Stifel Internet Research - The Long Runway to Solving Consumer Problems

Scott Devitt
Stifel does and seeks to do business with companies covered in its research reports. As a result, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
All relevant disclosures and certifications appear on pages 49-51 of this report.
Internet
Research Overview and Trends
John Egbert
Alex Chavdaroff
Ansel Parikh
Prices are as of the close on August 11, 2014
August 2014
eCommerce Online TravelDigital Media

1
Table of Contents
• Internet Investing Framework
• Sector Analysis
• Top Picks Summary
• Company Summaries
• Price Target Methodology and Risks
• Comparables
2-4
5-12
13-16
17-36
37-40
41-48

2
Internet Investing Framework

3
Stifel Internet Coverage
Source: Company reports, Stifel estimates, Factset
eCommerce
Digital Media
Online Travel
Company Price
Name 8/11/2014
AMZN Amazon.com, Inc. Hold $318.33 $151,302 $150,476
CRCM Care.com, Inc. Hold $9.19 $304 $186
EBAY eBay Inc. Hold $53.88 $69,102 $67,054
MELI MercadoLibre SA Buy $130 $109.14 $4,819 $4,610
SALE RetailMeNot, Inc. Hold $17.40 $978 $800
SPDC Speed Commerce Inc Hold $2.76 $184 $208
CRTO Criteo SA Sponsored ADR Hold $29.85 $1,935 $1,616
DHX Dice Holdings, Inc. Hold $8.45 $466 $560
FB Facebook, Inc. Class A Buy $95 $73.44 $197,492 $183,536
GOOGL Google Inc. Class A Buy $700 $577.25 $397,139 $344,003
LNKD LinkedIn Corporation Class A Buy $250 $212.90 $27,839 $25,472
P Pandora Media, Inc. Buy $34 $26.38 $6,229 $5,791
TWTR Twitter, Inc. Hold $43.27 $31,421 $29,324
YELP Yelp Inc. Class A Buy $85 $70.16 $6,064 $5,720
AWAY Homeaway, Inc. Hold $33.47 $3,334 $2,874
EXPE Expedia, Inc. Hold $83.94 $11,673 $10,521
PCLN Priceline Group Inc Buy $1,600 $1,309.28 $69,314 $63,939
TRIP TripAdvisor, Inc. Buy $120 $95.63 $14,386 $14,215
Enterprise
Value
Ticker Rating Target
Market
Cap

4
Stifel Internet Investment Framework
Our framework includes 12 company attributes / characteristics that we have found to drive differentiation in Internet franchises over long
periods of time. We think investors should focus on companies with large, global market opportunities relative to current market
capitalization and those that have the appropriate business model in place to solve consumer problems.
 Well-defined and large market opportunity relative to current market capitalization
 Global opportunity
 Scale-advantaged, winner take most market
 Business category solves a consumer problem
 Company has appropriate business model to solve the problem
 Founder-led and / or unique corporate culture
 Capable and proven management team
 Focused solely on long-term outcomes
 Technology-centric model
 Large profit pools
 Valuation / capital allocation / employee share grant dilution
 Strategic asset

6
Sector Themes – eCommerce
Key Themes: (1) Long-term eCommerce penetration
levels, (2) eCommerce profitability, (3) global
expansion.
Long-term global eCommerce penetration:
• We estimate global eCommerce sales will total $1.4T
in 2017 versus $827B in 2013 (14% CAGR).
• Penetration of 11.1% of addressable retail sales in
2017 versus 7.4% in 2013.
• Key drivers of growth include: (1) growth in emerging
markets, (2) growth in mobile commerce, (3)
development of multi-channel distribution by
traditional retailers, (4) increased penetration of
product categories late to migrate online.
eCommerce profitability:
• More price transparency has increased price
competition, pressuring margins.
• Expect continued shift in developed markets from 1P
to hybrid models.
• Expect 3P distribution to be more preferable in
emerging markets.
Global expansion:
• More opportunity in faster growing international
markets.
• China expected to be the fastest growing market
through 2017 and likely to surpass U.S. as the
largest eCommerce market.
• More difficult to gain share outside of home market
due to competition from local players.
North America
35%
Asia-Pacific
28%
Western Europe
26%
Latin America
4%
Central &
Eastern Europe
4%
Middle East &
Africa
2%
2013
North America
31%
Asia-Pacific,
36%
Western Europe
23%
Latin America
4%
Central &
Eastern Europe
3%
Middle East &
Africa
3%
2017E
Global eCommerce Growth and Penetration
Regional Share of Total eCommerce Sales: 2013 & 2017E
Note: Total retail sales exclude automobiles and parts dealers, fuel and grocery.
Note: eCommerce sales includes leisure and unmanaged travel booked over the Internet.
$827 $956 $1,094 $1,242 $1,391
16.3%
15.5%
14.5%
13.5%
12.0%
7.4%
8.4%
9.3%
10.2%
11.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
$400B
$600B
$800B
$1,000B
$1,200B
$1,400B
$1,600B
2013 2014E 2015E 2016E 2017E
Global eCommerce Sales eCommerce Growth (y/y) Global eCommerce Penetration
GlobaleCommerceSales
Source: eMarketer, World Bank, Stifel estimates

7
Sector Themes – Digital Media
We expect global digital media to reach $214B by 2018E
or 25% of the total global advertising market, up from
$110B or 17% of the $640B market in 2013.
Ad spend continuing to migrate toward online channels:
The overarching theme in digital media continues to be the
secular shift in ad budgets from offline channels toward more
efficient digital media channels. This movement is largely the
result of: (1) consumer time spent rapidly shifting toward
online services; (2) digital media advertising efficiencies,
including accurate ad targeting, enhanced measurability, and
flexible ad formats. These attributes offer better ROI for
advertisers / publishers and continue to evolve each year.
TV spend growing, other offline channels flat / declining:
According to our consolidated 3rd party advertising model,
most offline channels (print, radio, and outdoor) have shown
signs of stagnant or declining growth, and modest growth
(+3%) projected in broadcast radio could be from digital
service contributions. Among offline channels, only TV
advertising is expected to show meaningful growth over the
next 5 years, growing from $213B in 2013 to $308B by
2018E (+8% CAGR) – this despite strong projected growth
from digital video platforms offered by Google, Netflix,
Amazon, and Hulu.
Digital growing much faster than offline, led by mobile:
Total digital media spend is forecasted to grow at a +14%
CAGR from $110B in 2013 to $214B in 2018E, with mobile
(+41% CAGR) growing roughly 5x faster than desktop
Internet (+8%) and global TV spend.
TV
$213B
33%
Internet
$110B
17%
Radio
$34B
5%
Print
$129B
20%
Direct Mail
$80B
13%
Outdoor /
Other
$74B
12%
2013
Total = $640B
TV
$308B
36%
Internet
$214B
25%
Radio
$39B
4%
Print
$132B
15%
Direct Mail
$87B
10%
Outdoor /
Other
$85B
10%
2018E
Total = $865B
Global Advertising Spend by Market – 2013 vs. 2018E
Global Advertising Trends – 2013-2018E
0
$50B
$100B
$150B
$200B
$250B
$300B
$350B
TV Desktop
Internet
Mobile
Internet
Radio Print Direct Mail Outdoor /
Other
2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E
Source: IDC, Zenith Optimedia, Stifel estimates

0%
10%
20%
30%
40%
50%
60%
5
10
15
20
25
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E
%ofTotalDollarsContributed
DollarsContributed($B)
GOOG FB TWTR P / LNKD / YELP / TRIP Rest of Ad Mkt
GOOG % FB % TWTR % P / LNKD / YELP / TRIP % Rest of Ad Mkt %
11
15
12 12
16
18
21
22
23
7
10
9
10
15 15
17 17 17
0
$50B
$100B
$150B
$200B
$250B
2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E
GOOG FB TWTR P / LNKD / YELP / TRIP Rest of WW Ad Market
64
75
90
102
115
131
148
169
191
214
24 31
41
50
60
75
90
107
123
140
66%
65%
63%
61%
57%
52%
48%
45%
41%
38%
% Penetration
8
Within digital media, we believe share will continue to
consolidate among a smaller number of companies.
Digital consolidation leads to ad dollar concentration:
We believe scale-based advantages make Google (search)
and Facebook (display) best-positioned to capture ad dollars
coming online, which should lead to greater concentration of
digital revenue. A next tier of platforms exists with critical
mass / competitive advantages in specific market segments,
including Twitter (online display / TV dollars), Pandora (radio
dollars), LinkedIn (B2B ads / content marketing), Yelp (local /
classifieds / YP), and TripAdvisor (travel-related ad dollars).
These platforms may compete with Google / Facebook for ad
dollars in specific verticals and should gain an outsized share
of ad dollars relative to smaller players / long-tail websites.
Digital ad market forecasts may be light, or company
forecasts could be too aggressive: In aggregate, our 7
coverage companies with digital ad businesses represented
~52% of global digital ad spend in 2013 ($60B) and are
forecasted to reach 65% by 2018 ($139B). Having this much
concentration in U.S.-based platforms suggests: (1) current
forecasts for the global online ad market are too low; (2) the
digital space is becoming more U.S.-centric and forecasts for
non-U.S. companies should come down; (3) our U.S.
forecasts may be overly optimistic and overlook the risk of
increasing digital competition; (4) a combination of #1-3. We
believe 2014/15 digital forecasts are too low (do not reflect
recent upside from FB), we think non-U.S. digital forecasts
may not adequately incorporate Google / Facebook risks,
and Twitter’s long-term ad forecasts could be difficult to
attain.
Global Advertising Spend by Market – 2013 vs. 2018E
Digital Dollar Contribution from U.S. Coverage – 2013-2018E

