.07% 4.35% 0.98% 45.01% 12.76% 13.28% 3.43%
29 29 Cigarettes & tobacco 155.6 0.1 67.61% 3.02% 1.03% 0.32% 20.05% 3.66% 0.32% 3.98%
Direct response advertising 6,461.6 5.4 36.32% 2.15% 7.64% 0.03% 17.86% 32.83% 1.08% 2.09%
Miscellaneous 4,306.4 2.0 22.11% 21.93% 29.84% 1.26% 8.27% 6.39% 3.99% 6.20%
Total 149,688.7 3.6 17.71% 3.02% 18.72% 2.56% 32.54% 11.54% 7.39% 6.53%
54 August 10, 2007

Figure 55: Top U.S. Advertisers (1–50) with Total Spend and Internet Spend ($ in millions)
Internet Advertising
Rank Total Ad Spending Total Internet Ad Spending As % of Total Advertising
2006 2005 Marketer Headquarters 2006 2005 %CHG 2006 2005 %CHG 2006 2005
1 1 Procter & Gamble Co. Cincinnati 4,898.0 4,587.9 6.8 54.0 33.5 61.1 1.10% 0.73%
2 5 AT&T San Antanio 3,344.7 2,653.6 26.0 168.7 56.2 200.3 5.04% 2.12%
3 2 General Motors Corp. Detroit 3,296.0 4,110.1 -19.8 118.2 110.5 7.0 3.59% 2.69%
4 3 Time Warner New York 3,088.8 3,518.3 -12.2 90.6 166.1 -45.4 2.93% 4.72%
5 7 Verizon Communications New York 2,821.8 2,481.3 13.7 123.6 144.0 -14.2 4.38% 5.80%
6 6 Ford Motors Co. Dearborn, Mich. 2,576.8 2,611.8 -1.3 99.1 55.0 80.1 3.85% 2.11%
7 9 GlaxoSmithKline Brentford, Middlesex, U.K. 2,444.2 2,249.8 8.6 15.1 14.1 7.3 0.62% 0.63%
8 8 Walt Disney Co. Burbank, Calif. 2,320.0 2,291.7 1.2 133.2 90.3 47.5 5.74% 3.94%
9 4 Johnson & Johnson New Brunswick, N.J. 2,290.5 2,669.4 -14.2 34.1 24.6 38.5 1.49% 0.92%
10 12 Unilever London/Rotterdam 2,098.3 1,943.5 8.0 27.9 13.4 108.5 1.33% 0.69%
11 14 Toyota Motor Corp. Toyota City, Japan 1,995.3 1,783.2 11.9 55.6 32.9 69.1 2.79% 1.84%
12 13 Sony Corp. Tokyo 1,994.0 1,801.8 10.7 73.6 44.1 67.0 3.69% 2.45%
13 10 DaimlerChrysler Auburn Hills, Mich./Stuttgart,Germany 1,952.2 2,181.2 -10.5 44.6 31.6 41.3 2.28% 1.45%
14 11 General Electric Co. Fairfield, Conn. 1,860.2 1,979.9 -6.0 60.8 36.8 65.2 3.27% 1.86%
15 16 Sprint Nextel Corp. Reston, Va. 1,775.2 1,715.2 3.5 37.5 26.6 40.7 2.11% 1.55%
16 17 McDonald's Corp. Oak Brook,Ill. 1,748.3 1,656.8 5.5 13.9 12.5 11.4 0.80% 0.75%
17 15 Sears Holdings Corp. Hoffman Estates, Ill. 1,652.8 1,715.3 -3.6 24.3 6.4 282.5 1.47% 0.37%
18 19 L'Oreal Clinchy, France 1,456.3 1,464.2 -0.5 7.8 6.9 12.3 0.54% 0.47%
19 22 Kraft Foods Northfield, Ill. 1,423.2 1,428.9 -0.4 22.9 -- -- 1.61% --
20 23 Federated Departmet Stores Cincinnati 1,361.2 1,346.7 1.1 4.5 2.8 60.5 0.33% 0.21%
21 24 Honda Motor Co. Tokyo 1,350.8 1,314.9 2.7 34.3 11.2 207.4 2.54% 0.85%
22 18 Bank of America Corp. Charlotte, N.C. 1,334.4 1,497.0 -10.9 42.7 24.5 73.9 3.20% 1.64%
23 21 Nissan Motor Co. Tokyo 1,328.9 1,441.8 -7.8 28.6 6.9 312.8 2.15% 0.48%
24 20 PepsiCo Purchase, N.Y. 1,322.7 1,461.0 -9.5 14.3 19.1 -25.2 1.08% 1.31%
25 25 Nestle Vevey, Switzerland 1,315.0 1,270.9 3.5 20.9 51.4 -59.4 1.59% 4.05%
26 28 News Corp. New York 1,244.5 1,166.4 6.7 55.7 47.6 17.0 4.48% 4.08%
27 30 J.C. Penny Co. Plano, Texas 1,162.3 1,084.9 7.1 33.1 32.5 1.9 2.85% 2.99%
28 34 Target Corp. Minneapolis 1,156.9 1,021.2 13.3 56.7 36.9 53.7 4.90% 3.61%
29 26 U.S. Government Washington 1,132.7 1,230.2 -7.9 43.7 30.5 43.1 3.86% 2.48%
30 29 Home Depot Atlanta 1,118.1 1,109.3 0.8 7.4 2.4 214.5 0.66% 0.21%
31 45 Pfizer New York 1,104.9 849.2 30.1 23.2 20.9 10.7 2.10% 2.47%
32 39 Berkshire Hathaway Omaha 1,093.4 919.6 18.9 13.9 2.2 529.0 1.27% 0.24%
33 41 Wyeth Madison, N.J. 1,076.8 892.7 20.6 17.8 19.0 -6.3 1.65% 2.13%
34 36 Wal-Mart Stores Bentonville, Ark. 1,072.6 970.3 10.5 61.2 34.2 78.8 5.71% 3.53%
35 38 JP Morgan Chase & Co. New York 1,062.5 922.2 15.2 27.8 31.2 -10.9 2.62% 3.38%
36 27 Novartis Basel, Switzerland 1,052.2 1,175.3 -10.5 27.3 25.5 7.0 2.59% 2.17%
37 33 Estee Lauder Cos. New York 1,031.3 1,039.0 -0.7 1.7 0.5 252.0 0.16% 0.05%
38 65 Merck & Co. Whitehouse Station, N.J. 1,024.2 538.6 90.2 17.9 7.5 137.8 1.75% 1.40%
39 35 Citigroup New York 1,012.2 1,000.5 1.2 24.8 33.7 -26.5 2.45% 3.37%
40 48 Astra Zeneca London 1,005.3 826.0 21.7 29.9 24.8 20.3 2.97% 3.01%
41 31 Viacom New York 934.1 1,075.5 -13.1 30.0 36.3 -17.3 3.21% 3.37%
42 43 Schering-Plough Corp. Kenilworth,N.J. 931.5 854.7 9.0 4.8 5.1 -5.8 0.52% 0.60%
43 32 American Express Co. New York 928.7 1,068.9 -13.1 80.8 28.1 188.0 8.70% 2.62%
44 44 General Mills Minneapolis 920.5 852.0 8.0 15.7 20.3 -22.6 1.71% 2.38%
45 46 Microsoft Corp. Redmond, Wash. 912.2 839.9 8.6 81.6 103.0 -20.8 8.95% 12.27%
46 42 Yum Brands Lousiville, Ky. 902.0 866.7 4.1 2.8 0.9 204.0 0.31% 0.11%
47 37 Dell Round Rock, Texas 882.5 945.8 -6.7 137.8 156.6 -12.0 15.61% 16.56%
48 50 Best Buy Co. Richfield, Minn. 878.7 823.5 6.7 31.6 13.5 134.7 3.60% 1.63%
49 49 Capital One Finance Corp. McLean, VA. 863.7 824.8 4.7 53.1 33.0 61.1 6.15% 4.00%
50 51 Lowe's Co. Mooresville, N.C. 838.5 778.2 7.7 19.5 8.0 145.0 2.33% 1.02%
August 10, 2007 55

Figure 56: Top U.S. Advertisers (51–100) – With Total Spend and Internet Spend ($ in millions)
Internet Advertising
Rank Total Ad Spending Total Internet Ad Spending As % of Total Advertising
2006 2005 Marketer Headquarters 2006 2005 %CHG 2006 2005 %CHG 2006 2005
51 47 Hewlett-Packard Co. Palo Alto, Calif. 828.8 831.8 -0.4 111.4 108.0 3.2 13.44% 12.98%
52 53 Deutsche Telekom Bonn, Germany 815.1 714.6 14.1 35.0 13.0 168.7 4.29% 1.82%
53 40 Anheuser-Busch Cos. St. Louis 813.4 919.2 -11.5 6.1 2.6 132.0 0.75% 0.29%
54 59 Hyundai Motors Co. Seoul 785.9 608.5 29.2 14.4 8.7 66.0 1.83% 1.43%
55 55 Kohl's Corp. Menomonee Falls, Wis. 765.9 646.6 18.5 4.0 4.5 -10.9 0.52% 0.69%
56 52 Kellog Co. Battle Creek, Mich 765.1 725.2 5.5 9.3 10.6 -12.3 1.22% 1.46%
57 71 IAC/InterActiveCorp New York 743.5 496.1 49.9 122.1 -- -- 16.42% --
58 54 Coca-Cola Co. Atlanta 740.8 711.2 4.2 21.3 5.9 258.4 2.88% 0.84%
59 61 Bristol-Myers Squibb Co. New York 691.1 585.4 18.1 17.1 7.9 115.9 2.47% 1.35%
60 58 Nike Beaverton.Ore. 678.4 608.6 11.5 11.0 3.0 268.9 1.62% 0.49%
61 56 Mars Inc. McLean, VA. 658.2 636.5 3.4 11.1 2.6 327.7 1.69% 0.41%
62 57 Cadbury Schweppes London 643.7 628.2 2.5 6.6 1.5 340.9 1.03% 0.24%
63 68 Victoria's Secret Corp. Columbus, Ohio 600.5 515.0 16.6 45.3 13.9 226.7 7.54% 2.69%
64 69 Visa International San Francisco 597.1 500.3 19.3 17.2 20.9 -17.7 2.88% 4.18%
65 62 SC Johnson Racine, Wis. 596.5 575.7 3.6 1.7 0.3 509.3 0.28% 0.05%
66 63 Clorox Co. Oakland, Calif. 584.2 572.4 2.1 8.8 2.6 240.8 1.51% 0.45%
67 70 Comcast Corp. Philadelphia 568.5 497.1 14.4 32.1 7.4 335.9 5.65% 1.48%
68 73 Campbell Soup Co. Camden, N.J. 564.3 484.0 16.6 4.1 3.1 34.3 0.73% 0.63%
69 75 Eli Lilly & Co. Indianapolis 561.0 475.3 18.0 9.2 9.1 0.9 1.64% 1.92%
70 79 Bayer Leverkusen, Germany 553.6 452.7 22.3 11.3 0.8 1,323.2 2.04% 0.18%
71 72 Doctor's Associates Milford, Conn. 539.8 486.8 10.9 2.3 2.4 -3.2 0.43% 0.49%
72 74 Safeway Pleasanton, Calif. 533.6 481.7 10.8 0.7 0.0 7,677.8 0.13% 0.00%
73 66 Kroger Co. Cincinnati 527.5 537.5 -1.9 1.0 0.8 24.2 0.19% 0.15%
74 64 IBM Corp. Armonk, N.Y. 516.5 547.0 -5.6 13.0 9.9 32.0 2.52% 1.80%
75 83 Circuit City Stores Richmond, Va. 498.2 426.5 16.8 49.4 50.3 -1.8 9.92% 11.79%
76 82 Gap Inc. San Francisco 489.4 432.1 13.3 5.8 5.3 9.4 1.19% 1.23%
77 76 MasterCard International Purchase, N.Y. 486.3 466.0 4.4 21.6 10.3 109.5 4.44% 2.21%
78 92 Allstate Corp. Northbrook, Ill. 476.9 394.0 21.0 18.6 20.3 -8.3 3.90% 5.15%
79 85 Vonage Holdings Corp. Holmdel, N.J. 465.1 413.7 12.4 185.7 275.7 -32.7 39.93% 66.65%
80 67 Sanofi-Aventis Paris 463.1 518.3 -10.7 8.8 8.2 6.8 1.90% 1.59%
81 87 Staples Framingham, MA 457.2 404.9 12.92 1.9 -- -- 0.42% --
82 80 Wells Fargo & Co. San Francisco, CA. 456.1 443.1 2.9 7.1 -- -- 1.56% --
83 90 eBay San Jose, CA 453.3 396.6 14.3 51.7 -- -- 11.41% --
84 86 Washington Mutual Seattle, WA 443.0 406.9 8.9 17.7 -- -- 4.00% --
85 77 Wendy's International Dublin, Ohio 435.2 453.4 -4.0 6.9 4.6 51.3 1.59% 1.01%
86 60 Volkswagen Wolfsburg, Germany 419.3 590.0 -28.9 19.5 19.9 -1.9 4.65% 3.37%
87 91 Diageo London 418.9 394.3 6.2 10.5 2.6 305.7 2.51% 0.66%
88 95 Mattel El Segundo, Calif. 394.1 383.6 2.7 2.8 1.7 61.2 0.71% 0.45%
89 156 Apple Cupertino, CA 383.7 219.5 74.8 14.6 -- -- 3.81% --
90 101 Burger King Corp. Miami 379.5 354.5 7.1 1.8 0.9 91.7 0.47% 0.26%
91 81 Abbot Laboratories Abbott Park, Ill 374.4 436.4 -14.2 3.3 2.5 33.7 0.88% 0.57%
92 78 SABMiller London 370.8 452.9 -18.1 4.5 4.5 -1.1 1.21% 1.00%
93 89 Molson Coors Brewing Co. Denver/Montreal 369.5 400.9 -7.8 6.5 2.3 183.6 1.76% 0.57%
94 84 CBS Corp. New York, NY 369.2 426.5 -13.4 13.9 -- -- 3.76% --
95 97 Reckitt Benckiser Sloth, Berkshire, U.K. 366.7 369.3 -0.7 0.6 0.6 -0.7 0.16% 0.16%
96 100 ConAgra Foods Omaha 366.2 355.8 2.9 0.6 1.0 -41.7 0.16% 0.29%
97 102 Qwest Communications International Denver, CO. 362.4 352.6 2.8 2.6 -- -- 0.72% --
98 103 Philips Electronics Amsterdam 350.8 337.2 4.0 3.5 8.1 -56.9 1.00% 2.41%
99 109 Office Depot Delray Beach, Fl. 342.7 314.4 9.0 12.5 -- -- 3.65% --
100 88 State Farm Mutual Auto Insurance Co. Bloomington, Ill 338.1 401.7 -15.8 33.9 15.5 118.0 10.03% 3.87%
Total 104,795.0 101,634.1 3.1 3,273.0 2,449.5 33.6 3.12% 2.41%
56 August 10, 2007

Figure 57: Domestic Search Share, June 2007
MySpace.com, 0.3%
Google Sites, 49.5%
Ask Network, 5.0%
MSN-Microsoft Sites,
13.2%
Time Warner Network,

4.2%
Yahoo! Sites, 25.1%
Source: comScore Networks, Lehman Brothers estimates
Figure 58: Global Search Share, June 2007
MYSPACE.COM, 0.2%
Ask Netw ork, 2.9%
Tim e Warner
Netw ork, 1.6%
Microsoft Sites,
9.3% Google Sites, 67.0%
Yahoo! Sites, 17.8%
August 10, 2007 57

Figure 59: Domestic Search Share – Google and Yahoo!
Google Sites, 49.5%

55.0%
50.0%
45.0%
40.0%
35.0% Yahoo! Sites, 25.1%
30.0%
25.0%
20.0%
6
7
5
6
5
6
5
06
07
7
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Google Sites A Yahoo! Sites
Figure 60: Domestic Search Share – Microsoft, Ask.com, and AOL
18.0%
15.0%
Microsoft Sites, 13.2%
12.0%
9.0%
Ask Network, 5.0%
6.0%
3.0% Time Warner Network, 4.2%
0.0%
5
7
5
6
5
06
07
7
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6
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58 August 10, 2007

Figure 61: U.S. Search Market Share and Growth, June 2005–June 2007
Searches Jun-05 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07
Total 4,967,302,768 6,406,649,000 6,255,473,000 6,469,491,000 6,591,012,000 6,797,086,000 6,717,164,000 6,774,757,000 6,884,885,000 6,937,999,000 7,335,850,000 7,338,414,000 7,611,283,000 8,045,488,000
Google Sites 1,831,240,000 2,863,501,000 2,736,278,000 2,850,802,000 2,972,178,000 3,085,845,000 3,150,030,000 3,206,086,000 3,268,516,000 3,340,053,000 3,540,604,000 3,647,075,000 3,861,004,000 3,984,743,000
Yahoo! Sites 1,507,767,000 1,825,904,000 1,800,944,000 1,857,328,000 1,849,240,000 1,919,464,000 1,892,019,000 1,932,895,000 1,937,774,000 1,952,159,000 2,019,676,000 1,969,377,000 2,011,760,000 2,017,791,000
Time Warner Network 464,882,000 357,212,000 366,274,000 359,627,000 367,605,000 366,011,000 342,275,000 335,117,000 342,265,000 338,474,000 367,933,000 364,437,000 348,302,000 341,473,000
MSN-Microsoft Sites 778,307,000 818,341,000 802,236,000 811,671,000 785,506,000 796,317,000 736,207,000 713,120,000 732,934,000 729,637,000 797,660,000 757,254,000 781,709,000 1,062,681,000
Ask Network 299,169,000 326,659,000 338,089,000 358,247,000 383,489,000 391,836,000 367,313,000 363,468,000 361,231,000 347,683,000 378,674,000 376,178,000 383,697,000 403,145,000
MYSPACE.COM - 49,458,000 41,992,000 49,127,000 43,106,000 46,783,000 36,768,000 20,446,000 26,464,000 24,233,000 26,553,000 28,151,000 34,860,000 35,649,000
Monthly Change Jun-05 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07
Total -4% -6% -2% 3% 2% 3% -1% 1% 2% 1% 6% 0% 4% 6%
Google Sites -6% -5% -4% 4% 4% 4% 2% 2% 2% 2% 6% 3% 6% 3%

Yahoo! Sites -4% -5% -1% 3% 0% 4% -1% 2% 0.3% 1% 3% -2% 2% 0%
Time Warner Network -4% -18% 3% -2% 2% 0% -6% -2% 2% -1% 9% -1% -4% -2%
MSN-Microsoft Sites -1% -9% -2% 1% -3% 1% -8% -3% 3% -0.4% 9% -5% 3% 36%
Ask Network -7% -10% 3% 6% 7% 2% -6% -1% -1% -4% 9% -1% 2% 5%
MYSPACE.COM NA 5% -15% 17% -12% 9% -21% -44% 29% -8% 10% 6% 24% 2%
Quarterly 2Q05 2Q06 3Q06 4Q06 1Q07 2Q07

Total 15,291,195,798 19,891,982,000 19,315,976,000 20,289,007,000 21,158,734,000 22,995,185,000
Google Sites 5,654,182,000 8,753,350,000 8,559,258,000 9,441,961,000 10,149,173,000 11,492,822,000

Yahoo! Sites 4,646,027,000 5,606,682,000 5,507,512,000 5,744,378,000 5,909,609,000 5,998,928,000
Time Warner Network 1,407,046,000 1,249,354,000 1,093,506,000 1,043,403,000 1,048,672,000 1,054,212,000
MSN-Microsoft Sites 2,391,293,000 2,571,325,000 2,399,413,000 2,245,644,000 2,260,231,000 2,601,644,000
Ask Network 934,354,000 1,073,625,000 1,079,825,000 1,122,617,000 1,087,588,000 1,163,020,000
MYSPACE.COM NA 96,486,000 134,225,000 103,997,000 77,250,000 98,660,000
Q/Q Change 2Q05 2Q06 3Q06 4Q06 1Q07 2Q07

Total -3% 12% -3% 5% 4% 9%
Google Sites 0% 17% -2% 10% 7% 13%

Yahoo! Sites -5% 13% -2% 4% 3% 2%
Time Warner Network -2% -10% -12% -5% 1% 1%
MSN-Microsoft Sites -7% 8% -7% -6% 1% 15%
Ask Network 12% 4% 1% 4% -3% 7%
MYSPACE.COM NA NA 39% -23% -26% 28%
Search Share Jun-05 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Google Sites 36.9% 44.7% 43.7% 44.1% 45.1% 45.4% 46.9% 47.3% 47.5% 48.1% 48.3% 49.7% 50.7% 49.5%
Yahoo! Sites 30.4% 28.5% 28.8% 28.7% 28.1% 28.2% 28.2% 28.5% 28.145% 28.137% 27.5% 26.8% 26.4% 25.1%
Time Warner Network 9.4% 5.6% 5.9% 5.6% 5.6% 5.4% 5.1% 4.9% 5.0% 4.9% 5.0% 5.0% 4.6% 4.2%
MSN-Microsoft Sites 15.7% 12.8% 12.8% 12.5% 11.9% 11.7% 11.0% 10.5% 10.6% 10.5% 10.9% 10.3% 10.3% 13.2%
Ask Network 6.0% 5.1% 5.4% 5.5% 5.8% 5.8% 5.5% 5.4% 5.2% 5.0% 5.2% 5.1% 5.0% 5.0%
MYSPACE.COM NA 0.8% 0.7% 0.8% 0.7% 0.7% 0.5% 0.3% 0.4% 0.3% 0.4% 0.4% 0.5% 0.4%
Y/Y Change - Monthly Jun-05 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07
Total 28% 29% 30% 28% 31% 33% 30.5% 29.7% 26% 19% 14% 10.5% 11.2% 25.6%
Google Sites 36% 56% 56% 52% 57% 55% 54% 54% 44% 36% 29% 27% 28% 39%
Yahoo! Sites 32% 21% 23% 24% 23% 28% 25% 25% 23% 22% 13% 6% 5% 11%
Time Warner Network -8% -23% -23% -26% -20% -19% -23% -25% -21% -27% -24% -20% -20% -4%
MSN-Microsoft Sites 42% 5% 8% 2% 0% 7% 1% -5% -3% -7% -6% -12% -13% 30%
Ask Network 33% 9% 15% 18% 19% 12% 9% 10% 18% -1% 1% -2% 6% 23%
MYSPACE.COM NA NA NA NA NA NA NA NA NA NA NA NA NA NA
Y/Y Change - Quarterly 2Q05 2Q06 3Q06 4Q06 1Q07 2Q07

Total 31% 30% 30% 31% 19% 16%
Google Sites 38% 55% 55% 54% 36% 31%

Yahoo! Sites 42% 21% 23% 26% 19% 7%
Time Warner Network -6% -11% -23% -22% -24% -16%
MSN-Microsoft Sites 42% 8% 3% 1% -5% 1%
Ask Network 156% 15% 18% 10% 5% 8%
MYSPACE.COM NA NA NA NA NA 2%
Quarterly Market Share 2Q05 2Q06 3Q06 4Q06 1Q07 2Q07

Total 100% 100% 100% 100% 100% 100%
Google Sites 37.0% 44.0% 44.3% 46.5% 48.0% 50.0%

Yahoo! Sites 30.4% 28.2% 28.5% 28.3% 27.9% 26.1%
Time Warner Network 9.2% 6.3% 5.7% 5.1% 5.0% 4.6%
MSN-Microsoft Sites 15.6% 12.9% 12.4% 11.1% 10.7% 11.3%
Ask Network 6.1% 5.4% 5.6% 5.5% 5.1% 5.1%
MYSPACE.COM NA 0.5% 0.7% 0.5% 0.4% 0.4%
August 10, 2007 59

Figure 62: Global Search Market Share and Growth, June 2005–June 2007
Searches Jun-05 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07
Total 13,934,642,000 18,657,752,000 18,670,040,000 18,266,581,000 19,043,712,000 20,137,801,000 20,041,211,000 20,636,718,000 21,541,160,000 21,886,612,000 23,335,257,000 23,914,050,000 24,831,390,000 26,322,678,000
Google Sites 7,786,175,000 11,629,409,000 11,335,515,000 11,190,839,000 12,005,736,000 12,809,234,000 13,000,755,000 13,493,252,000 14,091,790,000 14,378,373,000 15,481,064,000 16,024,008,000 16,817,737,000 17,641,660,000
Yahoo! Sites 3,043,367,000 3,966,528,000 4,099,373,000 3,822,074,000 3,795,460,000 3,976,624,000 3,869,121,000 4,033,027,000 4,211,452,000 4,274,225,000 4,485,484,000 4,496,029,000 4,595,861,000 4,672,561,000
Microsoft Sites 1,529,851,000 1,599,961,000 1,690,331,000 1,643,289,000 1,631,151,000 1,709,654,000 1,632,895,000 1,622,240,000 1,662,568,000 1,715,294,000 1,786,255,000 1,842,827,000 1,880,347,000 2,448,884,000
Ask Network 669,754,000 555,388,000 609,548,000 623,203,000 644,576,000 673,986,000 632,203,000 632,785,000 659,325,000 658,423,000 693,715,000 716,517,000 733,178,000 751,473,000
Time Warner Network 607,791,000 550,444,000 562,421,000 560,951,000 559,282,000 547,168,000 489,891,000 464,217,000 453,663,000 442,445,000 458,201,000 448,442,000 429,556,000 421,066,000
MYSPACE.COM NA 60,029,000 52,231,000 60,425,000 58,703,000 64,044,000 51,380,000 29,658,000 52,732,000 55,005,000 60,582,000 43,865,000 47,924,000 51,859,000
Monthly Change Jun-05 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07
Total 1% -4% 0% -2% 4% 6% -0.5% 3.0% 4.4% 1.6% 6.6% 2.5% 3.8% 6.0%
Google Sites 2% -4% -3% -1% 7% 7% 1% 4% 4% 2% 8% 4% 5% 5%

Yahoo! Sites -1% 0% 3% -7% -1% 5% -3% 4% 4% 1% 5% 0% 2% 2%
Microsoft Sites 6% -7% 6% -3% -1% 5% -4% -1% 2% 3% 4% 3% 2% 30%
Ask Network -8% -11% 10% 2% 3% 5% -6% 0% 4% 0% 5% 3% 2% 2%
Time Warner Network -5% -17% 2% 0% 0% -2% -10% -5% -2% -2% 4% -2% -4% -2%
MYSPACE.COM NA 5% -13% 16% -3% 9% -20% -42% 78% 4% 10% -28% 9% 8%
Quarterly 2Q05 2Q06 3Q06 4Q06 1Q07 2Q07

Total 41,205,376,000 56,089,895,000 55,980,333,000 60,815,730,000 66,763,029,000 75,068,118,000
Google Sites 22,762,943,000 34,695,849,000 34,532,090,000 39,303,241,000 43,951,227,000 50,483,405,000

Yahoo! Sites 9,068,717,000 11,577,847,000 11,716,907,000 11,878,772,000 12,971,161,000 13,764,451,000
Microsoft Sites 4,448,218,000 4,923,291,000 4,964,771,000 4,964,789,000 5,164,117,000 6,172,058,000
Ask Network 2,117,764,000 1,857,633,000 1,877,327,000 1,938,974,000 2,011,463,000 2,201,168,000
Time Warner Network 1,855,956,000 1,903,071,000 1,682,654,000 1,501,276,000 1,354,309,000 1,299,064,000
MYSPACE.COM NA 167,893,000 171,359,000 145,082,000 168,319,000 143,648,000
Q/Q Change 2Q05 2Q06 3Q06 4Q06 1Q07 2Q07

Total 10% 15% 0% 9% 10% 12%
Google Sites 21% 18% 0% 14% 12% 15%

Yahoo! Sites 1% 16% 1% 1% 9% 6%
Microsoft Sites -1% 12% 1% 0% 4% 20%
Ask Network 15% -7% 1% 3% 4% 9%
Time Warner Network -9% -7% -12% -11% -10% -4%
MYSPACE.COM NA NA 2% -15% 16% -15%
Search Share Jun-05 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Google Sites 55.9% 62.3% 60.7% 61.3% 63.0% 63.6% 64.9% 65.4% 65.4% 65.7% 66.3% 67.0% 67.7% 67.0%
Yahoo! Sites 21.8% 21.3% 22.0% 20.9% 19.9% 19.7% 19.3% 19.5% 19.6% 19.5% 19.2% 18.8% 18.5% 17.8%
Microsoft Sites 11.0% 8.6% 9.1% 9.0% 8.6% 8.5% 8.1% 7.9% 7.7% 7.8% 7.7% 7.7% 7.6% 9.3%
Ask Network 4.8% 3.0% 3.3% 3.4% 3.4% 3.3% 3.2% 3.1% 3.1% 3.0% 3.0% 3.0% 3.0% 2.9%
Time Warner Network 4.4% 3.0% 3.0% 3.1% 2.9% 2.7% 2.4% 2.2% 2.1% 2.0% 2.0% 1.9% 1.7% 1.6%
MYSPACE.COM NA 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.1% 0.2% 0.3% 0.3% 0.2% 0.2% 0.2%
Y/Y Change - Monthly Jun-05 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07
Total 47.3% 33.9% 43.3% 38.4% 42.5% 44.6% 38.9% 41.9% 45.2% 37.6% 29.3% 32.7% 28.0% 41.1%
Google Sites 70.7% 49.4% 56.6% 51.8% 57.7% 58.9% 50.0% 57.5% 58.4% 50.1% 41.2% 45.6% 39.4% 51.7%
Yahoo! Sites 24.0% 30.3% 48.3% 37.0% 38.4% 41.5% 40.1% 30.7% 36.8% 33.9% 22.2% 22.8% 16.3% 17.8%
Microsoft Sites 56.8% 4.6% 13.7% 10.3% 11.6% 18.5% 16.1% 18.6% 23.5% 19.4% 11.3% 14.7% 9.5% 53.1%
Ask Network 50.9% -17.1% -6.5% -4.3% -4.2% -6.1% -10.5% -2.9% 9.6% -4.1% -2.4% 6.1% 16.9% 35.3%
Time Warner Network -8.4% -9.4% -8.9% -11.5% -10.7% -13.8% -23.6% -28.5% -28.2% -35.3% -37.9% -35.1% -35.1% -23.5%
MYSPACE.COM NA NA NA NA NA NA NA NA NA NA NA NA NA NA
Y/Y Change - Quarter 2Q05 2Q06 3Q06 4Q06 1Q07 2Q07

Total 50% 36% 41% 42% 37% 34%
Google Sites 74% 52% 55% 55% 49% 46%

Yahoo! Sites 32% 28% 41% 37% 30% 19%
Microsoft Sites 46% 11% 12% 18% 18% 25%
Ask Network 182% -12% -5% -7% 1% 18%
Time Warner Network -4% 3% -10% -22% -34% -32%
MYSPACE.COM NA NA NA NA NA NA
Quarterly Market Shar 2Q05 2Q06 3Q06 4Q06 1Q07 2Q07

Total 100% 100% 100% 100% 100% 100%
Google Sites 55% 62% 62% 65% 66% 67%

Yahoo! Sites 22% 21% 21% 20% 19% 18%
Microsoft Sites 11% 9% 9% 8% 8% 8%
Ask Network 5% 3% 3% 3% 3% 3%
Time Warner Network 5% 3% 3% 2% 2% 2%
MYSPACE.COM NA NA 0% 0% 0% 0%
60 August 10, 2007

Figure 63: Lehman Brothers Partnership Matrix, Part 1: Destination Site and Advertising Provider
Portal
Jun-07 Graphical
Web Domain Type of Site Unique Visitors Natural Search Paid Search Contextual Ads Display Advertising
YAHOO.COM Portal 129,532 Yahoo Yahoo Yahoo Yahoo
MSN.COM Portal 96,451 MSN MSN MSN MSN
AOL.COM Portal 85,443 Google Google Google AOL
ABOUT.COM Portal 36,815 -- Google Google --
GO.COM Portal 33,237 Yahoo Yahoo -- --
COMCAST.NET Portal 14,946 Google Google -- Yahoo
GLAM.COM Network Portal 19,075 Google Google Google Google
Search/Navigation
Jun-07 Graphical
GOOGLE.COM Portal 118,438 Google Google -- --
ASK.COM Search Engine 24,132 Ask.com Google/Ask -- --
MYWEBSEARCH.COM Search Engine 16,116 Ask.com Google/Ask -- --
ANSWERS.COM Search Engine 11,995 -- Google -- --
NETSCAPE.COM Search Engine 8,954 Google Google -- --
LYCOS.COM Search Engine 4,703 Ask.com Google/Ask -- --
FINDARTICLES.COM Search Engine 6,318 LookSmart LookSmart -- --
INFOSPACE.COM Meta Search Engine 3,446 Google/Yahoo/MSN/Ask Google/Yahoo/MSN/Ask -- --
IWON.COM Search Engine 1,811 Google Google -- --
METACAFE.COM Video Search Engine 6,200 -- -- -- Google
DOGPILE.COM Meta Search Engine 3,618 Google/Yahoo/MSN/Ask Google/Yahoo/MSN/Ask -- --
ALTAVISTA.COM Search Engine 2,097 Yahoo Yahoo -- --
TECHNORATI.COM Search Engine 2,231 -- -- Google --
News/Information
Jun-07 Graphical
WEATHER.COM Weather 29,580 Yahoo Yahoo -- --
MSNBC.COM General News 27,780 MSN MSN Pulse 360 --
CNN.COM General News 19,233 Google Google Google --
NYTIMES.COM Newspaper Website 7,234 Google Google Google --
USATODAY.COM Newspaper Website 6,263 Yahoo Yahoo Quigo --
FOXNEWS.COM General News 6,900 MSN MSN Quigo --
ABCNEWS.COM General News 5,635 -- -- Quigo
WASHINGTONPOST.COM Newspaper Website 5,431 Google Google Google --
CBSNEWS.COM General News 3,949 Yahoo Yahoo Yahoo --
ACCUWEATHER.COM Weather 3,167 Google Google Google --
CNET.COM Technology News 4,190 Search.com (Meta) Google Google --
LATIMES.COM Newspaper Website 2,329 -- Google Quigo --
TIME.COM General News 2,352 -- -- Quigo --
SALON.COM General News 1,065 Yahoo Yahoo Google --
DIGG.COM Social News Ranking 4,353 -- MSN MSN --
--
Community
Jun-07 Graphical
MYSPACE.COM Social Networking 70,478 Google Google Google --
FACEBOOK.COM Social Networking 27,965 MSN MSN MSN MSN
IVILLAGE.COM Women 4,777 Yahoo Yahoo Yahoo --
BEBO.COM Social Networking 4,083 Google Google -- --
FRIENDSTER.COM Social Networking 1,667 Google Google Google Google
Retail/E-Commerce
Jun-07 Graphical
EBAY.COM Online Auctions 72,368 -- -- Yahoo Yahoo
AMAZON.COM Multicategory E-Commerce 43,681 Amazon (A9) Amazon (ClickRiver) -- Amazon
SHOPPING.COM Comparison Shopping 12,037 -- Google -- --
BIZRATE.COM Comparison Shopping 13,643 -- Google -- --
SHOPZILLA.COM Comparison Shopping 9,726 -- Google -- --
DEALTIME.COM Comparison Shopping 6,343 -- Google -- --
SHOPLOCAL.COM Comparison Shopping 7,814 -- Google -- --
PRICEGRABBER.COM Comparison Shopping 4,258 -- Google -- --
Business/Finance
Jun-07 Graphical
CNNMONEY.COM Financial News 4,716 Yahoo Yahoo Quigo --
FORBES.COM Financial News 5,778 Eurekster Business.com Quigo --
BUSINESSWEEK.COM Financial News 1,871 -- Business.com IndustryBrains.com --
WSJ.COM Financial News 1,470 -- Business.com Pulse 360 --
Source: Company Web sites, Lehman Brothers, comScore Networks
August 10, 2007 61

Figure 64: Lehman Brothers Partnership Matrix, Part 2: Destination Site and Advertising Provider
Directories/Resources
Jun-07 Graphical
MAPQUEST.COM Maps 53,775 Google via AOL Google via AOL -- --
DICTIONARY.COM Reference 10,939 Google Google -- --
SWITCHBOARD.COM Directories 6,003 InfoSpace (Meta) InfoSpace (Meta) -- --
MATCH.COM Personals 4,216 Ask.com Google/Ask -- --
Entertainment
Jun-07 Graphical
YOUTUBE.COM Online Video 42,986 -- -- -- Google
IMDB.COM Movies 21,862 -- Kanoodle -- --
TICKETMASTER.COM Event Tickets 14,272 Ask.com Google/Ask -- --
CITYSEARCH.COM Local Directory 13,707 Ask.com Google/Ask -- --
ABC.COM TV 9,269 Yahoo Yahoo -- --
MTV.COM Entertainment/Music 8,836 -- Yahoo Yahoo --
NBC.COM TV 5,257 SLI Systems Yahoo -- --
TMZ.COM Entertainment News 9,390 Google via AOL Google via AOL -- --
PEOPLE.COM Entertainment News 6,083 -- -- Quigo --
CBS.COM TV 3,320 -- -- -- --
VH1.COM Entertainment/Music 4,192 -- Yahoo Yahoo --
WARNERBROS.COM Multimedia 4,230 Yahoo Yahoo -- --
ISP
Jun-07 Graphical
EARTHLINK.NET ISP 6,684 Google Google -- --
NETZERO.NET ISP 3,677 Yahoo Yahoo -- --
JUNO.COM ISP 2,284 Yahoo Yahoo -- --
Services
Jun-07 Graphical
HOTMAIL.COM Email 37,890 MSN MSN MSN MSN
BLOGGER.COM Blogs 28,285 Google Google -- --
FLICKR.COM Social Networking-Photo 9,622 Yahoo Yahoo -- --
EVITE.COM Online Invitation 6,903 -- Google via Ask.com -- --
Sports
Jun-07 Graphical
ESPN.COM Sports News 17,473 -- Quigo Quigo --
FOXSPORTS.COM Sports News 14,710 MSN MSN Pulse 360 --
SI.COM Sports News 5,072 Yahoo Yahoo Quigo --
SPORTSLINE.COM Sports News 2,899 Google Google Google --
NASCAR.COM Sports News 4,886 -- Kanoodle Kanoodle --
Other
Jun-07 Graphical
WEBMD.COM Health 10,022 -- Google -- --
HOTJOBS.COM Career Resources 11,338 Yahoo Yahoo -- --
CARS.COM Automotive 4,737 Google -- -- --
International
Jun-07
Web Domain Type of Site Country Unique Visitors Natural Search Paid Search Contextual Ads
NAVER.COM Portal S. Korea 26,294 Naver Yahoo --
DAUM.NET Portal S. Korea 22,045 Google Google --
SINA.COM Sites Portal China 56,886 Google Google --
ALIBABA.COM Web Services Company China 21,090 Yahoo Yahoo --
BAIDU.COM Homepage Search Engine China 26,211 Baidu -- --
YAHOO.CO.JP Portal Japan 48,698 Yahoo Yahoo --
TERRA.COM Portal Spain 8,352 Google --
BBC.CO.UK News Portal U.K. 44,362 BBC -- --
OEM
Company Provider Deal Term Deal Scope

DELL Google NA Google toolbar and desktop search
HP Yahoo! NA Yahoo! search toolbar & homepage
ACER Yahoo! NA Yahoo! search toolbar & homepage
LENOVO Microsoft NA Windows Live services pre-loaded
GATEWAY Google NA Google toolbar and desktop search
Source: Company reports, Lehman Brothers, comScore Networks
62 August 10, 2007

Figure 65: Help Wanted Advertising Market Share Analysis, U.S., 1998–2011E ($ in millions)
1998 1999 2000 2001 2002 2003 2004 2005 2006(A) 2007(E) 2008(E) 2009(E) 2010(E) 2011(E)
Help Wanted Market - U.S.
Traditional Newspaper 7,702.1 8,026.0 8,712.6 5,704.7 4,387.5 3,977.4 4,576.3 5,126.5 4,741.1 4,148.5 3,837.4 3,549.6 3,283.3 3,037.1
Internet 182.0 411.0 740.0 877.0 798.0 859.0 1,161.0 1,606.7 2,041.7 2,280.4 2,490.4 2,669.4 2,821.2 2,962.3
Total Revenue 7,884.1 8,437.0 9,452.6 6,581.7 5,185.5 4,836.4 5,737.3 6,733.2 6,782.8 6,428.9 6,327.7 6,218.9 6,104.6 5,999.4
% Change
Traditional Newspaper -- 4.2% 8.6% -34.5% -23.1% -9.3% 15.1% 12.0% -7.5% -12.5% -7.5% -7.5% -7.5% -7.5%
Internet -- 125.8% 80.0% 18.5% -9.0% 7.6% 35.2% 38.4% 27.1% 11.7% 9.2% 7.2% 5.7% 5.0%
Total -- 7.0% 12.0% -30.4% -21.2% -6.7% 18.6% 17.4% 0.7% -5.2% -1.6% -1.7% -1.8% -1.7%
% Market Share
Traditional Newspaper 97.7% 95.1% 92.2% 86.7% 84.6% 82.2% 79.8% 76.1% 69.9% 64.5% 60.6% 57.1% 53.8% 50.6%
Internet 2.3% 4.9% 7.8% 13.3% 15.4% 17.8% 20.2% 23.9% 30.1% 35.5% 39.4% 42.9% 46.2% 49.4%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Internet Help Wanted Market - U.S. -- Major Players

Revenue
Monster (U.S.) -- -- 266.1 367.8 284.3 295.8 399.2 521.6 658.1 723.9 778.1 828.7 870.2 913.7
CareerBuilder -- -- 45.0 62.5 54.1 80.3 141.4 247.5 336.6 378.7 416.5 447.8 474.7 498.4
Other -- -- 428.9 446.7 459.6 482.9 620.5 837.6 1,047.0 1,177.9 1,295.7 1,392.9 1,476.4 1,550.3
Total 182.0 411.0 740.0 877.0 798.0 859.0 1,161.0 1,606.7 2,041.7 2,280.4 2,490.4 2,669.4 2,821.2 2,962.3
% Change
Monster (U.S.) -- -- -- 38.2% -22.7% 4.0% 35.0% 30.7% 26.2% 10.0% 7.5% 6.5% 5.0% 5.0%
CareerBuilder -- -- -- 38.9% -13.4% 48.4% 76.0% 75.1% 36.0% 12.5% 10.0% 7.5% 6.0% 5.0%
Other -- -- -- 4.2% 2.9% 5.1% 28.5% 35.0% 25.0% 12.5% 10.0% 7.5% 6.0% 5.0%
Total -- 125.8% 80.0% 18.5% -9.0% 7.6% 35.2% 38.4% 27.1% 11.7% 9.2% 7.2% 5.7% 5.0%
E = Lehman Brothers estimates A = Actual

Note: CareerBuilder revenue shown excludes revenue allocated directly to the contributing newspaper websites (approximately 50% of total).
Thus, the contributing newspaper websites' help wanted revenue is included in the other category.
Source: NAA, Forrester, and Lehman Brothers
Source: NAA, Forrester, Lehman Brothers Advertising & Publishing Analyst Craig Huber
Figure 66: Auto Classified Advertising Market Share, U.S., 1998–2011E ($ in millions)
1998 1999 2000 2001 2002 2003 2004 2005 2006(A) 2007(E) 2008(E) 2009(E) 2010(E) 2011(E)
Auto Classified Market - U.S.
Internet 21.5 38.7 65.8 111.8 190.1 304.2 446.9 625.6 782.0 918.9 1,056.7 1,162.4 1,249.6 1,343.3
Total Revenue 4,526.8 4,950.3 5,092.1 5,001.3 5,346.1 5,496.6 5,470.7 5,214.6 4,781.6 4,501.1 4,370.2 4,227.4 4,084.7 3,965.8
% Change
Traditional Newspaper -- 9.0% 2.3% -2.7% 5.5% 0.7% -3.2% -8.7% -12.8% -10.4% -7.5% -7.5% -7.5% -7.5%
Internet -- 80.0% 70.0% 70.0% 70.0% 60.0% 46.9% 40.0% 25.0% 17.5% 15.0% 10.0% 7.5% 7.5%
Total -- 9.4% 2.9% -1.8% 6.9% 2.8% -0.5% -4.7% -8.3% -5.9% -2.9% -3.3% -3.4% -2.9%
% Market Share
Internet 0.5% 0.8% 1.3% 2.2% 3.6% 5.5% 8.2% 12.0% 16.4% 20.4% 24.2% 27.5% 30.6% 33.9%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Figure 67: Real Estate Advertising Market Share Analysis, U.S., 1998–2011E ($ in millions)
1998 1999 2000 2001 2002 2003 2004 2005 2006(A) 2007(E) 2008(E) 2009(E) 2010(E) 2011(E)
Real Estate Market - U.S.
Internet 38.4 65.3 110.9 188.6 320.6 398.0 565.1 762.9 953.6 1,120.4 1,288.5 1,417.4 1,523.7 1,637.9
Total Revenue 3,132.7 3,181.6 3,277.8 3,700.4 3,989.1 4,351.7 4,786.6 5,402.2 6,109.1 5,803.3 5,620.1 5,424.1 5,229.9 5,066.2
% Change
Traditional Newspaper -- 0.7% 1.6% 10.9% 4.5% 7.8% 6.8% 9.9% 11.1% -9.2% -7.5% -7.5% -7.5% -7.5%
Internet -- 70.0% 70.0% 70.0% 70.0% 24.1% 42.0% 35.0% 25.0% 17.5% 15.0% 10.0% 7.5% 7.5%
Total -- 1.6% 3.0% 12.9% 7.8% 9.1% 10.0% 12.9% 13.1% -5.0% -3.2% -3.5% -3.6% -3.1%
% Market Share
Internet 1.2% 2.1% 3.4% 5.1% 8.0% 9.1% 11.8% 14.1% 15.6% 19.3% 22.9% 26.1% 29.1% 32.3%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
August 10, 2007 63

64 August 10, 2007

e-Commerce
August 10, 2007 65

Figure 68: U.S. E-Commerce by Category, 2003–11E ($ in millions)

2003 2004 2005 2006E 2007E 2008E 2009E 2010E 2011E
Apparel $6,922 $8,542 $11,150 $13,762 $16,420 $19,260 $22,213 $25,215 $28,211
General Apparel $5,139 $6,055 $7,863 $9,571 $11,290 $13,179 $15,213 $17,357 $19,566
Accessories $737 $870 $1,066 $1,333 $1,653 $1,984 $2,314 $2,631 $2,932
Footwear $1,046 $1,617 $2,220 $2,859 $3,478 $4,096 $4,686 $5,227 $5,713
Books $4,070 $4,378 $4,743 $5,268 $5,864 $6,371 $6,795 $7,150 $7,451
Trade/consumer $2,926 $3,078 $3,282 $3,621 $4,030 $4,378 $4,670 $4,914 $5,121
Academic $1,144 $1,300 $1,461 $1,648 $1,834 $1,992 $2,125 $2,236 $2,330
Computer hardware/software $13,274 $14,622 $16,221 $18,166 $20,517 $22,778 $25,018 $27,299 $29,671
Computer hardware $10,387 $11,442 $12,599 $14,131 $15,935 $17,659 $19,364 $21,100 $22,906
Computer software $1,783 $2,013 $2,356 $2,664 $3,092 $3,526 $3,973 $4,440 $4,935
Computer peripherals $1,104 $1,167 $1,265 $1,372 $1,491 $1,592 $1,680 $1,758 $1,829
Consumer electronics $4,525 $5,756 $7,796 $9,800 $11,940 $14,381 $17,117 $20,130 $23,392
Flowers/cards/gifts $4,223 $5,469 $6,811 $8,344 $10,322 $12,374 $14,407 $16,346 $18,147
Flowers $778 $1,129 $1,487 $1,833 $2,298 $2,787 $3,270 $3,721 $4,119
Cards $303 $440 $599 $723 $846 $968 $1,086 $1,196 $1,294
Gift cards and gift certificates $3,143 $3,900 $4,725 $5,788 $7,178 $8,619 $10,051 $11,429 $12,734
Cosmetics and fragrances $278 $406 $565 $760 $952 $1,139 $1,310 $1,459 $1,585
Over-the-counter personal care $519 $736 $982 $1,292 $1,621 $1,994 $2,401 $2,830 $3,269
Home furnishings $4,271 $5,953 $7,828 $10,204 $12,540 $15,041 $17,650 $20,315 $22,996
Furniture $1,578 $2,210 $3,045 $4,112 $5,191 $6,419 $7,770 $9,209 $10,696
Home décor and crafts $2,044 $2,916 $3,770 $4,929 $6,031 $7,167 $8,305 $9,429 $10,535
Linens $649 $828 $1,013 $1,163 $1,318 $1,456 $1,575 $1,678 $1,766
Appliances and tools $2,631 $3,670 $4,765 $5,904 $7,046 $8,261 $9,561 $10,965 $12,487
Tools/hardware $436 $726 $1,120 $1,574 $1,992 $2,501 $3,112 $3,832 $4,669
Garden supplies $416 $655 $916 $1,203 $1,482 $1,809 $2,183 $2,604 $3,070
Major appliances $825 $1,043 $1,209 $1,406 $1,594 $1,749 $1,873 $1,971 $2,049
Small appliances $955 $1,246 $1,519 $1,720 $1,978 $2,203 $2,394 $2,557 $2,698
Office supplies $2,721 $3,446 $4,330 $5,317 $6,279 $7,544 $8,880 $10,259 $11,656
Pet supplies $194 $294 $432 $527 $705 $928 $1,199 $1,517 $1,879
Jewelry/luxury goods $1,561 $2,388 $3,247 $4,049 $4,799 $5,627 $6,522 $7,469 $8,452
Music/video $4,658 $5,553 $6,667 $8,189 $9,945 $11,753 $13,656 $15,614 $17,593
Music $1,184 $1,344 $1,536 $1,796 $2,100 $2,329 $2,562 $2,798 $3,031
Video $3,474 $4,209 $5,131 $6,392 $7,845 $9,425 $11,094 $12,816 $14,562
Sporting goods and apparel $2,543 $3,559 $4,647 $5,758 $6,835 $8,021 $9,301 $10,654 $12,060
Sporting goods and equipment $1,701 $2,372 $3,009 $3,639 $4,228 $4,883 $5,602 $6,382 $7,217
Sporting apparel $841 $1,188 $1,638 $2,119 $2,607 $3,138 $3,699 $4,273 $4,843
Tickets $1,963 $2,832 $3,916 $5,115 $6,390 $7,897 $9,649 $11,651 $13,903
Movie tickets $297 $468 $655 $841 $1,026 $1,238 $1,477 $1,741 $2,028
Event tickets $1,666 $2,364 $3,261 $4,275 $5,364 $6,659 $8,172 $9,910 $11,874
Toys/video games $4,006 $5,076 $6,175 $7,451 $8,963 $10,444 $11,824 $13,060 $14,139
Toys $2,130 $2,663 $3,142 $3,728 $4,402 $5,035 $5,591 $6,055 $6,425
Baby products $779 $1,015 $1,305 $1,607 $1,935 $2,258 $2,557 $2,825 $3,057
Video games $1,097 $1,399 $1,728 $2,117 $2,625 $3,152 $3,675 $4,179 $4,656
Other* $4,602 $5,011 $5,457 $5,942 $6,368 $6,877 $7,490 $8,227 $9,100
General merchandise subtotal $62,960 $77,691 $95,731 $115,848 $137,506 $160,691 $184,994 $210,160 $235,991
Auto/auto parts $5,129 $7,173 $11,672 $15,930 $19,028 $22,250 $25,470 $28,568 $31,446
Food/beverage $3,424 $4,031 $4,931 $6,227 $7,236 $8,380 $9,671 $11,118 $12,728
Travel $50,466 $57,118 $64,714 $73,400 $84,600 $96,500 $108,700 $119,100 $129,413
Airline tickets $32,379 $35,810 $39,604 $43,800 $48,800 $54,200 $60,100 $63,700 $66,885
Car rentals $2,086 $2,430 $2,832 $3,300 $4,000 $4,600 $5,200 $5,800 $6,380
Full-service travel agents $773 $985 $1,255 $1,600 $2,200 $2,800 $3,300 $3,700 $4,052
Hotel reservations $15,229 $17,893 $21,023 $24,700 $29,600 $34,900 $40,100 $45,900 $52,097
Auto/grocery/travel subtotal $59,020 $68,322 $81,316 $95,557 $110,864 $127,130 $143,841 $158,786 $173,587
Total U.S. Online Retail $121,980 $146,013 $177,047 $211,405 $248,370 $287,821 $328,836 $368,946 $409,578
Note: 2006–11 estimates are pulled directly from Forrester’s five-year forecast. 2003–05 numbers are Lehman Brothers estimates derived using growth curves provided by
Forrester in both the October 2006 report as well as the previous report from September 2005.
Source: Forrester Research, Lehman Brothers estimates
66 August 10, 2007

