GP Bullhound Turkish Internet Report

TURKISH COFFEE – GET IT WHILE IT’S BREWING

In times of global financial flux and uncertainty, a highly dynamic new market

is evolving for financial and strategic investors looking for the next opportunity:

Turkey. This report provides comprehensive and in-depth insight into the fast

growing Internet and Digital Media markets in Turkey.

A number of factors are converging in Turkey — favorable demographics

(young, prospering and engaged), a developing risk-capital ecosystem, a

reverse brain transfer (Turkish talent returning home from abroad),

widespread mobile penetration, emerging Internet ecosystem and maturing

eCommerce sector, stable government, strong online and offline consumption

habits and more, making Turkey one of the most anticipated markets in the

world.

The promise demonstrated by evolving sector dynamics and vastly changing

entrepreneurial conditions led last year to considerable hype with regards to

investing in Turkey. This enthusiasm in turn boosted a perception somewhat

in advance of reality, stimulating premature expectations.

Now it’s time, for all concerned to come back to Earth. Particularly in regard to

the eCommerce sector, and the hard work called for may be more mundane

than the glittering fanfare. Survival of the fittest is eliminating lagging players

and strengthening the entrepreneurial ecosystem. The young market is in fact

maturing, and early investors now have the kind of opportunity that comes

around only when a particular constellation of conditions prevail.

This report acknowledges and provides context for short-term caution

associated with emerging markets such as this. However, the overall findings

suggest substantial potential in the mid to long-term for the Turkish Internet

market to be a new growth region for entrepreneurs and investors alike.

INDEPENDENT TECHNOLOGY RESEARCH SECTOR INITIATION APRIL 2013 DIGITAL MEDIA

ALI DAGLI [email protected]

US: +1 415 412 2015 Turkey : +90 532 245 7505

DANIEL MAGGS

[email protected] London: +44 207 101 7660

Important disclosures appear at the back of this report GP Bullhound LLP is authorised and regulated by the Financial Conduct Authority in the UK

GP Bullhound Inc. is regulated by the Financial Industry Regulatory Authority (“FINRA”)

GP BULLHOUND – TURKISH INTERNET REPORT – TURKISH COFFEE: GET IT WHILE IT’S BREWING

1

GP Bullhound LLP

TABLE OF CONTENTS

Market Overview ...................................................................................................................... 2

Turkey in Context .................................................................................................................... 4

SWOT Analysis ........................................................................................................................ 5

Emerging Internet Ecosystem in Turkey ............................................................................... 5

Private Capital Environment .................................................................................................. 7

Digital Media Landscape ........................................................................................................ 8

Hot Topics................................................................................................................................ 9

Three Paths to Success .................................................................................... 9 Leadership Position and More Innovation ......................................................... 9 “Copy Now” and “Sell Fast” Does Not Work ...................................................... 9 Chicken-and-Egg Paradox .............................................................................. 10 Undue Focus on User/Revenue Growth .......................................................... 10 Appointing Additional Leadership When Needed ............................................ 11 One-way Ticket Back Home ............................................................................ 11

Selected Sector Overviews .................................................................................................. 12

eCommerce ..................................................................................................... 12 Gaming ............................................................................................................ 17 Digital Agencies, Online Advertising and Marketing ........................................ 22 Social Media and Online Content .................................................................... 25

Selected Private Placements ................................................................................................ 30

Selected M&A Transactions ................................................................................................. 32

Facebook and Mobile Internet Rankings............................................................................. 33

Company Tree Diagrams by Sector ..................................................................................... 35


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GP Bullhound LLP

Market Overview

Turkey is a country where East and West have always met, diverse cultures co-exist, and a

dynamic young population is expanding. A quarter of Turkey's 75m people are less than 15

years old, growing up in the world of Facebook, Twitter, and mobile Internet, and promising a

stronger future for the Turkish economy and its emerging Internet and Digital Media sectors.

Turkey is the world's 15th

, and Europe's 6th, biggest economy by GDP. According to the

Organization for Economic Co-operation and Development, Turkey is expected to overtake

India as the world’s second fastest growing economy by 2017.

E X H I B I T 1 : T U R K I S H G DP, 2 001-2 013

Source: The World Bank

Since the Turkish economic crisis of 2001 and the reforms initiated by Kemal Dervis, the

Minister of Economic Affairs and the Treasury at the time, inflation has fallen from 18.4% in

2003 to around 7.4% (expected) in 2012, and unemployment has fallen from 13.3% in April

2009 to 9.2% in 2012 — the lowest level since 2005. Although the budget deficit and foreign

debt remain cause for concern, in November 2012 rating agency Fitch raised Turkey’s credit

rating to investment grade as a vote of confidence in Turkish officials’ efforts to transition the

country towards a more self-sustaining, export-driven economy.

There is an exponentially developing appetite for digital media consumption in Turkey. Use of

IP-based platforms such as web, social networks, and mobile Internet is growing at an

unprecedented pace. 36.5m Turks are Internet users — the fifth largest digital population in

Europe after Germany, UK, Russia and France, and with more room for growth. Broadband

Internet subscriptions have grown 38% year-on-year to 19.3m in 2012.

E X H I B I T 2 : I N T E R N E T B R O A D B A N D P E N E T R A T I O N I N T U R K E Y

Source: IMF, The World Bank

Mobile penetration is high at 90% with 67m users. Turkcell, Vodafone, and Avea are the

dominant carriers with 52%, 28%, and 20% market shares respectively. 60% of mobile users

are currently on 3G data plans. According to Flurry, Turkey is one of the top ten fastest

growing iOS and Android markets at 185% year-on-year growth. 71% of mobile subscribers

$841bn $912bn

$0bn

$200bn

$400bn

$600bn

$800bn

$1,000bn

$1,200bn

2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E 2013E

5.9 6.8 8.6

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2008A 2009A 2010A 2011A Q3 2012E

No. of Broadband Users (m) Penetration as % of Population


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GP Bullhound LLP

connect to the Internet via mobile phone at least once a day. Every major eCommerce and

Digital Media — and even traditional — company in Turkey is releasing new mobile initiatives

and experiencing significant upside from this rapidly growing medium.

E X H I B I T 3 : M O B I L E I S B E C O M I N G MO B I L E I N T E R N E T – 3 G S U B S C R I B E R G R O W T H

Source: www.tk.gov.tr

People in Turkey are extremely digitally engaged and social, evident on the ground and in the

statistics. Turkish people spend the third-longest time online in Europe after the Netherlands

and the UK, and with 32.4m Facebook users — 89% of all Internet users and 43% of the total

population — Turkey is ranked the seventh largest country on Facebook. With 9m users and

rapidly growing, Turkey is also becoming one of the largest Twitter-using countries. Just

recently, leading mobile operator Turkcell and Twitter reached an agreement to better

integrate Twitter into Turkcell’s mobile phone architecture.

Turkey's overall infrastructure is well developed. Credit-card penetration, at some 60%, is

higher than the European average of 50%. And, relative to for example Russia, logistics and

physical infrastructure are good. Thanks to heavy investment, communication links are strong.

The third-generation network, at least in major urban areas, is often faster than that found in

many other European countries.

Available data indicates that Turkey’s economic environment is, and appears likely to remain,

strong; likewise the political environment is, and appears likely to remain, stable. With more

"profit-focused" execution, innovation, and smart money/investors feeding into Turkey, these

positive digital media trends are on track to continue for years to come.

7.1 19.4

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2008 2009 2010 2011 Q1 2012 Q2 2012 Q3 2012

No. of 2G Subscribers (m) No. of 3G Subscribers (m) Mobile Penetration (%)


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GP Bullhound LLP

Turkey in Context

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5

GP Bullhound LLP

SWOT Analysis

E X H I B I T 4 : SW OT A N A L Y S I S

Source: GP Bullhound

Emerging Internet Ecosystem in Turkey

New Internet startups are being formed and large traditional corporations are announcing new

online initiatives in Turkey virtually every day. Large conglomerates such as Dogan and

Dogus have numerous Internet companies under their umbrellas (such as Amazon-like

HepsiBurada and Hulu-like Tvyo). The spread of entrepreneurship in Turkey is taking place

not just at the corporate level, but at the startup level as well. Many Turkish professionals

have embraced the Internet as the forward-looking direction for growth. There is tremendous

energy behind a push to create what might one day become the Silicon Valley of Anatolia.

Entrepreneurship and Internet studies are being taught in every major university across

Turkey, and entrepreneurs and sector experts frequently attend panel discussions and give

lectures to stimulate debate and initiative. Arda Kutsal and his team at the very popular

Turkish tech portal Webrazzi are playing a major role in cultivating the Silicon Valley paradigm

in Turkey — by updating Turkish entrepreneurs on a daily basis as to what’s going on in

California, and how to emulate or localize these dynamic developments in Turkey.

Burak Buyukdemir has done an outstanding job of mentoring and incubating up-and-coming

entrepreneurs through his incubation platform eTohum. In fact, there are growing numbers of

incubators and accelerators (Fit Startup Factory, Dunya Invest, Inventram, among others).

The Turkish arm of Endeavor, which offers strategic advice, mentorship and global contacts to

promising startups, is working hard to help mature the entrepreneurial ecosystem.

The quality of advice available from some of the local counsels — such as Sidika Baysal

Hatipoglu of B+B or Enver Sezer Caliskan of Caliskan & Kizilyel — compares favorably to that

which one would get from seasoned professionals at Wilson Sonsini or Fenwick in Silicon

Valley.

Strengths Opportunities

Weaknesses Threats

Strong macro trends and growing economy

Young, educated and engaged population

Large Internet user base w/ room for growth

90%+ mobile penetration

Robust logistics, payments and Internet

infrastructure

Entrepreneurial energy and quick problem-

solving capability

Hard-working and low-cost labor force

East/West geographical and cultural magnet

R

Young Internet ecosystem

Lack of private capital, small set of smart

institutional investors

Insufficient innovation

Unbalanced activity in eCommerce versus

other digital media segments

Undue focus on revenue growth

Dependence on Google user acquisition

Lack of non-founding employee incentives

and stock options

Immature business models failing with

potential chilling effect on new investment

Domestic challenges to modernization

Internet censorship by government agencies

Unstable conditions in nearby countries

Exponentially growing appetite for digital media

Pressing move in 2013 towards more

innovative and profitable businesses

Money-spend online to catch up with time-

spend online (consumers and advertisers)

Massive growth trajectory in smartphone and

broadband penetration

Foreign investors looking to invest in Turkey

Investment incentives from government

Affluent professionals coming back home


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GP Bullhound LLP

The Turkish government, recognizing these new developments as vital for boosting the

accelerated growth Turkey has been experiencing in recent years, has been initiating a host of

policies — legal and fiscal measures and infrastructure projects — to attract entrepreneurial

activity and job seekers to the Internet sector. Especially helpful for growing startups is

"Government R&D company status" incentivizing them to rent offices in numerous tax-exempt

‘technoparks’ located on university campuses throughout the country. Such government

support is aimed at overcoming some of the known liabilities inherited from the past, creating

a friendly, proactive and robust environment for new businesses.

Despite all these positive trends, the Turkish Internet ecosystem is still young and

inexperienced in regard to the mores and skill sets of Silicon Valley. The older generation is

still bound by tradition and this can hamper younger players from developing and deploying

the entrepreneurial spirit to which Silicon Valley is accustomed. Cronyism, lack of vision, fear

of failure, insufficient skill in planning and cooperation are formidable deterrents.