63% 62% 62% 61% 55%
10% 10% 9% 11% 16%
20% 21% 22% 21% 22%
0%
20%
40%
60%
80%
100%
Q2:13 Q3:13 Q4:13 Q1:14 Q2:14
Google Sites Baidu Sites Yahoo Sites Yandex Sites All Others
9
We expect global search to grow at a +14% CAGR over
the next 5 years to $106B by 2018, up from $56B in 2013,
while Google’s share falls by 450bps to 68% (~$73B).
Expect search spend to accelerate in 2014, grow in mid-
teens over the next 5 years: Our advertising model projects
U.S. search spend to accelerate to +14% y/y growth in 2014
(from +5% in 2013) and grow at a +11% CAGR over the next
5 years to $38B by 2018 (0.18% of U.S. GDP, up from 0.13%
in 2013). The global market may have a longer runway for
growth with search at <0.08% of global GDP in 2014. Our ad
model projects global search spend to grow at a +14%
CAGR from 2013-2018, reaching $106B in 2018E (0.10% of
GDP). This implies that search spend will grow at roughly
twice the rate of global GDP (+7% CAGR).
Google U.S. share steady, but may cede global share to
Baidu: According to comScore, Google’s share of U.S.
search queries remains very high at ~66%, but global share
fell over 800bps y/y to ~55% as it is yielding share to
regionally-focused search engines like Baidu (+600bps y/y to
~16% share) and Yandex (+50bps to 3% share). Google
maintains a leadership position in most of the world’s major
search markets and we assume it will continue to over-index
in its share of global search spend, though we expect it to fall
from 73% of gross search dollars in 2013 (vs. avg. query
share of 63%) to 68% share in 2018 after growing at a
slightly slower pace (+12%) than the global search market
(+14%) over the next 5 years. We still expect Google to add
$32B in annual search revenue over the next 5 years to
reach $73B in 2018.
Global Search Ad Spend Forecasts – 2013-2018E
Global Search Query Share – Last 5 Quarters
Search Ad Market Opportunity Historical Periods Forecast Periods
(USD millions) 2012 2013 2014E 2015E 2016E 2017E 2018E
US GDP $16,244,600 $16,778,000 $17,528,000 $18,275,000 $19,127,000 $20,005,000 $20,923,303
y/y Growth - % 4.6% 3.3% 4.5% 4.3% 4.7% 4.6% 4.6%
US Search Ad Market $21,173 $22,302 $25,355 $28,263 $31,302 $34,493 $37,690
y/y Growth - % 18.5% 5.3% 13.7% 11.5% 10.8% 10.2% 9.3%
% of US GDP - bps 13.0 13.3 14.5 15.5 16.4 17.2 18.0
Global GDP $72,830,127 $74,914,269 $78,607,311 $83,729,956 $89,379,583 $96,072,703 $103,569,830
y/y Growth - % 2.9% 2.9% 4.9% 6.5% 6.7% 7.5% 7.8%
Global Search Ad Market $49,337 $55,921 $64,511 $73,375 $83,777 $94,794 $106,213
y/y Growth - % 17.3% 13.3% 15.4% 13.7% 14.2% 13.2% 12.0%
% of Global GDP - bps 6.8 7.5 8.2 8.8 9.4 9.9 10.3
Google Search Revenue $36,187 $40,698 $46,299 $52,441 $58,682 $65,511 $72,502
y/y Growth - % 15.6% 12.5% 13.8% 13.3% 11.9% 11.6% 10.7%
% of Global Search Revenue 73.3% 72.8% 71.8% 71.5% 70.0% 69.1% 68.3%

15
16 18 21 22
25
28
31
34
38
7
9 11
14
17
20
23
27
30
34
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0
$5B
$10B
$15B
$20B
$25B
$30B
$35B
$40B
2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E
US Search Spend US Display Spend US Search Growth Y/Y US Display Growth Y/Y
10
We expect native social media ads, digital video spots,
and advertising technology improvements to help global
display advertising growth (+17% CAGR) outpace search
ad growth (+14%) over the next 5 years.
Display spend widening growth gap with search spend:
U.S. display ad spend (+18% CAGR) grew slightly faster
than search spend (+16%) from 2008-2013 albeit on a
smaller base of revenue. We expect the growth disparity to
widen further over the next 5 years with U.S. display
forecasted to grow at a +15% CAGR (vs. search at +11%).
We expect similar trends internationally with global display
ad revenue expected to grow at a +17% CAGR from 2013-
2018 vs. +14% for the global search market.
Display strength driven by several key trends affecting
our coverage universe: (1) Rising consumer usage of
digital video platforms like Google’s YouTube, which are
increasing sales of high-value video ad spots; (2) momentum
from native social media advertising on Facebook, Twitter,
and LinkedIn; (3) Innovations in ad formats / targeting /
technology creating new ad opportunities and improving
performance of existing ad real estate usually filled with low-
value remnant inventory.
Video leads all formats in growth: Our advertising model
forecasts digital video to be the fastest growing component
of the global display market; video is forecasted to grow at a
+29% CAGR over the next 5 years to reach $22B by 2018E.
Banners / native ads / other traditional formats are expected
to grow the next fastest at a CAGR of +15% ($61B in
2018E), while rich media ads should grow the slowest (+5%).
U.S. Search vs. Display Ad Forecasts – 2013-2018E
Drivers of Global Display Advertising – 2013-2018E
18
23 27 30
35
40
47
54
61
2
3
4
6
8
11
14
17
22
4
4
4
5
5
5
5
5
6
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
$10B
$20B
$30B
$40B
$50B
$60B
$70B
$80B
$90B
$100B
2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E
Banners / Native / Traditional Display Online Video Rich Media
B/N/T Growth Y/Y Video Growth Y/Y RM Growth Y/Y
24
30
35
41
48
56
66
77
88

11
Broadcast and local business ad spend are substantial
opportunities for Pandora and Yelp, who have developed
defensible competitive advantages in digital advertising.
Broadcast parity offers Pandora considerable upside to ad
revenue forecasts: Broadcast radio advertising was a $15.8B
business in the U.S. in 2013, of which we estimate Pandora
took ~2% share through audio ads (~$360mm) despite having
8% share of listener hours. We expect this gap to close over
time as local market sales teams continue to ramp and local
radio buyers gain more comfort with the benefits of digital
campaigns. Our ad model projects the radio market to grow at a
+2% CAGR to $17.5B in 2018, when we expect Pandora to
have 15% share of total radio listening and 8.5% share of radio
dollars. The gap in 2018 offers Pandora a tangible opportunity
(+77% potential upside to audio ad revenue / +58% upside to
total ad revenue) to outperform our current ad forecasts.
Yelp drawing from local online, print, and Yellow Pages:
Yelp counts roughly 80K businesses as advertisers and 1.8mm
claimed local business pages. We think Yelp is uniquely
positioned to benefit from the shift in local dollars online over
the next 5 years due to: 1) best-in-class breadth / quality of
local content; 2) significant audience (over 100mm U.S. active
users); 3) long runway for growth in the U.S. online market
(<$200mm penetrated in the $17B local ad market in 2013).
Our ad model projects U.S. local online spend to grow +12%
over the next 5 years to $28B by 2018, with Yellow Pages (-
17% CAGR) and local print (-1% CAGR) expected to contract.
We forecast Yelp to grow advertising revenue at a +47% CAGR
over the same period to $1.3B by 2018.
Pandora Upside from Broadcast Parity – 2013-2018E
Yelp Penetration of U.S. Market Opportunity – 2013-2018E
0.1 0.2 0.3 0.5 0.7 0.9 1.2 1.50.5
0.8
0.9 1.0 1.0 1.1 1.1 1.1
4%
6%
8%
9%
11%
12%
14%
15%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
$2B
$4B
$6B
$8B
$10B
$12B
$14B
$16B
$18B
$20B
2011 2012 2013 2014 2015E 2016E 2017E 2018E
Pandora Audio Revenue P Revenue Parity Oppty Broadcast Radio Market P Share of Radio Listening
15.2 15.6 15.8 15.7 16.1
17.016.6
17.5

12
Sector Themes – Online Travel
We expect the online travel market to continue to gain
share, with total gross bookings of $1.46T estimated by
2017.
Tug of war between aggregators of travel content and
online travel agencies (OTAs): We believe the answer is
not so clear-cut in terms of content vs. transaction and
believe that both TripAdvisor (content) and Priceline (OTA)
will continue to become more powerful over time. We have
grown to respect TripAdvisor’s efforts as it transitioned its
business model to be much more customer-centric in recent
years. The prospect of being the global travel vertical search
player with integrated booking capability is one that, if
successful, could support a market cap well above current
levels. As a result we believe TRIP shares offer the most
long-term upside in the group. That said, Priceline continues
to be well-positioned and should grow at an above industry
rate in the core hotel segment, supporting outperformance in
Priceline shares for years to come, in our view.
Industry marketing costs continue to rise: OTAs have
been ramping up marketing spend, particularly online, to
drive incremental bookings through their platform.
TripAdvisor is well positioned for this trend as it develops into
a vertical search engine that generates high quality traffic.
The increasing relevance of this traffic has helped drive CPC
revenues generated by the company’s ad units at an 18% 2-
year CAGR. We believe TripAdvisor will benefit from
improving CPC pricing and volumes as its relevance to
travelers, OTAs, and suppliers grows.
Global Travel Bookings & Online Penetration
OTA Marketing Spend & TRIP CPC Revenues
Source: PhocusWright, Company reports, Stifel estimates

DEVITTS & CREDITS INTERNET INVESTING FRAMEWORK - >$10B Buy Hold
FB GOOG LNKD PCLN TRIP AMZN EBAY EXPE TWTR
Total DEVITTS & CREDITS 33 33 33 33 32 32 30 28 28
Well-defined and large market opportunity relative to current market capitalization 3 3 3 3 3 3 3 3 3
Global opportunity 3 3 3 3 3 3 3 3 3
Scale-advantaged, winner take most market 3 3 3 3 3 3 3 3 3
Business category solves a consumer problem 3 3 3 3 3 3 3 3 3
Company has appropriate business model to solve the problem 3 3 3 3 3 3 2 2 2
Founder-led and / or unique corporate culture 3 3 3 2 3 3 2 2 2
Capable and proven management team 3 3 3 3 2 3 3 2 2
Focused solely on long-term outcomes 3 3 3 3 3 3 2 2 2
Technology-centric model 3 3 3 3 2 3 2 2 2
Large profit pools 3 3 2 3 3 3 3 3 3
Valuation / capital allocation / employee share grant dilution 2 2 2 3 2 1 2 2 1
Strategic asset 1 1 2 1 2 1 2 1 2
DEVITTS & CREDITS INTERNET INVESTING FRAMEWORK - <$10B Buy Hold
YELP P MELI SALE CRTO AWAY CRCM DHX SPDC
Total DEVITTS & CREDITS 33 31 31 28 28 28 26 23 22
Well-defined and large market opportunity relative to current market capitalization 3 3 3 2 3 3 2 2 1
Global opportunity 2 2 1 2 3 3 2 2 1
Scale-advantaged, winner take most market 3 3 3 2 2 2 2 2 2
Business category solves a consumer problem 3 3 3 3 2 3 3 2 3
Company has appropriate business model to solve the problem 3 2 3 2 2 2 3 2 2
Founder-led and / or unique corporate culture 3 3 3 2 2 3 3 2 2
Capable and proven management team 3 3 3 3 2 2 2 2 2
Focused solely on long-term outcomes 3 2 2 2 2 2 2 2 2
Technology-centric model 3 3 3 3 3 2 2 2 2
Large profit pools 2 2 2 2 2 2 2 2 2
Valuation / capital allocation / employee share grant dilution 2 2 2 3 2 2 2 2 2
Strategic asset 3 3 3 2 3 2 1 1 1
14
Stifel Internet Investment Framework
We recommend 8 of the 18 companies in our current coverage and have endeavored to cover higher quality companies within the much larger set
of companies in the overall Internet sector. At $10B+ we are recommending: Facebook, Google, LinkedIn, Priceline, and TripAdvisor; sub-$10B:
MercadoLibre, Pandora, and Yelp. We welcome feedback on the characteristics weighed in our framework and our relative rankings.
Source: Stifel estimates