Figure 69: U.S. E-Commerce Growth Rates by Category, 2004–11E

2004 2005 2006E 2007E 2008E 2009E 2010E 2011E
Online % Growth
Apparel 23% 31% 23% 19% 17% 15% 14% 12%

General Apparel 18% 30% 22% 18% 17% 15% 14% 13%
Accessories 18% 23% 25% 24% 20% 17% 14% 11%
Footwear 55% 37% 29% 22% 18% 14% 12% 9%
Books 8% 8% 11% 11% 9% 7% 5% 4%

Trade/consumer 5% 7% 10% 11% 9% 7% 5% 4%
Academic 14% 12% 13% 11% 9% 7% 5% 4%
Computer hardware/software 10% 11% 12% 13% 11% 10% 9% 9%

Computer hardware 10% 10% 12% 13% 11% 10% 9% 9%
Computer software 13% 17% 13% 16% 14% 13% 12% 11%
Computer peripherals 6% 8% 8% 9% 7% 6% 5% 4%
Consumer electronics 27% 35% 26% 22% 20% 19% 18% 16%
Flowers/cards/gifts 29% 25% 23% 24% 20% 16% 13% 11%

Flowers 45% 32% 23% 25% 21% 17% 14% 11%
Cards 45% 36% 21% 17% 14% 12% 10% 8%
Gift cards and gift certificates 24% 21% 23% 24% 20% 17% 14% 11%
Cosmetics and fragrances 46% 39% 34% 25% 20% 15% 11% 9%
Over-the-counter personal care 42% 33% 32% 26% 23% 20% 18% 15%
Home furnishings 39% 31% 30% 23% 20% 17% 15% 13%
Furniture 40% 38% 35% 26% 24% 21% 19% 16%
Home décor and crafts 43% 29% 31% 22% 19% 16% 14% 12%
Linens 28% 22% 15% 13% 10% 8% 7% 5%
Appliances and tools 39% 30% 24% 19% 17% 16% 15% 14%
Tools/hardware 67% 54% 41% 27% 26% 24% 23% 22%
Garden supplies 58% 40% 31% 23% 22% 21% 19% 18%
Major appliances 26% 16% 16% 13% 10% 7% 5% 4%
Small appliances 30% 22% 13% 15% 11% 9% 7% 6%
Office supplies 27% 26% 23% 18% 20% 18% 16% 14%
Pet supplies 52% 47% 22% 34% 32% 29% 27% 24%
Jewelry/luxury goods 53% 36% 25% 19% 17% 16% 15% 13%
Music/video 19% 20% 23% 21% 18% 16% 14% 13%

Music 14% 14% 17% 17% 11% 10% 9% 8%
Video 21% 22% 25% 23% 20% 18% 16% 14%
Sporting goods and apparel 40% 31% 24% 19% 17% 16% 15% 13%
Sporting goods and equipment 39% 27% 21% 16% 15% 15% 14% 13%
Sporting apparel 41% 38% 29% 23% 20% 18% 15% 13%
Tickets 44% 38% 31% 25% 24% 22% 21% 19%

Movie tickets 58% 40% 28% 22% 21% 19% 18% 16%
Event tickets 42% 38% 31% 25% 24% 23% 21% 20%
Toys/video games 27% 22% 21% 20% 17% 13% 10% 8%

Toys 25% 18% 19% 18% 14% 11% 8% 6%
Baby products 30% 29% 23% 20% 17% 13% 10% 8%
Video games 28% 24% 23% 24% 20% 17% 14% 11%
Other* 9% 9% 9% 7% 8% 9% 10% 11%

General merchandise subtotal 23% 23% 21% 19% 17% 15% 14% 12%
Auto/auto parts 40% 63% 36% 19% 17% 14% 12% 10%
Food/beverage 18% 22% 26% 16% 16% 15% 15% 14%
Travel 13% 13% 13% 15% 14% 13% 10% 9%

Airline tickets 11% 11% 11% 11% 11% 11% 6% 5%
Car rentals 17% 17% 17% 21% 15% 13% 12% 10%
Full-service travel agents 27% 27% 27% 38% 27% 18% 12% 10%
Hotel reservations 17% 17% 17% 20% 18% 15% 14% 14%
Auto/grocery/travel subtotal 16% 19% 18% 16% 15% 13% 10% 9%
Total U.S. Online Retail 19.7% 21.3% 19.4% 17.5% 15.9% 14.2% 12.2% 11.0%
August 10, 2007 67

Figure 70: U.S. E-Commerce as a Percentage of Total U.S. Retail, 2003–11E

Online as % of Total Category 2003 2004 2005 2006E 2007E 2008E 2009E 2010E 2011E
Apparel 3% 4% 5% 6% 8% 9% 10% 11% 12%

General Apparel 3% 4% 5% 5% 6% 7% 8% 9% 11%
Accessories 8% 9% 11% 13% 15% 17% 19% 20% 22%
Footwear 4% 6% 8% 10% 12% 14% 15% 16% 17%
Books 14% 15% 16% 17% 19% 20% 21% 22% 22%
Trade/consumer 16% 17% 17% 19% 20% 22% 23% 23% 24%
Academic 11% 12% 14% 15% 16% 17% 18% 19% 19%
Computer hardware/software 47% 48% 49% 51% 53% 55% 56% 56% 57%
Computer hardware 50% 51% 52% 54% 56% 58% 59% 59% 60%
Computer software 38% 39% 42% 43% 45% 47% 48% 49% 49%
Computer peripherals 38% 39% 41% 43% 45% 47% 48% 49% 49%
Consumer electronics 8% 9% 12% 14% 16% 18% 20% 22% 24%
Flowers/cards/gifts 8% 10% 12% 14% 16% 19% 22% 24% 25%

Flowers 4% 6% 8% 9% 11% 14% 16% 18% 20%
Cards 4% 6% 8% 9% 11% 12% 14% 15% 16%
Gift cards and gift certificates 11% 13% 15% 18% 21% 24% 26% 28% 30%
Cosmetics and fragrances 3% 4% 6% 8% 9% 11% 12% 13% 14%
Over-the-counter personal care 2% 3% 4% 5% 6% 7% 8% 9% 10%
Home furnishings 4% 5% 7% 8% 9% 11% 12% 13% 14%

Furniture 3% 4% 5% 7% 8% 10% 11% 12% 14%
Home décor and crafts 5% 6% 7% 9% 10% 11% 12% 13% 14%
Linens 8% 10% 12% 14% 15% 16% 17% 18% 19%
Appliances and tools 2% 3% 4% 4% 5% 5% 6% 6% 7%

Tools/hardware 1% 1% 2% 2% 3% 3% 4% 4% 5%
Garden supplies 1% 2% 2% 3% 3% 3% 4% 4% 5%
Major appliances 7% 8% 9% 11% 12% 13% 14% 14% 14%
Small appliances 15% 19% 23% 25% 28% 30% 32% 33% 33%
Office supplies 6% 7% 8% 9% 11% 12% 14% 15% 16%
Pet supplies 1% 1% 2% 2% 3% 3% 4% 5% 5%
Jewelry/luxury goods 3% 5% 6% 7% 9% 10% 11% 13% 14%
Music/video 10% 12% 13% 16% 18% 20% 23% 25% 27%
Music 9% 11% 12% 14% 16% 17% 19% 21% 23%
Video 11% 12% 14% 16% 19% 21% 24% 26% 28%
Sporting goods and apparel 3% 4% 5% 7% 8% 9% 10% 11% 12%

Sporting goods and equipment 3% 4% 5% 6% 7% 8% 9% 10% 11%
Sporting apparel 4% 5% 6% 8% 9% 11% 12% 14% 15%
Tickets 6% 7% 10% 12% 14% 16% 18% 20% 22%

Movie tickets 3% 5% 6% 7% 9% 10% 11% 13% 14%
Event tickets 6% 9% 11% 13% 15% 18% 20% 23% 25%
Toys/video games 10% 12% 15% 18% 21% 24% 26% 28% 30%
Toys 10% 13% 15% 18% 21% 24% 26% 28% 30%
Baby products 9% 12% 15% 18% 21% 24% 26% 28% 30%
Video games 11% 13% 15% 18% 21% 24% 26% 28% 30%
Other*
General merchandise subtotal 7% 8% 9% 11% 12% 14% 15% 17% 18%
Auto/auto parts 1% 1% 1% 2% 2% 3% 3% 3% 4%
Food/beverage 1% 1% 1% 1% 1% 1% 2% 2% 2%
Travel 21% 23% 26% 29% 34% 38% 42% 46% 49%
Airline tickets 27% 30% 32% 35% 39% 43% 47% 49% 51%
Car rentals 12% 14% 16% 19% 22% 26% 28% 31% 34%
Full-service travel agents 11% 13% 17% 21% 29% 36% 42% 47% 50%
Hotel reservations 16% 18% 21% 25% 29% 34% 38% 43% 48%
Auto/grocery/travel subtotal 4% 4% 5% 6% 7% 8% 9% 9% 10%
U.S. Online as a % of Total U.S. Retail 4.9% 5.7% 6.8% 7.9% 9.0% 10.2% 11.3% 12.4% 13.4%
68 August 10, 2007

Figure 71: U.S. Department of Commerce E-Commerce Data, by Quarter, 2000–1Q07 ($ in millions)
1Q00 2Q00 3Q00 4Q00 2000 1Q01 2Q01 3Q01 4Q01 2001 1Q02 2Q02 3Q02 4Q02 2002
Total Retail Spend 696,048 753,211 746,875 792,622 2,988,756 704,757 779,011 756,128 827,829 3,067,725 717,302 790,486 792,657 833,877 3,134,322
Y/Y Growth NA NA NA NA NA 1.3% 3.4% 1.2% 4.4% 2.6% 1.8% 1.5% 4.8% 0.7% 2.2%
Q/Q Growth -9.5% 8.2% -0.8% 6.1% NA -11.1% 10.5% -2.9% 9.5% NA -13.4% 10.2% 0.3% 5.2% NA
E-commerce Spend 5,624 6,139 6,993 9,212 27,968 8,062 8,040 8,006 11,188 35,296 10,043 10,568 11,302 14,906 46,819
Y/Y Growth NA NA NA NA NA 43.3% 31.0% 14.5% 21.5% 26% 24.6% 31.4% 41.2% 33.2% 33%
Q/Q Growth 5.8% 9.2% 13.9% 31.7% NA -12.5% -0.3% -0.4% 39.7% NA -10.2% 5.2% 6.9% 31.9% NA
E-Commerce as % of Retail 0.8% 0.8% 0.9% 1.2% 0.9% 1.1% 1.0% 1.1% 1.4% 1.2% 1.4% 1.3% 1.4% 1.8% 1.5%
1Q03 2Q03 3Q03 4Q03 2003 1Q04 2Q04 3Q04 4Q04 2004 1Q05 2Q05 3Q05 4Q05 2005
Total Retail Spend 741,060 819,232 830,692 874,493 3,265,477 794,720 870,834 872,340 936,446 3,474,340 835,280 931,513 939,788 986,849 3,693,430
Y/Y Growth 3.3% 3.6% 4.8% 4.9% 4.2% 7.2% 6.3% 5.0% 7.1% 6.4% 5.1% 7.0% 7.7% 5.4% 6.3%
Q/Q Growth -11.1% 10.5% 1.4% 5.3% NA -9.1% 9.6% 0.2% 7.3% NA -10.8% 11.5% 0.9% 5.0% NA
E-commerce Spend 12,984 13,629 14,607 18,795 60,015 17,074 17,378 18,321 23,571 76,344 20,839 21,467 22,556 28,416 93,278
Y/Y Growth 29.3% 29.0% 29.2% 26.1% 28% 31.5% 27.5% 25.4% 25.4% 27% 22.1% 23.5% 23.1% 20.6% 22.2%
Q/Q Growth -12.9% 5.0% 7.2% 28.7% NA -9.2% 1.8% 5.4% 28.7% NA -11.6% 3.0% 5.1% 26.0% NA
E-Commerce as % of Retail 1.8% 1.7% 1.8% 2.1% 1.8% 2.1% 2.0% 2.1% 2.5% 2.2% 2.5% 2.3% 2.4% 2.9% 2.5%
1Q06 2Q06 3Q06 4Q06 2006 1Q07

Total Retail Spend 899,329 993,153 984,776 1,027,047 3,904,305 935,364
Y/Y Growth 7.7% 6.6% 4.8% 4.1% 5.7% 4.0%
Q/Q Growth -8.9% 10.4% -0.8% 4.3% NA -8.9%
E-commerce Spend 25,846 26,363 27,092 35,322 114,623 30,605
Y/Y Growth 24.0% 22.8% 20.1% 24.3% 22.9% 18.4%
Q/Q Growth -9.0% 2.0% 2.8% 30.4% NA -13.4%
E-Commerce as % of Retail 2.9% 2.7% 2.8% 3.4% 2.9% 3.3%
Source: U.S. Department of Commerce
Figure 72: U.S. Department of Commerce E-Commerce Data, by Quarter, 2000–1Q07
$35,000
$30,000
$25,000
Online Sales (MM)
$20,000
$15,000
$10,000
$5,000
$0
1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07
August 10, 2007 69

Figure 73: U.S. E-Commerce as a Percentage of Total U.S. Retail, by Quarter, 2000–1Q07
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07
70 August 10, 2007

Figure 74: Top U.S. Online Retailers by Revenue (1–50) ($ in millions)

Rank Company 2004 2005 2006
1 Amazon.com Inc. 6,921 8,490 10,710
2 Staples Inc. 3,000 3,800 4,900
3 Office Depot Inc. 3,100 3,800 4,300
4 Dell Inc. 3,257 3,724 3,965
5 HP Home & Home Office 2,691 2,829 3,055
6 Office Max Inc. 2,200 2,567 2,849
7 Sears Holding Corp. 1,740 2,160 2,376
8 CDW Corp. 1,526 1,769 2,001
9 SonyStyle.com 1,597 1,625 1,690
10 Newegg.com 1,000 1,300 1,500
11 Best Buy Co. 959 1,267 1,425
12 J.C. Penney Co. Inc. 812 1,039 1,300
13 Wal-Mart Stores Inc. 782 1,050 1,260
14 QVC Inc. 739 1,017 1,257
15 Apple Computer Inc. 547 817 1,136
16 Victoria's Secret Direct 158 870 1,097
17 Circuit City Stores Inc. 577 832 1,000
18 Netflix Inc 506 688 997
19 Target Corp. 756 897 986
20 Williams-Sonoma Inc. 561 766 927
21 Costco Wholesale Corp. 377 534 880
22 Quixtar Inc. 748 800 880
23 L.L. Bean Inc. 523 747 825
24 Systemax Inc. 515 650 819
25 Overstock.com Inc. 495 804 796
26 IAC/InterActiveCorp. 303 614 792
27 Gap Inc. 563 595 730
28 Redcats USA 401 475 720
29 Avon Products Inc. 456 567 612
30 Macy's Group 300 450 608
31 Zappos.com Inc 184 370 597
32 PC Connection Inc. 271 383 514
33 BarnesandNoble.com 420 440 433
34 1-800-Flowers.com Inc. 307 361 430
35 Drugstore.com Inc. 360 399 416
36 Neiman Marcus Group 242 314 406
37 The Home Depot Inc. 164 352 404
38 Buy.com Inc. 291 346 397
39 Toys "R" Us Inc. 386 427 384
40 Nordstrom Inc. 201 290 377
41 Scholastic Corp. 220 270 342
42 CompUSA Inc. 268 293 316
43 Peapod LLC 183 240 300
44 Foot Locker Inc. 212 243 279
45 Oriental Trading Co. 160 213 264
46 Coldwater Creek Inc. 162 198 264
47 Saks Fifth Avenue 135 187 252
48 Musician's Friend Inc. 169 220 252
49 Blue Nile Inc. 169 203 252
50 FTD Inc. 181 216 249
Source: Internet Retailer, 2007
August 10, 2007 71

Figure 75: Top U.S. Online Retailers by Revenue (51–100) ($ in millions)

51 Blockbuster Inc. 8 143 248
52 Crate & Barrel 161 195 234
53 Spiegel Brands Inc. 191 204 230
54 Gateway Inc. 419 297 223
55 Eddie Bauer 222 229 218
56 American Eagle Outfitters 65 130 200
57 FreshDirect LLC 120 150 200
58 Army & Air Force 126 162 198
59 Lillian Vernon Corp. 108 153 198
60 Disney Direct 137 184 198
61 Recreational Equipment 111 164 195
62 The Talbots Inc. 83 106 191
63 J. Crew Group Inc. 122 160 189
64 ShopNBC.com 131 159 177
65 American Girl N/A 174 176
66 Xtraplus Corp N/A 170 175
67 Abercrombie & Fitch 110 159 174
68 Follett Higher Ed. 83 134 174
69 Lowe's Cos. Inc. 110 149 174
70 Abebooks Inc. 130 150 170
71 Walgreen Co. 113 143 170
72 Etronics Inc. 100 130 169
73 PC Mall Inc. 139 162 168
74 Hanover Direct Inc. 114 141 168
75 Harry and David 90 96 166
76 Northern Tool + Equip. 104 131 165
77 Nike Inc. 29 128 154
78 Bass Pro Outdoor 105 130 153
79 VistaPrint 59 91 152
80 Cabela's Inc 91 114 147
81 U.S. Auto Parts Network 36 98 145
82 Schwan's Home 120 127 137
83 CVS Corp. 93 113 136
84 MLB Advanced Media 70 116 135
85 Drs. Foster & Smith Inc. 90 115 133
86 Bidz.com Inc. 65 90 132
87 Market Day Corp. 99 118 131
88 SmartBargains.com 92 111 127
89 Crutchfield Corp. 108 117 125
90 dELiA*s Inc. 80 106 125
91 1-800 Contacts Inc. 106 119 124
92 eBags.com 73 103 124
93 Shutterfly Inc. N/A 84 123
94 RealPlayer Music Store 49 98 123
95 Sierra Trading Post Inc. 27 98 123
96 Restoration Hardware 54 76 122
97 J&R Electronics Inc. 85 100 120
98 Tiffany & Co. 100 110 120
99 Palm Inc. 93 118 120
100 Charming Shoppes Inc. 30 59 118
72 August 10, 2007

Figure 76: Top U.S. Online Retailers’ Revenue Growth Rates (1–50)
Rank Company 2005 2006
1 Amazon.com Inc. 23% 26%
2 Staples Inc. 27% 29%
3 Office Depot Inc. 23% 13%
4 Dell Inc. 14% 6%
5 HP Home & Home Office 5% 8%
6 Office Max Inc. 17% 11%
7 Sears Holding Corp. 24% 10%
8 CDW Corp. 16% 13%
9 SonyStyle.com 2% 4%
10 Newegg.com 30% 15%
11 Best Buy Co. 32% 12%
12 J.C. Penney Co. Inc. 28% 25%
13 Wal-Mart Stores Inc. 34% 20%
14 QVC Inc. 38% 24%
15 Apple Computer Inc. 49% 39%
16 Victoria's Secret Direct 452% 26%
17 Circuit City Stores Inc. 44% 20%
18 Netflix Inc 36% 45%
19 Target Corp. 19% 10%
20 Williams-Sonoma Inc. 37% 21%
21 Costco Wholesale Corp. 42% 65%
22 Quixtar Inc. 7% 10%
23 L.L. Bean Inc. 43% 10%
24 Systemax Inc. 26% 26%
25 Overstock.com Inc. 63% -1%
26 IAC/InterActiveCorp. 103% 29%
27 Gap Inc. 6% 23%
28 Redcats USA 18% 52%
29 Avon Products Inc. 24% 8%
30 Macy's Group 50% 35%
31 Zappos.com Inc 101% 61%
32 PC Connection Inc. 41% 34%
33 BarnesandNoble.com 5% -2%
34 1-800-Flowers.com Inc. 17% 19%
35 Drugstore.com Inc. 11% 4%
36 Neiman Marcus Group 30% 29%
37 The Home Depot Inc. 115% 15%
38 Buy.com Inc. 19% 15%
39 Toys "R" Us Inc. 11% -10%
40 Nordstrom Inc. 44% 30%
41 Scholastic Corp. 23% 27%
42 CompUSA Inc. 9% 8%
43 Peapod LLC 31% 25%
44 Foot Locker Inc. 15% 15%
45 Oriental Trading Co. 33% 24%
46 Coldwater Creek Inc. 22% 33%
47 Saks Fifth Avenue 38% 35%
48 Musician's Friend Inc. 30% 14%
49 Blue Nile Inc. 20% 24%
50 FTD Inc. 19% 15%
August 10, 2007 73

Figure 77: Top U.S. Online Retailers’ Revenue Growth Rates (51–100)
Rank Company 2005 2006
51 Blockbuster Inc. 1600% 74%
52 Crate & Barrel 21% 20%
53 Spiegel Brands Inc. 7% 13%
54 Gateway Inc. -29% -25%
55 Eddie Bauer 3% -5%
56 American Eagle Outfitters 100% 54%
57 FreshDirect LLC 25% 33%
58 Army & Air Force 29% 22%
59 Lillian Vernon Corp. 41% 30%
60 Disney Direct 35% 8%
61 Recreational Equipment 48% 19%
62 The Talbots Inc. 28% 80%
63 J. Crew Group Inc. 31% 18%
64 ShopNBC.com 21% 11%
65 American Girl N/A 1%
66 Xtraplus Corp N/A 3%
67 Abercrombie & Fitch 45% 9%
68 Follett Higher Ed. 61% 30%
69 Lowe's Cos. Inc. 35% 17%
70 Abebooks Inc. 15% 13%
71 Walgreen Co. 27% 19%
72 Etronics Inc. 30% 30%
73 PC Mall Inc. 17% 4%
74 Hanover Direct Inc. 24% 19%
75 Harry and David 7% 73%
76 Northern Tool + Equip. 26% 26%
77 Nike Inc. 342% 20%
78 Bass Pro Outdoor 24% 18%
79 VistaPrint 55% 67%
80 Cabela's Inc 25% 29%
81 U.S. Auto Parts Network 173% 47%
82 Schwan's Home 5% 8%
83 CVS Corp. 21% 20%
84 MLB Advanced Media 67% 16%
85 Drs. Foster & Smith Inc. 28% 16%
86 Bidz.com Inc. 38% 47%
87 Market Day Corp. 20% 11%
88 SmartBargains.com 20% 15%
89 Crutchfield Corp. 8% 7%
90 dELiA*s Inc. 32% 18%
91 1-800 Contacts Inc. 12% 5%
92 eBags.com 41% 20%
93 Shutterfly Inc. N/A 47%
94 RealPlayer Music Store 100% 26%
95 Sierra Trading Post Inc. 259% 25%
96 Restoration Hardware 43% 60%
97 J&R Electronics Inc. 18% 20%
98 Tiffany & Co. 10% 9%
99 Palm Inc. 27% 2%
100 Charming Shoppes Inc. 96% 101%
74 August 10, 2007

Figure 78: Top U.S. Online Retailers – Online Revenue as a Percentage of Total Revenue (1–50) ($ in millions)
Rank Company 2006 Online Revenue 2006 Total Revenue Online as % of Total Rev.
1 Amazon.com Inc. $10,710 $10,710 100.0%
2 Staples Inc. 4,900 18,200 26.9%
3 Office Depot Inc. 4,300 15,000 28.7%
4 Dell Inc. 3,965 57,900 6.8%
5 HP Home & Home Office 3,055 91,658 3.3%
6 Office Max Inc. 2,849 8,966 31.8%
7 Sears Holding Corp. 2,376 55,000 4.3%
8 CDW Corp. 2,001 6,800 29.4%
9 SonyStyle.com 1,690 63,541 2.7%
10 Newegg.com 1,500 1,500 100.0%
11 Best Buy Co. 1,425 30,800 4.6%
12 J.C. Penney Co. Inc. 1,300 19,903 6.5%
13 Wal-Mart Stores Inc. 1,260 348,650 0.4%
14 QVC Inc. 1,257 7,074 17.8%
15 Apple Computer Inc. 1,136 19,315 5.9%
16 Limited Brands Inc. 1,097 10,671 10.3%
17 Circuit City Stores Inc. 1,000 12,430 8.0%
18 Netflix Inc 997 997 100.0%
19 Target Corp. 986 59,490 1.7%
20 Williams-Sonoma Inc. 927 3,728 24.9%
21 Costco Wholesale Corp. 880 60,151 1.5%
22 Quixtar Inc. 880 1,118 78.7%
23 L.L. Bean Inc. 825 1,500 55.0%
24 Systemax Inc. 819 2,345 34.9%
25 Overstock.com Inc. 796 796 100.0%
26 IAC/InterActiveCorp. 792 2,933 27.0%
27 Gap Inc. 730 15,943 4.6%
28 Redcats USA 720 1,708 42.2%
29 Avon Products Inc. 612 8,764 7.0%
30 Macy's Group Inc. 608 26,970 2.3%
31 Zappos.com Inc 597 597 100.0%
32 PC Connection Inc. 514 1,636 31.4%
33 BarnesandNoble.com 433 5,300 8.2%
34 1-800-Flowers.com Inc. 430 782 55.0%
35 Drugstore.com Inc. 416 416 100.0%
36 Neiman Marcus Group 406 4,106 9.9%
37 The Home Depot Inc. 404 90,800 0.4%
38 Buy.com Inc. 397 397 100.0%
39 Toys "R" Us Inc. 384 11,275 3.4%
40 Nordstrom Inc. 377 8,600 4.4%
41 Scholastic Corp. 342 2,284 15.0%
42 CompUSA Inc. 316 4,700 6.7%
43 Peapod LLC 300 300 100.0%
44 Foot Locker Inc. 279 5,750 4.9%
45 Oriental Trading Co. 264 400 66.0%
46 Coldwater Creek Inc. 264 1,050 25.1%
47 Saks Fifth Avenue 252 2,940 8.6%
48 Musician's Friend Inc. 252 2,030 12.4%
49 Blue Nile Inc. 252 252 100.0%
50 FTD Inc. 249 465 53.5%
August 10, 2007 75

Figure 79: Top U.S. Online Retailers – Online Revenue as a Percentage of Total Revenue (51–100) ($ in millions)
Rank Company 2006 Online Revenue 2006 Total Revenue Online as % of Total Rev.
51 Blockbuster Inc. 248 4,030 6.2%
52 Crate & Barrel 234 1,100 21.3%
53 Spiegel Brands Inc. 230 459 50.0%
54 Gateway Inc. 223 3,981 5.6%
55 Eddie Bauer 218 1,013 21.5%
56 American Eagle Outfitters 200 2,794 7.2%
57 FreshDirect LLC 200 200 100.0%
58 Army & Air Force 198 8,474 2.3%
59 Lillian Vernon Corp. 198 398 49.9%
60 Disney Direct 198 2,511 7.9%
61 Recreational Equipment 195 1,164 16.8%
62 The Talbots Inc. 191 2,231 8.5%
63 J. Crew Group Inc. 189 1,152 16.4%
64 ShopNBC.com 177 764 23.2%
65 American Girl 176 440 40.0%
66 Xtraplus Corp 175 175 100.0%
67 Abercrombie & Fitch 174 3,318 5.2%
68 Follett Higher Ed. 174 2,000 8.7%
69 Lowe's Cos. Inc. 174 46,900 0.4%
70 Abebooks Inc. 170 170 100.0%
71 Walgreen Co. 170 47,409 0.4%
72 Etronics Inc. 169 169 100.0%
73 PC Mall Inc. 168 1,006 16.7%
74 Hanover Direct Inc. 168 416 40.3%
75 Harry and David 166 598 27.8%
76 Northern Tool + Equip. 165 750 22.0%
77 Nike Inc 154 15,000 1.0%
78 Bass Pro Outdoor 153 1,915 8.0%
79 VistaPrint 152 152 100.0%
80 Cabela's Inc 147 2,060 7.1%
81 U.S. Auto Parts Network 145 145 100.0%
82 Schwan's Home 137 4,000 3.4%
83 CVS Corp. 136 43,814 0.3%
84 MLB Advanced Media 135 264 51.0%
85 Drs. Foster & Smith Inc. 133 228 58.3%
86 Bidz.com Inc. 132 132 100.0%
87 Market Day Corp. 131 131 100.0%
88 SmartBargains.com 127 127 100.0%
89 Crutchfield Corp. 125 211 59.2%
90 dELiA*s Inc. 125 258 48.3%
91 1-800 Contacts Inc. 124 249 49.9%
92 eBags.com 124 124 100.0%
93 Shutterfly Inc. 123 123 100.0%
94 RealPlayer Music Store 123 395 31.1%
95 Sierra Trading Post 123 250 49.2%
96 Restoration Hardware 122 713 17.2%
97 J&R Electronics 120 400 30.0%
98 Tiffany & Co. 120 2,648 4.5%
99 Palm Inc. 120 1,579 7.6%
100 Charming Shoppes 118 3,068 3.9%
76 August 10, 2007

Figure 80: Top U.S. Online Retailers – Apparel/Accessories ($ in millions)

1 Victoria's Secret Direct $158 $870 $1,097
2 L.L. Bean Inc. 523 747 825
3 Gap Inc. 563 595 730
4 Redcats USA 401 475 720
5 Zappos.com Inc. 184 370 597
6 Neiman Marcus Group 242 314 406
7 Nordstrom Inc. 201 290 377
8 Foot Locker Inc. 212 243 279
9 Coldwater Creek Inc. 162 189 264
10 Saks Fifth Avenue 135 187 252
11 Spiegel Brands Inc. 191 204 230
12 Eddie Bauer 222 229 218
13 American Eagle Outfitters 65 130 200
14 The Talbots Inc. 83 106 191
15 J. Crew Group Inc. 122 160 189
16 Abercrombie & Fitch 110 159 191
17 Hanover Direct Inc. 114 141 168
18 Nike Inc. 29 128 154
19 dELiA*s Inc. 80 106 125
20 eBags.com 73 103 124
21 Sierra Trading Post Inc. 27 98 123
22 Charming Shoppes Inc. 30 59 118
23 Ralph Lauren Media LLC 50 85 114
24 Ann Taylor Stores Corp. 45 51 96
25 Blair Corp. 61 79 94
26 YOOX Group 9 63 84
27 Fingerhut Direct Marketing Inc. 39 52 82
28 Onlineshoes.com n/a 49 80
29 Blue fly Inc. 44 59 77
30 eLuxury.com 51 62 75
31 NormThomson Outfitter Inc. 61 70 74
32 The Orvis Co. Inc. 57 63 70
34 The Finish Line Inc. 42 60 64
33 ShoeMall.com (Mason Companies Inc.) 36 44 64
35 Shoes.com Inc. 18 35 63
36 Urban Outfitters Inc. 41 52 61
37 Frederick's of Hollywood Inc. 38 48 56
38 Hanna Anderson Corp. 43 47 55
39 Road Runner Sports Inc. 48 51 54
40 Coach Inc. 33 42 54
41 Fossil Inc. 25 36 41
42 Burlington Coat Factory Warehouse Corp. 35 37 39
August 10, 2007 77

Figure 81: Top U.S. Online Retailers – Computers/Electronics ($ in millions)

1 Dell Inc. $3,257 $3,724 $3,965
2 HP Home & Home Office 2,691 2,829 3,055
3 CDW Corp. 1,526 1,769 2,001
4 SonyStyle.com 1,597 1,625 1,690
5 Newegg.com 1,000 1,300 1,500
6 Best Buy Co. 959 1,267 1,425
7 Apple Computer Inc. 547 817 1,136
8 Circuit City Stores Inc. 577 832 1,000
9 Systemax Inc. 515 650 819
10 PC Connection Inc. 271 383 514
11 CompUSA Inc. 268 293 316
12 Gateway Inc. 419 297 223
13 Xtraplus Corp. n/a 170 175
14 Etronics Inc. 100 130 169
15 PC Mall Inc. 139 162 168
16 Crutchfield Corp. 108 117 125
17 J&R Electronics Inc. 85 100 120
18 Palm Inc. 93 118 120
19 Accoona Corp. n/a 109 115
20 eCOST.com Inc. 178 173 101
21 Ritz Interactive 86 83 99
22 B&H Photo-Video-Pro Audio 54 67 84
23 OneCall.com (Huppins Hifi, Photo and Video Inc.) 61 70 73
24 Comp-U-Plus 65 72 68
25 Abt Electronics Inc. 40 52 62
26 Panasonic Corp. of North America n/a 50 60
27 Computer Geeks 37 45 52
28 RadioShack 35 44 50
29 Outpost.com (Fry's Electonics Inc.) 36 41 44
30 SuperMediaStore.com 16 24 33
78 August 10, 2007

Figure 82: Top U.S. Online Retailers – Media (Books/CDs/DVDs) ($ in millions)

1 Netflix Inc $506 $688 $997
2 BarnesandNoble.com 420 440 433
3 Scholastic Corp. 220 270 342
4 Blockbuster Inc. 8 147 248
5 Follett Higher Ed. 83 134 174
6 Abebooks Inc. 130 150 170
7 Napster Inc. 35 85 109
8 Alibris Inc. 61 79 94
9 Infinity Resources 60 80 92
10 Audible.com n/a 63 82
11 Indigo books & Music 45 55 72
12 eCampus.com (A Book Co. LLC) 40 44 46
13 CD Universe (CLBL Inc.) 30 34 44
14 TimeLife.com 26 32 41
15 DVD empire 29 32 33
Figure 83: Top U.S. Online Retailers – Flowers/Gifts ($ in millions)

1 1-800-Flowers.com Inc. $307 $361 $430
2 FTD Inc. 181 216 249
3 Red Enevelope Inc. 57 75 91
4 Hallmark Cards 78 82 89
5 Potpourri Group Inc. 31 52 69
6 American Greeting Corp. 36 58 65
7 Celebrate Express Inc. 31 41 59
8 The Vermont Teddy Bear Co. 32 41 51
9 PersonalCreations.com (PC Acquisitions) 36 40 44
10 The Yankee Candle Co. Inc. 7 13 14
August 10, 2007 79

Figure 84: Top U.S. Online Retailers – Food/Drugs ($ in millions)

1 Drugstore.com Inc. $360 $399 $416
2 Peapod LLC 183 240 300
3 FreshDirect LLC 120 150 200
4 Walgreen Co. 113 143 170
5 Harry and David 90 96 166
6 Schwan's Home 120 127 137
7 CVS Corp. 93 113 136
8 Market Day Corp. 99 118 131
9 Omaha Steaks 80 97 106
10 NBTY Inc. 42 56 67
11 SimonDelivers.com 64 65 60
12 Safeway Inc. 36 43 46
13 Wine.com 36 39 41
Figure 85: Top U.S. Online Retailers – Hardware/Home Improvement ($ in millions)

1 The Home Depot Inc. $164 $352 $404
2 Lowe's Cos. Inc. 110 149 174
3 Northern Tool + Equip. 104 131 165
4 Improvement Direct Inc. 21 35 57
5 iFloor.com (Smooth Corp.) 47 50 54
6 Decorative Product Source Inc. 24 40 51
Figure 86: Top U.S. Online Retailers – Health/Beauty ($ in millions)

1 Quixtar Inc. $748 $800 $880
2 Avon Products Inc. 456 567 612
3 1-800 Contacts Inc. 106 119 124
4 Sephora USA LLC 57 85 111
5 Coastal Contacs 31 67 81
6 Bodybuilding.com (Higher Power Inc.) 33 47 65
7 Vitacost.com Inc. 27 37 60
80 August 10, 2007

Figure 87: Top U.S. Online Retailers – Housewares/Home Furnishings ($ in millions)

1 Williams-Sonoma Inc. $561 $766 $927
2 Crate & Barrel 161 195 234
3 Lillian Vernon Corp. 108 153 198
4 Restoration Hardware 54 76 122
5 Art.com Inc. 34 108 117
6 CSN Stores Inc. n/a 64 110
7 HomeDecor Products Inc 50 79 107
8 Bed Bath & Beyond Inc. 62 71 79
9 AJ Madison Inc. 42 57 74
10 Lamps Plus Inc. 38 48 74
11 Brookstone Inc. 45 50 68
12 Linens 'n Things Inc. 45 55 65
13 Furniture.com Inc 43 54 60
14 Thompson and Company of Tampa Inc. 53 62 59
15 Replacements Ltd. n/a 42 52
Figure 88: Top U.S. Online Retailers – Jewelry ($ in millions)

1 Blue Nile Inc. $169 $203 $252
2 Bidz.com Inc. 65 90 132
3 Tiffany & Co. 100 110 120
4 Ross-Simons Inc. 52 63 73
5 Jewelry Television (America's Collectible Network) 30 39 70
6 Ice.com 25 34 49
7 Zale Corp. 18 25 45
August 10, 2007 81

Figure 89: Top U.S. Online Retailers – Mass Merchant/Department Store ($ in millions)
1 Amazon.com Inc. $6,921 $8,490 $10,710
2 Sears Holding Corp. 1,740 2,160 2,376
3 J.C. Penney Co. Inc. 812 1,039 1,300
4 Wal-Mart Stores Inc. 782 1,050 1,260
5 QVC Inc. 739 1,017 1,257
6 Target Corp. 756 897 986
7 Costco Wholesale Corp. 377 534 880
8 Overstock.com Inc. 495 804 796
9 IAC/InterActiveCorp. 303 614 792
10 Macy's Group Inc. 300 450 608
11 Buy.com Inc. 291 346 397
12 Army & Air Force 126 162 198
13 ShopNBC.com 131 159 184
14 SmartBargains.com 92 111 127
15 NetShops Inc, 24 66 115
16 CafePress.com 69 87 95
17 Direct Marketing Services Inc. 45 55 69
18 The Shopping Channel, A Division of Roger Media 45 58 66
19 Kohl's Corp. 21 29 32
20 Boscov's Department Store LLC 16 20 25
Figure 90: Top U.S. Online Retailers – Office Supplies ($ in millions)

1 Staples Inc. $3,000 $3,800 $4,900
2 Office Depot Inc. 3,100 3,800 4,300
3 Office Max Inc. 2,200 2,567 2,849
4 Franklin Covey Co. 39 40 42
82 August 10, 2007

Figure 91: Top U.S. Online Retailers – Specialty/Non-Apparel ($ in millions)

1 Oriental Trading Co. $160 $213 $264
2 Musician's Friend Inc. 169 220 252
3 Disney Direct 137 184 198
4 VistaPrint 59 91 152
5 U.S. Auto Parts Network 36 98 145
6 MLB Advanced Media 70 116 135
7 Drs. Foster & Smith Inc. 90 115 133
8 Shutterfly n/a 84 123
9 RealPlayer Music Store 49 98 123
10 J.C. Whitney & Co. 82 90 101
11 PetMed Express Inc. 56 72 99
12 The Sharper Image 116 107 85
13 National Football League 53 46 70
14 PetSmart Inc. 39 49 54
15 AutoZone 33 47 52
16 PETCO Animal Supplies Inc. 43 44 48
17 Chelsea & Scott Ltd. 37 45 47
18 Discovery Communications Inc. 26 34 46
19 NASCAR.com Superstore 37 41 45
20 American Musical Supply Inc. 31 37 44
Figure 92: Top U.S. Online Retailers – Sporting Goods ($ in millions)

1 Recreational Equipment 111 164 $195
2 Bass Pro Outdoor 105 130 153
3 Cabela's Inc 91 114 147
4 Backcountry.com 27 52 82
5 Dick's Sporting Goods Inc, 46 60 75
6 The Sports Authority Inc. 51 55 59
7 Gear Direct.com (Speciality Sports Ventures) 26 53 53
8 Golfsmith International Holdings 21 34 37
9 Callaway Golf Interactive 22 26 32
10 Team Express Inc. 15 21 31
Figure 93: Top U.S. Online Retailers – Toys-Hobbies ($ in millions)

1 Toys "R" Us Inc. $386 $427 $384
2 American Girl n/a 174 176
3 eToys Direct Inc. 38 105 118
August 10, 2007 83

Figure 94: Top Online Retail Satisfaction Index (1–50)

Satisfaction Score
Rank Website 2006 2007 % change
1 Netflix.com 85 85 0%
2 QVC.com 82 85 4%
3 Amazon.com 83 83 0%
4 BN.com 78 82 5%
5 DrsFosterSmith.com N/A 81 N/A
6 AmericanGirl.com N/A 79 N/A
7 MarketDay.com N/A 79 N/A
8 LLBean.com 80 79 -1%
9 HSN.com 78 79 1%
10 TigerDirect.com 78 79 1%
11 Zappos.com 78 79 1%
12 Apple.com 77 79 3%
13 Cabelas.com N/A 78 N/A
14 MusiciansFriend.com N/A 78 N/A
15 OrientalTrading.com N/A 78 N/A
16 Schwans.com N/A 78 N/A
17 Newegg.com 82 78 -5%
18 Avon.com 76 78 3%
19 Dell.com 76 78 3%
20 Blockbuster.com N/A 77 N/A
21 Shutterfly.com N/A 77 N/A
22 VictoriasSecret.com N/A 77 N/A
23 Quixtar.com 78 77 -1%
24 BassPro.com N/A 76 N/A
25 Crutchfield.com N/A 76 N/A
26 VistaPrint.com N/A 76 N/A
27 Drugstore.com 78 76 -3%
28 JCPenney.com 76 76 0%
29 Overstock.com 76 76 0%
30 shopping.hp.com 74 76 3%
31 Target.com 73 76 4%
32 1800Contacts.com N/A 75 N/A
33 AAFES.com N/A 75 N/A
34 DisneyDirect.com N/A 75 N/A
35 eBags.com N/A 75 N/A
36 HarryandDavid.com N/A 75 N/A
37 Walgreens.com N/A 75 N/A
38 Williams-Sonoma.com 79 75 -5%
39 Staples.com 77 75 -3%
40 Walmart.com 74 75 1%
41 ColdwaterCreek.com N/A 74 N/A
42 NorthernTool.com N/A 74 N/A
43 Scholastic.com N/A 74 N/A
44 OfficeDepot.com 75 74 -1%
45 CircuitCity.com 73 74 1%
46 AbeBooks.com N/A 73 N/A
47 CrateandBarrel.com N/A 73 N/A
48 Domestications.com N/A 73 N/A
49 EddieBauer.com N/A 73 N/A
50 LillianVernon.com N/A 73 N/A
Source: ForeSee Results
84 August 10, 2007

Figure 95: Top Online Retail Satisfaction Index (51–94)

Satisfaction Score
Rank Website 2006 2007 % change
51 Nike.com N/A 73 N/A
52 Peapod.com N/A 73 N/A
53 REI.com N/A 73 N/A
54 Talbots.com N/A 73 N/A
55 Chadwicks.com 78 73 -6%
56 Nordstrom.com 77 73 -5%
57 AE.com N/A 72 N/A
58 CVS.com N/A 72 N/A
59 FootLocker.com N/A 72 N/A
60 JCrew.com N/A 72 N/A
61 LaneBryant.com N/A 72 N/A
62 Gap.com 73 72 -1%
63 Sears.com 73 72 -1%
64 Costco.com 71 72 1%
65 dELiAs.com N/A 71 N/A
66 FTD.com N/A 71 N/A
67 OfficeMax.com N/A 71 N/A
68 Palm.com N/A 71 N/A
69 SmartBargains.com N/A 71 N/A
70 Spiegel.com N/A 71 N/A
71 1800Flowers.com 76 71 -7%
72 BestBuy.com 73 71 -3%
73 Buy.com 71 71 0%
74 CompUSA.com 71 71 0%
75 ToysRUs.com 71 71 0%
76 Abercrombie.com N/A 70 N/A
77 Bidz.com N/A 70 N/A
78 BlueNile.com N/A 70 N/A
79 CDW.com N/A 70 N/A
80 efollett.com N/A 70 N/A
81 eToys.com N/A 70 N/A
82 FreshDirect.com N/A 70 N/A
83 Lowes.com N/A 70 N/A
84 SaksFifthAvenue.com N/A 70 N/A
85 Shop.MLB.com N/A 70 N/A
86 Gateway.com 71 70 -1%
87 SonyStyle.com 69 70 1%
88 HomeDepot.com N/A 69 N/A
89 ShopNBC.com N/A 69 N/A
90 NeimanMarcus.com 76 69 -9%
91 Macys.com 69 69 0%
92 Etronics.com N/A 68 N/A
93 PCConnection.com N/A 67 N/A
94 PCMall.com N/A 67 N/A
Source: ForeSee Results
August 10, 2007 85

86 August 10, 2007

Company Information and Models
August 10, 2007 87

Figure 96: Yahoo! Snapshot

Strengths Biggest Concerns
- #1 in branded advertising, #2 in search, making Yahoo! well positioned to capitalize on the - Portal conundrum, what does Yahoo! want to be and can its pending organization review
secular growth drivers of the Internet. focus it around a few key strategic initiatives?
- Display: Can premium display return to its historic levels of growth given the increasing
- One of the largest platforms on the web with 463 million users worldwide and 238 million popularity of user generated content, verticalization, and the willingness of advertisers to
registered, giving Yahoo! scale, reach, and frequency of use. distribute ad dollars across premium and non-premium content? More display going through
networks?
- Diversified business model with a full suite of offerings including branded, search, and - Search: Continuing share declines, increasing distribution costs leading to higher TAC, and
subscription services leading to multiple cross-selling opportunities. limited overseas exposure may limit Yahoo!'s monetization improvements from Panama.
- Continued search and monetization improvements in 2H07 and beyond as Yahoo! improves - Access deal with AT&T could be renegotiated downward in 2008, impacting EBITDA and
ad relevancy and, importantly, monetization with Panama. EBITDA margins.
- Display partnerships with eBay, Comcast, and the newspaper consortium extend Yahoo!'s
- Continued brain drain toward start-ups and other Internet companies.
display network and likely have lower TAC than search partnerships.
- Balance sheet has $3.1B in cash, plus $4.25 per share in Yahoo! Japan and Alibaba. - Non-premium page views are growing fastest but they are not well monetized.
What to Watch For Guidance
- Whether 3Q07 is the low point in terms of EBITDA growth and margins due to seasonality,
increased marketing spend, expansion of headcount, Rivals.com and Right Media.
3Q07 2007
- Can Panama lead to sustainable double digit RPS growth going forward? RPS grew 15-
20% in 2Q07. Revenues excluding TAC $1,170 - $1,310 $4,890-$5,190
Other cost of revenues $225-$255 $865-$985
- Whether Yahoo! can gain search share or will it continue to lose share to Google? Gross Profit $945-$1,055 $4,025-$4,205
Implied Operating Expenses $855-$935 $3,400-$3,480
- If Yahoo!'s display biz can build upon its distribution relationships with eBay, Comcast, and
the newspaper consortium, and sign other display syndication deals. Operating Income $90-$120 $625-$725
Depreciation & Amortization $150-$170 $600-$640
- Whether its recent reorganization combining its search and display sales teams drives
greater cross-selling. Stock compensation expense $140-$160 $550-$590
EBITDA $380-$450 $1,775-$1,955
- Whether Yahoo! can successfully add its non-premium (and some premium) inventory to the
Implied EBITDA Margin (low-
Right Media exchange while growing its CPMs without flooding the exchange.
mid-high) 32.5%-33.5%-34.4% 36.3%-37.0%-37.7%
- Whether the impact of a new (somewhat) management team can improve Yahoo!'s
competitive edge, speed of innovation, and technology focus. Operating Cash Flow $380 - $450 $1,415-$1,515
Free Cash Flow $1,125-$1,275
- Greater investment in: advertising platforms (Panama, RightMedia, and the newspaper
consortium); product development (SmartAds, Yahoo! Mail, mobile, and marketing); Free Cash Conversion of EBITDA 63.4%-64.3%-65.2%
partnerships (beyond eBay, Comcast, and the newspapers); and talent.
Capex $625-$675
Fee-paying relationships more than 19.0M

Fee-paying Revenue per user per
month (straight $) $3-$4
88 August 10, 2007

Figure 97: Yahoo! Income Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Gross Revenues $3,564.6 $5,257.7 $1,567.1 $1,575.9 $1,580.3 $1,702.4 $6,425.7 $1,671.9 $1,697.9 $1,694.0 $1,861.9 $6,925.7 $7,957.9
Traffic Acquisition Costs (TAC) $974.8 $1,561.7 $479.4 $453.2 $458.9 $474.5 $1,865.9 $488.8 $454.2 $471.7 $490.9 $1,905.5 $2,364.9
Net Revenues excluding TAC $2,589.8 $3,695.9 $1,087.7 $1,122.7 $1,121.5 $1,227.9 $4,559.8 $1,183.1 $1,243.8 $1,222.3 $1,371.0 $5,020.1 $5,593.1
Other cost of revenues 367.5 534.5 176.9 191.0 220.6 214.7 803.2 222.9 226.5 238.4 256.4 944.1 1,073.9
Gross profit 2,222.3 3,161.5 910.8 931.7 900.9 1,013.2 3,756.6 960.2 1,017.3 984.0 1,114.6 4,076.1 4,519.2
Operating expenses
Sales & marketing 778.0 1,025.2 292.3 287.4 288.6 299.0 1,167.2 317.2 338.3 342.3 372.9 1,370.6 1,471.0
Product development 368.8 547.1 179.9 172.6 163.8 172.1 688.3 191.2 216.6 226.1 235.8 869.8 978.8
General & administrative 262.6 319.7 97.9 108.4 91.9 112.1 410.4 115.7 123.4 124.7 119.3 483.1 531.3
Payroll taxes on option exercises - - - - - - - - - - - - -
Stock compensation expense 32.3 52.5 108.6 99.7 121.5 95.1 424.9 140.0 128.8 140.0 145.0 553.8 526.1
Amortization of intangibles 101.9 109.2 30.9 34.0 32.8 27.2 124.8 27.1 25.2 35.0 33.0 120.3 126.3
Restructuring costs - - - - - - - - - - - - -
Acquisition costs - - - - - - - - - - - - -
Total operating expenses 1,543.6 2,053.7 709.6 702.1 698.6 705.4 2,815.6 791.2 832.3 868.1 906.0 3,397.5 3,633.5
Operating income 678.7 1,107.7 201.2 229.6 202.3 307.8 941.0 169.0 185.0 115.9 208.6 678.5 885.7
Other income, net 496.4 1,435.9 35.4 36.1 50.3 35.2 157.0 35.5 30.7 35.4 38.0 139.6 173.1
Income before taxes, acctg change 1,175.1 2,543.6 236.6 265.7 252.6 343.1 1,098.0 204.5 215.7 151.3 246.6 818.1 1,058.8
Provision for income taxes 434.1 767.8 102.9 122.7 124.4 108.0 458.0 92.4 87.7 66.6 108.5 355.2 444.7
Effective tax rate 36.9% 30.2% 43.5% 46.2% 49.2% 31.5% 41.7% 45.2% 40.7% 44.0% 44.0% 43.4% 42.0%
Earnings in equity interests 95.0 128.2 26.4 21.6 30.2 33.9 112.1 29.1 32.1 30.5 31.0 122.8 135.0
Minority interest (2.5) (7.8) (0.3) (0.3) 0.1 (0.2) (0.7) 1.2 0.5 - - 1.7 -
GAAP Net Income (loss) bf Cum. Effect 833.5 1,896.2 159.9 164.3 158.5 268.7 751.4 142.4 160.6 115.3 169.1 587.3 749.1
Accounting change/One-time items (314.3) (1,030.8) - - - - - - - - - - -
GAAP Net income (loss) 519.2 865.4 159.9 164.3 158.5 268.7 751.4 142.4 160.6 115.3 169.1 587.3 749.1
GAAP Net income (loss) per share $0.36 $0.58 $0.11 $0.11 $0.11 $0.19 $0.52 $0.10 $0.11 $0.08 $0.12 $0.42 $0.53
Diluted shares outstanding 1,452.5 1,486.5 1,493.3 1,476.6 1,442.4 1,419.1 1,457.9 1,418.2 1,403.8 1,408.8 1,413.8 1,411.2 1,426.2
Pro Forma Net Income Reconciliation:

GAAP Net Income 519.2 865.4 159.9 164.3 158.5 268.7 751.4 142.4 160.6 115.3 169.1 587.3 749.1
Tax effect (53.7) (64.7) (55.8) (53.5) (52.0) (48.9) (210.2) (66.8) (61.6) (70.0) (71.2) (269.6) (261.0)
Non-recurring items - - - - (24.3) - (24.3) - - - - - -
Pro Forma Net income (loss) 599.7 962.4 243.6 244.6 236.5 342.0 1,066.6 242.7 252.9 220.3 275.9 991.8 1,140.6
Pro Forma Net income (loss) per share $0.41 $0.65 $0.16 $0.17 $0.16 $0.24 $0.73 $0.17 $0.18 $0.16 $0.20 $0.70 $0.80
Diluted shares outstanding 1,452.5 1,486.5 1,493.3 1,476.6 1,442.4 1,419.1 1,457.9 1,418.2 1,403.8 1,408.8 1,413.8 1,411.2 1,426.2
EBITDA Reconciliation
Operating income (reported) 678.7 1,107.7 201.2 229.6 202.3 307.8 941.0 169.0 185.0 115.9 208.6 678.5 885.7
Depreciation & amortization 311.0 397.1 125.1 127.5 149.9 137.5 540.0 151.0 159.9 150.0 155.0 615.9 750.0
EBITDA 1,022.0 1,557.3 434.9 456.9 473.7 540.4 1,905.9 460.0 473.6 405.9 508.6 1,848.2 2,161.8
2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Yr/Yr Growth
Net revenues 75.9% 42.7% 32.5% 28.3% 20.3% 15.0% 23.4% 8.8% 10.8% 9.0% 11.6% 10.1% 11.4%
Gross profit 75.4% 42.3% 28.9% 23.8% 13.2% 11.8% 18.8% 5.4% 9.2% 9.2% 10.0% 8.5% 10.9%
Sales and marketing 46.6% 31.8% 26.8% 16.6% 8.6% 5.8% 13.8% 8.5% 17.7% 18.6% 24.7% 17.4% 7.3%
Product development 77.9% 48.4% 50.7% 37.5% 15.7% 7.1% 25.8% 6.3% 25.5% 38.0% 37.0% 26.4% 12.5%
General and administrative 67.2% 21.7% 33.2% 33.2% 18.2% 28.9% 28.4% 18.2% 13.8% 35.6% 6.4% 17.7% 10.0%
Total operating expenses 58.9% 33.0% 54.4% 42.8% 32.9% 22.2% 37.1% 11.5% 18.5% 24.3% 28.4% 20.7% 6.9%
Operating income 129.6% 63.2% -18.7% -12.2% -25.1% -6.4% -15.1% -16.0% -19.4% -42.7% -32.2% -27.9% 30.5%
EBITDA 114.1% 52.4% 26.0% 24.0% 23.0% 17.8% 22.4% 5.8% 3.7% -14.3% -5.9% -3.0% 17.0%
GAAP EPS 93.0% 62.9% -16.5% -13.8% -31.3% 14.9% -11.5% -6.2% 2.8% -25.6% -36.8% -19.2% 26.2%
Pro Forma EPS 86.9% 56.8% 14.2% 14.6% -7.0% 31.3% 13.0% 4.9% 8.8% -4.6% -19.0% -3.9% 13.8%
Sequential Growth
Net revenues 1.8% 3.2% -0.1% 9.5% -3.7% 5.1% -1.7% 12.2%
% of Revenues
Other cost of revenues (non-TAC) 14.2% 14.5% 16.3% 17.0% 19.7% 17.5% 17.6% 18.8% 18.2% 19.5% 18.7% 18.8% 19.2%
Sales & marketing 30.0% 27.7% 26.9% 25.6% 25.7% 24.3% 25.6% 26.8% 27.2% 28.0% 27.2% 27.3% 26.3%
Margins
Gross margin 85.8% 85.5% 83.7% 83.0% 80.3% 82.5% 82.4% 81.2% 81.8% 80.5% 81.3% 81.2% 80.8%
Operating margin 26.2% 30.0% 18.5% 20.5% 18.0% 25.1% 20.6% 14.3% 14.9% 9.5% 15.2% 13.5% 15.8%
EBITDA 39.5% 42.1% 40.0% 40.7% 42.2% 44.0% 41.8% 38.9% 38.1% 33.2% 37.1% 36.8% 38.7%
Operating Leverage/Flow-through 48.7% 48.4% 33.7% 35.7% 46.8% 51.1% 40.4% 26.3% 13.8% -67.2% -22.2% -12.5% 54.7%
August 10, 2007 89

Figure 98: Yahoo! Revenue Analysis, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Total Revenues Excluding TAC 2,589.8 3,695.9 1,087.7 1,122.7 1,121.5 1,227.9 4,559.8 1,183.1 1,243.8 1,222.3 1,371.0 5,020.1 5,593.1
Y/Y growth 75.9% 42.7% 32.5% 28.3% 20.3% 15.0% 23.4% 8.8% 10.8% 9.0% 11.6% 10.1% 11.4%
Q/Q growth 1.8% 3.2% -0.1% 9.5% -3.7% 5.1% -1.7% 12.2%
Marketing Services
Paid Introductions 4,232 6,243 1,896 1,846 1,799 1,811 7,351 1,923 1,855 1,861 1,883 7,523 8,125
Y/Y growth 58.1% 47.5% 30.8% 21.0% 13.8% 7.4% 17.8% 1.5% 0.5% 3.5% 4.0% 2.3% 8.0%
Q/Q growth 12.4% -2.6% -2.6% 0.7% 6.2% -3.5% 0.3% 1.2%
Revenue per Click $0.47 $0.49 $0.50 $0.50 $0.50 $0.50 $0.50 $0.49 $0.52 $0.56 $0.57 $0.53 $0.57
Y/Y growth NA 5.0% 2.3% 2.3% 0.2% 0.0% 1.2% -0.6% 4.2% 12.1% 13.1% 7.2% 6.0%
Q/Q growth -1.8% 0.0% 0.0% 1.8% -2.4% 4.8% 7.6% 2.7%
Search Revenue Including TAC (Gross) 1,988.0 3,071.0 938.4 913.7 890.3 912.7 3,655.0 946.3 956.6 907.1 949.5 3,759.5 4,591.9
Y/Y growth NA 54.5% 33.8% 23.7% 14.0% 7.4% 19.0% 0.8% 4.7% 1.9% 4.0% 2.9% 22.1%
Q/Q growth 10.4% -2.6% -2.6% 2.5% 3.7% 1.1% -5.2% 4.7%
Traffic Acquisition Costs (TAC) 974.8 1,561.7 479.4 453.2 458.9 474.5 1,865.9 488.8 454.2 471.7 490.9 1,905.5 2,364.9
Q/Q growth 10.7% -5.5% 1.2% 3.4% 3.0% -7.1% 3.9% 4.1%
TAC as % of sales 49.0% 50.9% 51.1% 49.6% 51.5% 52.0% 51.1% 51.7% 47.5% 52.0% 51.7% 50.7% 51.5%
Search Revenue Excluding TAC (Net) 1,013.2 1,509.2 459.0 460.5 431.4 438.2 1,789.1 457.5 502.5 435.4 458.6 1,854.0 2,227.1
Y/Y growth NA 49.0% 31.7% 27.6% 12.6% 5.1% 18.5% -0.3% 9.1% 0.9% 4.7% 3.6% 20.1%
Q/Q growth 10.1% 0.3% -6.3% 1.6% 4.4% 9.8% -13.3% 5.3%
Inktomi 107.0 126.0 36.0 37.0 38.0 38.5 149.5 39.6 40.7 41.8 42.4 164.5 180.9
Y/Y growth NA 17.7% 28.8% 23.3% 18.8% 6.9% 18.7% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Kelkoo 76.2 131.0 41.0 33.0 33.0 61.0 168.0 46.3 35.5 35.6 66.2 183.6 200.2
Y/Y growth NA NA 64.0% 32.0% 26.9% 10.9% 28.2% 13.0% 7.5% 8.0% 8.5% 9.3% 9.0%
Other Revenue - - - - - - - - - - - - -
Total Text-Based Revenue Excluding TAC (Net) 1,196.4 1,766.2 536.0 530.5 502.4 537.7 2,106.6 543.4 578.7 512.9 567.1 2,202.1 2,608.1
Y/Y growth NA 47.6% 33.5% 27.6% 13.9% 5.9% 19.3% 1.4% 9.1% 2.1% 5.5% 4.5% 18.4%
Q/Q growth 5.6% -1.0% -5.3% 7.0% 1.1% 6.5% -11.4% 10.6%
Display Advertising 810.7 1,099.7 319.9 355.6 361.6 428.0 1,465.1 385.9 402.2 409.3 490.1 1,687.4 1,940.5
Y/Y growth 34.3% 35.6% 38.4% 37.2% 29.9% 29.3% 33.2% 20.6% 13.1% 13.2% 14.5% 15.2% 15.0%
Q/Q growth -3.4% 11.1% 1.7% 18.4% -9.9% 4.2% 1.8% 19.7%
Listings 147.2 166.4 45.6 47.0 47.5 49.5 189.6 50.6 51.5 52.8 55.0 209.8 226.6
Y/Y growth 15.7% 13.1% 16.0% 13.0% 13.0% 14.0% 14.0% 11.0% 9.5% 11.0% 11.0% 10.6% 8.0%
Q/Q growth 4.9% 3.2% 1.2% 4.1% 2.1% 1.8% 2.5% 4.1%
Marketing Services Revenue Excl. TAC 2,154.2 3,032.2 901.5 933.0 911.5 1,015.2 3,761.3 979.8 1,031.9 990.9 1,128.2 4,130.8 4,775.2
Y/Y growth 84.2% 40.8% 34.2% 30.2% 19.7% 15.1% 24.0% 8.7% 10.6% 8.7% 11.1% 9.8% 15.6%
Q/Q growth 2.2% 3.5% -2.3% 11.4% -3.5% 5.3% -4.0% 13.9%
Marketing services revenues as % of total 83.2% 82.0% 82.9% 83.1% 81.3% 82.7% 82.5% 82.8% 83.0% 81.1% 82.3% 82.3% 85.4%
Fees
AT&T (SBC) Access 130.5 188.6 56.5 60.2 63.1 65.1 244.9 66.2 67.1 69.1 71.0 273.5 106.7
Y/Y growth 101.2% 44.5% 34.8% 32.9% 29.2% 24.0% 29.9% 17.1% 11.5% 9.6% 9.0% 11.7% -61.0%
AT&T (SBC) DSL subs 5,104 6,921 7,432 7,774 8,148 8,573 8,573 9,023 9,473 9,923 10,373 10,373 11,773
AT&T (SBC) Yahoo! Subs 4,440 6,021 6,540 6,841 7,170 7,544 7,544 7,940 8,336 8,732 9,128 9,128 10,360
% of AT&T (SBC) subs 87.0% 87.0% 88.0% 88.0% 88.0% 88.0% 88.0% 88.0% 88.0% 88.0% 88.0% 88.0% 88.0%
Avg. AT&T (SBC) Yahoo! Subs 3,691 5,231 6,281 6,691 7,006 7,357 6,834 7,742 8,138 8,534 8,930 8,336 9,744
Monthly ARPU to Yahoo! $2.95 $3.00 $3.00 $3.00 $3.00 $2.95 $2.99 $2.85 $2.75 $2.70 $2.65 $2.73 $0.35
BT Access 19.0 62.2 20.3 21.2 22.1 22.6 86.4 22.7 22.7 23.1 23.4 91.9 98.9
Y/Y growth NA 226.4% 73.4% 45.9% 31.1% 19.3% 39.0% 11.7% 7.0% 4.3% 3.4% 6.5% 7.5%
Addressable BT DSL subs 1,491 2,328 2,432 2,537 2,641 2,745 2,745 2,850 2,950 3,050 3,150 3,150 3,522
BT Yahoo! Broadband Subs 1,118 2,212 2,310 2,410 2,509 2,608 2,608 2,708 2,803 2,898 2,993 2,993 3,346
% of addressable BT subs 75.0% 95.0% 95.0% 95.0% 95.0% 95.0% 95.0% 95.0% 95.0% 95.0% 95.0% 95.0% 95.0%
Avg. BT Yahoo! Subs 577.0 1,726 2,261 2,360 2,460 2,558 2,410 2,658 2,755 2,850 2,945 2,802 3,169
Monthly ARPU to Yahoo! $2.75 $3.00 $3.00 $3.00 $3.00 $2.95 $2.99 $2.85 $2.75 $2.70 $2.65 $2.73 $2.60
Rogers Cable Access 4.7 24.8 7.7 8.0 8.3 8.6 32.6 8.6 8.6 8.8 9.0 35.0 37.8
Y/Y growth NA 422.7% 50.4% 35.7% 25.8% 19.7% 31.4% 12.4% 8.3% 5.5% 3.8% 7.4% 8.0%
Addressable Rogers DSL subs 890 980 1,000 1,020 1,050 1,080 1,080 1,105 1,135 1,165 1,195 1,195 1,315
Rogers Yahoo! Broadband Subs 534 833 870 898 956 994 994 1,022 1,066 1,106 1,147 1,147 1,275
% of addressable Rogers subs 60.0% 85.0% 87.0% 88.0% 91.0% 92.0% 92.0% 92.5% 94.0% 95.0% 96.0% 96.0% 97.0%
Avg. Rogers Yahoo! Subs 287 689 852 884 927 975 909 1,008 1,044 1,086 1,126 1,066 1,211
Monthly ARPU to Yahoo! NA $3.00 $3.00 $3.00 $3.00 $2.95 $2.99 $2.85 $2.75 $2.70 $2.65 $2.73 $2.60
Verizon Access 11.0 10.8 12.8 15.2 17.5 56.3 20.3 23.5 27.6 32.5 103.9 158.8
Y/Y growth NA NA NA NA NA NA NA NA NA NA 84.6% 52.9%
Addressable Verizon DSL subs 3,485 4,981 5,421 5,750 6,051 6,682 6,682 7,032 7,382 7,732 8,115 8,115 8,798
Verizon Yahoo! Broadband Subs 1,096 1,301 1,553 1,815 2,138 2,138 2,602 3,100 3,711 4,463 4,463 5,719
% of addressable Verizon subs 22.0% 24.0% 27.0% 30.0% 32.0% 32.0% 37.0% 42.0% 48.0% 55.0% 55.0% 65.0%
Avg. Verizon Yahoo! Subs 614 1,198 1,427 1,684 1,977 1,571 2,370 2,851 3,406 4,087 3,179 5,091
Monthly ARPU to Yahoo! $3.00 $3.00 $3.00 $3.00 $2.95 $2.98 $2.85 $2.75 $2.70 $2.65 $2.72 $2.60
Personals 74.2 90.9 26.1 26.8 26.5 26.4 105.8 29.5 30.3 29.9 29.8 119.5 132.7
Y/Y growth 33.6% 22.4% 20.0% 17.0% 16.0% 13.0% 16.4% 13.0% 13.0% 13.0% 13.0% 13.0% 11.0%
Avg. Personals subs 337.9 421 483 496 490 489 490 546 561 554 552 553 614
Y/Y growth 39.2% 24.5% 20.0% 17.0% 16.0% 13.0% 16.4% 13.0% 13.0% 13.0% 13.0% 13.0% 11.0%
ARPU $18.30 $18.00 $18.00 $18.00 $18.00 $18.00 $18.00 $18.00 $18.00 $18.00 $18.00 $18.00 $18.00
Other Premium Services 82.3 108.0 29.6 30.0 30.1 32.9 122.6 30.7 31.1 30.6 34.2 126.5 126.4
Y/Y growth 53.8% 31.2% 18.0% 15.0% 15.0% 7.6% 13.6% 3.4% 3.5% 1.8% 4.0% 3.2% -0.1%
Avg. Other Premium subs 2,064 2,768 3,041 3,081 3,087 3,478 3,172 3,345 3,420 3,426 3,861 3,513 3,829
% growth 62.1% 34.1% 18.0% 15.0% 15.0% 11.0% 14.6% 10.0% 11.0% 11.0% 11.0% 10.8% 9.0%
ARPU $3.32 $3.25 $3.25 $3.25 $3.25 $3.15 $3.22 $3.06 $3.03 $2.98 $2.95 $3.00 $2.75
Musicmatch/Yahoo! Music Unlimited 11.0 61.0 15.7 16.3 19.2 23.2 74.4 18.2 18.9 22.3 26.9 86.3 96.6
Y/Y growth NA NA 31.0% 25.0% 20.0% 16.0% 21.9% 16.0% 16.0% 16.0% 16.0% 16.0% 12.0%
Other Fees Revenue 125.5 117.3 19.4 14.3 25.5 16.4 75.5 7.0 9.7 20.0 16.0 52.7 60.0
Y/Y growth -2.8% -6.5% - - - - -35.6% - - - -30.2% -
Fees 447.3 663.7 186.2 189.6 209.9 212.7 798.5 203.2 211.9 231.4 242.8 889.3 817.9
Y/Y growth 47.5% 48.4% 25.0% 19.5% 23.2% 14.5% 20.3% 9.1% 11.7% 10.2% 14.1% 11.4% -8.0%
Q/Q growth 0.3% 1.8% 10.7% 1.3% -4.5% 4.3% 9.2% 4.9%
Fees revenues as % of total 17.3% 18.0% 17.1% 16.9% 18.7% 17.3% 17.5% 17.2% 17.0% 18.9% 17.7% 17.7% 14.6%
90 August 10, 2007

Figure 99: Yahoo! Cash Flow Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Cash flows from operating activities

Net income 839.6 1,896.2 159.9 164.3 158.5 268.7 751.4 142.4 160.6 115.3 169.1 587.3 749.1
Adjustments
Depreciation & amortization 311.0 397.1 125.1 127.5 149.9 137.5 540.0 151.0 159.9 150.0 155.0 615.9 750.0
Tax benefits from stock-based compensation 409.0 759.5 78.8 84.5 110.8 255.5 529.7 61.1 97.0 90.0 90.0 338.1 338.1
Excess tax benefits from stock-based compensation - - (99.8) (116.1) (139.0) (242.2) (597.1) (45.5) (82.4) (175.0) (170.0) (472.9) (472.9)
Cumulative effect of accounting change - - - - - - - - - - - - -
Earnings in equity interests (95.0) (128.2) (26.4) (21.6) (30.2) (33.9) (112.1) (29.1) (32.1) (30.5) (31.0) (122.8) (135.0)
Minority interests in ops of consolidated subsidiaries 2.5 7.8 0.3 0.3 (0.1) 0.2 0.7 (1.2) (0.5) - - (1.7) -
Noncash losses/impairments - - - - - - - - - - - - -
Other non-cash charges (including stock based compensation) (361.7) (1,215.2) 101.4 117.8 107.8 95.8 422.7 94.8 99.8 140.0 145.0 479.6 526.1
Total Change in working capital (15.5) (5.9) 45.7 72.9 32.0 (314.3) (163.7) 67.7 3.4 95.7 (220.4) (53.7) (66.3)
Cash flows from operations 1,089.8 1,711.4 384.9 429.7 389.7 167.4 1,371.6 441.2 405.6 385.4 137.7 1,369.9 1,689.0
Cash flows from investing activities

Acquisition of PP&E (Capex, net) (245.5) (408.9) (141.7) (175.1) (240.8) (131.6) (689.1) (118.0) (144.7) (195.0) (190.0) (647.7) (777.2)
Purchases of marketable securities (3,449.2) (7,023.8) (334.8) (313.6) (240.7) (439.5) (1,328.5) (570.3) (422.8) - - (993.0) -
Proceeds from sales and maturities of marketable securities 2,642.6 7,342.0 436.0 409.7 585.5 520.1 1,951.3 728.0 616.8 - - 1,344.8 -
Acquisitions, net of cash acquired (761.6) (1,698.2) 5.5 (60.8) (6.0) (81.0) (142.3) (11.6) (24.4) - - (36.0) -
Proceeds from sales of other investments 502.8 1,006.1 - - - - - - - - - - -
Investments, net - - - - - - - - - - - - -
Other 18.0 (39.1) (0.3) (0.3) 19.1 (3.6) 14.9 (6.6) (13.3) - - (19.9) -
Net cash from investing activities (1,292.8) (821.9) (35.4) (140.1) 117.2 (135.5) (193.7) 21.5 11.6 (195.0) (190.0) (351.9) (777.2)
Cash flows from financing activities

Proceeds from issuance of stock, net 650.5 746.8 87.5 102.3 41.6 86.7 318.1 71.9 131.8 - - 203.7 -
Excess tax benefits from stock-based compensation - - 99.8 116.1 139.0 242.2 597.1 45.5 82.4 175.0 170.0 472.9 472.9
Other (69.6) (997.4) (616.6) (301.3) (1,091.9) - (2,009.8) (845.0) (421.9) - - (1,266.9) -
Net cash from financing activities 581.0 (250.6) (429.3) (82.9) (911.3) 328.8 (1,094.6) (727.6) (207.7) 175.0 170.0 (590.2) 472.9
Other (effect of exchange rate) 29.9 (32.9) 12.1 22.4 (1.6) 23.9 56.9 4.0 7.2 - - 11.2 -
Net change in cash 407.8 606.0 (67.6) 229.1 (406.0) 384.6 140.2 (260.8) 216.7 365.4 117.7 439.0 1,384.7
Cash & equivalents - BOP 415.9 823.7 1,429.7 1,362.1 1,591.2 1,185.3 1,429.7 1,569.9 1,309.1 1,525.8 1,891.3 1,569.9 2,008.9
Cash & equivalents - EOP 823.7 1,429.7 1,362.1 1,591.2 1,185.3 1,569.9 1,569.9 1,309.1 1,525.8 1,891.3 2,008.9 2,008.9 3,393.6
Average cash & marketable securities 2,914.3 3,332.7 3,139.8 3,334.3 3,575.8 4,327.0
Estimated annual interest rate 0.00% 4.3% 4.3% 4.3% 4.3% 4.0%
Interest income on cash balance 0.0 35.4 33.4 35.4 38.0 173.1
Other (incl. Yahoo! Japan) 0.0
Other income 496.4 1435.9 35.4 36.1 50.3 35.2 157.0 35.4 33.4 35.4 38.0 142.2 173.1
2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Working Capital Analysis:
Changes in:
Accounts receivable, net (162.7) (272.4) (40.1) (13.3) 6.6 (138.4) (185.2) 40.2 3.2 48.2 (198.5) (106.9) (188.5)
Prepaid expenses and other assets (12.2) (35.3) (10.5) (4.6) (12.3) (161.64) (189.0) 13.36 (25.88) - - (12.5) -
Accounts payable (3.6) 31.6 35.7 28.1 3.2 (36.6) 30.4 31.0 0.1 (8.1) (38.5) (15.5) 32.7
Accrued expenses and other liabilities 114.0 212.1 46.3 42.3 50.2 37.1 175.9 (28.2) 18.9 67.0 24.4 82.2 48.2
Deferred revenue 49.0 58.2 14.3 20.3 (15.7) (14.8) 4.2 11.3 7.2 (11.5) (7.9) (0.9) 41.4
Changes in working capital (15.5) (5.9) 45.7 72.9 32.0 (314.3) (163.7) 67.7 3.4 95.7 (220.4) (53.7) (66.3)
Free Cash Flow Reconciliation

Cash flow from operations 1,089.8 1,711.4 384.9 429.7 389.7 167.4 1,371.6 441.2 405.6 385.4 137.7 1,369.9 1,689.0
Capex (245.5) (408.9) (141.7) (175.1) (240.8) (131.6) (689.1) (118.0) (144.7) (195.0) (190.0) (647.7) (777.2)
Change in LT deferred revenue/other - (10.7) - (12.9) - - (12.9) - (15.2) - - (15.2) -
Reported Free Cash Flow 844.3 1,291.8 342.9 357.8 287.9 278.0 1,266.7 368.8 328.1 365.4 117.7 1,180.0 1,384.7
% change 149.1% 53.0% 8.0% 19.3% -16.5% -15.7% -1.9% 7.5% -8.3% 26.9% -57.7% -6.8% 17.4%
Reported Free Cash Flow per share $0.58 $0.87 $0.23 $0.24 $0.20 $0.20 $0.87 $0.26 $0.23 $0.26 $0.08 $0.84 $0.97
Normalized Free Cash Flow Calculation

Reported Free Cash Flow 844.3 1,291.8 342.9 357.8 287.9 278.0 1,266.7 368.8 328.1 365.4 117.7 1,180.0 1,384.7
Points program revenue (9.9) - - - - - - - - - - - -
Restructuring costs - - - - - - - - - - - - -
Acquisition Related Costs 11.6 - - - - - - - - - - - -
Contract Termination fee (proceeds) - - - - - - - - - - - - -
Asset disposal - - - - - - - - - - - - -
Dividends received - - - - - - - - - - - - -
Sale of land - - - - - - - - - - - - -
Tax effect on supplemental items 3.9 - - - - - - - - - - - -
Normalized Free Cash Flow 849.9 1,291.8 342.9 357.8 287.9 278.0 1,266.7 368.8 328.1 365.4 117.7 1,180.0 1,384.7
% change 122.4% 52.0% 8.0% 19.3% -16.5% -15.7% -1.9% 7.5% -8.3% 26.9% -57.7% -6.8% 17.4%
Normalized Free Cash Flow per share $0.59 $0.87 $0.23 $0.24 $0.20 $0.20 $0.87 $0.26 $0.23 $0.26 $0.08 $0.84 $0.97
FCF conversion as % of EBITDA 83.2% 82.9% 78.9% 78.3% 60.8% 51.4% 66.5% 80.2% 69.3% 90.0% 23.1% 63.8% 64.1%
FCF conversion as % of sales 32.8% 35.0% 31.5% 31.9% 25.7% 22.6% 27.8% 31.2% 26.4% 29.9% 8.6% 23.5% 24.8%
Capex as % of EBITDA 24.0% 26.3% 32.6% 38.3% 50.8% 24.3% 36.2% 25.7% 30.5% 48.0% 37.4% 35.0% 36.0%
August 10, 2007 91

Figure 100: Yahoo! Discounted Cash Flow Analysis

1,000.0 0 1 2 3 4 5 6 7 2006E-2011E
2005A 2006A 2007E 2008E 2009E 2010E 2011E 2012E CAGR
Revenue 3,695.9 4,559.8 5,020.1 5,593.1 6,124.2 6,694.4 7,192.0 7,640.9 9.5%
% change 42.7% 23.4% 10.1% 11.4% 9.5% 9.3% 7.4% 6.2%
EBITDA 1,557.3 1,905.9 1,848.2 2,161.8 2,440.5 2,720.4 2,968.2 3,211.1 9.3%
% change 52.4% 22.4% -3.0% 17.0% 12.9% 11.5% 9.1% 8.2%
Cash Taxes (51.0) (65.9) (81.8) (127.1) (186.4) (245.6) (307.3) (372.9)
Capex (408.9) (689.1) (647.7) (777.2) (909.4) (1,045.8) (1,171.3) (1,276.7)
Change in working capital (5.9) (163.7) (53.7) (66.3) (85.6) (78.2) (74.4) (71.0)
Unlevered free cash flow 1,091.5 987.2 1,065.0 1,191.2 1,259.3 1,350.9 1,415.3 1,490.5 7.5%
% change 47.7% -9.6% 7.9% 11.8% 5.7% 7.3% 4.8% 5.3%
2005 PV of Cash Flow 1,091.5 885.4 856.7 859.3 814.7 783.9 736.5 695.7 #REF!
Per Share $0.73 $0.60 $0.58 $0.58 $0.55 $0.53 $0.50 $0.47
2006 PV of Cash Flow 987.2 955.2 958.1 908.4 874.0 821.3 775.7
Per Share $0.68 $0.66 $0.66 $0.62 $0.60 $0.56 $0.53
2007 PV of Cash Flow 1,065.0 1,068.3 1,012.9 974.5 915.7 864.9

Per Share $0.75 $0.76 $0.72 $0.69 $0.65 $0.61
2008 PV of Cash Flow 1,191.2 1,129.4 1,086.6 1,021.0 964.3

Per Share $0.84 $0.79 $0.76 $0.72 $0.68
#REF!
Terminal EBITDA multiple 14.0x 14.0x 14.0x 14.0x
Discount Rate 11.5% 11.5% 11.5% 11.5%
Terminal value 44,955.8 44,955.8 44,955.8 44,955.8
Implied Terminal FCF Multiple 30.2 30.2 30.2 30.2 #REF!
Present value of FCF 6,723.7 6,279.9 5,901.3 5,392.5 #REF!

Present value of terminal value 20,982.7 23,395.7 26,086.3 29,086.2
Implied Firm Value $27,706.4 $29,675.6 $31,987.6 $34,478.7
Plus: Cash 3,999.8 3,537.3 3,634.6 5,019.4

Less: Debt 750.0 749.9 749.6 0.0
Plus: Yahoo! Japan 4,417.2 4,417.2 4,417.2 4,417.2
Plus: Alibaba 1,600.0 1,760.0 1,936.0 2,129.6
Plus: Gmarket 65.3 76.2 77.7 79.3
Plus: Google Equity - - - -
Less: Minority Interest - - - -
Implied Equity Value $37,038.8 $38,716.4 $41,303.5 $46,124.1
Fully diluted shares outstanding 1,486.5 1,457.9 1,411.2 1,426.2
Equity Value Per Share $24.92 $26.56 $29.27 $32.34
92 August 10, 2007

Figure 101: Google Snapshot

- Worldwide leader in search with 67%+ share, including 50% in the U.S. and - Revenue growth is decelerating amid continued high expectations for Google's
75%+ in Europe. search business with little insight into the contribution from other growth initiatives.
- Strong monetization capability via relevancy-based model and continued - Google Network Sites net revenues decreased Q/Q and Y/Y in 2Q due in part to
enhancements to its quality score algorithm drive enhanced user satisfaction. higher TAC rates, which we believe are likely to continue rising.
- EBITDA margins are likely to modestly decline as Google signs more network
- Broad distribution network, including AOL and Ask, increases network traffic and
partners leading to higher TAC, launches new products such as Google Checkout,
stimulates keyword bidding market for Google Sites.
and continues to invest in capex and new hires.
- Diversified growth within search: U.S. & International, Google Sites & Google - Domestic growth is slowing, in 2Q07 domestic gross revenues grew 4.5% Q/Q
Network , volume & monetization. compared to +8.8% in 1Q07 and +7.9% in 2Q06, but still up 43% Y/Y.
- Key Drivers: 1) market share gains; 2) international; 3) better monetization; 4) - Google has yet to materially monetize anything away from search, despite
product extensions…halo effect. investments in Google Apps, mobile, and other forms of traditional advertising.
- Strong balance sheet: $12.5B in cash in a consolidating, competitive, capex-

- Capex spending: Projecting $2.5B in '07 and $3.3B in '08.
intensive space.
- Focus on technology and user experience. - Industry pushback / headline risk related to Doubleclick acquisition.
- Risk of employees leaving for start-ups.
What to Watch For - How big can Google be? $162B market capitalization.
- Continued search share gains in the U.S. and internationally, with international - That Google becomes too big to manage effectively and it loses speed and
representing faster growth. innovation.
- Continued monetization improvements from quality score updates, landing page - That anti-Google sentiment develops as Google gets too big, too strong, and has
tweaks, and more relevant ads as coverage decreases. too much information.
- Whether Google can reignite domestic growth.
- Whether TAC remains steady at 2Q07 levels of $1.15B or continues to rise

based on distribution deals with MySpace, AOL, and the potential renewal of Ask.
- If Google can meaningfully build out its Search/Ads/Apps strategy and diversify
its revenue streams.
- If Google can contain its new hire expansion. In 2Q07 Google hired 1,548
employees which was likely a cause of overall margin compression.
- Whether industry reaction to the Doubleclick acquisition includes client

defections and industry pushback, as well as overall privacy concerns.
- Usage and monetization effects from Universal Search.
- YouTube litigation & monetization: Where is its digital fingerprinting product and
what is the video model?
- 4Q07 margin benefit from less bonus accural?
- Will there be a rebound in the Google Network Sites biz?
August 10, 2007 93

Figure 102: Google Income Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Gross Revenues $3,189.2 $6,138.6 $2,253.8 $2,456.0 $2,689.7 $3,205.5 $10,604.9 $3,664.0 $3,872.0 $4,074.1 $4,615.1 $16,225.1 $22,121.1
Traffic Acquisition Costs (TAC) $1,228.6 $2,114.9 $722.7 $785.2 $825.3 $975.6 $3,308.8 $1,125.0 $1,147.9 $1,146.9 $1,274.4 $4,694.3 $5,987.6
Net Revenues excluding TAC $1,960.6 $4,023.6 $1,531.0 $1,670.8 $1,864.4 $2,229.9 $7,296.1 $2,538.9 $2,724.1 $2,927.2 $3,340.6 $11,530.8 $16,133.4
Other cost of revenues 229.0 456.6 179.1 201.6 221.3 296.7 898.6 341.0 404.7 418.6 454.3 1,618.6 2,387.7
Gross profit 1,731.6 3,567.1 1,351.9 1,469.3 1,643.1 1,933.2 6,397.5 2,197.9 2,319.4 2,508.6 2,886.3 9,912.2 13,745.7
Operating expenses
Research & development 225.6 484.0 173.5 212.0 250.9 304.7 941.1 287.6 375.1 386.4 434.3 1,483.4 2,339.3
Sales & marketing 246.3 439.7 175.0 182.1 192.3 240.7 790.1 275.3 319.2 316.1 350.8 1,261.4 1,790.8
General & administrative 139.7 335.3 146.0 150.7 168.7 192.8 658.2 230.0 278.9 275.2 277.3 1,061.3 1,452.0
Total operating expenses 890.4 1,459.8 609.2 653.9 711.8 872.6 2,847.5 976.7 1,214.8 1,165.0 1,239.4 4,595.9 6,388.8
Operating income 841.2 2,107.3 742.7 815.4 931.3 1,060.6 3,550.0 1,221.2 1,104.6 1,343.6 1,646.9 5,316.3 7,356.9
PF Operating income 1,119.9 2,308.0 857.4 924.5 1,031.2 1,195.0 4,008.1 1,405.1 1,346.1 1,530.9 1,824.0 6,106.1 8,163.5
Other income, expense and other, net 10.0 124.4 67.9 160.8 108.2 124.1 461.0 130.7 137.1 163.0 175.6 606.4 805.3
One-time items (201.0) (90.0) - - - - - - - - - - -
Income before taxes 650.2 2,141.7 810.6 976.2 1,039.5 1,184.7 4,011.0 1,351.9 1,241.7 1,506.6 1,822.5 5,922.7 8,162.1
Provision for income taxes 251.1 676.3 218.3 255.1 306.2 154.0 933.6 349.8 316.6 421.8 510.3 1,598.5 2,285.4
GAAP Net Income (loss) 399.1 1,465.4 592.3 721.1 733.4 1,030.7 3,077.4 1,002.2 925.1 1,084.7 1,312.2 4,324.2 5,876.7
GAAP Diluted Income (loss) per share $1.46 $5.02 $1.95 $2.33 $2.36 $3.29 $9.94 $3.18 $2.93 $3.43 $4.14 $13.69 $18.31
Diluted shares outstanding 272.8 291.9 304.1 310.0 310.6 313.5 309.5 314.9 315.5 316.3 317.1 315.9 320.9
Non-recurring items:
One-time items 17.4 61.8 34.0 (54.9) - (133.2) (154.0) - - - - - -
Tax Effect (30.6) (83.2) (41.4) (3.2) (20.9) (34.7) (100.3) (26.8) (43.0) (37.5) (35.4) (142.6) (161.3)
PF Net Income (loss) 664.7 1,644.8 699.5 772.1 812.3 997.3 3,281.3 1,159.3 1,123.6 1,234.6 1,453.8 4,971.3 6,522.1
PF Diluted Income (loss) per share $2.44 $5.64 $2.30 $2.49 $2.62 $3.18 $10.60 $3.68 $3.56 $3.90 $4.59 $15.74 $20.32
Operating income (reported) 841.2 2,107.3 772.7 815.4 931.3 1,060.6 3,580.0 1,221.2 1,104.6 1,343.6 1,646.9 5,316.3 7,356.9
Depreciation & amortization 159.8 315.9 115.2 126.2 152.1 189.3 582.7 205.0 227.0 246.4 274.9 953.4 1,432.5
EBITDA 1,279.8 2,623.8 1,002.5 1,050.7 1,183.3 1,384.3 4,620.8 1,610.1 1,573.2 1,777.4 2,098.9 7,059.5 9,596.1
2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
YEAR/YEAR GROWTH
Gross Revenues 117.6% 92.5% 79.4% 77.4% 70.4% 67.0% 72.8% 62.6% 57.7% 51.5% 44.0% 53.0% 36.3%
Traffic Acquisition Costs (TAC) 133.4% 72.1% 56.5% 58.8% 55.7% 55.1% 56.4% 55.7% 46.2% 39.0% 30.6% 41.9% 27.6%
Net Revenues 108.7% 105.2% 92.7% 87.7% 77.8% 72.8% 81.3% 65.8% 63.0% 57.0% 49.8% 58.0% 39.9%
Gross profit 106.1% 106.0% 90.1% 86.6% 77.7% 69.0% 79.4% 62.6% 57.9% 52.7% 49.3% 54.9% 38.7%
Operating income 145.6% 150.5% 67.7% 71.4% 76.0% 60.8% 68.5% 64.4% 35.5% 44.3% 55.3% 49.8% 38.4%
PF Operating Income 95.9% 106.1% 74.4% 76.8% 79.2% 66.5% 73.7% 63.9% 45.6% 48.5% 52.6% 52.3% 33.7%
EBITDA 100.4% 105.0% 83.0% 78.1% 76.0% 70.1% 76.1% 60.6% 49.7% 50.2% 51.6% 52.8% 35.9%
GAAP EPS 255.4% 243.2% 51.2% 94.9% 79.4% 168.5% 98.0% 63.4% 26.1% 45.2% 25.9% 37.7% 33.8%
PF EPS 86.7% 131.3% 84.5% 87.9% 73.3% 106.0% 88.1% 60.1% 43.0% 49.3% 44.1% 48.5% 29.1%
SEQUENTIAL GROWTH
Gross revenues 17.4% 9.0% 9.5% 19.2% 14.3% 5.7% 5.2% 13.3%
Traffic Acquisition Costs (TAC) 14.9% 8.6% 5.1% 18.2% 15.3% 2.0% -0.1% 11.1%
Net revenues 18.7% 9.1% 11.6% 19.6% 13.9% 7.3% 7.5% 14.1%
EBITDA 23.2% 4.8% 12.6% 17.0% 16.3% -2.3% 13.0% 18.1%
% OF NET REVENUES
Research & development 11.5% 12.0% 11.3% 12.7% 13.5% 13.7% 12.9% 11.3% 13.8% 13.2% 13.0% 12.9% 14.5%
Sales & marketing 12.6% 10.9% 11.4% 10.9% 10.3% 10.8% 10.8% 10.8% 11.7% 10.8% 10.5% 10.9% 11.1%
General & administrative 7.1% 8.3% 9.5% 9.0% 9.0% 8.6% 9.0% 9.1% 10.2% 9.4% 8.3% 9.2% 9.0%
Stock compensation expense 14.2% 5.0% 7.5% 6.5% 5.4% 6.0% 6.3% 7.2% 8.9% 6.4% 5.3% 6.8% 5.0%
% OF GROSS REVENUES
Traffic Acquisition Costs (TAC) 38.5% 34.5% 32.1% 32.0% 30.7% 30.4% 31.2% 30.7% 29.6% 28.2% 27.6% 28.9% 27.1%
Research & development 7.1% 7.9% 7.7% 8.6% 9.3% 9.5% 8.9% 7.8% 9.7% 9.5% 9.4% 9.1% 10.6%
Sales & marketing 7.7% 7.2% 7.8% 7.4% 7.1% 7.5% 7.5% 7.5% 8.2% 7.8% 7.6% 7.8% 8.1%
General & administrative 4.4% 5.5% 6.5% 6.1% 6.3% 6.0% 6.2% 6.3% 7.2% 6.8% 6.0% 6.5% 6.6%
Stock compensation expense 8.7% 3.3% 5.1% 4.4% 3.7% 4.2% 4.3% 5.0% 6.2% 4.6% 3.8% 4.9% 3.6%
MARGINS AS % OF NET REVENUES
Gross margin 88.3% 88.7% 88.3% 87.9% 88.1% 86.7% 87.7% 86.6% 85.1% 85.7% 86.4% 86.0% 85.2%
Net margin 20.4% 36.4% 38.7% 43.2% 39.3% 46.2% 42.2% 39.5% 34.0% 37.1% 39.3% 37.5% 36.4%
EBITDA 65.3% 65.2% 65.5% 62.9% 63.5% 62.1% 63.3% 63.4% 57.8% 60.7% 62.8% 61.2% 59.5%
Operating Leverage/Flow-through 62.8% 65.2% 61.7% 59.0% 62.6% 60.7% 61.0% 60.3% 49.6% 55.9% 64.3% 57.6% 55.1%
MARGINS AS % OF GROSS REVENUES
Gross margin 54.3% 58.1% 60.0% 59.8% 61.1% 60.3% 60.3% 60.0% 59.9% 61.6% 62.5% 61.1% 62.1%
Net margin 12.5% 23.9% 26.3% 29.4% 27.3% 32.2% 29.0% 27.4% 23.9% 26.6% 28.4% 26.7% 26.6%
EBITDA 40.1% 42.7% 44.5% 42.8% 44.0% 43.2% 43.6% 43.9% 40.6% 43.6% 45.5% 43.5% 43.4%
Operating Leverage/Flow-through 37.2% 45.6% 45.6% 43.0% 46.0% 44.4% 44.7% 43.1% 36.9% 42.9% 50.7% 43.4% 43.0%
94 August 10, 2007

Figure 103: Google Revenue Analysis, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Total Gross Revenues 3,189.2 6,138.6 2,253.8 2,456.0 2,689.7 3,205.5 10,604.9 3,664.0 3,872.0 4,074.1 4,615.1 16,225.1 22,121.1
GROSS REVENUE SEGMENT ANALYSIS

Google Web Sites - Gross Revenues 1,589.1 3,377.1 1,297.3 1,432.5 1,626.0 1,977.0 6,332.8 2,282.1 2,486.3 2,699.1 3,094.1 10,561.6 14,997.5
Y/Y growth 100.6% 112.5% 97.5% 94.3% 83.8% 80.0% 87.5% 75.9% 73.6% 66.0% 56.5% 66.8% 42.0%
Q/Q growth 18.1% 10.4% 13.5% 21.6% 15.4% 8.9% 8.6% 14.6%
Google Network Web Sites - Gross Revenues 1,554.3 2,687.9 928.4 996.6 1,037.0 1,197.9 4,159.8 1,345.3 1,352.1 1,342.9 1,485.4 5,525.7 6,962.4
Y/Y growth 147.3% 72.9% 58.9% 58.1% 53.6% 50.0% 54.8% 44.9% 35.7% 29.5% 24.0% 32.8% 26.0%
Q/Q growth 16.3% 7.3% 4.1% 15.5% 12.3% 0.5% -0.7% 10.6%
Total Gross Advertising Revenues 3,143.3 6,065.0 2,225.7 2,429.0 2,663.0 3,174.9 10,492.6 3,627.5 3,838.3 4,042.1 4,579.4 16,087.3 21,959.8
Y/Y growth 121.3% 92.9% 79.3% 77.6% 70.7% 67.4% 73.0% 63.0% 58.0% 51.8% 44.2% 53.3% 36.5%
Q/Q growth 17.3% 9.1% 9.6% 19.2% 14.3% 5.8% 5.3% 13.3%
Licensing & Other Gross Revenues 45.9 73.6 28.1 27.0 26.7 30.6 112.3 36.5 33.6 32.0 35.6 137.8 161.2
Y/Y growth 1.4% 60.3% 82.2% 57.9% 42.1% 37.1% 52.7% 30.1% 24.8% 20.0% 16.5% 22.7% 17.0%
Q/Q growth 25.8% -3.9% -1.1% 14.7% 19.4% -7.9% -4.9% 11.3%
Y/Y growth 117.6% 92.5% 79.4% 77.4% 70.4% 67.0% 72.8% 62.6% 57.7% 51.5% 44.0% 53.0% 36.3%
Q/Q growth 17.4% 9.0% 9.5% 19.2% 14.3% 5.7% 5.2% 13.3%
TAC ANALYSIS
Traffic Acquisition Costs (TAC) 1,228.6 2,114.9 722.7 785.2 825.3 975.6 3,308.8 1,125.0 1,147.9 1,146.9 1,274.4 4,694.3 5,987.6
TAC as % of Gross Advertising Revenues 39.1% 34.9% 32.5% 32.3% 31.0% 30.7% 31.5% 31.0% 29.9% 28.4% 27.8% 29.2% 27.3%
Gross Google Network Web Sites Revs 1,554.3 2,687.9 928.4 996.6 1,037.0 1,197.9 4,159.8 1,345.3 1,352.1 1,342.9 1,485.4 5,525.7 6,962.4
TAC as % of Gross Google Network Web Sites Revs 79.0% 78.7% 77.8% 78.8% 79.6% 81.4% 79.5% 83.6% 84.9% 85.4% 85.8% 85.0% 86.0%
GROSS REVENUE SHARE BY SEGMENT

Google Web Sites - Gross Revenues 49.8% 55.0% 57.6% 58.3% 60.5% 61.7% 59.7% 62.3% 64.2% 66.3% 67.0% 65.1% 67.8%
Google Network Web Sites - Gross Revenues 48.7% 43.8% 41.2% 40.6% 38.6% 37.4% 39.2% 36.7% 34.9% 33.0% 32.2% 34.1% 31.5%
Total Gross Advertising Revenues 98.6% 98.8% 98.8% 98.9% 99.0% 99.0% 98.9% 99.0% 99.1% 99.2% 99.2% 99.2% 99.3%
Licensing & Other Gross Revenues 1.4% 1.2% 1.2% 1.1% 1.0% 1.0% 1.1% 1.0% 0.9% 0.8% 0.8% 0.8% 0.7%
Total Gross Revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Traffic Acquisition Costs (TAC) 1,228.6 2,114.9 722.7 785.2 825.3 975.6 3,308.8 1,125.0 1,147.9 1,146.9 1,274.4 4,694.3 5,987.6
Total Net Revenues 1,960.6 4,023.6 1,531.0 1,670.8 1,864.4 2,229.9 7,296.1 2,538.9 2,724.1 2,927.2 3,340.6 11,530.8 16,133.4
NET REVENUE SEGMENT ANALYSIS

Google Web Sites (AdWords) - Net Revenues 1,589.1 3,377.1 1,297.3 1,432.5 1,626.0 1,977.0 6,332.8 2,282.1 2,486.3 2,699.1 3,094.1 10,561.6 14,997.5
Y/Y growth 100.6% 112.5% 97.5% 94.3% 83.8% 80.0% 87.5% 75.9% 73.6% 66.0% 56.5% 66.8% 42.0%
Q/Q growth 18.1% 10.4% 13.5% 21.6% 15.4% 8.9% 8.6% 14.6%
Google Network Web Sites (AdSense) - Net Revenues 325.6 573.0 205.6 211.4 211.8 222.2 851.1 220.3 204.1 196.1 210.9 831.4 974.7
Y/Y growth 219.0% 76.0% 68.1% 55.5% 45.9% 31.0% 48.5% 7.1% -3.4% -7.4% -5.1% -2.3% 17.2%
Q/Q growth 21.2% 2.8% 0.2% 5.0% -0.9% -7.3% -4.0% 7.6%
Total Net Advertising Revenues 1,914.7 3,950.1 1,503.0 1,643.9 1,837.7 2,199.3 7,183.9 2,502.4 2,690.4 2,895.2 3,305.0 11,393.0 15,972.2
Y/Y growth 114.1% 106.3% 92.9% 88.3% 78.5% 73.5% 81.9% 66.5% 63.7% 57.5% 50.3% 58.6% 40.2%
Q/Q growth 18.5% 9.4% 11.8% 19.7% 13.8% 7.5% 7.6% 14.2%
Licensing & Other Net Revenues 45.9 73.6 28.1 27.0 26.7 30.6 112.3 36.5 33.6 32.0 35.6 137.8 161.2
Y/Y growth 1.4% 60.3% 82.2% 57.9% 42.1% 37.1% 52.7% 30.1% 24.8% 20.0% 16.5% 22.7% 17.0%
Q/Q growth 25.8% -3.9% -1.1% 14.7% 19.4% -7.9% -4.9% 11.3%
Total Net Revenues 1,960.6 4,023.6 1,531.0 1,670.8 1,864.4 2,229.9 7,296.1 2,538.9 2,724.1 2,927.2 3,340.6 11,530.8 16,133.4
Y/Y growth 108.7% 105.2% 92.7% 87.7% 77.8% 72.8% 81.3% 65.8% 63.0% 57.0% 49.8% 58.0% 39.9%
Q/Q growth 18.7% 9.1% 11.6% 19.6% 13.9% 7.3% 7.5% 14.1%
NET REVENUE SHARE BY SEGMENT

Google Web Sites as % of Total Net Revs 81.1% 83.9% 84.7% 85.7% 87.2% 88.7% 86.8% 89.9% 91.3% 92.2% 92.6% 91.6% 93.0%
Google Network Web Sites as % of Total Net Revs 16.6% 14.2% 13.4% 12.7% 11.4% 10.0% 11.7% 8.7% 7.5% 6.7% 6.3% 7.2% 6.0%
Total Advertising Revenues as % of Total Net Revs 97.7% 98.2% 98.2% 98.4% 98.6% 98.6% 98.5% 98.6% 98.8% 98.9% 98.9% 98.8% 99.0%
Licensing & Other Revenue as % of Total Net Revs 2.3% 1.8% 1.8% 1.6% 1.4% 1.4% 1.5% 1.4% 1.2% 1.1% 1.1% 1.2% 1.0%
Total Net Revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Geographic Breakdown
($ millions) 2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Y/Y growth 117.6% 92.5% 79.4% 77.4% 70.4% 67.0% 72.8% 62.6% 57.7% 51.5% 44.0% 53.0% 36.3%
Q/Q growth 17.4% 9.0% 9.5% 19.2% 14.3% 5.7% 5.2% 13.3%
United States 2,119.0 3,756.9 1,317.5 1,421.0 1,506.8 1,784.8 6,030.1 1,941.9 2,028.9 2,094.1 2,358.3 8,423.2 10,618.1
Y/Y growth 104.1% 77.3% 70.7% 68.5% 57.4% 50.6% 60.5% 47.4% 42.8% 39.0% 32.1% 39.7% 26.1%
Q/Q growth 11.2% 7.9% 6.0% 18.4% 8.8% 4.5% 3.2% 12.6%
U.S. revenues as % of Gross Revenues 66.4% 61.2% 58.5% 57.9% 56.0% 55.7% 56.9% 53.0% 52.4% 51.4% 51.1% 51.9% 48.0%
International 1,070.2 2,381.7 936.2 1,035.0 1,182.9 1,420.7 4,574.8 1,722.1 1,843.1 1,980.0 2,256.8 7,801.9 11,503.0
Y/Y growth 150.3% 122.5% 93.2% 91.2% 90.4% 93.5% 92.1% 83.9% 78.1% 67.4% 58.8% 70.5% 47.4%
Q/Q growth 27.5% 10.5% 14.3% 20.1% 21.2% 7.0% 7.4% 14.0%
International revenues as % of Gross Revenues 33.6% 38.8% 41.5% 42.1% 44.0% 44.3% 43.1% 47.0% 47.6% 48.6% 48.9% 48.1% 52.0%
Other Metrics
($ actual) 2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Full-Time Headcount 3,021 5,680 6,790 7,942 9,378 10,674 10,674 12,238 13,786 15,086 16,286 16,286 21,786
Y/Y growth 85.6% 88.0% 95.0% 89.9% 88.0% 87.9% 87.9% 80.2% 73.6% 60.9% 52.6% 52.6% 33.8%
Q/Q growth 19.5% 17.0% 18.1% 13.8% 14.7% 12.6% 9.4% 8.0%
Absolute Sequential Change in Headcount 1,393 2,659 1,110 1,152 1,436 1,296 4,994 1,564 1,548 1,300 1,200 5,612 5,500
Annualized Gross Revenue/Average Full Time Employee $ 1,372,004 $ 1,411,001 $ 1,445,873 $ 1,333,690 $ 1,242,343 $ 1,278,874 $ 1,296,920 $ 1,279,319 $ 1,190,281 $ 1,128,865 $ 1,176,861 $ 1,203,642 $ 1,162,065
Annualized Net Revenue/Average Full Time Employee $ 843,442 $ 924,863 $ 982,209 $ 907,321 $ 861,159 $ 889,639 $ 892,276 $ 886,501 $ 837,403 $ 811,084 $ 851,875 $ 855,403 $ 847,523
Annualized EBITDA/Average Full Time Employee $ 550,551 $ 603,112 $ 643,157 $ 570,590 $ 546,559 $ 552,272 $ 565,102 $ 562,174 $ 483,601 $ 492,484 $ 535,227 $ 523,701 $ 504,100
Annualized Cash Opex/Average Full Time Employee $ 263,124 $ 289,407 $ 317,277 $ 295,824 $ 282,634 $ 294,515 $ 292,213 $ 276,836 $ 299,185 $ 270,902 $ 270,896 $ 282,353 $ 293,243
August 10, 2007 95

