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Technology & Communications April 3, 2017

Industry Brief Aaron Kessler, CFA, (415) 616-8959, Aaron.Kessler@RaymondJames.com

Justin Patterson, CFA, (415) 616-8035, Justin.Patterson@RaymondJames.com

James Pardee, Res. Assoc., (415) 616-8032, James.Pardee@RaymondJames.com

Technology & Communications: Industry Tidbit ______________________________________________________________________

The Raymond James Internet Weekly includes our analysis of recent Internet industry news, recent Raymond James Internet notes, a valuation analysis of the Raymond James Internet coverage universe, Internet stock performance, recent Internet sector data points, and Raymond James/industry market sizing estimates.

Key Industry News

Google to let advertisers monitor preferred content, according to Recode. Google provided a full list of their preferred

content channels to GroupM, and it is believed other clients may request it. (Link)

Facebook introduces new camera features and Stories feature on Facebook App. Facebook Stories has similar

functionality to Snapchat’s Stories, allowing users to share content that disappears after 24 hours. (Link)

Amazon's Twitch to start selling video games, in-game content, TechCrunch reports. Streamers who partner with the

program will earn 5% of the sales from their channels, while game publishers earn 70%. There 50 titles available at launch

along with in-game content. (Link)

Amazon Web Services announces Amazon Connect. Amazon Connect is a self-service, cloud based contact center service,

using the same contact center technology used by Amazon’s customer service. (Link)

Amazon unveils ‘AmazonFresh Pickup’ grocery pickup service. The service allows users to order groceries online and

choose a time to pick them up from the store. The service is free for Prime members and has no order minimum.

AmazonFresh is currently available in select Seattle neighborhoods. (Link)

Amazon shuts down Quidsi, one of its largest acquisitions (six years ago for $545M) that runs six shopping sites including

Diapers.com, Soap.com, and Wag.com due to profitability issues, according to Recode. (Link)

Recent Raymond James Internet Research Internet: Food Wars GOOG: Thoughts on Advertisers’ Suspension of YouTube/Display Network PCLN/EXPE/TRIP: Quarterly Meta Tracker for 1Q17; Trends Consistent With Guidance Key Takeaways from Shoptalk eCommerce Conference GRUB: Thoughts on Barron’s Article AMZN/EBAY: Reviewing E-Commerce Trends Ahead of Shoptalk Conference Internet sector performance: The Raymond James Internet Index (RJII) increased 1.1% for the week ended March 31 vs. the NASDAQ’s 1.4% increase and the S&P 500’s 0.8% increase. Largest gainers for the week included: Rubicon Project (+5.6%), Wayfair (+5.5%), Amazon (+4.8%), and GoDaddy (+4.1%). The biggest laggards included CafePress (-5.3%), Criteo (-3.0%), and GrubHub (-2.3%). Over the last 12 months (LTM), the RJII has increased 25% vs. the NASDAQ’s 21.4% increase and the S&P 500’s 14.7% increase.

Raymond James U.S. Research

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International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863 2

Internet Sector News

Online Advertising and Digital Media

Facebook introduces new camera features and Stories feature on Facebook App. Facebook Stories has similar

functionality to Snapchat’s Stories, allowing users to share content that disappears after 24 hours. (Link)

Google to let advertisers monitor preferred content, according to Recode. Google provided a full list of their preferred

content channels to GroupM, and it is believed other clients may request it. (Link)

Twitter expands Pre-Roll Ads to Periscope Video. Pre-roll ads will allow video brands to merge their message with specific

broadcasts from content creators while allowing creators/publishers to monetize their content. (Link)

Facebook announces Town Hall tool to help users find/contact elected representatives on Facebook. (Link)

Google working on app for groups to edit photos, according to TechCrunch and confirmed by Google. The release date has

yet to be confirmed, speculated to launch at event in May. (Link)

Facebook hires 15-year Apple veteran to lead Oculus VR hardware, according to Bloomberg. Michael Hillman will work

closely with Hans Hartmann, Oculus’s COO. (Link)

Facebook introduces Live Location sharing in Messenger. (Link)

Facebook rolls out ‘Live 360’ to all users. The Live 360 feature allows users to stream 360-degree video live to viewers.