15
Top Stock Picks
eCommerce
MercadoLibre:
 Strategic asset as largest eCommerce player in Latin America
 Management successfully navigating difficult macroeconomic environment
 Key operating metrics such as growth in Brazil and MercadoPago remain strong
 Gaining traction in recent initiatives around shipping (MercadoEnvios), bringing branded stores on the platform,
and mobile
Online Travel
Priceline:
 One of the largest sources of hotel inventory in the world
 Consistent 30%+ y/y bookings growth despite large scale and mature business model
 Aggressive geographic and category expansion through Booking.com and OpenTable
 Sustained EBITDA margins of ~40% despite increased marketing spend
TripAdvisor:
 World’s number one destination for online travel planning, becoming a vertical search engine for travel
 Disrupting the online travel booking process through Instant Booking offering
 Improving underlying core metric growth (hotel shoppers, CPC pricing, and revenue per hotel shopper)
 Increasing upside potential from monetization of other categories, namely restaurants through the La
Fourchette acquisition

16
Top Stock Picks
Digital Media
Facebook:
 Dominant Internet platform that’s gaining share of ad budgets
 Continues to post strong growth, with over 65% y/y growth in advertiser revenue in 2Q:14 on tougher comparison
 Further upside remains, driven by Instagram, Facebook Audience Network, and video ads
Google:
 One of the most dominant global Internet platforms, capturing over 40% of total digital ad budgets in 2013
 Finding growth in Google Play (Android) and YouTube
 Continues to better monetize core search business and positive optionality exists surrounding rising traction of Google
Shopping and perhaps eventually, travel bookings
LinkedIn:
 The world’s leading destination for professional networking with 3 diverse business lines
 Core business, Talent Solutions, remains healthy and has a long runway of growth from new and existing customers
 Seeing signs of an inflection in Marketing Solutions (content marketing) and sales product revenue in 2014
Pandora:
 Largest U.S. digital music service attacking a $16B opportunity in broadcast advertising dollars
 Potential upside in gaining radio spend proportionate to listening, success in automobiles, and international expansion
Yelp:
 Provides a valuable discovery service to consumers and serves as a powerful channel for local businesses to advertise
to consumers with purchase intent
 Trades at a premium but is a strategic asset that continues to post strong operating metrics and beat and raise
estimates as it penetrates the nearly $40B local advertising market in the U.S. alone and a large opportunity abroad

18
Facebook (FB) – Buy, $95 PT
We are resuming coverage of Facebook with a Buy rating and $95 price target. With over 1.3B monthly users, Facebook is the world’s
largest social network. After paving the way to mobile monetization and demonstrating ad efficacy in 2013, 2014 should see the
company get significant share of budget from advertisers. While the company has warned that it will see decelerating growth as it laps
the rollout of newsfeed ads, the company continues to beat consensus revenue estimates, and we see continued promise in the
platform and sources for a sustained growth rate of 30%+ for the next several years. In particular, we believe continued improvements
in targeting, increased uptake of Facebook exchange (FBX), Instagram monetization, the introduction of a third-party mobile ad
network, and video ads on Facebook are sources of future upside. Moreover, we highlight that while Facebook generated $7B in ad
revenues in 2013, this represented only 6% penetration into the global digital ad market (vs. over 40% for Google).
Key Debates
 Will engagement remain strong and will Facebook continue to purchase emerging social apps? Facebook recently spent over $20B to
acquire Whatsapp and Oculus VR after spending nearly $1B to buy Instagram in 2012. Some investors argue that Facebook is being forced to
buy younger rivals, particularly for their popularity with younger users, which many media reports claim are fleeing Facebook. We believe that
Instagram, Whatsapp, and Oculus are rare companies that just happened to be acquisition targets within a relatively short, but active M&A
period. All the companies all fit into Facebook’s longer-term goals of connecting everyone (WhatsApp / Instagram), understanding the world,
and building the knowledge economy (Oculus). Regarding engagement, despite the emergence of a plethora of new social apps, Facebook
continues to grow users and engagement. Among 18-24 year olds, Facebook alone (excluding Instagram) added as many mobile minutes y/y in
2Q 2014 as all the other major social networks combined.
 Are Facebook ads effective and are they sustainably useful? A long standing debate is whether Facebook ads work and more broadly,
whether social media is an effective advertising channel. While some doubts may persist, we believe Facebook made meaningful strides in 2013
to prove ad efficacy. Large, sophisticated advertisers are increasingly viewing and measuring return on ad spend from a cross-channel
perspective. And early data suggests Facebook advertisers improves search ad efficacy. Facebook also continues to improve its own targeting
capabilities and Facebook’s ad exchange (FBX) has the potential to improve ad targeting and attract performance advertisers.
 Will new revenue streams such as Instagram monetization, Facebook video ads, and Facebook Audience Network become significant
growth drivers? Facebook has a number of nascent initiatives with the potential to contribute meaningful growth. However, all are very nascent,
having been launched in the last year or in the case of Instagram, just now beginning to monetize. We believe there is significant potential in
these revenue streams. Instagram has grown from approximately 20mm users to over 200mm monthly users. After much delay, 4Q:13 saw the
first rollout of video ads, which was recently followed by Facebook’s acquisition of supply-side-platform (SSP), LiveRail. While not a significant
contributor to revenues today, we estimate video ads on Facebook will rise to over $5B and comprise 10% of its total advertising revenue by
2024. Finally, the Facebook Audience Network has the potential to reshape the mobile app ad market, allowing for the same targeting,
measurement, and ad units as the Facebook platform itself.
Source: Company reports, Stifel estimates

19
Google (GOOGL) – Buy, $700 PT
We are resuming coverage of Google with a Buy rating and $700 price target. Google has built one of the most dominant Internet
platforms in the world. The company has four properties with greater than 1B monthly users – Google Search, YouTube, Android, and
the Chrome browser. Google has built one of the most effective advertising platforms in the world and serves as the backbone of the
entire Internet advertising industry. Despite already representing over 40% of total global advertising expenditure, the company
continues to find growth, primarily fueled by its long-term speculative investments such as Google Play (Android) and YouTube. While
the company has missed earnings estimates in 4 of the last 5 quarters, and we remain concerned that consensus earnings estimates
are too high, second quarter results combined with commentary from large search engine marketers highlight to us that the company
continues to find a way to drive greater monetization from its high-margin search business through the introduction and improvement of
ad units. We also see newfound positive optionality in the company’s search business, as for the first time, Google seems to be making
inroads into its long sought effort to extend its search dominance into vertical search with Google Shopping and perhaps down the
road, travel bookings. We believe shares currently offer an attractive entry point, and highlight that Google is a much more seasonal
stock than many investors realize – in the last five years, Google shares have risen 31% on average in the second half vs. only 2% in in
the first half.
Key Debates
 Will Google search become less relevant in a mobile world? Google became one of the most dominant Internet platforms in the world by gaining
the majority of worldwide search market share. However, data suggests that mobile Internet usage is structurally different, with people using apps far
more than browsing mobile websites. While we believe this certainly poses a long-term risk to Google, we believe fears of Google becoming obsolete
are overblown. Data suggests that mobile has increased aggregate time spent online and comScore suggests time spent on Google properties in the
U.S. across both desktop and mobile devices increased 20% y/y in 2014 to date. While mobile monetization has lagged, Google has several avenues
to improve mobile monetization and we expect the gap to narrow significantly as cross-screen targeting and attribution improve, users increasingly
make purchases through mobile devices, and Google better monetizes mobile traffic through the growing Google Play store and recently introduced
app-install ads.
 Can Google extend into vertical search and eCommerce? Google has long tried to extend its search dominance into vertical search, much to no
avail. While we are less convinced of Google’s ability to succeed in non-eCommerce-related vertical search, Google is gaining traction in eCommerce
with Google Shopping providing a bridge for the company to transition from the gateway of the Internet to a click-based marketplace. After testing it out
throughout 2013, retailers spent significantly on PLAs in 4Q:13 and recent reports by large search engine marketers suggest PLA spend is incremental
for as much as 30% of their clients.
 Can YouTube grab a significant share of TV ad dollars? People spend more time watching videos on YouTube than anywhere else across the web.
However, the company’s success in attracting significant TV ad dollars remains to be seen. We believe over time TV ad budgets will follow viewers
who have already made the switch to cross-screen viewing, and estimate YouTube will rise from an estimated $4B in revenue in 2013 to nearly $30B
in revenue by 2024, reaching a scale equivalent to approximately 7.5% of the global TV ad market.

20
Pandora Media (P) – Buy, $34 PT
We are initiating coverage of Pandora Media with a Buy rating and $34 price target. With nearly 80mm monthly active listeners and
over 250mm registered users, Pandora is one of the world’s leading digital music platforms despite having only a small minority of its
users outside the U.S. Pandora continues to grow its user base and listener hours despite operating in an intensely competitive space,
where digital music competitors both large and small are vying to take share of listening. Pandora’s advertising business has turned a
corner due to its steady progress in building out local sales teams to attack the $16B opportunity in broadcast radio advertising, which
has been boosted by local / national audience measurement and inclusion into media buying systems. We are encouraged by
Pandora’s monetization improvements over the past 12-18 months and believe it can continue to increase revenue per 1,000 listener
hours (RPM) in the near term as it still drastically under-monetizes its listening compared to broadcast radio stations. Improved
distribution through automobile integrations along with further international expansion should help Pandora continue to grow listeners /
hours over the medium and long term, which can provide it with the inventory to grow an even larger advertising business over time.
Key Debates
 How strong is Pandora’s competitive positioning in digital music? Pandora has continued to grow its active users, listener hours, and share of
total radio listening despite increased competition from rival Internet radio services like iHeartRadio, Slacker, and iTunes radio as well as innovative on-
demand products like Spotify, Google All Access, Rdio, Rhapsody, Beats Music, and now Amazon Prime Music. We continue to believe that Pandora
has the most compelling non-interactive service offering available, which addresses the largest pool of listening (free, ad-supported listening) in the
U.S. Pandora’s first-mover distribution advantage in automobiles / consumer electronics devices will likely fade over time, but its valuable head start
could extend its leadership position beyond PCs, smartphones, and tablets. Onerous digital music licensing terms from international rights
organizations also appear to be stifling innovation in this category of listening outside of the U.S., leading to very few competitors with critical audience
mass for Pandora to compete with if it successfully enters more international markets in the future.
 Will Pandora’s revenue per 1,000 listener hours (RPM) continue to increase? Can Pandora close the gap between desktop and mobile
monetization? As listener hour growth has decelerated to more manageable levels (partially boosted by its temporary mobile listening cap) and
Pandora’s local sales force has expanded over the past year, Pandora’s total / mobile advertising RPMs grew to $41 / $36 in 4Q:13 from $32 / $26 in
4Q:12. With Pandora’s sales force continuing to ramp in productivity and more local radio advertisers gaining comfort in digital buys, we believe RPMs
will continue to steadily increase in the near-term to help Pandora gradually improve profitability.
 How stable is Pandora’s cost structure? Will royalty rates continue to increase? For the moment, Pandora’s publishing royalties appear to be
stable in the absence of additional publishers choosing to pull out of performance rights organizations (ASCAP, BMI, and SESAC) to negotiate more
lucrative deals with Pandora directly. The bigger focus is on the Copyright Royalty Board’s (CRB) decision in the upcoming Webcasting proceedings,
which will determine the rate schedule for royalties paid to SoundExchange from 2016-2020 (currently close to 50% of Pandora’s total revenue). While
there are a lot of moving parts to this discussion, many observers believe that direct deals reached with labels by Apple and Clear Channel may narrow
the range of outcomes for webcasters to rates very comparable to the ones paid by Pandora today.