At times, new business leaders can be impatient and naïve, underestimating what it takes to

grow a sustainable enterprise. There is a lack of institutional private funding, and existing local

investors want too much control, being unwilling to allow entrepreneurs to chart untried

trajectories. This results in a lack of innovation, premature abandonment of good ideas, and

inadequate financial incentives.

Of course, all these shortcomings are natural part of continued growth and development. And

as the country’s new business leaders demonstrate that they are finding their feet in this newly

developing arena, Internet entrepreneurship in Turkey is increasingly acquiring a distinctive

flavor, both local and global, creating a new and as yet untapped sphere of opportunity for

investors.


7

GP Bullhound LLP

Private Capital Environment

To date, the Turkish private capital environment has been largely dominated by local

investors and a small set of outside investors. Many of these are angel investors in the form

of successful entrepreneurs such as Emre Kurttepeli, founder of leading Internet portal

Mynet, Hasan Aslanoba, CEO of Aslanoba, and Tolga Tatari, Ahmet Emre Sari, and Sina

Afra, co-founders of eCommerce giant Markafoni. Turkish angels have generally invested in

rounds of up to $1m so far, although in some cases they have joined larger rounds alongside

non-angel investors.

We see significant deal activity from a number of key local digital media investors. 212 and

iLab in particular have been highly active and have played a key role in building awareness

of and confidence in the Turkish tech scene.

212 is the largest early-stage VC fund dedicated to making investments in Internet and

technology companies in Turkey, investing in a broad range of verticals including social

gaming, eCommerce, cloud services and social media.

iLab is unique in being both an investor and incubator, and focuses primarily on the

classifieds, comparison, e-commerce and content categories – all proven models and highly

scalable businesses. Founded in 2000, iLab is an icon of the Turkish tech scene - it has

holdings in 12 businesses with a combined total of over 700 employees, more than 400m

page views, 24m users, 6m unique monthly visitors, and a reach of 25% of the Turkish

Internet market. iLab invested in GittiGidiyor in 2006 and still owns a minority stake.

Generally speaking, the serious money has been provided by a small set of international

investors, with the largest raises to date coming from General Atlantic ($44m for Yemek

Sepeti, together with Endeavor Global) and Tiger Global Management (large stakes in Mynet

and Trendyol). Hummingbird and Earlybird have also made multiple investments. As global

investors get comfortable with the idea of investing in Turkey, we expect foreign capital

inflows to increase significantly.

E X H I B I T 5 : S E L E C T E D V C F I R M S W I T H T U R K I S H I N T E R N E T I N V E S T M E N T S

Source: CapitalIQ, Webrazzi, GP Bullhound

Investor Key Investments


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GP Bullhound LLP

Digital Media Landscape

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GP Bullhound LLP

Hot Topics Three Paths to Success

For an emerging country such as Turkey, we see three major routes to entrepreneurial

success. The first is to clone existing products/services that are already successful in

developed markets, but need a lot of work to flower in new territory. To date this has been a

common strategy for many Turkish entrepreneurs, and has been highly profitable for first-

movers such as eBay-clone Gittigidiyor and Gilt-clone Markafoni.

The second route is to create a unique or differentiated product/service for the local market

only — in this case, offerings with specific appeal to the Turkish population. Peak Gaming’s

flagship title Okey, for instance, has created unique appeal for Turkish gamers by

successfully porting the tea house experience of playing tile games to the Internet. Players

can also send each other topical gifts such as Turkish coffee, a nargila water pipe and even

a belly dancer!

The third and less well trodden route is to create a product/service with global appeal which

can compete outside of Turkey as well as within it — here the most innovation is required.

Already we see a number of success stories in the making. In mobile Internet games, for

instance, we see promising, high-quality, products such as Picnic Hippo's Bucketz, Duello's

iSlash, and Fugo's Wordz.

Leadership Position and More Innovation

Naturally, Turkish entrepreneurs and investors at first directed most of their attention and

money into types of businesses with which they and consumers are most familiar and

comfortable. That is, selling offline goods through online channels with a new make-up and

social mechanics. Accordingly, the majority of Internet-based businesses in Turkey and

MENA have been about selling offline goods online. And this has been fine, as a start.

However, we have to keep in mind that by their nature online shopping businesses have

relatively lower margins. In addition, low barriers to entry result in intense competition and

additional margin pressure. This means that only companies in the leading position by a high

margin and/or offering proprietary products will be embraced by consumers over the long

term.

Thus there are two ways to move forward in creating more local and global online success

stories in Turkey. Either the leading players further ramp up to widen the margin between

themselves and the competition, or entrepreneurs retool and come up with a wider range of

innovative, diversified, differentiated, and disruptive businesses — both in eCommerce and

other under-penetrated Internet sectors — that can in due course reach scale and

profitability.

In Turkey so far, Hepsiburada.com (online retailer), Sahibinden (online classifieds), Cicek

Sepeti (online flower delivery), Yemek Sepeti (online food delivery), Mynet (online portal),

Joygame (online gaming), Kariyer.net (online recruitment) have revenue scale and profitable

growth. All these companies offer differentiated products and are distinguished leaders of

their respective sectors. What is needed is more of them.

“Copy Now” and “Sell Fast” Does Not Work

Being inspired by and “cloning” a business that has been successful elsewhere can be a

smart move for entrepreneurs, and may bring considerable success. And it may at first

appear that this route is a shortcut compared with launching an enterprise that is brand new

on the scene. This perception may, however, be deceptive. Whether it is cloning a winning

business model or innovating from the ground up, local case studies support the common

experience of excessive workloads before payback can be expected.


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GP Bullhound LLP

In other words, successful and enduring companies are not built easily or overnight. When

we look at the time span of some of the successful online businesses in Turkey, where there

is both revenue scale and profitability (or a successful exit), this point becomes evident:

E X H I B I T 6 : S E L E C T E D C O M P A N I E S W I T H R E V E N U E S C A L E A N D P R O F I T A B I L I T Y

Source: CapitalIQ, GP Bullhound

Chicken-and-Egg Paradox

Today, investors all over the world are looking for growth, but with developed countries in

abeyance and many developing countries (such as Brazil and India) experiencing lower than

anticipated growth, attractive opportunities without high risk are few and far between.

In many respects, Turkey is becoming a standout place to look for high growth opportunities,

and investors are now keen on investing in Turkey. However, many are sitting on the

sidelines, waiting for more definitive signs. Optimistic and willing though they may be, they

remain cautious.

On the other hand, Turkish entrepreneurs require early-stage capital and seasoned investors

backing them up to unlock the ecosystem’s underlying value, to maturate the nascent

developments into the solid opportunities the investors are waiting for. Thus we have at the

moment something of a chicken-and-egg paradox, awaiting bold moves on the part of

frontrunner investors to break into a new and profitable arena.

Undue Focus on User/Revenue Growth

As commonly experienced in the western European and Silicon Valley start-up community, we

see many examples in Turkey where Turkish entrepreneurs focus on customer acquisition

and revenue growth as markers of success. However, this mentality can prove to be short-

sighted. Investors, on the other hand, anticipating changes wrought by maturity, need to see

not just revenue growth but a path to profitability.

2000 20122002 2004 2006 2008 2010 2013

Amazon

$235m

eBay

iLab Ventures iLab Ventures

$7.2m

Trayas

Allegro

(Naspers)

Tiger Global

Management

European Founders

Fund Management

1998

iLab Ventures eBay

$44m

General Atlantic

Endeavor Global

LEGEND

Private Placement M&A (Exit)

13 years old

15 years old

7 years old

6 years old

4 years old

14 years old

5 years old

14 years old

13 years old

12 years old

11 years old$2.5m

Intel Capital

Hummingbird

Ventures

$15m (50% stake)

CJ Games


11

GP Bullhound LLP

For example, for long-term value, Turkish e-commerce entrepreneurs need to look beyond

simply acquiring large numbers of users, instead focusing on the lifetime value of customers,

conversion rates, user royalty, and organic channels of customer acquisition and other key

performance indicators.

Emre Aydin, founder and CEO of Cicek Sepeti, has successfully demonstrated this by a

relentless focus on analyzing customer data and leveraging it to make operational

enhancements, as well as ongoing product innovation. And the result is clear — over the

years, Cicek Sepeti has enjoyed strong revenue growth with unprecedented EBITDA margins

of around 20%, delivering flowers online, in many respects, better than its global counterparts.

Appointing Additional Leadership When Needed

It is very common, both in Turkey and globally, for founders of Internet companies to be

wearing lots of hats. Although these talented leaders have had what it takes to get their

enterprises off the ground to considerable acclaim, Turkish entrepreneurs sometimes

underestimate the need to delegate authority and to widen the talent pool by bringing in

professional personnel with additive experience and complementary responsibilities. Such

limitation can prove to be damaging. Not only does it constrain the scope of realizable

potential for the enterprise, but the leader may be blindsided by the success they’ve enjoyed,

becoming overwhelmed and spending a lot of their time where they are not needed or as

valuable.

It was a smart decision, when Burak Balik, the founder of the highly successful online gaming

company Joygame, brought in Baris Ozistek as CEO in March 2011, two years after the

company’s founding. Today Burak is leading the product teams, game selection and on-going

platform innovation with Baris leading day-to-day execution and dealing with the corporate

development needs of the business. We expect this leadership to continue to translate to

exciting milestones for Joygame that the Turkish ecosystem as a whole can be proud of —

Korean entertainment and media company CJ E&M recently acquired 50% of Joygame for

$15m.

Another great example of successful additional leader appointment is in the case of Sina Afra

joining Tolga Tatari and Ahmet Sari in order to bring organizational experience and discipline

to the initial Markafoni team. The three leaders truly complemented each other with their

respective roles and turned Markafoni into the great success story it has become. Naspers

acquired 66% of Markafoni in 2011 and continues to back Markafoni with their new initiatives.

The collective goal is to turn Markafoni into a billion dollar company and have an IPO in a few

years.

One-way Ticket Back Home

A fairly recent phenomenon of significance for the tech sector in Turkey is the accelerating

“reverse brain transfer,” whereby Turkish professionals who have been studying and working

abroad are returning home to seek newly emerging opportunities. The tech sector has been a

major beneficiary of this trend.

For example, after 17 successful years in the US — having sold SelectMinds to Oracle —

entrepreneur Cem Sertoglu returned home in 2006 and became one of the early pioneers of

the (then non-existent) VC community. Two companies Sertoglu invested in — Gittigidiyor and

Grupanya — have already enjoyed exits.

In addition, well-regarded sector executives such as Hakan Bas of Lidyana, Rina Onur of

Peak Games, and Demet Mutlu of Trendyol studied in leading US universities and returned

home after a few years of investment banking experience to participate in this rapidly growing

sector. In another manifestation of coming back home, there are numerous Turkish executives

working abroad for US-based enterprises being asked by their companies to return to Turkey

to lead their operations in the region. Just recently, Baris Aksoy was asked by Intel Capital to

relocate from Silicon Valley to head their new offices in Istanbul.


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GP Bullhound LLP

Selected Sector Overviews eCommerce

eCommerce is arguably the sector in the Turkish digital media landscape which has attracted

the most attention and investment. The combination of a young and affluent demographic,

rapid economic growth, developed infrastructure and strong Internet, mobile and credit card

penetration has created fertile ground for eCommerce players to thrive. As penetration has

risen, the value of domestic eCommerce transactions has dramatically increased, from

around $3.1bn in 2007 to over $17bn in 2012, representing a 41% CAGR. Likewise, the

volume of such transactions has surged from 54m in 2007 to 162m in 2012, a 24.5% CAGR.

