61
Global Equity Research
05 Januar
y 2009
Imran Khan
(1-212) 622-6693

Medio Systems
Medio Systems is a provider of mobile search and advertising solutions. Created
specifically for mobile, Medio Mobile Search combines a user interface with
recommendation and personalization technologies. Using the targeting capabilities
of the mobile search platform, the Medio MobileNow Search Advertising Network
enables advertisers to identify and reach interested audiences. Through Medio's
unique partnerships with mobile carriers and publishers, ads are integrated into the
consumer mobile search experience where increased relevance drives response.
Millennial Media
Millennial Media is a mobile media network that specializes in the “millennial”
audience. With Millennial Motion rich media for engaging user experiences, the
MBrand network for targeted audiences across premium content and Decktrade for
performance-driven campaigns, Millennial Media has a broad advertising offering.
MoVoxx
MoVoxx is an interactive advertising agency focused on mobile advertising via
SMS/text. Solutions offer traditional and interactive agencies, media buyers and
brand managers a quick, silent way to have a 1-to-1 dialogue with mobile consumers.
INTXT allows advertisers to append ads to the outgoing SMS messages of MoVoxx
Publisher Network traffic, creating a method of instant mobile distribution. Ads can
be targeted by geography, daypart, and content channel. INADS enables advertisers
to build their own mobile inventory through keyword/shortcode placements within
their existing advertisements - print, TV, radio, Internet, or in-venue. This product

helps leverage existing ads with an interactive call to action and a method for success
reporting.
mSnap
mSnap is a mobile ad network, enabled by a platform for Broadcasters and
Advertisers to easily create and manage mobile campaigns. The mSnap Network
currently includes over 650 broadcast media partners, with the potential to reach over
200 million mobile users a week. Through exclusive relationships with broadcast
partners like Citadel/ABC, the company offers the ability to target mobile ad
campaigns locally or nationally, and by numerous demographic and interest-based
criteria. Broadcasters can mobilize their programming, making it more interactive,
engaging and measurable. SMS traffic can be monetized while increasing
listener/viewer engagement and interactivity.
Quattro
Quattro is a mobile ad network that provides targeted, interactive multi-media mobile
ad units (Video, SMS, WAP, click-to-call, email, share) all tracked in real time. For
publishers, the company offers its proprietary Juicing technology (allows publishers
to run wired assets on wireless devices without feeds), handset expertise, and
interactive feature sets.



62
Global Equity Research
05 Januar
y 2009
Imran Khan
(1-212) 622-6693

2009 Online Payment Outlook
2008 proved to be another strong year for online payment platforms, especially

PayPal, which saw revenue in the first nine months of the year grow 32% Y/Y,
compared to 30% in F’07, with the unit’s off-eBay business posting particularly
strong growth. Further, in October 2008, eBay acquired Bill Me Later for nearly
$1B. In Latin America, Mercadolibre has seen strong growth in its payment business
and has rolled out direct payment features in several countries, including Argentina.
In China, Alipay has continued to grow rapidly, as well, adding stores and users to its
portfolio. We expect growth to continue in 2009, helped by:
• Continued global e-commerce growth, helped by increased global broadband
penetration;
• The growing acceptance of payment solutions on third-party platforms, including
travel sites;
• Increased use of mobile money transfer platforms helping drive revenues for
those with a presence in the market, such as PayPal and Amazon Payment
(through its relationship with Textpayme); and
• Increased fee generation from deferred payment plan options, which are
particularly attractive in developing markets.
At the same time, we see several challenges to the Payment space, which may cloud
the outlook somewhat.
• Although we expect eCommerce to continue to win wallet share from offline
shopping, the challenging environment could significantly hamper growth.
• A tough credit environment may likewise dampen the growth in the segment
derived from improved financing options.
Key Highlights from 2008
This past year was a successful one for online payment companies. Both PayPal,
which benefited from strength in its off-eBay business, and MercadoPago,
Mercadolibre’s Latin America Payment platform, saw faster revenue growth through
the first nine months of F’08 than F’07. Some key events in 2008:
• PayPal continued to add buyer protection features, raising the dollar value of
purchases insured for eBay buyers paying with PayPal. The company also bought
FraudSciences in January to improve fraud prevention.

• eBay started pushing for mandatory or near-mandatory acceptance of PayPal on
its site, including a short-lived attempt to make it fully mandatory in Australia,
which encountered regulatory difficulties.
• MercadoPago continued the rollout of its MercadoPago 3.0 platform, with
Argentina the most recent and largest geography to begin using the service.
• eBay acquired Bill Me Later for $945M, with plans to integrate the offering more
fully into PayPal.


63
Global Equity Research
05 Januar
y 2009
Imran Khan
(1-212) 622-6693

• Alipay announced several sizable merchant deals, including Amazon and Giant
Interactive, and reported, as of August, that it had 100M users and processed over
2M daily transactions; over 460K merchants now accept the service.
Global eCommerce Growth Expected to Slow
We expect online payment portals to benefit from eCommerce continuing to take
wallet share away from offline channels in 2009 in both the U.S. and global markets;
we continue to see rising broadband penetration as a key catalyst of eCommerce
growth, and we expect eCommerce growth to flow through to higher usage of online
payment services.
While we expect the overall retail environment in the U.S. to remain weak, we
expect online retailers to benefit from the continued shift of retail dollars online,
driven by (1) increases in product selection, (2) continued Y/Y online sales
improvements for brick-and-mortar retailers, (3) volatility in the offline retail space
and (4) further improved efficiencies from site optimization.