21
LinkedIn Corp (LNKD) – Buy, $250 PT
We are initiating coverage of LinkedIn Corporation with a Buy rating and $250 price target. LinkedIn is the world’s leading destination
for professional networking with over 316mm registered members globally. LinkedIn’s enterprise recruiting business has transformed
the way companies find and source talent and the unprecedented amount of data it collects on the flow of human capital could help
LinkedIn similarly impact the productivity of the world’s sales professionals. While investors have grown increasingly fixated on potential
growth deceleration in Talent Solutions, the segment is still growing at almost 50% y/y as of 2Q:14 and we believe there is still a long
runway of growth in Talent Solutions from deepening relationships with large U.S. customers and increasing traction for enterprise
recruiting products internationally. We are encouraged by the ramp in Sponsored Update ad units and believe the launch of LinkedIn’s
flagship product for sales professionals represents a meaningful catalyst for the stock in the second half of the year.
Key Debates
 Will Talent Solutions growth continue to decelerate? Is LinkedIn reaching enterprise saturation in its core business? In 4Q:13,
LinkedIn’s Talent Solutions revenue growth slowed to +53% y/y from +65% in 3Q:13 and LinkedIn added less incremental revenue Q/Q than it
did in the prior year quarter, which some investors believed was due to LinkedIn Corporate Solutions (LCS) account additions flattening out. This
sparked concerns that LinkedIn was approaching a point of saturation in its enterprise customer base, which triggered a significant pullback in
the stock. However, Talent Solutions bounced back in 1Q:14 by accelerating in Q/Q revenue growth and had an even stronger 2Q:14 by adding
more incremental dollars than 1Q (+$31mm vs. +$30mm), while added disclosure around LCS account additions and cohort data on LCS spend
trends over time helped investors get comfortable with the health of the segment. We continue to believe there is significant headroom for LCS
both customer growth and capturing greater spend within existing accounts, which should help Talent Solutions continue to grow at strong albeit
gradually decelerating rates.
 How quickly can Sales Solutions become a material contributor to revenue? LinkedIn is aggressively ramping its sales force ahead of the
launch of its flagship product for sales professionals, which is expected to occur in the second half of 2014. LinkedIn’s existing tools for sales
professionals are already showing strong growth among individual subscribers / early field sales customers (Sales Navigator makes up ~25% of
Premium Subscriptions revenue, amounting to roughly $30MM in 2Q:14), but we believe the revenue impact from the launch of an full-fledged
enterprise product offering sold on a top-down basis at large sales organizations could further accelerate growth in this business.
 Will Marketing Solutions see a turnaround this year? LinkedIn’s Marketing Solutions revenue decelerated significantly in 2Q:13 when it
began transitioning away from customized display deals with large advertisers / agencies toward Sponsored Updates, which it believes can
make the business much more scalable over the long term. Sponsored Updates have quickly ramped to roughly 28% of Marketing Solutions
revenue within just a few quarters, and effective CPMs on these ad units appear to be quite healthy and surpassing those of custom deals (we
think mid-teens CPMs on average). Marketing Solutions accelerated in 2Q:14 due to easier comps from the transition in 2013 and continued
product innovation on the consumer side of the business may continue to propel growth in this segment.

22
Mercadolibre (MELI) – Buy, $130 PT
We are resuming coverage of MercadoLibre with a Buy rating and a $130 price target. MercadoLibre operates the largest online
marketplace in Latin America and is pursuing a long-term strategy to combine the best qualities of its third-party marketplace (breadth
of selection) with the benefits of traditional first-party retailer businesses (consistent shipping experiences). The company launched its
shipping solution, MercadoEnvios, a year and a half ago and is also looking to bring more branded stores online, and both initiatives
are seeing early but positive signs of traction. Management has successfully navigated a difficult macroeconomic environment and the
company continues to benefit from the secular growth in users and usage as more consumers in Latin America get Internet access and
eCommerce penetration rates rise from low single digit rates. While the company trades at a premium at 18x 2016E EBITDA and 27x
2016E PF EPS, we view the company as a strategic asset that should be part of investors’ portfolios.
Key Debates
 Will MercadoLibre be successful in navigating an increasingly competitive environment in Brazil, its largest market? Over the last year,
competition in the important Brazilian eCommerce market, which represents 48% of the company’s revenue, has intensified. Large regional
competitors such as B2W and Buscape are marketing aggressively and outspending MercadoLibre by a wide margin. MercadoLibre has to some
degree, increased its own marketing spend in response, pressuring margins. However, comScore data suggests that to date, MercadoLibre has
not seen a material decline in its global visitors, but may have seen its market share flat-line lately. While long speculated, Amazon also seems
to be nearing its entry into physical sales in Brazil, posting jobs listings for Brazilian logistics personnel in February. In addition, while eBay has
historically focused primarily on cross-border-trade in the region, and even owns 18% of MercadoLibre, in May 2014 the company launched
localized websites in Latin America with both Spanish and Portuguese-language versions of eBay.com and local currencies. While we believe it
is too early to focus on market share, the heightened competitive dynamics increase the risk profile and may weigh on the multiple of shares
from time to time. We also highlight that MercadoLibre has fared well in Brazil in the first half of 2014, with Brazilian revenue accelerating to 30%
y/y in 1Q:14 and 34% y/y in 2Q:14 in local currency.
 Can MercadoPago replicate PayPal’s success in penetrating off-platform transactions? Similar to eBay in its earlier days, MercadoPago’s
total payments volume (TPV) is generated primarily on-platform. Since switching from a buyer-pay model and requiring all merchants to offer
MercadoPago, on-platform penetration has risen dramatically, and now represents over 60% of Brazilian GMV and 38% in Argentina as of
1Q:14. While we believe most investors expect on-platform penetration to continue to rise, we believe a key debate is the extent to which
MercadoPago is successful in penetrating off-platform transactions. As the company most closely resembles the eBay of Latin America, we
believe MercadoPago’s off-platform opportunity is best viewed by looking at PayPal’s off-platform growth, which reached over $125B in 2013 or
70% of the company’s total TPV. Due to structural differences in Latin America, such as the prevalence of cash on delivery as a payment
method, we believe it will be many years before off-platform represents the majority of the segment’s TPV. However, we believe that
MercadoPago should see further growth over the coming years as MercadoEnvios is expanded beyond Brazil and Argentina, and off-platform
should see a boost in growth upon the launch of MercadoEnvios off-platform, although we do not expect this to occur until a few years from now.

23
Priceline (PCLN) – Buy, $1,600 PT
We are resuming coverage of Priceline with a Buy rating and $1,600 price target. Priceline is a leading global online travel agency with
multiple well-known owned and operated brands such as Booking.com and Kayak. We use a 12 month DCF approach to arrive at our
$1,600 price target, with both bookings and gross profit growing at a 25% CAGR from 2013 to 2016. We assume a perpetual growth
rate of 2.75% and discount rate of 11.0%. At our price target, the stock would trade at 16.1x 2016E EBITDA and 21.5x 2016E PF EPS
vs. its current 13.0x and 17.6x multiples respectively. The company continues to exhibit 30%+ y/y growth in bookings and strong hotel
room nights growth due to aggressive international expansion, increased marketing, and an expansive base of hotel, air,
and car inventory. In 2Q:14 it reported 33% y/y FX adj. growth in bookings and 29% y/y growth in hotel room nights, which is
particularly impressive, in our view, given the size and scale of the company’s operations. The recent acquisition of OpenTable for
$2.6B cash could present meaningful opportunities as the company expands the booking net to include restaurant reservations and
uses its international strength to cross-sell OpenTable’s offerings abroad, especially in Europe. That said, in our view the main risks that
investors need to monitor are the sustainability of key metric growth at such a large scale and the threat of new entrants such as
TripAdvisor and Google into the hotel booking space. We believe if Priceline continues to execute its aggressive expansion strategy
and effectively convert traffic it can mitigate these key concerns and improve its competitive position.
Key Debates
 Can Priceline sustain high growth given its scale? Priceline’s bookings reached nearly $40B in 2013, similar to Expedia. However, it
accelerated growth to 38% y/y FX adj. compared to Expedia’s 16% y/y FX adj. growth last year. We believe Priceline’s early focus on a strong
inventory base helped create a “virtuous cycle” of investment, higher SEO ranks, better conversions, and reinvestment. This attention to supplier
integration combined with aggressive geographic expansion and marketing propelled the company to its current competitive position. However,
increasing competition and pressure from external players bring the sustainability of this growth into question. If Priceline’s bookings growth,
especially internationally from Booking.com, exhibits any considerable deceleration investors would likely view it as a sign that the platform is
reaching maturity.
 What are the biggest external threats to Priceline’s business model? Both TripAdvisor’s Instant Booking offering and Google’s re-
emergence in the online travel industry pose competitive threats to Priceline and its OTA peers. TripAdvisor recently launched its front-end
mobile booking platform powered by OTAs which could reduce traffic to Priceline if the platform gains traction. Furthermore, the re-emergence of
Google in the online travel industry implied by new partnerships and features could significantly impact the organic traffic Priceline receives from
Google search queries. If Priceline has to spend more on SEM and other marketing efforts to maintain traffic growth, margins could see
contraction over the long term. If either company’s initiatives to expand down the booking funnel generate meaningful adoption, Priceline could
face a tapering growth trajectory, in our view.

