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Sandeep Aggarwal (415) 489-2518 [email protected] Caris & CompanyStan Velikov, CFA (415) 489-2510 [email protected] 44 Montgomery Stree

Suite 1500San Francisco, CA 94104

FINRA SIPCFor full disclosure, please see end of report

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T e c h n o l o g y : I n t e r n e t & S o f t w a r

Industry UpdateThursday, September 16, 2010

Indian Internet Has Finally Arrived!

SummaryIndia is the least penetrated Internet economy among the large nations but hasfinally hit the inflection point, in our view. The last decade of the Internet ramp-uphas been painfully slow in India (vs. US/China) constrained by poor ITinfrastructure, low broadband penetration, low PC shipments, lack of home-growninnovations, lack of local content/reasons, and VC money chasing more maturenon-Internet companies with equally compelling growth prospects. However, in ourview, the next 10-years will bring massive growth in the Internet sector in Indiasupported by highly favorable demographics, growing Internet/broadbandpenetration, launch of one of the worlds best 3G networks, growing middle

class/income levels, noticeable pick-up in tech/gadget and mobile culture, and surgein home-grown Internet start-ups. In our view, India's Internet market is 10 yearsbehind US's and 6 years behind China's in terms of several key factors namely overall Internet adoption, broadband penetration, Internet adverting, E-Commerce,quality content, and sophistication & functionality of websites. However, until2015, we expect CAGR of 15% for Internet users, 20% for Internet advertising,25% for E-Commerce and OTAs. There are four public Internet companies in Indiai.e. SIFY, REDF and MMYT listed on NASDAQ and Info Edge listed in HongKong & India. We are initiating on MMYT with a Buy and $46 PT.

Key Points

Inflection point. In our view, India Internet has finally hit the inflection point.With 81mm Internet users base, increasing time spent online, upcoming best3G mobile network, younger demographic, growing wealth, and surge inInternet start-ups, India is saliently creating a solid Net economy & ecosystem.

Internet users and penetration. In our view, India has taken much more timeto reach 7% Internet penetration than the US, China, and many emergingmarkets. We believe that by 2015, India will have achieved 15%-18%penetration i.e. 180mm to 200mm Internet users.

Internet advertising. The global ad industry is $700bn and Internet is $50bn ofthat. The Indian ad industry is $5bn and Internet ad is a miniscule $200mm. Weexpect Internet advertising to grow at 30% for the next several years.

E-Commerce. E-Commerce adoption is fairly low in India. In our view, E-Commerce is trying to grow in India at the same time as the organized retailrevolution E-Commerce is only $1.4bn vs. $350bn retail sector in India.

Online Travel. The most exciting segment of India's Internet sector is onlinetravel which accounts for $4bn vs. $20bn total travel industry.

Mobile Internet. Supported by good wireless infrastructure, economical voice/data plans, availability of cheap handsets, and lower PC installed base, India'smobile market is in many ways more advanced than many mature markets.

Noteworthy private Internet Co's. While there are many Internet companieswith massive growth, the following are some of the noteworthy private ones inIndia Yatra, Cleartrip, Via, Indiamart, Shaadi, Interactive Avenues, Komli,Quikr, Sulekha, JustDial, and BharatMatrimony. The established Internet Co'swith traditional media roots are Times, HT Media, NDTV, Network18.

Company Ticker Price Rating

Amazon AMZN $145.45 3/Average

Digital River DRIV $30.35 1/Buy

eBay EBAY $24.19 1/Buy

Expedia EXPE $26.66 3/Average

Google GOOG $480.64 3/Average

GSI Commerce GSIC $23.34 1/Buy

MakeMyTrip MMYT $38.39 1/Buy

Microsoft MSFT $25.12 1/Buy

Priceline.com PCLN $332.06 1/BuycomScore SCOR $19.40 1/Buy

TechTarget TTGT $5.11 1/Buy

ValueClick VCLK $12.26 3/Average

Yahoo! YHOO $14.27 1/Buy


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CARIS &COMPANY NEW YORK DEL MAR SAN FRANCISCO BOSTON MEMBER FINRA/SIPC

Table of Contents:

# Section Page

1 Economic and Demographic Overview .......................... 3-5

2 Overview of the Internet Sector in India......................... 5-9

3 Overview of Internet Advertising in India ...................... 10-11

4 Overview of E-Commerce in India ................................. 11-12

5 Overview of Online Travel in India ................................ 12-13

6 Overview of Mobile Internet in India ............................. 13-15

7 Growth Segments in Indian Internet ............................... 15

8 Overview of Indian Public Internet Companies.............. 16-17

9 IPO/M&A Outlook for the Internet Sector in India ........ 17-18

10 Worldwide and US Internet Overview............................ 19-25

11 Valuation Framework ..................................................... 26


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3CARIS &COMPANY NEW YORK DEL MAR SAN FRANCISCO BOSTON MEMBER FINRA/SIPC

Section 1: Economic and Demographic Overview

Indian economy has been on a massive growth trajectory for the past one decade infused by young demographics, rising capitalinvestments in key sectors (including infrastructure), increasing wealth, robust job market, high savings rates, government-ledliberalization of the economy, high-tech revolution, and increasing foreign investments.

India was the center of global economic activities until 1600 AD

India accounted for anywhere from 35% to 25% of world GDP between 1 AD and 1600 AD but since then its share of the globaeconomy kept going down and reached under 3% by the 1980s.

Source: Angus Maddison, The World Economy: Historical Statistics

Share of World GDP Over Time

0%

5%

10%

15%

20%

25%

30%

35%

USA Europe China India

Today, India is re-emerging very fast and is firmly positioned among the 5 largest world economies

India and China are the emerging-world powers with growth rates well above developed countries'. Nowadays India accounts forabout 5% of world GDP and is expected to reach 10% by 2020. The country is currently the fifth largest world economy (by 2009GDP at PPP) after only the EU, the US, China, and Japan and has the 10th best GDP real growth rate in the world. India is alsothe second most populous country in the world and one of the youngest among the major world economies (the median age of itspopulation is 25.9 years). Although the country ranks fourth in terms of total Internet users, Internet penetration in India (at 7%) isthe lowest among the emerging economies and has a great potential for growth.

Source: CIA World Factbook; Cari s & Company

2009 GDP at Purchasing Power Parity ($bn)

$14.1

$8.7

$4.2$3.6

$2.8$2.1

USA China Japan India Germany UK


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GDP Trends in India

Indian GDP and GDP growth over the last six years look very compelling.

Source: IMF; Caris & Company

Indian GDP (at PPP) and GDP Growth

$2.36

$2.67

$3.01$3.30

$3.53

$3.8613.4%12.5%

9.6%

6.9%

9.5%

2005 2006 2007 2008 2009 2010

GDP ($ trillion) GDP Growth (Y/Y)

Comparing India with the US and China on Key Economic and Other Relevant Measures

Below we compare India with the US and China on key economic factors and several sectors relevant to this report i.e. totaladvertising and Internet advertising, total retail and E-Commerce, and total travel and online travel.

United States China India

Population (mm) 307 1,339 1,157

Median Age 36.8 35.2 25.9

GDP - PPP ($ trillion) 14.14 8.75 3.57

GDP Growth -2.6% 9.1% 7.4%

GDP per Capita ($) 46,000 6,600 3,100

Internet Users (mm) 239 420 81

Internet Penetration 77% 32% 7%

Internet Users Growth 152% 1767% 1520%

Advertising ($ bil lion) - CY10E 266.6 45.0 5.7

Advertising LT Growth Outlook 2%-3% 8%-10% 10%-12%

Online Advert ising ($ billion) - CY10E 25.9 3.6 0.2

Online Advert ising LT Growth Outlook 13%-15% 24%-27% 32%-35%

Online Advert ising Penetration 10% 8% 4%

Retail ($ billion) - CY10E 3,600.0 1,000.0 350.0

Retail LT Growth Outlook 2%-3% 10%-12% 12%-14%

E-Commerce ($ billion) - CY10E 156.3 24.0 1.4E-Commerce LT Growth Outlook 10%-12% 20%-24% 50%-55%

E-Commerce Penetration 4.3% 2.4% 0.4%

Travel* ($ billion) - CY10E 255.0 65.0 42.0

Travel LT Growth Outlook 2%-3% 6%-8% 8%-10%

Online Travel* ($ billion) - CY10E 106.3 8.5 5.5

Online Travel LT Growth Out look 10%-12% 24%-26% 35%-40%

Online Travel Penetration 42% 13% 13%

* Travel includes leisure and unmanaged corporate travel only

Source: CIA World Factbook; Internet World Stats; Caris & Company

Comparison of the Largest Countries in the World


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Rising Middle Class in India

Today, India experiences profound demographic/socio-economic changes as well and its middle class (defined as Seekers andStrivers by McKinsey & Company) is expected to increase from 50mm in 2005 to 225mm in 2015 and 585mm by 2025.

* Income Brackets in Thousand Indian Rupees per Annum (2000)

Source: McKinsey Global Institute

Share of Indian Population (% of Households) by Income Bracket*

93

80

54

35

22

6

18

41

43

36

4

19

32

1 2

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1985 1995 2005 2015 2025

Deprived (1,000)

2

9

1 21

Section 2: Overview of the Internet Sector in India

In our view, Internet has only scratched the surface in India so far. However, that has been the case for the past decade duringwhich Internet adoption in the country has been painfully slow. India has not only one of the lowest Internet penetration levelsamong the major world economies but also a very small Internet economy when it comes to the overall economic impact and newjob creation. More specifically, Internet advertising and E-Commerce remain very small industries. However, India's Internet hasgiven boost to online travel as well as B2B businesses and both of these segments have seen astronomical growth.

Indian Internet Population & Penetration

India has the 4th largest Internet population in the world after China, the US, and Japan. However, India is the slowest among thelarge nations in terms of Internet adoption. As of June 2010, Internet penetration in the country has only reached 7% way belowany major developed or emerging economy in the world.

The country accounts for 17% of the worldwide population and for only 4% of Internet users. Still, Internet has been growingvery fast in India (1,520% between 2000 and 2010) and we expect penetration to accelerate even further with the curreninfrastructure improvements and growth in wealth and education levels in the country.


