Agenda

Context: Scenarios of the AdEX shift in the Singapore market

Existing businesses Assessment and recommendations
Content businesses
Classifieds
Directory
New businesses Additional opportunities for SPH
Methodology and short list
Deep-dives
D
di
on short-listed
h t li t d opportunities
t iti
Preliminary views on the right internet portfolio for SPH

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77

Summary of directory: Rednano

Rednano

Financial & strategic value

How to capture it / What to do

SIN online directory market

expected to grow to $15-45m
$
by
2015
20% target share translates to
$5-10m online upside for SPH
No print revenue at risk

Focus on directory and discontinue non-core activities

in search / search-reseller and other businesses
Some services can be done by IBU
Enter new businesses only based on compelling
business plan and clear competitive advantages

Financially, search-related
business is not attractive to SPH
Search market going to be big
(up to 190m by 2015)
2015), but will
be dominated by Google
Search-reseller business
sizable, but unattractive due to
shrinking margins
Low-medium strategic value
Some value in offering
"complete" solutions to
advertisers,, incl. directoryy
listings
Option value with regards to
location-based mobile plays
205900-05-Second Steering Committee-Long version-25Mar10-MM-vFINAL.ppt

Match investment level with the size of the opportunity

Reduce cost base by at least 50%
Potentially leverage 701 sou / panduan platform to move
to a leaner model
Within directory, focus on a few categories and enhance
content and user-friendliness
Potential categories: Food, Health, Female, Home &
Decor,, Travel (capturing
( p
g a large
g share of directory
y search))
Embed directory function into main content verticals
Add user-generated content and use editorial content in
a more focused way
Invest
In
est with
ith an e
eye
e to
towards
ards option value,
al e e.g.
eg
flexibility of platform to offer mobile services or embed
sub-sections in content verticals
78

Rednano consists of several business, many of which are

unattractive or overlap with other SPH operations
Directory

Search

Subbusinesses

Search

Reseller

Algorithmic search
Web, people, news,
maps, images
Ad platform
Adsmart
Rednano CAN
DB intentions
Licensing services

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

Directory
Paid listings
Editorial content

Other
Mobile directory
services
Paid listings
SMS, short codes
Mobile portal dev
Contests
Other

734

FY09 Revenue
(000' SGD)
(000's

305
99

45

?
Attractiveness
to SPH

Duplication
within SPH

Winner take all

dynamics favor global
players

Low barriers to entry,

intense competition, and
low margins

Mid-sized market where

local players can build
content advantage

Potentially very
attractive future market
Need to build strong
directory business first

n/a; minor duplication on

news content

ClickTrue (SEM, SEO)

IBU (eDM/mDM, Rich
media ads, microsite)

n/a; minor duplication on

news content

IBU (SMS, short codes)

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Search

In search, Google is breaking away from competitors both

globally, and in Singapore

... and locally

y in Singapore
g p
as well2

Google
g extending
g its global
g
lead...
% share of global searches1

Page views per user

100

80

80

17

15

Others

3
9

3
7

Microsoft Sites

Yahoo!

11

Baidu

60

Google
Search

60
Yahoo
Singapore
Search

40

40
60

67

~30M
Page views
(usage, sheer size)

Google
20

Lighter = Aug
Darker = Dec

20
Bing
Rednano
0

0
Jul-08

Jul-09

0.0

0.5

1.0

1.5

2.0

2.5

RMS of UVs

1. Comscore qSearch 2009 (Search Engine Watch) search share is not an exact proxy for search revenue, but Google reported ~$24B in combined Adwords & Adsense revenue in 2009 2 Metrics
for Singapore market only, Comscore
Source: Comscore, Search Engine Watch, BCG analysis
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80

Search

Search advertising platform dynamics favor the leader

Revenue per search is
key
y to search ad p
platform
Revenue per search (RPS)1
0.06

$0.05 Leader

0.04

$0.025 #2
0.02

illustrative only1

RPS is driven by many

factors

Syndication deals favor

the leader

Volume of searches
Organic (ie. through own
site)
Inorganic (ie.
(ie search
partnership deals with AOL)
Ecosystem of content
partners