Our international forecast is driven by (1) continued rises in online shopping
penetration, especially Western Europe, (2) continued investments by online retailers
in broadening selection, (3) improvements in shipping infrastructure, (4) improved
payment systems and (5) better fraud protection.
Table 34: J.P. Morgan Global eCommerce Projections (Excluding Travel)
$ in millions
Global eCommerce Forecast 2004 2005 2006 2007 2008E 2009E 2010E 2011E ’08E – ’11E CAGR
US 88,780 106,851 128,708 151,443 160,563 168,270 187,958 207,505 8.9%
Europe 52,430 72,690 96,631 123,698 152,537 140,740 170,942 198,200 9.1%
Asia 31,972 43,054 55,556 69,705 90,585 112,573 127,949 139,617 15.5%
ROW 9,440 13,216 18,502 25,903 34,970 41,963 55,811 73,113 27.9%
Total 182,622 235,811 299,397 370,749 438,655 463,546 542,660 618,435 12.1%

Y/Y Growth 29.1% 27.0% 23.8% 18.3% 5.7% 17.1% 14.0%
Source: Department of Commerce, Internet WorldStats, UK eStats, Forrester Research, Iresearch, Korea National Statistics Office, Japanese Statistics Bureau, eMarketer, PhuCusWright, TIA.org,
Jupiter, company reports, J.P. Morgan estimates
PayPal Remains the Largest Online Player; Still Trails
Credit Cards
According to our proprietary survey, 55% of online shoppers use PayPal, compared
to 6% who use Google Checkout and 14% who use Amazon Payment. Although the
number of people who reported using all three payment services was quite small,
among them a 57% majority reported that PayPal was their preferred service.
Credit cards remain the preferred method for online shoppers, with 84% stating that
they use credit cards to make online purchases; the results were very consistent with
the findings of our survey a year ago, when 83% noted using credit cards and 55%
noted using PayPal. Unsurprisingly, PayPal’s penetration was even higher among
those who said they had sold on eBay in the past: 78% of such respondents were
PayPal users.




64
Global Equity Research
05 Januar
y 2009
Imran Khan
(1-212) 622-6693

Figure 33: Payments Methods Used by Online Shoppers
% among respondents who stated they shop online
83.6%
55.1%
5.5%
13.8%
9.5%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
Credit Cards PayPal Google Checkout Amazon Pay ment Other

Source: J.P. Morgan Internet Team 2008 Consumer Survey
Online Payment Providers Offer a Viable Alternative to
Other Payment Options
Users Are Still Driven to Online Payment Options Despite Strong Satisfaction
with Credit Cards
PayPal, as well as Amazon Payment and Google Checkout, have been able to make
inroads into the online retail business despite 89% of online shoppers who use credit

cards rating their experience as either excellent or very good.
It doesn’t appear that dissatisfaction with credit cards is the catalyst for growth for
the third-party online payment platforms. Even users who are happy with credit cards
are still choosing other options some of the time. Among respondents who used both
credit cards and an online payment service, credit cards received one of the top two
ratings (“Excellent” or “Very Good”) 90%+ of the time.
Figure 34: Online Shoppers’ Satisfaction with Credit Cards for Users of Online Payment Services
% of online shoppers who use the selected payment option
48%
39%
58%
48%
42%
32%
25%
26%
10%
7%
3%
7%
1% 1%
0% 0%
0%
25%
50%
75%
All credit card users PayPal users Google Checkout users Amazon Pymts Users
Excellent Very Good Satisfactory Needs Improv ement

Source: J.P. Morgan Internet Team 2008 Consumer Survey

% among all shoppers who use the payment method; may not add to 100% due to online payment users who don't use credit cards.

Among online shoppers who do not use credit cards, PayPal is the prevalent method,
with over 70% of those saying they used the service.


65
Global Equity Research
05 Januar
y 2009
Imran Khan
(1-212) 622-6693

Figure 35: PayPal Dominant among Shoppers Who Eschew Credit Cards
% of online shoppers who don’t use credit cards who use the selected payment option
69%
5%
14%
40%
0%
10%
20%
30%
40%
50%
60%
70%
80%
PayPal Google Checkout Amazon Pay ment Other


Source: J.P. Morgan Internet Team 2008 Consumer Survey
Given the high level of satisfaction with credit cards, we find it remarkable that
online payment services have been able to establish significant footholds online. We
believe online payment services offer users security and ease-of-use advantages over
credit cards, including eliminating the need to enter credit card numbers. Extending
beyond eCommerce shoppers, online retailers can benefit from lower total
transaction costs and P2P users benefit from lower costs and the added security
benefit from not having to share personal financial information, such as bank account
numbers.
Figure 36: Online Payment Providers Simplify the Payment Process

Traditional payment structure
Merchant Consumer
Payment
gateway
provider
Card issuer
processor
Merchant
bank
Card-issuing
bank
PayPal payment structure
Merchant
Consumer
Merchant
bank
Consumer
bank


Source: J.P. Morgan.
Younger Users Are More Likely to Use Online Payment
Providers
Our proprietary survey revealed that younger users are more likely to be comfortable
with more than one method of payment: nearly 60% of online shoppers in our survey
between the ages 18-41 reported having used multiple payment choices (e.g., both
credit cards and Google Checkout), compared to 46% among those older than 42.