Figure 104: Google Cash Flow Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Cash flows from operating activities

Net income 399.1 1,465.4 592.3 721.1 733.4 1,030.7 3,077.4 1,002.2 925.1 1,084.7 1,312.2 4,324.2 5,876.7
Adjustments
Depreciation & amortization of PP&E 128.5 256.8 95.9 110.2 129.6 158.8 494.4 170.3 188.1 214.4 242.9 815.8 1,298.6
Amortization of warrants - - - - - - - - - - - -
In-process research & development 11.3 22.0 4.0 - 6.8 - 10.8 - 3.66 - - 3.7 -
Stock-based compensation 278.7 200.7 114.7 109.1 99.9 134.4 458.1 183.9 241.5 187.3 177.1 789.8 806.7
Tax benefits from exercise of stock options and other - 433.7 - - (329.1) (252.7) (581.7) (74.1) (105.7) (105.7) (105.7) (391.3) (391.3)
One-time items 392.6 - - - - 1.7 1.7 (6.4) 2.7 - - (3.7) -
Changes in working capital (253.2) 43.7 2.7 (115.9) 348.1 (192.6) 42.3 (91.0) (60.7) 194.3 (152.6) (109.9) 66.3
Cash flows from operations 977.0 2,459.4 824.8 840.6 1,004.3 910.8 3,580.5 1,219.6 1,229.9 1,607.1 1,505.8 5,562.4 7,790.9
-40% -31% -26%
Cash flows from investing activities
Purchases of PP&E (319.0) (838.2) (344.9) (699.0) (492.2) (366.6) (1,902.8) (596.9) (575.1) (644.0) (668.1) (2,484.0) (3,307.4)
Purchase of short-term investments (4,134.6) (12,675.9) (13,111.5) (4,464.6) (5,575.3) (3,530.5) (26,681.9) (5,225.2) (2,118.7) - - (7,343.9) -
Maturities and sales of short-term investments 2,611.1 10,257.2 11,755.8 4,100.7 4,032.5 3,218.2 23,107.1 5,079.4 1,937.8 - - 7,017.2 -
Acquisitions, net of cash acquired (25.0) (86.5) (188.0) (1,004.8) (79.3) (149.6) (1,421.6) (34.4) 24.2 - - (10.3) -
Change in other assets (33.9) (14.8) - - - - - - (207.5) - - (207.5) -
Net cash from investing activities (1,901.4) (3,358.2) (1,888.6) (2,067.6) (2,114.4) (828.5) (6,899.2) (777.1) (939.3) (644.0) (668.1) (3,028.5) (3,307.4)
Cash flows from financing activities

Proceeds from issuance of common stock 1,161.1 4,287.2 - 2,063.8 (0.0) (0.2) 2,063.5 - - - - - -
Proceeds from issuance of convertible preferred stock, net - - - - - - - - - - - - -
Proceeds from exercise of stock options, net 12.0 85.0 42.6 54.5 58.5 165.6 321.1 14.4 14.4 - - 28.8 -
Excess tax benefits from stock-based award activity 77.3 180.8 71.0 252.7 581.7 74.1 105.7 105.7 105.7 391.3 391.3
Proceeds from exercise of warrants 21.9 - - - - - - - - - - - -
Payments of notes receivable from stockholders 4.3 - - - - - - - - - - - -
Payments of principal on capital leases and equip. loans (4.7) (1.4) - - - - - - - - - - -
Net cash from financing activities 1,194.6 4370.8 119.9 2,299.1 129.4 418.0 2,966.4 88.5 120.1 105.7 105.7 420.1 391.3
Other (effect of exchange rate) 7.6 (21.8) 1.9 8.7 3.0 6.0 19.7 5.7 1.6 - - 7.3 -
Net change in cash 277.9 3,450.3 (942.0) 1,080.7 (977.6) 506.3 (332.5) 536.7 412.3 1,068.9 943.4 2,961.3 4,874.8
Cash & equivalents - BOP 149.0 426.9 3,877.2 2,935.2 4,015.9 3,038.3 3,877.2 3,544.7 4,081.3 4,493.6 5,562.5 3,544.7 6,506.0
Cash & equivalents - EOP 426.9 3,877.2 2,935.2 4,015.9 3,038.3 3,544.7 3,544.7 4,081.3 4,493.6 5,562.5 6,505.9 6,506.0 11,380.8
2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Working Capital Analysis:
Changes in:
Accounts receivable, net (156.9) (372.3) (155.2) (38.0) (150.1) (280.7) (624.0) (153.6) (171.5) (49.1) (306.6) (680.7) (415.6)
Income taxes (125.2) 87.4 139.2 (131.9) 521.2 (130.1) 398.4 337.7 (4.30) - - 333.4 -
Prepaid revenue share, expenses and other assets (99.8) (51.7) (26.5) (41.4) (199.8) (21.4) (289.2) (185.5) (22.0) 23.9 (86.5) (270.1) (113.3)
Accounts payable (13.5) 80.6 30.2 33.6 27.3 4.2 95.4 (29.3) (45.4) 68.4 28.9 22.7 121.1
Accrued expenses and other liabilities 86.4 166.8 (39.3) 54.1 109.9 166.9 291.5 (139.9) 160.8 133.1 124.7 278.7 304.4
Accrued revenue share 33.9 93.3 51.2 5.8 33.9 48.4 139.3 77.9 4.3 1.2 64.1 147.5 127.5
Deferred revenue 22.0 39.6 3.0 2.0 5.7 20.0 30.8 1.7 17.5 16.8 22.7 58.6 42.1
Changes in working capital (253.2) 43.7 2.7 (115.9) 348.1 (192.6) 42.3 (91.0) (60.7) 194.3 (152.6) (109.9) 66.3
Capex Analysis:
Capex 319.0 838.2 344.9 699.0 492.2 366.6 1,902.8 596.9 575.0 644.0 668.1 2,484.0 3,307.4
Capex as % of net revenues 16.3% 20.8% 22.5% 41.8% 26.4% 16.4% 26.1% 23.5% 21.1% 22.0% 20.0% 21.5% 20.5%
Capex as % of operating cash flow 32.6% 34.1% 41.8% 83.2% 49.0% 40.3% 53.1% 48.9% 46.8% 40.1% 44.4% 44.7% 42.5%
Free Cash Flow Reconciliation

Cash flow from operations 977.0 2,459.4 824.8 840.6 1,004.3 910.8 3,580.5 1,219.6 1,229.9 1,607.1 1,505.8 5,562.4 7,790.9
Capex (319.0) (838.2) (344.9) (699.0) (492.2) (366.6) (1,902.8) (596.9) (575.0) (644.0) (668.1) (2,484.0) (3,307.4)
Excess tax benefits from stock-based award activity - - - - - - - - - - - - -
Free Cash Flow 658.0 1,621.2 479.9 141.6 512.1 544.2 1,677.7 622.7 654.9 963.1 837.7 3,078.4 4,483.6
% Y/Y change 201.0% 146.4% 23.9% -69.7% 44.6% 31.9% 3.5% 29.8% 362.6% 88.1% 53.9% 83.5% 45.6%
Free Cash Flow per share $2.41 $5.55 $1.58 $0.46 $1.65 $1.74 $5.42 $1.98 $2.08 $3.05 $2.64 $9.74 $13.97
FCF conversion as % of Cash Flow from Ops 67.4% 65.9% 58.2% 16.8% 51.0% 59.7% 46.9% 51.1% 53.2% 59.9% 55.6% 55.3% 57.5%
Y/Y change in CFO 147.1% 151.7% 55.7% 34.6% 55.3% 38.3% 45.6% 47.9% 46.3% 60.0% 65.3% 55.4% 40.1%
FCF as % of EBITDA 51.4% 61.8% 47.9% 13.5% 43.3% 39.3% 36.3% 38.7% 41.6% 54.2% 39.9% 43.6% 46.7%
96 August 10, 2007

Figure 105: Google Discounted Cash Flow Analysis

1,000.0 0 1 2 3 4 5 6 7 8 9 2006E-2011E
2003A 2004A 2005A 2006A 2007E 2008E 2009E 2010E 2011E 2012E CAGR
Net Revenues 939.4 1,960.6 4,023.6 7,296.1 11,530.8 16,133.4 20,808.4 25,230.1 29,126.8 32,639.7
% change 172.3% 108.7% 105.2% 81.3% 58.0% 39.9% 29.0% 21.2% 15.4% 12.1% 31.9%
EBITDA 638.5 1,279.8 2,623.8 4,620.8 7,059.5 9,596.1 12,107.3 14,555.6 16,650.7 18,557.5
% change 169.3% 100.4% 105.0% 76.1% 52.8% 35.9% 26.2% 20.2% 14.4% 11.5% 29.2%
Cash Taxes (241.0) (251.1) (676.3) (933.6) (1,598.5) (2,285.4) (2,888.7) (3,467.4) (3,956.3) (4,443.3)
Capex (176.8) (319.0) (838.2) (1,902.8) (2,484.0) (3,307.4) (4,057.6) (4,667.6) (5,097.2) (5,385.6)
Change in working capital (6.2) (253.2) 43.7 42.3 (109.9) 66.3 175.9 (8.6) (45.3) 8.6
Unlevered free cash flow 214.5 456.4 1,153.1 1,826.7 2,867.0 4,069.6 5,336.8 6,412.1 7,551.9 8,737.3
% change 79.3% 112.8% 152.6% 58.4% 56.9% 41.9% 31.1% 20.1% 17.8% 15.7% 32.8%
2003 PV of Cash Flow 214.5 407.5 919.2 1,300.2 1,822.0 2,309.2 2,703.8 2,900.5 3,050.1 3,150.8
Per Share $0.82 $1.55 $3.50 $4.95 $6.94 $8.79 $10.30 $11.05 $11.62 $12.00
2004 PV of Cash Flow 456.4 1,029.5 1,456.3 2,040.7 2,586.3 3,028.2 3,248.6 3,416.1 3,528.8
Per Share $1.60 $3.60 $5.09 $7.14 $9.04 $10.59 $11.36 $11.95 $12.34
2005 PV of Cash Flow 1,153.1 1,631.0 2,285.6 2,896.6 3,391.6 3,638.4 3,826.0 3,952.3
Per Share $3.79 $5.37 $7.52 $9.53 $11.16 $11.97 $12.59 $13.00
2006 PV of Cash Flow 1,826.7 2,559.8 3,244.2 3,798.6 4,075.0 4,285.1 4,426.6
Per Share $5.83 $8.17 $10.35 $12.12 $13.00 $13.67 $14.12
2007 PV of Cash Flow 2,867.0 3,633.5 4,254.5 4,564.0 4,799.4 4,957.8

Per Share $9.08 $11.50 $13.47 $14.45 $15.19 $15.69
2008 PV of Cash Flow 4,069.6 4,765.0 5,111.7 5,375.3 5,552.7

Per Share $12.68 $14.85 $15.93 $16.75 $17.30
Terminal EBITDA multiple 16.0x 16.0x 16.0x 16.0x 16.0x 16.0x

Discount Rate 12.0% 12.0% 12.0% 12.0% 12.0% 12.0%
Terminal value 296,920.7 296,920.7 296,920.7 296,920.7 296,920.7 296,920.7
Implied Terminal FCF Multiple 34.0 34.0 34.0 34.0 34.0 34.0
Present value of FCF 18,777.8 20,791.0 22,774.7 24,216.2 25,076.2 24,874.3

Present value of terminal value 107,072.6 119,921.3 134,311.8 150,429.3 168,480.8 188,698.5
Implied Firm Value $125,850.4 $140,712.2 $157,086.5 $174,645.4 $193,556.9 $213,572.7
Plus: Cash 334.7 2,132.3 8,034.2 11,243.9 14,515.8 19,390.7

Less: Debt - - - - - -
Implied Equity Value $126,185.1 $142,844.5 $165,120.7 $185,889.3 $208,072.7 $232,963.5
Fully diluted shares outstanding 262.6 285.9 304.0 313.5 315.9 320.9
Equity Value Per Share $480.59 $499.55 $543.21 $593.03 $658.63 $725.93
August 10, 2007 97

Figure 106: eBay Snapshot

- Symbiotic, network effect business model within core eBay,
PayPal, and Skype - Natural evolution of e-commerce toward multi-channel buying and selling
- Community of 241 million registered users, 83 million active - Rebalance helping ASPs & conversion rates, but buyer demand still lags and
users; strong barriers to entry around core auction business listings growth slowing
- Annualized GMV of $58B; would be ~11th largest retailer in the

world - Core growth: 2Q07 GMV +8% in U.S. and +11% international (ex FX)
- Vertically integrated through PayPal; exploiting off eBay - Low/no growth in the U.S. and Germany which make up ~70% of eBay’s
opportunity business
- PayPal a key driver, but facing increased competition from Google Checkout and
- Rebalancing initiatives improving ASPs and conversion rates potentially Amazon; 2/3 of PayPal biz on eBay platform
- Strong balance sheet: $3.5 billion in cash---bought back $2B of - Is there a novelty effect to online auctions? Do e-commerce shoppers want more
stock and another $2B to go---could also lever up convenience, speed, ease of use? It looks like Amazon is taking share
- Shift to more in-season merchandise magnifies the effects of seasonality; eBay

Express gaining traction slowly

3Q07 2007
- Whether RPL improvements can continue to be driven by ASPs,
conversion rates, non-GMV biz, fees---+32% in 2Q07 Net Revenues $1.775B - $1.825B $7.300B - $7.450B
Y/Y revenue growth Implied 22% - 25%
- Whether eBay can stimulate buyer demand by improving user
experience and trust/safety Operating Margin 26%
Pro Forma Operating Margin 33%
- Whether listings reaccelerate from (-6%) in 2Q07 GAAP Diluted EPS $0.25 - $0.27 $1.08 - $1.12
Pro Forma Diluted EPS $0.31-$0.33 $1.34 - $1.38
- Core growth: current numbers helped by FX, acquisitions, buybacks,
China deconsolidation, lower tax rate, advertising Non-cash charges and tax impact
GAAP Effective Tax Rate 23.5% - 24%
- Health of the Big 3: U.S., Germany, UK PF Effective Tax Rate 25.5% - 26.0%
Capex 7% - 8% of Revenue
- Continued share buybacks: repo’d $2.3B worth from 3Q06-2Q07; addt’l
$1.7B in authorizations through January 2009 Free Cash Flow ~$1.950B
- Potential to lever up and do bigger buyback; increased credit line from

$1B to $2B
- Increased presence of YHOO sponsored search results on null search &

within complementary listings; also graphical
- Comps: Listings comps easier in 2H07, but also lapping RPL

improvements in 4Q
- Whether investors give eBay credit for non-GMV businesses, i.e.,

Shopping.com, Classifieds, Rent.com
- 2H07 enhancements: new homepage, better search technology, one-

click buying capability
98 August 10, 2007

Figure 107: eBay Income Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Net revenues 3,271,309 4,552,401 1,390,419 1,410,784 1,448,637 1,719,901 5,969,741 1,768,074 1,834,429 1,816,040 2,034,653 7,453,196 8,889,027
Cost of net revenues 614,415 818,104 269,092 284,848 307,716 344,304 1,205,960 380,375 401,859 399,529 435,416 1,617,179 1,902,252
Gross profit 2,656,894 3,734,297 1,121,327 1,125,936 1,140,921 1,375,597 4,763,781 1,387,699 1,432,570 1,416,511 1,599,237 5,836,017 6,986,775
Operating expenses
Sales and marketing 857,874 1,230,728 375,841 370,937 371,671 439,715 1,558,164 424,029 454,682 454,010 492,386 1,825,107 2,204,479
Product development 240,647 328,191 98,369 100,981 101,395 112,461 413,206 121,641 128,514 127,123 136,322 513,600 622,232
General and administrative 415,725 591,715 186,430 193,591 203,362 249,333 832,716 250,362 256,001 257,878 280,782 1,045,023 1,208,908
Payroll expense on employeee stock options 17,479 13,015 2,324 1,609 467 4,400 - - -
Patent litigation expense - - - - - - - - - - - - -
Amortization of acquired intangible assets 65,927 128,941 51,921 61,996 51,474 49,538 214,929 51,890 56,846 55,000 55,000 218,736 220,000
Incremental non-cash stock-based comp (FAS123) 83,818 85,408 73,519 74,665 317,410 71,950 79,621 80,000 80,000 311,571 322,476
Total operating expenses 1,597,652 2,292,590 798,703 814,522 801,888 925,712 3,340,825 919,872 975,664 974,010 1,044,490 3,914,036 4,578,094
Operating income 1,059,242 1,441,707 322,624 311,414 339,033 449,885 1,422,956 467,827 456,906 442,501 554,747 1,921,981 2,408,681
PF Operating income 1,148,480 1,615,435 460,687 460,427 464,493 575,007 1,960,614 593,445 594,664 577,501 689,747 2,455,357 2,951,157
Interest and other income, net 77,867 111,148 25,759 25,629 41,230 37,399 130,017 30,020 33,967 35,204 37,925 137,116 151,805
Interest expense (8,879) (3,478) (747) (929) (553) (3,687) (5,916) (4,542) (2,734) - - (7,276) -
Impairment of certain equity investments - - - - - - - - - - - - -
Total non-operating expenses, net 68,988 107,670 25,012 24,700 40,677 33,712 124,101 25,478 31,233 35,204 37,925 129,840 151,805
Income (loss) before income taxes and minority interests 1,128,230 1,549,377 347,636 336,114 379,710 483,597 1,547,057 493,305 488,139 477,704 592,673 2,051,821 2,560,486
Provision for income taxes (343,885) (467,285) (99,354) (86,120) (98,814) (137,130) (421,418) (116,129) (112,315) (117,993) (145,205) (491,642) (614,517)
Tax Rate 30.5% 30.2% 28.6% 25.6% 26.0% 28.4% 27.2% 23.5% 23.0% 24.7% 24.5% 24.0% 24.0%
Minority interests in consolidated companies (6,122) (49) (1) (1) (1) (1) (4) - - - - - -
GAAP Net income (loss) 778,223 1,082,043 248,281 249,993 280,895 346,466 1,125,635 377,176 375,824 359,711 447,468 1,560,179 1,945,969
Basic income (loss) per share $0.59 $0.79 $0.18 $0.18 $0.20 $0.25 $0.80 $0.28 $0.28 $0.26 $0.33 $1.15 $1.42
Diluted income (loss) per share $0.57 $0.78 $0.17 $0.17 $0.20 $0.25 $0.79 $0.27 $0.27 $0.26 $0.33 $1.13 $1.40
Basic shares outstanding 1,319,443 1,361,656 1,406,309 1,411,925 1,406,382 1,380,577 1,399,251 1,366,915 1,361,046 1,360,046 1,359,046 1,361,763 1,373,763
Diluted shares outstanding 1,367,001 1,393,688 1,437,581 1,435,757 1,426,112 1,402,749 1,425,472 1,384,287 1,378,697 1,377,697 1,376,697 1,379,345 1,391,345
Payroll expense on employeee stock options 17,479 13,015 2,324 1,609 467 919 5,319 1,778 1,291 - - 3,069 -
Amortization of acquired intangible assets 65,927 128,941 51,921 61,996 51,474 49,538 214,929 51,890 56,846 55,000 55,000 218,736 220,000
Opex adj. for non-cash stock based comp. 5,623 30,170 83,818 85,408 73,519 74,665 317,410 71,950 79,621 80,000 80,000 311,571 322,476
Cost of net revenues adjustment 209 1,602 - - - - -
Interest and other income adjustment (6,485) (2,260) - - - - - - - - - - -
Tax adjustment (31,520) (50,517) (43,442) (48,260) (38,946) (41,042) (171,690) (42,315) (42,532) (41,310) (43,990) (170,147) (207,768)
Other one-time items - - - - - - - - -
Minority interests - - - - - - - - -
PF Net income (loss) 829,456 1,202,994 342,902 350,746 367,409 430,546 1,491,603 460,479 471,050 453,401 538,478 1,923,408 2,280,677
PF basic income (loss) per share $0.63 $0.88 $0.24 $0.25 $0.26 $0.31 $1.07 $0.34 $0.35 $0.33 $0.40 $1.41 $1.66
PF diluted income (loss) per share $0.61 $0.86 $0.24 $0.24 $0.26 $0.31 $1.05 $0.33 $0.34 $0.33 $0.39 $1.39 $1.64
Basic shares outstanding 1,319,443 1,361,656 1,406,309 1,411,925 1,406,382 1,380,577 1,399,251 1,366,915 1,361,046 1,360,046 1,359,046 1,361,763 1,373,763
Diluted shares outstanding 1,367,001 1,393,688 1,437,581 1,435,757 1,426,112 1,402,749 1,425,472 1,384,287 1,378,697 1,377,697 1,376,697 1,379,345 1,391,345
PF Operating income 1,148,480 1,615,435 460,687 460,427 464,493 575,007 1,960,614 593,445 594,664 577,501 689,747 2,455,357 2,951,157
Depreciation 187,763 249,224 71,365 80,430 83,750 94,078 329,623 91,559 89,876 95,000 100,000 376,435 387,074
EBITDA 1,336,243 1,864,659 532,052 540,857 548,243 669,085 2,290,237 685,004 684,540 672,501 789,747 2,831,792 3,338,231
2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Y/Y Growth
Net sales 51.1% 39.2% 34.8% 29.9% 31.0% 29.4% 31.1% 27.2% 30.0% 25.4% 18.3% 24.8% 19.3%
Operating income 68.3% 36.1% -3.9% -17.8% -5.0% 21.5% -1.3% 45.0% 46.7% 30.5% 23.3% 35.1% 25.3%
PF Operating income 65.3% 40.7% 25.4% 13.3% 18.0% 28.3% 21.4% 28.8% 29.2% 24.3% 20.0% 25.2% 20.2%
GAAP Net income 76.2% 39.0% -3.1% -14.3% 10.2% 24.1% 4.0% 51.9% 50.3% 28.1% 29.2% 38.6% 24.7%
PF Net income 67.7% 45.0% 24.4% 14.2% 31.1% 26.6% 24.0% 34.3% 34.3% 23.4% 25.1% 28.9% 18.6%
EBITDA 66.3% 39.5% 25.3% 16.1% 20.2% 29.2% 22.8% 28.7% 26.6% 22.7% 18.0% 23.6% 17.9%
Sequential Growth
Net sales 4.6% 1.5% 2.7% 18.7% 2.8% 3.8% -1.0% 12.0%
% of Revenues
Sales and marketing 26.2% 27.0% 27.0% 26.3% 25.7% 25.6% 26.1% 24.0% 24.8% 25.0% 24.2% 24.5% 24.8%
Margins
Gross margin 81.2% 82.0% 80.6% 79.8% 78.8% 80.0% 79.8% 78.5% 78.1% 78.0% 78.6% 78.3% 78.6%
PF Operating margin 35.1% 35.5% 33.1% 32.6% 32.1% 33.4% 32.8% 33.6% 32.4% 31.8% 33.9% 32.9% 33.2%
EBITDA margin 40.8% 41.0% 38.3% 38.3% 37.8% 38.9% 38.4% 38.7% 37.3% 37.0% 38.8% 38.0% 37.6%
Operating Leverage (∆ in PF op inc / ∆ in revenues) 41.0% 36.4% 26.0% 16.7% 20.7% 32.5% 24.4% 35.2% 31.7% 30.8% 36.5% 33.4% 34.5%
August 10, 2007 99

Figure 108: eBay Segment Breakdown, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
TOTAL LISTINGS 1,412,600 1,876,800 575,400 596,000 583,700 610,200 2,365,300 588,400 559,100 574,010 650,198 2,371,708 2,564,160
Y/Y growth 45% 33% 33% 35% 27% 12% 26% 2% -6% -2% 7% 0% 8%
Q/Q growth 5% 4% -2% 5% -4% -5% 3% 13%
Conversion Rate 49.8% 48.5% 46.0% 45.4% 46.1% 47.8% 46.4% 49.1% 50.7% 48.8% 47.8% 49.0% 49.1%
Y/Y growth -3% -3% -9% -10% -4% 6% -4% 7% 12% 6% 0% 6% 0%
Average Selling Price (ASP) $48.56 $48.69 $47.25 $47.64 $46.95 $49.46 $47.83 $49.47 $51.00 $50.44 $50.93 $50.45 $53.20
Y/Y growth 2% 0% -3% -2% -4% 2% -2% 5% 7% 7% 3% 5% 5%
TOTAL GMV 34,168,000 44,299,000 12,504,000 12,896,000 12,639,000 14,434,000 52,473,000 14,281,000 14,464,000 14,120,314 15,818,242 58,683,556 66,946,108
Y/Y growth 44% 30% 18% 18% 17% 20% 18% 14% 12% 12% 10% 12% 14%
eBay Merchandise Take Rate 7.31% 7.68% 7.92% 7.73% 8.05% 8.30% 8.01% 8.48% 8.55% 8.62% 8.49% 8.53% 8.67%
TOTAL EBAY TRANSACTION REVENUE (non-PayPal) 2,496,187 3,402,301 990,527 997,121 1,017,274 1,198,418 4,203,340 1,211,545 1,236,835 1,217,602 1,342,431 5,008,413 5,803,528
Y/Y growth 48% 36% 28% 22% 22% 24% 24% 22% 24% 20% 12% 19% 16%
Total Transaction Revenue Per Listing $1.77 $1.81 $1.72 $1.67 $1.74 $1.96 $1.78 $2.06 $2.21 $2.12 $2.06 $2.11 $2.26
Y/Y growth 2% 3% -4% -10% -4% 11% -2% 20% 32% 22% 5% 19% 7%
Q/Q growth -3% -3% 4% 13% 5% 7% -4% -3%
3.2% 5.1%
US LISTINGS 773,986 916,587 264,600 265,000 260,700 271,600 1,061,900 258,400 243,100 260,700 287,896 1,050,096 1,123,603
Y/Y growth 30% 18% 23% 23% 16% 4% 16% -2% -8% 0% 6% -1% 7%
Q/Q growth 1% 0% -2% 4% -5% -6% 7% 10%
% of total listings 54.8% 48.8% 46.0% 44.5% 44.7% 44.5% 44.9% 43.9% 43.5% 45.4% 44.3% 44.3% 43.8%
Conversion Rate 49.3% 49.3% 49.6% 48.8% 48.8% 49.9% 49.3% 52.1% 54.0% 51.5% 50.0% 51.8% 52.5%
Y/Y growth -4% 0% -2% -4% -1% 7% 0% 5% 11% 5% 0% 5% 1%
Y/Y growth 2% 1% -2% -3% -1% 2% -1% 5% 8% 8% 4% 6% 5%
US GMV 18,455,912 21,958,809 6,236,000 6,109,000 6,111,000 6,777,000 25,233,000 6,736,000 6,700,000 6,981,546 7,485,296 27,902,842 31,854,137
Y/Y growth 27% 19% 18% 15% 13% 14% 15% 8% 10% 14% 10% 11% 14%
% of total GMV 54% 50% 50% 47% 48% 47% 48% 47% 46% 49% 47% 48% 48%
Take Rate 7.3% 7.9% 8.14% 8.03% 8.49% 8.66% 8.3% 8.63% 8.86% 8.80% 8.75% 8.8% 8.8%
US TRANSACTION REVENUE 1,338,715 1,737,039 507,312 490,440 518,810 587,225 2,103,787 581,542 593,681 614,376 654,963 2,444,562 2,803,164
Y/Y growth 31% 30% 30% 20% 19% 16% 21% 15% 21% 18% 12% 16% 15%
US Transaction Revenue Per Listing $1.73 $1.90 $1.92 $1.85 $1.99 $2.16 $1.98 $2.25 $2.44 $2.36 $2.28 $2.33 $2.49
Y/Y growth 0% 10% 6% -2% 3% 12% 5% 17% 32% 18% 5% 18% 7%
Q/Q growth -1% -3% 8% 9% 4% 9% -4% -3%
INTERNATIONAL LISTINGS 638,614 960,213 310,800 331,000 323,000 338,600 1,303,400 330,000 316,000 313,310 362,302 1,321,612 1,440,557
Y/Y growth 70% 50% 43% 47% 38% 19% 36% 6% -5% -3% 7% 1% 9%
Q/Q growth 9% 6% -2% 5% -3% -4% -1% 16%
% of total listings 45.2% 51.2% 54.0% 55.5% 55.3% 55.5% 55.1% 56.1% 56.5% 54.6% 55.7% 55.7% 56.2%
Conversion Rate 50.4% 47.7% 42.9% 42.7% 43.9% 46.2% 44.0% 46.7% 48.2% 46.5% 46.0% 46.8% 46.4%
Y/Y growth -3% -5% -15% -16% -7% 5% -8% 9% 13% 6% 0% 6% -1%
Y/Y growth 2% 0% -4% -2% -6% 2% -3% 4% 6% 7% 2% 5% 6%
INTERNATIONAL GMV 15,712,088 22,340,191 6,268,000 6,787,000 6,528,000 7,657,000 27,240,000 7,545,000 7,764,000 7,138,768 8,332,946 30,780,714 35,091,970
Y/Y growth 69% 42% 18% 22% 21% 26% 22% 20% 14% 9% 9% 13% 14%
% of total GMV 46% 50% 50% 53% 52% 53% 52% 53% 54% 51% 53% 52% 52%
Take Rate 7.367% 7.454% 7.71% 7.47% 7.64% 7.98% 7.7% 8.35% 8.28% 8.45% 8.25% 8.33% 8.55%
INTERNATIONAL TRANSACTION REVENUE 1,157,472 1,665,262 483,215 506,681 498,464 611,193 2,099,553 630,003 643,154 603,226 687,468 2,563,852 3,000,363
Y/Y growth 76% 44% 25% 23% 24% 32% 26% 30% 27% 21% 12% 22% 17%
INTERNATIONAL Transaction Revenue Per Listing $1.81 $1.73 $1.55 $1.53 $1.54 $1.81 $1.61 $1.91 $2.04 $1.93 $1.90 $1.94 $2.08
Y/Y growth 4% -4% -13% -16% -10% 11% -7% 23% 33% 25% 5% 20% 7%
Q/Q growth -5% -2% 1% 17% 6% 7% -5% -1%
Segment Breakdown
2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
NET REVENUE BY TYPE
Transaction
U.S. 1,338,715 1,737,039 507,312 490,440 518,810 587,225 2,103,787 581,542 593,681 614,376 654,963 2,444,562 2,803,164
Y/Y growth 31% 30% 30% 20% 19% 16% 21% 15% 21% 18% 12% 16% 15%
Q/Q growth 0% -3% 6% 13% -1% 2% 3% 7%
% of transaction revenue 42% 39% 38% 37% 38% 37% 38% 36% 36% 37% 36% 36% 35%
International 1,157,472 1,665,262 483,215 506,681 498,464 611,193 2,099,553 630,003 643,154 603,226 687,468 2,563,852 3,000,363
Y/Y growth 76% 44% 25% 23% 24% 32% 26% 30% 27% 21% 12% 22% 17%
Q/Q growth 4% 5% -2% 23% 3% 2% -6% 14%
Payments 680,813 1,001,915 328,150 330,684 340,032 402,958 1,401,824 418,992 432,294 427,149 491,998 1,770,432 2,116,918
Y/Y growth 59% 47% 44% 39% 42% 35% 40% 28% 31% 26% 22% 26% 20%
Q/Q growth 10% 1% 3% 19% 4% 3% -1% 15%
Total Transaction revenue 3,177,000 4,404,216 1,318,677 1,327,805 1,357,306 1,601,376 5,605,164 1,630,537 1,669,129 1,644,751 1,834,429 6,778,846 7,920,445
Y/Y growth 50% 39% 31% 26% 26% 26% 27% 24% 26% 21% 15% 21% 17%
Q/Q growth 4% 1% 2% 18% 2% 2% -1% 12%
Advertising & other non-transaction rev 94,309 123,376 36,582 38,821 41,310 55,108 171,821 60,459 76,167 77,250 93,684 307,559 436,734
Y/Y growth 78% 31% 28% 34% 44% 49% 39% 65% 96% 87% 70% 79% 42%
Q/Q growth -1% 6% 6% 33% 10% 26% 1% 21%
Skype Transaction Revenue (closed 10/14/05) 7,000 60,000 35,160 44,158 50,021 63,417 192,756 77,078 89,133 94,039 106,541 366,791 531,847
Y/Y growth NA 857% NA NA NA 156% 221% 119% 102% 88% 68% 90% 45%
Q/Q growth 42% 26% 13% 27% 22% 16% 6% 13%
Skype revenue contribution to eBay - 24,809 35,160 44,158 50,021 63,417 192,756 77,078 89,133 94,039 106,541 366,791 531,847
Total Net Revenue 3,271,309 4,552,401 1,390,419 1,410,784 1,448,637 1,719,901 5,969,741 1,768,074 1,834,429 1,816,040 2,034,653 7,453,196 8,889,027
Y/Y growth 51% 39% 35% 30% 31% 29% 31% 27% 30% 25% 18% 25% 19%
Q/Q growth 5% 1% 3% 19% 3% 4% -1% 12%
TYPE AS % OF TOTAL NET REVENUE

Transaction 97% 97% 95% 94% 94% 93% 94% 92% 91% 91% 90% 91% 89%
Total Advertising and other non-transaction rev 3% 3% 3% 3% 3% 3% 3% 3% 4% 4% 5% 4% 5%
Skype - 1% 3% 3% 3% 4% 3% 4% 5% 5% 5% 4.9% 6%
Total Net Revenue 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
100 August 10, 2007

Figure 109: eBay Cash Flow Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Cash Flows from Operating Activities

Net income (loss) 778,223 1,082,043 248,281 249,993 280,895 346,466 1,125,635 377,176 375,824 359,711 447,468 1,560,179 1,945,969
Provision for doubtful accounts and authorized credits 90,941 89,499 27,047 24,827 22,319 26,536 100,729 24,795 20,452 35,000 35,000 115,247 127,924
Provision for transaction losses 50,459 73,773 25,627 24,279 31,790 44,743 126,439 35,937 33,832 34,000 40,000 143,769 158,146
Depreciation and amortization 253,690 378,165 123,286 142,426 135,224 143,616 544,552 143,449 146,722 150,000 155,000 595,171 607,074
Stock based compensation expense related to stock options 5,833 31,772 83,818 85,408 73,519 74,665 317,410 71,950 79,621 80,000 80,000 311,571 322,476
Tax benefit on the exercise of employee stock options 261,983 267,142 37,442 53,082 18,266 39,775 148,565 22,995 30,014 40,000 40,000 133,009 133,009
Excess tax benefits from stock-based compensation - - (23,372) (37,601) (16,290) (15,108) (92,371) (13,773) (16,001) (20,000) (20,000) (69,774) (69,773)
Minority interests and other 6,122 49 1 1 1 1 4 - - - - - -
Gain on sale of assets - - - - - - - - - - - - -
Changes in working capital:
Accounts receivable (105,540) (151,993) (22,901) (14,697) (79,433) (52,719) (169,750) (12,676) (20,241) (140,590) (3,696) (177,203) (208,786)
Funds receivable (44,751) (132,606) 29,748 4,062 (88,182) (92,528) (146,900) (23,278) (77,159) 33,257 (72,405) (139,585) (82,119)
Other current assets (312,756) (49,372) (117,726) (15,765) (205,787) (104,252) (443,530) (18,521) (4,352) - - (22,873) -
Other non-current assets (308) (4,611) 7,263 1,514 2,092 (743) 10,126 (22,364) (35,469) - - (57,833) -
Deferred tax assets 28,652 91,690 (7,500) (5,800) (118,157) (49,637) (181,094) (42,032) (9,145) - - (51,177) -
Accounts payable (33,975) 564 51,956 23,336 (11,391) (30,915) 32,986 8,407 153 75,341 (33,097) 50,804 29,842
Due to customers and funds payable 216,967 251,870 74,331 5,684 307,451 187,671 575,137 24,974 93,572 1,280 60,814 180,640 (64,412)
Accrued expenses and other liabilities 39,618 17,012 (18,761) (6,963) (24,509) 19,207 (31,026) (40,503) 13,078 (54,034) (20,846) (102,305) (28,857)
Deferred revenue and customer advances 20,061 3,646 9,023 15,641 12,000 11,195 47,859 14,176 2,358 47 (2,857) 13,724 35,355
Income taxes payable 30,096 61,248 56,640 (33,915) 182,304 77,987 283,016 13,780 21,326 - - 35,106 -
Net cash provided by (used in) operating activities 1,285,315 2,009,891 584,203 515,512 522,112 625,960 2,247,787 564,492 654,585 594,012 705,381 2,518,469 2,905,849
(161,936)
Cash Flows from Investing Activities
Purchases of property and equipment (292,838) (338,281) (133,576) (148,432) (136,867) (96,573) (515,448) (85,413) (121,328) (160,000) (160,000) (526,741) (605,752)
Proceeds from sale of corporate aircraft - 28,290 - - - - - - - - - - -
Purchases of investments (1,754,808) (1,324,353) (378,087) (113,137) (56,189) (35,850) (583,263) (112,527) (47,616) - - (160,143) -
Maturities and sales of investments 1,079,548 1,928,540 365,777 395,382 121,120 497,948 1,380,227 392,696 232,571 - - 625,267 -
Proceeds from sale of property and equipment - (622) - - - - - - - - - - -
Acquisitions, net of cash acquired (1,036,476) (2,732,229) - (45,505) - - (45,505) (258,559) (61,636) - - (320,195) -
Payments on notes receivable - - - - - - - - - - - - -
Purchases of other non-current assets (8,646) (14,076) - (1,245) (7,551) 1,638 (7,158) 1,153 959 - - 2,112 -
Net cash provided by (used in) investing activities (2,013,220) (2,452,731) (145,886) 87,063 (79,487) 367,163 228,853 (62,650) 2,950 (160,000) (160,000) (379,700) (605,752)
Cash Flows from Financing Activities

Proceeds from issuance of common stock, net 650,638 599,844 80,606 94,395 34,074 104,407 313,482 92,155 92,286 - - 184,441 -
Repurchases of common stock - - - - (666,541) (999,999) (1,666,540) (331,085) (343,776) (250,000) (225,000) (1,149,861) (175,000)
Payment of headquarter facility lease obligation - (126,390) - - - - - - - - - - -
Proceeds from (principal payments on) long-term debt (2,969) (1,849) - - - - - - - - - - -
Proceeds from issuance of common stock by subsidiaries - - - - - - - - - - - - -
Proceeds from notes payable - - - - - - - - - - - - -
Partnership contributions - - - - - - - - - - - - -
Partnership distributions - - - - - - - - - - - - -
Excess tax benefits from stock-based compensation - - 23,372 37,601 16,290 15,108 92,371 13,773 16,000 20,000 20,000 69,773 69,773
Net cash provided by (used in) financing activities 647,669 471,605 103,978 131,996 (616,177) (880,484) (1,260,687) (225,157) (235,490) (230,000) (205,000) (895,647) (105,227)
Effect of exchange-rate on cash and equivalents 28,768 (45,230) 20,558 23,375 21,427 67,895 133,255 27,532 29,294 56,826 -
Net change in cash (51,468) (16,465) 562,853 757,946 (152,125) 180,534 1,349,208 304,217 451,339 204,012 340,381 1,299,948 2,194,870
Cash & equivalents - BOP 1,381,513 1,330,045 1,313,580 1,876,433 2,634,379 2,482,254 1,313,580 2,662,788 2,967,005 3,418,344 3,622,356 2,662,788 3,962,736
Cash & equivalents - EOP 1,330,045 1,313,580 1,876,433 2,634,379 2,482,254 2,662,788 2,662,788 2,967,005 3,418,344 3,622,356 3,962,736 3,962,736 6,157,606
Free Cash Flow Calculation

Net cash provided by operating activities 1,285,315 2,009,891 584,203 515,512 522,112 625,960 2,247,787 564,492 654,585 594,012 705,381 2,518,469 2,905,849
Payment of headquarters facility lease obligations - (126,390) - - - - - - - - - - -
Purchases of fixed assets (net) (292,838) (309,991) (133,576) (148,432) (136,867) (96,573) (515,448) (85,413) (121,328) (160,000) (160,000) (526,741) (605,752)
Free Cash Flow 992,477 1,573,510 450,627 367,080 385,245 529,387 1,732,339 479,079 533,257 434,012 545,381 1,991,728 2,300,097
Cumulative Free Cash Flow last four quarters 1,734,692 1,695,719 1,631,442 1,732,339
Operating Cash Flow Growth

Y/Y Growth 47% 56% 18% 4% 6% 19% 12% -3% 27% 14% 13% 12% 15%
Q/Q Growth 11% -12% 1% 20% -10% 16% -9% 19%
Free Cash Flow Growth
Y/Y Growth 95% 59% 56% -10% -14% 24% 10% 6% 45% 13% 3% 15% 15%
Q/Q Growth 5% -19% 5% 37% -10% 11% -19% 26%
August 10, 2007 101

Figure 110: eBay Discounted Cash Flow Analysis

Periods from Today 0 1 2 3 4 5 6 7 2007E-2012E
2005A 2006A 2007E 2008E 2009E 2010E 2011E 2012E CAGR
Revenue 4,552,401 5,969,741 7,453,196 8,889,027 10,268,104 11,458,584 12,570,463 13,575,545
% change 39.2% 31.1% 24.8% 19.3% 15.5% 11.6% 9.7% 8.0% 12.7%
EBITDA 1,864,659 2,290,237 2,831,792 3,338,231 3,900,639 4,386,270 4,821,324 5,198,558

% change 39.5% 22.8% 23.6% 17.9% 16.8% 12.5% 9.9% 7.8% 12.9%
Cash Taxes (467,285) (421,418) (491,642) (614,517) (761,399) (911,010) (1,037,537) (1,152,653)
Capex (338,281) (515,448) (526,741) (605,752) (687,529) (770,032) (847,035) (914,798)
Change in working capital 87,448 (23,176) (270,703) (318,977) (451,723) (545,584) (536,926) (477,727)
Unlevered free cash flow $1,146,541 $1,330,195 $1,542,706 $1,798,985 $1,999,989 $2,159,644 $2,399,825 $2,653,380
% change 30.1% 16.0% 16.0% 16.6% 11.2% 8.0% 11.1% 10.6% 11.5%
2005 PV of Cash Flow $1,146,541 $1,187,674 $1,229,836 $1,280,482 $1,271,029 $1,225,440 $1,215,826 $1,200,254
Per Share $0.80 $0.83 $0.86 $0.90 $0.89 $0.86 $0.85 $0.84
2006 PV of Cash Flow $1,330,195 $1,377,417 $1,434,140 $1,423,553 $1,372,493 $1,361,725 $1,344,285
Per Share $0.95 $0.98 $1.02 $1.01 $0.98 $0.97 $0.96
2007 PV of Cash Flow $1,542,706 $1,606,237 $1,594,379 $1,537,192 $1,525,132 $1,505,599

Per Share $1.12 $1.16 $1.16 $1.11 $1.11 $1.09
2008 PV of Cash Flow $1,798,985 $1,785,704 $1,721,655 $1,708,148 $1,686,271

Per Share $1.29 $1.28 $1.24 $1.23 $1.21
Discount Rate 12.0% 12.0% 12.0% 12.0%

Terminal EBITDA Multiple 11.0x 11.0x 11.0x 11.0x
Terminal Value 57,184,134 57,184,134 57,184,134 57,184,134
Implied Terminal FCF Multiple 21.6x 21.6x 21.6x 21.6x
Present value of FCF $9,757,084 $9,643,808 $9,311,246 $8,700,765

Present value of terminal value 25,867,198 28,971,262 32,447,813 36,341,551
Implied Firm Value $35,624,282 $38,615,069 $41,759,059 $45,042,315
Plus: Cash 2,913,897 3,482,748 4,320,857 6,515,727

Plus: Investments 54,450 59,895 65,885 72,473
Less: Debt - - - -
Less: Minority Interest - - - -
Implied Equity Value $38,592,629 $42,157,712 $46,145,801 $51,630,515
Fully diluted shares outstanding 1,426,475 1,402,749 1,379,345 1,391,345
102 August 10, 2007

Figure 111: Amazon Snapshot

- Has evolved from books to a virtual shopping mall; captures ~6% of U.S. - Valuation: 43x ‘08 EPS, 22x ’08 EV/EBITDA, 3.7% ’08 FCF yield, but trading more on
online retail ex-travel lack of liquidity and short interest
- Consumer-centric company with 69M active users - Tougher comps shold result in profit slowdown in late '07 and into '08
- Virtual model results in lower overhead and invested capital, enables - Tech and content spending slowing, but profitability levels could remain low due to free
technology spending shipping, Prime, low prices
- Turns inventory ~11-12 times per year, results in negative working capital
cash cycle - Is another round of investment needed in N-T?
- Investing in long-term loyalty via free shipping, Amazon Prime, low prices; - Media growth accelerating, but still 66% of biz and at risk of category shifting to digital;
has been paying off in last few quarters limited traction with Unbox
- Amazon Prime gaining traction; driving incremental sales across - Competition continues to increase from search, comparison shopping, traditional
categories; accelerating revenue growth, increasing loyalty retailers shifting online
- Business benefitting from Prime, supplier efficiencies, int’l 3rd party, media
mix, lower tech & content spend, low headcount adds
- Solid balance sheet: $1.6 billion in cash, $1.26B in debt---bought back

$500M in stock Aug ’06-2Q07 & addt’l $500M auth.