(Link)

Facebook to unveil group chatbots at its F8 conference in April, according to TechCrunch. Group chatbots will keep groups

informed about real-time news and will be opened up to developers to start building group bots as well. (Link)

Oculus co-founder and Rift creator Palmer Luckey leaves Facebook, Upload reports. This departure was made in an official

statement by Oculus but did not disclose the reason for the departure. (Link)

eCommerce & Local

Amazon's Twitch to start selling video games, in-game content, TechCrunch reports. Streamers who partner with the

program will earn 5% of the sales from their channels, while game publishers earn 70%. There 50 titles available at launch

along with in-game content. (Link)

Amazon Web Services announces Amazon Connect. Amazon Connect is a self-service, cloud based contact center service,

using the same contact center technology used by Amazon’s customer service. (Link)

Amazon unveils ‘AmazonFresh Pickup’ grocery pickup service. The service allows users to order groceries online and

choose a time to pick them up from the store. The service is free for Prime members and has no order minimum.

AmazonFresh is currently available in select Seattle neighborhoods. (Link)

eBay releases enhancements to mobile apps to ease selling process, including enhanced cataloguing capabilities and more

efficient listing flow. (Link)

Amazon will collect sales tax nationwide on April 1st

. This also includes Hawaii, Idaho, Maine, and New Mexico, the last

four remaining holdouts. (Link)

Amazon delays opening of Amazon Go to fix technical glitches as the monitoring technology has had difficulty tracking

more than 20 people, WSJ reports. (Link)

WWE and eBay’s StubHub announce multiyear agreement. StubHub will become the exclusive resale marketplace for fans

in the United States and Canada. (Link)

Amazon shuts down Quidsi, one of its largest acquisitions (six years ago for $545M) that runs six shopping sites including

Diapers.com, Soap.com, and Wag.com due to profitability issues, according to Recode. (Link)

Raymond James U.S. Research

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Recent Raymond James Internet Research

GOOG: Thoughts on Advertisers’ Suspension of YouTube/Display Network

PCLN/EXPE/TRIP: Quarterly Meta Tracker for 1Q17; Trends Consistent With Guidance

Key Takeaways from Shoptalk eCommerce Conference

GRUB: Thoughts on Barron’s Article

AMZN/EBAY: Reviewing E-Commerce Trends Ahead of Shoptalk Conference

Internet: Food Wars

GRUB: Reiterate Outperform & $46 PT Following Online Takeout Survey

FB: Agency Checks

WIX: Thoughts Following Meeting with Wix

YELP: Key Takeaways from Yelp Meeting

RUBI: Header Bidding Headwinds Persist; Maintain Market Perform

NFLX: Film Division Hire Reaffirms That Netflix Is Making a Significant Push into Movies

P: Pandora Premium Launch March 15; Framing Market Size, Price Sensitivity

PCLN/EXPE/TRIP: More Than Just the Trip; Revisiting Data Around Airbnb Experiences

GOOG: GCP Takeaways: Leaning into G Suite and Data/Analytics; Adding Regions; Enhancing Support

CRTO: Institutional Investor Conference Highlights

PRSS: Mixed 4Q; Expect Return to Modest Growth in 2017

SFLY: Takeaways from Raymond James Institutional Investors Conference

CHGG: Takeaways from Chegg at Raymond James Institutoinal Investors Conference

TRIP: Highlights from Raymond James IIC

P: Highlights from Raymond James IIC

TTD: Reiterating Outperform Rating and Raising Price Target to $50

CTRP: Highlights From CFO Meeting; Remain Confident on Growth and Margin Opportunity

PCLN: Still the Best Deal in Travel: Scale Efficiencies Showing Over Peers; TP to $1,915