For example, if #2 player

wanted to power AOL's
search, it would have to offer
upside down economics
Leader can share ~80% of
$0.05 revenue = $0.04
#2 player must share
~160% of $0.025 to match
th $0.04
the
$0 04 revenue share
h

Quality
Q
lit off search
h and
d
advertising results
Relevance affects clickthru-rates, conversions, etc

$0.010

Number of advertisers
Bid density drives up

0.00

Same dynamic holds for

ecosystem of smaller content
partners (ie.
p
( blogs)
g )
Small publishers will
choose the option that
maximizes revenue

V
Very
ffew players
l
have
h
enough
h money to
t "buy
"b their
th i way""
into competitive position
1. Illustrative only, exact numbers n/a. Based on BCG interviews
Source: BCG interviews
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81

Reseller

Rednano's reseller business primarily focused on search

engine marketing (SEM)
SEM: an illustrative example

3rd party wants to improve search ad

results; approaches Rednano

Rednano manages campaign to ensure

highest placement at lowest cost
3rd party typically starts with a goal
ie. 1000 clicks and 10 conversions
Campaign manager then uses various tools to help
3rd party achieve those goals
At minimum, reseller will manage key words, design
and test ads, & optimize performance
More sophisticated campaign managers will optimize
across multiple mediums and offer consultancy
services

Source: Yahoo, Clicktrue business model presentation, BCG analysis

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Reseller

Reseller revenues driving largest portion of Rednano revenue

% of total
100

80

$129
1%

$782

$1,183
4%
8%

33%

0%

1%

Others
Search

30%

Directory

69%

Reseller

26%

60

40

55%
62%

20
11%

0
FY08

FY09

YTD FY10

Source: SPH finance, BCG analysis

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83

Reseller

Unfortunately, reseller revenues generate very small margins

Rednano gross revenue artificially
grossed up
g
p by
y advertising
g expense
p

Net revenue driven by management fees and rev

share from partners
For Rednano, on a weighted avg basis, the two
represent ~20%
20% of adex1

YTD (Jan '10) 000's SGD

600
540

What remains is a relatively unattractive

business

452

$88K represents net revenue; when costs are

added, business is likely to be unprofitable

400

More than
M
th 50% off R
Rednano's
d
' ttotal
t l reseller
ll
2
revenues generated by 701 Search
701 Search is the largest customer
No management fees earned by Rednano

200
88

Gross
Revenue

Adex

Net
Revenue

Margins are small and getting smaller

On a fully burdened cost basis, reseller business
likely upside down3
New entrants creating pricing pressure
Google providing increased transparency

1. Reflects weighted average management fee. No fee is collected from 701 Search which decreases avg. Typical rev shares range from 12-18% for Yahoo. Though Rednano believes it receives
rev share from Google, both SPH finance and Google website state that no rev shares are provided to resellers 2. SPH finance 3. Assuming ~$200k in net revenue on an annualized basis, this is
barely enough to cover the cost of 3-4 heads. As another point of reference, Clicktrue operated at ~10% margin in FY07 & FY08.
Source: Rednano, SPH finance, BCG analysis
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Directory

Directory advertising likely to be a modest opportunity in

Singapore...
BCG believes total online directory1 ad market
will reach ~$45M in Singapore by 2015
Singapore directional advertising
revenue (2008-2013E)
S$ M
150

CAGR
(08-15)

118
105
100
73

Print

-3%

45

Online

17%

90
50

15
0

2008

2015E

Methodology and key assumptions

Print
Yellow page print revenue ~$49M (2008)3
Other players (ie. Greenbook, eGuide, etc)
~$40M in print2
2008 - '15 growth
th rate
t based
b
d on Y
Yellow
ll
page
3
group's print revenue historical growth
Online
Yellow page internet revenue $5M (2008)4
Assume IYP accounts for
f 40%
% share in 20085,
total online pure directory market ~$12.5M
Local search and pure internet players:
Google 2008 revenue $38M6, assume 5%7
from directional search $2M
Pure internet players: Hungrygowhere:
<$1M8
2008 - '15 growth rate based on Kelsey Group9
estimate, but taken down slightly to reflect larger
starting point