Even in 2012, when other sectors slowed down, domestic eCommerce spending rose by

34%, and volumes by 29%.

E X H I B I T 7 : V O L U M E A N D V A L U E O F D O M E S T I C E C O M M E R C E T R A N S A C T I O N S

Source: Interbank Card Center, xe.com, GP Bullhound

Turkish people are spending more online not only in aggregate terms, but also per transaction –

average basket sizes have grown 13.1% in 2012 alone. Turkey already has around 10m online

shoppers. Assuming Turkish Internet penetration will continue towards EU averages, this number

should reach around 16m by 2016.

E X H I B I T 8 : A V E R A G E D O M E S T I C E C O M M E R C E T R A N S A C T I O N V A L U E S ($ )

Source: Interbank Card Center, xe.com, GP Bullhound

Investor interest in Turkish eCommerce has been heightened by a series of landmark transactions

which took place in 2011. First, eBay acquired 83% of Turkey’s largest auction site GittiGidiyor, in a

deal rumoured to value the company at $215m. Then South African media conglomerate Naspers

acquired 70% of Markafoni, one of Turkey’s largest private shopping companies, in a deal valuing it

3.1 5.1 5.8

8.6

12.9

17.3

54.1 64.6 66.5

91.9

125.9

162.0

0

20

40

60

80

100

120

140

160

180

0

5

10

15

20

25

2007A 2008A 2009A 2010A 2011A 2012A

Transaction Value ($bn) Transaction Volume (m)

57.8

79.6 87.3

93.6 102.7 107.0

2007A 2008A 2009A 2010A 2011A 2012A


13

GP Bullhound LLP

around $200m. Lastly, Amazon invested in leading online flower store Ciceksepeti. Since then,

Turkish fundraising activity has been dominated by e-commerce plays as investors seek to tap the

sector’s long-term growth potential (see Selected M&A Transactions and Private Placements on

pages 30-32 for details).

At the same time, the sector faces a number of challenges. The success of and hype surrounding

leading companies such as Markafoni, Yemek Sepeti, Grupfoni and Lidyana has spawned

numerous imitations, creating intense competition for market share and driving down (already low)

gross margins for the market as a whole. There are hundreds of small-scale firms in each

eCommerce segment, but many lack distinctive sustainable business models and are too small to

attract investment.

That said, the overall long-term picture is still one of considerable optimism. Turkish per capita

income currently stands at c. $10,000, and is projected to reach $60,000 by 2050. GDP growth will

further the infrastructure investment needed to bring increasing numbers of Turks online. High

mobile penetration will go a long way to overcoming current infrastructure issues. In addition, the

ongoing and anticipated demise of large numbers of companies will bring maturity to the Turkish

eCommerce sector. Entrepreneurs and investors will need to have a more considered and

disciplined approach, and will need to focus more on product differentiation, sustainability, unit level

economics, and paths to profitability along with revenue growth. With eCommerce penetration

standing at around 0.6% of retail sales, the sector is still in its infancy with a long and profitable way

to catch up with the consumption levels of already mature European counterparts.

E X H I B I T 9 : E- C O M M E R C E S H A R E O F R E T A I L S A L E S (20 11 , N O N -T R A V E L )

Source: Center for Retail Research

General eTailers and Horizontal Marketplaces

Leading general business-to-consumer eTailers serving Turkish customers, such as Dogan Group’s

Hepsiburada and Amazon, work with large numbers of merchants and sell hundreds of thousands of

products across a broad range of categories. Founded in 1998, hepsiburada.com is the largest

eCommerce site in Turkey with over 6m monthly unique visitors, 900,000 monthly purchases and

annual revenues of over $300m. The Company offers 350 SKUs in 32 categories and employs 250

employees. Although much smaller, Sabanci Group’s Kliksa and Hurriyet’s newcomer Yenicarsim are

other prominent players in this segment.

Horizontal marketplaces act as virtual bazaars that bring together merchants, small businesses, and

individuals to trade almost anything. Sahibinden is currently the leading marketplace and classifieds

destination in Turkey, with over 13m monthly unique visitors. It claims over 3m listings at any one

time and around 50,000 new listings a day. eBay’s GittiGidiyor is currently second in the space with

over 6m monthly unique visitors. eBay’s 2011 acquisition of GittiGidiyor remains the largest Internet

acquisition in Turkey, with a deal value of $217m.

10.7%

8.0% 7.4% 7.0% 6.8%

6.0% 5.8%

4.3% 3.3% 3.0%

2.5%

0.6%


14

GP Bullhound LLP

Online Private Shopping

Online private shopping clubs offer an environment that hosts sales of designer brands for members

at deep discounts. They often encourage members to introduce friends in their online social networks

with additional savings and offers. UK-based Vente Privee offered this model to online customers for

the first time in 2001 and remains one of the most valuable private companies in the world, with

revenues in 2011 of $773m and valuations estimated between two to three billion dollars. Gilt Groupe,

the first to bring the luxury sample sale to the US online market when launched in 2007, has also

experienced extraordinary growth. Realizing this massive opportunity, Turks were fast to follow, with

private shopping clubs Markafoni and Trendyol launching in 2008 and 2009, respectively. Other

sizable (and somewhat challenged) players are Limango, Vipdükkan, Morhippo, and 1v1y.com.

Group Buying and Daily Deals

Group buying sites offer products and services at significantly reduced prices providing that a

minimum number of buyers purchase the same item. They are viral versions of traditional

daily deal sites, bolstered by integration with Facebook and various social features. Huge

consumer demand and hype for this segment was reflected in the creation of 150+ new

players and a rash of deals in Turkey in 2011. That year, Intel invested in Grupanya, Quants

Financial Services took a majority stake in Grupfoni, and betting site Bilyoner acquired

Grupca. However, with intense competition, low barriers to entry, and questionable ROI, this

market has been shrinking. Currently, Istanbul-based Grupanya and Chicago-based Groupon

are the leading players in Turkey, with Yakala.co, Grupfoni, and Bonubon chasing after them.

Price Comparison and Lead Generation

Price comparison services allow individuals to see different lists of prices for specific products from

large numbers of retailers. These sites typically do not charge users to use the service, but charge the

retailers a flat fee or have them pay every time a user clicks through to the retailers’ product (CPC).

Since price is a big value driver of eCommerce for Turkish consumers (in many instances versus

convenience), price comparison sites are quite popular. The price comparison sites with the most

traffic are Akakce, Ucuzu, and iLab’s Cimri.

Vertical eCommerce Companies

In Turkey, 2010 was the year of private shopping, 2011 was all about group buying sites, and in 2012

vertical eTailers and Marketplaces grabbed most of the attention. These are destinations where

consumers go to buy products or services in a specific vertical, varying from cars, consumer

electronics, cosmetics, accessories, baby products, and home decoration.

Certain verticals, such as food and flowers, already have their well-established leaders. Yemeksepeti,

founded in 2001, and Ciceksepeti, founded in 2006, have done an excellent job of executing their

business plans and attracting high quality investors such as General Atlantic, Amazon, and

Hummingbird. Benefiting from the company’s strong and influential investor and celebrity network,

Lidyana is emerging as the leading player in the accessories market. There is both huge growth and

intense competition going after the “golden mom” in the baby and home decoration verticals. The

travel vertical is still largely owned by offline players, and there is huge room for growth online.

Vertical eCommerce in Turkey has had some consolidation — Dogan’s acquisition of Evmanya and

Pera Bulvari buying WestWing — but has yet to see large M&A transactions. The investment

landscape, on the other hand, has been very active as investors have started to follow companies

that identify a niche and become proficient in catering to it.


15

GP Bullhound LLP

E X H I B I T 10 : L E A D I N G T U R K I S H V E R T I C A L E C O M M E R C E C O M P A N I E S


Vertical Leading Player(s) Selected Investor(s)

Accessories and

Jewellery

Automotive

Books

Conservative

Fashion

Consumer

Electronics

Cosmetics

Flowers and Gifts

Food

Home Decoration

Mother and Baby

Personalised

Fashion

Shoes

Travel Bookings

Rentals

Local Events


16

GP Bullhound LLP

Payments

The Turkish payments industry has benefited greatly from the eCommerce boom of the last

few years. As we discussed at the outset, Turkey’s continued GDP growth, 60% credit card

and near 50% Internet penetration generated 162m eCommerce transactions in 2012, with a

total transaction value of $17.3bn and a per-transaction average of $107. However, as we’ve

also noted, only 0.6% of Turkish retail sales take place online, so the balance of payments is

firmly weighted towards offline for the time being. This is not just a matter of economic

development; there are important market factors which have caused eCommerce to lag

behind. Many small businesses which would otherwise sell online lack an appropriate point

of sale. Ability to absorb chargebacks is also a concern for small vendors, who may struggle

to meet shipping deadlines for large volumes of purchases in a time and cost effective

manner. Prior to 2009, eCommerce was largely limited to retail in small-ticket consumer

electronics purchases – thin margins meant that few saw an opportunity. A number of large

online retailers were also badly damaged by the 2008-2009 financial crisis, which did little to

raise confidence in eCommerce. On the demand side, trust and security are important

concerns for Turkish consumers.

Despite all this, things are clearly changing. The explosive growth of private shopping and

group buying sites has been a major boon for Turkish eCommerce. By leveraging social

networks and an attractive sense of exclusivity, they have succeeded in creating

environments where Turkish users feel comfortable making high-ticket purchases they would

previously have made in-store.

We now see close to a dozen serious payment players in Turkey:

i) Leading micro/mobile payment solutions are Mikro Odeme, Paybyme, PaytoGo /

GameSultan, This segment has seen the most transaction activity. On January 25,

2012, Mikro Odeme, Turkey’s leading mobile payment service, received a majority

investment from London-based private equity house Mediterra Capital. And in

February 2013, Asian e-payments giant MOL acquired a majority stake in

PaytoGo/GameSultan.

ii) Leading digital wallet solutions are Interbank Card Center’s BKM Express,

Turkcell’s Cuzdan (Wallet), Paypal, and Vodafone’s Cuzdan (Wallet). These digital

wallet platforms make eCommerce purchases easier and faster by letting users

register their debit, credit and/or prepaid cards on the platform in advance.

iii) Rapidly growing pre-paid solutions include Ininal Mastercard, Vodafone’s CepNakit

Kart, Turkcell’s Cep-T Para Cart, Magir Kart, and Paysafecard. Ininal is the only

independent player that offers reloadable prepaid cards with 90% market reach

given its large merchant ecosystem and retail distribution system.

iv) POS and merchants solutions include Paypal, PayU, Mikro Odeme/3pay, ipara, and

multipaynet.

Given the rising acceptance of eCommerce in Turkey and considerable room for growth in

terms of Internet, mobile and credit card penetration, the payments vertical will continue to

remain a competitive but exciting space.


17

GP Bullhound LLP

Gaming

Turkish gamers — a quarter of the population — are proud to call themselves gamers, and

have always embraced gaming without limits. There was a point in 2008, however, when the

Ministry of Finance banned Knight Online, Irvine-based K2 Networks’ micro-transaction-

based F2P massively-multiplayer online game on the basis that, “there were thousands of

people in Turkey that were becoming addicted to games and companies were earning profits

without being taxed.” Knight Online was a victim of its success — the profits from Turkish

players were reaching $1m a month. The ban was unfortunate, but the game’s popularity is

an indicator of the very promising online gaming sector in Turkey.

E X H I B I T 11 : T U R K E Y ’ S G A M I N G P O P U L A T I O N (20 12)

Source: Newzoo

Turkey is estimated to have approximately 22m active gamers, or 29% of its total population

of 75.6m. Of these 22m, more than half are estimated by Newzoo to be spending money on

games.