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# Country Population

% of WW

Population

Internet

Users

% of WW

Internet

2000-'10

Growth

Internet

Penetration

1 China 1,330,141,295 19% 420,000,000 21% 1,767% 32%

2 United States 310,232,863 5% 239,232,863 12% 152% 77%

3 Japan 126,804,433 2% 99,143,700 5% 111% 78%

4 India 1,173,108,018 17% 81,000,000 4% 1,520% 7%

5 Brazil 201,103,330 3% 75,943,600 4% 1,419% 38%

6 Germany 82,282,988 1% 65,123,800 3% 171% 79%

7 Russia 139,390,205 2% 59,700,000 3% 1,826% 43%

8 United Kingdom 62,348,447 1% 51,442,100 3% 234% 83%

9 France 64,768,389 1% 44,625,300 2% 425% 69%

10 Nigeria 152,217,341 2% 43,982,200 2% 21,891% 29%

WW Total 6,845,609,960 53% 1,966,514,816 60% 445% 29%

Source: Internet World Stats (Jun '10)

Number of Internet Users - Top 10 Countries

Broadband Penetration in India

At 5.1Mbps USA is ranked 28th in the world for bandwidth speed (Korea at 21.4Mbps, Japan at 15.8Mbps, Sweden at 12.8Mbpsand the Netherlands at 11Mbps lead the pack) while India continues to struggle with 256kbps and highly limited broadbandpenetration at 9mm subscribers (out of 81mm Internet users in India). We do not see PC-based broadband becoming moreubiquitous in India any time soon, however, India is in the middle of implementing one of the most advanced 3G mobile networksin the world and we believe with that mobile Internet will get a much needed impetus as an industry.

Worldwide Internet Population and Penetration

Internet adoption has been increasing not only in India but throughout the world. Over the past 10 years, the number of Internetusers worldwide has grown 445% and there is still plenty of room for growth Internet penetration as of June 2010 has jusreached 29% on a global basis.

WW Regions Population

% of Total

Population

Internet

Users

% of Total

Internet

2000-'10

Growth

Internet

Penetration

Af rica 1,013,779,050 15% 110,931,700 6% 2,357% 11%

Asia 3,834,792,852 56% 825,094,396 42% 622% 22%

Europe 813,319,511 12% 475,069,448 24% 352% 58%

Middle East 212,336,924 3% 63,240,946 3% 1,825% 30%

North America 344,124,450 5% 266,224,500 14% 146% 77%

Latin America/Caribbean 592,556,972 9% 204,689,836 10% 1,033% 35%

Oceania/Australia 34,700,201 1% 21,263,990 1% 179% 61%

WW Total 6,845,609,960 100% 1,966,514,816 100% 445% 29%


Number of Worldwide Internet Users

Indian Internet Landscape

Given the size of the country and its global economic impact, India remains in an arguably nascent state of Internet evolutionGoogle, Yahoo!, MSN, AOL, and Facebook are among the most visited websites in India. The other popular public and mostlyprivate Internet companies in the country are presented in the exhibit below roughly classified in eight major categories.


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Online Ad/ ClassifiedsOnline Marketing

Services E-Commerce Online TravelE-Commerce

Services MobileSocial Media &

GamingContent & Digita

Media

US Popular PublicCompanies

Google, Yahoo!, MSN,AOL, Monster,

ValueClick, 24/7Media(WPP), Google, Yahoo!

Amazon, eBay, Rediff(REDF), Apple

Expe dia , P rice line DigitalRiver Go ogle, Apple Google, MS N, Sif y(SIFY), Rediff (REDF)

Google, Yahoo!,MSN, AOL

India Popular Public

Companies

InfoEdge, Sify (SIFY),

Rediff (REDF) N/A N/A

Makemytrip

(MMYT) N/A N/A N/A

Sify (SIFY), Redif

(REDF)

Popular US/Indian

Private Companies

Quikr, Shaadi, Sulekha,

Bharatmatrimony,Justdial, Ideacts

Komli, Interactive

Avenues

Fashonandyou,

Flipcart, Indiamart,Future Bazar

Yatra, Cleartrip,

Via, Travelguru

mCheck, Paymate One97, Nazara,

inmobi, IMImobile,July System, Kirusa

Facebook, Orkut,

Linkedin, Twitter, Hi5,Chakpak, Minglebox,Games2win

Seventymm,

Canvera

Market Size 250mm 30mm 1.4bn 5.5bn $50mm $500mm $25mm $350mm

Long-Term Growth

Rate 32%-35% 35.0% 50%-55% 35%-40% 40.0% 40.0% 40.0% 40.0%

EntrepreneurialOpportunities

High High High High High High High High

M&A Activity High High Moderate High Moderate High Low Moderate

Source: Caris & Company

India Internet Market Overview

Trends for Active Internet Users in India

The Internet user base in India has been growing over the past 10 years but still remains materially limited in reach.

Source: Internet and Mobile Association of India; Caris & Company

Claimed and Active Internet Users in India (MM)

24

811

21

2932

36

42

46

52

5

912

16

32

42

46

50

57

63

71

2000 2001 2003 2004 2006 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09

Active Internet Us ers Claimed Inte rnet Users

Time Spent on the Internet in India RisingFinally

In addition to growth of the overall Internet user base, the time spend on the Internet has gone up, especially quite dramatically inthe last two years.


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Internet Usage - Average Hours per Week

5.6

4.8

6.2

8.2

6.9

9.3

15.7

2001 2003 2004 2006 2007 2008 2009

Top Internet Activities in India

Below we present the top activities that bring people in India online.


Top Online Activities (% of Respondents): 2008 vs. 2009

20

13 13

21 21

4137

46

32

49

76

91

1214

1618

24

33 33

40

45

65

80

87

OnlineBanking

VoIP Calls& Chat

OnlineNews

Book RailTickets

FinancialInfo

OnlineGaming

OnlineJobsites

Text Chat Mus ic /Video

EducationInfo

GeneralSearch

E-Mail

2008 2009


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Below we present the top search activities on the Internet in India.

Source: eMarketer; JuxtConsult; Caris & Company

Most Popular Online Activities in India (% of Respondents)

84%

71%

68%

67%

62%

55%

53%

52%

49%

49%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Online Travel Search

Job Search

Product Search

Instant Messaging/Chatting

Check General News

Dating/Friendship

Check Cricket Content/Scores

Check Sports Other Than Cricket

Marriage Search

English Information Search Engine

Why Indias Internet Adoption has been Slower than Other Large Countries?

While US-based portals and search companies have traditionally seen a large user base out of India, the pure-play India Internethas not seen the kind of growth observed in the US, China, Western Europe, Japan, etc. In our view, the major Internet growthdrivers and impediments in India include the following:

# Growth Drivers # Grow th Impediments

1 Availability of Internet access points 1 Limited reach of the Internet

2 Increasing broadband penetration 2 Poor Internet infrastructure

3 PC shipment and installed base 3 Low bandw idth

4 Rise in white collar jobs with PC and Internet at work 4 Low adoption

5 Internet-capable mobile phones/best 3G Network 5 Small PC installed base

6 Affordable voice and data plans 6 Lack of local content

7 Rising income levels 7 E-Commerce adoption limited

8 News , Email, Search, Social and E-Commerce 8 Low c redit Card penetration

9 Younger Demographics 9 Product development and management lack global standards

10 Emergence of home-grown companies 10 Traditional businesses are in ear ly stage of evolution as well


Major Internet Growth Drivers and Impediments


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Section 3: Overview of Internet Advertising in India

India Internet Advertising Market Forecast

The Indian Internet advertising market is still relatively small in absolute terms about $154mm in 2009, by our estimates but itshows extraordinary growth rates. We are estimating CAGR of 32.9% between 2009 and 2012 for Internet advertising which

compares to 14.5% CAGR for total Indian advertising over the same period. Total Internet ad spend is expected to grow to$360mm by 2012, up from $65mm in 2007 and $210mm in 2010. Currently, Internet advertising is about 3.0% - 3.5% of totaadvertising and we expect its share to grow to 5% by 2012.

$MM 2007 2008 2009E 2010E 2011E 2012E '09-'12 CAGR

Total India Advertising $4,663 $4,962 $4,798 $5,738 $6,484 $7,198 14.5%

Y/Y Change 32.1% 6.4% -3.3% 19.6% 13.0% 11.0%

India Internet Advertising $65 $114 $154 $210 $275 $360 32.9%

Y/Y Change 85% 75% 34.5% 36.8% 31.0% 30.9%

India Internet as a % of Total 1.4% 2.3% 3.2% 3.7% 4.2% 5.0%

Y/Y Increase in Penetrat ion 40 bps 90 bps 90 bps 46 bps 58 bps 76 bps

Source: PricewaterhouseCoopers; eMarketer; Caris & Company estimates; Excludes Online Classifieds

India Internet Advertising Revenue ($MM)

Looking at Various Formats of Internet Advertising in India

State of Search Advertising in India. Similar to most other countries, search in India is dominated by Google and the otherleading search engines such as Yahoo! and Bing. There are two notable home-grown search services that are worth mentioningand those are guruji.com and justdial.com. We believe that Google, Yahoo! and Bing together generate search revenue close to$125mm from India.

State of Display Advertising in India. In addition to the leading US portals i.e. MSN, Yahoo!, AOL, etc., the display ad businesshas dozens of strong home-grown companies especially many with traditional media roots i.e. The Times Group, HindustanTimes, Network18, Rediff, and Sify.

State of Other Online Ad Formats in India. Besides search and display, lead generation is another online ad format that haspotential in India but marketing sophistication is still not very high. Email marketing and video advertising remain smalcategories in India but, with retail and brand revolution, will grow in the coming years.

State of Online Classifieds in India. In our view, online classifieds is perhaps the biggest category for online advertising in Indiawith jobs, real estate, auto, and matrimony having multiple companies with sizeable revenue and growth. As per our estimatesonline classifieds is a $200mm category in India.

State of Online Marketing Services in India. We include online ad networks, interactive ad agencies, search engine marketingagencies (SEMs), and search engine optimization agencies (SEOs) as part of online marketing services in India. Because Interneadvertising remains a small category in India, online marketing services, which is a derivative of the Internet ad spend, remainsvery small as well.

Advertising by Media in India

Unlike in most of the mature markets, advertising is a growth industry in India. While this data are relatively old, below wehighlight Indias adverting industry by format.


