GCV Presentation, 21 May 2013

Charles Searle

15 Years of Investing in the Internet

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…

1915 1985 1994 1997 2004

(listed)

listed

Embracing changes in technology along the way

6

…and through acquisitions

2008 2009 2010 2011 2012

listed

etc.

etc.

etc.

etc.

2013

etc.

7

Some early strategic insights…

Transition to electronic media

Potential of internet identified

early

Emerging market opportunity

Term BRIC coined in 2001

* First Satellite TV operator ex-USA

* First internet investment in 1995

(Yahoo founded in 1994, AOL earlier…)

* MIH investing in China since 1996

Global platform operator

Pay-TV e-CommerceI-

Media

DTT DTH Classifieds e-Tail Payments

South Africa

Sub-Saharan

Africa

Central & EEU

Latam

Africa &

Middle East

South-east Asia

Type

Form

atGeo

graphy

8

9

Naspers group history

Naspers internet group

10

• 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….

Rationale for investing in emerging markets

11

MIH in SA MIH in China & SE Asia

• M-Web ISP -

1997

• China -

1998

• Thailand -

1999

• Indonesia -

2000

History of initial Naspers internet investing

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

- Outstanding local 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

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“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

Sources: Morgan Stanley, PWC

Billion US$

Global Total Asia Pac North America China EMEA Japan Lat Am0

100

200

300

400

500

600 Online Shopping

Online Advertising

Online Gaming

Movie Box Office Sales

13x19x

6x

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(fashion, shoes, etc.)

e-Commerce: strategy pivot

Paymentplatforms

Portals

Instant messaging and e-mail

Social networking

Mobile value-addedservices

Online games

E-commerce

Community

Lead-generation

B2C

(price-comparison etc.)

Other

Vertical e-tail

Marketplace(facilitation)

Classifieds(free, paid)

Payments

e-Commerce

General e-tail

e-Commerce now our core focus

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Growing through acquisitions: M&A activity

Total acquisition spend (US$m)

Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Sep 12 -

500

1,000

1,500

2,000

2,500

3,000

3,110

214 517

754

260

Other

~US$5bn to date

377

Subsequent acquisitions

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Growing through development spend

Mar 09 Mar 10 Mar 11 Mar 12 Sep 11 Sep 12 -

500

1,000

1,500

2,000

272 268

575

1,725

550

1,031

Development spend (ZARm)

3yr C

AGR 85%

87%

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e-Commerce: revenue growth

Revenue (ZARm)

Mar 09 Mar 10 Mar 11 Mar 12 Sep 11 Sep 12 -

1,000

2,000

3,000

4,000

5,000

6,000

1,981 2,713

3,684

5,736

2,478

3,991

3yr C

AGR 42%

61%

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e-Commerce: revenue breakdown

Revenue by type

Marketplace (34%)

e-Tail (35%)

Lead generation (11%)

CEEU (71%)

Latin America (18%)

Africa & Middle East (7%)

Revenue by geography

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e-Commerce: value creation

0 1 2 3 4 5 6 7 8 9 10 11 120

20

40

60

80

100

120

140

160

180

200

Revenue Cost

Time

Am

ount

e-Commerce value creation over time

Value creationValue

Losses

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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….

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Q & A