E X H I B I T 12 : M O N E Y S P E N T O N G A M E S I N 2 012 - D I S T R I B U T I O N

Source: Newzoo

According to recent Newzoo research, the Turkish gaming market is estimated to reach

$450m in 2012. Although more traditional genres (console, PC, and massively-multiplayer

online games) still comprise the largest share (at 24%, 21% and 12% respectively), emerging

platforms such as social networks and mobile Internet are already at 20% levels with

projections for much higher growth and innovative vehicles, such as in-app purchases, for

monetization.

76 m (100%)

Total Turkish population

37 m (48%)

Internet Population

22 m (29%)

Active Gamers

11 m (15%) Paying

Gamers

Console games 24%

MMO games 21%

PC/Mac download

15%

PC/Mac boxed 12%

Mobile phones

10%

Social networks

9%

Casual websites

9%


18

GP Bullhound LLP

E X H I B I T 13 : G R O W T H I N MENA I N T E R N E T U S E R S

Source: Arabnet and Discover Digital Arabica

In addition to Turkey, the Middle East and North Africa (MENA) region offers attractive

conditions for gaming growth and a significant area of expansion for Turkish gaming

companies. According to Arabnet and Discover Digital Arabica, in 2011 the MENA region

had around 72m Internet users and is expected to have 150m by 2015, representing an

annual growth rate of 21%. Turkey is also a young demographic; the average age is 28.

Utilizing the new opportunities afforded by global app store distribution on social networks

and Mobile Internet devices, small players in atypical locations have been developing gaming

app revenues of a million dollars a day. Turkish gaming companies are becoming alert to

such opportunities, and investors are on the lookout for those most likely to break through.

PC/Console Gaming

According to Newzoo, PC and console gaming currently occupies the largest share of the

Turkish gaming market, estimated at around $170m each generating around $85m.

Playstation 3 was the dominant console platform with 80% market share by hardware and

software sales in H1 2012, with Xbox and Wii sharing the rest of the console market.

On the PC and console gaming side, we cannot point to a successful Turkish game developer

since the large global developers/publishers dominate the Turkish market. Top publishers are

EA, Activision, Konami, Take 2, and UBISOFT. As per 2012 sales, Turkish players favored the

following games the most: Pro Evolution Soccer, Fifa, Call of Duty, Medal of Honour, and

Need for Speed. In addition to these multi-platform games, Diablo 3, Football Manager and

Sims 3 were the most popular titles on PC.

The only semi-Turkish global success story is German-based Crytec, led by three Turkish-

German brothers, Cevat, Faruk, and Avni Yerli. The company is known for creating

exceptionally high-quality games for the PC and next-generation consoles, powered by

proprietary 3D-game technology CryENGINE. The company has been on an aggressive

expansion spree over the last several years opening offices in the United States, Ukraine,

South Korea and, most recently, in the founding brothers’ ancestral Turkey. It is worth

mentioning that, Mr. Yerli recently announced that all Crytek games would be free-to-play

going forward. It is rumored that the Company’s most recent free-to-play first person shooter

game Warface — still in beta — is generating a few million dollars a month in Russia alone.

MMO Games

Massive multiplayer online (MMO) games in Turkey are hugely popular. According to

Newzoo, more than one in five dollars spent on games in Turkey goes to MMO, higher than

in many other countries. Turkey is estimated to have around 9.8m regular MMO gamers,

80% of whom are under 35. The share of paying MMO gamers is high at 46%, although

average monthly spending is several times lower than in the US. 96% of MMO gamers play

free-to-play and 27% play subscription-based MMO games. In revenue terms, free-to-play

games take slightly more than half. Spending on MMO and console games at gaming cafes

is estimated to add at least another $30m to the picture. The growth and popularity of MMO

15m

70m

150m

2006A 2011A 2015E


19

GP Bullhound LLP

games has been driven by the same factors driving social gaming – a young population, high

Internet penetration and usage, and rising disposable income - important for covering the

cost of subscriptions. That said, ultimately MMO in Turkey, like MMORPGs, caters more to

hardcore gamers than casual ones.

Established in 2009, the leading Turkish MMO publisher is Joygame. Unlike social gaming

company Peak Games, Joygame does not produce any titles, but localizes and publishes

existing ones into the local market. However, the company truly shines when it comes to

publishing foreign titles in Turkey, and the user metrics, revenue growth, and strong margin

profile speak to this fact. The team spend days working on the graphics, language, local

jargon, and analyzing user data as part of the localization process. The company currently

has 15m registered users, 2.5m monthly active users and 400,000 daily active users.

Wolfteam is the biggest title of Joygame and actually the most popular MMO first-person

shooter (FPS) game in the region, estimated to be generating above $2m in monthly

revenues. Joygame started out by publishing localized titles for the Turkish market only, but

in 2011 it expanded its operations into MENA, first by opening an office in Egypt. Korea-

based CJ E&M acquired 50% of Joygame in March 2013.

Sobee is a truly Turkish multiplayer game development company founded by highly regarded

video game developer Mevlut Dinc. Mr. Dinc moved to his homeland after developing global

hits such as the First Samurai and Street Racer to share his wealth of knowledge with the

Turkish game developers and gamers. The company develops server based multiplayer

games that are available and customised for a Turkish audience.

Social Network Gaming

Social network gaming typically includes games that are played on social networks and/or

have some type of social graph integration. These games are generally monetized through

virtual currency, free-to-play and have strong virality components attached to them.

Facebook, which went from 100m users in 2008 to 1bn in 2012, has been the main driving

force in the surge of social network gaming.

E X H I B I T 14 : T O P F A C E B O O K D E V E L O P E R S B Y DAU ( J A N 2013 )

Source: Appdata.com

Out of 32.4m Turkish Facebook users, 89% play games. After three years of operations,

Zynga’s smash hit Farmville franchise is still the most successful franchise on Facebook,

which speaks to the retention and monetization potential of successful social network games.

Turkish people are participants in the success of Farmville - 1 out of 8 Internet users in

Turkey plays Farmville.

Rank Name CountryCompany

Metrics

MAU DAU

1 Zynga US 142.3m 16.5m

2 King.com UK 38.3m 4.7m

3 Electronic Arts US 17.4m 3.7m

4 Peak Games Turkey 11.8m 3.4m

5 Wooga Germany 21.6m 3.2m

6 Social Point Spain 21.3m 2.1m

7 FunPlus Game China 9.8m 2.0m

8 Playdom US 7.4m 1.7m

9 RockYou! US 2.9m 1.2m

10 Playtika Israel 6.1m 1.1m

11 PlayQ US 5.6m 1.1m

12 Miniclip.comz UK 6.1m 1.1m


Metrics

MAU DAU

13 FreshPlanet US 10.2m 1.0m

14 Rovio Finland 10.3m 1.0m

15 Geewa Czech Rep. 10.1m 1.0m

16 Tetris Online US 5.1m 1.0m

17 Kiloo Games Denmark 5.0m 1.0m

18 SGN US 6.4m 1.0m

19 6waves Hong Kong 2.2m 0.8m

20 THX Games Hungary 2.8m 0.7m

21 Boyaa China 4.3m 0.7m

22 Digital Chocolate US 4.4m 0.5m

23 Mynet Turkey 3.8m 0.5m

24 Qublix Canada 3.6m 0.4m


20

GP Bullhound LLP

The Turkish poster child of global social gaming is Istanbul-based Peak Games, a company

which in little over three years has become the world’s fourth largest gaming company on

Facebook by daily active users (DAUs). This is impressive, since DAU is a metric that

measures highly engaged users and is a proxy for monetization potential. The company’s

flagship title is Okey, a digital version of a popular Turkish tile-based game usually played

with four people. After resounding domestic success with Okey, Peak released Turkey and

MENA focused Happy Farm, a farming simulation game in the style of Zynga’s Farmville.

While Happy Farm’s core mechanics are similar to Farmville’s, notable modifications include

the use of Arabic instead of English, and characters in local dress (and the absence of pigs).

Mynet is another Turkish company that gets a top-25 spot on Facebook’s developer

leaderboard. Whereas Peak Games is a dedicated game development and localization

studio, Mynet is a diversified Internet media company with a massive user base on its web

portal, mobile apps and Facebook, from which online games can be distributed.

Mobile Internet Gaming

In terms of the number of new games in development, media consumption and monetization,

mobile Internet is the current rising star in the Turkish gaming landscape. Despite local

complaints with regard to the lack of local developer talent (those who can write code in

objective C or Unity) we expect to see more and more high quality games developed in

Turkey targeting local and global mobile audiences through Mobile Internet devices such as

iPhone, iPad, and Android.

E X H I B I T 15 : T O P 15 G R O S S I N G I P H O N E G A M E S I N T U R K E Y ( J A N 20 13)

Source: Apple iOS and Google Play App Stores

Although there are a large number of Turkish game developers offering their games on the

Turkish app store, only Peak Games finds itself a spot in the top 15 grossing rankings with its

highly successful mobile game, Okey Plus. Out of 15 top-grossing games, eight of them are

localized for Turkish players, which shows the importance of localization. Two other important

points to highlight from our analysis concern the file size and business model. When a mobile

game is more than 50 megabytes, consumers cannot download it on the fly, through 3G

mobile networks, which creates significant friction. Numbers speak to this fact. 14 of the 15

top-grossing games on the Turkish app store are less than 50 megabytes. In terms of the

business model, all of the 15 top-grossing games are free-to-download and monetize through

in-app purchases. Finland-based Supercell has the perfect recipe. The company’s highly

successful social mobile games, Clash of Clans and Hayday — which are both localized, less

than 50 megabytes, and free-to-play — have been consistently ranked first and second in the

top-grossing charts in the last few months.

Turkish mobile game developers have not only achieved some domestic success, but global

recognition as well—with studios such as FUGO, Duello and Picnic Hippo achieving good

traction in a very short time. Founded in 2009, FUGO has been a global name in mobile

gaming through its popular word challenge game Wordz, which has been distributed in 35

languages downloaded over five million times. Duello, a developer of casual mobile games for

Turkish Developer Localised Smaller than 50MB Free-to-Play

1

8 15

14


21

GP Bullhound LLP

all ages, was founded in 2010 and has accumulated over 17m installations to date, over one

million paid downloads and close to 3m monthly active users through its popular iSlash

franchise. Moreover, it has already reached profitability with no outside financing, and is

preparing to roll out additional titles to capitalise on its success to date. Picnic Hippo, which

was founded in 2011, has also become a global success story with Bucketz, a simple and

humorous touch screen game which has been featured by Apple on 146 app stores worldwide

and is the number one ranking game by iPhone Quality Index, a site which condenses critical

opinion on apps from across the web into a definitive score. All of these studios have

produced innovative, popular and internationally accessible titles. They are also small and

lean, with no more than ten staff each.

Licensed Online Betting

Turkey has a complicated relationship with gambling. Although betting is officially illegal under

Turkish law, licensed online betting is permitted in a number of selective cases including the

state lottery (Piyango), sports betting (Sportoto) and gambling on horse racing. The national

lottery is something of an institution for Turkish people and forms a billion dollar market.

Soccer and horse racing are also highly popular - and the sports lottery generates in excess of

$1.5bn yearly, with track-side betting bringing in around $700m. The sports lottery has been

the primary driver behind the shift in Turkey towards betting online – unsurprising given that

the Internet provides a constant stream of sports news and insight. Licensed online players

are estimated to represent approximately 15% of total betting spend, and growing. The

leading “legal” players are Bilyoner.com, Nesine, Tuttur, Oley, and Birebin.