SSTK: Softer 4Q Growth and Outlook; Maintain Market Perform

W: Downgrade to market Perform on Slowing U.S. Growth and Valuation

CTRP: Margins Expanding, Leaning Into China and Outbound; Raise TP to $55

CRTO: Organic Growth on Track; Margins Better than Expected; Raise TP to $52

TRIP: Ad Expense Temper Near Profitability; Framing Potential TV Investment; Market Perform

GDDY: Mixed 4Q and Guide; Strategy Remains on Track; Outperform, PT to $42

GRPN: Improved 4Q Profits Though Still Early in Turnaround; Market Perform

ANGI: Softer Service Provider Revenues in 4Q; Target Price to $9

WIX: Strong 4Q and Outlook; Outperform, Target Price to $74

GOOG: A Walk in the Clouds: GCP’s Opportunities and Challenges in 2017

CHGG: Solid 4Q Driven by Chegg Services

AMZN: New 10-K Disclosures Provide More Transparency into Prime and Advertising Revenues

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Raymond James Internet Coverage Valuation Analysis

Source: FactSet, Raymond James research. Prices as of 3/31/17.

Price Market Enterprise 16-17 16-17 16-17 LT EPS

Company Ticker Analyst 3/31 Shares (M) Value ($M) Value ($M) CY17E CY18E Growth CY17E CY18E Growth CY17E CY18E Growth CY17E CY18E CY17E CY18E Growth

Company Name Ticker Analyst Price Shares OS Market CapEnterprise Value LT EPS Growth

Online Advertising/Digital Media

Alphabet GOOG Kessler $829.56 700 $580,875 $498,477 5.7x 4.9x 18% 7.6x 6.7x 16% 11.5x 47% 19% 19.6x 17.1x 1.3x 1.1x 15%

Facebook FB Kessler $142.05 2938 $417,343 $387,894 10.0x 7.7x 40% 11.5x 8.9x 39% 15.8x 120% 36% 25.0x 19.7x 1.0x 0.8x 25%

Netflix NFLX Patterson $147.81 440 $65,046 $66,676 6.0x 5.0x 26% 17.2x 12.9x 39% 53.7x 152% 103% nm 48.6x nm 1.2x 40%

Twitter TWTR Kessler $14.95 728 $10,883 $8,648 3.6x 3.5x (5%) 5.6x 5.6x (11%) 12.9x 20% -11% 51.1x nm 1.7x nm 30%

Yahoo! YHOO Kessler $46.41 959 $44,490 $8,242 2.4x na (4%) 3.4x na (3%) 9.3x 18% 2% 59.8x nm 12.0x nm 5%

Pandora P Patterson $11.81 234 $2,766 $2,864 1.8x 0.8x 17% 4.6x 2.1x 24% nm 8.2x -95% nm 13.9x nm 0.7x 20%

Criteo CRTO Patterson $49.99 74 $3,687 $3,503 3.8x 3.1x 27% 4.3x 3.5x 27% 12.1x 9.4x 29% 24.0x 20.2x 1.0x 0.8x 25%

The Trade Desk TTD Kessler $37.25 43 $1,603 $1,495 5.5x 4.4x 33% 7.1x 5.6x 30% 20.9x 15.1x 10% 42.4x 31.2x 1.4x 1.0x 30%

Rubicon Project RUBI Kessler $5.89 49 $288 $98 0.5x 0.5x (23%) 0.7x 0.8x (31%) 9.1x 27.4x -85% nm nm nm nm 25%

Online Advertising Mean 4.4x 3.7x 15% 6.9x 5.8x 14% 18.1x 7.1x 1% 37.0x 25.1x 3.1x 0.9x 24%

eCommerce

Amazon AMZN Kessler $886.75 497 $440,715 $422,428 2.5x 2.1x 22% 7.0x 5.6x 26% 22.0x 16.4x 25% nm 48.7x nm 1.6x 30%