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Spending Y/Y Change % Share

Print $2,242.4 16% 47.4%

TV $1,898.7 17% 40.2%

Outdoor $323.9 11% 6.8%

Radio $151.1 38% 3.2%

Internet $82.8 45% 1.8%

Cinema $29.4 24% 0.6%

Total $4,728.3 17% 100.0%

Source: eMarketer; Pitch-Madison; Caris & Company

2008 Advertising Spend in India ($bn)

Section 4: Overview of E-Commerce in India

India E-Commerce Market Forecast

The Indian retail market is the 5th largest in the world at approximately $350bn with less than 10% in the organized retail sector(retail chains/corporate play vs. mom-and-pop shops). What is more important, though, is that unlike in the US, the Indian retaisector is growing at an estimated growth rate of 10% Y/Y until 2018. Consultancy McKinsey expects the Indian retail market togrow 4x by 2025.

In India, the retail E-Commerce market is currently a tiny fraction of the total retail market about 0.5% and is expected toreach $1.4bn in 2010. By our estimates, its share will more than double by 2012 due to much faster growth compared to overalretail. We expect E-Commerce in India to grow almost 3x to 4x faster than the overall retail market (58.5% CAGR vs. 15.4%CAGR between 2009 and 2012). We estimate retail E-Commerce to reach $5bn by 2012 (up from $500mm in 2008 and $1.4bn in2010). We think by 2013, E-Commerce in India will achieve 1% penetration.

Sales in $MM 2008 2009 2010E 2011E 2012E 2013E '09-'12 CAGR

Total Retail $260,000 $300,000 $350,000 $404,250 $460,845 $520,755 15.4%

Y/Y Change 15.6% 15.4% 16.7% 15.5% 14.0% 13.0%

Total Retail E-Commerce $500 $850 $1,400 $2,212 $3,384 $5,009 58.5%

Y/Y Change 81.8% 70.0% 64.7% 58.0% 53.0% 48.0%

E-Commerce as % of Retail 0.2% 0.3% 0.4% 0.5% 0.7% 1.0%

Y/Y Increase in Penetration 0.07% 0.09% 0.12% 0.15% 0.19% 0.23%

* Excludes sales of travel products and services

Source: Caris & Company estimates

India Retail and E-Commerce Sales ($MM)

Shift in Spending Behavior in India is a Catalyst for E-Commerce Growth

Younger demographics, higher education levels, global cultural awareness, and increasing affordability are brining shifts in the

spending behavior of consumers in India. We believe that these shifts may serve as a catalyst for the E-Commerce growth, whichhas lagged behind on the adoption curve.

Below we present a chart that shows where the average Indian consumer is allocating his or her share of wallet.


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Source: McKinsey Global Institute

Share of Average Household Consumption in India

56

4234

25

5

6

5

5

14

12

12

10

2

3

3

3

4

8

9

11

11

17

19

20

1

23

6

35

6

9

4 7 913

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 2005 2015 2025

Health care

Education & recreation

Communication

Transportation

Personal products & services

Household products

Housing & utilities

Apparel

Food, beverages, tobacco

Section 5: Overview of Online Travel in India

India Online Travel Market Forecast

Tourism demand in India is growing not only from domestic sources more Indians taking vacation but also from internationalsources foreign tourists visiting the country. The Indian Ministry of Tourism has set a goal of reaching 10mm foreign touristarrivals (FTAs) in 2010 (compared to 5.1mm in 2009) and 675mm domestic tourists. This target seems somewhat ambitioustoday (FTAs have reached just 3.5mm by August 2010) but the efforts the Indian government puts in promoting the country as atourist destination (i.e. its Incredible India media campaign, etc.) should pay off in the near future (most likely once macroeconomic uncertainties ease around the world).

India is among the fastest growing travel and tourism markets in the world. Travel and tourism is a $40bn industry in India(includes managed corporate travel; $20bn for leisure and unmanaged corporate travel) and online is expected to reach $5.5bn ingross bookings by the end of 2010. While online travel has low penetration, relative to Indias E-Commerce market, it is thebiggest category online. We estimate the online travel market will grow at a CAGR of 27.8% between 2009 and 2012 and reach$8.9bn by 2012. Online travel is expected to grow almost twice as fast as the overall Indian travel market during that period.

2008 2009 2010E 2011E 2012E '09-'12 CAGR

Indian Total Travel $35,200 $36,000 $42,000 $48,426 $55,254 15.4%

Y/Y Change -- 2.3% 16.7% 15.3% 14.1%

Indian Online Travel $3,100 $4,250 $5,500 $7,040 $8,870 27.8%Y/Y Change 82% 37.1% 29.4% 28.0% 26.0%

Online Travel as % of Total 8.8% 11.8% 13.1% 14.5% 16.1%

Y/Y Increase in Penetration -- 3.00% 1.29% 1.44% 1.52%

Source: WTTC; Caris & Company estimates

Indian Total and Online Travel Sales ($MM)


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Travel is Among the Top Products Indians Search For Online

One interesting trend in India is that travel products are the most popular type of products which Internet users research andpurchase online. This is very encouraging for the Indian online travel industry and bodes well for all OTAs domestic and multi-national.

Source: eMarketer; Google; Caris & Company

Types of Products Researched and Purchased Online

66%

40%

26%

0% 10% 20% 30% 40% 50% 60% 70%

Travel Products

Entertainment Products

Technology Products

Section 6: Overview of Mobile Internet in India

Indian Mobile Internet

India has more than half a billion mobile subscribers today (2nd large mobile subs in the world) and very soon it is set to launchthe worlds most advanced 3G network that many experts claim to be as fast as WiMAX. In our view, mobile Internet in India isway ahead of mobile Internet in the US and Western Europe because of several factors 1) the telecom sector picked-up in Indialater than in Western countries but that allowed India to benefit from best practices, 2) the PC is less affordable and Internetconnections are not that pervasive so mobile has become a gadget of choice to access the Internet, 3) mobile plans for voice anddata are highly affordable.

CAGR

2008 2009 2010 2011 2012 2013 2014 '09 - '12

Total Populat ion 1,140.6 1,156.9 1,173.1 1,189.2 1,205.1 1,220.8 1,236.3 1.4%

Y/Y Growth -- 1.4% 1.4% 1.4% 1.3% 1.3% 1.3%

Mobile Phone Subs 346.9 525.2 604.1 666.0 723.1 787.4 853.0 11.2%

Y/Y Growth -- 51.4% 15.0% 10.2% 8.6% 8.9% 8.3%

Penetration 30.4% 45.4% 51.5% 56.0% 60.0% 64.5% 69.0%

Mobile Internet Users 2.0 5.0 12.1 30.0 65.1 114.2 162.1 135.3%

Y/Y Growth -- 150.0% 142.0% 147.9% 117.0% 75.4% 41.9%

Penetration 0.2% 0.4% 1.0% 2.5% 5.4% 9.4% 13.1%

Source: eMarketer; US Census Bureau; Caris & Company

Mobile Phone and Mobile Internet Users in India: 2008 - 2014 (MM)

India Is the 3rd Largest Nation for Mobile Internet

Given this favorable environment, it is not surprising that India is one of the countries with the highest mobile Internet traffic inthe world. According to eMarketer, the country accounted for 11% of total mobile Internet traffic in February 2009 surpassedonly by the US and the UK which together accounted for half of all the traffic.


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Source: eMarketer; Bango; Caris & Company

Top 10 Countries Ranked by Mobile Internet Traffic, Feb. 2009

US 29.3%

UK 20.3%

India 11.1%

Indonesia 5.5%

South Africa 5.4%

Egypt 1.7%

Malaysia 1.4%

Spain 1.4%

Portugal 1.2%

Sweden 1.1%

Other 21.6%

0% 5% 10% 15% 20% 25% 30% 35%

India has the Highest Mobile Users Growth Among BRIC Nations

Mobile Internet usage is also expected to grow materially over the next 4-5 years as the country upgrades its network and smart-phones become more affordable (due to increasing wealth and competitive pricing pressure). According to eMarketer, the numberof mobile Internet users in India is expected to grow at the astonishing 111% CAGR between 2009 and 2012. This is about 4xfaster than the other BRIC countries.

CAGR

2009 2010 2011 2012 2013 2014 '09 - '12

Brazil 19.1 31.6 46.2 58.6 71.3 82.8 31.2%

Russ ia 15.7 23.6 29.8 42.1 50.9 60.1 29.2%

India 5.0 12.1 30.0 65.1 114.2 162.1 111.3%

China 233.0 372.8 526.4 686.9 831.9 956.7 30.7%

Source: eMarketer; Caris & Company

Mobile Internet Users in BRIC: 2009 - 2014 (MM)

India is the 2nd

Largest BRIC Country for Mobile Ad Spend

At the same time, growth of mobile advertising spend in the country is expected to be less robust, compared to the other BRICcountries, but still at a remarkable 60% CAGR between 2009 and 2012.

CAGR

2009 2010 2011 2012 '09 - '12

Brazil 6.1 11.8 23.8 40.9 88.6%

Russ ia 4.8 6.4 12.1 22.4 67.1%

India 20.8 35.4 56.5 85.4 60.1%

China 101.0 223.2 448.7 699.9 90.7%


Mobile Ad Spend in BRIC: 2009 - 2012 ($MM)


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Mobile Internet Advertising Trends in India and China

Mobile Internet advertising is also a small market today about $21mm in 2009 but is also expected to show tremendousgrowth over the next couple of years. Per eMarketer, mobile ad spend will see CAGR of around 60% between 2009 and 2012.


Mobile Ad Spend - India vs. China: 2009 - 2012 ($MM)

$20.8$35.4

$56.5$85.4

$101.0

$223.2

$448.7

$699.9

2009 2010 2011 2012

In dia Ch ina

Section 7: Growth Segments in Indian Internet

In our view, Internet as an industry remains in an early stage of evolution compared to how it ramped up in the US and China.That also means that almost any category in India presents a long-term growth opportunity. While India's Internet overall willoutperform the rest of the big nations, below we present the 10 specific Internet segments where we expect to see the mostremarkable growth over the next several years. We also show some of the key players in each segment.