- Whether margins can move toward 10%; current stock price may already
factor this in 3Q07 2007
Net Sales $3.0B - $3.175B $13.8B-$14.3B
- Whether AMZN can keep top line growth around 30% and continue to take
share of e-commerce up 30%-38% up 29%-34%
Implied Cons. Operating Inc. $125M - $160M $725M-$825M
- Whether Prime is driving incremental volume and loyalty Stock-based Comp. $50M $185M
Operating Income $75M - $110M $540M-$640M
- AMZN Prime effect overseas---just rolled out in Japan Effective Tax Rate 26%
Cash taxes $25M
- Traction of 3rd party stores in Europe; helping margins Capex ~$250M
- Whether AMZN extends Endless/Shopbop off-platform model to other

categories, such as jewelry PF op. margin: low-mid-high 4.17% - 4.6% - 5.04% 5.25% - 5.5% - 5.77%
Free cash flow growth Trend similar to CSOI Y/Y
- Shareholder structure: top 5 own 63%---10% of shares out are short
- Traction in Services and Seller Platforms, i.e. EC2, S3, Fulfillment by

Amazon (FBA), etc.
- Buying back stock at current levels?
- Impact of Harry Potter in 3Q07
- The trend around TTM average revenue/active shopper; up 15% Y/Y in

2007
August 10, 2007 103

Figure 112: Amazon Income Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Net sales 6,921,124 8,490,000 2,279,000 2,139,000 2,307,000 3,986,000 10,711,000 3,015,000 2,886,000 3,157,240 5,189,740 14,247,980 18,015,450
Cost of sales 5,319,127 6,452,000 1,732,000 1,630,000 1,758,000 3,136,000 8,256,000 2,296,000 2,185,000 2,406,438 4,064,613 10,952,051 13,841,029
Gross profit 1,601,997 2,038,000 547,000 509,000 549,000 850,000 2,455,000 719,000 701,000 750,802 1,125,127 3,295,929 4,174,422
Operating expenses
Fulfillment 590,397 727,901 190,000 182,000 209,000 331,000 912,000 253,000 248,000 280,994 430,748 1,212,743 1,477,267
Marketing 158,022 192,001 54,000 52,000 63,000 90,000 259,000 71,000 63,000 75,774 114,174 323,948 405,348
Technology and content 251,195 405,901 138,000 151,000 156,000 162,000 607,000 167,000 176,000 186,277 202,400 731,677 882,757
General and administrative 112,220 145,701 45,000 44,000 49,000 38,000 176,000 49,000 49,000 48,845 55,088 201,934 270,644
Stock-based compensation 57,702 87,696 11,000 30,000 30,000 30,000 101,000 34,000 46,000 50,000 55,000 185,000 190,550
Amortization of other intangibles (3,187) 3,250 3,000 3,000 2,000 2,000 10,000 - 3,000 2,000 2,000 7,000 7,000
Restructuring related and other (4,777) 44,000 - - - - - - - - - - -
Total operating expenses 1,161,572 1,606,450 441,000 462,000 509,000 653,000 2,065,000 574,000 585,000 643,891 859,411 2,662,302 3,233,565
Operating income 440,425 431,550 106,000 47,000 40,000 197,000 390,000 145,000 116,000 106,911 265,716 633,627 940,856
PF Operating income 490,163 566,496 120,000 80,000 72,000 229,000 501,000 179,000 165,000 158,911 322,716 825,627 1,138,406
Interest income 28,197 44,000 15,000 13,000 14,000 18,000 60,000 20,000 20,000 21,049 26,396 87,445 142,140
Interest expense (107,227) (92,000) (21,000) (19,000) (21,000) (19,000) (80,000) (19,000) (19,000) (18,840) (18,840) (75,680) (69,080)
Other income, net (4,701) 2,000 (1,000) 1,000 4,000 (8,000) (4,000) - (1,000) - - (1,000) -
Remeasurement of 6.875% PEACS, other (824) 42,000 (3,000) 12,000 1,000 1,000 11,000 (2,000) (5,000) - - (7,000) -
Total non-operating expenses, net (84,555) (4,000) (10,000) 7,000 (2,000) (8,000) (13,000) (1,000) (5,000) 2,209 7,556 3,765 73,060
Income (loss) before equity-method investees 355,870 427,550 96,000 54,000 38,000 189,000 377,000 144,000 111,000 109,119 273,272 637,392 1,013,916
Equity in losses of equity-method investees, net - - - - - - - - - - - - -
Income (loss) before income taxes 355,870 427,550 96,000 54,000 38,000 189,000 377,000 144,000 111,000 109,119 273,272 637,392 1,013,916
Provision (benefit) for income taxes (232,581) 95,000 45,000 32,000 19,000 91,000 187,000 33,000 33,000 28,371 71,051 165,422 263,618
Effective Tax Rate -65.4% 22.2% 46.9% 59.3% 50.0% 48.1% 49.6% 22.9% 29.7% 26.0% 26.0% 26.0% 26.0%
Income before change in acctg/ Fully Taxed Income 588,451 332,550 51,000 22,000 19,000 98,000 190,000 111,000 78,000 80,748 202,221 471,970 750,298
Cumulative effect of change in acctng principle 26,000 - - - - - - - - - - -
GAAP Net income (loss) 588,451 358,550 51,000 22,000 19,000 98,000 190,000 111,000 78,000 80,748 202,221 471,970 750,298
Basic shares outstanding 405,926 412,250 417,000 418,000 417,000 413,000 416,250 412,000 412,000 413,000 413,750 412,688 415,688
Diluted shares outstanding 424,757 425,500 426,000 426,000 424,000 422,000 424,500 420,000 423,000 424,000 424,750 422,938 425,938
Amortization of other intangibles (3,187) 3,250 3,000 3,000 2,000 2,000 10,000 - 3,000 2,000 2,000 7,000 7,000
Restructuring related and other (4,777) 44,000 - - - - - - - - - - -
Remeasurement of 6.875% PEACS, other 824 (42,000) 3,000 (12,000) (1,000) (1,000) (11,000) 2,000 5,000 - - 7,000 -
Equity in losses of equity-method investees, net - - - - - - - - - - - - -
Cum. Effect of change in acctg/Other one-time items (244,000) (64,000) - - - - - - - - - - -
PF Net income (loss) 395,013 387,496 68,000 43,000 50,000 129,000 290,000 147,000 132,000 132,748 259,221 670,970 947,848
PF basic income (loss) per share $0.97 $0.94 $0.16 $0.10 $0.12 $0.31 $0.70 $0.36 $0.32 $0.32 $0.63 $1.63 $2.28
PF diluted income (loss) per share $0.93 $0.91 $0.16 $0.10 $0.12 $0.31 $0.68 $0.35 $0.31 $0.31 $0.61 $1.59 $2.23
PF diluted fully-taxed EPS (normalized) $0.62 $0.80 $0.17 $0.11 $0.11 $0.34 $0.73 $0.28 $0.25 $0.25 $0.51 $1.29 $1.85
$0.01
PF Operating income 490,163 566,496 120,000 80,000 72,000 229,000 501,000 179,000 165,000 158,911 322,716 825,627 1,138,406
Depreciation and other amortization 75,724 120,000 40,000 43,000 63,000 59,000 205,000 62,000 60,000 60,000 58,000 240,000 256,800
EBITDA 565,887 686,496 160,000 123,000 135,000 288,000 706,000 241,000 225,000 218,911 380,716 1,065,627 1,395,206
2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Y/Y Growth
Net sales 31.5% 22.7% 19.8% 22.0% 24.2% 33.9% 26.2% 32.3% 34.9% 36.9% 30.2% 33.0% 26.4%
Gross profit 27.4% 27.2% 19.4% 13.1% 18.6% 27.4% 20.5% 31.4% 37.7% 36.8% 32.4% 34.3% 26.7%
Fulfillment 23.8% 23.3% 16.6% 19.0% 25.9% 34.6% 25.3% 33.2% 36.3% 34.4% 30.1% 33.0% 21.8%
Marketing 28.7% 21.5% 25.6% 30.0% 50.0% 34.3% 34.9% 31.5% 21.2% 20.3% 26.9% 25.1% 25.1%
Technology and content 20.9% 61.6% 68.5% 62.4% 44.4% 31.7% 49.5% 21.0% 16.6% 19.4% 24.9% 20.5% 20.6%
General and administrative 27.1% 29.8% 7.9% 37.5% 88.5% -17.4% 20.8% 8.9% 11.4% -0.3% 45.0% 14.7% 34.0%
Total cash operating expenses 24.1% 32.3% 29.6% 34.9% 39.5% 28.8% 32.8% 26.5% 24.9% 24.1% 29.2% 26.4% 22.9%
Operating income 62.8% -2.0% -1.4% -54.8% -27.3% 19.4% -9.6% 36.8% 146.8% 167.3% 34.9% 62.5% 48.5%
PF Operating income 35.7% 15.6% -6.6% -39.4% -40.5% 23.8% -11.6% 49.2% 106.3% 120.7% 40.9% 64.8% 37.9%
GAAP Net income 1567.9% -39.1% -34.2% -57.7% -36.7% -50.8% -47.0% 117.6% 254.5% 325.0% 106.3% 148.4% 59.0%
PF Net income 54.3% -1.9% 16.2% -30.6% -44.4% -27.1% -25.2% 116.2% 207.0% 165.5% 100.9% 131.4% 41.3%
GAAP EPS 1546.6% -39.2% -34.7% -57.8% -36.1% -50.3% -46.9% 120.8% 260.9% 325.0% 105.0% 149.3% 57.9%
PF EPS 52.3% -2.1% 15.4% -30.8% -43.9% -26.4% -25.0% 119.3% 209.2% 165.5% 99.6% 132.2% 40.3%
PF diluted FT EPS (normalized) 54.5% 27.8% -2.0% -36.6% -37.3% 25.5% -8.1% 61.6% 121.6% 133.5% 49.2% 76.0% 43.8%
EBITDA 29.6% 21.3% 2.2% -22.2% -10.6% 30.3% 2.8% 50.6% 82.9% 62.2% 32.2% 50.9% 30.9%
Sequential Growth
Net sales -23.4% -6.1% 7.9% 72.8% -24.4% -4.3% 9.4% 64.4%
% of Revenues
Cost of sales 76.9% 76.0% 76.0% 76.2% 76.2% 78.7% 77.1% 76.2% 75.7% 76.2% 78.3% 76.9% 76.8%
Fulfillment 8.5% 8.6% 8.3% 8.5% 9.1% 8.3% 8.5% 8.4% 8.6% 8.9% 8.3% 8.5% 8.2%
Marketing 2.3% 2.3% 2.4% 2.4% 2.7% 2.3% 2.4% 2.4% 2.2% 2.4% 2.2% 2.3% 2.3%
Margins
Gross margin 23.1% 24.0% 24.0% 23.8% 23.8% 21.3% 22.9% 23.8% 24.3% 23.8% 21.7% 23.1% 23.2%
PF Operating margin 7.1% 6.7% 5.3% 3.7% 3.1% 5.7% 4.7% 5.9% 5.7% 5.0% 6.2% 5.8% 6.3%
EBITDA margin 8.2% 8.1% 7.0% 5.8% 5.9% 7.2% 6.6% 8.0% 7.8% 6.9% 7.3% 7.5% 7.7%
PF Operating Profit/Gross Profit 30.6% 27.8% 21.9% 15.7% 13.1% 26.9% 20.4% 24.9% 23.5% 21.2% 28.7% 25.0% 27.3%
Operating Leverage (∆ PF op inc / ∆ Revenues) 7.8% 4.9% -2.3% -13.5% -10.9% 4.4% -2.9% 8.0% 11.4% 10.2% 7.8% 9.2% 8.3%
104 August 10, 2007

Figure 113: Amazon Segment Analysis, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
NET SALES
North America
Media 2,589,438 3,045,000 815,000 730,000 785,000 1,251,000 3,581,000 990,000 923,000 1,028,350 1,588,770 4,530,120 5,481,445
% change 14.1% 17.6% 16.6% 15.5% 14.8% 21.5% 17.6% 21.5% 26.4% 31.0% 27.0% 26.5% 21.0%
Electronics and other general merchandise 1,127,754 1,444,000 374,000 365,000 409,000 876,000 2,024,000 564,000 606,000 654,400 1,243,920 3,068,320 4,295,648
% change 28.4% 28.0% 32.6% 31.3% 34.5% 51.0% 40.2% 50.8% 66.0% 60.0% 42.0% 51.6% 40.0%
Other 130,152 222,000 58,000 62,000 63,000 81,000 264,000 68,000 72,000 72,450 90,720 303,170 345,614
% change 17.9% 70.6% 26.1% 24.0% 18.9% 11.0% 18.9% 17.2% 16.1% 15.0% 12.0% 14.8% 14.0%
Total North America Sales 3,847,344 4,711,000 1,247,000 1,157,000 1,257,000 2,208,000 5,869,000 1,622,000 1,601,000 1,755,200 2,923,410 7,901,610 10,122,707
% change 18.1% 22.4% 21.4% 20.5% 20.7% 31.2% 24.6% 30.1% 38.4% 39.6% 32.4% 34.6% 28.1%
International
Media 2,512,911 2,886,000 763,000 718,000 757,000 1,247,000 3,485,000 1,000,000 910,000 999,240 1,546,280 4,455,520 5,391,179
% change 41.2% 14.8% 13.0% 16.9% 20.3% 28.8% 20.8% 31.1% 26.7% 32.0% 24.0% 27.8% 21.0%
Electronics and other general merchandise 558,490 885,000 265,000 259,000 290,000 523,000 1,337,000 383,000 364,000 394,400 706,050 1,847,450 2,438,634
% change 148.7% 58.5% 33.2% 45.5% 55.1% 62.9% 51.1% 44.5% 40.5% 36.0% 35.0% 38.2% 32.0%
Other 2,379 8,000 4,000 5,000 3,000 8,000 20,000 10,000 11,000 8,400 14,000 43,400 62,930
% change 97.6% 236.3% 300.0% 400.0% 200.0% 60.0% 150.0% 150.0% 120.0% 180.0% 75.0% 117.0% 45.0%
Total International Sales 3,073,780 3,779,000 1,032,000 982,000 1,050,000 1,778,000 4,842,000 1,393,000 1,285,000 1,402,040 2,266,330 6,346,370 7,892,743
% change 53.3% 22.9% 17.9% 23.8% 28.5% 37.4% 28.1% 35.0% 30.9% 33.5% 27.5% 31.1% 24.4%
Total Consolidated Sales

Media 5,102,349 5,931,000 1,578,000 1,448,000 1,542,000 2,498,000 7,066,000 1,990,000 1,833,000 2,027,590 3,135,050 8,985,640 10,872,624
% change 26.0% 16.2% 14.8% 16.2% 17.4% 25.0% 19.1% 26.1% 26.6% 31.5% 25.5% 27.2% 21.0%
Electronics and other general merchandise 1,686,244 2,329,000 639,000 624,000 699,000 1,399,000 3,361,000 947,000 970,000 1,048,800 1,949,970 4,915,770 6,734,282
% change 52.9% 38.1% 32.8% 36.8% 42.4% 55.3% 44.3% 48.2% 55.4% 50.0% 39.4% 46.3% 37.0%
Other 132,531 230,000 62,000 67,000 66,000 89,000 284,000 78,000 83,000 80,850 104,720 346,570 408,544
% change 18.7% 73.5% 31.9% 31.4% 22.2% 14.1% 23.5% 25.8% 23.9% 22.5% 17.7% 22.0% 17.9%
Total Consolidated Sales 6,921,124 8,490,000 2,279,000 2,139,000 2,307,000 3,986,000 10,711,000 3,015,000 2,886,000 3,157,240 5,189,740 14,247,980 18,015,450
% change 31.5% 22.7% 19.8% 22.0% 24.2% 33.9% 26.2% 32.3% 34.9% 36.9% 30.2% 33.0% 26.4%
GROSS PROFIT
North America 1,023,552 1,267,000 341,000 309,000 343,000 532,000 1,525,000 439,000 434,000 470,394 710,389 2,053,782 2,611,658
% change 18% 24% 22% 11% 17% 27% 20% 28.7% 40.5% 37.1% 33.5% 35% 27%
% margin 26.6% 26.9% 27.3% 26.7% 27.3% 24.1% 26.0% 27.1% 27.1% 26.8% 24.3% 26.0% 25.8%
International 578,445 771,000 206,000 200,000 206,000 318,000 930,000 280,000 267,000 280,408 414,738 1,242,146 1,562,763
% change 48% 33% 15% 16% 20% 28% 21% 35.9% 33.5% 36.1% 30.4% 34% 26%
% margin 18.8% 20.4% 20.0% 20.4% 19.6% 17.9% 19.2% 20.1% 20.8% 20.0% 18.3% 19.6% 19.8%
Total Consolidated 1,601,997 2,038,000 547,000 509,000 549,000 850,000 2,455,000 719,000 701,000 750,802 1,125,127 3,295,929 4,174,422
% change 27% 27% 19% 13% 19% 27% 20% 31.4% 37.7% 36.8% 32.4% 34% 27%
% margin 23.1% 24.0% 24.0% 23.8% 23.8% 21.3% 22.9% 23.8% 24.3% 23.8% 21.7% 23.1% 23.2%
CASH OPERATING EXPENSES

North America 702,676 971,000 279,000 284,000 321,000 409,000 1,293,000 353,000 352,000 384,389 534,984 1,624,373 1,994,173
% change 20% 38% 31% 38% 42% 25% 33% 26.5% 23.9% 19.7% 30.8% 26% 23%
% of sales 18.3% 20.6% 22.4% 24.5% 25.5% 18.5% 22.0% 21.8% 22.0% 21.9% 18.3% 20.6% 19.7%
International 409,158 501,000 148,000 145,000 156,000 212,000 661,000 187,000 184,000 207,502 267,427 845,929 1,041,842
% change 31% 22% 26% 29% 34% 36% 32% 26.4% 26.9% 33.0% 26.1% 28% 23%
% of sales 13.3% 13.3% 14.3% 14.8% 14.9% 11.9% 13.7% 13.4% 14.3% 14.8% 11.8% 13.3% 13.2%
Total Consolidated 1,111,834 1,472,000 427,000 429,000 477,000 621,000 1,954,000 540,000 536,000 591,891 802,411 2,470,302 3,036,015
% change 24% 32% 29% 35% 39% 29% 33% 26.5% 24.9% 24.1% 29.2% 26% 23%
% of sales 16.1% 17.3% 18.7% 20.1% 20.7% 15.6% 18.2% 17.9% 18.6% 18.7% 15.5% 17.3% 16.9%
PF OPERATING INCOME
North America 320,876 296,000 62,000 25,000 22,000 123,000 232,000 86,000 82,000 86,005 175,405 429,409 617,485
% change 13% -8% -6% -65% -67% 34% -22% 38.7% 228.0% 290.9% 42.6% 85% 44%
% margin 8.3% 6.3% 5.0% 2.2% 1.8% 5.6% 4.0% 5.3% 5.1% 4.9% 6.0% 5.4% 6.1%
International 169,287 270,496 58,000 55,000 50,000 106,000 269,000 93,000 83,000 72,906 147,311 396,218 520,921
% change 116% 60% -7% -8% -9% 14% -1% 60.3% 50.9% 45.8% 39.0% 47% 31%
% margin 5.5% 7.2% 5.6% 5.6% 4.8% 6.0% 5.6% 6.7% 6.5% 5.2% 6.5% 6.2% 6.6%
Total Consolidated 490,163 566,496 120,000 80,000 72,000 229,000 501,000 179,000 165,000 158,911 322,716 825,627 1,138,406
% change 36% 16% -7% -39% -40% 24% -12% 49.2% 106.3% 120.7% 40.9% 65% 38%
% margin 7.1% 6.7% 5.3% 3.7% 3.1% 5.7% 4.7% 5.9% 5.7% 5.0% 6.2% 5.8% 6.3%
SHARE OF REVENUE BY CATEGORY

North America Sales 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Media 67% 65% 65% 63% 62% 57% 61% 61% 58% 59% 54% 57% 54%
Electronics and other general merchandise 29% 31% 30% 32% 33% 40% 34% 35% 38% 37% 43% 39% 42%
Other 3% 5% 5% 5% 5% 4% 4% 4% 4% 4% 3% 4% 3%
International Sales 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Media 82% 76% 74% 73% 72% 70% 72% 72% 71% 71% 68% 70% 68%
Other 0% 0% 0% 1% 0% 0% 0% 1% 1% 1% 1% 1% 1%
Total Consolidated Sales 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Media 74% 70% 69% 68% 67% 63% 66% 66% 64% 64% 60% 63% 60%
Other 2% 3% 3% 3% 3% 2% 3% 3% 3% 3% 2% 2% 2%
SHARE OF REVENUE BY GEOGRAPHY
SHARE OF OPERATING INCOME BY GEOGRAPHY
SEASONALITY
Net Sales 100% 100% 21% 20% 22% 37% 100% 21% 20% 22% 36% 100% 100%
PF Operating Income 100% 100% 24% 16% 14% 46% 100% 22% 20% 19% 39% 100% 100%
August 10, 2007 105

Figure 114: Amazon Cash Flow Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006E 3/07A 6/07A 9/07E 12/07E 2007E 2008E

Net income (loss) 588,451 359,000 51,000 22,000 19,000 98,000 190,000 111,000 78,000 80,748 202,221 471,970 750,298
Equity in losses of equity-method investees - - - - - - - - - - - - -
Amortization of goodwill, other intangibles (3,187) 3,000 3,000 3,000 2,000 2,000 10,000 - 3,000 2,000 2,000 7,000 7,000
Non-cash restructuring-related and other (4,777) 4,000 - - - - - - - - - - -
(Gain) Losses on sale of marketable securities, net (586) (1,000) 2,000 (1,000) (3,000) - (2,000) - - - - - -
Remeasurement of PEACS and other 824 (42,000) 3,000 (12,000) (1,000) - (10,000) 3,000 5,000 - - 8,000 -
Non-cash interest expense, deferred taxes and other 4,756 4,000 1,000 1,000 1,000 - 3,000 - - - - - -
Deferred income taxes (256,696) 71,000 10,000 (2,000) 7,000 8,000 23,000 2,000 (2,000) 23,559 61,279 84,838 118,628
Excess tax benefit on stock awards (64,000) (64,000) (24,000) (35,000) (15,000) (15,000) (89,000) (89,000)
Cumulative effect of accounting change - (26,000) - - - - - - - - - - -
Changes in working capital: -
Inventories (168,896) (105,000) 33,000 30,000 (218,000) (127,000) (282,000) 126,000 25,000 (275,317) (79,529) (203,845) (387,422)
Accounts receivable, net and other current assets (1,745) (84,000) 50,000 16,000 (53,000) (116,000) (103,000) 66,000 (10,000) (114,434) (199,796) (258,231) (295,357)
Accounts payable 286,091 275,000 (442,000) 4,000 252,000 588,000 402,000 (602,000) 82,000 315,192 621,396 416,588 650,884
Accrued expenses and other current liabilities (15,110) 102,000 (71,000) 1,000 27,000 246,000 203,000 (58,000) 31,000 116,738 72,621 162,358 178,507
Increases to unearned revenue 109,936 156,000 54,000 38,000 39,000 75,000 206,000 45,000 64,000 - - 109,000 -
Amortization of previously unearned revenue (106,886) (149,000) (48,000) (43,000) (35,000) (55,000) (181,000) (44,000) (48,000) - - (92,000) -
Interest payable 959 (41,000) - - - - - - - - - - -
Net cash provided by (used in) operating activities 566,560 733,000 (303,000) 130,000 130,000 744,000 701,000 (279,000) 299,000 243,486 778,192 1,041,679 1,380,889
Total Change in Working Capital 104,349 154,000 (424,000) 46,000 12,000 611,000 245,000 (467,000) 144,000 42,179 414,692 133,871 146,613

Sales and maturities of marketable securities 1,426,786 836,000 288,000 249,000 438,000 869,000 1,844,000 784,000 161,000 - - 945,000 -
Purchases of marketable securities (1,584,089) (1,386,000) (130,000) (232,000) (227,000) (1,340,000) (1,929,000) (514,000) (180,000) - - (694,000) -
Purchases of fixed assets, incl. software, site devel. (89,133) (203,000) (46,000) (58,000) (62,000) (50,000) (216,000) (34,000) (47,000) (80,000) (80,000) (241,000) (265,100)
Proceeds from sale of subsidiary and other - - - - - - - - (22,000) - (22,000) -
Investments in equity-method investees, other (71,195) (24,000) (28,000) - (2,000) (2,000) (32,000) (1,000) - - - (1,000) -
Net cash provided by (used in) investing activities (317,631) (777,000) 84,000 (41,000) 147,000 (523,000) (333,000) 235,000 (88,000) (80,000) (80,000) (13,000) (265,100)

Proceeds from exercise of stock options, other 60,109 61,000 6,000 7,000 4,000 18,000 35,000 9,000 - - - 9,000 -
Excess tax benefit on stock awards 4,000 8,000 21,000 9,000 64,000 102,000 24,000 35,000 15,000 15,000 89,000 89,000
Common stock repurchased - - - (252,000) - (252,000) (248,000) (248,000) -
Proceeds from issuance of common stock, net - - - - - - - - 35,000 - - 35,000 -
Proceeds from long-term debt, other - 13,000 3,000 66,000 13,000 17,000 99,000 - - - - - -
Repayment of long-term debt (157,401) (271,000) (313,000) (21,000) (42,000) (7,000) (383,000) (17,000) - - - (17,000) -
Repayment of capital lease obligation, other - - - - - - - - (29,000) - - (29,000.00) -
Financing costs - - - - - - - - - - - - -
Net cash provided by (used in) financing activities (97,292) (193,000) (296,000) 73,000 (268,000) 92,000 (399,000) (232,000) 41,000 15,000 15,000 (161,000) 89,000
Effect of exchange-rate on cash and equivalents 48,690 (53,000) 9,000 14,000 1,000 16,000 40,000 2,000 4,000 - - 6,000 -
Net change in cash 200,327 (290,000) (506,000) 176,000 10,000 329,000 9,000 (274,000) 256,000 178,486 713,192 873,679 1,204,789
Cash & equivalents - BOP 1,102,273 1,302,600 1,012,600 506,600 682,600 692,600 1,012,600 1,021,600 747,600 1,003,600 1,182,086 1,021,600 1,895,279
Cash & equivalents - EOP 1,302,600 1,012,600 506,600 682,600 692,600 1,021,600 1,021,600 747,600 1,003,600 1,182,086 1,895,279 1,895,279 3,100,068
Other cash flow information:

Fixed assets acquired under capital leases, other financing 860
Equity securities received for commercial agreements -
Stock issued in connection with business acquisitions -
Cash paid for interest 107,604 105,000 63,000 - 22,000 1,000 86,000 43,000 -
Cash paid for income tax 4,051 12,000 5,000 3,000 5,000 1,000 14,000 3,000 3,000

Operating cash flow 566,560 733,000 (303,000) 130,000 130,000 744,000 701,000 (279,000) 299,000 243,486 778,192 1,041,679 1,380,889
Purchases of fixed assets (89,133) (203,000) (46,000) (58,000) (62,000) (50,000) (216,000) (34,000) (47,000) (80,000) (80,000) (241,000) (265,100)
One time Items - 40,000 - - - - - - - - - - -
Free Cash Flow 477,427 570,000 (349,000) 72,000 68,000 694,000 485,000 (313,000) 252,000 163,486 698,192 800,679 1,115,789
% change 38.0% 19.4% NA -63.6% -41.9% 20.7% -14.9% NA 250.0% 140.4% 0.6% 65.1% 39.4%
Cumulative Free Cash Flow last four quarters 541,000 415,000 366,000 485,000 521,000 701,000 796,486 800,679
% change 29.5% -14.7% -29.0% -14.9% -3.7% 68.9% 117.6% 65.1%
Free Cash Flow Conversion of Operating Cash Flow 84% 78% NA 55% 52% 93% 69% NA 84% 67% 90% 77% 81%
106 August 10, 2007

Figure 115: Amazon Discounted Cash Flow Analysis

2007E-2012E
2005A 2006A 2007E 2008E 2009E 2010E 2011E 2012E CAGR
Net Sales 8,490,000 10,711,000 14,247,980 18,015,450 21,793,537 25,561,108 29,166,012 32,417,242 17.9%
% change 22.7% 26.2% 33.0% 26.4% 21.0% 17.3% 14.1% 11.1%
EBITDA 686,496 706,000 1,065,627 1,395,206 1,707,403 2,036,899 2,372,390 2,712,119 20.5%
% change 21.3% 2.8% 50.9% 30.9% 22.4% 19.3% 16.5% 14.3%
Cash Taxes (12,000) (15,000) (25,000) (144,990) (295,561) (432,904) (528,022) (628,829)
Capex (203,000) (216,000) (241,000) (265,100) (291,610) (320,771) (352,848) (388,133)
Change in working capital 154,000 245,000 133,871 146,613 144,761 183,425 144,365 164,425
Unlevered Free Cash Flow 625,496 720,000 933,498 1,131,729 1,264,993 1,466,649 1,635,884 1,859,582 14.8%
% change 7.6% 15.1% 29.7% 21.2% 11.8% 15.9% 11.5% 13.7%
2003 PV of Cash Flow 498,642 512,482 593,255 642,173 640,885 663,438 660,706 670,584 1,464,648
Per Share $1.17 $1.21 $1.40 $1.51 $1.51 $1.56 $1.55 $1.58
2004 PV of Cash Flow 558,479 573,980 664,445 719,234 717,791 743,050 739,991 751,054
Per Share $1.31 $1.35 $1.56 $1.69 $1.69 $1.75 $1.74 $1.77
2005 PV of Cash Flow 625,496 642,857 744,179 805,542 803,926 832,216 828,790 841,180
Per Share $1.47 $1.51 $1.75 $1.89 $1.89 $1.96 $1.95 $1.98
2006 PV of Cash Flow 720,000 833,480 902,207 900,397 932,082 928,245 942,122
Per Share $1.70 $1.96 $2.13 $2.12 $2.20 $2.19 $2.22
498,641.6 2,570,383.9
2007 PV of Cash Flow 933,498 1,010,472 1,008,445 1,043,932 1,039,634 1,055,177
Per Share $2.21 $2.39 $2.38 $2.47 $2.46 $2.49
2008 PV of Cash Flow 1,131,729 1,129,458 1,169,204 1,164,390 1,181,798

Per Share $2.68 $2.67 $2.76 $2.75 $2.79
Terminal EBITDA multiple 12.0x 12.0x 12.0x 12.0x

Discount Rate 12.0% 12.0% 12.0% 12.0% 2,570,383.9
Terminal value 32,545,433 32,545,433 32,545,433 32,545,433
Implied Terminal FCF Multiple 17.5x 17.5x 17.5x 17.5x
Present value of FCF 6,124,186 6,158,533 6,091,157 5,776,579

Present value of terminal value 14,721,901 16,488,529 18,467,153 20,683,211
Implied Firm Value 20,846,087 22,647,062 24,558,310 26,459,789
Plus: Cash 2,000,000 2,019,000 2,556,279 3,761,068

Less: Debt 1,521,000 1,247,000 1,256,000 1,256,000
Implied Equity Value 21,325,087 23,419,062 25,858,588 28,964,857
Fully diluted shares outstanding 425,500 424,500 422,938 425,938
August 10, 2007 107

Figure 116: IAC/InterActiveCorp Snapshot

- Multi-brand strategy with leading positions across a number of verticals such as
tickets and personals - N-T fundamentals challenging due to HSN, Lending, Ask
- Two largest businesses, Retailing and Ticketing, generate solid FCF and fund
investment in emerging properties - HSN EBITA likely to decline in ’07---turnaround is an ’08 event if it happens at all
- Ask.com provides exposure to search market and represents one of the largest
domestic search affiliates; current deal with Google expires at the end of 2007; new - Will be challenging for HSN to close gap w/ QVC; operational issues, brand
3-yr deal could approach $2 billion; MSFT & YHOO in the mix recognition, scale, channel placement
- Potential NT catalysts include: 1) HSN swap w/Liberty; 2) Ask search deal; 3)

bigger buyback; 4) levering up (unlikely N-T given credit mkt); 5) Shop Channel
(Japan) monetization - Was Ticketmaster 2Q a one quarter, industry related shortfall?
- Net L-T buyer of its own stock, although quiet lately. Repurchased 7.6M shares in - Tough N-T macro trends around Lending; loan origination increases overall risk
1Q07, none in 2Q; 58.8M shares remain under authorization profile
- Ask focused on market share and search deal via $100M ad campaign---can
- Strong balance sheet: $1.8 billion in cash and $1.0 billion in debt Ask gain share?
- Limited synergy across various business units; difficult to leverage sales and
- Valuation: currently trading at 6.4x 2008E EBITDA marketing; can Ask help?
- IAC remains a complicated story due to multi-branded structure and limited
- Any signs of improved performance at HSN 3Q07 4Q07 2007
- Whether Ask can gain share ahead w/ad campaign ahead of new paid search
Revenue
deal---GOOG renewal? YHOO, MSN?
EBITA ~flat Y/Y growth ~positive Y/Y growth
- Monetization of Japan and China equity stakes; Jupiter Shop Channel (Japan)
stake ~$500M after-tax
- Trends in the overall ticket & event mkt along with Ticketmaster pricing power &
rev splits; summer concerts, 3Q
- Ticketmaster-LiveNation deal runs through end of 2008; Accounts for ~15% of

Ticketmaster revs
- Signs that Lending can weather macro environment
- Continued share buybacks; bought back 11% of shares in ’06…7.6M 1Q07 (none
in 2Q); 58.8M left in authorization; bigger buyback when market opens up?
- Potential to shift capital structure, take on debt
- Potential swap w/Liberty: HSN for Liberty’s IACI shares
- A better 2H07, and potentially easy ’08 comps
- HSN carriage in LA market
108 August 10, 2007

Figure 117: IAC/InterActiveCorp Income Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Revenue 4,181.7 5,416.5 1,353.4 1,431.6 1,411.7 1,722.7 5,919.4 1,492.7 1,512.4 1,498.7 1,817.5 6,321.3 6,724.9
Cost of revenue 2,396.2 2,855.2 740.1 718.6 766.3 945.2 3,170.2 838.5 784.8 786.8 981.5 3,391.5 3,577.6
Gross profit 1,785.5 2,561.3 613.3 713.0 645.4 777.5 2,749.2 654.2 727.6 711.9 836.1 2,929.7 3,147.2
Selling and marketing expense 575.8 946.2 301.2 323.6 283.3 344.9 1,252.9 343.4 345.1 299.7 307.2 1,295.4 1,277.7
General and administrative expense 493.7 656.8 163.2 188.3 194.5 186.1 732.1 212.0 205.9 200.8 203.6 822.3 840.6
Other operating expense 84.6 93.3 33.6 27.3 (57.0) (55.9) (52.0) 37.0 28.0 7.4 16.4 88.7 91.3
Other (one-time expenses, restructuring, etc.) - - - - - - - - - - - - -
EBITDA 631.4 865.0 208.4 220.6 224.7 302.3 956.0 178.0 171.6 203.9 308.9 862.5 937.6
Amortization of cable distribution fees 69.2 70.4 19.7 21.4 20.0 6.4 67.5 1.2 1.2 2.0 2.0 6.5 2.0
Depreciation 144.6 133.7 38.8 37.5 38.1 36.1 150.5 37.8 38.7 36.5 36.3 149.3 150.1
Other adjustments (0.5) 1.5 (3.1) (3.4) (3.6) (2.9) (13.0) (3.5) (3.9) - - (7.4) -
EBITA 418.2 659.4 153.0 165.1 170.2 262.7 751.0 142.5 135.6 165.4 270.6 714.2 785.5
Amortization of non-cash distrib. & mktg 1.3 - 8.5 9.5 14.6 4.5 37.1 0.5 24.0 20.0 25.0 69.5 41.5
Amortization of non-cash compensation 70.3 137.5 24.0 28.7 18.1 21.6 92.4 24.2 26.9 23.0 24.0 98.1 93.2
Goodwill impairment 184.8 - - - - 189.1 189.1 - - - - - -
Merger costs - - - - - - - - - - - - -
Operating income (23.6) 335.3 68.8 81.6 108.0 (8.7) 249.7 87.6 54.4 92.4 191.6 426.1 530.3
Interest income (expense), net 101.8 63.4 3.4 3.2 1.3 2.0 9.8 4.2 3.0 2.3 2.9 12.4 20.7
Equity in income of VUE 16.2 523.5 - - - - - - - - - - -
Equity in the income (loss) of affiliates and other 34.5 60.5 4.9 14.9 11.9 0.7 32.3 8.6 13.5 11.5 11.5 45.3 45.3
Income (loss) before taxes and minority interest 128.9 982.8 77.1 99.6 121.1 (6.0) 291.8 100.4 70.9 106.3 206.1 483.7 596.2
Income tax expense (benefit) 73.0 389.8 32.3 42.4 53.3 (5.5) 122.5 38.3 23.9 40.9 78.3 181.4 226.6
Effective tax rate 56.7% 39.7% 41.9% 42.6% 44.0% - 42.0% 38.1% 33.6% 38.5% 38.0% 37.5% 38.0%
Minority interest (3.2) (2.3) (0.1) 0.8 0.0 (0.2) 0.5 (0.1) 0.4 0.2 0.2 0.5 0.5
Net Income (loss) from Continuing Operations 52.7 590.8 44.7 58.0 67.8 (0.7) 169.8 62.0 47.4 65.5 127.9 302.8 370.2
Diluted income (loss) per share from continuing ops $0.14 $1.68 $0.13 $0.18 $0.22 ($0.00) $0.53 $0.20 $0.16 $0.22 $0.43 $1.01 $1.26
One-time items - 70.2 - - - 9.6 9.6 - 35.1 - - 35.1 -
Income from discontinued operations 112.1 209.7 2.5 (4.1) 7.1 7.7 13.2 0.1 13.5 - - 13.6 -
Earnings before preferred dividends 164.9 870.6 47.2 53.9 74.9 16.6 192.6 62.1 96.0 65.5 127.9 351.5 370.2
Preferred dividends (13.1) (8.0) - - - - - - - - - - -
Net earnings available to common shareholders 151.8 862.6 47.2 53.9 74.9 16.6 192.6 62.1 96.0 65.5 127.9 351.5 370.2
Diluted earnings (loss) per share $0.41 $2.45 $0.14 $0.17 $0.24 $0.06 $0.60 $0.20 $0.32 $0.22 $0.43 $1.17 $1.26
Adjusted Net Income Calculation
Net income 151.8 862.7 47.2 53.9 74.9 16.6 192.6 62.1 96.0 65.5 127.9 351.5 370.2
Amortization of non-cash distrib. & mktg 1.3 - 8.5 9.5 14.6 4.5 37.1 0.5 24.0 20.0 25.0 69.5 41.5
Discontinued ops & other 72.7 (283.2) 5.0 2.1 (0.3) 184.7 191.5 6.3 (50.5) - - (44.2) -
Equity in the income of VUE (16.2) (545.4) - - - - - - - - - - -
Equity in the income (loss) of affiliates and other - - - - - - - - - - - - -
Impact of income taxes and minority interest (96.7) 106.7 (33.7) (32.2) (26.8) (75.9) (168.6) (21.2) (30.0) (26.6) (28.8) (106.7) (93.2)
Adjusted Net Income 368.5 464.8 102.6 107.3 110.1 207.7 527.7 102.1 96.6 111.9 178.1 488.6 532.3
Adjusted EPS $0.98 $1.31 $0.30 $0.32 $0.35 $0.66 $1.61 $0.33 $0.31 $0.37 $0.59 $1.59 $1.78
Adjusted shares outstanding 374.8 356.0 345.4 332.7 316.1 315.3 327.3 310.8 309.3 306.3 303.3 307.4 299.4
Y/Y GROWTH
Revenue 9.4% 29.5% 27.3% 10.0% 3.8% 1.9% 9.3% 10.3% 5.6% 6.2% 5.5% 6.8% 6.4%
Cost of revenue 6.6% 19.2% 30.4% 1.8% 7.5% 8.8% 11.0% 13.3% 9.2% 2.7% 3.8% 7.0% 5.5%
Gross profit 13.4% 43.5% 23.7% 19.6% -0.2% -5.5% 7.3% 6.7% 2.0% 10.3% 7.5% 6.6% 7.4%
Selling and marketing NA NA 83.5% 38.6% 12.4% 16.3% 32.4% 14.0% 6.6% 5.8% -10.9% 3.4% -1.4%
General and administrative NA NA 8.3% 11.6% 16.5% 9.2% 11.5% 29.9% 9.4% 3.3% 9.4% 12.3% 2.2%
EBITDA 9.8% 37.0% 29.1% 24.0% 9.7% -5.8% 10.5% -14.6% -22.2% -9.3% 2.2% -9.8% 8.7%
EBITA 14.0% 57.7% 39.1% 26.9% 7.5% 0.7% 13.9% -6.9% -17.9% -2.8% 3.0% -4.9% 10.0%
SEQUENTIAL GROWTH
Revenue -20.0% 5.8% -1.4% 22.0% -13.4% 1.3% -0.9% 21.3%
EBITA -41.4% 7.9% 3.1% 54.3% -45.8% -4.8% 22.0% 63.6%
EBITDA -35.1% 5.8% 1.9% 34.5% -41.1% -3.6% 18.8% 51.5%
% OF REVENUES
Cost of sales 57.3% 52.7% 54.7% 50.2% 54.3% 54.9% 53.6% 56.2% 51.9% 52.5% 54.0% 53.7% 53.2%
Selling and marketing expense 13.8% 17.5% 22.3% 22.6% 20.1% 20.0% 21.2% 23.0% 22.8% 20.0% 16.9% 20.5% 19.0%
General and administrative expense 11.8% 12.1% 12.1% 13.2% 13.8% 10.8% 12.4% 14.2% 13.6% 13.4% 11.2% 13.0% 12.5%
Other operating expenses 2.0% 1.7% 2.5% 1.9% -4.0% -3.2% -0.9% 2.5% 1.8% 0.5% 0.9% 1.4% 1.4%
MARGINS
Gross margin 42.7% 47.3% 45.3% 49.8% 45.7% 45.1% 46.4% 43.8% 48.1% 47.5% 46.0% 46.3% 46.8%
Operating margin -0.6% 6.2% 5.1% 5.7% 7.6% -0.5% 4.2% 5.9% 3.6% 6.2% 10.5% 6.7% 7.9%
EBITA margin 10.0% 12.2% 11.3% 11.5% 12.1% 15.2% 12.7% 9.5% 9.0% 11.0% 14.9% 11.3% 11.7%
EBITDA margin 15.1% 16.0% 15.4% 15.4% 15.9% 17.5% 16.1% 11.9% 11.3% 13.6% 17.0% 13.6% 13.9%
Operating leverage (∆EBITA / ∆Revenue) 14.3% 19.5% 14.8% 27.0% 23.0% 5.6% 18.2% -7.5% -36.5% -5.5% 8.4% -9.2% 17.7%
August 10, 2007 109

Figure 118: IAC/InterActiveCorp Segment Breakdown – Revenue and EBITA, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
REVENUE
Retailing
U.S. 1,906 2,671 673 696 686 878 2,933 685 701 697 904 2,988 3,109
Total Retailing 2,248 2,671 673 696 686 878 2,933 685 701 697 904 2,988 3,109
Transactions
Ticketmaster 768 950 246 295 266 279 1,085 310 303 291 299 1,202 1,317
Lending & Real Estate 190 426 125 123 122 115 486 113 114 115 111 453 434
Service Magic (Home Services) 7 41 14 16 18 15 64 22 25 27 21 95 114
Total Services 1,259 1,417 385 434 406 410 1,635 445 442 432 431 1,750 1,865
Media & Advertising

Ask.com 261 165 101 121 122 141 485 135 142 142 161 581 668
Other Media & Services 30 48 17 10 14 19 59 33 32 18 23 107 123
Total Media & Advertising 30 213 118 131 136 160 544 168 174 160 185 687 791
Membership & Subscriptions

Interval (Vacations) 257 273 81 74 73 71 299 89 89 87 83 348 383
Match.com 198 250 73 78 80 79 311 82 87 88 90 346 378
Entertainment (Discounts) 218 219 24 20 32 121 197 21 19 33 124 196 198
Intra-Sector Elimination (1) (2) (0) (1) (0) (1) (2) - (1) - - (1) -
Total Membership & Subscriptions 671 740 178 171 185 271 805 192 193 208 296 889 959
Emerging Businesses - 1 0 1 1 6 8 4 5 6 6 21 21
Intersegment Eliminations (27) (5) (1) (2) (2) (2) (6) (1) (4) (5) (5) (15) (20)
TOTAL REVENUE 4,182 5,037 1,353 1,432 1,412 1,723 5,919 1,493 1,512 1,499 1,818 6,321 6,725
EBITA
Retailing
U.S. 195 277 59 61 57 92 269 40 38 47 88 213 221
Total Retailing 199 277 59 61 57 92 269 40 38 47 88 213 221
Transactions
Ticketmaster 164 219 66 76 57 66 264 72 59 61 72 263 283
Lending & Real Estate 21 64 8 10 13 12 42 (4) (4) 2 5 (0) 9
Service Magic (Home Services) 0 11 3 4 6 3 16 6 7 8 5 26 32
Total Services 203 294 77 91 76 80 323 74 62.2 71 81 289 324
Media & Advertising

Ask.com 75 24 9 10 13 16 48 11 10 13 15 49 55
Other Media & Services (13) 6 3 1 2 4 10 6 2 3 4 15 19
Total Media & Advertising (13) 31 12 11 16 20 58 17 12 16 19 65 74

Interval (Vacations) 90 111 36 29 29 30 125 41 36 37 36 150 166
Match.com 28 48 6 17 19 21 64 8 20 21 22 71 75
Entertainment (Discounts) 22 18 (14) (17) (4) 48 14 (13) (14) (3) 48 19 18
Total Membership & Subscriptions 140 176 29 30 45 99 202 36 42 55 106 240 259
Emerging Businesses (5) (12) (4) (4) (5) (3) (16) (3) 3 (5) (5) (10) (10)
Corporate (106) (106) (19) (22) (19) (26) (86) (23) (22) (19) (19) (83) (83)
Subtotal 418 659 153 165 170 263 751 143 136 165 271 714 786
Intersegment Eliminations - - - - - - - - - - - - -
TOTAL EBITA 418 659 153 165 170 263 751 143 136 165 271 714 786
110 August 10, 2007

Figure 119: IAC/InterActiveCorp Segment Breakdown – Growth Rates and Margins, 2004–08E
2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
REVENUE GROWTH
Retailing
U.S. 8% 40% 35% 4% 3% 4% 10% 2% 1% 2% 3% 2% 4%
Total Retailing 6% 19% 35% 4% 3% 4% 10% 2% 1% 2% 3% 2% 4%
Transactions
Ticketmaster 3% 24% 16% 14% 17% 10% 14% 26% 3% 10% 7% 11% 10%
Lending & Real Estate 240% 124% 49% 23% -3% 0% 14% -10% -7% -6% -4% -7% -4%
Service Magic (Home Services) NA NA 83% 51% 51% 46% 56% 54% 58% 44% 39% 49% 20%
Total Services 15% 13% 27% 18% 11% 8% 15% 15% 2% 6% 5% 7% 7%
Media & Advertising

Ask.com 144% 41% 6% 29% 40% 50% 31% 34% 17% 16% 15% 20% 15%
Other Media & Services 6% 58% 89% -14% 12% 20% 23% 96% 221% 35% 25% 80% 15%
Total Media & Advertising 6% NA NA NA NA 46% NA 43% 33% 18% 16% 26% 15%

Interval (Vacations) 15% 6% 9% 9% 10% 11% 10% 9% 19% 20% 17% 16% 10%
Match.com 7% 26% 35% 28% 22% 17% 25% 12% 11% 9% 13% 11% 9%
Entertainment (Discounts) 8% 0% -3% -41% 4% -7% -10% -13% -3% 2% 2% 0% 1%
Intra-Sector Elimination NA NA NA NA NA NA NA NA NA NA NA NA NA
Total Membership & Subscriptions 10% 10% 16% 6% 14% 3% 9% 8% 13% 12% 9% 10% 8%
TOTAL REVENUE 9% 20% 41% 19% 11% 8% 18% 10% 6% 6% 6% 7% 6%
EBITA GROWTH
Retailing
U.S. 16% 42% 4% 3% 1% -12% -3% -33% -37% -17% -5% -21% 3%
Total Retailing 15% 39% 4% 3% 1% -12% -3% -33% -37% -17% -5% -21% 3%
Transactions
Ticketmaster 14% 33% 40% 21% 14% 11% 21% 9% -22% 7% 9% 0% 7%
Lending & Real Estate NA 198% -20% -32% -56% 7% -34% -145% -138% -82% -58% -100% NA
Service Magic (Home Services) NA NA 60% 22% 71% 19% 44% 94% 61% 27% 87% 59% 24%
Total Services 28% 45% 31% 11% -7% 11% 10% -3% -31% -6% 2% -11% 12%
Media & Advertising

Ask.com 234% -2% -65% -55% 47% -4% -34% 27% 3% -4% -7% 2% 12%
Other Media & Services NA NA NA -48% 38% 14% NA NA 76% 32% 15% 54% 25%
Total Media & Advertising NA NA NA NA NA -1% -34% 48% 9% 2% -3% 11% 15%

Match.com -11% 74% 10% 66% 16% 36% 33% 40% 13% 9% 4% 12% 6%
Entertainment (Discounts) -52% -20% NA NA NA -2% -21% NA NA NA 0% 35% -5%
Total Membership & Subscriptions -2% 26% 8% 26% 23% 10% 15% 27% 43% 23% 7% 19% 8%
TOTAL EBITA 14% 58% 39% 27% 8% 1% 14% -7% -18% -3% 3% -5% 10%
EBITA MARGIN
Retailing
U.S. 10.2% 10.4% 8.8% 8.7% 8.4% 10.5% 9.2% 5.8% 5.5% 6.8% 9.7% 7.1% 7.1%
Total Retailing 8.9% 10.4% 8.8% 8.7% 8.4% 10.5% 9.2% 5.8% 5.5% 6.8% 9.7% 7.1% 7.1%
Transactions
Ticketmaster 21.4% 23.0% 26.8% 25.7% 21.5% 23.5% 24.4% 23.1% 19.5% 21.0% 24.0% 21.9% 21.5%
Lending & Real Estate 11.3% 15.0% 6.2% 8.3% 10.3% 10.2% 8.7% -3.1% -3.4% 2.0% 4.5% 0.0% 2.0%
Service Magic (Home Services) NA 27.4% 22.8% 27.5% 32.6% 16.3% 25.2% 28.7% 28.1% 28.6% 22.0% 27.0% 28.0%
Total Services 16.1% 20.7% 19.9% 20.9% 18.6% 19.5% 19.7% 16.7% 14.1% 16.4% 18.9% 16.5% 17.4%
Media & Advertising

Ask.com 28.6% 14.8% 9.0% 8.0% 11.0% 11.5% 10.0% 8.5% 7.0% 9.1% 9.3% 8.5% 8.3%
Other Media & Services -43.7% 12.8% 15.0% 10.0% 18.4% 20.7% 16.7% 17.3% 5.5% 18.0% 19.0% 14.3% 15.5%
Total Media & Advertising -43.7% 14.3% 9.9% 8.1% 11.7% 12.6% 10.7% 10.2% 6.7% 10.1% 10.5% 9.4% 9.4%

Interval (Vacations) 35.1% 40.6% 44.7% 39.0% 40.0% 42.8% 41.7% 46.1% 41.0% 42.0% 43.5% 43.1% 43.4%
Match.com 13.9% 19.2% 8.2% 22.1% 24.1% 26.3% 20.4% 10.2% 22.6% 24.0% 24.3% 20.5% 19.9%
Entertainment (Discounts) 10.1% 8.0% -57.4% -85.1% -12.2% 39.7% 7.1% -62.8% -71.4% -9.0% 39.0% 9.6% 9.0%
Total Membership & Subscriptions 20.8% 23.8% 16.1% 17.3% 24.1% 36.7% 25.1% 18.9% 21.9% 26.4% 35.8% 27.0% 27.0%
Emerging Businesses NA NA NA NA NA NA NA NA NA NA NA NA NA
Corporate NA NA NA NA NA NA NA NA NA NA NA NA NA
TOTAL EBITA MARGIN 10.0% 13.1% 11.3% 11.5% 12.1% 15.2% 12.7% 9.5% 9.0% 11.0% 14.9% 11.3% 11.7%
August 10, 2007 111

Figure 120: IAC/InterActiveCorp Segment Breakdown –Share of Revenue and EBITA, 2004–08E
2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
REVENUE
Retailing
U.S. 46% 53% 50% 49% 49% 51% 50% 46% 46% 47% 50% 47% 46%
Total Retailing 54% 53% 50% 49% 49% 51% 50% 46% 46% 47% 50% 47% 46%
Transactions
Ticketmaster 18% 19% 18% 21% 19% 16% 18% 21% 20% 19% 16% 19% 20%
Lending & Real Estate 5% 8% 9% 9% 9% 7% 8% 8% 8% 8% 6% 7% 6%
Service Magic (Home Services) 0% 1% 1% 1% 1% 1% 1% 1% 2% 2% 1% 1% 2%
Total Services 30% 28% 28% 30% 29% 24% 28% 30% 29% 29% 24% 28% 28%
Media & Advertising

Ask.com NA 3% 7% 8% 9% 8% 8% 9% 9% 9% 9% 9% 10%
Other Media & Services 1% 1% 1% 1% 1% 1% 1% 2% 2% 1% 1% 2% 2%
Total Media & Advertising 1% 4% 9% 9% 10% 9% 9% 11% 12% 11% 10% 11% 12%

Match.com 5% 5% 5% 5% 6% 5% 5% 6% 6% 6% 5% 5% 6%
Entertainment (Discounts) 5% 4% 2% 1% 2% 7% 3% 1% 1% 2% 7% 3% 3%
Intra-Sector Elimination 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Emerging Businesses 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Intersegment Eliminations -1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
TOTAL REVENUE 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
EBITA
Retailing
U.S. 47% 42% 39% 37% 34% 35% 36% 28% 28% 29% 32% 30% 28%
Total Retailing 48% 42% 39% 37% 34% 35% 36% 28% 28% 29% 32% 30% 28%
Transactions
Ticketmaster 39% 33% 43% 46% 34% 25% 35% 50% 44% 37% 27% 37% 36%
Lending & Real Estate 5% 10% 5% 6% 7% 4% 6% -2% -3% 1% 2% 0% 1%
Service Magic (Home Services) 0% 2% 2% 3% 4% 1% 2% 4% 5% 5% 2% 4% 4%
Total Services 49% 45% 50% 55% 44% 30% 43% 52% 46% 43% 30% 40% 41%
Media & Advertising

Ask.com NA 4% 6% 6% 8% 6% 6% 8% 7% 8% 6% 7% 7%
Other Media & Services -3% 1% 2% 1% 1% 1% 1% 4% 1% 2% 2% 2% 2%
Total Media & Advertising -3% 5% 8% 6% 9% 8% 8% 12% 9% 10% 7% 9% 9%

Match.com 7% 7% 4% 10% 11% 8% 8% 6% 14% 13% 8% 10% 10%
Entertainment (Discounts) 5% 3% -9% -10% -2% 18% 2% -9% -10% -2% 18% 3% 2%
Emerging Businesses -1% -2% -3% -3% -3% -1% -2% -2% 2% -3% -2% -1% -1%
Corporate -25% -16% -13% -13% -11% -10% -11% -16% -16% -11% -7% -12% -11%
Sub Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Intersegment Eliminations 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
TOTAL EBITA 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
112 August 10, 2007

Figure 121: IAC/InterActiveCorp Cash Flow Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E

Earnings before preferred dividends 164.9 876.2 47.2 53.8 74.9 16.7 192.6 62.1 96.0 65.5 127.9 351.5 370.2
Less: discontinued operations (110.0) (277.8) (0.8) 6.7 (5.8) (17.9) (17.8) 3.8 (52.5) - - (48.7) -
Earnings from continuing operations 54.9 598.4 46.4 60.5 69.1 (1.2) 174.8 65.9 43.5 65.5 127.9 302.8 370.2
Depreciation and amortization 330.0 335.7 92.0 92.1 72.9 82.3 339.2 69.4 67.7 66.5 66.3 269.9 270.7
Amortization of non-cash distribution and marketing 1.3 - 8.5 9.5 14.6 4.5 37.1 0.5 24.0 20.0 25.0 69.5 41.5
Amortization of non-cash compensation expense 70.3 137.5 24.0 28.7 18.1 21.6 92.3 24.2 26.9 23.0 24.0 98.1 93.2
Amortization of cable distribution fees 69.2 70.4 19.7 21.4 (17.9) 6.4 29.6 1.2 1.2 2.0 2.0 6.5 2.0
Amortization of deferred financing costs - - - - - - - - - - - - -
Deferred income taxes (10.6) (1,068.8) 12.6 6.9 44.7 (52.2) 12.0 1.7 (6.0) - - (4.3) -
Non-cash interest income (41.7) (17.6) - - - - - - - - - - -
Minority interest 3.2 2.2 0.1 (0.8) (0.0) 0.2 (0.5) 0.1 (9.5) - - (9.4) -
Goodwill impariment 184.8 - - - - 189.1 189.1 - - - - - -
Increase in cable distribution fees (20.1) (24.0) (5.4) (16.3) 4.9 (0.0) (16.9) - - - - - -
Gain on loans held for sale & other (31.9) (567.8) (70.7) (63.1) (61.9) (59.0) (254.7) (56.5) (39.2) - - (95.7) -
Changes in working capital:
Accounts receivable (33.5) (60.6) 6.9 13.1 (31.5) (57.8) (69.3) 17.6 2.7 (76.0) (58.7) (114.4) (111.9)
Loans available for sale (24.2) (166.3) 61.7 69.3 79.1 37.4 247.5 (16.3) 236.6 - - 220.2 220.2
Inventories (23.0) 1.8 (5.1) (21.2) (63.0) 63.1 (26.1) (31.3) 5.7 17.6 13.9 6.0 (53.8)
Prepaids and other assets (5.7) (34.1) (11.3) 2.4 (5.9) 0.4 (14.4) (13.4) 2.9 - - (10.5) -
Accounts payable and accrued liabilities (78.4) 606.6 (112.5) (2.2) (1.7) 114.9 (1.5) (92.7) 7.1 33.0 104.3 51.6 (7.4)
Deferred revenue 28.5 33.6 19.7 3.9 1.8 (3.3) 22.2 19.5 5.7 (18.6) 2.3 9.0 9.2
Funds collected by Ticketmaster on behalf of clients, net 15.3 70.9 16.7 38.4 9.9 (62.4) 2.6 43.3 (11.0) - - 32.4 -
Other, net 15.2 9.8 17.8 7.7 11.5 14.3 51.3 12.4 2.6 - - 15.0 -
Net cash provided by (used in) operating activities 503.7 (72.3) 121.1 250.3 144.6 298.4 814.4 45.6 360.9 133.1 307.1 846.6 833.9

Acquisitions and deal costs, net of cash acquired (234.7) (693.4) (56.9) (1.0) (22.3) (37.4) (117.6) (54.6) (130.9) - - (185.5) -
Capital expenditures (167.8) (241.5) (59.2) (59.0) (60.5) (72.8) (251.4) (52.8) (51.6) (52.5) (63.6) (220.4) (248.8)
Decrease (increase) in long-term investments and notes receivable 13.3 (32.4) 1.5 - 2.6 (17.6) (13.5) (0.3) (221.4) - - (221.6) -
Purchases of marketable securities (3,368.1) (2,158.7) (251.6) (191.8) (86.2) (405.1) (934.8) (166.2) (359.4) - - (525.6) -
Proceeds from sale of marketable securities 2,647.5 3,124.1 448.1 388.8 383.2 323.7 1,543.8 283.3 363.2 - - 646.5 -
Proceeds from sale of VUE and other - 2,065.3 - - - 267.6 267.6 - - - - - -
Other, net 7.8 21.9 (5.2) 7.6 (0.1) (9.1) (6.8) 0.0 14.6 - - 14.6 -
Net cash provide by (used in) investing activities (1,102.0) 2,085.5 76.7 144.6 216.8 49.3 487.4 9.5 (385.4) (52.5) (63.6) (492.0) (248.8)

Borrowings - 80.0 - - 0.8 (0.8) - - - - - - -
Increase in warehouse loans payable 25.2 162.8 2.6 (14.2) (27.2) 15.0 (23.8) 62.4 (188.3) - - (125.9) 0.0
Principal payments on long-term obligations (1.5) (400.2) (10.6) (1.1) (1.1) (1.0) (13.8) (11.5) (8.6) - - (20.1) (115.0)
Purchase of treasury stock by IAC and subsidiaries (430.3) (1,848.3) (115.7) (467.6) (343.7) (56.1) (983.2) (322.6) - (90.0) (93.0) (505.6) (340.0)
Issuance of common stock, net of withholding taxes for options 147.3 (19.9) 20.4 15.2 14.3 44.0 93.8 19.6 12.4 - - 32.0 -
Redemption of preferred stock - (655.7) - - - - - - - - - - -
Preferred dividends (13.1) (9.6) - - - - - - - - - - -
Other, net 8.7 (14.5) 14.6 19.9 1.6 (2.3) 33.9 (7.9) 6.2 - - (1.6) -
Net cash provided by (used in) financing activities (263.7) (2,705.3) (88.8) (447.8) (355.4) (1.3) (893.2) (259.9) (178.2) (90.0) (93.0) (621.2) (455.0)
Net change in cash (862.0) (692.2) 109.0 (52.9) 6.0 346.5 408.564 (204.8) (202.7) (9.4) 150.4 (266.5) 130.1
Total cash provided by discontinued operations 1,092.7 706.7 (13.9) 13.0 (2.7) 4.3 0.7 (5.8) 2.7 - - (3.1) -
Effect of exchange-rate on cash and equivalents 9.4 (27.1) 4.2 14.2 4.9 8.5 31.8 3.6 4.5 - - 8.2 -
Net (decrease) increase in cash and cash equivalents 240.1 (12.6) 99.3 (25.7) 8.2 359.3 441.1 (207.0) (195.5) (9.4) 150.4 (261.4) 130.1
Cash & equivalents - BOP 759.6 999.7 987.1 1,086.4 1,060.7 1,068.8 987.1 1,428.2 1,221.2 1,025.7 1,016.3 1,428.2 1,166.8
Cash & equivalents - EOP 999.7 987.1 1,086.4 1,060.7 1,068.8 1,428.2 1,428.2 1,221.2 1,025.7 1,016.3 1,166.8 1,166.8 1,296.9

Net cash provided by operating activities 503.7 (72.3) 121.1 250.3 144.6 298.4 814.4 45.6 360.9 133.1 307.1 846.6 833.9
% of Revenue 4.0% 4.5% 4.4% 4.1% 4.3% 4.2% 4.2% 3.5% 3.4% 3.5% 3.5% 3.5% 3.7%
Increase in warehouse loans payable 25.2 162.8 2.6 (14.2) (27.2) 15.0 (23.8) 62.4 (188.3) - - (125.9) 0.0
Tax payments related to the sale of VUE interests - 862.6 10.4 0.7 - - 11.1 17.5 - - - 17.5 -
Preferred dividends paid (13.1) (9.6) - - - - - - - - - - -
Free Cash Flow 348.0 702.1 74.9 177.8 56.9 240.6 550.2 72.7 121.1 80.6 243.4 517.8 585.1
% change -23.1% 101.7% -52.0% 128.1% NA -50.1% -21.6% -3.0% -31.9% 41.7% 1.2% -5.9% 13.0%
August 10, 2007 113

Figure 122: IAC/InterActiveCorp Sum-of-the-Parts Analysis

2008E Multiple 2008E
Consolidated Operations:
Retailing (HSN, Cornerstone, Shoebuy) 259 EBITDA 7.5x 1,941
Ticketmaster 327 EBITDA 10.0x 3,271
Interval (Vacations) 174 EBITDA 9.0x 1,566
Ask.com 79 EBITDA 12.5x 993
Other Media & Advertising (CitySearch, evite) 27 EBITDA 8.0x 216
Match.com (Personals) 83 EBITDA 9.0x 751
LendingTree & Real Estate 23 EBITDA 8.0x 182
Service Magic 34 EBITDA 10.0x 338
Entertainment (Discounts) 24 EBITDA 6.0x 143
Corporate/Other (92) EBITDA 9.1x (843)
Total Consolidated Operations $938 9.1x $8,557
Equity Investments
Jupiter Shop Channel (home shopping in Japan)---30% stake 531
TVSN Holdings (home shopping in China)---21% stake 440
TM Mexico---33.3% stake 110
Points (Canada)---3.17% stake -
iLike (Ticketmaster investment) (entered in 4Q06) -
Chinese joint venture (entered in 4Q06) -
Total Unconsolidated Operations $1,081
Total Asset Value of InterActiveCorp $9,638
Less: Debt & Preferred 943

Plus: Cash 2,082
Value to Common Shareholders $10,778
Total shares outstanding 299
Value per InterActiveCorp share $36.00
114 August 10, 2007

Figure 123: Expedia Snapshot

- Largest player in online travel, ultimately the Internet's most lucrative e- - Reaccelerated domestic bookings to 8% in 2Q07, but still losing overall
commerce category. share.
- Online bookings 1.7x that of #2 player in 2006. - Air: likely to remain soft in 2H07 until GDS deals lapped
- Strong FCF with merchant model: $541M in 2007E -- 6.2% FCF yield;
- Hotel: MGM, Starwood, and Hilton agreements are likely in 2H07.
4.1% ex-WC.
- International Opportunity: 22% penetration in Europe and 12% in Asia-

- Need to spend aggressively on marketing long-term.
Pacific vs 47% of travel booked online in the U.S during 2006.
- Increased competition from suppliers, travel search engines, tour

-Large scale brings more leverage in negotiating with suppliers.
operators in Europe, and other third-party distributors.
- International hotel business will likely become more competitive.