24
TripAdvisor (TRIP) – Buy, $120 PT
We are resuming coverage of TripAdvisor with a Buy rating and $120 price target. TripAdvisor is the number one online destination for
travel planning with over 170mm user generated reviews of hotels, restaurants, and travel destinations. The company’s meta-search
platform displays inventory pricing from its supplier and OTA partners that users can select and book through an external site. However,
TripAdvisor has taken deliberate steps to move down the booking funnel and partially disintermediate OTAs through its recent launch of
the mobile Instant Booking offering. For select inventory, travelers can now directly book hotels without having to leave the platform.
This product is 100% rolled out in the U.S. as of 2Q:14 and is expected to launch on the desktop in 3Q:14. Management has not
included this initiative in its guidance and also excluded potential benefits from advertising campaigns and higher CPC pricing. We
believe that TripAdvisor’s expansion down the booking funnel combined with multiple opportunities to exceed guidance warrant the
premium 19x 2016E EBITDA and 26x 2016E PF EPS multiples. Furthermore, the company will face easing comps in the back half of
the year. We believe if management can execute on these key opportunities, multiples could see further expansion as investors
reassess TripAdvisor’s role in the online travel ecosystem.
Key Debates
 Which metrics should investors focus on? Investors have been evaluating TripAdvisor’s performance on the hotel shopper growth, or engaged
user, metric while the company transformed its ad unit to meta-display from pop-under windows. This metric along with CPC pricing experienced
significant fluctuations due to the transition. In 2Q:14 pricing improved, demonstrating continued strength in the demand for the meta ad units. However
hotel shopper growth of 17% y/y was only a slight acceleration from a weak 14% y/y 1Q:14 figure. While normally this would be a concern
management stressed its pivot to monetization from user growth started in 1Q:14. The company measures this with the revenue per hotel shopper
metric, which grew 11% y/y vs. 9% y/y in 1Q:14. We believe that monetization, captured by revenue per hotel shopper, represents the next challenge
for the company. Though CPC pricing and hotel shopper growth remain important gauges of the platform’s fundamentals, the fluctuations and tough
unit metric comps in the first half of 2014 make identifying short-term trends difficult. As the company moves down the booking funnel, investors will
need to focus on metrics more directly related to hotel shopper conversion, specifically revenue per hotel shopper, in our view.
 Will TripAdvisor disrupt the online travel space? Recently, the company has started to put pressure on OTAs through Instant Booking by extracting
a portion of the economics in the booking process shared by major players like Priceline and Expedia. We view the shift of focus to pricing and
monetization metrics as an indicator that the company is looking to continue downward expansion. Over the long term, in our view, it is difficult to
predict Google’s and OTA’s competitive actions and how they will impact TripAdvisor’s position within the ecosystem. However, we believe that the
company is making decisive steps toward disintermediating both ends of the travel funnel as it evolves into a vertical search engine.
 How will OTAs react to Instant Bookings? TripAdvisor launched its mobile Instant Booking feature in June 2014, a new service that allows travelers
to book hotels directly on the app without being redirected to a supplier or OTA. Each party bids for commissions to fulfill the booking. Management
reiterated that major OTAs like Priceline and Expedia are in a “wait and see” mode before coming onboard. We believe that this initiative is a credible
threat for OTAs and if Priceline’s $1.8B acquisition of KAYAK is any indicator of how OTAs view insurgents, the company likely transformed from a
strategic partner to a strategic asset, in our view.

25
Yelp (YELP) – Buy, $85 PT
We are resuming coverage of Yelp with a Buy rating and $85 price target. Yelp provides a valuable discovery service that is helping
people find great local businesses. Yelp’s website sees nearly 140mm monthly users who have cumulatively written over 60mm
reviews. The company also has over 1.8mm local business pages and approximately 80,000 local businesses paying to advertise on
Yelp. While we are mindful of the premium valuation of Yelp shares, which trade at 23x 2016E EBITDA, we believe consensus
estimates may rise meaningfully over time as the company penetrates its large addressable market. For context, YP (formally the
Yellow Pages) has 19mm business listings and 575,000 ad clients, compared to our estimate of 183,000 paying advertisers on Yelp in
2016. In the last year, the company has also taken steps to close the loop by launching Yelp Platform, which allows users to transact on
Yelp. We believe this is an important step that moves the company beyond matchmaker and increasingly into the realm of a local
platform, with increased data, ad efficacy, and financial leverage.
Key Debates
 Can Yelp become the Amazon of local? Local has often been described as the holy grail of Internet advertising, with nearly $40B in local ad
spend in the U.S. alone in 2013 per SNL Kagan, with $17B of this spent online. However, local is very difficult, requiring companies to build
massive salesforces to call on less sophisticated advertisers with small budgets. We believe Yelp has the potential to become of the few success
stories in local. Yelp has already become a dominant platform in the United States and is expanding internationally. The company is now in 27
countries around the world and has over 140mm monthly users worldwide and 80,000 local paying advertisers. The company is also taking an
important step to go beyond review database and recently began taking steps to close the transaction loop with Yelp Platform, partnering with
OpenTable, Orbitz, etc. to enable consumers to transact with businesses directly on Yelp.
 Are Yelp shares as interesting as the business? Yelp’s valuation is among the most contentious in our coverage universe. Over the past few
months, Yelp has traded as high as $102 and as low as $52, with little, if anything, changing about the fundamental story or direction of key
operating metrics. Currently trading at $70, Yelp has a nearly $6B enterprise value and trades at approximately 24x 2016E EBITDA. While this is
certainly a premium, those long YELP likely views the stock as a strategic asset and believe there is significant upside to consensus estimates.
We agree with this view due to three primary reasons: the strategic value of the growing franchise and the belief that consensus estimates are
too low due to: 1) international opportunity, 2) Yelp platform, and 3) self-serve (cost-per-click) ad monetization.
 How strong is Yelp’s competitive positioning in local advertising? The local market is enormous and Yelp’s success has attracted
competition from leading Internet giants such as Facebook and Google. While we do not treat competition from dominant Internet players lightly,
we believe the story continues to be one that is more about the transition of local ad dollars from offline to online, with offline local advertising in
yellow page listings and local print ads representing over $20B in 2013 in the U.S. alone. We believe Yelp has established a dominant first-
mover advantage over traditional businesses such as the Yellow Pages and Dex Media and see the recent partnership between Yelp and YP as
an acknowledgement by YP that the industry of SMB listings is heading toward Yelp.

27
Amazon (AMZN) – Hold
We are resuming coverage of Amazon.com, Inc. (AMZN) with a Hold rating and a $330 fair value. Amazon is an innovative low-cost
operator, a rare combination, in our view. We believe Amazon is still early in addressing the general merchandise retail, hardware,
digital goods, and web service markets. The company’s customer centric approach to business is a strategy built upon the belief that
duration (the long-term) is all that matters. Under this premise, Amazon is accelerating investment in new growth initiatives such as
international eCommerce, international digitization, hardware, video, and AWS, limiting the margin expansion opportunity. As Amazon
continues to widen its offering by investing heavily in new businesses and geographies, the company is facing a stronger set of
competitors without the first mover advantages. The result is less visibility in the outcome and the potential for lower returns (than in the
past). In our view, investors will grow less tolerant of the elongated investment cycle, without resultant profitability, as the current
landscape appears more difficult to navigate relative to the past.
Key Debates
 Has Amazon already won the U.S. general merchandise eCommerce battle? eCommerce is still relatively early in the growth curve in the U.S. as
eCommerce sales comprise just 11.1% of addressable retail sales. As the largest online retailer in the U.S., Amazon GMV represents 20%-22% of U.S.
eCommerce sales, by our estimate. Amazon has been able to leverage its competitive advantage of its fulfillment infrastructure to drive scale and
develop a best-in-class consumer experience including its Amazon Prime service. Over the last decade, Amazon has generated growth roughly 2x the
industry, as the company disrupted traditional brick-and-mortar retail, capturing a sizable share of “commoditized” product categories that were quick to
migrate online. In the decade ahead we expect Amazon to continue to generate better-than-industry growth as the company continues to leverage the
strengths of its fulfillment network and its Amazon Prime service. We however note that Amazon will likely encounter greater resistance to eCommerce
share gains going forward as traditional retailers are better positioned to capture a piece of online sales.
 Will international growth accelerate and will international margins expand? While Amazon stands to benefit from tailwinds consisting of
increasing international digital content and online shopping penetration, enhanced customer service stemming from improved fulfillment capabilities
and easing compares, we are hesitant to call for an acceleration in international topline as Amazon faces stronger global competition and lacks early
mover and branding advantages enjoyed in the U.S. Amazon has struggled to gain share in China, the fastest growing and soon-to-be largest
eCommerce market. We believe Amazon has potential to elevate international margins as the company realizes scale benefits from investments in
international fulfillment.
 What is the AWS moat and how big could AWS become over time? Amazon offers one of the broadest sets of cloud services of any vendor in the
industry and is a global leader in cloud computing. The company is executing a similar playbook with AWS as it did with eCommerce – gain scale,
leverage scale advantages to lower costs, take prices down, and acquire more customers with lower prices. Amazon’s scale advantage as one of the
largest operators and its broad service offering have allowed the company to grab a sizable share primarily among SMBs. We however note viable
competitors are quickly catching up. Amazon experienced more intense price competition in the most recent quarter, which we expect will continue for
the foreseeable future, potentially pressuring sales growth and margin.

28
Care.com (CRCM) – Hold
We are resuming coverage of Care.com with a Hold rating and $10 fair value. Care.com operates a two-sided marketplace that helps
match care seekers and caregivers at a fraction of the cost of traditional placement agencies and with more scale and reliability than
other traditional means such as word of mouth referrals. The company is the leader in this early stage category with 3-5x the number of
visitors as its next largest competitor and a large potential opportunity: Care.com has only a single digit penetration of its $8-$10B
addressable market. While we believe there is potential for the company to see solid sustained growth, we are concerned about the
company’s ability to sustain such growth and reach profitability in the next few years, as the episodic usage of the platform means the
company must continuously replace its user base. The company has also failed to beat and raise guidance in its first three quarters as
a public company and has not demonstrated the hyper growth often associated with Internet companies of similarly low penetration
rates.
Key Debates:
 Will Care.com be successful in payments? Care.com acquired its payments business in 3Q:12 and the segment now has a small base of
approximately 13,000 customers. With EBITDA margins of 50%+ in the payments business and a highly recurring, 3.5 year average length of customer
stay, a key question for the revenue growth and particularly profitability of Care.com is its success in extending its relationship with its customers
beyond matchmaker and into payments. We appreciate the large opportunity of the payments segment but are skeptical of Care.com’s ability to get
material penetration of payments members into its much larger consumer matching member base. While over 40% of new payments members now
come from Care.com, this represents a penetration rate of less than 2% into its paying consumer matching member base. To be fair, the company only
began efforts to cross-sell its payments business on its core care.com website in the summer of 2013. However, we would have expected higher
penetration and highlight that the product is expensive at $1,000 per year per family, which may limit the long-term addressable market for the product.
We are encouraged by the company’s test of tiered payment subscription levels, including significantly lower price points, but are concerned that a
rollout of lower priced options may cannibalize the existing product.
 Can Care.com achieve profitability? In 2013, the company spent 68% of its revenue in S&M, almost all of which was spent on customer acquisition.
While unit economics appear favorable, with a 2.5-3x target ROI on consumer matching customers, the episodic nature of the business means
Care.com must continue to spend aggressively to replace its paying members and drive growth. We do believe Care.com can achieve profitability, and
estimate the company will reach FY EBITDA profitability in 2017. The driver of this profitability will primarily be the growing tail of returning members
whose usage comes at very high incremental margins since they do not need to be re-acquired.