Alibaba Group BABA Kessler $107.83 2571 $277,231 $225,689 8.1x 6.3x 30% 12.5x 10.0x 29% 17.0x 13.5x 29% 27.0x 21.3x 1.3x 1.1x 20%

eBay EBAY Kessler $33.57 1119 $37,565 $35,407 3.8x 3.5x 5% 4.9x 4.6x 4% 10.0x 9.3x 3% 16.7x 14.9x 2.4x 2.1x 7%

Wayfair W Kessler $40.49 90 $3,627 $3,247 0.8x 0.6x 26% 3.2x 2.5x 27% nm nm -45% nm nm nm nm nm

Shutterfly SFLY Kessler $48.29 35 $1,672 $1,621 1.4x 1.3x 2% 2.8x 2.6x 1% 7.4x 6.2x 5% 29.5x 20.4x 2.3x 1.6x 13%

Chegg CHGG Kessler $8.44 100 $847 $770 3.2x 2.7x 0% 5.0x 4.2x 14% 21.9x 14.2x 69% 50.1x 25.7x 2.5x 1.3x 20%

CafePress PRSS Kessler $3.02 17 $51 $8 0.1x 0.1x 5% 0.2x 0.2x (5%) nm 26.7x nm nm nm nm nm 5%

eCommerce Mean 2.8x 2.4x 13% 5.1x 4.2x 14% 15.7x 14.4x 14% 30.8x 26.2x 2.1x 1.5x 16%

Local Marketplaces/B2B

Zillow Z Kessler $33.67 190 $6,408 $6,269 6.0x 5.0x 24% 6.5x 5.4x 24% 28.0x 20.8x 55% 62.4x 38.9x 2.5x 1.6x 25%

GoDaddy GDDY Kessler $37.90 181 $6,860 $8,829 4.0x 3.4x 19% 6.2x 5.2x 20% 15.7x 13.9x 39% 40.7x 26.7x 2.0x 1.3x 20%

GrubHub GRUB Kessler $32.89 87 $2,850 $2,527 3.9x 3.2x 30% 6.3x 5.2x 25% 14.2x 11.5x 23% 31.2x 25.8x 1.7x 1.4x 18%

Yelp YELP Kessler $32.75 84 $2,763 $2,266 2.6x 2.1x 20% 2.8x 2.3x 21% 13.9x 10.5x 35% 36.6x 27.3x 1.5x 1.1x 25%

Groupon GRPN Kessler $3.93 625 $2,457 $2,365 0.7x 0.7x 0% 1.8x 1.7x (1%) 10.6x 9.0x 25% 32.4x 19.6x 2.2x 1.3x 15%

Shutterstock SSTK Kessler $41.35 36 $1,484 $1,205 2.2x 1.9x 12% 3.7x 3.3x 11% 11.3x 9.7x 12% 26.9x 27.4x 1.3x 1.4x 20%

Wix.com WIX Kessler $67.90 58 $3,938 $3,766 9.2x 7.0x 41% 15.3x 8.0x 0% 47.2x 28.1x 87% nm 56.8x nm 1.9x 30%

Angie's List ANGI Kessler $5.70 60 $343 $360 1.2x 1.1x (7%) 1.3x 1.3x (6%) 17.1x 11.1x -24% nm 62.9x nm 3.1x 20%

Local/B2B Mean 3.7x 3.1x 17% 5.5x 4.0x 12% 19.8x 14.3x 32% 38.4x 35.7x 1.9x 1.6x 22%

Online Travel

Priceline PCLN Patterson $1,779.97 50 $89,034 $82,924 6.6x 5.7x 17% 6.8x 5.9x 18% 17.2x 14.6x 17% 22.7x 19.5x 1.5x 1.3x 15%

Expedia EXPE Patterson $126.17 156 $19,684 $24,039 2.4x 2.1x 15% 3.3x 2.6x 0% 13.0x 10.5x 14% 28.0x 24.6x 1.9x 1.6x 15%

Ctrip CTRP Patterson $49.15 576 $28,310 $26,231 8.5x 6.3x 43% 8.5x 6.3x 43% 34.1x 20.3x 135% nm 50.2x nm 1.7x 30%