# Category Popular Companies

1 O nline Travel Mak eMyTrip, Ya tra, Cleartrip , Via, Travelguru, redBus

2 E -Co mme rce Fli pka rt.co m, Fash ion you. com , Re diff .com , Futu re B azaa r, Naa pto l, I nfi be am

3 Matrimony and Dating Shaadi.com, BharatMatrimony.com, Jeevansathi .com

4 Internet Advertising/Search Justdial, Guruji, Web18, Rediff.com, Sify, Time, PubMatic, Ideacts

5 Mobile Content and VAS Kirusa, Cellcast, InMobi, Comviva, One97 Communications, IMImobile.com, July Systems

6 Digital Agency/ Ad Networks Interactive Avenues/Ad Magnate, Komli, RS LiveMedia

7 Online Classifieds Naukri, Sulekha, MotorExchange, Carwale, 99acres.com, magicbricks.com, Quikr.com, Makaan.com, Indiamart.com

8 O nline/Mobile Payment mCheck, PayMat e

9 Online Education TutorVista, TopChalks

10 Content/Social /Gaming Minglebox.com, Nazara, Chakpak, Games2win


Top 10 Growth Segments in India's Internet Sector


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Section 8: Overview of Indian Public Internet Companies

India is a small market when it comes to publicly traded Internet companies. Against roughly 50 public Internet companies in theUS and close to 25-30 in China, there are four notable public Internet companies in India MakeMyTrip, Info Edge (ticker:532777-BOM), Rediff.com (ticker: REDF), and Sify (ticker: SIFY). Below we present some key metrics on these companies.

MakeMyTrip Info Edge Rediff Sify

Ticker MMYT 532777-BOM REDF SIFY

Year Established 2000 1995 1996 1998

FY10 Revenue ($MM) $40.3 $57.4 $18.8 $156.9

Total Employees 800 1,550 330 3,000

Monthly Uniques ('000) 2,159 4,662 9,917 2,443

Source: Company reports; comScore; Caris & Company

Public Internet Companies

MakeMyTrip

MakeMyTrip (NASDAQ: MMYT) is the largest online travel company in India, based on gross bookings, and offers a wide range

of travel and travel-related services and products to residents of India and non-resident Indians and others traveling to India fromthe United States, Canada, the United Arab Emirates, and other countries. It provides business and leisure travelers with stand-alone and packaged travel products and services that include air tickets, hotels, packages, rail tickets, bus tickets, car hire, andancillary travel services such as facilitating access to travel insurance, visa processing, etc. Through its websites focused on itsfour core markets (i.e. India, US, Canada, and UAE), call centers, 19 travel stores in major Indian cities, and a network of 2,000agents the company provides travelers with the tools and information they need to efficiently research, plan, book, and purchasetravel services and products in India and overseas. MakeMyTrip started operations in 2000 and spent its first five years focusedon the non-resident Indian market in the US (selling primarily air tickets for India-bound travel). The company started its Indianbusiness in September 2005 with the launch of its Indian website www.makemytrip.com.

Info Edge

Info Edge (India) Limited (532777-BOM) is Indias premier online classifieds company in recruitment, matrimony, real estate,education, and related services. Its Recruitment business includes online recruitment classifieds (www.naukri.com, Indias top

job-search website, and www.naukrigulf.com, a website focused at the Middle East job market) and offline executive search(www.quadranglesearch.com). Other websites in this business include professional networking site (www.brijj.com) and a newhiring website (www.firstnaukri.com). Info Edge's Matrimony business comprises of online matrimony classifieds(www.jeevansathi.com) and 14 offline Jeevansathi Match Points. Its Real Estate business includes online real estate classifieds(www.99acres.com) and a real estate brokerage business (www.allcheckdeals.com). Its Education business comprises of onlineeducation classifieds (www.shiksha.com). Info Edge was incorporated on May 1, 1995 and is headquartered in Noida, UttarPradesh, India. The company maintains a network of 49 offices located in 32 cities throughout India and employs about 1,550people.

Rediff.com

Rediff.com (NASDAQ: REDF) is one of the premier worldwide web portals providing news, information, communication,entertainment, and shopping services. Its website is one of the most visited in India (among the Top 5 based on unique visitors

data by comScore). The company provides a platform for Indians across the world to connect with each other online. Rediff.comalso offers the Indian American community one of the oldest and largest Indian weekly newspapers, India Abroad. The companywas founded in 1996 and is headquartered in Mumbai, India with offices in New Delhi, Bangalore, Chennai, Hyderabad, and NewYork, USA. Rediff.com employed 329 people at the end of June 2010.

Sify Technologies Limited

Sify Technologies Limited (NASDAQ: SIFY) provides Internet, network, and E-Commerce services mostly in India. It was oneof the first private companies to offer Internet access in India when the sector was opened to private operators. The companyoffers corporate network/data services as well as application services, such as website design, development, content managementsearch engine optimization, hosting, domain name management, secure socket layer certificate for websites, and server space in


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required operating system and database. Further, it offers Internet access services, including high-speed/broadband access tohomes over cable, public Internet access from its network of e-ports, and VoIP and dial-up access to homes. The company has seup a chain of franchised internet cafes a network of over 3,300 cyber-cafes. Sify was incorporated in December 1995 and begancommercial operations in April 1998. It is headquartered in Chennai, India.

Section 9: IPO/M&A Outlook for the Internet Sector in India

So far, Internet has not been among the top sectors for M&A deals and IPOs in India. However, this may change in the comingyears.

India Internet IPO Outlook

As far as IPO is concerned, we believe that Indian Internet companies with compelling fundamentals and sizeable revenue andbalance sheets have an opportunity to tap into a global investors base that is looking for growth and thematic stories with apossible listing on NASDAQ (similar to IPO and listing of Makemytrip on NASDAQ in Aug 2010).

In 2005, the US Internet sector had created $350bn in market capitalization while China was at under $5bn and India stood atunder $500mm. By the end of 2009, the US Internet sector market capitalization reached $450bn, China was at $100bn and Indiaremained under $5bn. As per our estimates, there are roughly 50-60 public Internet companies in the US, 20-25 in China, andfewer than 5 in India. However, in the next 3-5 years, we think India's Internet sector will finally create bigger economicactivities/impact and draw global attention.

India Internet M&A Outlook

We believe that global Internet companies will get more active in India-focused Internet M&A in the next 2-3 years as they searchfor hyper-growth regions across the world and India starts looking more attractive on absolute numbers basis. eBay andMonster.com have made Internet acquisition in India to expand their geographical presences but other large Internet companieshave focused on organic growth to expand in India so far. However, we believe that the US-based Internet companies will getmore aggressive in India's Internet market. For M&A perspective, we find the entire market to be attractive but in our view thefollowing 5 categories are very attractive i.e. online travel, interactive ad agencies, Internet ad networks, mobile Internet, andonline music and content.

Overview of Private Internet Companies

The majority of private Internet companies in India are concentrated in several segments travel, portals, Internet advertisingcontent (both Internet and mobile consumption), E-Commerce, social networking, classifieds, matrimony/dating, and educationSome of the most popular names include Yatra, Cleartrip, Travelguru, Shaadi.com, Interactive Avenues, Komli, Quikr, SulekhaJustDial, and BharatMatrimony.com.

Top 50 Hot Internet Companies

Below we have compiled a list of the Top 50 private Internet companies in India.


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# Company Description # Company Description

1 9.9 Media Traditional and online media 26 mChek Mobile payment platform

2 BharatMatrimony.com Matrimonial services 27 Minglebox.com Social network ing s ite

3 Canvera Online/offline digital photography 28 MotorExchange B2B marketplace for used vehicles

4 Cellcast Interact ive mobile content 29 Naaptol Comparison-based social shopping portal

5 Chakpak Media Online movie portal 30 Nazara Technologies Brand-led mobile entertainment content

6 ClearTrip Online travel portal 31 ngpay Mobile commerce service platform

7 ClickIndia.com Online class if ieds 32 OLX Free online classifieds

8 Desi Hits South Asian digital media entertainment hub 33 One97 Mobile content and VAS9 DimDim Web conferencing solutions 34 PayMate Wireless payments

10 FashionandY ou.com Private (invit ation only) shopping club 35 PubMatic A d monetization and management solutions

11 Flipkart.com Online shopping site 36 Quikr Online classifieds

12 Future Bazaar Online shopping site 37 redBus Online bus ticketing

13 Games2win Online gaming 38 RS LiveMedia Digital display network

14 GETIT Mult i-media information servic es 39 Saffronart Modern art website

15 G ingersoft Media SMS b ased t argeted advertising platform 40 Sevent ymm O nline movie and entert ainment services

16 Guruji Search engine 41 Shaadi.com Matrimonial services

17 IMImobile Mobile VAS 42 SMS GupShup Social SMS service

18 Infibeam.com Online shopping site 43 Sulekha Class if ieds & yellow pages

19 InMobi Mobile ad network 44 TopChalks Digital education services

20 Interactive Avenues Digital marketing agency 45 Travelguru Online travel agency

21 July Systems Mobile media company 46 TutorVista Educational portal

22 JustDial Local search engine 47 ValueFirst Enterprise mobility and mobile marketing

23 Kirusa Advanced mobile solut ions 48 Vdopia Internet video ad network

24 Komli Online ad network platform 49 Via Travel services

25 mCarbon Mobile c ontent and service management 50 Yatra Online travel agency

Source: Company website; Caris & Company

Private Indian Internet Companies

Top Internet-focused VCs in India

Most Internet-focused VCs in India either funded Silicon Valley-style early stage companies in the late 1990s in the midst of the.com bubble or invest today on opportunistic basis. However, the majority of VCs operating in India tend to invest in non-Internet companies or start-ups that have already achieved some traction with self funding or seed money. In our view, VCs inIndia tend to stay away from early stage start-ups as they can find growth companies with rewarding exit options in categoriesthat are saturated in mature markets.

Below we present a list of 12 notable venture capital firms that invest in the Indian Internet sector. In our view, Sequoia, Helion

and SAIF are the most Internet-focused VCs in India with series of noteworthy investments and successful exits.

# Name

1 Sequoia Capital

2 Helion Venture Partners

3 SAIF Partners

4 Kliener Perkins/Sherpalo

5 Draper Fisher Jurvetson

6 NEA

7 Matrix Partners

8 Canaan Partners

9 Nexus Venture Partners

10 Reliance Technology Ventures Ltd

11 Indo-US Ventures

12 Sierra Ventures


Notable India-Focused VCs


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Section 10: Worldwide and US Internet Overview

Global Internet Population and Penetration by Region

There are close to 7 billion people living on the Earth today and roughly 2 billion of them are Internet users. Over the past 10

years, the number of Internet users has grown 445% and there is still plenty of room for growth Internet penetration as of June2010 has just reached 29% on a global basis. In the US, Internet users are close to 240 million for a penetration rate of 77% oneof the highest across the world.