Similar to the United States, several changes have been made to Turkish gambling laws in the

last decade making it illegal for gambling companies to target Turkish citizens with their

products. While there are no legally-licensed Internet gambling websites operating out of the

country, foreign operators continue to target Turkish players. Betsson, for example, received

more than a quarter of its revenue from Turkey last year. In addition, Sportingbet recently sold

its highly popular Turkish bookmaking service Superbahis.com to GVC Sports for

approximately $200m, despite attempts from Turkish regulations to stop the sale.

The Turkish government has recently announced its intention to sell Sportoto - its only legal

sports betting organization - as part of a privatization bid expected to raise in excess of $10bn.


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GP Bullhound LLP

Digital Agencies, Online Advertising and Marketing

Both globally and in Turkey, the Internet is the fastest growing advertising medium, attracting

advertisers with its rapidly expanding audience, extensive reach, interactive nature and

ability to target specific demographics and performance.

E X H I B I T 16 : G R O W T H A N D A L L O C A T I O N O F T U R K I S H A D V E R T I S I N G S P E N D ($ B N )

Source: Turkish Association of Advertising Agencies, GP Bullhound

Overall advertising in Turkey is estimated to be growing at a nearly 20% CAGR from $1.5bn

in 2009 to $3.2bn in 2013, with online advertising representing 10% of the market. Other

online verticals and online advertising can be expected to benefit each other in turn: as more

and more media consumption and spending shifts online, so will advertising dollars.

Conversely, with increased online ad spend, Internet companies and online retailers can be

expected to capture new consumers through both brand, performance, and video

advertising. According to Mediascope Europe, users spend more time with the Internet and

TV than any other media (18 hours per week on each), but last year, advertisers still spent

three times more on print media and six times more on television than they do on online

advertising. In addition, most Turkish advertisers still allocate far less of their marketing

budgets to digital and online marketing – around only 10% compared to a global average of

27%. These disparities are expected to be the driving force of double-digit growth rates in

online and video advertising spend in the years ahead.

E X H I B I T 17 : A V E R A G E H O U R S S P E N T O N L I N E P E R MO N T H P E R U S E R (20 12)

Source: Turkish Association of Advertising Agencies

People in Turkey spend more time online than any other European nation except the UK –

this gives advertisers a potentially long window of opportunity within which to engage and

capture consumers. In addition, online media consumption habits are shifting dramatically.

Passive, traditional, one-way media consumption is rapidly evolving towards active

39.1

30.7 28.9 27.8 27.6 26.3 25.5 25.2 24.7 24.5

UK Turkey France Finland Europe Spain Russia Germany Sweden Worldwide

TV Adverts

57%

Print Media 24%

Internet 8%

Billboards 7%

Radio 3%

2011A: $2.4bn

1.5

2.0

2.4

2.8

3.2

2009A 2010A 2011A 2012E 2013E


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GP Bullhound LLP

interaction, dialog, and engaged communities. As previously stated, Turkey is the seventh

largest population on Facebook (more than 32m users). The high proportion of users

engaging with social media means that advertisers have real opportunities to generate

superior performance through rapidly growing web and mobile platforms. And advertisers are

embracing this change. According to Egon Zehnder International, more than 75% of

businesses in Turkey are using or planning to use Facebook, Twitter, and mobile marketing

for digital marketing, and are open to using alternative social channels such as YouTube,

blogs, communities, and adgames as long as brand safety remains intact.

E X H I B I T 18 : T R E N D S I N T U R K I S H E X E C U T I V E S P E N D I N G

Source: 2013 Marketing Trends Survey (StrongMail)

Likewise, in a recent survey by StrongMail of over 1,000 Turkish executives, 56% said that

they planned to increase company spending on email marketing, 52% planned to increase

social media spend, and 43% mobile. In accordance with this trend, a significant proportion

of executives planned to decrease spending on conventional forms of advertising such as

tradeshows, events and direct mails. Although the high importance of social media and

mobile is not a uniquely Turkish phenomenon, the fact that online forms of customer

engagement have achieved a higher priority than conventional advertising in such a short

period of time is a testament to Turkey’s rapid growth and socio-economic conditions

conduciveness to social media penetration.

Digital Creative Agencies

Digital agencies have proliferated in

Turkey as entrepreneurs have rushed to

match strong demand from businesses

seeking the best way to deploy email

marketing, social media, mobile and

other strategies under a digital agency

umbrella. It has consequently become

the most crowded and competitive

segment of the online advertising sector

in Turkey. Whereas many of these

agencies were originally service-led

businesses, competition and innovation have led players, such as Krombera, to diversify into

less labor-intensive and higher margin media products (such as software-driven social media

marketing tools tailored to the requirements of each client).

Programs for which Turkish executives

intend to increase spend

Programs for which Turkish executives

intend to decrease spend

10.2%

13.9%

15.4%

17.3%

26.8%

39.8%

42.8%

51.8%

55.5%

Other

Public Relations

Direct Mail

Tradeshows & Events

Advertising

Search (SEO/PPC)

Mobile

Social Media

Email Marketing

2.4%

3.4%

4.8%

9.3%

11.6%

17.6%

23.0%

33.6%

37.4%

Mobile

Email Marketing

Social Media

Search (SEO/PPC)

Public Relations

Other

Advertising

Tradeshows & Events

Direct Mail

EXHIBIT 19: SELECTED CREATIVE AGENCIES


24

GP Bullhound LLP

2.4%

3.7%

13.3%

18.0%

26.9%

28.9%

33.1%

34.4%

44.4%

Direct Mail

Tradeshows & Events

Advertising

Not sure yet

New customer acquisition

Driving revenue

Awareness building

Expanded reach to new audiences

Building loyalty and retention

Mobile Enablers

As consumption and spending habits move to emerging mobile and tablet (and smart TV)

platforms such as iOS and Android, leading Turkish companies need to connect and satisfy

their customers in this new and rapidly growing medium. Mobile enablers offer their customers

app development and software services. Some of the key solutions and applications include

mobile banking, mobile payments, mCommerce, mobile betting and sales force management.

Two leading players in Turkey are Pozitron and tmob.

Brand and Performance Advertising

Brand and Performance advertising businesses are less common in Turkey when compared

with digital agencies, and have yet to reach the level of sophistication seen in more mature

markets. The most common form of advertising is generic display banner ads and creative

campaigns, with performance advertising being deployed less often.

On the sell side, leading ad networks include Reklamz, (acquired by Ballroom International

Network in December 2011), reklamport and NetBook Media Network. In addition, large

media companies and content sites have their own ad networks; these include MedyaNet

(Dogan), Turkuvaz, Milliyet, Nokta Grubu, Netbook, Netcom and MCD. On the buy side,

leading media buying networks include, GroupM, OMD, Carat, Digitouch (backed by

Hummingbird Ventures) and DBI.

Online Video Advertising

As audiences increase the amount of time they spend consuming video content online, and

publishers continue to find ways to use video advertising to monetize non-video content such

as casual games, social games, online radio and mobile applications, brands are growing the

portion of their advertising budget allocated to digital video. Local online video leaders such

as Nokta (owns popular online video portals Izlesene and AlkislarlaYasiyorum) will likely

benefit the most from this shift. We also expect more premium content to be consumed and

monetized via web and tablets. Leading online video ad networks include Coolshark,

Medyanet’s Mobia, Ballroom’s Vidyoda, and Dailymotion’s MCD.

Mobile Advertising

Turkey’s mobile penetration of over 90% and rapid growth in smartphones make mobile

advertising a much needed and highly effective weapon for companies to deploy. Mobile is

the fastest growing consumption medium and according to StrongMail’s recent survey, 43%

of Turkish advertisers are looking to increase their mobile advertising budgets in 2013. Within

mobile, more than 40% of surveyed advertisers are interested in reaching consumers via

mobile apps. Leading players include Mobilike, acquired by Madvertise in April 2012,

Mobilera, MoveZ, Rabarba and Project House.

Email and Mobile Marketing

E X H I B I T 20 : P R I M A R Y V A L U E O F MO B I L E M A R K E T I N G T O T U R K I S H E X E C U T I V E S

Source: 2013 Marketing Trends Survey (StrongMail)


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GP Bullhound LLP

Email marketing is a key growth area for the Turkish advertising vertical. As shown in Exhibit

20, email marketing is expected to be a priority spending area for Turkish executives going

into 2013, so specialist providers of such services can be expected to benefit. Leading players

include EuroMessage, Sendloop, and ODC.

EuroMessage, which recently received funding from Dogus, provides a dedicated software

platform that can be operated via a choice of self-service, joint account management or full

service plans. The platform is supported by a comprehensive analytics offering, which both

draws from and feeds into the clients’ databases to maximize click-through rates and ROI.

Sendloop has a slightly different focus. It is primarily a DIY software proposition, focusing on

providing clients with a cost-effective, easy to use solution with minimal training requirements.

It also has a greater emphasis on email list management, providing a number of tools for

segmenting and organizing lists to improve campaign targeting. ODC, on the other hand,

provides an e-marketing and campaign management platform that aims to help companies

communicate with existing and potential clients, effect sales and create customer loyalty

through e-mail, SMS, MMS, wap-push and other mobile channels.

Social Media and Online Content

With Turkish people spending the third-longest time online in Europe (after the Netherlands

and the UK) social media players have – competition aside – a largely captive audience.

Turkey’s most popular destinations are all social media or content oriented – Google (online

search and Google products), Facebook (social media), YouTube (online video), Mynet

(online content, games, and Mynet products), and Microsoft Live (online search and content),

Nokta (online video and blogging) — all of which are reaching more than 15m monthly

unique visitors per comScore.

That Turkey is more socially penetrated than many more mature Internet economies is to a

large extent a reflection of the country’s highly social character. Turkey is known for having a

strong sense of community, both offline and now online. In a society where people are

typically known for being friendly, outgoing and direct, there is little resistance to sharing

thoughts and feelings with strangers and friends-of-friends via the Internet.

A third trend we observe is that Turkey is also comparatively advanced in terms of digital

media penetration rates.

E X H I B I T 21 : P R E F E R R E D M E D I U M T O F O L L O W T H E N E W S – C O U N T R Y C O M P A R I S O N

Source: Campaign Türkiye (campaigntr.com)

Although conventional channels are most popular with those over 55, online content is the

preferred choice of Turkey’s burgeoning 25-35 year-old bracket. Users access news through a

range of portals, including websites for established TV channels, but also online-only

platforms which source and generate their own content.

39%

28%

14%

6% 6% 2%

0%

10%

20%

30%

40%

50%

60%

News Sites TV NewsChannels

TV PrimeNews

Newspapers SocialNetworks

Radio

Turkey USA China Poland Brazil Japan


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GP Bullhound LLP

Social Media

Social media has an unusually strong and pervasive influence across the Turkish tech

ecosystem given the scene’s relative immaturity. Turkey is the seventh largest country on

Facebook - with over 32m users, or 89% of all Turkish Internet users; it is also one of the

most socially penetrated. Blogging sites are also highly popular. Dedicated blogging

platforms such as Blogger.com (owned by Google), Blogcu (owned by Turkish content portal

operator Nokta) and Wordpress attract high user volumes, as do more casual and accessible

micro blogs such as tumblr and Twitter.