29
Dice Holdings (DHX) – Hold
We are resuming coverage of Dice Holdings with a Hold rating and $9 fair value. Dice is a leading provider of specialized recruiter and
community websites, focusing on the technology, energy, finance, security, healthcare, hospitality, and biotechnology verticals. We
recognize that the company screens very well: the company trades at 6.9x 2014E EBITDA and a 10% FCF yield and the midpoint of FY
2014 guidance implies 22% y/y growth. However, the company has made a string of acquisitions recently that have significantly inflated
reported revenue growth. By our estimates, organic growth in 2Q:14 was 1% vs. the 28% y/y reported growth, and the company has
failed to grow organic revenue by more than 2% for nearly two years now. An important factor in this is that over half of the company’s
revenue comes from the tech and clearance segment, which seems to be losing market share to large competitors such as LinkedIn.
Dice.com recruitment package customers has declined over the last year from 8,650 average recruitment package customers in 2Q:13
to 8,000 in 2Q:14 - the lowest figure in about three years. This despite the launch of a seemingly impressive meta search product
(Open Web). We believe any rise in recruitment package customers would cause shares to rise. However, until we see evidence that
investments by the new management team to revitalize growth have borne fruit, we remain on the sidelines.
Key Debates
 Will LinkedIn encroach on specialty recruitment websites? As the broad category leader, LinkedIn poses a competitive threat to smaller,
specialized recruitment websites such as Dice Holdings. While LinkedIn seems to primarily be pressuring Dice’s classified postings and short-
term, lower package level business today, the threat to Dice’s core recruitment package customers remains. The long-term question is the extent
to which Dice will be able to retain market share against broader platforms such as LinkedIn. We believe the company will continue to face
pressure in the highly competitive recruitment space. While Open Web has the potential to help Dice reduce client losses to competition, the
product’s uptake has been much slower than we would have expected, with only 450 customers using the product today.
 Can the company revitalize growth? In 2Q:14, Dice beat and raised its full-year guidance. While we are encouraged by these results, we are
concerned about the sustainability of the company's growth, as growth is primarily being driven by recent acquisitions. To be fair, we commend
Mike Durney for making acquisitions that are more in-line with the company's core business than has been the case in previous acquisitions.
However, we believe material organic growth will be difficult to achieve unless the company can revitalize its core Dice.com recruitment package
revenue, as tech and clearance continues to make up over 50% of total revenue. And we remain skeptical that the company can significantly
revitalize growth in tech and clearance. Open Web has thus far failed to be a game changer with only 450 paying customers. In 2Q:14, Dice.com
recruitment package customers declined once again to 8,000 on average - the lowest figure in about three years.
 Will Open Web be successful? Open Web allows subscribers to do a search across both profiles in the Dice database as well as related
candidate data from 130 other social sites. As of 1Q:14, customers using Open Web showed 100-200bps higher renewal rates. However,
adoption has been slow, with only 450 customers using Open Web as of 2Q:14. Moreover, while we believe the company may find some
success in its upcoming rollout of Open Web at IT Job Board, we question whether the product will prove as useful in non-tech verticals where
candidates have less professionally relevant material in outside sources.

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Criteo (CRTO) – Hold
We are resuming coverage of Criteo (CRTO) with a Hold rating and $33 fair value. Criteo is disrupting the display advertising industry.
The company buys ad inventory on a cost-per-impression (CPM) basis and sells it to advertisers on a cost-per-click (CPC) basis,
bringing Google-like transparency and attribution to the highly fragmented and traditionally inefficient display ad market. The company
also has deep integration with both clients and publishers, with access to clients’ internal conversion and shopping cart data and direct
relationships and even first-look inventory arrangements with many of its publishers, which gives Criteo access to inventory not
available on public exchanges. Despite a largely positive view of the company’s fundamentals today, we believe it is difficult for
investors to discern the long-term winners within the rapidly evolving, highly competitive ad tech landscape, and therefore, remain on
the sidelines.
Key Debates
 Are margins sustainable? Criteo’s revenue ex-TAC margins were 40% in 2013. A key question for investors in Criteo and the ad-tech
landscape more broadly is what do the long-term sustainable margin profiles look like? As competition in programmatic increases, the cost of the
inventory Criteo purchases will likely rise. While we believe we are at least several years away from significant margin compression, we highlight
this as the key risk. The history of traditional ad networks suggests that ad tech margins take longer to decline than many would think, with many
of these ad networks still seeing 40%+ gross margins. However, this time may be different. To date the percentage of digital media budgets
spent programmatically has been miniscule. As this becomes a significant percentage of advertisers’ budgets, however, advertisers may
increasingly focus on the margins of intermediaries throughout the ad tech landscape. While we believe Criteo is better positioned than most,
they may suffer a significant decline in gross margins in the future.
 How big is Criteo’s addressable market and can they truly move up the funnel? The global display market is estimated to be over $55B in
2015. Criteo estimates that 40% of the display market is in their performance TAM today. However, we believe Criteo is growing the addressable
market for performance display by bringing significantly higher ROIs and Google-like attribution to the historically inefficient display market. We
also believe that Criteo’s penetration rate into the display market will grow substantially alongside the broader penetration of programmatic within
digital ad spend. Finally, while nascent efforts, Criteo is beginning to move up the funnel and broaden beyond pure retargeting, now generating
more revenue from product discovery than pure retargeting and recently launching a mid-funnel customer re-engagement product. Criteo is also
broadening beyond display with the acquisition of an email retargeter and search bid management platform.
 How strong is Criteo’s competitive positioning in ad-tech? Criteo may be the largest public ad tech company by both enterprise value and
ad dollars spent on the platform, but the company competes with a myriad of public and private companies in a rapidly changing segment of the
industry. We believe Criteo is a differentiated player within the ad tech landscape due to primarily to its CPC business model and predictive
engine and deep integration with both clients and publishers. However, we are unsure of the sustainability of these factors as Criteo must not
only continue to navigate the rapidly changing industry environment but must maintain best-in-class proprietary algorithms against the likes of
dominant Internet companies such as Google and Amazon as well as fellow ad tech intermediaries.

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eBay (EBAY) – Hold
We are resuming coverage of eBay with a Hold rating and a $57 fair value. As the world’s largest online marketplace, with over 150mm
active accounts, LTM Enabled Commerce Volume (ECV) over $229B and a leading payments platform, eBay appears well positioned
as a key long term partner to retailers in their transition to multi-channel distribution. Management executed a successful business
turnaround and company re-positioning, resulting in better-than-industry growth throughout 2011/2012. Momentum, however, has since
slowed as many initiatives implemented to revitalize the Marketplaces business have been largely realized. eBay’s core business has
slowed to a level in-line to below the industry, causing downward estimate revisions amidst weakening investor sentiment. Increased
competition from large and niche eCommerce players as well as traditional retailers gives us reason for caution in the near term despite
reduced earnings expectations and relatively favorable valuation multiples. Increased penetration of PayPal offline presents a long-term
opportunity, though we remain neutral on the platform until we see evidence of significant traction in offline customer adoption.
Key Debates
 What is the sustainable growth rate of the marketplace GMV? We are modeling marketplace GMV growth of 12% in 2014 and 11% in 2015,
generally in-line with global eCommerce growth. Over the last four quarters, U.S. GMV trends have decelerated due to increased competition and
declines in the auction business. International GMV stabilized in the low double-digit range as a result of weak macroeconomic environment and slower
international online penetration. eBay’s fixed price offering brings the company more competitively aligned with Amazon, traditional brick-and-mortar
retail eCommerce channels, and numerous niche platforms focused on specific product categories. Given the growth in eCommerce has increased
price transparency across vendors and platforms; the heavier fixed price offering shifts the product mix in favor of more commoditized categories,
weakening eBay’s competitive strengths, in our view.
 What is the PayPal opportunity outside of the eBay platform? PayPal is one of the largest online payment platforms in the world, facilitating $180B
of total payment volumes (TPV) during 2013. Given U.S. eCommerce comprises just 11% of addressable retail sales (5.8% of total retail sales),
PayPal’s TPV only represents a fraction of a much larger offline opportunity. However, growing share of offline retail sales presents two key challenges:
(1) competition as the payments market is becoming more crowded with both large players such as Amazon Payments and Google Wallet and new
entrants such as Square and Stripe and (2) slow adoption from customers and merchants as consumers see little added convenience of paying
through a mobile app versus swiping a credit card. We believe if PayPal can leverage its brand and develop an offline platform that adds significant
consumer value beyond niche use cases, the platform could gain traction along the global commerce penetration curve.
 How compelling is eBay’s valuation? eBay is relatively inexpensive versus peers on a comparative multiple and sum-of-the-parts basis. The market
is assigning a 2015E EV/ Adj. EBITDA multiple of 10.7x. Our 12-month DCF based approach yields a fair value of $57 using a discount rate of 10%
and a terminal growth rate of 2.5%. However, based on a sum–of-the-parts valuation, we arrive at a valuation of $61, representing 15% upside to the
current share price. Our sum-of-the-parts valuation applies an adjusted EBITDA multiple to 2015 estimates for each of the company’s three segments
based on comparative multiples to arrive at a value for eBay. Though expectations have been reduced, we believe there is risk to 2015 and
subsequent year estimates. We see limited opportunity for acceleration in Marketplace top line growth coupled with continued investment in new
products, and lower take rate due to channel mix shift pressuring margins.