WW Regions Population

% of Total

Population Internet Users

% of Total

Internet

2000-'10

Growth

Internet

Penetration

Africa 1,013,779,050 15% 110,931,700 6% 2,357% 11%

Asia 3,834,792,852 56% 825,094,396 42% 622% 22%

Europe 813,319,511 12% 475,069,448 24% 352% 58%

Middle East 212,336,924 3% 63,240,946 3% 1,825% 30%

North America 344,124,450 5% 266,224,500 14% 146% 77%

Latin America/Caribbean 592,556,972 9% 204,689,836 10% 1,033% 35%

Oceania/Australia 34,700,201 1% 21,263,990 1% 179% 61%WW Total 6,845,609,960 100% 1,966,514,816 100% 445% 29%


Number of Worldwide Internet Users

Overview of the Internet Landscape

Internet Advertising

Online Marketing

Services E-Commerce Online Travel

E-Commerce

Services

Social Media &

Gaming

Content & Digital

Media

Popular US Public

Companies

Google,Microsof t, Yahoo!,

AOL, Ask

Marchex, ValueClick,

Websense

Amazon, BlueNile, eBay,

Overstock.com, Shutterfly,

TigerDirect, Alibaba

Expedia, Priceline, Orbitz,

Travelzoo

Digital River, GSI

Commerce, PSFw eb

N/A Netflix, RealNetw orks,

TechTarget, The Knot,

TheStreet.com, WebMD

Popular US Private

Companies

Motelyfools, Bankrate,

Netshelter, Glam,Plentyoffish

AdBrite, AudienceScience,

Casale Media, Collective,Didit, Eff icient Frontier,

ExactTarget, JumpTap,

Specific Media

Become, Etsy, New egg,

Nextag, Zazzle, Z illow

Kay ak, Tr av eloc ity Baz aar voic e,

PowerReview s,Retrevo, Shopwiki,

Wise

Facebook, LinkedIn,

Twitter, Yelp, Zynga,Playfish, Rock You,

Mindjolt Games,

SlashKey, Country Lif e

Edmunds, Fool.com,

Hulu, Joost, LoveFilm,Metacafe, Oanda,

Pandora

Global Market Size $46bn $3-$5bn $518bn $275bn $8-$10bn $2-$3bn $4-$5bn

Global LT Grow th

Rate 15% 14%-16% 15% 13% 18%-20% 40%-50% 15%-17%

Entrepreneurial

Opportunities

High High Moderate Moderate Low High High

M&A Activity High High Moderate Moderate Moderate High Moderate


Internet Landscape

Worldwide Online Advertising Forecast

We expect worldwide online advertising to reach $46.5bn in 2010, up 15.0% from 2009. We estimate worldwide onlineadvertising will reach $62bn by 2012, a CAGR of 15.4% from 2009 to 2012, and will become 8.7% of total worldwideadvertising in 2012, up from 6.3% in 2009.


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$MM 2007 2008 2009E 2010E 2011E 2012E '09-'12 CAGR

Total Worldw ide Advertising $639,700 $659,103 $637,543 $655,937 $684,683 $715,493 3.9%

Y/Y Change 5.8% 3.0% -3.3% 2.9% 4.4% 4.5%

WW Internet Advertising $35,663 $40,218 $40,354 $46,459 $53,593 $61,978 15.4%

Grow th Rate 27% 13% 0.3% 15.1% 15.4% 15.6%

WW Internet as % of Total 5.6% 6.1% 6.3% 7.1% 7.8% 8.7%Y/Y Increase in Penetration 94 bps 53 bps 23 bps 75 bps 74 bps 83 bps

Source: Universal McCann; IAB & PricewaterhouseCoopers; Caris & Company estimates

Worldwide Internet Advertising Revenue ($MM)

Worldwide Online Advertising by Format

We believe that Search will remain the largest online ad category and its market share will go up worldwide from 51% of totalonline advertising in 2009 to 53% in 2012. We estimate Display advertising to account for 32% of total online advertising in 2012(down 300bps from 2009) and Classifieds to decline to 7% of total online advertising in 2012 (down 200bps from 2009). We alsobelieve that search will grow faster than the overall market but we expect rich media and video advertising to grow even fastethan search.

Ad Revenue ($MM) 2006 2007 2008 2009E 2010E 2011E 2012E

Total $28,000 $35,663 $40,218 $40,354 $46,459 $53,593 $61,978

Search $11,867 $15,923 $19,188 $20,712 $23,779 $27,801 $32,872

Classifieds $3,817 $4,405 $4,457 $3,536 $3,775 $4,131 $4,619

Referrals/Lead Gen $1,740 $2,063 $2,354 $2,273 $2,607 $2,950 $3,359

Email $449 $569 $637 $696 $754 $902 $1,008

Display Related Ads $10,128 $12,704 $13,817 $13,964 $15,544 $17,808 $20,121

Banners Ads $7,439 $8,646 $9,469 $9,618 $10,756 $12,030 $13,179

Rich Media/Video ads $1,738 $2,843 $3,183 $3,464 $4,044 $4,953 $6,023

Sponsorships $951 $1,214 $1,165 $883 $745 $825 $919

Ad Revenue (Y/Y Grow th) 2006 2007 2008 2009E 2010E 2011E 2011E

Total 33.3% 27.4% 12.8% 0.3% 15.1% 15.4% 15.6%Search 34% 34% 21% 8% 15% 17% 18%

Classifieds 40% 15% 1% -21% 7% 9% 12%

Referrals/Lead Gen 73% 19% 14% -3% 15% 13% 14%

Email 43% 27% 12% 9% 8% 20% 12%

Display Related Ads 25% 25% 9% 1% 11% 15% 13%

Banners Ads 33% 16% 10% 2% 12% 12% 10%

Rich Media/Video ads 25% 64% 12% 9% 17% 22% 22%

Sponsorships -1% 28% -4% -24% -16% 11% 11%

Ad Revenue (% of Total) 2006 2007 2008 2009E 2010E 2011E 2012E

Total 100% 100% 100% 100% 100% 100% 100%

Search 42% 45% 48% 51% 51% 52% 53%

Classifieds 14% 12% 11% 9% 8% 8% 7%

Referrals/Lead Gen 6% 6% 6% 6% 6% 6% 5%

Email 2% 2% 2% 2% 2% 2% 2%


Banners Ads 27% 24% 24% 24% 23% 22% 21%


Sponsorships 3% 3% 3% 2% 2% 2% 1%


Worldwide Internet Advertising by Category/Format


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U.S. Online Advertising Forecast

We expect U.S. online advertising to reach $25.9bn in 2010, up 14.4% from 2009. We estimate U.S. online advertising will reach$33.4bn by 2012, a CAGR of 13.8% from 2009 to 2012, and will become 11.8% of total U.S. advertising in 2012, up from 8.7%in 2009.

$MM 2007 2008 2009E 2010E 2011E 2012E '09-'12 CAGR

Total U.S. Advertising $279,600 $280,998 $261,328 $266,555 $273,885 $282,102 2.6%

Y/Y Change -0.7% 0.5% -7.0% 2.0% 2.75% 3.00%

U.S. Internet Advertising $21,206 $23,448 $22,661 $25,935 $29,375 $33,401 13.8%

Y/Y Change 26% 11% -3.4% 14.4% 13.3% 13.7%

U.S. Internet as a % of Total 7.6% 8.3% 8.7% 9.7% 10.7% 11.8%

Y/Y Increase in Penetration 159 bps 76 bps 33 bps 106 bps 100 bps 111 bps


U.S. Internet Advertising Revenue ($MM)

U.S. Online Advertising by Format

We believe that Search will remain the largest online ad category and its market share will go up in the U.S. from 47% of totaonline advertising in 2009 to 51% in 2012. We estimate Display advertising to account for 33% of total online advertising in 2012(down 200bps from 2009) and Classifieds to decline to 8% of total online advertising in 2012 (down 200bps from 2009). We alsobelieve that search will grow faster than the overall U.S. market but we expect rich media and video advertising to grow evenfaster than search.

Ad Revenue ($MM) 2006 2007 2008 2009 2010E 2011E 2012E

Total $16,879 $21,206 $23,448 $22,661 $25,935 $29,375 $33,401

Search $6,752 $8,694 $10,552 $11,290 $12,645 $14,542 $16,868

Classif ieds $3,038 $3,393 $3,283 $2,298 $2,390 $2,557 $2,762

Referrals/Lead Gen $1,350 $1,484 $1,641 $1,477 $1,581 $1,739 $1,930

Email $338 $424 $469 $519 $549 $624 $679

Display Related Ads $5,401 $7,210 $7,738 $7,904 $8,771 $9,913 $11,162Banners Ads $3,713 $4,453 $4,924 $4,973 $5,471 $6,072 $6,649

Rich Media/Video ads $1,182 $2,121 $2,345 $2,579 $2,966 $3,500 $4,165

Sponsorships $506 $636 $469 $352 $334 $341 $348

Ad Revenue (Y/Y Growth) 2006 2007 2008 2009E 2010E 2011E 2012E

Total 34.6% 25.6% 10.6% -3.4% 14.4% 13.3% 13.7%

Search 31% 29% 21% 7% 12% 15% 16%

Classif ieds 42% 12% -3% -30% 4% 7% 8%

Referrals/Lead Gen 79% 10% 11% -10% 7% 10% 11%

Email 47% 26% 11% 11% 6% 14% 9%


Banners Ads 51% 20% 11% 1% 10% 11% 10%


Sponsorships -19% 26% -26% -25% -5% 2% 2%

Ad Revenue (% of Total) 2006 2007 2008 2009E 2010E 2011E 2012E

Total 100% 100% 100% 100% 100% 100% 100%

Search 40% 41% 45% 47% 49% 50% 51%

Classif ieds 18% 16% 14% 10% 9% 9% 8%

Referrals/Lead Gen 8% 7% 7% 6% 6% 6% 6%

Email 2% 2% 2% 1% 2% 2% 2%


Banners Ads 22% 21% 21% 22% 21% 21% 20%


Sponsorships 3% 3% 2% 2% 1% 1% 1%

Source: Universal McCann; IAB & PricewaterhouseCoopers; Cari s & Company estimates

U.S. Internet Advertising by Category/Format


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U.S. Online Advertising Historical Trends

Internet advertising spend in the US has been growing consistently between 2002 and 2008 and only in 2009 saw a decline due tothe economic recession which started in 2008.