- Stabilization of supplier economics over next couple quarters.
Revenues/air ticket should be flattish in 2008 and hotel economics may be - HSD EBITA growth in 2007.
stabilizing.
- Macro travel trends; is Expedia countercyclical? - Selling and Marketing expense expected to be up Y/Y in 2007.
- G&A expense expected to increase Y/Y in 2007 in absolute dollars, but

- Whether core Expedia can continue turnaround.
decrease as a percentage of revenue.
- Media & Advertising strength, high margins---will investors give credit? - Technology and Content expenses in expected to increase Y/Y in 2007.
- Can EXPE close the hotel gap in Europe with PCLN?
- Potential to lever-up, buy back more stock . As of August 2, Expedia's

tender offer was to purchase up to 25M shares of common stock, or
approximately 9% of common stock outstanding.
-Continued cost savings from Apollo.
August 10, 2007 115

Figure 124: Expedia Income Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Revenue 1,843.0 2,119.5 493.9 598.5 613.9 531.3 2,237.6 550.5 689.9 729.8 614.2 2,584.4 2,852.3
Cost of revenue 390.3 470.7 116.1 126.9 131.3 120.0 494.2 120.4 143.0 153.3 130.8 547.5 604.7
Gross profit 1,452.7 1,648.7 377.8 471.6 482.7 411.3 1,743.3 430.1 546.9 576.6 483.4 2,036.9 2,247.6
Selling and marketing expense 653.0 697.5 195.8 195.2 212.1 167.2 770.3 219.0 253.1 266.4 203.9 942.4 1,032.5
General & administrative expense 161.0 211.5 63.7 62.3 59.1 67.7 252.8 68.5 68.7 72.3 76.8 286.2 310.9
Technology & content expense 85.0 112.3 29.8 29.9 31.4 30.2 121.3 38.2 38.0 40.1 36.9 153.2 171.1
Amortization of non-cash distrib. & mktg 16.7 12.6 8.2 0.6 0.7 0.1 9.6 - - - - - -
Impairment of intangible asset - - - - 47.0 - 47.0 - - - - - -
Depreciation - - - - - - - - - - - - -
Merger costs - - - - - - - - - - - - -
Operating income 240.5 397.1 26.2 136.3 89.3 99.5 351.3 67.3 153.6 163.8 131.8 516.6 623.3
Interest income (expense), net 24.9 41.0 1.7 6.6 4.8 1.7 14.8 (3.9) 0.7 (8.1) (16.5) (27.9) (56.9)
Equity income (loss) in affiliates and other (2.5) 11.1 - - - - - - - - - - -
Other income, net 6.7 (36.4) 3.7 10.5 2.9 1.72 18.8 (5.5) 5.94 - - 0.4 -
Income (loss) before taxes and minority interest 269.5 412.8 31.6 153.3 97.1 103.0 384.9 57.9 160.2 155.7 115.3 489.2 566.4
Income tax expense (benefit) 106.4 186.0 9.7 56.2 37.7 35.9 139.5 23.6 64.1 60.7 43.2 191.7 215.2
Minority interest 0.3 0.8 1.4 (1.6) (0.4) 0.1 (0.5) 0.5 0.0 0.0 0.0 0.5 0.5
Net Income 163.5 227.7 23.3 95.5 59.0 67.1 244.9 34.8 96.1 95.0 72.1 298.0 350.7
Adjusted Net Income Calculation
Net income 163.5 227.7 23.3 95.5 59.0 67.1 244.9 34.8 96.1 95.0 72.1 298.0 350.7
Amortization 313.2 230.4 62.3 48.0 43.7 46.7 200.7 37.1 33.5 34.0 34.0 138.5 109.7
One-time items - 29.5 (4.3) (7.9) 47.6 3.5 38.9 1.4 (8.4) - - (7.0) -
Minority interest (0.5) (1.8) (0.3) (0.2) (0.2) (0.2) (0.9) (0.2) (0.2) - - (0.4) -
Income taxes (109.5) (71.0) (24.0) (17.1) (32.9) (19.0) (93.1) (13.7) (7.0) (12.9) (12.9) (46.6) (41.7)
Adjusted Net Income 366.7 414.7 57.0 118.2 117.2 98.1 390.5 59.3 114.0 116.1 93.1 382.5 418.8
Adjusted EPS $1.08 $1.18 $0.15 $0.32 $0.34 $0.28 $1.09 $0.18 $0.35 $0.37 $0.31 $1.21 $1.39
Adjusted shares outstanding 340.5 351.9 370.2 366.2 347.9 349.4 358.4 329.7 327.3 311.3 300.3 317.1 300.3
EBITA and EBITDA Reconciliation

Operating income 240.5 397.1 26.2 136.3 89.3 99.5 351.3 67.3 153.6 163.8 131.8 516.6 623.3
Amortization and other 313.2 230.4 62.3 48.0 90.7 46.7 247.7 37.1 33.5 34.0 34.0 138.5 109.7
EBITA 553.7 627.4 88.5 184.2 180.0 146.2 599.0 104.4 187.1 197.8 165.8 655.1 733.0
Depreciation 44.1 50.4 11.0 11.6 13.2 12.9 48.8 14.4 13.7 13.5 13.5 55.1 57.0
EBITDA 597.8 677.9 99.6 195.8 193.2 159.2 647.8 118.8 200.8 211.3 179.3 710.2 790.0
Y/Y GROWTH
Revenue 31.5% 15.0% 1.8% 7.8% 5.0% 7.4% 5.6% 11.5% 15.3% 18.9% 15.6% 15.5% 10.4%
Cost of revenue 49.8% 20.6% 7.3% 2.1% 2.5% 8.9% 5.0% 3.7% 12.7% 16.7% 9.0% 10.8% 10.4%
Gross profit 27.4% 13.5% 0.3% 9.5% 5.7% 7.0% 5.7% 13.8% 16.0% 19.5% 17.5% 16.8% 10.3%
Selling and marketing 56.8% 6.8% 14.2% 5.4% 14.4% 7.6% 10.4% 11.9% 29.6% 25.6% 22.0% 22.3% 9.6%
General & administrative expense -29.2% 31.4% 50.5% 38.4% 0.4% 3.6% 19.5% 7.6% 10.3% 22.2% 13.4% 13.2% 8.6%
Technology & content expense NA 32.1% 13.3% 13.6% 9.3% -2.5% 8.0% 28.0% 27.3% 27.7% 22.2% 26.3% 11.7%
EBITDA 20.4% 13.4% -32.8% 5.1% -2.4% 9.4% -4.4% 19.3% 2.5% 9.4% 12.7% 9.6% 11.2%
EBITA 18.1% 13.3% -35.2% 5.7% -1.9% 10.0% -4.5% 17.9% 1.6% 9.9% 13.4% 9.4% 11.9%
SEQUENTIAL GROWTH
Revenue -0.2% 21.2% 2.6% -13.5% 3.6% 25.3% 5.8% -15.8%
EBITA -33.4% 108.1% -2.3% -18.8% -28.6% 79.2% 5.7% -16.2%
Selling and marketing 26.0% -0.3% 8.7% -21.2% 31.0% 15.6% 5.2% -23.5%
% OF REVENUES
Cost of sales 21.2% 22.2% 23.5% 21.2% 21.4% 22.6% 22.1% 21.9% 20.7% 21.0% 21.3% 21.2% 21.2%
Selling and marketing expense 35.4% 32.9% 39.6% 32.6% 34.6% 31.5% 34.4% 39.8% 36.7% 36.5% 33.2% 36.5% 36.2%
General & administrative expense 8.7% 10.0% 12.9% 10.4% 9.6% 12.7% 11.3% 12.4% 10.0% 9.9% 12.5% 11.1% 10.9%
Technology & content expense 4.6% 5.3% 6.0% 5.0% 5.1% 5.7% 5.4% 6.9% 5.5% 5.5% 6.0% 5.9% 6.0%
MARGINS
Gross margin 78.8% 77.8% 76.5% 78.8% 78.6% 77.4% 77.9% 78.1% 79.3% 79.0% 78.7% 78.8% 78.8%
EBITA margin 30.0% 29.6% 17.9% 30.8% 29.3% 27.5% 26.8% 19.0% 27.1% 27.1% 27.0% 25.3% 25.7%
EBITDA margin 32.4% 32.0% 20.2% 32.7% 31.5% 30.0% 29.0% 21.6% 29.1% 28.9% 29.2% 27.5% 27.7%
Operating leverage (∆EBITA / ∆Revenue) 19.2% 26.7% -544.3% 22.9% -12.0% 36.4% -24.1% 28.0% 3.1% 15.3% 23.6% 16.2% 29.1%
116 August 10, 2007

Figure 125: Expedia Segment Breakdown, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Revenue 1,843 2,119 494 598 614 531 2,238 551 690 730 614 2,584 2,852
Y/Y growth 31.5% 15.0% 1.8% 7.8% 5.0% 7.4% 5.6% 11.5% 15.3% 18.9% 15.6% 15.5% 10.4%
Q/Q Growth -0.2% 21.2% 2.6% -13.5% 3.6% 25.3% 5.8% -15.8%
EBITA 554 628 89 184 180 146 599 104 187 198 166 655 733
Y/Y growth 18.1% 13.3% -35.3% 5.7% -1.9% 10.0% -4.5% 17.9% 1.6% 9.9% 13.4% 9.4% 11.9%
% margin 30.0% 29.6% 17.9% 30.8% 29.3% 27.5% 26.8% 19.0% 27.1% 27.1% 27.0% 25.3% 25.7%
Depreciation 44 50.4 11 12 13 13 49 14 14 14 14 55 57
EBITDA 598 678 100 196 193 159 648 119 201 211 179 710 790
Y/Y growth 20.4% 13.4% -32.8% 5.1% -2.4% 9.4% -4.5% 19.3% 2.5% 9.4% 12.7% 9.6% 11.2%
% margin 32.4% 32.0% 20.2% 32.7% 31.5% 30.0% 29.0% 21.6% 29.1% 28.9% 29.2% 27.5% 27.7%
GROSS BOOKINGS
North America 10,418 12,065 3,522 3,445 3,104 2,666 12,737 3,559 3,723 3,476 2,946 13,704 14,595
Y/Y Growth 23.6% 15.8% 10.3% 7.5% 2.0% 1.6% 5.6% 1.1% 8.1% 12.0% 10.5% 7.6% 6.5%
Q/Q Growth 34.2% -2.2% -9.9% -14.1% 33.5% 4.6% -6.6% -15.3%
% of total bookings 82% 78% 76% 75% 73% 72% 74% 71% 71% 70% 70% 71% 68%
Europe 2,356 2,515 780 752 792 677 3,001 1,032 1,035 1,030 860 3,956 4,866
Y/Y Growth 106.5% 6.8% 12.7% 12.3% 23.0% 32.8% 19.3% 32.3% 37.6% 30.0% 27.0% 31.8% 23.0%
Q/Q Growth 53.0% -3.6% 5.3% -14.5% 52.4% 0.3% -0.5% -16.5%
Other 972 347 368 365 344 1,424 425 466 453 430 1,774 2,128
Y/Y Growth NA 72.6% 41.5% 46.6% 31.3% 46.5% 22.5% 26.6% 24.0% 25.0% 24.6% 20.0%
Q/Q Growth NA 6.1% -0.8% -5.8% 23.5% 9.6% -2.9% -5.0%
% of total bookings 6% 7% 8% 9% 9% 8% 8% 9% 9% 10% 9% 10%
Total Gross Bookings 12,774 15,552 4,649 4,565 4,261 3,687 17,162 5,016 5,224 4,959 4,236 19,434 21,590
Y/Y Growth 33.5% 21.7% 13.8% 10.4% 8.2% 8.6% 10.4% 7.9% 14.4% 16.4% 14.9% 13.2% 11.1%
Q/Q Growth 36.9% -1.8% -6.7% -13.5% 36.0% 4.1% -5.1% -14.6%
NET REVENUE
North America NA NA 382 456 450 378 1,666 407 506 521 427 1,861 1,956
Y/Y Growth NA NA NA NA NA 6.5% 10.8% 15.9% 12.9% 11.7% 5.1%
Q/Q Growth NA 19.6% -1.4% -15.9% 7.5% 24.5% 3.1% -18.1%
% of total revenue 77% 76% 73% 71% 74% 74% 73% 71% 70% 72% 69%
Europe NA NA 85 112 134 121 452 110 145 170 146 571 707
Y/Y Growth NA NA NA NA NA 29.0% 29.5% 26.8% 20.8% 26.3% 23.8%
Q/Q Growth NA 31.3% 19.6% -9.7% -9.1% 31.8% 17.2% -14.0%
% of total revenue 17% 19% 22% 23% 20% 20% 21% 23% 24% 22% 25%
Other NA NA 27 30 30 32 119 34 39 38 41 152 189
Y/Y Growth NA NA NA NA 25.9% 30.0% 28.2% 27.7% 28.0% 24.4%
Q/Q Growth NA 11.1% 0.0% 6.7% 6.3% 14.7% -1.4% 6.2%
% of total revenue 5% 5% 5% 6% 5% 6% 6% 5% 7% 6% 7%
Total Net Revenue 1,843 2,119 494 598 614 531 2,238 551 690 730 614 2,584 2,852
Y/Y Growth NA 15.0% 1.8% 7.8% 5.0% 7.4% 5.6% 11.5% 15.3% 18.9% 15.6% 15.5% 10.4%
Q/Q Growth -0.2% 21.2% 2.6% -13.5% 3.6% 25.3% 5.8% -15.8%
% of total revenue 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
NET REVENUE AS % OF CURRENT PERIOD BOOKINGS

North America NA NA 10.8% 13.2% 14.5% 14.2% 13.1% 11.4% 13.6% 15.0% 14.5% 13.6% 13.4%
Europe NA NA 10.9% 14.9% 16.9% 17.9% 15.1% 10.7% 14.0% 16.5% 17.0% 14.4% 14.5%
Other NA NA 7.8% 8.2% 8.2% 9.3% 8.4% 8.0% 8.4% 8.5% 9.5% 8.6% 8.9%
Total 14.4% 13.6% 10.6% 13.1% 14.4% 14.4% 13.0% 11.0% 13.2% 14.7% 14.5% 13.3% 13.2%
NET REVENUE AS % OF PREVIOUS PERIOD BOOKINGS

North America NA NA 14.5% 13.0% 13.1% 12.2% NA 15.2% 14.2% 14.0% 12.3% NA NA
Europe NA NA 16.7% 14.4% 17.8% 15.3% NA 16.2% 14.1% 16.4% 14.2% NA NA
Other NA NA 10.3% 8.6% 8.2% 8.8% NA 9.9% 9.2% 8.3% 9.0% NA NA
Total NA NA 14.5% 12.9% 13.4% 12.5% NA 14.9% 13.8% 14.0% 12.4% NA NA
2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07E 9/07E 12/07E 2007E 2008E
GROSS BOOKINGS BY BRAND
Expedia 9,878 12,303 3,700 3,614 3,368 2,985 13,667 4,039 4,129 3,900 3,402 15,471 17,207
Y/Y Growth 24.9% 24.6% 13.8% 11.2% 8.8% 10.3% 11.1% 9.2% 14.3% 15.8% 14.0% 13.2% 11.2%
Q/Q Growth 36.7% -2.3% -6.8% -11.4% 35.3% 2.2% -5.5% -12.8%
% of total gross bookings 77% 79% 80% 79% 79% 81% 80% 81% 79% 79% 80% 80% 80%
Hotels.com 1,776 1,889 582 621 600 456 2,259 612 696 714 529 2,552 2,807
Y/Y Growth 12.7% 6.4% 20.6% 24.9% 19.4% 12.0% 19.6% 5.2% 12.1% 19.0% 16.1% 12.9% 10.0%
Q/Q Growth 43.0% 6.7% -3.4% -24.0% 34.2% 13.7% 2.6% -25.9%
Other 1,120 1,360 367 330 293 246 1,236 365 399 344 304 1,412 1,576
Y/Y Growth NA 21.4% 4.3% -14.7% -13.8% -12.5% -9.1% -0.5% 20.9% 17.5% 23.6% 14.3% 11.6%
Q/Q Growth 30.6% -10.1% -11.2% -16.0% 48.4% 9.3% -13.8% -11.6%
GROSS BOOKINGS BY AGENCY/MERCHANT

Agency 7,346 9,104 2,696 2,728 2,473 2,254 10,151 2,910 3,025 2,876 2,499 11,310 12,587
Y/Y Growth 30.3% 23.9% 14.0% 13.9% 8.7% 9.0% 11.5% 7.9% 10.9% 16.3% 10.9% 11.4% 11.3%
Q/Q Growth 30.3% 1.2% -9.4% -8.9% 29.1% 4.0% -4.9% -13.1%
Merchant 5,428 6,448 1,953 1,837 1,788 1,433 7,011 2,106 2,199 2,083 1,737 8,124 9,003
Y/Y Growth 38.0% 18.8% 13.4% 5.7% 7.6% 8.0% 8.7% 7.8% 19.7% 16.5% 21.2% 15.9% 10.8%
Q/Q Growth 47.2% -6.0% -2.6% -19.8% 46.9% 4.4% -5.3% -16.6%
August 10, 2007 117

Figure 126: Expedia Cash Flow Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E

Net income 163.5 228.7 23.3 95.5 59.0 67.1 244.9 34.8 96.1 95.0 72.1 298.0 350.7
Amortization of non-cash distribution and marketing 16.7 12.6 8.2 0.6 0.7 0.1 9.6 - - - - - -
Amortization of non-cash compensation expense 171.4 91.7 23.9 17.2 16.4 22.7 80.3 15.9 14.0 15.0 15.0 59.8 53.8
Amortization of deferred financing costs 0.2 - - - - - - - - - - - -
Deferred income taxes (5.3) 16.1 13.3 (18.9) (26.1) 21.1 (10.7) 4.4 (3.7) - - 0.7 -
Unrealized loss on derivative instruments - 6.0 (4.3) (7.9) 0.6 3.5 (8.1) 1.4 3.2 - - 4.5
Equity in (income) losses of unconsolidated affiliates (0.2) (1.7) 0.1 (0.7) (1.7) (0.2) (2.5) 1.3 2.3 - - 3.6 -
Minority interest (0.3) (0.8) (1.4) 1.6 0.4 (0.1) 0.5 (0.5) (0.0) - - (0.5) -
Other - 33.9 (7.6) (7.5) 39.6 (13.6) 10.9 2.2 (4.0) - (30.0) (31.8) -
Accounts and notes receivable 10.9 (21.8) (24.8) (1.8) (13.3) 7.6 (32.1) (71.6) (21.9) 21.4 34.0 (38.1) (55.8)
Prepaids and other assets 3.0 (22.5) (47.0) (4.3) 21.1 9.48 (20.7) (58.1) (12.7) - - (70.9) -
Accounts payable and accrued liabilities 225.7 293.6 (15.5) 157.6 83.4 (102.4) 123.1 91.0 205.8 52.8 (156.1) 193.5 140.6
Deferred revenue (2.5) 1.7 4.0 1.5 (1.5) (0.78) 3.2 1.3 1.1 - - 2.4 -
Deferred merchant bookings 54.9 45.1 432.1 (13.4) (201.8) (157.5) 59.5 480.4 71.3 (215.4) (219.3) 117.0 115.3
Other, net (4.3) - - - - - - - - (15.0) (15.0) (30.0) -
Total change in working capital 287.7 296.1 348.9 139.6 (112.0) (243.5) 132.9 442.9 243.6 (156.1) (356.5) 173.9 200.2
Net cash provided by (used in) operating activities 802.9 859.2 445.7 261.3 16.6 -106.1 617.4 538.1 384.6 (13.7) (266.9) 642.0 717.6
Change in working capital as % of operating cash flow 36% 35% 78% 53% NA NA 22% 82% 63% NA NA 27% 28%

Acquisitions and deal costs, net of cash acquired (261.4) 10.5 (0.3) (4.6) (24.9) (2.7) (32.5) (39.9) (19.8) - - (59.6) -
Purchases of marketable securities (5.0) (0.1) - - - - - - - - - - -
Proceeds from sale of business to a related party - - - 13.2 13.2
Proceeds from sale of marketable securities 722.6 1.0 - - - - - - - - - - -
(Increase) decrease in long-term investments and notes receivable (62.4) (0.4) (0.4) (1.2) (0.2) 0.3 (1.5) (28.5) (1.1) - - (29.6) -
Transfers (to) from IAC (1,272.7) (757.2) - - - - - - - - - - -
Other, net (0.1) (2.9) - - - - - - - - - - -
Net cash provide by (used in) investing activities (932.4) (801.3) (13.7) (26.8) (58.7) (14.3) (113.5) (86.7) (41.5) (31.0) (31.0) (190.2) (111.1)

Short-term borrowings - 230.7 (230.5) (0.2) 0.0 (0.4) (231.0) - - - - - -
Proceeds from issuance of long-term debt - - - - 495.7 (0.3) 495.3 - - 712.5 - 712.5 -
Changes in restricted cash and cash equivalents (2.3) (9.5) (8.7) 4.3 1.9 7.2 4.6 (9.5) (2.1) - - (11.6) -
Principal payments on long-term obligations (2.9) - - - - - - - - - - - -
Purchase of treasury stock - - - - - - - - - - - - -
Proceeds from sale of subsidiary stock, including stock options - 29.1 15.1 8.9 5.4 5.9 35.3 8.3 26.6 - - 34.9 -
Excess tax benefit on equity awards - - 0.8 (0.0) - 0.5 1.3 0.8 0.8 - - 1.6 -
Treasury stock activity - - (5.6) (121.6) (167.9) (0.6) (295.7) (666.5) (1.5) (712.5) - (1,380.5) -
Withholding taxes for stock option excercises - (86.6) - - - - - - - - - - -
Contribution from (distribution to) IAC, net 103.8 (52.8) - - - - - - - - - - -
Other, net 8.7 (4.4) - - - - - 0.4 - - - 0.4 -
Net cash provided by (used in) financing activities 107.3 106.5 (228.9) (108.7) 335.1 12.3 9.8 (666.5) 23.7 - - (642.7) -
Effect of exchange-rate on cash and equivalents (13.8) (8.6) 0.7 0.8 1.7 38.9 42.1 (0.4) 6.9 - - 6.5 -
Net change in cash (36.0) 155.7 203.7 126.6 294.7 (69.1) 555.9 (215.6) 373.7 (44.7) (297.9) (184.5) 606.6
Cash & equivalents - BOP 177.7 141.7 297.4 501.1 627.7 922.4 297.4 853.3 637.7 1,011.4 966.8 853.3 668.8
Cash & equivalents - EOP 141.7 297.4 501.1 627.7 922.4 853.3 853.3 637.7 1,011.4 966.8 668.8 668.8 1,275.4

Net cash provided by operating activities 802.9 859 446 261 17 (106.1) 617.4 538 385 (14) (267) 642 718
Capital expenditures (53.4) (52) (13) (21) (34) (25) (93) (18) (21) (31) (31) (101) (111)
Free Cash Flow 749.4 806.9 432.6 240.3 (17.0) (131.2) 524.8 519.7 363.9 (44.7) (297.9) 541.1 606.6
% change 25.4% 7.7% -11.2% -13.1% -111.7% 27.7% -35.0% 20.1% 51.4% NA NA 3.1% 12.1%
as % of EBITDA 125% 119% 434% 123% -9% -82% 81% 438% 181% -21% -166% 76% 77%
118 August 10, 2007

Figure 127: Netflix Snapshot

- Leadership position in online DVD rental market with ~65% share---6.8M - BBI Total Access: 1) very aggressive in-store; 2) took ~100% of industry net adds in
subs vs. Blockbuster at 3.6M 2Q; 3) mail and store-based options, digital delivery would add 3rd leg
- High quality service and proprietary technology lead to scale, cost - Netflix digital limited by content & portability---expensive N-T, but need it to get to TV
leadership advantages, and barriers to entry to shift landscape in ‘08
- Digital content likely to remain limited in N-T as a majority of catalog

content remains in L-T pay TV contracts --> lengthens DVD lifespan - Cable VOD day & date releases gaining some momentum, but still very early
- Headline risk as digital platforms are launched and content producers explore new
- Well-run company with ability to balance growth and profitability distribution channels
- Churn and usage should decline as lower priced plans gain traction with
more casual movie watchers - Ball in BBI's court and unclear how much they will raise prices and what time frame
- $100M stock buyback program in place through end of 2007 - NFLX's only levers are price and digital
- Reaching critical mass of subscribers at >5% HH penetration---driving

stronger word-of-mouth advertising and further closures of traditional retail
rental stores---Blockbuster has closed ~4% of U.S. stores over the last year

- More material BBI price increase 3Q07 4Q07 2007
Revenue $284M - $289M $277M - $287M $1,170M - $1,185M
- Lower NFLX pricing if BBI doesn't shift strategy GAAP net income $8M - $13M (-$1M) - $4M $42.4M - $52.4M
GAAP EPS $0.11 - $0.19 (-$0.01) - $0.06 $0.62 -$0.76
- Impact of just-announced BBI price increases on 3Q, 4Q subscriber growth
for both BBI and NFLX. Will the price changes slow churn at NFLX?
Ending subscribers 6.7M - 6.9M 6.8M - 7.3M 6.8M - 7.3M
- Strategy for digital to the TV in early '08; CES?
- BBI digital strategy
August 10, 2007 119

Figure 128: Netflix Income Statement, 2004–08E

Revenues
Subscription 500.6 682.2 224.1 239.4 256.0 277.2 996.7 305.3 303.7 284.8 277.6 1,171.5 1,164.9
DVD & Advertising Sales 5.6 --- - - - - - - - - - - -
Total Net Revenues $506.2 $682.2 $224.1 $239.4 $256.0 $277.2 $996.7 $305.3 $303.7 $284.8 $277.6 $1,171.5 $1,164.9
Cost of Sales
Revenue sharing 82.1 126.2 39.0 37.0 38.4 38.0 152.4 43.4 43.7 43.9 42.2 173.1 174.7
DVD amortization 74.8 91.8 25.8 30.3 34.4 43.4 134.0 47.0 48.4 48.9 47.5 191.7 192.6
Postage & packaging 114.6 174.3 61.4 61.2 62.4 61.1 246.0 74.8 74.4 71.8 70.8 291.8 297.0
Amortization of intangibles 1.8 1.4 0.1 0.1 0.0 0.0 0.3 0.1 1.0 - - 1.1 0.0
Total Cost of subscription revenue 273.4 393.8 126.2 128.6 135.2 142.6 532.6 165.2 167.6 164.5 160.5 657.7 664.4
Fulfillment 56.6 70.8 21.8 21.8 23.4 26.5 93.4 29.6 29.0 28.2 33.9 120.7 115.3
DVD & Advertising Sales 3.1 - - - - - - - - - - - -
Total Cost of Sales 333.1 464.6 148.0 150.4 158.6 169.1 626.1 194.8 196.6 192.7 194.3 778.5 779.7
Gross profit 173.2 217.7 76.1 89.0 97.4 108.1 370.6 110.5 107.1 92.1 83.3 393.0 385.2
Operating expenses
Technology and development 22.9 30.9 10.2 11.2 11.0 12.3 44.8 15.0 18.1 17.1 17.2 67.3 71.1
Marketing 98.0 142.0 52.4 46.5 58.8 65.6 223.4 71.6 44.7 49.1 52.4 217.8 214.8
General and administrative 16.3 29.4 6.8 5.3 8.4 9.6 30.1 10.8 12.5 12.5 12.8 48.6 45.4
Restructuring related and other - (2.0) (1.4) (1.0) (1.1) (1.3) (4.8) (0.9) (9.3) (0.1) (0.1) (10.4) (11.4)
Amortization of other intangibles - - - - - - - - - - - - -
Total operating expenses 153.8 214.7 71.3 65.1 80.3 89.4 306.2 99.3 68.8 81.6 85.3 334.9 330.9
Operating income 19.4 3.0 4.8 23.9 17.1 18.7 64.4 11.2 38.3 10.6 (2.0) 58.0 54.2
Operating income (ex. stock comp) 35.9 17.3 8.1 27.0 20.2 21.8 77.1 14.0 41.1 13.6 1.0 69.7 65.3
Interest income 2.6 5.8 2.5 3.7 4.7 5.1 15.9 5.4 5.0 4.8 4.7 19.8 18.4
Interest expense (0.2) (0.4) - - - - - - - - - - -
Total non-operating income (expenses) 2.4 5.3 2.5 3.7 4.7 5.1 15.9 5.4 5.0 4.8 4.7 19.8 18.4
Pre-tax income 21.8 8.3 7.2 27.6 21.7 23.8 80.3 16.6 43.2 15.4 2.7 77.9 72.6
Income tax provision 0.2 (33.7) 2.8 10.6 9.0 8.9 31.2 6.7 17.7 6.2 1.1 31.7 29.4
Income tax rate NA NA 39.1% 38.2% 41.2% 37.4% 38.9% 40.5% 40.8% 40.5% 40.5% 40.7% 40.5%
GAAP Net income (loss) 21.6 42.0 4.4 17.0 12.8 14.9 49.1 9.9 25.6 9.2 1.6 46.2 43.2
GAAP Basic income (loss) per share $0.42 $0.79 $0.08 $0.29 $0.19 $0.22 $0.78 $0.14 $0.38 $0.14 $0.02 $0.69 $0.67
GAAP Diluted income (loss) per share $0.33 $0.64 $0.07 $0.25 $0.18 $0.21 $0.71 $0.14 $0.37 $0.13 $0.02 $0.67 $0.65
Basic shares outstanding 52.0 53.5 55.2 58.4 68.1 68.4 62.6 68.7 68.0 66.5 64.5 66.9 64.8
3%
Non-GAAP Fully Taxed EPS Reconciliation:
GAAP Pre-tax net income 21.8 8.3 7.2 27.6 21.7 23.8 80.3 16.6 43.2 15.4 2.7 77.9 72.6
Restructuring related and other - 3.2 - - - - - - (7.0) - - (7.0) -
Non-GAAP Pre-tax income 38.4 25.9 10.5 30.7 24.9 26.9 93.0 19.4 39.1 18.4 5.7 82.5 83.7
Tax effect 16.3 12.1 4.1 11.7 10.3 10.1 36.2 7.8 16.0 7.4 2.3 33.5 33.9
Non-GAAP Fully taxed net income (loss) 22.1 13.7 6.4 18.9 14.6 16.8 56.8 11.5 23.1 10.9 3.4 49.0 49.8
Non-GAAP Fully taxed basic income (loss) per share $0.42 $0.26 $0.12 $0.32 $0.22 $0.25 $0.91 $0.17 $0.34 $0.16 $0.05 $0.73 $0.77
Non-GAAP Fully taxed diluted income (loss) per share $0.34 $0.21 $0.10 $0.27 $0.21 $0.24 $0.82 $0.16 $0.33 $0.16 $0.05 $0.71 $0.75
EBITDA Reconciliation:
Operating Income 19.4 3.0 4.8 23.9 17.1 18.7 64.4 11.2 38.3 10.6 (2.0) 58.0 54.2
Depreciation of PP&E 5.9 9.1 3.6 3.9 4.1 4.4 15.9 4.6 5.1 5.0 5.2 19.9 24.0
Amortization of DVD Library 80.3 96.9 27.3 31.9 36.3 45.7 141.2 49.4 51.0 51.4 50.0 201.8 202.7
Amortization of Intangibles 2.0 1.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 - - 0.0 0.0
Stock-based comp, other non-cash charges 16.6 17.5 3.3 3.1 3.2 3.1 12.7 2.8 (0.0) 3.0 3.0 8.8 11.0
EBITDA 124.1 127.5 39.0 62.8 60.6 71.9 234.2 68.1 94.4 70.0 56.2 288.6 292.0
EBITDA (excluding add-back of DVD Amortization) 43.8 30.6 11.7 30.8 24.3 26.2 93.1 18.6 43.4 18.6 6.2 86.8 89.3
GROWTH AND MARGINS

Y/Y GROWTH
Total Revenue 85.9% 34.8% 47.0% 45.9% 48.2% 43.6% 46.1% 36.2% 26.9% 11.3% 0.1% 17.5% -0.6%
Gross profit 87.0% 25.7% 82.3% 91.3% 69.9% 50.0% 70.3% 45.2% 20.3% -5.4% -23.0% 6.0% -2.0%
Marketing 96.3% 44.9% 46.4% 76.6% 79.0% 39.7% 57.3% 36.6% -3.8% -16.6% -20.2% -2.5% -1.4%
General and administrative 69.9% 80.5% 35.0% 8.3% 4.9% -15.9% 2.5% 60.0% 134.9% 48.9% 32.4% 61.3% -6.5%
Total cash operating expenses 77.2% 47.5% 44.7% 62.5% 60.1% 31.3% 47.4% 40.3% 19.5% 0.5% -6.0% 9.4% -1.2%
Operating income 332.8% -84.6% NA 436.3% 209.0% 567.9% 2055.0% NA 60.2% -38.1% -110.7% -9.9% -6.6%
Operating income (ex stock comp) 136.6% -51.8% NA 242.5% 129.5% 255.9% 345.3% 73.2% 52.3% -33.0% -95.4% -9.7% -6.3%
Pre-tax income 234.4% -61.7% NA 384.3% 210.7% 438.6% 863.6% 129.0% 56.7% -29.2% -88.7% -3.0% -6.8%
GAAP net income 231.6% 94.6% NA 199.7% 84.0% -61.1% 16.8% 124.0% 50.1% -28.4% -89.2% -5.9% -6.5%
EBITDA (excluding add back of DVD Amortization) 90.0% -30.1% NA 196.2% 66.8% 199.3% 203.9% 59.2% 40.7% -23.7% -76.3% -6.8% 2.9%
Q/Q GROWTH
Total revenue 16.1% 6.8% 6.9% 8.3% 10.1% -0.5% -6.2% -2.5%
% OF REVENUES
Revenue sharing as a % of subscription revenue 16.4% 18.5% 17.4% 15.5% 15.0% 13.7% 15.3% 14.2% 14.4% 15.4% 15.2% 14.8% 15.0%
DVD amortization as a % of subscription revenue 14.9% 13.5% 11.5% 12.7% 13.5% 15.7% 13.4% 15.4% 15.9% 17.2% 17.1% 16.4% 16.5%
Postage & packaging as a % of subscription revenue 22.9% 25.6% 27.4% 25.6% 24.4% 22.1% 24.7% 24.5% 24.5% 25.2% 25.5% 24.9% 25.5%
Total cost of subscription rev as a % of subscription rev. 54.6% 57.7% 56.3% 53.7% 52.8% 51.4% 53.4% 54.1% 55.2% 57.8% 57.8% 56.1% 57.0%
Fulfillment 11.2% 10.4% 9.7% 9.1% 9.1% 9.6% 9.4% 9.7% 9.6% 9.9% 12.2% 10.3% 9.9%
Cost of DVD & advertising sales as a % of DVD & ad sales rev. 54.4% NA NA NA NA NA NA NA NA NA NA NA NA
Total Cost of sales 65.8% 68.1% 66.0% 62.8% 62.0% 61.0% 62.8% 63.8% 64.7% 67.7% 70.0% 66.5% 66.9%
Technology and development 4.5% 4.5% 4.6% 4.7% 4.3% 4.4% 4.5% 4.9% 6.0% 6.0% 6.2% 5.7% 6.1%
Marketing 19.4% 20.8% 23.4% 19.4% 23.0% 23.7% 22.4% 23.5% 14.7% 17.2% 18.9% 18.6% 18.4%
MARGINS
Gross margin 34.2% 31.9% 34.0% 37.2% 38.0% 39.0% 37.2% 36.2% 35.3% 32.3% 30.0% 33.5% 33.1%
Operating margin 3.8% 0.4% 2.1% 10.0% 6.7% 6.7% 6.5% 3.7% 12.6% 3.7% -0.7% 5.0% 4.7%
Operating margin (ex. stock comp) 7.1% 2.5% 3.6% 11.3% 7.9% 7.9% 7.7% 4.6% 13.5% 4.8% 0.4% 5.9% 5.6%
EBITDA margin 24.5% 18.7% 17.4% 26.2% 23.7% 25.9% 23.5% 22.3% 31.1% 24.6% 20.2% 24.6% 25.1%
EBITDA margin (excluding add back of DVD Amortization) 8.7% 4.5% 5.2% 12.9% 9.5% 9.5% 9.3% 6.1% 14.3% 6.5% 2.2% 7.4% 7.7%
120 August 10, 2007

Figure 129: Netflix Subscriber and Revenue Analysis, 2004–08E

SUBSCRIBER & REVENUE ANALYSIS 2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Subscribers: Beginning of Period 1,487 2,610 4,179 4,866 5,169 5,662 4,179 6,316 6,797 6,742 6,740 6,316 6,820
Plus: Gross Additions 2,716 3,729 1,377 1,070 1,310 1,493 5,250 1,520 1,028 1,061 1,090 4,699 4,323
Y/Y Growth 72.9% 37.3% 45.7% 51.3% 42.2% 29.2% 40.8% 10.4% -3.9% -19.0% -27.0% -10.5% -8.0%
Q/Q Growth 5.9% -22.3% 22.4% 14.0% 0.5% -32.4% 3.2% 2.7%
Less: Cancellations 1,593 2,160 690 767 817 839 3,113 1,039 1,083 1,063 1,010 4,195 4,029
Y/Y Growth 69.3% 35.6% 28.5% 45.0% 55.6% 47.5% 44.1% 50.6% 41.2% 30.1% 20.4% 34.8% -3.9%
Q/Q Growth 21.3% 11.2% 6.5% 2.7% 23.8% 4.2% -1.9% -5.0%
Monthly Churn (cancels/(BOP subs + gross sub adds)) 5.1% 4.5% 4.1% 4.3% 4.2% 3.9% 4.1% 4.4% 4.6% 4.5% 4.3% 4.5% 4.3%
Net additions 1,123 1,569 687 303 493 654 2,137 481 (55) (2) 80 504 294
TOTAL SUBSCRIBERS, END OF PERIOD 2,610 4,179 4,866 5,169 5,662 6,316 6,316 6,797 6,742 6,740 6,820 6,820 7,114
Y/Y Growth 75.5% 60.1% 61.2% 61.7% 57.6% 51.1% 51.1% 39.7% 30.4% 19.0% 8.0% 8.0% 4.3%
Q/Q Growth 16.4% 6.2% 9.5% 11.6% 7.6% -0.8% 0.0% 1.2%
Average Subscribers 2,049 3,395 4,523 5,018 5,416 5,989 5,248 6,557 6,770 6,741 6,780 6,568 6,967
Free Subscribers: end of period 124 153 132 152 173 162 162 121 133 138 128 128 131
% Change Y/Y 74.6% 23.4% 0.8% 74.7% 2.4% 5.9% 5.9% -8.3% -12.5% -20.0% -21.0% -21.0% 2.0%
Free subscribers as a % of ending subscribers 4.8% 3.7% 2.7% 2.9% 3.1% 2.6% 2.6% 1.8% 2.0% 2.1% 1.9% 1.9% 1.8%
Paid Subscribers: end of period 2,486 4,026 4,734 5,017 5,489 6,154 6,154 6,676 6,609 6,602 6,692 6,692 6,983
Y/Y Growth 75.6% 61.9% 64.0% 61.4% 60.4% 52.9% 52.9% 41.0% 31.7% 20.3% 8.7% 8.7% 4.3%
Q/Q Growth 17.6% 6.0% 9.4% 12.1% 8.5% -1.0% -0.1% 1.4%
Average Paid Subscribers 1,951 3,256 4,380 4,876 5,253 5,822 5,090 6,415 6,643 6,605 6,647 6,423 6,838
Subscriber breakdown
Free Subscribers as % of subs 4.8% 3.7% 2.7% 2.9% 3.1% 2.6% 2.6% 1.8% 2.0% 2.1% 1.9% 1.9% 1.8%
Paid Subscriber as % of subs 95.2% 96.3% 97.3% 97.1% 96.9% 97.4% 97.4% 98.2% 98.0% 97.9% 98.1% 98.1% 98.2%
Total Subscribers 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Subscription revenue per average paid sub (monthly) $21.38 $17.46 $17.06 $16.36 $16.24 $15.87 $16.32 $15.83 $15.22 $14.37 $13.92 $15.18 $14.20
Y/Y Growth 4.9% -18.3% -9.8% -10.3% -7.9% -8.1% -6.5% -7.2% -7.0% -11.5% -12.3% -6.9% -6.5%
Q/Q Growth -1.3% -4.1% -0.7% -2.3% -0.3% -3.9% -5.6% -3.1%
TOTAL SUBSCRIPTION REVENUE $500.6 $682.2 $224.1 $239.4 $256.0 $277.2 $996.7 $304.6 $303.3 $284.8 $277.6 $1,170.3 $1,164.9
Y/Y Growth 85.1% 36.3% 47.0% 45.9% 48.2% 43.6% 46.1% 35.9% 26.7% 11.3% 0.1% 17.4% -0.5%
Q/Q Growth 16.1% 6.8% 6.9% 8.3% 9.9% -0.4% -6.1% -2.5%
DVD & ADVERTISING SALES REVENUE $5.6

Y/Y Growth 206.4%
Q/Q Growth
TOTAL REVENUE $506.2 $682.2 $224.1 $239.4 $256.0 $277.2 $996.7 $304.6 $303.3 $284.8 $277.6 $1,170.3 $1,164.9
Y/Y Growth 85.9% 34.8% 47.0% 45.9% 48.2% 43.6% 46.1% 35.9% 26.7% 11.3% 0.1% 17.4% -0.5%
Q/Q Growth 16.1% 6.8% 6.9% 8.3% 9.9% -0.4% -6.1% -2.5%
MARKETING EXPENSES
Number of New Subscribers 2,716 3,729 1,377 1,070 1,310 1,493 5,250 1,520 1,028 1,061 1,090 4,699 4,323
Subscriber Acquisition Cost (SAC) - consolidated $36.15 $37.87 $38.47 $43.95 $45.32 $44.31 $43.01 $47.46 $44.02 $46.23 $48.08 $46.45 $49.70
Y/Y Growth 13.7% 4.8% 1.5% 18.0% 27.0% 9.0% 13.6% 23.4% 0.2% 2.0% 8.5% 8.0% 7.0%
Q/Q Growth -5.4% 14.2% 3.1% -2.2% 7.1% -7.2% 5.0% 4.0%
Calculated Marketing Expense 98.0 142.0 53.0 47.0 59.4 66.2 225.5 72.1 45.3 49.1 52.4 218.8 214.8
Y/Y Growth 96.2% 44.9% 47.9% 78.6% 80.6% 40.8% 58.8% 36.2% -3.8% -17.4% -20.8% -3.0% -1.8%
Q/Q Growth 12.7% -11.2% 26.2% 11.4% 9.0% -37.3% 8.4% 6.8%
Reported marketing expense 53.0 47.0 59.4 66.2 72.1 45.3
August 10, 2007 121

Figure 130: Netflix Cash Flow Statement, 2004–08E

Net income (loss) 21.6 42.0 4.4 17.0 12.8 14.9 49.1 9.9 25.6 9.2 1.6 46.2 43.2
Adjustments to reconcile net income (loss) to net cash
Depreciation of property and equipment 5.9 9.1 3.6 3.9 4.1 4.4 15.9 4.6 5.1 5.0 5.2 19.9 24.0
Amortization of DVD library 80.3 96.9 27.3 31.9 36.3 45.7 141.2 49.4 51.0 51.4 50.0 201.8 202.7
Amortization of intangible assets 2.0 1.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 - - 0.0 0.0
Noncash charges for equity instruments granted - - - - - - - (0.1) 0.0 0.0 0.0 (0.0) -
Stock-based compensation expense 16.6 14.3 3.3 3.1 3.2 3.1 12.7 2.8 2.8 2.8 2.8 11.3 11.0
Stock option income tax benefits 0.2 - (0.7) (3.0) (3.9) (5.7) (13.2) (4.1) (12.0) (12.0) (12.0) (40.1) (40.1)
Loss on disposal of short term investments 0.3 - - - - - - (0.1) (0.0) (0.0) (0.0) (0.3) (0.3)
Loss on disposal of property and equipment 0.1 - (0.0) - - - (0.0) - - - - - -
Gain on disposal of DVD's (2.9) (3.6) (2.0) (2.0) (2.2) (2.8) (9.1) (2.6) (5.2) (5.2) (5.2) (18.2) (18.2)
Non-cash interest expense 0.0 0.0 - - - - - - - - - - -
Deferred income taxes - (34.9) 2.1 7.3 4.1 2.7 16.2 (0.3) (0.5) - - (0.8) -
Changes in Working Capital
Prepaid expenses and other current assets (9.1) (4.9) 2.3 (6.1) (0.1) (3.1) (7.1) (10.3) 5.7 (1.9) 0.4 (6.2) (3.0)
Accounts payable 17.1 8.2 2.9 (0.2) (2.6) 3.2 3.2 11.4 (10.9) 20.4 8.8 29.7 10.7
Accrued expenses 1.5 12.4 3.4 0.2 9.0 4.9 17.6 7.7 14.2 2.1 (0.4) 23.7 20.8
Deferred revenue 13.6 16.6 (0.6) 1.1 0.8 19.8 21.1 (5.4) (3.7) (0.7) 29.0 19.2 16.0
Deferred rent 0.4 0.2 0.1 0.1 0.1 0.0 0.3 0.1 0.0 - - 0.1 -
Change in Working Capital 23.5 32.6 8.1 (4.9) 7.2 24.8 35.1 3.5 5.3 19.9 37.8 66.5 44.5
Net cash provided by (used in) operating activities 147.6 157.5 46.0 53.3 61.5 87.1 247.9 63.0 72.1 71.1 80.1 286.3 266.9

Purchases of short term investments (0.6) - - - - - - (264.2) (53.9) - - (318.1) -
Proceeds from sale of short term investments 45.0 - - - - - - 95.4 28.7 - - 124.1 -
Purchases of property and equipment (15.0) (27.7) (6.7) (3.9) (5.2) (11.5) (27.3) (18.0) (9.0) (5.7) (6.9) (39.6) (34.9)
Acquisition of intangible asset - (0.5) - (0.6) - - (0.6) - - - - - -
Acquisitions of DVD library (103.0) (111.4) (29.8) (46.1) (37.3) (56.3) (169.5) (68.5) (64.3) (59.8) (55.5) (248.2) (233.0)
Proceeds from sale of DVD's 5.6 5.8 2.5 2.8 3.7 4.0 12.9 5.6 7.4 0.3 0.3 13.6 22.9
Deposits and other assets (0.5) 0.6 (0.3) 0.1 (0.3) (0.8) (1.3) (0.1) 0.3 - - 0.2 0.2
Net cash provide by (used in) investing activities (68.4) (133.2) (34.3) (47.8) (39.1) (64.6) (185.9) (249.8) (90.9) (65.2) (62.2) (468.1) (244.9)