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Expedia (EXPE) – Hold
We are resuming coverage of Expedia with a Hold rating and an $88 fair value. Expedia is a major global online travel agency that
helps travelers book hotels, vacation homes, car rentals, and airline tickets through its owned and operated properties and affiliate
partners. Recently OTAs have enjoyed tailwinds from the broad recovery in the travel industry that supported Expedia’s bookings
growth which posted strong 29% y/y growth in 2Q:14. However, a significant portion of this growth originates from its multiple
acquisitions and partnerships such as Trivago and Travelocity, bringing into question the long-term sustainability of current growth
rates. We remain on the sidelines until we see more consistent growth trends in key metrics as the company continues its international
expansion strategy.
Key Debates
 What is the true sustainable growth rate? Expedia has made numerous acquisitions and partnerships to expand its geographic reach (eLong,
Venere) and manage adjacent steps in the travel booking process (Trivago). Hotel room night growth, a key unit metric, of 29% y/y in 2Q:14 appears
strong compared to 24% in 1Q:14. Stripping out eLong and Travelocity yields growth of 20% y/y by our estimates, an acceleration from 1Q:14
partially aided by easier comps relative to the previous quarter. We see a similar trend with the 29% y/y growth in bookings during the quarter where
a considerable portion of this growth came from new domestic contributions from the Travelocity partnership. We believe that investors need to
monitor the organic growth rate of bookings and room nights, ex-acquisitions, to gauge the performance of the core Expedia businesses.
 Why is Priceline’s EV over 6x Expedia’s? In terms of customer offerings and 2013 booking volumes ($) Expedia and Priceline are very similar.
However the market has consistently rewarded Priceline in the last 8 quarters due to three main factors in our view: (1) International leverage –
Priceline had 74% of revenues originating internationally vs. Expedia’s 47% in 2013 with higher penetration in the fragmented European hotel
market. (2) Inventory Breadth – Priceline has 525,301 hotels and vacation homes on platform vs. Expedia’s 325,000. The larger inventory base
makes Priceline more relevant in searches, specifically in Europe where it has significantly more inventory than Expedia. (3) Higher margins – While
Expedia’s management has indicated that expansion of its 18% 2013 EBITDA margin is not a top priority, Priceline maintains close to 40% margins
despite aggressive marketing. We believe all these factors stem from the “virtuous cycle” that Priceline initiated by investing in its inventory early on,
which improved SEO conversions and led to more reinvestment into the platform, further widening the competitive gap with Expedia. If Expedia
makes considerable progress in growing inventories to the levels of Priceline and TripAdvisor the company could significantly reduce its valuation
gap with Priceline, in our view.
 What are the biggest external threats to Expedia’s business model? TripAdvisor’s new Instant Booking offering represents an expansion down
the booking funnel, overlapping with Expedia’s and other OTA’s offerings. The new product will likely reduce traffic to Expedia and could reduce
take rates over the long term as back-end execution services become a larger portion of the revenue mix. Google’s re-entrance into travel through
its new partnerships and features presents another long-term threat to Expedia and its peers. Although its initial attempt years ago did not gain
much traction, new deals with 3rd parties could indicate a re-emergence in force. Both players represent credible risks to the sustainability of
Expedia’s business model, in our view.

33
HomeAway (AWAY) – Hold
We are transferring coverage of HomeAway with a Hold rating and a $38 fair value. HomeAway operates the largest marketplace for vacation
rentals in the world. Its branded portfolio of websites provides vacation rental property managers and owners access to millions of travelers through
its paid listings and also offers back-end services to manage the rental process. The company has begun to shift its strategic focus in two ways: 1)
Transitioning from a pricing story with the pure subscription model to a volume story through the introduction of the Pay Per Booking (PPB) model
launched in 4Q:13. This effort combined with regional acquisitions such as Stayz should help the company serve underpenetrated geographies. 2)
Increasing emphasis on converting listings into bookings through its eCommerce platform, ReservationManager, and distribution agreement with
Expedia made in 4Q:13. 2Q:14 showed favorable results for the transitions with a 74.3% adj. renewal rate driven by North American strength,
improving organic FX adj. revenue growth of 23% y/y in line with 1Q:14, and accelerating listings growth of 34% y/y to 1.04mm. This early traction
is positive, but the sustainability of this growth along with other key metrics such as Average Revenue per Listing (ARPL) remains in question. We
remain on the sidelines until we see a significant impact from increased marketing in 2014 and 2015 as the company transitions its focus and value
proposition.
Key Debates
 Shift from pricing story to volume story When HomeAway first emerged in the vacation rental industry almost all the leading websites around the
world had an annual subscription model. Initially starting with only one price the company introduced tiered pricing in 2011, which is still in the process
of fully rolling out globally. In 4Q:13 HomeAway adopted the PPB model that charged property managers and owners a 10% flat commission on the
value of the booking. This allowed the company to appeal to suppliers that did not see the value in the subscription relative to their annual rental
income. Though it’s in the early stages, initial results indicate that the PPB has caused incremental increases in supply. If the company continues to
execute its roll out of tiered pricing and PPB globally it could considerably increase its paid listings and create more value for users and suppliers, in
our view. However, we await more constructive data as the company rolls out both the PPB and tiered pricing models to more geographies later this
year.
 Focusing on converting listings into bookings HomeAway’s eCommerce platform, ReservationManager , provides property owners and managers
with an integrated solution that includes payment and online booking services. The company aims to address the friction in the booking process by
making it more convenient for both travelers and suppliers to transact. The platform already has approximately 365,000 eCommerce-enabled listings
(including acquisitions), or 35% of the total, driven by online bookable PPB listings and adoption from existing subscription listings. Distribution through
Expedia could present another opportunity for conversion improvements, in our view. In 4Q:13 the company entered into a distribution agreement with
Expedia that gives HomeAway’s inventory exposure to a greater range of travelers. We commend management for these strategic moves, but maintain
a neutral stance until operating metrics indicate a meaningful contribution from the two initiatives.
 What competitive threat does Airbnb pose? Airbnb is similar to HomeAway in that it serves as a marketplace for vacation rentals along with unique
lodging such as castles and boats. The company has been aggressively expanding internationally, building its number of paid listings to over 600,000.
However, regulatory issues continue to be a drag on geographic expansion. HomeAway management has stressed that their supply and targeted
traveler has little overlap. We believe that Airbnb represents a legitimate long term risk to HomeAway’s leading industry position. The traction in paid
listings as well as public awareness could build momentum in the platform and improve its already strong network effects. If more inventory overlaps
between the two platforms, HomeAway may lose share in the global vacation rentals market, in our view.

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RetailMeNot (SALE) – Hold
We are resuming coverage of RetailMeNot, Inc. with a Hold rating and a $19 fair value. RetailMeNot operates the world’s largest digital
coupon marketplace with over 70,000 retailer partners. The company delivers value to both consumers and retailers through its
database of reliable discounts that help increase online retailer conversion rates and average order values. The company receives a
commission from retailers based on the transactions it facilitates through its coupons. In the four quarters following its IPO, RetailMeNot
beat estimates and raised guidance. However, the impact from Google's Panda update in the most recent quarter resulted in reduced
full year revenue and EBITDA guidance. We favorably view RetailMeNot’s leadership position in the digital coupon marketplace, its
strong profitability, positioning in the transition to multi-channel distribution, and optionality from geo-fencing initiatives. However,
exposure to Google algorithm changes and increasing competitive pressure, due to low barriers to entry, present sizable risks to the
company’s leadership position over the long term. The sustainability of the company’s business model relies on its ability to differentiate
itself through branding and offering a unique value proposition to consumers such as exclusives with retailers. We would like to see
RetailMeNot increase direct-to-site traffic as evidence of alleviating competitive pressure and reliance on Google search engine
optimization (SEO). Despite the considerable decline in share price following 2Q:14 earnings, we remain on the sidelines until we see
the company address these concerns.
Key Debates
 Will Google algorithm updates negatively affect traffic? Approximately 64% of RetailMeNot’s traffic originates from SEO, most of which is Google.
As a result, major changes to Google Search Algorithms can significantly impact the organic traffic. This risk played out in 2Q:14 when Google's Panda
4.0 update decreased organic traffic growth y/y and resulted in a 5% and 11% reduction to 2014 revenue and EBITDA guidance, respectively. To
mitigate this risk the company aims to increase the approximately 20% of traffic that navigates directly to its online properties. If RetailMeNot can
strengthen its brand and increase mobile app usage, the company has the potential to considerably improve its traffic mix, in our view.
 How will the company differentiate itself from mounting competition? The online coupons industry is highly fragmented with low barriers to entry.
Though not as large as RetailMeNot, competitors such as Coupons.com have been able to scale their services while others such as Techbargains.com
address specific verticals. Additionally, the industry faces tail risk from Google’s re-emergence into the online discounts market in earnest with its new
shopping campaign offerings. While RetailMeNot holds a first mover advantage and its large library of coupons help maintain the company’s leading
position, we believe it needs to differentiate its value proposition to remain a leader in an increasingly competitive space.
 Can RetailMeNot successfully penetrate offline retail? Approximately 90% of retail is still done in brick-and-mortar stores while RetailMeNot
currently generates a very small proportion of its revenue offline. The company has developed a mobile app with geo-fencing capabilities with the goal
of targeting consumers located near a store with promotional offers to drive in-store purchases. Given traditional brick-and-mortar retailers’ efforts to
combat “showrooming”, the ability to improve in-store conversion is an attractive opportunity. Though early to ascertain its ultimate success, the ability
to successfully penetrate offline retail presents a strong growth opportunity and significantly expands RetailMeNot’s TAM.

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Speed Commerce (SPDC) – Hold
We are resuming coverage of Speed Commerce with a Hold rating and a $3 fair value. Speed Commerce provides end-to-end
eCommerce solutions for small to medium sized retail businesses. The company offers web development, fulfillment, and many other
related services primarily built on top of the Oracle ATG platform. Recently management announced that it divested the legacy
distribution segment, giving investors the opportunity to assess the higher growth, higher margin e-Commerce & Fulfillment business.
While we view this move positively, the eCommerce business has high customer concentration with the top two clients accounting for
36% of segment revenues during FY2014. The addition of 11 new customers in F2Q:15 should help mitigate some of this risk, but a
loss of any major account could result in significant downward revisions to estimates. For now this remains a wait-and-see story as the
company makes a major strategic transition and on-boards new clients.
Key Debates
 What’s the impact if a major clients leaves? Speed Commerce’s top two customers contributed 36% of total revenues during FY2014. Many
of these customers utilize the full stack of offerings whereas multiple new clients this year such as Lowes-Mexico and Lenox primarily seek web
development services. If one of the end-to-end solutions customers decides to bring the eCommerce solutions in-house like Dress Barn did
earlier this year it could negatively impact the company’s revenue outlook. Over time Speed Commerce will onboard more clients and reduce its
customer concentration, in our view. As the company rolls out its SARA X web product it should decrease the time to take customers online and
serve as a major selling point to other small and medium sized businesses. However until this product fully launches and brings in incremental
new business, we remain concerned over the high customer concentration.
 Could Speed Commerce benefit from more scale? Now that the company has shed its high fixed cost distribution segment it has more
opportunity to scale its e-commerce solutions platform. Given the CEO, Richard Willis’s, track record with creating shareholder value through
strategic transactions, the company may look to merge or acquire competitors to diversify the customer base and expand geographically. We
view a merger or acquisition of a small or similar sized competitor could produce significant cost savings and cross-selling opportunities. We
view this as a positive option in the future, but plan to wait and see what traction the new standalone eCommerce and fulfillment business is able
to generate once new clients are on-boarded and the pipeline fills with more customers.