US Internet Ad Revenue History ($MM)

$8,087$7,134

$6,009

$7,267

$10,095

$12,542

$16,879

$21,206

$23,448 $22,66175%

-12%-16%

21%

39%

24%

35%26%

11%

-3%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Online Ad Revenue ($MM) Y/Y Change

54% CAGR from 1995 to 2009

16% CAGR from 2005 to 2009

Non-U.S. Online Advertising Forecast

We believe that non-U.S. online advertising will continue to grow faster than the overall U.S. online ad growth but we also thinkthe U.S. will remain the largest online ad market in the world for the foreseeable future. We expect non-U.S. online advertising toreach $20.5bn in 2010, up 16.0% from 2009. We estimate non-U.S. online advertising will reach $28.6bn by 2012, a CAGR of17.3% from 2009 to 2012.

$MM 2007 2008 2009E 2010E 2011E 2012E '09-'12 CAGR

Total Non-U.S. Advertising $360,100 $378,105 $376,214 $389,382 $410,798 $433,392 4.8%

Y/Y Change 11.5% 5.0% -0.5% 3.5% 5.5% 5.5%

Non-U.S. Internet Advertising $14,457 $16,770 $17,693 $20,524 $24,218 $28,577 17.3%

Y/Y Change 30.0% 16.0% 5.5% 16.0% 18.0% 18.0%

Non-U.S. Internet as a % of Total 4.0% 4.4% 4.7% 5.3% 5.9% 6.6%

Y/Y Increase in Penetration 57 bps 42 bps 27 bps 57 bps 62 bps 70 bps

Source: Universal McCann; IAB & P ricewaterhouseCoopers; Caris & Company es timates

Non-U.S. Internet Advertising Revenue ($MM)

Non-U.S. Online Advertising by Format

We believe that Search will remain the largest online ad category internationally as well and its market share will go up from 53%of total online advertising in 2009 to 56% in 2012. We estimate Display advertising to account for 31% of total non-U.S. onlineadvertising in 2012 (down 300bps from 2009) and Classifieds to stay flat at 7% of total non-U.S. online advertising in 2012.


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U.S. E-Commerce Forecast

We expect E-Commerce in the US to reach $156.3 in 2010, up 9% from 2009. We are also forecasting US E-Commerce sales toreach $197.0bn in 2012, up from $143.4bn in 2009 (a CAGR of 11.2%).

Sales in $MM 2007 2008 2009A 2010E 2011E 2012E '09-'12 CAGR

Total U.S. Retail $4,007,581 $3,951,865 $3,671,881 $3,780,855 $3,932,089 $4,099,203 3.7%

Y/Y Change 3.1% -1.4% -7.1% 3.0% 4.0% 4.3%

Total U.S. Retail E-Commerce $136,768 $142,100 $143,420 $156,328 $175,087 $196,973 11.2%

Y/Y Change 20.0% 3.9% 0.9% 9.0% 12.0% 12.5%

E-Commerce as % of Retail 3.4% 3.6% 3.9% 4.1% 4.5% 4.8%

Y/Y Increase in Penetration 0.48% 0.18% 0.31% 0.23% 0.32% 0.35%

Source: U.S. Department of Commerce; Caris & Company estimates; Does not include travel, financial services, or event ticket sales.

E-Commerce sales are goods and services where an order is placed by the buyer or price and terms of sale are negotiated over an

Internet, extranet, EDI network, e-mail, or other online system. Payment may or may not be made online.

U.S. Retail and E-Commerce Sales

U.S. Online Travel

We expect U.S. online travel to reach $106.3bn in 2010, up 11.5% from 2009. We estimate U.S. online travel will reach $134.5bnby 2012, a CAGR of 12.2% from 2009 to 2012.

2008 2009 2010E 2011E 2012E '09-'12 CAGR

B2C E-Commerce $237.4 $238.7 $262.6 $294.1 $331.5 11.6%

Y/Y Change 5.2% 0.6% 10.0% 12.0% 12.7%

Retail E-Commerce* $142.1 $143.4 $156.3 $175.1 $197.0 11.2%

Y/Y Change 4.9% 2.5% 8.5% 12.0% 12.0%

Online Travel** $95.3 $95.3 $106.3 $119.0 $134.5 12.2%

Y/Y Change 6.2% 0.0% 11.5% 12.0% 13.0%As % of B2C E-Commerce Sales 40% 40% 40% 40% 41%

* Excludes sales of travel, financial services and event tickets

** Includes online leisure and unmanaged business travel sales

Source: U.S. Department of Commerce; eMarketer; Caris & Company estimates

U.S. B2C E-Commerce Sales by Segment ($bn)


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Key Internet Growth Drivers

\

Major Internet M&A Themes for 2010

Below we highlight 15 different Internet M&A themes along with the likely top acquirers for each of the 15 themes.

# Internet M&A Themes Possible Acquirer Categories Examples of Possible Acquirers

1 Social media/gaming Large Internet or Traditional Media GOOG, YHOO, ABC, Viacom, AOL, CBS

2 Ad networks Traditional Advertising, Top 4 Internet, Large Ad Networks IPG, WPP, Omnicom, MSFT, YHOO, VCLK

3 Digital media download E-Commerce or Traditional Media AMZN, ABC, Viacom, AAPL

4 Web analyt ics & opt imization Top 4 Internet, Ad Networks MSFT, AOL, VCLK, Advert ising.com

5 International Top 20 US Internet Companies GOOG, TTGT

6 Vertical conten t p lay Large Po rtals, Small -t o-mid S ize Ve rt icall y Focused YHOO, AO L, KNOT, WBMD, TTGT7 Vertical E-Commerce play Top E-Commerce AMZN, EBAY

8 Ad targeting Top 4 Internet, Large Social Networks, Traditional Media IPG, WPP, Omnicom, GOOG, MSFT, YHOO, VCLK

9 Apps and widgets Top 4 Internet, Handset Manufacturers GOOG, AOL, YHOO, MSFT, NOK, MOT, Samsung

10 O nline off ic e p ro ductivity to ols To p 4 In tern et, La rg e Te ch Co mpa nies GOO G, MSFT, AM ZN, CSCO, IBM, HP Q

11 O the r Clo ud comp uting models To p 4 In tern et, La rge Te ch Co mpa nies GOO G, MSFT, AM ZN, CSCO, IBM, HP Q

12 Mobile Internet Top 4 Internet, IT Hardware, Handset OEMs GOOG, AOL, YHOO, MSFT, AAPL, HPQ, DELL, NOK

13 E-Commerce infrastructure Large E-Commerce AMZN, EBAY

14 Email market ing Industry Consolidation ExactTarget, VCLK

15 Digita l market inte lli gence Audience Measuremen t, Online Market Resea rch SCOR, Nielsen


M&A Themes in 2010

Display Growth Drivers

1. Wide reach, more time spent

2. Adoption of banner advertising byCPG and other big advertisers

3. Video advertising - attractive tobroader advertisers; high CPM

4. Behavioral targeting - higherconversion and CPM

5. Contextual ads - better targetingtechnologies, CPC pricing

Display Growth Drivers

1. Wide reach, more time spent

2. Adoption of banner advertising byCPG and other big advertisers

3. Video advertising - attractive tobroader advertisers; high CPM

4. Behavioral targeting - higherconversion and CPM

5. Contextual ads - better targetingtechnologies, CPC pricing

Mobile Internet Growth Drivers

1. 3x more mobile users than PC users

2. 24/7 access and often primary way togo online

3. Location and time-sensitive usage onthe rise

4. Software, content, and mobileapplications creating new opportunitiesfor start-ups

5. Form-factors and data plans gettingbetter

6. Google generated approximately $1per PC in the worldwide installed basein 2002 and $21 in 2009

Mobile Internet Growth Drivers

1. 3x more mobile users than PC users

2. 24/7 access and often primary way togo online

3. Location and time-sensitive usage onthe rise

4. Software, content, and mobileapplications creating new opportunitiesfor start-ups

5. Form-factors and data plans gettingbetter

6. Google generated approximately $1per PC in the worldwide installed basein 2002 and $21 in 2009

Search Growth Drivers

1. ROI for search is one of the mostcompelling among formats

2. Search providers are the leading

innovators in the advertising industry

3. Search converts high upfront fixedmarketing cost into low variable cost

4. Low cost of development, highertargetability, better measurement, nointrusiveness, higher campaign control

5. Scope of search is expanding beyonddirect marketers to brand advertisers

6. Search is highly under-penetratedinternationally

7. Only 10% of total ad dollars flow toonline formats

Search Growth Drivers

1. ROI for search is one of the mostcompelling among formats

2. Search providers are the leading

innovators in the advertising industry

3. Search converts high upfront fixedmarketing cost into low variable cost

4. Low cost of development, highertargetability, better measurement, nointrusiveness, higher campaign control

5. Scope of search is expanding beyonddirect marketers to brand advertisers

6. Search is highly under-penetratedinternationally

7. Only 10% of total ad dollars flow toonline formats

Social Media Growth Drivers

1. Top 3 social media websites accountfor 15% of total pages viewed in theUS vs. only 3% in 2005

2. Influx of huge new ad inventory andpressure on CPM and sell-thru forpremium content providers

3. Emergence of hundreds of newpublishers

4. Fully engaged and targeted audiencesfor advertisers

5. Ad networks are the big beneficiaries

Social Media Growth Drivers

1. Top 3 social media websites accountfor 15% of total pages viewed in theUS vs. only 3% in 2005

2. Influx of huge new ad inventory andpressure on CPM and sell-thru forpremium content providers

3. Emergence of hundreds of newpublishers

4. Fully engaged and targeted audiencesfor advertisers

5. Ad networks are the big beneficiaries

International Growth Drivers

1. Under-penetration of the Net

2. Broadband penetration increasing

3. Media time spent on the Internetincreasing

4. In many countries the only source ofentertainment that is easily accessible

5. E-Commerce growth

6. 65mm SMBs; 45mm in the US

International Growth Drivers

1. Under-penetration of the Net

2. Broadband penetration increasing

3. Media time spent on the Internetincreasing

4. In many countries the only source ofentertainment that is easily accessible

5. E-Commerce growth

6. 65mm SMBs; 45mm in the US


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Section 11: Valuation Framework

We usually value the Internet stocks we cover by using EV/EBITDA and/or P/E methods but we also consider free cash flowyield. For EV/EBITDA we look for EV/EBITDA/Growth of 0.5x to 0.7x with an average of 0.6x. For P/E we look for PEG of0.8x to 1.0x with an average of 0.9x. We tend to apply higher multiples to the companies with not only the top fundamentals inour sector but also for having relatively higher international exposure and for being takeout targets. Our multiple ranges may varybased on macro economic outlook, historical valuation trends, market trends, earnings revisions, competitive landscape, and

market sentiments. Below we present the current multiples and our target multiples for the stocks we cover.