E X H I B I T 22 : M O S T P O P U L A R S O C I A L M E D I A S E R V I C E S I N T U R K E Y ( D E C 201 2)

Source: comScore, GP Bullhound

As we can see from the above, the Turkish social landscape is dominated by established

non-Turkish names. There are however a number of local success stories, of which Nokta’s

Blogcu is one. Blogcu is a Turkish-language social blogging and blog discovery platform

which displays blog posts in the style of Pinterest. Another is Bobiler: founded in 2006, the

site began as an online community for Photoshop artists, before evolving into a broader

creative social network involving a range of online creaters and curators. Bobiler enables

creaters to submit their work to the platform for peer review – the pieces which receive the

most votes get published on the site’s main page. This scheme encourages people to submit

quality content to compete for publicity, and with high quality content come more users, more

votes and ultimately more advertising fees – a virtuous cycle.

Internet-Only New Media Portals

With more than 16m monthly active users, Nokta — backed by Intel Capital — is the fourth

largest (and largest local) Internet property in Turkey, after Facebook, Google, and Microsoft.

Nokta’s diverse portfolio of content sites include the leading online video sites in Turkey,

namely Izlesene.com and Alkislarlayasiyorum.com. In addition, Nokta owns the leading

blogging platform Blogcu, photography portal Fotokritik.com, and highly popular niche content

sites such as Sinemalar (movie reviews), Doviz.com (finance), and YemekTarifleri (food

recipes). Leadership and growth in online video will likely be the primary focus for Nokta going

forward.

The second largest local online content portal in Turkey is Mynet and we believe that the

company still has much untapped potential. Launched in 1998, it offers over 40 different

services to more than 18m customers, including email, news, online games and social

networking — and leverages its large user base and strong brand presence to generate cross-

selling opportunities between them. Mobile, games, and videos will likely be the key growth

drivers going forward.

Yeni Media Internet Publishing is another successful Internet-only media company in Turkey.

The company owns two leading Internet news portals, namely Haberler.com and

SonDakika.com, intersinema.com, popular cultural portal Antoloji.com, health portal

Hastane.com.tr, woman’s portal YeniKadin.com, and eDevlet.com.

90%

55%

40%35%

20% 20%15%

10%7%

Facebook Blogger Twitter Blogcu Instagram Wordpress LinkedIn Tumblr Bobiler.org


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GP Bullhound LLP

Another sizable player is ekolay. The company started as an Internet service provider before

pivoting into a news, magazine and entertainment portal, and is owned by Dogan Online. Two

new-comers are: Ilkekran.com and Onedio. Ilkekran is the first Turkish interactive digital news

and media platform to integrate rich content and eCommerce, and to have its own dedicated

24/7 news team. Ilkekran aggregates and curates content from variety of sources, third party

services and website users who contribute by posting articles, comments and reviews. Onedio

is an innovative social news portal which enables users to create, follow, share and comment

on content.

Traditional Media - Online News and Content Outlets

Big and traditional is still in control of most of the online content consumption in Turkey. The

top three players by unique users are Dogan Online and Publishing, Demiroren’s Milliyet

Group, and Hurriyet Internet Group (also owned by Dogan). All of these publishing groups

reach more than 15m unique active users per month. Following these top players are Calik

Holding’s Turkuvaz Publishing (Owns Sabah, Fotomac, and ATV), Ciner Medya Group

(Owns Haberturk), and Dogus Group (Owns Star, NTV, and CNBC).

Online Video

Turkish people are avid consumers of online video. According to comScore, nearly 22m

people watched an average of 210 online videos each month in Turkey in 2012 and video

views grew 32% in 2012. Average daily unique viewers and total minutes of video views,

metrics that act as a good proxy for engagement levels — grew about 20%. When we

segment the market to males aged 15-34: they account for 41% of the online video viewing, a

good indicator of future growth. 40% of this demographic watches online videos frequently,

indicating that online video is moving to the mainstream in Turkey. With more than 10m

monthly active users Nokta’s Izlesene is the most popular local online video sites in Turkey.

Magnet’s UzmanTV and Netbu’s Zapkolik are other highly popular video sites, with more than

5m monthly active users each.

E X H I B I T 23 : P O P U L A R O N L I N E V I D E O S I T E S B Y C A T E G O R Y


Online Music

Digital music is a highly popular, yet still emerging, online content market in Turkey. The

dominant content providers are not third party aggregators, but large carriers and platform

players: TTNet’s Müzik, Nokia’s Ovi, Avea’s Müzik, Turkcell’s Genç Turkcell and Vodafone’s

Vodafone Live are the leading players for legal music listening. One of the exceptions to the

rule is Fizy – founded in 2008, it is an online music and video search engine which is based

in and only available in Turkey. In 2010 the site was banned after alleged copyright

violations, before being restored in 2011 under the ownership of cell phone operator Turkcell.

Karnaval, online radio platform, is another popular online music destination of note.


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GP Bullhound LLP

Online Dating

Turkey’s young, social and mobile population makes the country a prime market for online

dating. With 50% of the population under the age of 30, there is a plentiful supply of potential

subscribers - and partners. Online dating has been a core business model since the early

days of Turkish tech: the first major player siberalem.com established itself in 2000, and offers

a broad range of content and dating tools including video chat, a match-making service and

dedicated customer support via email, telephone and online messaging.

Besides established, broad-based generalists such as Siberalem, we see more targeted

players such as Istanbul.net. Istanbul.net is a city-based dating network: launched in 2005 by

Magnet Media, it differentiates itself by accepting only members who are based in the capital

city. Users are able to search by district and are able to see who has viewed their profile and

add them to their favourites list. The site has grown rapidly and now has over 3.5m members.

Magnet also owns and operates the same type of site for 13 other large Turkish cities such as

Ankara and Izmir and reaches 7.5m members. Another specialist is eCift, which is Turkey’s

answer to eHarmony. Its differentiator is a proprietary personality test developed by a Turkish

psychologist, which is used to filter and match prospective partners. eCift currently has over

3m members, around 52% of whom are women and 48% men. It has also established a

presence in Germany through eCift.de. Three other players of note are Pembe Panjur,

Gayet.net, and YouLike.

Online Vertical Content

Within the online content verticals, sports portals are hugely popular among Turkish people.

Whereas around 46% of Europeans visit sports sites on average, Turkey has the highest

reach of the region with approximately 70% of Internet users – or 16.4m people - logging on

regularly to such portals, and is second globally only to the US (with a reach of 71%).

The top Turkish sports portals are Mackolik, Sahandan, Fanatik, and Sporx, with around 3m

monthly active users each. These sites typically source their own sports news and content but

provide access to betting through a third party online dealer, which in turn connects the user

with and provides quotes from government-authorized betting company Iddaa and licensed

online betting companies including Bilyoner, Nesine.com, Tuttur.com, Oley and Birebin.

Technology portals are also very popular in Turkey. Webrazzi is the country’s answer to

Techcrunch - it focuses mainly on issues regarding local and regional Internet and digital

markets, startups, investments, technological developments and events, and is available in

both Turkish and English. DonanimHaber and ShiftDelete are also highly popular technology

content channels, attracting over 8m and 3m monthly active users respectively with a targeted

focus on computing and video game hardware and software.

Reference sites have large dedicated audiences as well. Eksisozluk, Turkey’s

urbandictionary.com, is a collaborative humorous “dictionary” and one of the largest online

communities in Turkey, with over 5m monthly active visitors and 500,000 registered loyal

users. Antoloji, founded in 1999, is a highly popular culture, art, and poetry portal and caters

to over 3m monthly active users a month. SesliSozluk, founded in 1999, is the dictionary.com

of Turkey and between its web portal and mobile apps, is estimated to have more than 2m

monthly active users.

Fashion and women’s interest portals have been strong beneficiaries of the Turkish

eCommerce boom, and have themselves helped to fuel it. These sites not only aggregate and

generate content on a wide range of issues, but also have a notably strong social element –

much of the attraction is being able to discuss topics with other Turkish women, rather than

simply to read articles. Forumdas.net, Kadinlar Kulubu and Melekler Mekani, are all leading

sites with over 3m monthly unique users each. These sites have active, engaged audiences of

women with spending power – a valuable target for eCommerce players and a healthy source

of advertising revenue.

http://www.izmir.net/


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GP Bullhound LLP

For health and medical portals such as ilacpedia, Doktorsitesi.com however, the focus is

more firmly on the site’s own content – due partly to the greater gender mix, but also because

of the more specialized nature of subjects. Most of these still have a social element though –

ilacpedia, for instance, maintains a presence across most of the leading social networks. In

the case of Doktorsitesi, users actually connect directly with doctors online to obtain advice

and arrange consultations.

Given Turkey’s high credit card penetration, it is unsurprising that personal finance websites

such as Doviz.com attract a lot of traffic as well — more than one million active users in

Doviz’s case.

Last of all, Turkish movie portals have thrived on the back of what is now a booming film

industry. After the Turkish government implemented an incentive package to stimulate

growth in the film industry in 2004, the number of domestic movies being produced in Turkey

more than doubled from around 30 in 2005, to nearly 70 in 2011. Since the year 2000,

annual cinema ticket sales in Turkey have risen to 20m and the number of theatres to over

500 nationwide. Domestic films routinely surpass American blockbusters at the box office,

although foreign films are still highly popular. Sinemalar.com is Turkey’s leading film content

site with over 3.5m monthly active users, offering listings, reviews and trailer clips, as well as

discussion forums. IMDB also has a strong presence with over 2.5m users, although it has

no Turkish language option.


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GP Bullhound LLP

Selected Private Placements

Date

Announced Target Investor Investor HQ

Deal Value

(US$m) Commentary

Mar-13 Clover Games eTohum Turkey - Mobile game developer

Mar-13 Tablet Seminerler Angels (Hasan Aslanoba) Turkey 0.50 Workshop marketplace

Mar-13 Muvizi eTohum Turkey - On-demand online movie streaming platform

Feb-13 Mapps Galata Business Angels Turkey - Saas solution for apartment managers and residents

Jan-13 59Saniye Eksi Sozluk Turkey - Short-form social video sharing platform

Jan-13 SOCIAPlus Galata Business Angels Turkey 0.45 Develops social commerce softw are solutions

Jan-13 StilSOS Galata Business Angels Turkey 0.23 Shopping aggregator and social shopping site

Jan-13 Boni Angels (Hasan Aslanoba) Turkey 1.00Mobile eCommerce app developer focused on the retail and service

industry

Jan-13 Solvoyo 212 Limited Turkey - Develops supply chain management softw are

Dec-13 Koding RTP Ventures, Greycroft Partners US 7.25 Developer community and cloud development environment

Dec-12 Ustaeli Galata Business Angels Turkey 0.10Home services lead gen portal connecting home ow ners w ith

tradesmen

Nov-12 Kaft Angels (Erdem Yurdanur and Tarkan Onar) Turkey 0.25 Online retailer of private label tshirts

Nov-12 Vipdukkan ePlanet Capital US NA Turkish private shopping club

Nov-12 Iste Oyun Angels (Erdem Yurdanur and Sadok Kohen) Turkey 0.63 Turkish gamification platform

Nov-12 idemama Angels (Alp Saul, Cem Sertoglu, Evren Ucok) Turkey - Design crow dsourcing platform for professional designers and SMEs

Sep-12 Yemek Sepeti General Atlantic; Endeavor Global Investment Arm US 44.00 Operates online food ordering and delivery portals

Aug-12 Inploid Galata Business Angels Turkey 0.17 Social platform enabling users to share content and ask questions

Aug-12 HemenKiralik 212 Limited Turkey - Provides information about daily short term rentals available in Turkey

Jul-12 Annelutfen Ventech and Angels France NA Operates an online discount shopping club for mothers and children