Proceeds from issuance of common stock 4.2 13.4 3.1 105.5 0.8 3.6 113.0 0.8 2.7 - - 3.4 -
Proceeds from issuance of stock via employee plans 1.8 - - - - - - - - - - - -
Net Proceeds from issuance of sub. notes / warrants - - - - - - - - - - - - -
Repurchase of Common stock - - - - - - - - (30.2) (30.0) (40.0) (100.2) -
Proceeds from issuance of notes payable - - - - - - - - - - - - -
Principal payments on notes payable & capital leases (0.4) (0.1) - - - - - - - - - - -
Net cash provided by (used in) financing activities 5.6 13.3 3.8 108.4 4.7 9.2 126.2 4.8 (15.5) (18.0) (28.0) (56.6) 40.1
Effect of exchange rate changes (0.2) 0.2 - - - - - - - - - - -
Cash & equivalents - BOP 89.9 174.5 212.3 227.8 341.7 368.7 212.3 400.4 218.5 184.2 172.1 400.4 162.0
Net change in cash 84.6 37.8 15.5 113.9 27.0 31.7 188.2 (182.0) (34.3) (12.1) (10.0) (238.4) 62.1
Cash & equivalents - EOP 174.5 212.3 227.8 341.7 368.7 400.4 400.4 218.5 184.2 172.1 162.0 162.0 224.1

Operating cash flow 147.6 157.5 46.0 53.3 61.5 87.1 247.9 63.0 72.1 71.1 80.1 286.3 266.9
Purchases of fixed assets (property and equipment) (15.0) (27.7) (6.7) (3.9) (5.2) (11.5) (27.3) (18.0) (9.0) (5.7) (6.9) (39.6) (34.9)
Acquisitions of DVD library (103.0) (111.4) (29.8) (46.1) (37.3) (56.3) (169.5) (68.5) (64.3) (59.8) (55.5) (248.2) (233.0)
Proceeds from sale of DVD's 5.6 5.8 2.5 2.8 3.7 4.0 12.9 5.6 7.4 0.3 0.3 13.6 22.9
Deposits and other assets (0.5) 0.6 (0.3) (0.5) (0.3) (0.8) (1.3) (0.1) 0.3 - - 0.2 0.2
Free Cash Flow 34.8 24.7 11.7 5.5 22.3 22.5 62.6 (18.0) 6.5 5.9 17.9 12.2 22.0
% change Y/Y 41% -29% NA 200% 198% -8% 153% -254% 17% -74% -20% -80% 79%
Free Cash Flow per share $0.58 $0.34 $0.18 $0.08 $0.32 $0.32 $0.91 ($0.25) $0.09 $0.09 $0.27 $0.18 $0.33
Cash Flow Statement Assumptions

Acquisitions of DVDs
Revenue 506.2 682.2 224.1 239.4 256.0 277.2 996.7 305.3 303.7 284.8 277.6 1,171.5 1,164.9
Acquisitions of DVDs 103.0 111.4 29.8 46.1 37.3 56.3 169.5 68.5 64.3 59.8 55.5 248.2 233.0
Acquisitions of DVDs as a % of revenue 20.3% 16.3% 13.3% 19.3% 14.6% 20.3% 17.0% 22.4% 21.2% 21.0% 20.0% 21.2% 20.0%
Amortization of DVD library

Acquisitions of DVDs 103.0 111.4 29.8 46.1 37.3 56.3 169.5 68.5 64.3 59.8 55.5 248.2 233.0
Average DVD library balance 32.2 54.8 65.5 76.5 85.5 98.5 81.0 109.5 114.0 118.1 125.1 116.4 143.0
Amortization of DVD library 80.3 96.9 27.3 31.9 36.3 45.7 141.2 49.4 51.0 51.4 50.0 201.8 202.7
Amortization of DVD library as a % of Acquisition of DVDs 78.0% 86.9% 91.4% 69.2% 97.3% 81.2% 83.3% 72.1% 79.2% 86.0% 90.0% 81.3% 87.0%
Amortization of DVD library as a % of Avg DVD library balance 62.4% 44.2% 41.6% 41.7% 42.4% 46.4% 43.6% 45.1% 44.7% 43.6% 40.0% 43.4% 35.4%
Capex
Revenue 506.2 682.2 224.1 239.4 256.0 277.2 996.7 305.3 303.7 284.8 277.6 1,171.5 1,164.9
Capex 15.0 27.7 6.7 3.9 5.2 11.5 27.3 18.0 9.0 5.7 6.9 39.6 34.9
Capex as a % of revenue 3.0% 4.1% 3.0% 1.6% 2.0% 4.2% 2.7% 5.9% 3.0% 2.0% 2.5% 3.4% 3.0%
122 August 10, 2007

Figure 131: Overstock.com Snapshot

- Helping move the $60 billion retail liquidation market toward the Internet;
a more efficient means of distribution - Remains unprofitable in highly competitive overall e-commerce space
- Brand name drives customer adoption and access to suppliers - Sales are declining without high degree of marketing spend
- Overstock’s long-term opportunity in e-commerce remains intact if can - Strong relationships with suppliers, but Overstock does not have
improve execution contracts that guarantee access to inventory
- Company has taken new approach by limiting sales and marketing - Concentrated ownership, light float, and heavy short interest contribute to
spend and concentrating on the basic e-commerce platform volatility; mgmt focus is key
- e-commerce landscape extremely competitive; Overstock leads in

liquidation but also competing with eBay, Amazon, and others in overall
- Trading well below 2007 sales; 0.5x online retail
- Acquisition target? Would current management ever sell? - Weak traffic trends

- Need to balance growth and profitability Company does not provide guidance
- Gross margin improvement as company manages inventory more

effectively
- Product mix-shift toward partner (71% of revs) reduces merchandising

and inventory risks
- Stabilizing revenue declines in 3Q/4Q; revenue growth in early '08 could

signal recovery
- Shift from Books/Music/Video to home & garden, higher ticket items
August 10, 2007 123

Figure 132: Overstock.com Income Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Gross Bookings (excl. Auctions & Travel) 541,441 867,959 200,900 172,091 170,590 309,887 853,468 170,400 165,683 165,056 311,173 812,312 838,554
Revenue
Direct Revenue 213,210 324,875 79,710 68,770 56,564 98,158 303,202 45,701 43,578 38,464 72,637 200,379 170,323
Fulfillment Partner Revenue 281,425 474,441 98,334 90,422 100,321 195,871 484,948 112,229 105,389 114,366 222,314 554,298 609,727
Total Revenue 494,635 799,316 178,044 159,192 156,885 294,029 788,150 157,930 148,967 152,829 294,951 754,677 780,050
Cost of Goods Sold
Direct Revenue Cost of Sales 184,928 282,383 70,703 61,473 51,037 101,730 284,943 39,320 36,321 32,156 60,289 168,085 143,071
Fulfillment Partner Cost of Sales 243,468 400,057 83,587 75,411 84,483 164,926 408,407 93,295 86,343 94,123 182,742 456,503 502,415
Total Cost of Goods Sold 428,396 682,440 154,290 136,884 135,520 266,656 693,350 132,615 122,664 126,279 243,030 624,588 645,486
Gross profit (loss) 66,239 116,876 23,754 22,308 21,365 27,373 94,800 25,315 26,303 26,551 51,920 130,089 134,564
Operating expenses
Sales and Marketing expenses 40,533 77,155 12,659 11,911 17,282 29,045 70,897 11,284 7,962 9,934 18,287 47,467 52,263
Technology 8,449 27,864 13,424 14,897 16,157 26,354 70,832 14,973 15,237 14,977 15,927 61,115 53,043
General and administrative expenses 21,786 33,080 11,850 11,050 11,078 12,859 46,837 10,689 10,429 10,698 12,388 44,204 45,243
Restructuring - - - - - - - 6,089 6,194 12,283
Amortization of Goodwill - - - - - - - - - - - - -
Amorization of Stock-based compensation 360 - - - - - - - - - - - -
Total operating expenses 71,128 138,099 37,933 37,858 44,517 68,258 188,566 43,035 39,822 35,609 46,602 165,068 150,550
Operating income (loss) (4,889) (21,223) (14,179) (15,550) (23,152) (40,885) (93,766) (17,720) (13,519) (9,058) 5,318 (34,980) (15,986)
PF Operating income (loss) (4,529) (21,223) (14,179) (15,550) (23,152) (40,885) (93,766) (17,720) (13,519) (9,058) 5,318 (34,980) (15,986)
Interest income 1,173 (270) 315 2,215 459 577 3,566 990 1,078 1,046 1,105 4,218 5,001
Interest expense (775) (5,582) (1,267) (1,275) (1,096) (1,127) (4,765) (1,029) (1,027) (943) (943) (3,942) (3,773)
Other income (expense), net (49) 4,728 - (1) (6) 88 81 - - - - - -
Total non-operating income (expenses), net 349 (1,124) (952) 939 (643) (462) (1,118) (39) 51 103 161 276 1,228
Pre-Tax Income (Loss) - EBT (4,540) (22,347) (15,131) (14,611) (23,795) (41,347) (94,884) (17,759) (13,468) (8,956) 5,479 (34,704) (14,758)
Provision for income taxes - - - - - - - - -
Tax Rate - - - - - - - - - - - - -
Deemed dividend for redeemable common stock (188) (185) (33) (33) (33) - (99) - - - - - -
Deemed dividend for conversion of preferred - - - - - - - - - - - - -
Income (loss) from discontinued operations (2,571) (779) (1,128) (708) (4,267) (6,882) (3,624) (300) (3,924)
Net Income (loss) Attr. to Common (GAAP) (4,728) (25,103) (15,943) (15,772) (24,536) (45,614) (101,865) (21,383) (13,768) (8,956) 5,479 (38,628) (14,758)
Basic income (loss) per share ($0.26) ($1.29) ($0.82) ($0.78) ($1.19) ($2.16) ($5.01) ($0.91) ($0.58) ($0.38) $0.23 ($1.63) ($0.61)
Diluted income (loss) per share ($0.26) ($1.29) ($0.82) ($0.78) ($1.19) ($2.16) ($5.01) ($0.91) ($0.58) ($0.38) $0.23 ($1.63) ($0.61)
PF Operating income (loss) (4,529) (21,223) (14,179) (15,550) (23,152) (40,885) (93,766) (17,720) (13,519) (9,058) 5,318 (34,980) (15,986)
EBITDA (592) (5,609) (8,029) (8,674) (14,683) (28,494) (61,439) (9,949) (5,545) (1,758) 12,318 (4,935) 6,548
2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
Y/Y Growth
Gross Bookings 83.7% 60.3% 9.1% 5.1% -5.0% -9.0% -1.7% -15.2% -3.7% -3.2% 0.4% -4.8% 3.2%
Total Revenue 107.0% 61.6% 7.3% 5.7% -6.5% -6.7% -1.4% -11.3% -6.4% -2.6% 0.3% -4.2% 3.4%
Gross profit 156.8% 76.4% -4.1% -1.7% -15.5% -38.0% -18.9% 6.6% 17.9% 24.3% 89.7% 37.2% 3.4%
Sales and Marketing expenses 100.9% 90.4% -24.8% -17.8% 1.4% 0.9% -8.1% -10.9% -33.2% -42.5% -37.0% -33.0% 10.1%
Technology NA 229.8% 227.5% 144.1% 103.0% 171.6% 154.2% 11.5% 2.3% -7.3% -39.6% -13.7% -13.2%
General and administrative expenses 28.8% 51.8% 61.3% 46.0% 31.9% 31.6% 41.6% -9.8% -5.6% -3.4% -3.7% -5.6% 2.4%
Total operating expenses 90.8% 95.1% 34.2% 34.4% 33.3% 41.4% 36.5% -2.6% -11.2% -20.0% -31.7% -19.0% -1.5%
Operating income NA NA NA NA NA NA NA NA NA NA NA NA NA
PF Operating income NA NA NA NA NA NA NA NA NA NA NA NA NA
Pre-Tax Income (Loss) - EBT NA NA NA NA NA NA NA NA NA NA NA NA NA
GAAP Net income NA NA NA NA NA NA NA NA NA NA NA NA NA
PF Net income NA NA NA NA NA NA NA NA NA NA NA NA NA
GAAP EPS NA NA NA NA NA NA NA NA NA NA NA NA NA
PF EPS NA NA NA NA NA NA NA NA NA NA NA NA NA
EBITDA NA NA NA NA NA NA NA NA NA NA NA NA -232.7%
Sequential Growth
Gross bookings -41.0% -14.3% -0.9% 81.7% -45.0% -2.8% -0.4% 88.5%
Net sales -43.5% -10.6% -1.4% 87.4% -46.3% -5.7% 2.6% 93.0%
Gross profit -46.2% -6.1% -4.2% 28.1% -7.5% 3.9% 0.9% 95.6%
% of Revenues
Gross Bookings 109.5% 108.6% 112.8% 108.1% 108.7% 105.4% 108.3% 107.9% 111.2% 108.0% 105.5% 107.6% 107.5%
Total cost of goods sold 86.6% 85.4% 86.7% 86.0% 86.4% 90.7% 88.0% 84.0% 82.3% 82.6% 82.4% 82.8% 82.7%
Sales and Marketing 8.2% 9.7% 7.1% 7.5% 11.0% 9.9% 9.0% 7.1% 5.3% 6.5% 6.2% 6.3% 6.7%
Technology 1.7% 3.5% 7.5% 9.4% 10.3% 9.0% 9.0% 9.5% 10.2% 9.8% 5.4% 8.1% 6.8%
Revenue as % of Gross Bookings 91.4% 92.1% 88.6% 92.5% 92.0% 94.9% 92.3% 92.7% 89.9% 92.6% 94.8% 92.9% 93.0%
Margins
Gross margin 13.4% 14.6% 13.3% 14.0% 13.6% 9.3% 12.0% 16.0% 17.7% 17.4% 17.6% 17.2% 17.3%
Operating margin -1.0% -2.7% -8.0% -9.8% -14.8% -13.9% -11.9% -11.2% -9.1% -5.9% 1.8% -4.6% -2.0%
PF Operating margin -0.9% -2.7% -8.0% -9.8% -14.8% -13.9% -11.9% -11.2% -9.1% -5.9% 1.8% -4.6% -2.0%
Net margin -1.0% -3.1% -9.0% -9.9% -15.6% -15.5% -12.9% -13.5% -9.2% -5.9% 1.9% -5.1% -1.9%
EBITDA margin -0.1% -0.7% -4.5% -5.4% -9.4% -9.7% -7.8% -6.3% -3.7% -1.2% 4.2% -0.7% 0.8%
Operating Leverage (∆ Oper income / ∆ Revenues) 2.8% -5.4% -87.7% -117.8% 138.1% 175.1% 649.7% 17.6% -19.9% -347.5% 5013.9% -175.6% 74.9%
124 August 10, 2007

Figure 133: Overstock.com Segment Breakdown, 2004–08E

2004A 2005E 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E
GROSS BOOKINGS
Merchandise Gross Bookings 541,441 867,959 200,900 172,091 170,590 309,887 853,468 170,400 165,683 165,056 311,173 812,312 838,554
Y/Y growth 84% 60% 9% 5% -5% -9% -2% -15% -4% -3% 0% -5% 3%
Q/Q growth -41% -14% -1% 82% -45% -3% 0% 89%
Merch. Gross Bkngs as % of Total Revs 109.5% 108.0% 112.8% 108.1% 108.7% 105.4% 108.3% 107.9% 111.2% 108.0% 105.5% 107.6% 107.5%
TOTAL GROSS BOOKINGS (excl. Auctions & Travel) 541,441 867,959 200,900 172,091 170,590 309,887 853,468 170,400 165,683 165,056 311,173 812,312 838,554
Y/Y growth 84% 60% 9% 5% -5% -9% -2% -15% -4% -3% 0% -5% 3%
Q/Q growth -41% -14% -1% 82% -45% -3% 0% 89%
REVENUE
Direct Revenue 213,210 324,875 79,710 68,770 56,564 98,158 303,202 45,701 43,578 38,464 72,637 200,379 170,323
Y/Y growth 54.4% 52.4% 17.4% 14.5% -17.4% -23.6% -6.7% -42.7% -36.6% -32.0% -26.0% -33.9% -15.0%
Q/Q growth -38.0% -13.7% -17.7% 73.5% -53.4% -4.6% -11.7% 88.8%
Fulfillment Partner 281,425 478,947 98,334 90,422 100,321 195,871 484,948 112,229 105,389 114,366 222,314 554,298 609,727
Y/Y growth 179.2% 70.2% 0.3% -0.2% 1.0% 5.0% 1.3% 14.1% 16.6% 14.0% 13.5% 14.3% 10.0%
Q/Q growth -47.3% -8.0% 10.9% 95.2% -42.7% -6.1% 8.5% 94.4%
TOTAL REVENUE 494,635 799,316 178,044 159,192 156,885 294,029 788,150 157,930 148,967 152,829 294,951 754,677 780,050
Y/Y growth 107.0% 61.6% 7.3% 5.7% -6.5% -6.7% -1.4% -11.3% -6.4% -2.6% 0.3% -4.2% 3.4%
Q/Q growth 78.2%
NET REVENUE MIX

Direct Revenue 43% 41% 45% 43% 36% 33% 38% 29% 29% 25% 25% 27% 22%
Fulfilment Partner 57% 60% 55% 57% 64% 67% 62% 71% 71% 75% 75% 73% 78%
Total Net Revenue 100% 101% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
GROSS PROFIT
Direct
Direct Revenue 213,210 324,875 79,710 68,770 56,564 98,158 303,202 45,701 43,578 38,464 72,637 200,379 170,323
Direct Cost of Goods Sold 184,928 282,383 70,703 61,473 51,037 101,730 284,943 39,320 36,321 32,156 60,289 168,085 143,071
Direct Gross Profit 28,282 42,492 9,007 7,297 5,527 (3,572) 18,259 6,381 7,257 6,308 12,348 32,294 27,252
Direct Gross Margin 13.3% 13.1% 11.3% 10.6% 9.8% -3.6% 6.0% 14.0% 16.7% 16.4% 17.0% 16.1% 16.0%
Fulfillment Partner
Fulfillment Partner Revenue 281,425 474,441 98,334 90,422 100,321 195,871 484,948 112,229 105,389 114,366 222,314 554,298 609,727
Fulfilment Partner Cost of Goods Sold 243,468 400,057 83,587 75,411 84,483 164,926 408,407 93,295 86,343 94,123 182,742 456,503 502,415
Fulfillment Partner Gross Profit 37,957 74,384 14,747 15,011 15,838 30,945 76,541 18,934 19,046 20,243 39,572 97,795 107,312
Fulfillment Partner Gross Margin 13.5% 15.7% 15.0% 16.6% 15.8% 15.8% 15.8% 16.9% 18.1% 17.7% 17.8% 17.6% 17.6%
Total Net Sales 494,635 799,316 178,044 159,192 156,885 294,029 788,150 157,930 148,967 152,829 294,951 754,677 780,050
Total Cost of Goods Sold 428,396 682,440 154,290 136,884 135,520 266,656 693,350 132,615 122,664 126,279 243,030 624,588 645,486
Gross Profit 66,239 116,876 23,754 22,308 21,365 27,373 94,800 25,315 26,303 26,551 51,920 130,089 134,564
Gross Margin 13.4% 14.6% 13.3% 14.0% 13.6% 9.3% 12.0% 16.0% 17.7% 17.4% 17.6% 17.2% 17.3%
GROSS PROFIT MIX

Direct Revenue 43% 36% 38% 33% 26% -13% 19% 25% 28% 24% 24% 25% 20%
Fulfillment Partner 57% 64% 62% 67% 74% 113% 81% 75% 72% 76% 76% 75% 80%
Total Gross Profit 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
August 10, 2007 125

Figure 134: Overstock.com Cash Flow Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07A 9/07E 12/07E 2007E 2008E

Net income (loss) (4,540) (24,918) (15,910) (15,739) (24,503) (45,614) (101,766) (21,383) (13,768) (8,956) 5,479 (38,628) (14,758)
Amortization of Goodwill - - - - - - - - -
Loss on disposition of Property & Equipment 34 2,571 1,377 1,129 708 4,267 7,481 3,624 301 3,925 -
Amortization of unearned stock based compensation 360 72 958 1,088 1,042 1,032 4,120 1,073 1,137 1,100 1,400 4,710 4,898
Realized gain from marketable securities (2) 3,351 (217) (1,868) - - (2,085) -
Stock options issued to consultants for services 1,278 (389) 43 (9) (3) (8) 23 5 135 140
Stock issued to employees - - - - - - -
Amortization of debt discount 147 620 139 139 139 - 417 86 86 172
Gain from early extinguishment of debt (6,158) - - - - - -
Reissuance of treasury stock for 401K plan - 443 507 105 67 108 787 602 113 715
Restructuring 6,089 6,194 12,283
Selling shareholder fees - - - - - - - -
Accounts receivable, net 4,468 (5,109) 2,316 (977) (1,753) (3,749) (2,052) 3,827 (431) (3,520) (4,760) (4,884) 621
Inventories, net (15,815) (46,711) 11,918 6,529 6,040 42,522 67,009 3,612 1,237 (4,443) (9,627) (9,221) (7,947)
Prepaid inventory (9,376) 2,689 794 5,592 (781) 1,783 7,388 (360) 477 (5,517) (1,207) (6,608) (4,412)
Prepaid expenses and other assets (1,807) (4,939) (1,894) 723 436 1,781 1,004 (1,962) 700 4,150 (1,314) 1,574 (341)
Other long-term assets, net (944) (2,151) 47 (29) (123) 601 496 90 176 (3,519) (604) (3,856) (1,816)
Accounts Payable 33,697 36,455 (63,621) (1,603) 14,847 18,219 (35,200) (38,059) 5,467 1,607 17,940 (13,045) (828)
Accrued liabilities 13,601 23,566 (15,185) (8,384) (3,072) 19,543 (6,242) (23,255) 5,141 (5,691) 15,419 (8,385) (901)
Total Change in Working Capital 23,824 3,800 (65,625) 1,851 15,594 80,700 32,403 (56,107) 12,767 (16,933) 15,847 (44,425) (15,625)
Net cash provided by (used in) operating activities 25,038 (4,994) (72,578) (6,428) 1,513 52,876 (26,293) (58,240) 14,939 (17,489) 29,727 (31,063) (2,950)

Issuance of note receivable to vendor - - - - - - - 3,941 3,941
Increase in restricted cash (1,602) 1,349 - 55 - - 253 - - -
Decrease in restricted cash - - 198 - - (102) - - -
Investments in marketable securities (92,877) (185,543) - - - - (102) (21,381) (21,381) -
Sales of marketable securities 15,373 216,265 7,281 49,475 - - 56,756 3,400 3,400 -
Expenditures for property and equipment (8,734) (44,740) (6,804) (5,102) (7,807) (3,989) (23,441) (477) (1,439) (600) (600) (3,116) (3,900)
Acquisition of Ski West (24,620) - - - - - -
Expenditures for other long term assets - - (100) - - - (100) - -
Proceeds from the sale of property and equipment 20 1 - 1 - - 1 9,892 9,892 -
Paydown of note receivable 753 753
Cash received from the acquisition of gear.com - - - - - - - - -
Net cash provide by (used in) investing activities (87,820) (37,288) 575 44,429 (7,807) (4,091) 33,367 3,464 (8,775) (600) (600) (6,511) (3,900)

Cash Overdraft - - - - - - - - -
Payments on capital lease obligations (658) (7,086) (2,428) (326) (124) (183) (2,957) (5,247) (4) (1,146) (1,475) (7,872) -
Borrowings on line of credit, net 1,000 11,868 30,728 42,530 5,245 8,178 86,681 1,169 - 1,169 -
Borrowings on related party note payable - - - - - - - - -
Payments on related party note payable - - - - - - - - -
Issuance of redeemable preferred stock - - - - - - - - -
Issuance of common stock, net of costs 113,064 - - 25,000 - 39,406 64,406 - - -
Issuance of senior convertible note, net of costs 116,199 - - - - - - - -
Paydown of line of credit (1,000) (11,868) (10,728) (62,530) (5,245) (8,178) (86,681) (1,169) - (1,169)
Payments of deferred financings fees (301) - - - - - -
Payment of selling shareholder fees - - - - - - - - -
Issuance of common stock and redeemable common stock - - - - - - - - -
Payments to retire convertible debt (35,670) - - - - - - -
Purchase of treasury stock, other - (24,133) - - - - - - -
Settlement of call options for cash 7,937 - - - -
Purchase of call options - (47,507) - - - - - - -
Exercise of stock option and warrants 4,288 7,315 1,027 434 806 267 2,534 1,153 768 500 500 2,921 2,000
Net cash provided by (used in) financing activities 232,592 (99,144) 18,599 5,108 682 39,490 63,983 (4,094) 764 (646) (975) (4,951) 2,000
Effect of exchange-rate on cash and equivalents 22 86 15 (44) 40 23 34 (15) 36 21 -

Cash provided by (used in) discontinued operations (217) (17) 1,015 357 (614) 758
Net change in cash 169,832 (141,340) (53,606) 43,048 (5,572) 88,298 72,106 (58,528) 6,350 (18,735) 28,152 (41,746) (4,851)
Cash & equivalents - BOP 28,846 198,678 55,875 2,486 45,551 39,979 55,875 126,965 68,080 75,044 56,309 126,966 84,462
Cash & equivalents - EOP 198,678 57,338 2,486 45,551 39,979 128,277 126,966 68,080 75,044 56,309 84,461 84,462 79,611
Capex Analysis
Capex (8,734) (44,740) (6,804) (5,102) (7,807) (3,989) (23,702) (477) (1,439) (1,146) (1,475) (4,537) (3,900)
Capex as % of revenues 1.8% 5.6% 3.8% 3.2% 5.0% 1.4% 3.0% 0.3% 1.0% 0.8% 0.5% 0.6% 0.5%

Operating cash flow 25,038 (4,994) (72,578) (6,428) 1,513 52,876 (26,293) (58,240) 14,939 (17,489) 29,727 (31,063) (2,950)
Purchases of fixed assets (8,734) (44,740) (6,804) (5,102) (7,807) (3,989) (23,441) (477) (1,439) (600) (600) (3,116) (3,900)
Free Cash Flow 16,304 (49,734) (79,382) (11,530) (6,294) 48,887 (49,734) (58,717) 13,500 (18,089) 29,127 (34,179) (6,851)
% change NA NA NA NA NA -3.4% NA NA NA NA -40.4% NA NA
Cumulative Free Cash Flow last four quarters (80,891) (71,024) (46,576) (48,319) (27,654) (2,624) (14,419) (34,179)
% change NA NA NA NA NA NA NA NA
Free Cash Flow Conversion of Operating Cash Flow 65% NA NA NA NA 92% NA NA NA NA 98% 110% 232%
Note: Awaiting 3Q06–4Q06 restated CF statements, ex-Travel business.

126 August 10, 2007

Figure 135: Blue Nile Snapshot

- Internet is in the early stages of impacting the $60B jewelry market; Blue Valuation: risk/reward more balanced at current levels…3.7% FCF yield in 2008, but
Nile well positioned to benefit 64x ’08 GAAP EPS
- Contractual agreements with suppliers for exclusive online merchandise

provide barrier to entry - Tough top-line comps in 2H07 as NILE fully laps price cuts from 1Q06
- Access to inventory creates a competitive advantage versus both traditional - We think it is increasingly likely that AMZN will become a competitor through an
and online jewelers alternative brand
- Low capex, high inventory turns, & favorable payment terms lead to strong
free cash flow generation - Expanding more overseas in 2007, but bottom-line impact likely to be minimal
- International expansion into the UK and Canada provide additional revenue - Higher commodities costs could negatively impact gross margins; not passing on
streams; Japan next? to consumers
- Improvements in search advertising and site conversion, along with low - Rising online advertising prices, particularly in sponsored search, could weigh on
pricing could drive upside to top line traffic generation
- Real time inventory purchase requirements means the company is more subject to
- Top 5 holders own ~58% of shares and 17% of shares are short pricing changes
- ASPs may trend lower as company expands offering in non-engagement diamond

- Strong balance sheet with $69 million in cash and equivalents and non-diamond jewelry
- Repo’d $13.5M of stock in 1Q07, none in 2Q; $78M 2-yr auth remains;
bought back 15% for $88M since Feb ‘05 - $0.24 in stock comp impact in ’07 vs. $0.14 in ’06…

- Mix-shift towar non-engagement, non-diamond could drive higher gross
margins 2Q07 2007
Net Sales $65.5M - $67.5M $295M - $305M
- Enhanced international focus; potential entry into Japan Y/Y Growth (implied) 15% - 19% 17% - 21%
Net Income per diluted share $0.16 - $0.17 * $0.86 - $0.91 **
- Maintain solid top-line despite competitive environment and steady
increases in online marketing costs Effective Tax Rate 35.2% (for 2Q-4Q)
Capex $5M ***
- Gross margin stability amid potential inflation of input costs (platinum, gold,
etc)
- Whether conversion rates can continue to improve with traffic gains * includes negative impact of $0.05 related to expensing stock options
** includes negative impact of $0.24 related to expensing stock options
- Continued strong growth in high-ticket items; $25K+ up 51% in 2Q
including $1.5M sale *** Includes $1.8M related to the expansion of the company's fulfillment center.
- Will NILE continue to buyback at current levels?
August 10, 2007 127

Figure 136: Blue Nile Income Statement, 2004–08E

2004A 2005A 1Q06A 2Q06A 3Q06A 4Q06A 2006A 1Q07A 2Q07E 3Q07E 4Q07E 2007E 2008E
Net Sales 169,242 203,169 50,694 56,916 53,248 90,729 251,587 67,910 67,137 61,458 107,982 304,487 357,394
Cost of Sales 131,590 158,025 40,352 45,568 42,817 72,024 200,761 54,661 53,844 49,474 85,845 243,824 285,558
Gross profit 37,652 45,144 10,342 11,348 10,431 18,705 50,826 13,249 13,293 11,984 22,136 60,663 71,836
Operating expenses
Selling, General, and Administrative 22,795 27,095 7,677 7,746 8,271 10,575 34,269 9,564 9,399 9,219 12,310 40,492 48,606
Restructuring charges - - - - - - - - - - - - -
Operating income (loss) 14,857 18,049 2,665 3,602 2,160 8,130 16,557 3,685 3,894 2,766 9,826 20,171 23,231
Interest income 709 2,499 985 881 670 787 3,323 973 585 547 756 2,861 4,127
Interest expense - - - - - - - - - - - - -
Other income 63 5 - 100 1 (1) 100 203 203 -
Other income, net 772 2,504 985 981 671 786 3,423 1,176 585 547 756 3,064 4,127
Income (loss) before income taxes- EBT 15,629 20,553 3,650 4,583 2,831 8,916 19,980 4,861 4,479 3,312 10,583 23,235 27,358
Provision (benefit) for income taxes 5,642 7,400 1,295 1,451 1,007 3,163 6,916 1,698 1,577 1,166 3,725 8,166 9,575
Effective Tax Rate 36.1% 36.0% 35.5% 31.7% 35.6% 35.5% 34.6% 34.9% 35.2% 35.2% 35.2% 35.1% 35.0%
Net Income (loss) Attr. to Common (GAAP) 9,987 13,153 2,355 3,132 1,824 5,753 13,064 3,163 2,902 2,146 6,858 15,069 17,782
Operating income (loss) 14,857 18,049 2,665 3,602 2,160 8,130 16,557 3,685 3,894 2,766 9,826 20,171 23,231
EBITDA 16,367 19,766 4,023 5,055 3,945 9,836 22,859 5,380 5,564 4,436 11,496 26,876 30,437
Y/Y GROWTH
Total Revenue 31.3% 20.0% 14.9% 29.9% 26.8% 23.9% 23.8% 34.0% 18.0% 15.4% 19.0% 21.0% 17.4%
Gross profit 28.0% 19.9% 6.8% 13.6% 12.8% 15.3% 12.6% 28.1% 17.1% 14.9% 18.3% 19.4% 18.4%
Selling, general and administrative expenses 25.2% 18.9% 25.4% 25.3% 36.7% 21.0% 26.5% 24.6% 21.3% 11.5% 16.4% 18.2% 20.0%
Operating income 31.5% 21.5% -25.2% -5.4% -32.4% 8.6% -8.3% 38.3% 8.1% 28.0% 20.9% 21.8% 15.2%
Pre-Tax Income (Loss) - EBT 38.5% 31.5% -10.2% 5.0% -26.6% 7.9% -2.8% 33.2% -2.3% 17.0% 18.7% 16.3% 17.7%
GAAP Net income -63.0% 31.7% -9.5% 12.1% -26.1% 8.8% -0.7% 34.3% -7.3% 17.7% 19.2% 15.3% 18.0%
GAAP EPS -88.5% 26.6% -6.7% 19.1% -17.8% 20.3% 7.0% 48.0% -2.5% 17.1% 18.7% 19.5% 18.7%
EBITDA 30.0% 20.8% 1.1% 19.6% 8.7% 24.0% 15.6% 33.7% 10.1% 12.4% 16.9% 17.6% 13.3%
SEQUENTIAL GROWTH
Net sales -30.8% 12.3% -6.4% 70.4% -25.2% -1.1% -8.5% 75.7%
Cost of Sales -29.2% 12.9% -6.0% 68.2% -24.1% -1.5% -8.1% 73.5%
Gross profit -36.2% 9.7% -8.1% 79.3% -29.2% 0.3% -9.8% 84.7%
% OF REVENUES
Cost of Sales 77.8% 77.8% 79.6% 80.1% 80.4% 79.4% 79.8% 80.5% 80.2% 80.5% 79.5% 80.1% 79.9%
Selling, General, and Administrative 13.5% 13.3% 15.1% 13.6% 15.5% 11.7% 13.6% 14.1% 14.0% 15.0% 11.4% 13.3% 13.6%
MARGINS
Gross margin 22.2% 22.2% 20.4% 19.9% 19.6% 20.6% 20.2% 19.5% 19.8% 19.5% 20.5% 19.9% 20.1%
Net margin 5.9% 6.5% 4.6% 5.5% 3.4% 6.3% 5.2% 4.7% 4.3% 3.5% 6.4% 4.9% 5.0%
EBITDA margin 9.7% 9.7% 7.9% 8.9% 7.4% 10.8% 9.1% 7.9% 8.3% 7.2% 10.6% 8.8% 8.5%
Operating Leverage (∆ Oper income / ∆ Revenues) 8.8% 9.4% -13.7% -1.6% -9.2% 3.7% -3.1% 5.9% 2.9% 7.4% 9.8% 6.8% 5.8%
128 August 10, 2007

Figure 137: Blue Nile Cash Flow Statement, 2004–08E


Net income (loss) 9,987 13,153 2,355 3,132 1,824 5,753 13,064 3,163 2,902 2,146 6,858 15,069 17,782
Depreciation and amortization 1,510 1,717 468 484 489 427 1,868 391 420 420 420 1,651 1,900
Loss on disposal of assets (5) 11 - 2 2 1 5 - - -
Stock based compensation 375 342 890 969 1,296 1,279 4,434 1,304 1,250 1,250 1,250 5,054 5,307
Warrant-based interest expense - - - - - - - - -
Restructuring charge - - - - - - - - -
Deferred income taxes 5,388 7,062 1,220 1,381 (379) 432 2,654 (459) (459) -
Excess tax benefit from exercise of stock options - - (418) (151) 1,532 1,604 2,567 656 656 (48)
Receivables, net 83 (849) 1,025 31 (156) (664) 236 396 305 80 (489) 290 170
Inventories, net 290 (1,850) (1,918) 2,471 (1,465) (1,940) (2,852) (876) 2,266 (1,524) (3,607) (3,741) (2,729)
Prepaid expenses and other assets (581) (41) 203 (146) (62) 93 88 201 - - 173 - -
Accounts Payable 11,487 12,382 (21,745) (730) 2,163 36,780 16,468 (28,425) 2,754 3,296 46,455 24,079 34,384
Accrued liabilities 1,246 (452) (1,797) (122) 541 3,572 2,194 (2,476) 532 99 4,896 2,912 2,857
Deferred rent (29) (203) (59) (59) (33) (57) (208) (56) - - - (56) -
Total Change in Working Capital 12,496 8,987 (24,291) 1,445 988 37,562 15,704 (31,236) 5,857 1,950 47,428 23,485 34,682
Net cash provided by (used in) operating activities 29,751 31,272 (19,776) 7,262 5,752 47,280 40,518 (26,181) 10,429 5,767 55,956 45,456 59,623

Purchases of property and equipment (1,833) (1,072) (608) (574) (508) (218) (1,908) (193) (1,880) (1,967) (864) (4,903) (3,217)
Purchases of intangible assets - - - - - - - - -
Proceeds from the sale of property and equipment 7 8 1 - - - 1 10,000 10,000 -
Purchases of marketable securities (82,870) (156,870) (20,043) (5,152) (29,847) (19,988) (75,030) (20,094) (20,094) -
Proceeds from the sale of marketable securities 41,000 156,000 35,000 18,000 15,000 30,000 98,000 - -
Transfers to restricted cash 400 (119) 2 (2) - 2 2 - -
Net cash provide by (used in) investing activities (43,296) (2,053) 14,352 12,272 (15,355) 9,796 21,065 (10,287) (1,880) (1,967) (864) (14,997) (3,217)

Proceeds from sale of mandatorily redeemable preferred - - - - - - - - -
Proceeds from sale of common stock, net of issuance costs 42,516 - - - - - - - -
Purchase of restricted and common stock - (17,372) (6,071) (40,299) (7,778) (3,239) (57,387) (13,532) (10,000) (10,000) (6,468) (40,000) (20,000)
Net repayments on line of credit - - - - - - - - -
Payments on subordinated party note payable - - - - - - - - -
Borrowings on related party note payable - - - - - - - - -
Payments on notes payable to related party - - - - - - - - -
Payments on notes payable - - - - - - - - -
Payments on capital lease - - - - - - - - -
Excess tax benefit from exercise of stock options 418 151 (525) 128 172 48 48 48
Proceeds from warrant and stock option exercises 145 575 1,394 (307) 598 566 2,251 656 656 -
Net cash provided by (used in) financing activities 42,661 (16,797) (4,259) (40,455) (7,705) (2,545) (54,964) (12,828) (10,000) (10,000) (6,468) (39,296) (19,952)
Effect of exchange-rate on cash and equivalents - - - - - - - - -

Net change in cash 29,116 12,422 (9,683) (20,921) (17,308) 54,531 6,619 (49,296) (1,451) (6,200) 48,624 (8,837) 36,454
Capex Analysis
Capex (1,833) (1,072) (608) (574) (508) (218) (1,908) (193) (1,880) (1,967) (864) (4,903) (3,217)
Capex as % of revenues 1.1% 0.5% 1.2% 1.0% 1.0% 0.2% 0.8% 0.3% 2.8% 3.2% 0.8% 1.61% 0.9%

Operating cash flow 29,751 31,272 (19,776) 7,262 5,752 47,280 40,518 (26,181) 10,429 5,767 55,956 45,456 59,623
Purchases of fixed assets (1,833) (1,072) (608) (574) (508) (218) (1,908) (193) (1,880) (1,967) (864) (4,903) (3,217)
Free Cash Flow 27,918 30,200 (20,384) 6,688 5,244 47,062 38,610 (26,374) 8,549 3,800 55,092 40,553 56,406
% change 71.2% 8.2% 2.9% -5.5% -15.0% 28.0% 27.8% 29.4% 27.8% -27.5% 17.1% 5.0% 39.1%
Cumulative Free Cash Flow last four quarters 27,918 NA 29,625 29,237 28,312 38,610 NA 32,620 34,481 33,037 41,067 NA NA
% change 71.2% 53.9% 47.0% 22.7% 27.8% NA 10.1% 17.9% 16.7% 6.4% NA NA
Free Cash Flow Conversion of Operating Cash Flow 94% 97% 103% 92% 91% 100% 95% 101% 82% 66% 98% 89% 95%
Free Cash Flow Conversion of EBITDA 171% 153% -507% 132% 133% 478% 169% -490% 154% 86% 479% 151% 185%
Free Cash Flow Conversion of Revenue (FCF Margin) 16% 15% -40% 12% 10% 52% 15% -39% 13% 6% 51% 13% 16%
August 10, 2007 129

Figure 138: Greenfield Online Snapshot

- Well-positioned to benefit from the secular shift of market research toward the Internet: large
- Still experiencing pricing pressure and increased competition.
online panel with ~6M double opt-in members.
- Full-service market research firms could build or acquire internal panels, reducing dependency
- Ciao provides exposure to high growth, high margin comparison shopping business.
on Greenfield.
- Online data collection model can be highly scalable. - Client consolidation.
- Sizable market opportunity: about $3B-$4B of the $20B+ worldwide market research - Clients are market research firms, so Greenfield does not have a direct relationship with the end-
industry is spent on fieldwork. user.
- Still need to see sustainable survey growth

- Whether NA & Europe survey businesses can drive sustainable growth despite continued
pricing pressure. 2007
- Whether Ciao can maintain its leadership position in European comparision shopping versus
eBay's Shopping.com, Yahoo!'s Kelkoo, etc. Revenues $112M-$122M (+12%-22%).
- Continued cost cutting , lean operations. Implied EBITDA $29.1M - $34.2M
- Could Ciao comparison shopping business be monetized?

Adjusted EBITDA margins 26%-28%
- Conservative 2007 guidance.

Gross margins 74%-76%
- CEO has strong industry and turnaround experience; both are needed.
Capital Expenditures $7.0M - $7.5M
130 August 10, 2007

Figure 139: Greenfield Online Income Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07E 9/07E 12/07E 2007E 2008E
Net sales 44,428 89,179 21,532 24,453 24,875 29,482 100,342 27,469 31,027 30,946 35,629 125,071 146,224
Cost of Sales 11,081 24,327 5,548 5,560 5,974 7,004 24,086 7,139 7,633 7,582 8,551 30,904 35,679
Gross profit 33,347 64,852 15,984 18,893 18,901 22,478 76,256 20,330 23,395 23,364 27,078 94,167 110,545
Operating expenses
Selling, general and administrative 21,454 40,683 9,535 10,717 11,602 12,876 44,730 12,980 13,652 13,926 15,321 55,878 64,923
Panel acquisition expenses 2,300 3,762 1,706 1,231 1,351 1,239 5,527 1,048 1,303 1,238 1,247 4,836 5,849
Depreciation and Amortization 1,440 6,965 2,316 2,401 2,427 2,081 9,225 2,153 2,451 2,383 2,138 9,125 11,113
Research and Development 1,002 2,836 941 821 973 1,129 3,864 1,132 1,055 1,207 1,318 4,712 6,288
Impairment and restructuring charge - 91,305 168 20 55 (7) 236 - - - - - -
Total operating expenses 26,196 145,551 14,666 15,190 16,408 17,318 63,582 17,313 18,461 18,753 20,024 74,551 88,173
Operating income 7,151 (80,699) 1,318 3,703 2,493 5,160 12,674 3,017 4,933 4,611 7,055 19,616 22,372
Interest income (Expense) (970) (507) (167) 85 60 131 109 143 242 284 310 980 1,624
Other income, net (52) (54) 52 (206) (16) (140) (310) (23) - - - (23) -
Total non-operating expenses, net (1,022) (561) (115) (121) 44 (9) (201) 120 242 284 310 957 1,624
Pre-tax income 6,129 (81,260) 1,203 3,582 2,537 5,151 12,473 3,137 5,176 4,895 7,365 20,572 23,996
Provision for Taxes 411 (15,746) 362 1,328 694 1,635 4,019 1,178 1,822 1,575 2,607 7,182 8,519
Reported tax rate 6.7% NA 30.1% 37.1% 27.4% 31.7% 32.2% 37.6% 35.2% 32.2% 35.4% 34.9% 35.5%
Net income 5,718 (65,514) 841 2,254 1,843 3,516 8,454 1,959 3,354 3,320 4,758 13,391 15,478
Reported EPS to diluted $0.32 ($2.67) $0.03 $0.09 $0.07 $0.13 $0.33 $0.07 $0.13 $0.13 $0.18 $0.50 $0.58
Operational EPS to diluted $0.39 $0.45 $0.03 $0.09 $0.07 $0.13 $0.33 $0.07 $0.13 $0.13 $0.18 $0.50 $0.58
Fully taxed EPS to diluted $0.25 $0.24 $0.03 $0.09 $0.07 $0.13 $0.33 $0.07 $0.13 $0.13 $0.18 $0.50 $0.58
Pro forma fully diluted shares outstanding 17,614 24,558 25,505 25,541 25,986 26,272 25,826 26,461 26,561 26,561 26,661 26,561 26,761
Operating Income 7,151 (80,698) 1,318 3,703 2,493 5,160 12,674 3,017 4,933 4,611 7,055 19,616 22,372
Other adjustments (52) 92,288 220 (186) 435 25 494 (23) - - - (23) -
EBITDA 8,943 20,937 4,604 6,641 6,087 8,016 25,348 5,935 8,120 7,709 9,834 31,597 36,819
Compensation charges 1,345 878 582 636 654 652 2,524 901 800 775 775 3,251 3,251
Adjusted EBITDA 10,288 21,815 5,186 7,277 6,741 8,668 27,872 6,836 8,920 8,484 10,609 34,848 40,070
Y/Y Growth
Net sales 71.7% 100.7% 41.2% -7.0% 7.5% 20.3% 12.5% 27.6% 26.9% 24.4% 20.9% 24.6% 16.9%
Gross profit 96.3% 94.5% 47.6% -1.2% 15.0% 21.7% 17.6% 27.2% 23.8% 23.6% 20.5% 23.5% 17.4%
Selling, general and administrative 76.9% 89.6% 42.4% -4.1% -1.8% 17.1% 9.9% 36.1% 27.4% 20.0% 19.0% 24.9% 16.2%
Panel acquisition expenses 61.8% 63.6% 275.8% 47.8% 30.5% -14.0% 46.9% -38.6% 5.9% -8.4% 0.6% -12.5% 20.9%
Depreciation and Amortization 29.4% 383.7% 195.8% 18.9% 27.7% -8.0% 32.4% -7.0% 2.1% -1.8% 2.7% -1.1% 21.8%
Research and Development 60.1% 183.0% 172.0% 44.0% 13.9% 5.9% 36.2% 20.3% 28.5% 24.0% 16.8% 21.9% 33.4%
Total operating expenses 71.4% 455.6% 77.1% 4.1% 5.1% -83.8% -56.3% 18.0% 21.5% 14.3% 15.6% 17.3% 18.3%
Operating income 321.4% -1228.5% -48.2% -18.1% 202.5% -105.8% -115.7% 128.9% 33.2% 85.0% 36.7% 54.8% 14.1%
Pre-tax income 240.8% -1425.9% -59.3% -17.0% 450.3% -105.8% -115.3% 160.8% 44.5% 92.9% 43.0% 64.9% 16.6%
Net income 247.0% -1245.8% -65.9% -88.2% 18.8% -104.0% -112.9% 132.9% 48.8% 80.2% 35.3% 58.4% 15.6%
Adjusted EBITDA 135.1% 112.0% 30.4% -3.7% 47.1% 52.0% 27.8% 31.8% 22.6% 25.9% 22.4% 25.0% 15.0%
Sequential Growth
Net sales -12.1% 13.6% 1.7% 18.5% -6.8% 13.0% -0.3% 15.1%
% of Revenues
Cost of sales 24.9% 27.3% 25.8% 22.7% 24.0% 23.8% 24.0% 26.0% 24.6% 24.5% 24.0% 24.7% 24.4%
Selling, general and administrative 48.3% 45.6% 44.3% 43.8% 46.6% 43.7% 44.6% 47.3% 44.0% 45.0% 43.0% 44.7% 44.4%
Panel acquisition expenses 5.2% 4.2% 7.9% 5.0% 5.4% 4.2% 5.5% 3.8% 4.2% 4.0% 3.5% 3.9% 4.0%
Depreciation and Amortization 3.2% 7.8% 10.8% 9.8% 9.8% 7.1% 9.2% 7.8% 7.9% 7.7% 6.0% 7.3% 7.6%
Research and Development 2.3% 3.2% 4.4% 3.4% 3.9% 3.8% 3.9% 4.1% 3.4% 3.9% 3.7% 3.8% 4.3%
Margins
Gross margin 75.1% 72.7% 74.2% 77.3% 76.0% 76.2% 76.0% 74.0% 75.4% 75.5% 76.0% 75.3% 75.6%
Operating margin 16.1% -90.5% 6.1% 15.1% 10.0% 17.5% 12.6% 11.0% 15.9% 14.9% 19.8% 15.7% 15.3%
Pre-tax income margin 13.8% -91.1% 5.6% 14.6% 10.2% 17.5% 12.4% 11.4% 16.7% 15.8% 20.7% 16.4% 16.4%
Net income margin 12.9% -73.5% 3.9% 9.2% 7.4% 11.9% 8.4% 7.1% 10.8% 10.7% 13.4% 10.7% 10.6%
Net income to common margin -54.7% -73.5% 3.9% 9.2% 7.4% 11.9% 8.4% 7.1% 10.8% 10.7% 13.4% 10.7% 10.6%
Adjusted EBITDA margin 23.2% 24.5% 24.1% 29.8% 27.1% 29.4% 27.8% 24.9% 28.7% 27.4% 29.8% 27.9% 27.4%
Operating Leverage (∆ EBITDA / ∆ Revenues) 31.9% 25.8% 19.2% 15.1% 124.9% 59.5% 54.3% 27.8% 25.0% 28.7% 31.6% 28.2% 24.7%
August 10, 2007 131

Figure 140: Greenfield Online Segment Breakdown, 2004–08E

2004E 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07E 9/07E 12/07E 2007E 2008E
North American Survey Solutions 44,428 63,886 13,571 14,832 15,368 16,582 60,353 15,454 17,205 17,366 18,240 68,265 74,068
% Y/Y change 71.7% 43.8% -11.0% -18.5% 2.0% 7.9% -5.5% 13.9% 16.0% 13.0% 10.0% 13.1% 8.5%
% Q/Q change -11.7% 9.3% 3.6% 7.9% -6.8% 11.3% 0.9% 5.0%
Ciao/European Survey Solutions - 16,686 4,554 5,390 4,417 5,791 20,152 5,255 6,333 5,080 6,370 23,038 24,881
% Y/Y change NA 5.7% -6.2% -18.9% 5.4% 20.8% 15.4% 17.5% 15.0% 10.0% 14.3% 8.0%
% Q/Q change -17.1% 18.4% -18.1% 31.1% -9.3% 20.5% -19.8% 25.4%
Ciao Comparison Shopping - 8,607 3,407 4,231 5,090 7,109 19,837 6,760 7,489 8,500 11,019 33,768 47,275
% Y/Y change NA 55.6% 81.1% 92.9% 95.7% NA 98.4% 77.0% 67.0% 55.0% 70.2% 40.0%
% Q/Q change -6.2% 24.2% 20.3% 39.7% -4.9% 10.8% 13.5% 29.6%
Total Ciao/European Sales - 25,293 7,961 9,621 9,507 12,900 39,989 12,015 13,822 13,580 17,389 56,806 72,156
% Y/Y change NA 22.5% 19.1% 17.6% 41.3% 58.1% 50.9% 43.7% 42.8% 34.8% 42.1% 27.0%
% Q/Q change -12.8% 20.9% -1.2% 35.7% -6.9% 15.0% -1.8% 28.1%
TOTAL SALES 44,428 89,179 21,532 24,453 24,875 29,482 100,342 27,469 31,027 30,946 35,629 125,071 146,224
% Y/Y change 71.7% 43.8% 41.2% -7.0% 7.5% 20.3% 12.5% 27.6% 26.9% 24.4% 20.9% 24.6% 16.9%
% Q/Q change -12.1% 13.6% 1.7% 18.5% -6.8% 13.0% -0.3% 15.1%
Backlog Information
Backlog as of … 2/9/05 5/8/06 8/7/06 11/7/06 2/8/07 5/10/07
Days into the quarter 40 38 38 38 39 40
Total days in quarter 90 91 92 92 90 91
% of Quarter 44.4% 41.8% 41.3% 41.3% 43.3% 44.0%
Backlog 16,000 19,000 19,000 22,000 21,000 25,000
% of Revenue 74.3% 77.7% 76.4% 74.6% 76.4% 80.6%
132 August 10, 2007

Figure 141: Greenfield Online Cash Flow Statement, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07E 6/07E 9/07E 12/07E 2007E 2008E