LT 2010 LT 2010

Ticker 2009 2010E 2011E Growth GAAP PEG 2009 2010E 2011E 2009 2010E 2011E Growth EV/EBITDA/G 2010E 2011E

AMZN 71.3x 53.1x 38.9x 37% 1.4x 50.6x 39.1x 30.5x 30.4x 22.8x 18.4x 27% 0.8x 2.5% 7.1%

DRIV 23.0x 93.3x 35.1x 5% 18.7x 17.9x 36.9x 21.5x 7.4x 13.4x 9.3x 7% 1.9x -1.0% 6.0%EBAY 13.2x 19.0x 15.9x 14% 1.4x 15.3x 14.7x 12.9x 8.8x 8.4x 7.3x 12% 0.7x 5.2% 7.4%

EXPE 26.0x 17.9x 14.7x 17% 1.1x 19.4x 15.8x 13.3x 8.7x 7.8x 6.8x 12% 0.7x 8.3% 11.7%

GOOG 23.5x 19.6x 17.2x 19% 1.0x 20.7x 17.5x 15.3x 11.2x 9.6x 8.4x 17% 0.6x 5.6% 6.6%

GSIC (108.9x) ( 471.3x) 55.8x 65% (7.3x) 74.7x 47.2x 27.6x 11.4x 10.7x 9.2x 22% 0.5x 2.6% 5.7%

MMYT (148.1x) 420.0x 117.2x 90% 4.7x (438.2x) 366.4x 112.7x 698.5x 221.9x 91.6x 80% 2.8x 2.0% 2.5%

MSFT 13.8x 11.3x 9.5x 12% 0.9x 13.5x 11.3x 9.5x 8.0x 6.7x 5.9x 10% 0.7x 11.4% 12.2%

PCLN 33.6x 34.2x 26.9x 26% 1.3x 39.0x 26.5x 22.1x 28.3x 18.9x 15.4x 26% 0.7x 3.6% 4.6%

SCOR 151.3x 93.2x 46.0x 21% 4.4x 27.8x 21.5x 14.6x 17.2x 13.6x 9.8x 20% 0.7x 5.4% 5.8%

TTGT (41.8x) (161.0x) 94.7x 18% (8.9x) 29.3x 21.1x 17.1x 10.6x 7.8x 6.4x 18% 0.4x 3.2% 2.3%

VCLK 15.6x 17.1x 18.3x 0% n/m 13.5x 15.1x 13.6x 7.0x 6.8x 6.1x 10% 0.7x 8.7% 9.4%

YHOO 33.8x 19.8x 19.0x 14% 1.4x 22.8x 17.5x 15.7x 7.5x 7.0x 6.6x 9% 0.8x 4.3% 4.2%

Average 8.2x 12.8x 39.2x 26% 1.7x (7.2x) 50.0x 25.1x 65.8x 27.3x 15.5x 20.8% 0.9x 4.8% 6.6%

Avg. w/o GSIC, MM YT & TTGT 40.5x 37.9x 24.1x 17% 3.5x 24.0x 21.6x 16.9x 13.5x 11.5x 9.4x 15.0% 0.8x 5.4% 7.5%


FCF YieldEV/EBITDA

Current Valuation Multiples - Based on Our Estimates

PF P/EGAAP P/E

P/E/G Valuation 2011E Long-Term PEG Target P/E

Stock EPS Growth Multiple Multiple Target

AMZN $3.74 37% N/A N/A N/A

DRIV $1.41 5% N/A N/A N/A

EBAY $1.88 14% N/A N/A N/A

EXPE $1.81 17% N/A N/A N/A

GOOG $31.38 19% 0.9 17.0x $533

GSIC $0.42 65% N/A N/A N/A

MMYT $0.33 90% N/A N/A N/A

MSFT $2.65 12% 1.1 13.0x $34

PCLN $15.06 26% 0.9 23.0x $346

SCOR $0.42 21% N/A N/A N/A

TTGT $0.30 18% N/A N/A N/A

VCLK $0.67 0% N/A N/A N/A

YHOO $0.91 14% N/A N/A N/AAverage: 21% 1.0x 17.7x

E V/E BI TDA/G Val ua tio n 20 11 E Long- Te rm EV /EBITDA/ G Ta rget EV /E BI TDA

Stock EBITDA Growth Multiple Multiple Target

AMZN $7.27 27% 0.6 17.0x $139

DRIV $2.29 7% 1.6 11.5x $36

EBAY $2.80 12% 0.8 9.5x $32

EXPE $3.78 12% 0.5 6.5x $24

GOOG $46.19 17% 0.7 11.5x $637

GSIC $2.57 22% 0.5 12.0x $33

MMYT $0.87 80% 0.6 50.0x $44

MSFT $3.69 10% N/A N/A N/A

PCLN $20.29 26% 0.6 16.0x $350

SCOR $1.67 20% 0.7 13.0x $25

TTGT $0.55 18% 0.6 11.0x $8VCLK $1.55 10% 0.6 5.5x $12

YHOO $1.28 9% 1.1 9.5x $20

Average: 16% 0.8x 11.2x

P/FCF/G Valuation 2011E Long-Term P/FCF/Growth Target P/FCF

Stock FCF Growth Multiple Multiple TargetAMZN $10.26 15% N/A N/A N/A

DRIV $1.83 2% N/A N/A N/A

EBAY $1.80 8% N/A N/A N/A

EXPE $3.12 20% N/A N/A N/A

GOOG $31.81 31% N/A N/A N/A

GSIC $1.33 11% N/A N/A N/A

MMYT $0.96 90% N/A N/A N/AMSFT $3.06 12% 1.0 11.5x $35

PCLN $15.38 11% N/A N/A N/A

SCOR $1.13 6% N/A N/A N/A

TTGT $0.12 10% N/A N/A N/A

VCLK $1.16 -3% N/A N/A N/A

YHOO $0.60 3% N/A N/A N/A

Average: 11% 1.0x 11.5x

Source: Caris & Company estimates; MMYT EBITDA per share is ' 12 est

Target Valuation Multiples


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Valuation and Risks

Valuation

AMZN: Our rating for AMZN is 3/Average with $140 PT. We reach our $140 PT by applying a multiple of 17.0x to our 2011EEBITDA per share of $7.27 and adding $14.87 in net cash per share and $0.44 in NOLs per share (rounding up). This impliesEV/EBITDA to Growth of 0.6x based on our LT EBITDA growth rate of 27%. Because of continuing concerns about margins

and Cap-Ex, we are using a lower multiple vs. the overall LT growth for Amazon.

DRIV: Our rating for DRIV is 1/Buy with $36 PT. We reach our $36 PT by assigning a multiple of 11.5x to our 2011E EBITDAper share of $2.29, adjusting for 2010E year-end net cash of $9.15 per share.

EBAY: Our rating for EBAY is 1/Buy with $32 PT. We derive our $32 PT by applying a multiple of 9.5x to our 2011E EBITDAof $3.74bn (EBITDA per share of $2.80), adjusting for 2010E year-end net debt of $5.38bn, or $4.04 per share, and $1.00 foreBays stake in Skype. This implies EV/EBITDA to Growth of 0.8x based on our LT EBITDA growth rate of 12%.

EXPE: Our rating for EXPE is 3/Average with $24 PT. We arrive at our $24 PT by using an EV/EBITDA multiple on our 2011estimates. We assign 6.5x to our pro-forma 2011E EBITDA of $1.10bn (EBITDA per share of $3.78), adjusted for 2010E yearend net debt of $0.35 per share (EV/EBITDA/Growth of 0.5x).

GOOG: Our rating for GOOG is 3/Average with $550 PT. We arrive at our $550 PT by using a combination of EV/EBITDA andP/E multiples on our 11 estimates. We assign a multiple of 11.5x to our 2011E EBITDA of $15.00bn (EBITDA per share o

$46.19) to reach $637, adjusting for 2010E year-end net cash of $34.26bn or $106.12 per share. This implies EV/EBITDA toGrowth of 0.7x based on our LT EBITDA growth rate of 17%. We assign a multiple of 17.0x to our 2011E PF EPS of $31.38 toreach a $533 price. This implies a PEG of 0.9x based on our LT PF EPS growth rate of 19%.

GSIC: Our rating for GSIC is 1/Buy with $33 PT. We derive our $33 PT by applying a multiple of 12.0x to our 2011E EBITDAof $180.3mm (EBITDA per share of $2.57), adjusted for 2010E year-end net debt of $55.1mm (or $0.85 per share) and$1.60/share in NOLs (rounding down). This implies EV/EBITDA/Growth 0.5x.

MMYT: We are rating MMYT a Buy and assigning a $46 price target. Our $46 price target is a combination of EV/EBITDA andPrice to Gross Bookings. We assign 50x to our pro-forma 2012E EBITDA per share of $0.87 to reach $44, adjusting for 2011Eyear-end net cash of $0.81/share (EV/EBITDA/Growth of 0.6x). In terms of Price to Gross Bookings, we are assigning 0.95xmultiple to our 2012 Gross Bookings estimates of $1.69bn to reach $47. We assign our highest EV/EBITDA multiple to MMYTbecause its LT EBITDA growth is 80%, highest for any name we cover, and our 50x multiple implies 0.6x EV/EBITDA toGrowth. Also, we are using 2012 estimates (vs. 2011 for the rest of our names) since, in our view, MMYT is in an early stage of

margin improvement/evolution and using 2011 estimates may not capture the true earnings potential of the company.MSFT: Our rating for MSFT is 1/Buy with $35 PT. We arrive at our $35 PT by using P/E and P/FCF multiples on our CY11estimates. We assign a P/E multiple of 13.0x to our CY2011 GAAP EPS of $2.65 to reach $35 (rounding up). This implies a PEGof 1.1x based on our LT GAAP EPS growth rate of 12%. We assign a P/FCF multiple of 11.5x to our CY2011 FCF/share of$3.06 to reach $35. This implies P/FCF to Growth of 0.9x based on our LT FCF growth rate of 12%.

PCLN: Our rating for PCLN is 1/Buy with $348 PT. We reach our $348 PT by using a combination of EV/EBITDA and P/Emultiples on our 2011 estimates. We assign 16x to our 2011E EBITDA per share of $20.29 to reach $350, adjusted for 2010Eyear-end net cash per share of $20.09 and $5.41 in NOLs (EV/EBITDA/Growth of 0.5x). We assign 23x to our 2011 PF EPS of$15.06 (PEG of 0.8x) to reach $346. We are assigning higher multiples now because of our improving outlook for online traveltrends.

