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15 Years of Investing in the Internet

15 Years of Investing in the Internet . GCV Presentation, 21 May 2013 Charles Searle. Naspers group history Naspers internet group. Going from here. …to here . We operate in 133 countries across the world. Our history – growing organically…. 1985. 1994. 1997.

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15 Years of Investing in the Internet

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  1. 15 Years of Investing in the Internet GCV Presentation, 21 May 2013 Charles Searle

  2. Naspers group history Naspers internet group

  3. Going from here...

  4. …to here We operate in 133 countries across the world

  5. Our history – growing organically… 1985 1994 1997 2004 1915 (listed) listed Embracing changes in technology along the way

  6. …and through acquisitions 2009 2010 2011 2012 2013 2008 listed etc. etc. etc. etc. etc.

  7. Some early strategic insights… Transition to electronic media Potential of internet identified early Emerging market opportunity * First Satellite TV operator ex-USA * First internet investment in 1995 (Yahoo founded in 1994, AOL earlier…) Term BRIC coined in 2001 * MIH investing in China since 1996

  8. Global platform operator Pay-TV e-Commerce I-Media Type DTT DTH Classifieds e-Tail Payments Format South Africa Sub-Saharan Africa Central & EEU Latam Africa & Middle East South-east Asia Geography 8

  9. Naspers group history Naspers internet group

  10. Rationale for investing in emerging markets • Enter early, establish leadership, build barriers to entry • Less competition from foreign multinationals – as focused on own domestic markets • Ride the economic growth story • But, emerging market competitive • advantage is largely over….

  11. History of initial Naspers internet investing MIH in SA MIH in China & SE Asia • M-Web ISP - 1997 • China - 1998 • Thailand - 1999 • Indonesia - 2000 Paid school fees !

  12. Mistakes made and lessons learnt • Expat management teams… • Expensive products… • Big budget marketing strategies… • Shareholder control issues… • Just too early in some markets…

  13. Investment in Tencent - 2001 • Change in MIH investment strategy • Key strategic strengths identified early • Outstandinglocal management team • Instant Messaging always on • - could expand into many directions ? • Solved certain needs at that time • - e.g. Mobile QQ acted as SMS interconnection gateway between rival mobile networks • Technology, long-term focus • Ability to bring in new talent to complement founders • Facts and figures • - US$32m initial investment (50%) • - US$69bn market • - 825m monthly active QQ users • - 32,000 staff; 65% engineers

  14. “Halo” effects … • Tencent success created a “halo” effect… • Series of investments in Mail.ru in Russia followed …another great story! • But… • Limited social media opportunities elsewhere • “Halo” effects don’t last forever • Where to now ??? - US$6bn market cap - Naspers/MIH : 28%

  15. e-Commerce to dominate the internet Billion US$ Online Shopping Online Advertising Online Gaming Movie Box Office Sales 6x 13x 19x Sources: Morgan Stanley, PWC

  16. e-Commerce: strategy pivot Mobile value-added services Portals Community Instant messaging and e-mail Vertical e-tail General e-tail Social networking B2C e-Commerce Payment platforms E-commerce Marketplace (facilitation) Classifieds (free, paid) Online games Lead-generation Payments (price-comparison etc.) e-Commerce now our core focus Other

  17. Growing through acquisitions: M&A activity Total acquisition spend (US$m) Subsequent acquisitions 377

  18. Growing through development spend Development spend (ZARm) 3yr CAGR 85% 87%

  19. e-Commerce: revenue growth Revenue (ZARm) 61% 3yr CAGR 42%

  20. e-Commerce: revenue breakdown Revenue by type Revenue by geography

  21. e-Commerce: value creation e-Commerce value creation over time Value creation Value Losses

  22. A few lessons learnt… • Local entrepreneurs… • Skin in the game… • What problems being solved ? • Focus long-term and build scale… • Share experiences… • Be prepared to pivot every decade or so….

  23. Q & A

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