Jun-12 Lidyana ruNet Holdings Russia 3.30 Online retailer of fashion jew ellery

May-12 Evidea Tiger Global Management US 1.00 Online store for home furnishings and decorations

May-12 GrupHediye Angels (Ibrahim Harunoglu, Ali Harunoglu, Aydin Ulusan, Pimsa) Turkey 0.83Social gifting platform enabling people to share the cost of gifts w ith

friends

May-12 Ideasoft CIT Yatirim and Projectz Turkey 0.22 Provides solutions for small to midsize businesses

May-12 Sorula Angels (Erdem Yurdanur and Tarkan Onar) Turkey 0.03 Q&A platform enabling users to pose and receive answ ers to questions

Apr-12 Socialw ire First Round Capital US 2.00 Facebook advertising optimisation platform

Apr-12 Hazinem 212 Limited Turkey - Online retailer of gold, diamonds and semi-precious gemstone jew ellery

Apr-12 CloudArena 212 Limited Turkey - Offers SaaS digital marketing, search and booking travel solutions

Apr-12 Gimora Aksoy Internet Ventures Turkey 0.23 Online shop for accessories, bags, and jew elry

Apr-12 Unnado iLab Ventures Turkey - Operates an online discount shopping club for mothers and children

Mar-12 Anneysen Angels (Caglar Erol) Turkey - Social media site for mothers and mothers-to-be

Mar-12 euro.message Dogus Grubu Turkey - E-marketing platform

Mar-12 HemenKiralik 212 Limited Turkey - Provides information about daily short term rentals available in Turkey

Mar-12 Apsiyon Angels (Tarik Bugra Yildirim) Turkey 0.21 Apartment and residence management app and social netw ork

Feb-12 Sporcum Tiger Global Management; Angels (Emre Kurttepeli) Turkey 1.03 Online retailer of discounted sport and casual clothes

Feb-12 ArcadeMonk 212 Capital Partners Turkey -Game development company focusing on social, casual, and mobile

gaming

Feb-12 Biacayip Etohum Turkey - Web shopping for unique gifts

Feb-12 Trendyol Tiger Global Management; Kleiner Perkins US 13.79Private shopping site offering designer retail for men, w omen, kids, and

home

Jan-12 Balerin 212 Capital Partners Turkey - Online cosmetic shop

Jan-12 Butigo 212 Capital Partners Turkey - Online retailer of affordable fashion footw ear for w omen



31

GP Bullhound LLP

Selected Private Placements (Cont’d)

Date

Announced Target Investor Investor HQ

Deal Value

(US$m) Commentary

Dec-11 Ciceksepeti Amazon.com US - Operates an online f low er store

Nov-11 MARKmost Angels (Ahmet Emre Sari, Sina Afra, and Tolga Tatari) Turkey - Personalised recommendations app in the style of Foursquare

Nov-11 eCift European Investment Fund; 3TS Capital Partners Luxembourg 4.04 Operates an online dating platform

Nov-11 LuxyBox Angels (Çağlar Erol) Turkey - Online luxury perfume and cosmetics store

Nov-11 Yemek Sepeti European Founders Fund; Angels Turkey 2.77 Operates online food ordering and delivery portals

Oct-11 TeklifBorsasi Vallie Invest US 0.28 Service professionals lead gen marketplace

Oct-11 tasit Akinon; Angels Turkey 0.81 Provides an online auto classif ieds service

Oct-11 Grupanya Intel Capital US - Operates a daily discount deals site

Sep-11 Peak Games Earlybird Venture Capital; Hummingbird Ventures Germany; Belgium 11.50 Develops and publishes online social games

Aug-11 eCift B-To-V Partners Sw itzerland - Operates an online dating platform

Jul-11 Trendyol Kleiner Perkins; Tiger Global Management US 26.00Private shopping site offering designer retail for men, w omen, kids, and

home

Jul-11 Tamindir Angels (Devrim Demirel) Turkey - IT and computing content and review s portal

Jun-11 Vipdukkan ePlanet Capital US 5.00 Operates a number of e-commerce sites

May-11 sevenice Angels (Ahmet Alabalık) Turkey 0.50 Offers social media, site design and video production services

May-11 Rezztoran Grupanya Turkey - Online table booking platform

May-11 Mekanist Pond Venture Partners UK 3.36 Operates a place search engine

May-11 Sporcum Tiger Global; Angels (Emre Kurttepeli) US; Turkey - Online retailer of discounted sport and casual clothes

May-11 Peak Games Earlybird Venture Capital; Hummingbird Ventures Germany 5.00 Develops and publishes online social games

Mar-11 Nokta Intel Capital US 2.50Online media company connecting users through social media

properties

Mar-11 Grupca Bilyoner Turkey - Group buying and discount deals site

Mar-11 Unnado iLab Ventures Turkey 0.14 Operates an online discount shopping club for mothers and children

Feb-11 Hediyemo Angels (Emre Kurttepeli) Turkey - Provides a social and mobile online gifting platform

Dec-10 Trendyol Tiger Global Management US 10.00Private shopping site offering designer retail for men, w omen, kids, and

home

Jul-10 Mekanist Pond Venture Partners UK 0.65 Operates a place search engine

Jul-10 Trendyol Tiger Global Management US 2.85Private shopping site offering designer retail for men, w omen, kids, and

home

Jul-10 eCift B-To-V Partners; Euro Serve Media; Corp. Fin. Partners Germany - Operates an online dating platform

Jun-10 Dijimecmua iLab Ventures Turkey - Operates as a digital magazine platform

Jun-10 Neredekal iLab Ventures Turkey - Operates an online holiday and accomodation guide for travellers

Mar-10 Markafoni Trayas (Klaus Hommels and Oliver Jung) Germany 7.20 Web shopping club offering apparel, accessories and cosmetics

Jan-10 Peak Games Hummingbird Ventures Belgium 1.50 Develops and publishes online social games

Feb-09 Mekanist.net Angels (Mehmet Yucesoy) Turkey 0.20 Operates a place search engine

May-08 Yemek Sepeti European Founders Fund Management Germany 4.00 Operates online food ordering and delivery portals

May-07 GittiGidiyor eBay US - Online consumer portal offering auctions, stores and f ixed price listings

Feb-06 GittiGidiyor iLab Ventures Turkey - Online consumer portal offering auctions, stores and f ixed price listings



32

GP Bullhound LLP

Selected M&A Transactions

Date Deal Value

Implied

Valuation

Announced Target Buyer Buyer HQ (US$m) (US$m) Commentary

Mar-13 Joygame CJ Games Turkey 15.0 30.0 50% acquired. Publisher of massive multiplayer games

Mar-13 Beyazkutu DEMSA Group Turkey - - Private shopping

Mar-13 PaytoGo and Game Sultan Money Online (MOL) Turkey - - Mobile and gaming payments

Jan-13 Preview MyEmail SMTP US - - Email testing and analytics platform

Jan-13 Nasil TV Mynet Turkey - - Online video how -to guides on a range of subjects

Jan-13 Iyibilir Doga Bilisim Holding Turkey - - E-learning platform

Dec-12 Idefix Dogan Online Turkey - - Online retailer of books, e-books, e-readers, music and DVDs

Sep-12 WestWing Turkey (Rocket Internet) Pera Bulvari Turkey - - eCommerce site focuses on home & living products

Jun-12 Mackolik Perform Group UK 22.6 44.3 51% acquired. Ow ns and operates digital sports media portals

Apr-12 Mobilike Madvertise Germany - -Ad netw ork providing rich media and video ads on smartphones

and tablets

Apr-12 Enmoda.com (Ow ned by Dogus) Markafoni Turkey - - E-commerce site that retails online fashion products

Mar-12 Evmanya Dogan Turkey - - Internet shopping w ebsite for home decoration goods

Mar-12 e-bebek.com Topbas Family Turkey - - E-commerce site that retails mother and baby products

Feb-12 Kammelna Peak Games Turkey - - MENA-based social game developer

Jan-12 41? 29! WPP Ireland - - Digital marketing agency serving Turkish consumer brands

Jan-12 Mikro Odeme Mediterra Private Equity UK - - Mobile payments

Jan-12 reklamz, linkz, and sem A.S.Ballroom International

Netw orkGermany - - Leading Turkish advertising netw ork

Nov-11 Grupfoni Quants Financial Services Sw itzerland - - Operates a w eb portal w hich offers daily deals

Jul-11 Markafoni Naspers (via MIH Allegro) Netherlands - - Web shopping club offering apparel, accessories and cosmetics

Jun-11 AlkislarlaYasiyorum Nokta Turkey - - Popular humour video site

Jun-11 United Cellular Technologies Group Neomobile Italy - -Provides Internet platforms and services for mobile netw ork

operators

May-11 Cimri Bilgi Teknolojileri ve Sistemleri iLab Ventures Turkey - - Provides online product and price comparison services

Apr-11 Cimri GittiGidiyor Turkey - - Price comparison site

Apr-11 GittiGidiyor eBay US 217.0 261.4 83% acquired. Online ecommerce marketplace.

Mar-11 Genc Sinema Filmlerim Turkey - - Online content portal providing movie trailers, galleries and review s

Feb-11 Fizy Turkcell Turkey - - Online music search engine

Dec-10 Besinci Cadde Alamarka Turkey - - Online specialty perfume retailer

Sep-10 Project House Havas Worldw ide US - - Provides interactive, mobile and e-mail marketing services

May-10 Alamarka Investco US - - Online specialty perfume retailer

Jan-08 Cember XING Germany 4.4 4.4 Provides online business netw orking services

Nov-06 Biletix Ticketmaster US - - Provides an online event ticket booking and sales portal

Aug-06 Beyaz Perde MYNET Turkey - - Operates as a cinema w ebsite called beyazperde.mynet.com

Feb-06 MYNET Tiger Global Management US - -Internet portal offering email, social netw orking, games, music and