TripAdvisor TRIP Patterson $43.16 146 $6,301 $5,646 3.5x 3.1x 9% 3.7x 3.3x 8% 16.6x 14.0x -3% 36.3x 30.2x 2.4x 2.0x 15%

Online Travel Mean 5.2x 4.3x 21% 5.6x 4.5x 17% 20.2x 14.8x 41% 29.0x 31.1x 1.9x 1.7x 19%

Coverage Mean 3.9x 3.3x 16% 6.0x 4.9x 15% 18.5x 12.0x 19% 34.9x 30.1x 2.3x 1.4x 21%

Coverage Median 3.5x 3.1x 18% 4.9x 4.2x 14% 15.7x 11.1x 19% 31.2x 25.8x 1.7x 1.3x 20%

P/E (Non-GAAP) PEGEV/GPEV/Rev EV/EBITDA

Raymond James U.S. Research

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International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863 5

Source: FactSet, Raymond James research; as of 3/31/2017.

Source: FactSet, Raymond James research; as of 3/31/17.

(5.3%)

(3.0%)

(2.3%)

(1.5%)

(1.3%)

(1.2%)

(0.3%)

(0.2%)

(0.1%)

0.0%

0.5%

0.8%

0.9%

0.9%

0.9%

1.1%

1.2%

1.5%

1.9%

1.9%

3.3%

3.4%

3.7%

4.1%

4.1%

4.8%

5.5%

5.6%

1.1%

(6.0%) (4.0%) (2.0%) 0.0% 2.0% 4.0% 6.0% 8.0%

PRSS

CRTO

GRUB

GRPN

TWTR

EXPE

P

BABA

CTRP

YHOO

EBAY

YELP

SSTK

ZG

ANGI

TRIP

FB

PCLN

GOOG

WIX

SFLY

TTD

CHGG

NFLX

GDDY

AMZN

W

RUBI

Mean

RJ Internet Coverage 1 Week Price Performance

(67.4%)

(35.2%)

(32.1%)

(21.6%)

(8.6%)

(0.7%)

0.8%

3.6%

9.2%

10.5%

11.3%

17.0%

18.3%

23.8%

24.3%

24.8%

26.9%

35.2%

35.4%

35.6%

36.7%

39.6%

44.6%

48.1%

60.3%

88.4%

237.0%

25%

(100.0%) (50.0%) 0.0% 50.0% 100.0% 150.0% 200.0% 250.0% 300.0%

RUBI

TRIP

ANGI

PRSS

TWTR

W

GRPN

SFLY

CTRP

GOOG

SSTK

EXPE

GDDY

FB

P

CRTO

YHOO

PCLN

GRUB

ZG

BABA

EBAY

NFLX

AMZN

YELP

CHGG

WIX

Mean

RJ Internet Coverage LTM Price Performance

Raymond James U.S. Research

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Short Interest: Percentage of Float – Raymond James Internet Coverage

Source: FactSet, Raymond James research.

0% 5% 10% 15% 20% 25% 30% 35% 40%

PRSS

FB

GOOG

AMZN

EBAY

WIX

RUBI

PCLN

BABA

NFLX

YHOO

ANGI

EXPE

CRTO

YELP

TWTR

GRPN

TRIP

GDDY

SFLY

GRUB

TTD

SSTK

Z

CHGG

P

W

0%

1%

1%

1%

2%

2%

2%

3%

5%

6%

6%

7%

8%

9%

10%

11%

12%

16%

16%

16%

18%

20%

24%

25%

27%

29%

39%

3/31/2017 3/31/2016

Raymond James U.S. Research

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E-Commerce: Non-Store Retailers Growth (DOC)

Source: U.S. Department of Commerce, non-adjusted data; as of 3/24/17.