Net income (loss) 5,718 (65,959) 841 2,254 1,843 3,516 8,454 1,959 3,354 3,320 4,758 13,391 15,478
Deferred income tax provision - (18,392) (237) (382) 180 586 147 - - - - - -
Amortization of contract asset 17 - - - - - - - -
Stock-based compensation 1,345 872 582 636 654 652 2,524 901 800 775 775 3,251 3,251
Non-cash interest expense (income) 1,093 - - - - - - - -
Impairment and restructuring - 92,795 168 20 55 (7) 236 - -
Loss on disposal of property and equipment (2) 55 24 7 (28) 70 73 - -
Gain on sale of Custom Research Business - - - - - - - - -
Provision for doubtful accounts and other 125 575 44 8 238 (231) 59 - -
Amortization of debt discount - - - - - - - - -
Changes in working capital: (4,868) 4,368 522 (604) (344) 187 (239) (536) 2,015 10 (1,591) (102) (722)
Accounts receivable (6,425) (350) 2,968 (3,493) 118 (3,808) (4,215) 880 (665) 990 (1,947) (743) (2,092)
Deferred projects costs (23) (286) 194 (153) 151 96 288 - - - - - -
Other current assets (605) 443 (223) 265 (424) 260 (122) (197) (735) (148) (861) (1,942) (1,772)
Additions (refunds) of security deposits (136) (242) 477 (50) 89 (2) 514 - -
Accounts payable 1,303 (805) (536) 133 813 519 929 (421) 792 142 904 1,418 587
Accrued expenses 1,191 3,919 (1,337) 377 (786) 2,817 1,071 (690) 2,614 (973) 298 1,248 2,620
Other assets (4) 1,564 (39) 22 (40) 21 (36) - -
Payments for management change - - (103) 103 - (435) (435) - -
Payments for restructuring charges - - (243) 243 - (583) (583) - -
Income taxes payable - - (435) 1,725 (219) 1,228 2,299 - -
Deferred project revenues (169) 125 (201) 224 (46) 74 51 (108) 9 (1) 16 (84) (64)
Net cash provided by (used in) operating activities 5,273 23,661 5,010 5,063 5,757 7,604 23,434 5,123 9,355 7,203 6,721 28,402 32,454

Purchases of marketable securities (31,900) (8,249) - - (17,388) (3,181) (20,569) - -
Sales of marketable securities 14,500 25,649 - - 5,316 379 5,695 - -
Proceeds from sale of Custom Research Business - - - - - - - - -
Expenses paid in connection with Custom sale - - - - - - - - -
Security deposits, other - - - - - - - - -
Acquisitions, net of cash acquired (3,189) (113,645) - - - - - - -
Proceeds from sale of property and equipment 32 11 2 - 28 - 30 - -
Additions to property, equipment, and intangibles (2,404) (5,474) (762) (1,120) (1,319) (1,722) (4,923) (1,709) (1,500) (1,600) (1,800) (6,609) (6,800)
Net cash provided by (used in) investing activities (22,961) (101,708) (760) (1,120) (13,363) (4,524) (19,767) (1,709) (1,500) (1,600) (1,800) (6,609) (6,800)

Proceeds from issuance of capital stock 76,427 4,200 - - - - - - -
Proceeds from borrowings under debt/credit facility 1,000 18,848 - - - - - - -
Repayments under credit facility (1,000) (18,848) - - - - - - -
Other long-term liabilities 26 (65) (26) (2) (21) - (49) - -
Contribution to capital - 27 - - - - - -
Increase (decrease) in book overdraft - - - - - - - - -
Proceeds from borrowings under bridge notes - - - - - - - - -
Repayments under term loan - - - - - - - - -
Proceeds of options exercised 24 244 35 69 48 235 387 - -
Proceeds of employee stock purchase plan 65 151 31 30 33 33 127 - -
Repayment of Series C-2 Preferred (2,052) - - - - - - - -
Repayment of Series B Preferred (9,496) - - - - - - - -
IPO Proceeds 46,310 - - - - - - - -
Proceeds from subscriptions receivable from mgmt - - - - - - - - -
Principal payments under capital lease obligations (1,257) (1,622) (4,283) (8) (9) (9) (4,309) - -
Net cash provided by (used in) financing activities 110,047 2,935 (4,243) 89 51 259 (3,844) - - - - - -
Effect of exchange-rate on cash and equivalents 2 (347) 137 371 (233) 152 427 - -
Net change in cash 92,361 (75,459) 144 4,403 (7,788) 3,491 250 3,414 7,855 5,603 4,921 21,793 25,654

Operating cash flow 5,273 23,661 5,010 5,063 5,757 7,604 23,434 5,123 9,355 7,203 6,721 28,402 32,454
Purchases of equipment/software through capital leases (1,257) (1,622) (262) - - - (262) - - - - - -
Purchases of fixed assets (2,404) (5,474) (762) (1,120) (1,319) (1,722) (4,923) (1,709) (1,500) (1,600) (1,800) (6,609) (6,800)
Free Cash Flow 1,612 16,565 3,986 3,943 4,438 5,882 18,249 3,414 7,855 5,603 4,921 21,793 25,654
% change -42.1% 927.6% 221.7% -25.2% -8.2% 12.6% 10.2% -14.4% 99.2% 26.2% -16.3% 19.4% 17.7%
Cumulative Free Cash Flow last four quarters 1,612 16,565 19,312 17,987 17,589 18,249 18,249 17,677 21,589 22,754 21,793 21,793 25,654
Free Cash Flow Conversion of EBITDA 16% 76% 77% 54% 66% 68% 65% 50% 88% 66% 46% 63% 64%
Special/One-Time Items 1,100 - - - - - - - -
Normalized Free Cash Flow 2,712 16,565 3,986 3,943 4,438 5,882 18,249 3,414 7,855 5,603 4,921 21,793 25,654
Normalized Free Cash Flow Conversion of EBITDA 26% 76% 77% 54% 66% 68% 65% 50% 88% 66% 46% 63% 64%
August 10, 2007 133

Figure 142: Harris Interactive Snapshot

- The leader in transitioning market research to the Internet. - Continued challenges in healthcare (the company's largest research group) and
customer loyalty (2nd-largest U.S. group) verticals.
- Company has sophisticated, highly scalable technology platform and six - Execution in European business needs to improve---no physical presence outside
years of online research experience. of the UK and France.
- Strong consulting business with deep vertical expertise---potential price - Long-term trackers and multi-national contracts slowing conversion from bookings
increases going forward. to revenue.
-Well-established brand name through Harris Poll. - The company's lack of footprint in certain geographies has limited opportunities,
with globalization a focus moving forward.
- Looking at small M&A opportunities in Europe to establish a physical

presence outside of the UK and France. 4QFY07 2007
Implied Net Sales $55.4M - $57.4M $213M-$215M

- Large market opportunity: about $9B-$10B of the $23B spent on market
research could move online---currently at $1.9B worldwide. Implied EPS $0.04-$0.05. --
- Competition from larger traditional research companies like TNS' NFO

Worldwide and WPP's Kantar Group.
- In May 2007, the company announced an additional $25M share

repurchase authorization. Prior to the announcement, the company had
repurchased 10 million shares under its existing $55M plan, which had been
substantially completed, reducing shares outstanding by 15%.
- Trends within major verticals: healthcare, CLM, technology.
- How quickly new salespeople can ramp.
- Health of big Pharma industry.
- Share buybacks: have bought back 15% of shares and another $25M
authorized.
134 August 10, 2007

Figure 143: Harris Interactive Income Statement, Fiscal 2004–08E

FY04 FY05 1QFY06 2QFY06 3QFY06 4QFY06 FY06 1QFY07 2QFY07 3QFY07 4QFY07 FY07 FY08
F04A F05A 9/05A 12/05A 3/06A 6/06A F06A 9/06A 12/06A 3/07A 6/07E F07E F08E
Net sales $138.5 $197.0 $48.9 $54.8 $52.2 $60.0 $216.0 $48.0 $56.6 $52.6 $56.5 $213.7 $216.6
Cost of Sales 64.5 93.3 23.6 27.3 24.5 30.0 105.4 23.2 27.3 26.8 28.3 105.7 105.0
Gross profit 73.9 103.6 25.4 27.5 27.7 30.1 110.7 24.8 29.2 25.7 28.3 108.0 111.5
Operating expenses
Sales & Marketing 11.9 20.5 4.9 4.9 5.1 5.4 20.3 4.6 5.3 5.6 5.5 21.0 19.5
General & Administrative 43.9 65.6 16.5 16.8 16.8 18.4 68.5 17.4 17.0 17.0 17.5 69.0 69.3
Depreciation and Amortization 4.8 7.4 1.9 1.8 1.7 1.8 7.2 1.7 1.6 1.6 1.8 6.7 7.2
Restructuring related and other - 1.1 - - - 0.3 0.3 - (0.4) - - (0.4) -
Total operating expenses 60.7 94.6 23.3 23.5 23.6 25.9 96.4 23.8 23.5 24.2 24.9 96.3 96.0
Operating income $13.3 $9.0 $2.0 $4.0 $4.1 $4.2 $14.3 $1.0 $5.8 $1.5 $3.4 $11.7 $15.5
Interest income 0.6 0.7 0.2 0.3 0.4 0.7 1.5 0.6 0.6 0.6 0.3 2.1 1.9
Interest expense (0.1) (0.1) - - - - - - - - - - -
Total non-operating expenses, net 0.5 0.6 0.2 0.3 0.4 0.7 1.5 0.6 0.6 0.6 0.3 2.1 1.9
Inc before Income Taxes 13.8 9.6 2.2 4.2 4.5 4.9 15.8 1.6 6.4 2.1 3.7 13.8 17.4
Provision for Taxes (16.0) 5.1 1.0 1.9 2.0 1.5 6.3 0.7 2.7 0.9 1.6 5.9 7.3
Tax Rate NA 52.8% 44.2% 44.2% 43.6% 31.6% 40.2% 41.8% 43.1% 43.7% 43.0% 43.0% 42.0%
Pre-tax income per share $0.24 $0.16 $0.04 $0.07 $0.07 $0.08 $0.26 $0.03 $0.11 $0.04 $0.06 $0.24 $0.30
Income (loss) before change in accounting 29.8 4.5 1.2 2.4 2.5 3.3 9.5 0.9 3.6 1.2 2.1 7.8 10.1
Income (loss) from discontinued operations 0.1 (3.0) - - - - - - - - - - -
GAAP Net income (loss) $29.9 $1.6 $1.2 $2.4 $2.5 $3.3 $9.5 $0.9 $3.6 $1.2 $2.1 $7.8 $10.1
Fully Taxed EPS - Continued Operations $0.15 $0.07 $0.02 $0.04 $0.04 $0.05 $0.15 $0.02 $0.06 $0.02 $0.04 $0.13 $0.17
Operating Income 13.3 9.0 2.0 4.0 4.1 4.2 14.3 1.0 5.8 1.5 3.4 11.7 15.5
Depreciation and other amortization 4.8 7.4 1.9 1.8 1.7 1.8 7.2 1.7 1.6 1.6 1.8 6.7 7.2
EBITDA $18.1 $16.4 $3.9 $5.8 $5.8 $6.0 $21.5 $2.7 $7.4 $3.1 $5.2 $18.4 $22.7
Y/Y Growth
Net sales 6.1% 42.2% 24.4% 4.2% 2.7% 10.7% 9.7% -1.8% 3.2% 0.6% -5.8% -1.1% 1.3%
Gross profit 16.1% 40.2% 19.7% -2.0% 5.1% 7.3% 6.8% -2.2% 6.4% -7.3% -6.0% -2.4% 3.3%
Sales & Marketing 24.7% 72.7% 18.8% -12.5% -3.1% -2.3% -1.0% -6.2% 7.1% 9.2% 3.0% 3.3% -7.2%
General & Administrative 4.9% 49.2% 29.6% -7.9% -1.2% 5.0% 4.6% 5.7% 1.2% 1.4% -4.9% 0.7% 0.4%
Total operating expenses 8.6% 54.2% 26.9% -9.0% -1.7% 3.2% 3.2% 3.0% 2.5% 3.2% -3.1% 1.3% -1.4%
Operating income 73.4% -31.9% -25.3% 67.5% 274.0% 47.0% 58.3% -49.4% 45.6% -64.0% -19.2% -18.4% 33.3%
GAAP Net income 169.4% -94.7% -26.6% 65.5% -194.7% 189.3% 497.5% -24.8% 54.2% -54.4% -36.2% -17.1% 28.7%
GAAP EPS 156.2% -95.0% -29.8% 65.6% -194.5% 190.7% 491.5% -22.1% 61.7% -51.1% -31.9% -12.5% 28.7%
Pre-tax income 69.2% -30.2% -23.3% 71.9% 259.8% 61.2% 64.3% -27.9% 51.1% -54.3% -23.4% -13.0% 26.5%
Pre-tax EPS 60.9% -34.5% -26.6% 72.1% 259.1% 61.9% 62.7% -25.2% 58.4% -51.0% -18.3% -8.1% 26.5%
Fully taxed EPS 60.9% -51.0% -34.8% 61.6% 322.4% 404.3% 106.3% -22.1% 61.7% -51.1% -31.9% -12.5% 28.7%
EBITDA 36.4% -9.4% -8.5% 37.6% 91.1% 23.3% 31.2% -30.5% 28.0% -47.0% -13.3% -14.5% 23.6%
% of Revenues
Cost of sales 46.6% 47.4% 48.2% 49.9% 46.9% 49.9% 48.8% 48.4% 48.3% 51.1% 50.0% 49.5% 48.5%
Sales & Marketing 8.6% 10.4% 10.0% 9.0% 9.8% 9.0% 9.4% 9.6% 9.3% 10.6% 9.8% 9.8% 9.0%
General & Administrative 31.7% 33.3% 33.7% 30.7% 32.1% 30.7% 31.7% 36.3% 30.1% 32.4% 31.0% 32.3% 32.0%
Margins
Gross margin 53.4% 52.6% 51.8% 50.1% 53.1% 50.1% 51.2% 51.6% 51.7% 48.9% 50.0% 50.5% 51.5%
Pre-tax income margin 10.0% 4.9% 4.5% 7.7% 8.6% 8.1% 7.3% 3.3% 11.3% 3.9% 6.6% 6.4% 8.0%
EBITDA margin 13.1% 8.3% 8.1% 10.5% 11.2% 10.0% 10.0% 5.7% 13.0% 5.9% 9.2% 8.6% 10.5%
Operating Leverage (∆ EBITDA / ∆ Revenues) 60.9% -2.9% -3.8% 70.4% 200.1% 19.5% 26.9% NA 92.5% -896.7% 22.9% 134.3% 150.6%
August 10, 2007 135

Figure 144: Harris Interactive Segment Breakdown, Fiscal 2004–08E

NET SALES
United States
Non-Internet 30.1 52.2 12.3 14.5 14.4 16.6 57.8 12.2 14.8 13.5 14.9 55.4 54.9
% change -26.4% 73.5% 56.5% -9.0% 8.6% 9.2% 10.6% -1.1% 2.4% -6.2% -10.0% -4.1% -1.0%
Internet 81.9 97.7 24.8 29.2 28.0 30.2 112.2 24.4 28.4 27.5 29.0 109.3 111.5
% change 36.3% 19.3% 14.3% 26.3% 8.5% 11.4% 14.8% -1.5% -2.7% -1.8% -4.0% -2.6% 2.0%
Total U.S. Sales $112.0 $150.0 $37.1 $43.7 $42.4 $46.8 $170.0 $36.6 $43.2 $41.0 $43.9 $164.8 $166.4
% change 10.9% 33.8% 25.5% 11.9% 8.5% 10.6% 13.4% -1.3% -1.0% -3.3% -6.1% -3.1% 1.0%
International
Non-Internet 26.0 34.9 8.6 8.0 6.6 9.6 32.7 7.0 9.3 8.0 9.0 33.3 33.3
% change -11.9% 34.3% 18.6% -24.0% -23.7% 12.5% -6.2% -19.2% 16.8% 21.3% -6.0% 1.6% 0.0%
Internet 4.4 11.6 3.2 3.2 3.2 3.7 13.3 4.5 4.0 3.5 3.6 15.6 16.9
% change NA 165.4% 28.0% 23.1% 3.2% 7.4% 14.2% 40.0% 26.3% 9.4% -1.0% 18.0% 8.0%
Total International Sales $30.4 $46.5 $11.8 $11.2 $9.8 $13.2 $46.0 $11.4 $13.4 $11.5 $12.6 $48.9 $50.2
% change 2.9% 53.1% 21.0% -14.7% -16.6% 11.0% -1.1% -3.1% 19.5% 17.4% -4.6% 6.3% 2.6%
Other Revenue - 0.5 - - - - - - - - - - -
Total Consolidated Sales

Non-Internet 56.1 87.2 20.9 22.4 21.0 26.2 90.5 19.1 24.1 21.6 23.9 88.7 88.2
% change -20.4% 55.3% 38.3% -15.0% -4.1% 10.4% 3.9% -8.6% 7.5% 2.4% -8.5% -2.0% -0.6%
Internet 86.3 109.3 28.0 32.4 31.2 33.9 125.5 28.9 32.4 31.0 32.6 125.0 128.4
% change 43.6% 26.7% 15.7% 26.0% 8.0% 11.0% 14.8% 3.3% 0.1% -0.6% -3.7% -0.4% 2.8%
Total Consolidated Sales $142.4 $196.5 $48.9 $54.8 $52.2 $60.0 $216.0 $48.0 $56.6 $52.6 $56.5 $213.7 $216.6
% change 9.1% 38.0% 24.4% 4.2% 2.7% 10.7% 9.9% -1.8% 3.2% 0.6% -5.8% -1.1% 1.3%
SHARE OF REVENUE BY CATEGORY

United States Sales 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Non-Internet 27% 35% 33% 33% 34% 35% 34% 33% 34% 33% 34% 34% 33%
Internet 73% 65% 67% 67% 66% 65% 66% 67% 66% 67% 66% 66% 67%
Non-Internet 86% 75% 73% 71% 67% 72% 71% 61% 70% 70% 71% 68% 66%
Internet 14% 25% 27% 29% 33% 28% 29% 39% 30% 30% 29% 32% 34%
Non-Internet 39% 44% 43% 41% 40% 44% 42% 40% 43% 41% 42% 42% 41%
Internet 61% 56% 57% 59% 60% 56% 58% 60% 57% 59% 58% 58% 59%
SHARE OF REVENUE BY GEOGRAPHY

United States 79% 76% 76% 80% 81% 78% 79% 76% 76% 78% 78% 77% 77%
International 21% 24% 24% 20% 19% 22% 21% 24% 24% 22% 22% 23% 23%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
SHARE OF CATEGORY BY GEOGRAPHY

Non-Internet 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
United States 54% 60% 59% 64% 69% 63% 64% 64% 61% 63% 62% 62% 62%
International 46% 40% 41% 36% 31% 37% 36% 36% 39% 37% 38% 38% 38%
Internet 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
United States 95% 89% 89% 90% 90% 89% 89% 85% 88% 89% 89% 87% 87%
International 5% 11% 11% 10% 10% 11% 11% 15% 12% 11% 11% 13% 13%
United States 79% 76% 76% 80% 81% 78% 79% 76% 76% 78% 78% 77% 77%
International 21% 24% 24% 20% 19% 22% 21% 24% 24% 22% 22% 23% 23%
136 August 10, 2007

Figure 145: Harris Interactive Cash Flow Statement, Fiscal 2004–08E


Net income (loss) 29.9 1.6 1.2 2.4 2.5 3.3 9.5 0.9 3.6 1.2 2.1 7.8 10.1
Income (loss) from discontinued operations (0.0) 4.1 - - - - - - - - - - -
Stock-based compensation - - 0.7 0.7 0.7 1.1 3.1 1.0 0.9 0.9 0.7 3.5 3.5
Cash outflows for restr. and asset impair. (0.2) 0.5 (0.2) (0.2) (0.1) 0.1 (0.3) - (0.4) - - (0.4) -
Amort. of def. comp and mktbl sec./other 9.2 0.8 0.0 (0.0) (0.0) 1.1 1.1 1.0 2.6 (0.8) - 2.8 -
Changes in working capital: (26.5) 3.2 (2.3) 6.0 4.6 (1.1) 7.3 (2.9) 0.2 (0.1) 4.6 1.9 5.3
Accounts receivable, net and other (1.3) (6.2) 1.3 (4.8) 6.2 (2.9) (0.1) 3.2 (8.7) 9.1 0.2 3.8 (0.7)
Prepaids, other (27.8) 3.6 1.0 4.0 0.4 (1.8) 3.6 0.5 0.0 (0.5) 1.1 1.1 (0.5)
Accounts payable 0.2 1.7 (2.7) 2.0 (2.5) 5.0 1.8 (1.5) (0.8) (2.7) 3.7 (1.4) 2.4
Accrued expenses and other current 2.5 3.4 (2.9) 0.1 (0.6) 2.6 (0.8) (3.9) 3.6 (3.0) 2.3 (1.0) 1.2
Billings in excess of cost (0.1) 0.8 1.1 4.7 1.0 (4.0) 2.8 (1.2) 6.1 (2.8) (2.7) (0.5) 2.9
Net cash provided by (used in) operating activities 17.2 17.5 1.3 10.6 9.5 6.4 27.9 1.7 8.5 2.8 9.2 22.3 26.1

Purchase of marketable securities, acquisitions (44.9) (48.1) (3.2) (10.9) (29.0) (6.1) (49.2) (28.3) (11.2) (19.2) - (58.7) -
Proceeds from maturities & sales of mktbl sec., other 22.0 47.5 2.7 3.4 14.1 6.8 27.0 34.4 29.1 37.4 - 100.9 -
Net cash provide by (used in) investing activities (24.5) (14.0) (1.0) (8.1) (15.5) 0.3 (24.3) 5.3 16.7 17.3 (1.4) 37.9 (7.0)

Repurchase of common stock (11.0) (2.2) (27.5) - (41) -
Decrease in short-term borrowings - - - - - - - - - - - - -
Principal payments on long-term debt - (6.1) - - - - - - - - - - -
Issuance of common stock and stock options, other 4.9 2.3 0.0 0.8 0.7 (7.0) (5.4) 0.2 0.6 0.7 - 1.5 -
Net cash provided by (used in) financing activities 4.9 (3.8) - 0.8 0.7 (7.0) (5.4) (10.8) (1.6) (26.8) - (39.3) -
Effect of exchange-rate on cash and equivalents 0.2 0.2 0.1 (0.3) 0.2 0.2 0.2 (0.0) 0.2 0.0 - 0.2 -
Net cash from discontinued operations (1.1) 0.7
Net change in cash (3.2) 0.6 0.4 3.1 (5.2) (0.0) (1.7) (3.8) 23.9 (6.7) 7.8 21.2 19.1
Cash & equivalents - BOP 15.7 12.5 13.1 13.5 16.6 11.4 13.1 11.4 7.6 31.5 24.8 11.4 32.6
Cash & equivalents - EOP 12.5 13.1 13.5 16.6 11.4 11.4 11.422 7.6 31.5 24.8 32.6 32.6 51.7
Average Cash Balance 41.5 33.0 46.5

Annualized Interest Rate 4.0% 4.0% 4.0%
Calculated Interest Income 0.4 0.3 0.7 1.9

Operating cash flow 17.2 17.5 1.3 10.6 9.5 6.4 27.9 1.7 8.5 2.8 9.2 22.3 26.1
Purchases of fixed assets (1.6) (9.4) (0.5) (0.6) (0.6) (0.5) (2.1) (0.8) (1.1) (0.9) (1.4) (4.3) (7.0)
Free Cash Flow 15.5 8.1 0.8 10.1 8.9 5.9 25.7 0.9 7.4 1.9 7.8 18.0 19.1
% change 70.0% -47.8% -62.0% 100.1% -3239.4% -309.5% 217.7% 8.7% -26.5% -78.7% 32.0% -30.0% 5.9%
August 10, 2007 137

Figure 146: Alloy Snapshot

- Targets the youth market through various platforms including: 1)
- Inconsistent operational performance and limited track record as a
newspaper and radio; 2) event marketing; 3) location media; 4) print and
standalone company.
interactive.
- Alloy places ~90% of national college newspaper advertising and is the - Has yet to reap benefits from Sconex acquisition; investing in product
leader in on-campus marketing. development and user experience.
- Model shifting away from youth/college market to more out-of-home,

- Relatively defensible position in out-of-home market on college and high
potentially increases growth profile but also results in higher margin for
school campuses.
error.
- Alloy Media and Marketing should be more focused as a standalone - Larger media companies targeting youth market more aggressively
company. through web properties.
- Heavy investment in Channel One.
- Company must balance investment and growth opportunities with

2Q07
continued cost-cutting efforts.
- Acquisition of Sconex, a social networking website aimed at high school

Revenues Up mid-teens, including acquisitions
students, in March 2006 could drive higher online advertising exposure.
- Shift to higher margin products: out-of-home, online, database. Adjusted EBITDA Slightly below 1Q07
- Company expects FY07 to be more back-half loaded, as recent

- Will Channel One pay off? acquisitions of Channel One and Frontline Marketing should bring in new
advertiser relationships and incremental revenues.
138 August 10, 2007

Figure 147: Alloy Revenue and EBITDA Estimates, Fiscal 2004–07E

FY04A FY05A FY06A FY06A FY07E FY07E
1/31/2005 1/31/2006 4/30/2006 7/31/2006 10/31/2006 1/31/2007 1/31/2007 4/30/2007 7/31/2007 10/31/2007 1/31/2008 1/31/2008
FY04A FY05A 1Q06A 2Q06A 3Q06A 4Q06A FY06A 1Q07A 2Q07E 3Q07E 4Q07E FY07E
Revenue 184.2 195.3 44.8 46.7 63.7 40.9 196.1 37.8 54.0 75.1 49.0 215.9
Y/Y Growth NA 6.0% 3.7% 1.4% 1.4% -5.4% 0.4% -15.7% 15.5% 18.0% 20.0% 10.1%
Q/Q Growth 3.8% 4.2% 36.3% -35.8% -7.5% 42.8% 39.2% -34.8%
Adjusted EBITDA 25.8 3.8 5.4 12.8 5.6 27.6 2.3 2.1 15.8 7.3 27.4
% Margin 13.2% 8.6% 11.6% 20.1% 13.6% 14.1% 6.1% 3.8% 21.0% 14.8% 12.7%
Corporate Adjusted EBITDA (8.5) (2.3) (2.0) (1.7) (2.5) (8.6) (2.4) (2.2) (2.3) (2.2) (9.1)
TOTAL Adjusted EBITDA 4.8 17.3 1.5 3.4 11.1 3.0 19.0 (0.1) (0.1) 13.5 5.1 18.3
Y/Y Growth NA 258.6% 13.4% -12.0% 22.4% 0.4% 10.2% -106.7% -104.4% 21.7% 67.4% -3.8%
% Margin 2.6% 8.8% 3.4% 7.3% 17.4% 7.4% 9.7% -0.3% -0.3% 17.9% 10.3% 8.5%
Enterprise Value Calculation FY06A FY07E

Price per share $12.00 $12.00
Shares outstanding 14.3 14.3
Market Capitalization $171.6 $171.6
+ Debt 12.7 1.4
- Cash 29.4 44.9
Enterprise Value $154.9 $128.1
Adjusted EBITDA 19.0 18.3

EV/EBITDA 8.2x 7.0x
August 10, 2007 139

Figure 148: TechTarget Snapshot

- Beneficiary of growth in online advertising market as well trends in - Limited operating metrics and lack of visibility given the short-term nature
corporate IT spending. B2B online advertising is projected to reach of advertising contracts. Campaigns typically run for less than 90 days and
$2.4 billion in the U.S. in 2007, up 24% year-over-year. are cancellable with less than 30 days notice. Visibility is dependent on the
company’s ability to forecast spending and not based on any backlog or
bookings metrics
- Over 4.9 million registered users consisting primarily of IT - Organic revenue growth of 14% in 2006 was below 2006 total U.S. online
professionals and purchase decision makers with detailed user advertising growth of 35%. We are projecting 1H07 organic growth of 13%
information contributing to a valuable database of potential leads for compared to 17% reported.
advertisers.
- Network of 40+ highly-specialized sector specific websites, featuring - Continued erosion of Print business will offset some total revenue growth
over 20,000 pieces of original content per year tailored for specific in the near-term.
audiences. Leader in distribution of White Papers via BitPipe
network. Online projected to represent 69% of revenues in '07.
- Highly targeted database-driven campaigns are more effective at - Relatively high customer concentration creates risk. In 2006 top
providing measurable ROI and compare favorably to traditional CPM advertiser accounted for 11% of total revenue. Concentration could make
based campaigns which dominate the Web. company more susceptible to volatile quarter-to-quarter trends and product
launches of individual advertisers although no single client accounted for
more than 10% in 1Q07.
- Experienced management team with background in both business-to- - Client base is highly concentrated within the technology sector. As a
business and technology sectors as well as over 7 years of operating result, the macro environment around overall technology spending and
history at TechTarget and several years together prior to founding online advertising is critical.
TechTarget.

- International expansion opportunity as less than 1% of TechTarget's Company has not yet provided guidance
2006 revenue was International yet 30% of TechTarget's audience of
users is based overseas and 50% of global IT spending is based
overseas.
- Scalable entry into new technology verticals such as vertical

software markets and Channel. Company can launch new sites in a
cost efficient and timely manner.
- Print revenue declines are expected, but deceleration could be

greater than anticipated
- TechTarget likely has room to exercise pricing power if it continues

to deliver attractive ROI.
- Tuck-in acquisitions in specific verticals
140 August 10, 2007

Figure 149: TechTarget Income Statement, 2004–08E

($ in thousands, except per share data)
2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07E 9/07E 12/07E 2007E 2008E
Revenue
Online 31,342 43,662 10,374 12,812 12,565 15,424 51,176 13,709 15,592 15,204 18,663 63,168 78,191
Events 9,647 14,595 2,327 5,742 5,893 5,746 19,708 2,939 6,460 6,794 7,303 23,497 27,865
Print 5,738 8,489 2,209 2,163 1,809 1,947 8,128 1,697 1,341 1,130 1,188 5,356 3,960
Total Revenue 46,727 66,746 14,911 20,717 20,267 23,117 79,012 18,345 23,393 23,129 27,154 92,021 110,016
Cost of Revenue
Cost of Revenue - Online 7,554 10,476 2,621 2,987 3,635 3,658 12,901 3,455 3,742 4,364 4,386 15,946 19,454
Cost of Revenue - Events 5,712 6,202 1,274 1,733 1,629 1,826 6,462 1,360 2,164 1,889 2,337 7,750 9,072
Cost of Revenue - Print 3,073 5,322 1,407 1,422 1,384 1,114 5,327 1,120 919 882 831 3,751 2,832
Total Cost of Revenue 16,339 22,000 5,302 6,142 6,647 6,598 24,690 5,934 6,825 7,134 7,554 27,447 31,358
Gross Profit 30,388 44,746 9,609 14,575 13,619 16,519 54,322 12,411 16,569 15,995 19,600 64,574 78,657
Operating Expenses
Selling and Marketing 14,113 18,174 4,432 5,171 4,883 5,214 19,699 5,616 5,895 6,337 6,245 24,094 27,872
Product Development 4,104 5,756 1,564 1,553 1,607 1,481 6,205 1,675 1,708 1,781 1,819 6,983 8,035
General and Administrative 6,819 7,539 1,763 2,082 2,107 2,381 8,332 2,240 2,316 2,385 2,667 9,607 10,917
Depreciation 1,168 1,792 218 238 241 447 1,144 330 420 460 434 1,644 1,800
Amortization 1,304 5,172 1,084 1,424 1,378 1,143 5,029 759 790 790 650 2,989 1,440
Stock-based Compensation 6,283 78 28 36 92 1,093 1,250 1,071 1,130 1,195 1,180 4,576 4,625
Total Operating Expenses 33,791 38,511 9,089 10,504 10,308 11,759 41,659 11,691 12,259 12,948 12,995 49,893 54,688
Operating Income (3,403) 6,235 520 4,071 3,312 4,760 12,663 720 4,310 3,047 6,604 14,681 23,969
PF Operating Income (ex. stock-based comp) 2,880 6,313 548 4,108 3,404 5,853 13,913 1,791 5,440 4,242 7,784 19,257 28,594
Interest Income (Expense), net 143 (30) 95 42 (16) 200 321 (67) 2 276 296 506 4,136
Pre-tax Income (3,260) 6,205 615 4,113 3,296 4,960 12,984 653 4,312 3,322 6,900 15,187 28,105
Benefit from (Provision for) Income Taxes (32) 2,681 (175) (1,739) (1,709) (2,188) (5,811) (336) (2,177) (1,807) (3,232) (7,552) (13,092)
Reported Tax Rate NA NA 28.5% 42.3% 51.9% 44.1% 44.8% 51.5% 50.5% 54.4% 46.8% 49.7% 46.6%
Net Income (loss) (3,292) 8,886 440 2,374 1,587 2,772 7,173 317 2,135 1,515 3,668 7,636 15,013
Basic EPS ($0.11) $0.30 $0.01 $0.07 $0.05 $0.08 $0.22 $0.01 $0.06 $0.04 $0.09 $0.20 $0.37
Diluted EPS ($0.11) $0.30 $0.01 $0.07 $0.04 $0.08 $0.20 $0.01 $0.05 $0.03 $0.08 $0.19 $0.34
Basic Shares Outstanding 30,376 29,484 33,190 33,190 33,190 33,190 33,190 33,540 36,200 39,909 40,109 37,440 40,609
Diluted Shares Outstanding 30,376 29,484 35,933 35,933 35,933 35,933 35,933 36,290 40,000 43,350 43,550 40,798 44,050
Adjusted EPS Reconciliation

Net Income (3,292) 8,886 440 2,374 1,587 2,772 7,173 317 2,135 1,515 3,668 7,636 15,013
One-time Items - - - - - - - - - - - - -
Adjusted Net Income 2,991 8,964 468 2,411 1,679 3,865 8,423 1,388 3,265 2,710 4,848 12,211 19,638
Adjusted Basic EPS $0.10 $0.30 $0.01 $0.07 $0.05 $0.12 $0.25 $0.04 $0.09 $0.07 $0.12 $0.33 $0.48
Adjusted Diluted EPS $0.10 $0.30 $0.01 $0.07 $0.05 $0.11 $0.23 $0.04 $0.08 $0.06 $0.11 $0.30 $0.45
Total Stock-based Compensation 6,283 78 28 36 92 1,093 1,250 1,071 1,130 1,195 1,180 4,576 4,625
Operating Income (3,403) 6,235 520 4,071 3,312 4,760 12,663 720 4,310 3,047 6,604 14,681 23,969
Depreciation & Amortization 2,472 6,964 1,302 1,662 1,619 1,590 6,173 1,089 1,210 1,250 1,084 4,633 3,240
EBITDA 5,352 13,277 1,850 5,770 5,023 7,443 20,086 2,880 6,650 5,492 8,868 23,890 31,834
Y/Y GROWTH
Online Revenue 49.1% 39.3% -2.3% 5.6% 28.2% 38.8% 17.2% 32.1% 21.7% 21.0% 21.0% 23.4% 23.8%
Events Revenue 23.0% 51.3% 151.3% 23.7% 38.1% 20.7% 35.0% 26.3% 12.5% 15.3% 27.1% 19.2% 18.6%
Print Revenue 59.5% 47.9% 36.6% -3.0% -19.2% -18.9% -4.3% -23.2% -38.0% -37.5% -39.0% -34.1% -26.1%
Total Revenue 43.9% 42.8% 13.3% 9.0% 24.3% 26.5% 18.4% 23.0% 12.9% 14.1% 17.5% 16.5% 19.6%
Gross Profit 55.6% 47.2% 6.1% 8.8% 33.1% 37.0% 21.4% 29.2% 13.7% 17.4% 18.7% 18.9% 21.8%
Selling and Marketing 31.5% 28.8% 8.5% 8.2% 13.3% 4.3% 8.4% 26.7% 14.0% 29.8% 19.8% 22.3% 15.7%
Product Development 10.1% 40.3% 8.8% 13.9% 9.4% -0.4% 7.8% 7.1% 9.9% 10.8% 22.9% 12.5% 15.1%
General and Administrative 72.4% 10.6% -14.7% 0.0% 88.2% 4.8% 10.5% 27.1% 11.3% 13.2% 12.0% 15.3% 13.6%
Total Operating Expenses 68.7% 14.0% -3.3% 5.5% 20.0% 11.3% 8.2% 28.6% 16.7% 25.6% 10.5% 19.8% 9.6%
Operating Income 564.6% -283.2% -253.3% 18.2% 101.8% 219.9% 103.1% 38.6% 5.9% -8.0% 38.7% 15.9% 63.3%
Net Income -703.8% 119.2% -210.2% -30.2% -4.0% -34.5% -19.3% -27.9% -10.1% -4.5% 32.3% 6.5% 96.6%
Diluted EPS NA NA -193.2% -42.0% -21.5% -48.4% -33.8% -28.6% -19.2% -20.8% 9.2% -6.2% 82.1%
Adjusted Diluted EPS NA NA -200.1% -41.1% -17.2% -29.2% -22.9% 193.6% 21.7% 33.9% 3.5% 27.7% 48.9%
EBITDA 384.8% 148.1% 25.6% 11.5% 50.8% 125.7% 51.3% 55.7% 15.3% 9.3% 19.1% 18.9% 33.3%
% OF REVENUES
Cost of Online Rev as a % of Online Rev 24.1% 24.0% 25.3% 23.3% 28.9% 23.7% 25.2% 25.2% 24.0% 28.7% 23.5% 25.2% 24.9%
Cost of Events Rev as a % of Events Rev 59.2% 42.5% 54.7% 30.2% 27.6% 31.8% 32.8% 46.3% 33.5% 27.8% 32.0% 33.0% 32.6%
Cost of Print Rev as a % of Print Rev 53.6% 62.7% 63.7% 65.8% 76.5% 57.2% 65.5% 66.0% 68.5% 78.0% 70.0% 70.0% 71.5%
Total Cost of Revenue 35.0% 33.0% 35.6% 29.6% 32.8% 28.5% 31.2% 32.3% 29.2% 30.8% 27.8% 29.8% 28.5%
Selling and Marketing 30.2% 27.2% 29.7% 25.0% 24.1% 22.6% 24.9% 30.6% 25.2% 27.4% 23.0% 26.2% 25.3%
Product Development 8.8% 8.6% 10.5% 7.5% 7.9% 6.4% 7.9% 9.1% 7.3% 7.7% 6.7% 7.6% 7.3%
General and Administrative 14.6% 11.3% 11.8% 10.0% 10.4% 10.3% 10.5% 12.2% 9.9% 10.3% 9.8% 10.4% 9.9%
Total Operating Expenses 72.3% 57.7% 61.0% 50.7% 50.9% 50.9% 52.7% 63.7% 52.4% 56.0% 47.9% 54.2% 49.7%
MARGINS
Gross Margin - Online 75.9% 76.0% 74.7% 76.7% 71.1% 76.3% 74.8% 74.8% 76.0% 71.3% 76.5% 74.8% 75.1%
Gross Margin - Events 40.8% 57.5% 45.3% 69.8% 72.4% 68.2% 67.2% 53.7% 66.5% 72.2% 68.0% 67.0% 67.4%
Gross Margin - Print 46.4% 37.3% 36.3% 34.2% 23.5% 42.8% 34.5% 34.0% 31.5% 22.0% 30.0% 30.0% 28.5%
Gross Margin 65.0% 67.0% 64.4% 70.4% 67.2% 71.5% 68.8% 67.7% 70.8% 69.2% 72.2% 70.2% 71.5%
Operating Margin -7.3% 9.3% 3.5% 19.7% 16.3% 20.6% 16.0% 3.9% 18.4% 13.2% 24.3% 16.0% 21.8%
Net Margin -7.0% 13.3% 2.9% 11.5% 7.8% 12.0% 9.1% 1.7% 9.1% 6.6% 13.5% 8.3% 13.6%
EBITDA Margin 11.5% 19.9% 12.4% 27.8% 24.8% 32.2% 25.4% 15.7% 28.4% 23.7% 32.7% 26.0% 28.9%
Operating Leverage/EBITDA Flow-through 29.8% 39.6% 43.0% 67.5% 165.8% 84.9% 55.5% 95.6% 74.7% 437.4% 83.9% 29.2% 44.1%
August 10, 2007 141

Figure 150: TechTarget Segment Breakdown, 2004–08E

2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07E 9/07E 12/07E 2007E 2008E
TOTAL ONLINE REVENUE 31,342 43,662 10,374 12,812 12,565 15,424 51,176 13,709 15,592 15,204 18,663 63,168 78,191
Y/Y Growth 49.1% 39.3% -2.3% 5.6% 28.2% 38.8% 17.2% 32.1% 21.7% 21.0% 21.0% 23.4% 23.8%
Q/Q Growth -6.7% 23.5% -1.9% 22.8% -11.1% 13.7% -2.5% 22.8%
TOTAL EVENTS REVENUE 9,647 14,595 2,327 5,742 5,893 5,746 19,708 2,939 6,460 6,794 7,303 23,497 27,865
Y/Y Growth 23.0% 51.3% 151.3% 23.7% 38.1% 20.7% 35.0% 26.3% 12.5% 15.3% 27.1% 19.2% 18.6%
Q/Q Growth -51.1% 146.8% 2.6% -2.5% -48.9% 119.8% 5.2% 7.5%
#REF! #REF! #REF!
TOTAL PRINT REVENUE 5,738 8,489 2,209 2,163 1,809 1,947 8,128 1,697 1,341 1,130 1,188 5,356 3,960
Y/Y Growth 59.5% 47.9% 36.6% -3.0% -19.2% -18.9% -4.3% -23.2% -38.0% -37.5% -39.0% -34.1% -26.1%
Q/Q Growth -8.0% -2.1% -16.4% 7.7% -12.8% -21.0% -15.7% 5.1%
TOTAL REVENUE 46,727 66,746 14,911 20,717 20,267 23,117 79,012 18,345 23,393 23,129 27,154 92,021 110,016
43.9% 42.8% 13.3% 9.0% 24.3% 26.5% 18.4% 23.0% 12.9% 14.1% 17.5% 16.5% 19.6%
-18.4% 38.9% -2.2% 14.1% -20.6% 27.5% -1.1% 17.4%
Metrics
Segment Breakdown 2004A 2005A 3/06A 6/06A 9/06A 12/06A 2006A 3/07A 6/07E 9/07E 12/07E 2007E 2008E
Online Revenue 67% 65% 70% 62% 62% 67% 65% 75% 67% 66% 69% 69% 71%
Events Revenue 21% 22% 16% 28% 29% 25% 25% 16% 28% 29% 27% 26% 25%
Print Revenue 12% 13% 15% 10% 9% 8% 10% 9% 6% 5% 4% 6% 4%
Total Revenue 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Revenue Seasonality
Online Revenue 100% 20% 25% 25% 30% 100% 22% 25% 24% 30% 100% 100%
Events Revenue 100% 12% 29% 30% 29% 100% 13% 27% 29% 31% 100% 100%
Print Revenue 100% 27% 27% 22% 24% 100% 32% 25% 21% 22% 100% 100%
Total Revenue 100% 19% 26% 26% 29% 100% 20% 25% 25% 30% 100% 100%
142 August 10, 2007

Figure 151: TechTarget Cash Flow Statement, 2005–08E

2005A 2006A 3/07A 6/07E 9/07E 12/07E 2007E 2008E
Operating activities:
Net income (loss) 8,886 7,173 317 2,135 1,515 3,668 7,636 15,013
Adjustments:
Depreciation 1,792 1,144 330 420 460 434 1,644 1,800
Amortization of intangible assets 5,172 5,029 759 790 790 650 2,989 1,440
Provision for bad debt (124) 366 24 24 24 24 96 96
Stock-based compensation expense 78 1,250 1,071 1,130 1,195 1,180 4,576 4,625
Interest expense related to amortization of debt issuance costs 24 92 253 - - - 253 -
Deferred income taxes (2,995) 174 232 400 500 500 1,632 1,950
Realized gain/loss on foreign currency - - - - - - - -
Changes in operating assets and liabilities:
Accounts receivable, net 1,161 (3,247) 1,099 (724) (330) (1,821) (1,776) (3,995)
Other receivables - - - - - - - -
Prepaid expenses and other assets (383) (813) (1,878) 1,355 (128) (22) (673) (236)
Accounts payable 1,204 (741) 448 (1,037) 667 (20) 59 317
Income taxes payable 315 1,539 (1,757) - - - (1,757) -
Accrued expenses and other current liabilities 30 399 (380) 581 901 (427) 676 (200)
Accrued compensation expense (2,305) 446 (1,399) 577 100 - (722) -
Deferred revenue (1,642) (418) 3,129 (994) (1,209) (754) 171 259
Deferred rent expense/Other liabilities 122 (54) (35) - - - - -
Total changes in working capital (1,498) (2,889) (773) (241) 1 (3,045) (4,058) (3,855)
Net cash provided (used in) operating activities 11,335 12,339 2,213 4,658 4,485 3,412 14,768 21,069
Investing activities:
Acquisition of property and equipment (2,141) (1,263) (897) (700) (700) (650) (2,947) (3,000)
Acquisition of businesses, net of cash acquired - (15,017) (1,013) (15,000) - - (16,013) -
Proceeds from sale of assets 233 - - - - - - -
Purchases of short-term investments - - - - - - - -
Proceeds from sale of short-term investments 33,000 - - - - - - -
Net cash provided by (used in) investing activities 31,092 (16,280) (1,910) (15,700) (700) (650) (18,960) (3,000)
Financing activities:
IPO Proceeds - - - 75,240 - - 75,240 -
Proceeds from issuance of Series B preferred stock - - - - - - - -
Proceeds from issuance of Series C preferred stock - - - - - - - -
Proceeds from bank term loan payable - 10,000 - - - - - -
Payments of term loan payable (3,000) (23,000) (750) (750) (750) (750) (3,000) (3,000)
Proceeds from credit facility - - - 12,000 - - 12,000 -
Payments toward credit facility - - - (12,000) - - (12,000) -
Proceeds from exercise of warrants/stock options 238 892 121 - - - 121 -
Purchase of stock options through tender offer - - - - - - - -
Purchase of common and preferred stock through tender offer - - - - - - - -
Net cash provided (used in) financing activities (2,762) (12,108) (629) 74,490 (750) (750) 72,361 (3,000)
Total increase (decrease) in cash and cash equivalents 39,665 (16,049) (326) 63,448 3,035 2,012 68,169 15,069
Cash and cash equivalents, beginning of period 7,214 46,878 30,830 30,503 93,951 96,987 30,830 98,998
Cash and cash equivalents, end of period 46,878 30,830 30,503 93,951 96,987 98,998 98,998 114,067
Capex Analysis:
Capex 2,141 1,263 897 700 700 650 2,947 3,000
Capex as % of revenue 3.2% 1.6% 4.9% 3.0% 3.0% 2.4% 3.2% 2.7%
Capex as % of EBITDA 16.1% 6.3% 31.1% 10.5% 12.7% 7.3% 12.3% 9.4%
Free Cash Flow Reconciliation:

Cash flow from operations 11,335 12,339 2,213 4,658 4,485 3,412 14,768 21,069
Capex (2,141) (1,263) (897) (700) (700) (650) (2,947) (3,000)
Free Cash Flow 9,194 11,076 1,316 3,958 3,785 2,762 11,821 18,069
% Y/Y Change 79.7% 20.5% 1485.4% 6.7% 52.9%
Free cash flow per share
FCF as a % of CFO 81.1% 89.8% 59.5% 85.0% 84.4% 80.9% 80.0% 85.8%
FCF as a % of EBITDA 69.2% 55.1% 45.7% 59.5% 68.9% 31.1% 49.5% 56.8%
August 10, 2007 143

Important Disclosures:
Sector Coverage Universe

Below is the list of companies that constitute the sector coverage universe:
Alloy, Inc (ALOY) Amazon.com, Inc (AMZN)
Blue Nile (NILE) eBay, Inc (EBAY)
Expedia, Inc. (EXPE) Google Inc. (GOOG)
Greenfield Online (SRVY) Harris Interactive (HPOL)
IAC/InterActiveCorp (IACI) Netflix Inc. (NFLX)
Overstock.com (OSTK) TechTarget Inc. (TTGT)
Yahoo! Inc (YHOO)
Mentioned Company Ticker Price (07-Aug-2007) Stock / Sector Rating

Alloy, Inc ALOY US$ 8.54 2-Equal weight / 2-Neutral
Amazon.com, Inc AMZN US$ 79.14 2-Equal weight / 2-Neutral
Blue Nile NILE US$ 95.00 2-Equal weight / 2-Neutral
eBay, Inc EBAY US$ 35.89 2-Equal weight / 2-Neutral
Expedia, Inc. EXPE US$ 27.85 2-Equal weight / 2-Neutral
Google Inc. GOOG US$ 516.02 1-Overweight / 2-Neutral
Greenfield Online SRVY US$ 15.74 2-Equal weight / 2-Neutral
Harris Interactive HPOL US$ 4.18 1-Overweight / 2-Neutral
IAC/InterActiveCorp IACI US$ 26.71 2-Equal weight / 2-Neutral
Netflix Inc. NFLX US$ 17.35 2-Equal weight / 2-Neutral
Overstock.com OSTK US$ 21.76 2-Equal weight / 2-Neutral
TechTarget Inc. TTGT US$ 12.58 2-Equal weight / 2-Neutral
Yahoo! Inc YHOO US$ 23.44 1-Overweight / 2-Neutral
144 August 10, 2007

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What are the 5 key areas covered in the Data Book?

What are the 5 key areas covered in the Data Book?

What are Lehman Brothers' ratings within the coverage universe?

What are Lehman Brothers' ratings within the coverage universe?

INTERNET & MEDIA GLOBAL EQUITY RESEARCH

Internet NORTH AMERICA

! The ratings within our Internet coverage universe are:

1-Overweight: Google, Yahoo!, Harris Interactive

2-Equal weight: Blue Nile, Amazon.com, Greenfield Online, eBay, TechTarget,

Introduction to the Lehman Brothers Internet Data Book .............................................. 6

Figure 1: Coverage Universe Comparative Valuation – Large Cap......................... 14

2 August 10, 2007

Figure 31: International Broadband Penetration – Top 20 Countries ....................... 37

August 10, 2007 3

4 August 10, 2007

Figure 115: Amazon Discounted Cash Flow Analysis ........................................ 107

*All figures and estimates as of August 3, 2007

August 10, 2007 5

Introduction to the Lehman Brothers Internet Data Book

Industry Summary: Our Outlook for 2H07

In 2H07, we believe we will see a continuation of the trend toward consolidation of

6 August 10, 2007

1) Display Advertising Issues and the Rise of Ad Exchanges: We believe issues

2) One-Stop Shops and Advertising Platform Buildout: Although we believe it is likely

August 10, 2007 7

3) Domestic Search Growth: We believe monthly domestic query growth continues to

5) Google – Is Search Enough or Will Other Drivers Materialize?: Our growth

8 August 10, 2007

August 10, 2007 9

7) Amazon.com – Can Amazon’s Margin Expansion Continue?: Following a strong

8) IAC – Still Waiting on Ask.com Search Deal Announcement: Another remaining

10 August 10, 2007

The ratings within our Internet coverage universe are:

1-Overweight: Google, Yahoo!, Harris Interactive

August 10, 2007 11

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12 August 10, 2007

August 10, 2007 13

Figure 1: Coverage Universe Comparative Valuation – Large Cap

Price as of 8/3/2007 $22.92 $503.00 $33.32 $76.80 $27.40 $27.68

Market Capitalization $32,527 $157,670 $46,740 $32,410 $269,346 $8,640 $9,920

EARNINGS PER SHARE (EPS) 1,2,3,4,5,6,7

P/E 2006 31.3x 47.5x 31.8x 105.1x 53.9x 17.0x 25.4x

FREE CASH FLOW (FCF)

FCF/Share 2006 $0.89 $5.42 $1.23 $1.15 $1.74 $1.46

Price/FCF 2006 25.7x 92.8x 27.0x 66.8x 53.1x 15.7x 18.9x

EV/EBITDA 2006 12.4x 31.5x 18.9x 44.8x 26.9x 6.8x 15.2x

Source: Company reports, Lehman Brothers estimates

14 August 10, 2007

Figure 2: Coverage Universe Comparative Valuation – Small Cap

Price as of 8/3/2007 $16.57 $20.13 $81.07 $12.50 $16.08 $4.26 $8.89

Market Capitalization $1,171 $426 $1,352 $449 $422 $258 $127

EARNINGS PER SHARE (EPS) 1,2,3,4,5,6,7

P/E 2006 20.1x NA 107.2x 53.3x 49.1x 24.7x NA

FREE CASH FLOW (FCF)

FCF/Share 2006 $0.89 NA $2.32 $0.31 $0.69 $0.38 NA

Price/FCF 2006 18.7x NA 35.0x 40.6x 23.1x 11.1x NA

FCF Yield 2006 5.3% NA 2.9% 2.5% 4.3% 9.0% NA

EV/EBITDA 2006 8.3x NA 54.8x 21.2x 13.8x 9.6x 5.8x

Source: Company reports, Lehman Brothers estimates