video



33

GP Bullhound LLP

Facebook and Mobile Internet Rankings

Top Grossing iPhone Apps

Top Grossing iPad Apps

Rank Game Company Country Turkish? P2P? Size

1 Clash of Clans Supercell Finland Yes Yes 47.8 MB

2 Hay Day Supercell Finland Yes Yes 36.4 MB

3 Candy Crush Saga King.com UK No Yes 34.3 MB

4 Top Eleven Nordeus Serbia Yes Yes 42.2 MB

5 Poker by Zynga Zynga USA Yes Yes 41.0 MB

6 Okey Plus Peak Games Turkey No Yes 19.8 MB

7 Lords & Knights XYRALITY Germany Yes Yes 43.1 MB

8 Temple Run 2 Imangi Studios USA No Yes 45.7 MB

9 KoC: Battle for the North Kabam USA Yes Yes 31.6 MB

10 Subway Surfers Kiloo Denmark No Yes 46.4 MB

11 Slotomania Playtika Israel No Yes 41.4 MB

12 CSR Racing NaturalMotion UK No Yes 134.0 MB

13 Türkiye Texas Poker Boyaa Interactive China Yes Yes 24.7 MB

14 Diamond Dash wooga Germany Yes Yes 25.9 MB

15 Mustang Tuning Crash Chase Anibal Soares Portugal No Yes 38.6 MB


1 Clash of Clans Supercell Finland Yes Yes 47.8 MB

2 Hay Day Supercell Finland Yes Yes 36.4 MB

3 Candy Crush Saga King.com UK No Yes 34.3 MB

4 Minecraft - Pocket Edition Mojang Switzerland No No 3.1 MB

5 KoC: Battle for the North Kabam US Yes Yes 31.6 MB

6 Subway Surfers Kiloo Denmark No Yes 46.4 MB

7 Slotomania HD Playtika Israel No Yes 32.7 MB

8 Modern War Funzio US No Yes 36.5 MB

9 Agent Dash Full Fat UK No Yes 29.1 MB

10 FIFA 13 Electronic Arts US No No 1.4 GB

11 Poker by Zynga Zynga US Yes Yes 41 MB

12 Slotomania Playtika Israel No Yes 41.4 MB

13 Temple Run 2 Imangi Studios US No Yes 45.7 MB

14 Slots Shark Party US No Yes 45.9 MB

15 CSR Racing NaturalMotion UK No Yes 134 MB

Source: Apple iOS Store

Source: Apple iOS Store


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GP Bullhound LLP

Top Grossing Google Play Apps

Top 25 Facebook Game Developers


1 Top Eleven Football Manager Nordeus Serbia No Yes 17 M

2 Blood Brothers Mobage Japan No Yes 29 M

3 KoC: Battle for the North Kabam US No Yes Varies

4 Candy Crush Saga King.com UK No Yes Varies

5 Age of Empire Silent Ocean ?? No Yes 18 M

6 Okey Plus Peak Games Turkey Yes Yes 12 M

7 Zynga Poker Zynga US No Yes Varies

8 The Hobbit Kingdoms Kabam US No Yes Varies

9 Arcade Legends Spacetime Studios US No Yes 5.9 M

10 Eternity Warriors 2 Glu Mobile US No Yes 161 M

11 Wild Blood Gameloft US No No 720 M

12 Subway Surfers Kiloo Games Denmark No Yes 22 M

13 Need for Speed Most Wanted Electronic Arts US No No 12 M

14 World at Arms Gameloft US No Yes 12 M

15 Smurfs' Village Beeline Interactive US No Yes 58 M


MetricsNo. Apps in Top 10 No. Apps in Top 100 Total

Apps

No. Apps by Type

MAU DAU MAU DAU MAU DAU Developed Published

1 Zynga US 142.3m 16.5m 3 4 38 35 96 95 1

2 King.com UK 38.3m 4.7m 1 1 7 6 13 13 0

3 Electronic Arts US 17.4m 3.7m 0 0 18 18 57 57 0

4 Peak Games Turkey 11.8m 3.4m 0 0 9 11 37 25 12

5 Wooga Germany 21.6m 3.2m 1 0 3 3 8 8 0

6 Social Point Spain 21.3m 2.1m 0 0 3 3 21 21 0

7 FunPlus Game China 9.8m 2.0m 0 0 2 2 11 11 0

8 Playdom US 7.4m 1.7m 0 0 21 21 59 59 0

9 RockYou! US 2.9m 1.2m 0 0 10 11 33 31 2

10 Playtika Israel 6.1m 1.1m 0 0 1 1 4 4 0

11 PlayQ US 5.6m 1.1m 0 0 1 1 3 3 0

12 Miniclip.comz UK 6.1m 1.1m 0 0 9 9 14 14 0

13 FreshPlanet US 10.2m 1.0m 0 0 3 3 6 6 0

14 Rovio Finland 10.3m 1.0m 0 0 2 2 5 5 0

15 Geewa Czech Rep. 10.1m 1.0m 0 0 5 5 7 7 0

16 Tetris Online US 5.1m 1.0m 0 0 2 2 8 8 0

17 Kiloo Games Denmark 5.0m 1.0m 0 0 1 1 1 1 0

18 SGN US 6.4m 1.0m 0 0 5 5 24 24 0

19 6waves Hong Kong 2.2m 0.8m 0 0 0 0 474 424 50

20 THX Games Hungary 2.8m 0.7m 0 0 0 0 7 7 0

21 Boyaa China 4.3m 0.7m 0 0 6 6 30 30 0

22 Digital Chocolate US 4.4m 0.5m 0 0 3 3 30 30 0

23 Mynet Turkey 3.8m 0.5m 0 0 3 3 17 16 1

24 Qublix Canada 3.6m 0.4m 0 0 0 0 10 10 0

25 Halfbrick Australia 2.0m 0.2m 0 0 1 0 2 2 0

Source: Appdata.com

Source: Google Play App Store


35

GP Bullhound LLP

Company Tree Diagrams by Sector Horizontal eCommerce

Payments


36

GP Bullhound LLP

Vertical eCommerce


37

GP Bullhound LLP

Gaming


38

GP Bullhound LLP

Online Advertising


39

GP Bullhound LLP

Social Media and Online Content


40

GP Bullhound LLP

DISCLAIMER

No information set out or referred to in this research report shall form the basis of any contract. The issue of this research report shall not be deemed to be any form of binding offer or commitment on the part of GP Bullhound LLP. This research report is provided for use by the intended recipient for information purposes only. It is prepared on the basis that the recipients are sophisticated investors with a high degree of financial sophistication and knowledge. This research report and any of its information is not intended for use by private or retail investors in the UK or any other jurisdiction. You, as the recipient of this research report, acknowledge and agree that no person has nor is held out as having any authority to give any statement, warranty, representation, or undertaking on behalf of GP Bullhound LLP in connection with the contents of this research report. Although the information

contained in this research report has been prepared in good faith, no representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by GP Bullhound LLP. In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given as to the accuracy, completeness or reasonableness of any projections, targets, estimates or forecasts contained in this research report or in such other written or oral information that may be provided by GP Bullhound LLP. The information in this research report may be subject to change at any time without notice. GP Bullhound LLP is under no obligation to provide you with any such updated information. All liability is expressly excluded to the fullest extent permitted by law. Without prejudice to the generality of the foregoing, no party shall have any claim for innocent or negligent misrepresentation based upon any statement in this research report or any representation made in relation thereto. Liability (if it would otherwise but for this paragraph have arisen) for death or personal injury caused by the negligence (as defined in Section 1 of the Unfair Contracts Terms Act 1977) of the GP Bullhound LLP, or any of their respective affiliates, agents or employees, is not hereby excluded nor is damage caused by their fraud or fraudulent misrepresentation. This research report should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall they, or the fact of the distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. The

information contained in this research report has no regard for the specific investment objectives, financial situation or needs of any specific entity and is not a personal recommendation to anyone. Persons reading this research report should make their own investment decisions based upon their own financial objectives and financial resources and, if in any doubt, should seek advice from an investment advisor. Past performance of securities is not necessarily a guide to future performance and the value of securities may fall as well as rise. In particular, investments in the technology sector can involve a high degree of risk and investors may not get back the full amount invested. The information contained in this research report is based on materials and sources that are believed to be reliable; however, they have not been independently verified and are not guaranteed as being accurate. The information contained in this research report is not intended to be a complete statement or summary of any securities, markets, reports or developments referred to herein. No representation or warranty, either express or implied, is made or accepted by GP Bullhound LLP, its members, directors, officers, employees, agents or associated undertakings in relation to the accuracy, completeness or reliability of the information in this research report nor should it be relied upon as such. This research report may contain forward-looking statements, which involve risks and uncertainties. Forward-looking information is provided for illustrative purposes only and is not intended to serve as, and must not be relied upon as a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and

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LLP that is not reflected in this material and GP Bullhound LLP may have acted upon or used the information prior to or immediately following its publication. In addition, GP Bullhound LLP, the members, directors, officers and/or employees thereof and/or any connected persons may have an interest in the securities, warrants, futures, options, derivatives or other financial instrument of any of the companies referred to in this research report and may from time-to-time add or dispose of such interests. GP Bullhound LLP is a limited liability partnership registered in England and Wales, registered number OC352636, and is authorised and regulated by the Financial Conduct Authority. Any reference to a partner in relation to GP Bullhound LLP is to a member of GP Bullhound LLP or an employee with equivalent standing and qualifications. A list of the members of GP Bullhound LLP is available for inspection at its registered office, 52 Jermyn Street, London SW1Y 6LX. In the last twelve months, GP Bullhound LLP is or has been engaged as an advisor to and received compensation from the following companies mentioned in this report: VIP Dükkan. For US Persons: This research report is distributed to U.S. persons by GP Bullhound Inc. A broker-dealer registered with the SEC and a member of the FINRA. GP Bullhound Inc. is an affiliate of GP Bullhound LLP. This research report does not provide personalized advice or recommendations of any kind. All investments bear certain material risks that should be considered in consultation with an investor’s financial, legal and tax advisors. The following employees of GP Bullhound Inc. were involved in writing this report: Ali Dagli, Stirling Adelhelm and Anthony Augustin. In addition, independent advisory professional Okan Inaltay provided research support in the preparation of this report. GP Bullhound Inc. engages in private placement and mergers and acquisitions advisory activities with clients and counterparties in the Technology and CleanTech sectors.


41

GP Bullhound LLP

THE GP BULLHOUND BANKING TEAM

GP Bullhound is a research-centric investment bank with offices in London, San Francisco, Stockholm and Berlin.

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52 Jermyn Street London SW1Y 6LX Tel: +44 207 101 7560 Fax: +44 207 101 7561 Authorised and regulated by the FCA

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Disclaimer: Information contained in the

document does not constitute an off any securities. This document is made available for general information purposes only and is intended for a high degree of financial sophistication and knowledge intended for the use of retail investors in the UK. Although all reasonable care has been taken to ensure that the information contained in this document is accurate and current, no representation or warranty, express or implied, is made by GP Bullhound Ltd. as to its accuracy, completeness and currency. This report contains forward differ

significantly from the results described in the forward you should be aware that statements of fact or opinion made, may not be up public or confidential) of GP Bullhound Ltd. In addition, opinions and estimates are subject to change without notice. This reconstitutes a specific investment recommendation or advice upon which you should rely based upon, or irrespective circumstances. Use of this document is not a substitute for obtaining proper investment advice from an authorized investment professional. Retail investors are

urged to consult their own authorized investment professional before entering into any investment agreement. Past performance of securities is not necessarily a guide to future performance and the value of securities may arise. In particular, investments in the technology sector can involve a high degree of risk and investors may not get invested. OBS Fyll I rätt text, gick inte att kopiera korrekt från pdf:en

PER ROMAN

Managing Partner

MANISH

MADHVANI

Managing Partner

LORD CLIVE

HOLLICK

Partner

CHRISTIAN

LAGERLING

Managing Partner

ALEC DAFFERNER

Partner

ANDRE SHORTELL

Partner

SIMON NICHOLLS

Partner

JULIAN

RIEDLBAUER

Partner

HUGH CAMPBELL

Managing Partner

GUILLAUME

BONNETON

Partner

GRAEME BAYLEY

Partner

SIR MARTIN SMITH

Chairman

ALI DAGLI

Director

PER LINDTORP

Vice President

CLAUDIO

ALVAREZ

Vice President

CARL BERGHOLTZ

Vice President

MARK KLIMMEK

Vice President

SASHA

AFANASIEVA

Vice President

CHRISTOPH

AMELS

Associate

STIRLING

ADELHELM

Associate

ALISTAIR MALINS

Vice President

CARL WESSBERG

Associate

DAVID RAABE

Vice President

FLORENT ROULET

Associate

ALESSANDRO

CASARTELLI

Associate

LILJANA XHEKA

Analyst

PHILIPPE

GREMILLET

Analyst

MALCOLM

HORNER

Analyst

RAVI GHEDIA

Analyst

OLOF RUSTNER

Analyst

ANTHONY

AUGUSTIN

Analyst

DANIEL MAGGS

Analyst

DANIEL HERTER

Analyst

CECILIA ROMAN

Director

ANTONY

NORTHROP

Senior Advisor

MALCOLM

FERGUSON

Associate

ALEXIS SCORER

Vice President