7.0% 7.6% 7.6% 7.9%

13.2% 12.4%

11.7% 11.5%

14.7% 15.4%

14.8% 15.2% 15.8% 15.6%

14.3%

4%

6%

8%

10%

12%

14%

16%

18%

Y/Y

% G

row

th

U.S. Census Non-Store Retailer vs. eCommerce Growth

Non-Store Retailers eCommerceSource: U.S. Census.

Raymond James U.S. Research

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Online Travel: U.S. Y/Y Hotel Growth

Source: STR, Raymond James research; as of 3/24/17.

Online Travel: U.S. Air Transactions Growth Y/Y

Source: Airline Reporting Commission (ARC), Raymond James research; as of 3/3/17.

-0.5%

0.7%

0.1%

0.7%

0.0%

3.2%

2.9%

3.3%

2.6%2.5%

2.6%

3.6%3.4%

3.3%

2.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

1Q16 2Q16 3Q16 4Q16 1Q17E

Occ. Y/Y ADR Y/Y RevPAR Y/Y

0.7%

3.3%

6.6%

3.6%

6.6%

3.6%

-3.3%-3.8%

-5.6%

-4.4%

-0.8%

-3.4%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

4Q15 1Q16 2Q16 3Q16 4Q16 1Q17E

Trans Y/Y Fares Y/Y

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Online Travel: European Y/Y Hotel Growth (in euros)

Source: STR, Raymond James research; as of 3/24/17.

Online Travel: European Discount Airlines Passengers

Source: Ryanair, EasyJet, AirBerlin, Norwegian, IAG, Raymond James research; as of 3/17/17.

1.1%0.8%

-0.4%

2.8%

4.0%

2.4%2.1% 2.2% 2.3%

3.6%3.5%

2.7%

1.8%

4.1%

6.2%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

1Q16 2Q16 3Q16 4Q16 1Q17E

Occupancy Y/Y ADR Y/Y RevPAR Y/Y

14.5%

7.4% 7.2%

10.3%

2.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1Q16 2Q16 3Q16 4Q16 1Q17E

Passengers Y/Y%

Raymond James U.S. Research

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Source: Magna Global, Raymond James research. Data as of 1/6/17; $ in millions.

Global Online Advertising Estimates

2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E2016-2021

CAGR

Search $55,619 $64,877 $76,663 $89,526 $100,717 $110,788 $121,313 $131,989 $142,548 9.7%

Display $23,531 $26,240 $26,962 $26,239 $25,452 $24,688 $23,947 $23,468 $22,999 -2.6%

Video (ex social) $6,971 $9,853 $13,492 $17,062 $21,669 $26,869 $32,512 $38,364 $44,118 20.9%

Social $9,409 $15,165 $22,704 $33,196 $43,155 $52,649 $62,653 $72,677 $82,852 20.1%

Other $11,863 $12,166 $12,839 $12,451 $11,828 $11,237 $10,787 $10,356 $9,942 -4.4%

Total Internet 107,392 128,301 152,659 178,474 202,821 226,232 251,213 276,854 302,459 11.1%

of which Mobile $17,238 $33,531 $54,443 $80,329 $105,467 $131,215 $158,264 $188,261 $217,771 22.1%

Total Traditional Media 320,652 320,700 314,162 314,952 307,753 304,863 299,119 299,550 293,889 -1.4%

Total Media Advertising $420,305 $440,336 $456,371 $493,426 $510,574 $531,095 $550,332 $576,404 $596,349 3.9%

y/y% 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E

Search 20.0% 16.6% 18.2% 16.8% 12.5% 10.0% 9.5% 8.8% 8.0%

Display 6.2% 11.5% 2.8% (2.7%) (3.0%) (3.0%) (3.0%) (2.0%) (2.0%)

Video (ex social) 33.9% 41.4% 36.9% 26.5% 27.0% 24.0% 21.0% 18.0% 15.0%

Social 59.7% 61.2% 49.7% 46.2% 30.0% 22.0% 19.0% 16.0% 14.0%

Other 7.1% 2.6% 5.5% (3.0%) (5.0%) (5.0%) (4.0%) (4.0%) (4.0%)