36
Twitter (TWTR) – Hold
We are resuming coverage of Twitter with a Hold rating a $44 fair value. Twitter is one of the world’s leading microblogging services,
with more than 270mm monthly active users spread out across most major developed countries. Twitter’s advertising revenue growth
has been robust due to its sophisticated ad products gaining traction with many of the world’s largest advertisers and agencies, and we
believe increased uptake of complementary TV campaigns along with emerging formats like mobile app install ads could lead to
revenue outperformance in the short term. However, lagging user growth and flattish engagement metrics have fueled longer term
concerns about constrained ad inventory for Twitter down the road. We believe product innovation fueling reach / usage growth may be
necessary for Twitter to justify its current valuation, but success with off-Twitter initiatives powered by acquisitions like MoPub could
help Twitter reach a broader audience and potentially alleviate investors’ inventory concerns.
Key Debates
 Can Twitter accelerate growth in reach / engagement? Twitter added just 9mm total monthly active users in 4Q:13 (only +1mm in the U.S.)
and average timeline views per MAU were down significantly q/q and y/y, which raised doubts about Twitter’s ability to grow its user base.
Twitter’s user growth improved slightly in 1Q:14 (+14mm total MAUs, +3mm in the U.S.) due to a host of live events (Super Bowl, Olympics,
Oscars, and the GRAMMYs) and MAUs came in above expectations in Q2:14 with +16mm net additions (+3mm in the U.S.), although this may
have been largely due to the World Cup. We expect Twitter’s absolute MAU growth trajectory to remain similar to the first two quarters of 2014
(+14mm to +15mm) over the next few quarters and gradually slow to low-teens millions each quarter in 2015. If 4Q:13 turns out to be an
anomaly then investors may remain comfortable with Twitter’s pace of audience growth, but another quarter with MAU additions in the single-
digit millions could cause investors to reexamine Twitter’s long-term growth prospects. Twitter has been investing in easing signup process
friction and simplifying the core product to appeal to mainstream users, but it has proven challenging for the company to accelerate user growth.
 How impactful can TV-related dollars be to Twitter’s advertising business? Many large brands and broadcast / cable TV networks have
tested the waters with ad products like Amplify that are complementary to their TV campaigns, but it’s unclear how material these ads are to
Twitter’s total advertising revenue today. For Twitter’s ad business to reach the scale that bullish investors are hoping for, it could be imperative
that Twitter’s TV-related ad products demonstrate meaningful lift on TV campaigns and become a day-in, day-out buy for TV marketers rather
than an occasional, event-driven buy as we believe they are for the most part today.
 Will Twitter succeed with SMBs, international advertisers, and / or off-Twitter endeavors? Unlike Google and Facebook, which each
seeded the early growth of their advertising businesses through self-service platforms, Twitter grew its advertising platform primarily through
partnerships with large brands / ad agencies, but we think Twitter’s self-service platform (launched 3 years after its first promoted products) likely
makes up a minority of its advertising revenue today. We believe self-service / international advertisers will need to drive a disproportionate
amount of Twitter’s advertising growth going forward for it to reach current consensus forecasts. MoPub and other off-Twitter advertising
initiatives are an interesting opportunity to monetize Twitter’s highly-valuable audience, but it’s unclear how differentiated these products are.

37
Price Target Methodology and Risks

38
Price Target Methodology and Risks: Market Cap >$10B
Google
• Price Target Methodology: We use a 12-month DCF approach to arrive at our $700 price target, utilizing a perpetual growth rate of
3% and discount rate of 9%.
• Risks: In addition to general market and macroeconomic risks, the risks to Google include, among other things: regulatory risks,
competition, the rise of mobile and particularly app usage, the ability to develop new products, and the company's overall exposure
to cyclical advertising revenues.
Facebook
4.5% and discount rate of 10%.
• Risks: In addition to general market and macroeconomic risks, the risks to Facebook include: competition for consumer time spent,
reliance on product cycles for growth, user engagement for certain demographics, and shifts in advertising trends.
LinkedIn
• Price Target Methodology: We use a 12-month DCF approach utilizing a 10.5% discount rate and 4.5% terminal growth rate.
• Risks: Cyclical pressures on recruitment activity, uncertain ceiling on target addressable market opportunities, engagement gap vs.
other social media services, transition to a more content-focused marketing platform, and potential competition from larger
technology companies making a push into professional networking.
Priceline
• Price Target Methodology: We use a 12-month DCF approach to arrive at our $1,600 price target with a perpetual growth rate of
• Risks: In addition to general market and macroeconomic risks and currency fluctuations, these risks to Priceline include: increased
competition from other travel operators, competition from other payment solutions, a reduction in participation from major travel
suppliers, and the ability to produce an effective return on marketing spend to drive new bookings.

39
Price Target Methodology and Risks: Market Cap >$10B
TripAdvisor
• Risks: In addition to general market and macroeconomic risks, the risks to TripAdvisor include: increased competition from Google
and other travel platforms, the deterioration or loss of traffic from Google and online travel agencies, further expansion into less or
un-profitable international markets, potential changes to Google and other search engine algorithms, a decrease in trust of the user-
reviews by hotel shoppers, and concentrated voting control.

40
Price Target Methodology and Risks: Market Cap <$10B
Yelp
• Price Target Methodology: We use a 12-month DCF approach to arrive at our $85 price target, utilizing a perpetual growth rate and
discount rate assumption of 4.5% and 9.50% respectively.
• Risks: In addition to general market and macroeconomic risks, the risks to Yelp include: increased competition from Google and
other local platforms, the deterioration or loss of traffic from Google, further expansion into less or unprofitable international markets,
potential changes to Google and other search engine algorithms, a decrease in trust of the user-reviews by the Yelp community, and
concentrated voting control.
Pandora
• Price Target Methodology: We use a 12-month DCF approach to arrive at our $34 price target, utilizing a perpetual growth rate and
discount rate assumption of 4.5% and 11% respectively.
• Risks: Intensifying competition from several types of music services (radio broadcasters, other Internet radio services, on-demand
music platforms, digital downloads, music video streaming sites, piracy, etc.), uncertain impact of the upcoming Copyright Royalty
Board arbitration process on content cost structure, constrained investment capacity in an increasingly innovative digital music space
due to limited near-term profitability, and challenges to international expansion.
MercadoLibre
• Price Target Methodology: We use a 12-month DCF approach to arrive at a $130 price target, utilizing a perpetual growth rate of
4.5% and a discount rate of 11%.
• Risks: There are geopolitical and macroeconomic risks in addition to the persistent risk of competition from other e-commerce
companies, such as Submarino, Rakuten, and Amazon.

42
Stifel Internet Coverage Comparables
Source: FactSet, Stifel Estimates.
FX Assumptions
EUR/USD GBP/USD USD/JPY USD/KRW USD/ZAR
$1.34 $1.68 ¥101.85 ₩1,037 R10.69
Company Price
Name 8/11/2014 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E
AMZN Amazon.com, Inc. Hold $318.33 $151,302 $150,476 169.3x 71.5x 47.0x 25.3x 17.7x 13.8x 1.7x 1.4x 1.2x
AWAY Homeaway, Inc. Hold $33.47 $3,334 $2,874 58.8x 47.4x 36.9x 23.6x 20.0x 16.3x 6.4x 5.3x 4.6x
CRCM Care.com, Inc. Hold $9.19 $304 $186 NM NM NM NM NM NM 1.6x 1.1x 0.8x
CRTO Criteo SA Sponsored ADR Hold $29.85 $1,935 $1,616 53.9x 29.2x 18.2x 20.1x 11.7x 8.3x 4.2x 3.1x 2.6x
DHX Dice Holdings, Inc. Hold $8.45 $466 $560 19.8x 18.1x 16.1x 6.9x 6.8x 6.3x 2.2x 2.0x 1.9x
EBAY eBay Inc. Hold $53.88 $69,102 $67,054 18.2x 16.5x 14.6x 11.5x 10.6x 9.4x 3.7x 3.2x 2.8x
EXPE Expedia, Inc. Hold $83.94 $11,673 $10,521 21.8x 19.4x 18.1x 10.4x 9.2x 8.7x 1.9x 1.7x 1.6x
FB Facebook, Inc. Class A Buy $95 $73.44 $197,492 $183,536 46.7x 34.2x 25.1x 22.7x 16.8x 13.0x 14.9x 11.1x 8.4x
GOOGL Google Inc. Class A Buy $700 $577.25 $397,139 $344,003 22.1x 19.2x 17.3x 13.1x 11.3x 10.4x 6.5x 5.6x 4.9x
LNKD LinkedIn Corporation Class A Buy $250 $212.90 $27,839 $25,472 110.9x 74.2x 54.7x 44.7x 31.8x 23.2x 11.7x 8.9x 7.0x
MELI MercadoLibre SA Buy $130 $109.14 $4,819 $4,610 41.0x 34.7x 26.8x 37.1x 22.4x 17.8x 9.0x 7.7x 6.5x
P Pandora Media, Inc. Buy $34 $26.38 $6,229 $5,791 138.8x 61.3x 31.4x 103.7x 42.7x 22.0x 6.4x 4.9x 3.8x
PCLN Priceline Group Inc Buy $1,600 $1,309.28 $69,314 $63,939 25.1x 21.0x 17.6x 19.0x 15.7x 13.0x 7.5x 6.2x 5.2x
SALE RetailMeNot, Inc. Hold $17.40 $978 $800 20.2x 14.9x 13.1x 8.5x 7.1x 6.1x 3.0x 2.5x 2.1x
SPDC Speed Commerce Inc Hold $2.76 $184 $208 NM 26.2x 11.9x 30.2x 10.8x 7.7x 1.9x 1.5x 1.1x
TRIP TripAdvisor, Inc. Buy $120 $95.63 $14,386 $14,215 45.3x 33.6x 26.0x 28.9x 22.4x 17.8x 11.4x 9.3x 7.8x
TWTR Twitter, Inc. Hold $43.27 $31,421 $29,324 647.9x 181.8x 82.0x 123.9x 65.0x 32.7x 21.7x 13.8x 9.8x
YELP Yelp Inc. Class A Buy $85 $70.16 $6,064 $5,720 126.3x 58.7x 34.6x 82.1x 43.4x 23.5x 15.1x 9.8x 6.7x
SP50 Average 97.7x 46.7x 30.7x 36.5x 22.1x 15.2x 7.6x 5.8x 4.6x
Median 46.7x 33.9x 25.6x 24.4x 17.3x 13.4x 6.4x 5.3x 4.6x
Ticker Rating Target
Market
Cap
Enterprise
Value
PE EV/EBITDA EV/Revenues
Figures in $ millions, except per share data.
SPDC figures are fiscal year.
CRTO figures use a 1.35 EUR/USD exchange rate, all others use current EUR/USD of 1.34

Stifel Internet Research - The Long Runway to Solving Consumer Problems

Stifel Internet Research - The Long Runway to Solving Consumer Problems

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