SCOR: Our rating for SCOR is 1/Buy with $25 PT. We derive $25 by applying a multiple of 13.0x to our 2011E EBITDA of$53.4mm (EBITDA per share of $1.67), adjusting for 2010E year-end net cash of $94.0mm, or $2.96 a share

(EV/EBITDA/Growth 0.7x) and $0.36/share in NOLs.

TTGT: Our rating for TTGT is 1/Buy with $8 PT. We reach our $8 PT by assigning a multiple of 11.0x to our 2011E EBITDAper share of $0.55, adjusting for $1.81 per share in net cash and $0.02 in off-balance sheet assets (rounding up). This impliesEV/EBITDA to Growth of 0.6x based on our LT EBITDA growth rate of 18%.

VCLK: Our rating for VCLK is 3/Average with $12 PT. We arrive at our $12 PT by applying a multiple of 5.5x to our 2011EEBITDA of $129.1mm (EBITDA per share of $1.55), adjusting for 2010E year-end net cash of $268.2mm or $3.24 per share(rounding up). This implies EV/EBITDA to Growth of 0.55x based on our LT EBITDA growth rate of 10%.

YHOO: Our rating for YHOO is 1/Buy with $20 PT. We reach our $20 PT by assigning 9.5x to our 2011E EBITDA of $1.79bn(EBITDA per share of $1.28), adjusting for $3.19 per share in 2010E year-end net cash and $4.50 in off-balance sheet assets(Yahoo! Japan and Alibaba post illiquidity discount and tax and NOLs).


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Risks

AMZN: 1) Competition with pure-play/multi-channel retailers; 2) Economic weakness/depressed retail environment; 3) Lowprices, free shipping and product mix affecting margins; 4) Material FX exposure; 5) Seasonality of the business; 6) Inventoryrisk; 7) Evolving regulation of E-Commerce; 8) Macro concerns, especially in Europe.

DRIV: 1) Diverse competition; 2) Cloud computing; 3) Revenue growth dependent on the success of partners products; 4

Business model for revenue and costs not fully stable after Symantec loss; 5) Exposed to macro-economic slowdown; 6)Consolidation of software vendors; 7) Macro concerns, especially in Europe.

EBAY: 1) Rapidly growing competition; 2) Economic weakness/depressed retail environment; 3) Marketplaces still undertransformation; 4) Transitioning business model with long overdue sizeable investments and initiatives; 5) Legal lawsuits counterfeit and patents; 6) Motors pressurizing GMV; 7) FX headwinds; 8) Macro uncertainties, especially in Europe.

EXPE: 1) Material macro-economic headwinds; 2) Strong competition; 3) Occupancy tax issue remaining an overhang; 4)Voting control; 5) External events disrupting the travel industry; 6) Competition for ad revenue; 7) Changes in search enginealgorithms; 8) Macro concerns, especially in Europe and Asia.

GOOG: 1) Googles competition is getting more intense; 2) Google is still a one-trick pony with nearly 93% of revenue comingfrom search; 3) Execution risk with recent acquisitions; 4) Google is vulnerable to threats from computing platforms, browsingtechnologies, and ad blocking technologies; 5) Cap-Ex spending continues to be very high; 6) Rising cost of revenue; 7) Privacyissues and click fraud continue to be a nagging problem; 8) More experienced search marketers are diverting part of search ad

dollars to search engine optimization; 9) Macro concerns, especially in Europe.

GSIC: 1) Multi-dimensional competition; 2) High seasonality of the business; 3) Revenue concentration; 4) Investment modeinhibits margin expansion; 5) New acquisitions integration risk; 6) Revenue growth highly dependent on new customeracquisitions; 7) Exposed to macro-economic slowdown; 8) Limited disclosure of business metrics; 9) Macro concerns, especiallyin Europe.

MMYT: 1) Limited history of margins and operations; 2) Competition from homegrown and multinational OTAs; 3) Strongersupplier direct competition in India; 4) Socio-political uncertainties; 5) Possible fee cuts in air ticketing business; 6) Internet andbroadband penetration lagging rest of emerging markets; 7) Other emerging-market risks; 8) Key man risk.

MSFT: 1) Competition; 2) Slowing PC market growth; 3) Disappointing ramp-up of the online business so far; 4) Piracy; 5)Investment mode; 6) Cloud Computing/SaaS; 7) Virtualization; 8) Exposed to macro-economic headwinds; 9) Macrouncertainties, especially in Europe.

PCLN: 1) Material macro-economic headwinds; 2) Strong competition; 3) Occupancy tax issue remaining an overhang; 4)External events disrupting the travel industry; 5) Convertible senior notes can bring substantial dilution; 6) Limited number ofonline media assets; 7) Changes in search engine algorithms; 8) Macro concerns, especially in Europe and Asia.

SCOR: 1) Diverse and strong competition; 2) Ongoing concern with the accuracy of data/measurements; 3) Revenueconcentration; 4) Lack of cross-platform measurements; 5) Newest technologies making Web measurement challenging and lessrelevant; 6) Evolving industry standards; 7) Exposure to macro-economic slowdown; 8) Potential downward pressure on the stockfrom insiders selling; 9) Macro concerns, especially in Europe (but relatively small exposure).

TTGT: 1) Competition with both online and offline companies; 2) International presence still limited; 3) Move to performance-based marketing by some software vendors; 4) Moderate growth in worldwide IT spending; 5) Lower margins in Events; 6Limited business disclosures; 7) Macro concerns, especially in Europe.

VCLK: 1) Increasing competition, especially from the big four; 2) High dependence on search engines for monetization; 3)Slowing growth of innovations; 4) Exposure to economic headwinds; 5) Material deceleration in comparison shopping segment

6) Emergence of vertically focused ad networks; 7) Macro concerns, especially in Europe.

YHOO: 1) Increasing competitive pressure from Google and others; 2) Current growth materially lower than overall Internet adgrowth; 3) Limited traction internationally; 4) Mass talent attrition; 5) Execution risk with recent acquisitions; 6) Future businessstrategy not fully firmed up; 7) Macro concerns, especially in Europe.


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Ratings Distribution Chart:

Number of % of No. Provided % Prov ided

Ratings Ratings IB Services IB Services102 61.45% 0 0.00%


Ratings Ratings IB Services IB Services

61 36.75% 2 3.28%


Ratings Ratings IB Services IB Services

3 1.81% 0 0.00%

Sell

Total Securities Rated

166

Buy

Hold/Neutral

First Call ratings are adapted to the above chart as follows: 1 & 2 = Buy, 3 = Hold/Neutral, 4 & 5 = Sell

Ticker Rating Price Cap ($Bil) Date Analyst

AM ZN Average $145.45 $65.14 9/15/2010 Sandeep Aggarwal

DRIV Buy $30.35 $1.20 9/15/2010 Sandeep Aggarwal

EBAY Buy $24.19 $31.74 9/15/2010 Sandeep Aggarwal

EXPE Average $26.66 $6.90 9/15/2010 Sandeep Aggarwal

GOOG Average $480.64 $118.46 9/15/2010 Sandeep Aggarwal

VLO Average $17.34 $9.82 9/15/2010 Sandeep Aggarwal

GSIC Buy $23.34 $1.55 9/15/2010 Sandeep Aggarwal

MSFT Buy $25.12 $217.33 9/15/2010 Sandeep Aggarwal

PCLN Buy $332.06 $16.07 9/15/2010 Sandeep AggarwalSCOR Buy $19.40 $0.60 9/15/2010 Sandeep Aggarwal

TTGT Buy $5.11 $0.22 9/15/2010 Sandeep Aggarwal

VCLK Average $12.26 $1.00 9/15/2010 Sandeep Aggarwal

YHOO Buy $14.27 $19.24 9/15/2010 Sandeep Aggarwal

Companies mentioned in this report:

*Note: Caris & Company utilizes the First Call rating system when assigning ratings in equity research reports. The following is a list of eachnumerical rating and its respective definition.

1 Buy2 Above Average3 Average4 Below Average5 Sell

Unless otherwise noted, stock prices reflected herein are the closing price through the business day immediately preceding the date of this report.


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10

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25

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40

AVERAGE -

$21.00

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$23.00

AVERAGE -

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AVERAGE -

$27.00

AVERAGE -

$28.00

BUY - $37.00

Microsoft Corp. (MSFT-US) High:37.50

14-Sep-2007 to 15-Sep-2010 (Daily) Low: 14.87

USD Last: 25.11

10/07 1/08 4/08 7/08 10/08 1/09 4/09 7/09 10/09 1/10 4/10 7/100

50

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Analyst Certification

The analyst responsible for the content of this publication, Sandeep Aggarwal, hereby certifies that the views expressed in this publicationregarding the company or companies and their securities accurately represent that analysts personal views, and that no direct or indireccompensation is to be received by the analyst for any specific recommendation or views contained in this note.

Other Important Disclosures

The research analyst and/or research associate responsible for this report has received or will receive compensation based on various factorsincluding quality of research, investor client feedback, and the Firm's overall revenues, but not based on investment banking revenues.

This information is not intended to be used as the primary basis for investment decisions. The information contained herein shall not beconstrued as an offer, or the solicitation of an offer to buy or sell any securities, products, or services. Because of individual client risk andreturn requirements and client investment constraints, this material should not be construed as advice designed to meet the particular needs ofany investor. CRIS accepts no liability whatsoever for loss or damage of any sort arising out of use of all or part of this publication.

This material is based on data obtained from sources considered to be reliable. Caris & Company (CRIS) makes every effort to use reliablecomprehensive information, however, we make no representation that it is accurate or complete and it should not be relied upon as such. Pas

performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not berealized. Any opinions expressed herein are subject to change and CRIS disclaims any obligation to advise you of any such change.

The securities described herein may not be eligible for sale in all jurisdictions, or to any particular investors. Options, derivative products, andfutures involve risk, and are not suitable for all investors. CRIS, its affiliates, their respective directors, officers, employees, or members of theirfamilies may have long or short positions in, and buy or sell, the equities or issues referred to herein, or options thereon.

Neither the author of this report nor a member of his or her household maintains a position in the securities mentioned in this report.

The firm has not provided any investment banking services for the companies mentioned in this report.

Additional information on recommended securities is available upon request.

Neither this report, nor any portion thereof may be reprinted, sold, or redistributed without the express written consent of Caris & Company, Inc

Copyright Caris & Company 2010


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