Total Internet 18.4% 19.5% 19.0% 16.9% 13.6% 11.5% 11.0% 10.2% 9.2%

of which Mobile 107.8% 94.5% 62.4% 47.5% 31.3% 24.4% 20.6% 19.0% 15.7%

Total Traditional Media (0.1%) 0.0% (2.0%) 0.3% (2.3%) (0.9%) (1.9%) 0.1% (1.9%)

Total Media Advertising 3.7% 4.8% 3.6% 8.1% 3.5% 4.0% 3.6% 4.7% 3.5%

Mix 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E

Search 51.8% 50.6% 50.2% 50.2% 49.7% 49.0% 48.3% 47.7% 47.1%

Display 21.9% 20.5% 17.7% 14.7% 12.5% 10.9% 9.5% 8.5% 7.6%

Video (ex social) 6.5% 7.7% 8.8% 9.6% 10.7% 11.9% 12.9% 13.9% 14.6%

Social 8.8% 11.8% 14.9% 18.6% 21.3% 23.3% 24.9% 26.3% 27.4%

Other 11.0% 9.5% 8.4% 7.0% 5.8% 5.0% 4.3% 3.7% 3.3%

Total Internet 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

of which Mobile 16.1% 26.1% 35.7% 45.0% 52.0% 58.0% 63.0% 68.0% 72.0%

Internet - % of Total 25.6% 29.1% 33.5% 36.2% 39.7% 42.6% 45.6% 48.0% 50.7%

Source: Magna Global, Raymond James.

Raymond James U.S. Research

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Data as of 1/6/17.

Source: eMarketer, Raymond James research. Data as of 5/27/16; $ in billions.

$231 $261

$299 $343

$396

$456

$520

$590

$665

5.4% 5.8% 6.4%7.3%

8.2%9.2%

10.3%11.4%

12.6%

12.3%13.5%

14.8%16.3%

18.2%

20.3%

22.5%

24.8%

27.2%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

24.0%

28.0%

$0

$100

$200

$300

$400

$500

$600

$700

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Raymond James U.S. eCommerce Forecast

U.S. eCommerce ($B) % of total retail % of adjusted retail Y/Y

Source: DOC, Raymond James research. Adjusted Retail excludes non-traditional ecommerce categories.

$1,077 $1,337

$1,671

$2,072

$2,528

$3,033

$3,578 26% 24% 25%

24%

22% 20%

18%

5.1% 5.9% 7.4%

8.7% 10.1%

11.4% 12.8%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

2013 2014 2015 2016E 2017E 2018E 2019E

Global eCommerce Sales

WW ecommerce Sales y/y% % of Total Retail Sales

Source: eMarketer, Raymond James research.

Raymond James U.S. Research

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Ratings and Definitions

Raymond James & Associates (U.S.) definitions

Strong Buy (SB1) Expected to appreciate, produce a total return of at least 15%, and outperform the S&P 500 over the next six to 12 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, a total return of at least 15% is expected to be realized over the next 12 months. Outperform (MO2) Expected to appreciate and outperform the S&P 500 over the next 12-18 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, an Outperform rating is used for securities where we are comfortable with the relative safety of the dividend and expect a total return modestly exceeding the dividend yield over the next 12-18 months. Market Perform (MP3) Expected to perform generally in line with the S&P 500 over the next 12 months. Underperform (MU4) Expected to underperform the S&P 500 or its sector over the next six to 12 months and should be sold. Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should not be relied upon. Raymond James Ltd. (Canada) definitions

Strong Buy (SB1) The stock is expected to appreciate and produce a total return of at least 15% and outperform the S&P/TSX Composite Index over the next six months. Outperform (MO2) The stock is expected to appreciate and outperform the S&P/TSX Composite Index over the next twelve months. Market Perform (MP3) The stock is expected to perform generally in line with the S&P/TSX Composite Index over the next twelve months and is potentially a source of funds for more highly rated securities. Underperform (MU4) The stock is expected to underperform the S&P/TSX Composite Index or its sector over the next six to twelve months and should be sold. Raymond James Europe (Raymond James Euro Equities SAS & Raymond James Financial International Limited) rating definitions