1. Labeled as "Directory" revenue to simplify, but should technically be called "Directional". In Singapore, "directory" is the largest subset of "directional" which also includes local directory search
advertising as well. 2. per Rednano management team 3. Yellow Page Group's annual report 4. Yellow Page Group's annual report 5. Assume that Yellow Page group has slightly lower IYP
market share than in print, given that the IPY market is more fragmented than print. 6. Company Acra filings 7. Assumption based on the traffic share 8. BCG interviews 9. Kelsey Group
Note: Online include advertising revenue generated by Yellow Pages publishers, as well as pure-play online local search and directory operators.
Source: Global Yellow Pages and Local Search Report (Kelsey 2008), PWC, Company annual report,. BCG analysis
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85

Directory

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

Across scenarios, SPH online directory
revenue will be limited

Limited top line will require a large reduction

in cost to achieve breakeven by FY12

Revenue ($M SGD)

Cost ($M SGD)

15

15
13.4

170%

137%

11 1
11.1

10.5
9.6

10

10

8.2

7.6
6.3
5

3.4
1.2

1.2

0.3

0.3

FY09
Implied shr.1

2%

2%

6.0

3.0

0.6

FY10
5%

3%

4.1

6.0

1.9
1.1

3.7
4.1
1.5

FY11
12%

FY12

6%

run-rate))3

Est. total revenue (both methods)

FY10

FY11

FY12

21% 14%

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

Est. directoryy rev (per
(p YTD

FY09

Total Rednano cost base (per 3 yr plan)

Reqd
q cost to break even ((assume 3y
3yr p
plan rev))
Reqd cost to break even (assume YTD run-rate rev)

1. per BCG market size estimates 2. per Rednano 3 year plan 3. Assumes FY10 YTD performance through January is grossed up on a straight line basis. FY11 and FY12 assumed to grow per
Rednano FY09-FY12 CAGR 4. ~20% represents proxy for reasonable business for SPH.
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86

Directory

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

directory business
Option 1: No-frills
directory

Basic directory listings

Name, address, telephone,
map

Focus on limited set of categories

Topic specific directory (ie. food)

Enhanced directory +
Robust reviews (UGC)
Supplemented w/ editorial
content

Compete based on depth and

breadth of listings
g

Compete through variety of means

Enhanced content
Focus on content (editorial,
UGC, or combo)
Supplement with enhanced
listings
Multiple sources of traffic
Organic,
Organic inorganic,
inorganic and/or
partner
Focused user experience
Can be both standalone and
embedded experience, but
must be focused, unique &
describable by consumer

Compete through specialization

p
content
Specialized
Provide robust listings
Surround with specialized
content - UGC, suppl. w/
editorial
Multiple sources of traffic
Organic,
Organic inorganic,
inorganic and/or
partner
Focused vertical experience
Typically focused on one
key topic
User experience optimized
for topic

Primarily paid listings

Paid listings & advertising

Primarily advertising

Bases of
competition

Biz model

Option 3: Specialized pure

play

Sample players

User
experience

Option 2: Enhanced/
focused directory

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Enhanced directory listings

No frills + company description +
reviews and rankings

87

Directory

Each option evaluated across three key criteria

Key questions

User experience

Does it meet / exceed consumer

expectations?
Is it inline with market trends?
Does it enhance experience
p
on
other SPH properties?

Comparative
C
ti
advantage

Does it leverage SPH content?

Does it leverage SPH technology
(ie. 701 platform)?
Can SPH maintain comparative
advantage?

Option value

Is it scalable (ie. geo, content)?

Does it enable other business
models?
Does it preserve future option
value?

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No frills
directory

Enhanced /
focused
directory

Specialized
pure play

88