Strong Buy (1) Expected to appreciate, produce a total return of at least 15%, and outperform the Stoxx 600 over the next 6 to 12 months. Outperform (2) Expected to appreciate and outperform the Stoxx 600 over the next 12 months. Market Perform (3) Expected to perform generally in line with the Stoxx 600 over the next 12 months. Underperform (4) Expected to underperform the Stoxx 600 or its sector over the next 6 to 12 months. Suspended (S) The rating and target price have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and target price are no longer in effect for this security and should not be relied upon. In transacting in any security, investors should be aware that other securities in the Raymond James research coverage universe might carry a higher or lower rating. Investors should feel free to contact their Financial Advisor to discuss the merits of other available investments.

Rating Distributions

Coverage Universe Rating Distribution* Investment Banking Distribution

RJA RJL RJEE/RJFI RJA RJL RJEE/RJFI

Strong Buy and Outperform (Buy) 51% 72% 54% 22% 50% 0%

Market Perform (Hold) 44% 26% 32% 10% 17% 0%

Underperform (Sell) 5% 2% 14% 6% 0% 0%

* Columns may not add to 100% due to rounding.

Suitability Ratings (SR)

Medium Risk/Income (M/INC) Lower to average risk equities of companies with sound financials, consistent earnings, and dividend yields above that of the S&P 500. Many securities in this category are structured with a focus on providing a consistent dividend or return of capital.

Medium Risk/Growth (M/GRW) Lower to average risk equities of companies with sound financials, consistent earnings growth, the potential for long-term price appreciation, a potential dividend yield, and/or share repurchase program.

High Risk/Income (H/INC) Medium to higher risk equities of companies that are structured with a focus on providing a meaningful dividend but may face less predictable earnings (or losses), more leveraged balance sheets, rapidly changing market dynamics, financial and competitive issues, higher price volatility (beta), and potential risk of principal. Securities of companies in this category may have a less predictable income stream from dividends or distributions of capital.

High Risk/Growth (H/GRW) Medium to higher risk equities of companies in fast growing and competitive industries, with less predictable earnings (or losses), more leveraged balance sheets, rapidly changing market dynamics, financial or legal issues, higher price volatility (beta), and potential risk of principal.

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High Risk/Speculation (H/SPEC) High risk equities of companies with a short or unprofitable operating history, limited or less predictable revenues, very high risk associated with success, significant financial or legal issues, or a substantial risk/loss of principal.

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Raymond James expects to receive or intends to seek compensation for investment banking services from the subject companies in the next three months.

Stock Charts, Target Prices, and Valuation Methodologies

Valuation Methodology: The Raymond James methodology for assigning ratings and target prices includes a number of qualitative and quantitative factors including an assessment of industry size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition, and expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry- or company-specific occurrences. Only stocks rated Strong Buy (SB1) or Outperform (MO2) have target prices and thus valuation methodologies.

Risk Factors

General Risk Factors: Following are some general risk factors that pertain to the businesses of the subject companies and the projected target prices and recommendations included on Raymond James research: (1) Industry fundamentals with respect to customer demand or product / service pricing could change and adversely impact expected revenues and earnings; (2) Issues relating to major competitors or market shares or new product expectations could change investor attitudes toward the sector or this stock; (3) Unforeseen developments with respect to the management, financial condition or accounting policies or practices could alter the prospective valuation; or (4) External factors that affect the U.S. economy, interest rates, the U.S. dollar or major segments of the economy could alter investor confidence and investment prospects. International investments involve additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability.

Specific Investment Risks Related to the Industry or Issuer

Technology & Communications Risks Industry risks include customer concentration, product cycle delays, softer than expected North American capital investments in 2015, the potential slowing of specific initiatives such as 4G/LTE, and the potential revenue impact from the migration to SDN (software defined network) and NFV (network function virtualization) technologies.

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