GP Bullhound Turkish Internet Report

INDEPENDENT TECHNOLOGY RESEARCH
SECTOR INITIATION  APRIL 2013  DIGITAL MEDIA

TURKISH COFFEE – GET IT WHILE IT’S BREWING

In times of global financial flux and uncertainty, a highly dynamic new market
is evolving for financial and strategic investors looking for the next opportunity:
Turkey. This report provides comprehensive and in-depth insight into the fast
growing Internet and Digital Media markets in Turkey.

A number of factors are converging in Turkey — favorable demographics
(young, prospering and engaged), a developing risk-capital ecosystem, a
reverse brain transfer (Turkish talent returning home from abroad),
widespread mobile penetration, emerging Internet ecosystem and maturing
eCommerce sector, stable government, strong online and offline consumption
habits and more, making Turkey one of the most anticipated markets in the
world.

The promise demonstrated by evolving sector dynamics and vastly changing
entrepreneurial conditions led last year to considerable hype with regards to
investing in Turkey. This enthusiasm in turn boosted a perception somewhat
in advance of reality, stimulating premature expectations.

Now it’s time, for all concerned to come back to Earth. Particularly in regard to
the eCommerce sector, and the hard work called for may be more mundane
than the glittering fanfare. Survival of the fittest is eliminating lagging players
and strengthening the entrepreneurial ecosystem. The young market is in fact
maturing, and early investors now have the kind of opportunity that comes
around only when a particular constellation of conditions prevail.

This report acknowledges and provides context for short-term caution
associated with emerging markets such as this. However, the overall findings
suggest substantial potential in the mid to long-term for the Turkish Internet ALI DAGLI
ali.dagli@gpbullhound.com
market to be a new growth region for entrepreneurs and investors alike. US: +1 415 412 2015
Turkey : +90 532 245 7505

DANIEL MAGGS
daniel.maggs@gpbullhound.com
London: +44 207 101 7660

Important disclosures appear at the back of this report
GP Bullhound LLP is authorised and regulated by the Financial Conduct Authority in the UK
GP Bullhound Inc. is regulated by the Financial Industry Regulatory Authority (“FINRA”)

GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING

TABLE OF CONTENTS

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

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

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

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

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

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

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

Three Paths to Success ....................................................................................9
Leadership Position and More Innovation .........................................................9
“Copy Now” and “Sell Fast” Does Not Work ......................................................9
Chicken-and-Egg Paradox ..............................................................................10
Undue Focus on User/Revenue Growth ..........................................................10
Appointing Additional Leadership When Needed ............................................11
One-way Ticket Back Home ............................................................................11
Selected Sector Overviews ..................................................................................................12

eCommerce .....................................................................................................12
Gaming ............................................................................................................17
Digital Agencies, Online Advertising and Marketing ........................................22
Social Media and Online Content ....................................................................25
Selected Private Placements................................................................................................ 30

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

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

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

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Market Overview
Turkey is a country where East and West have always met, diverse cultures co-exist, and a
dynamic young population is expanding. A quarter of Turkey's 75m people are less than 15
years old, growing up in the world of Facebook, Twitter, and mobile Internet, and promising a
stronger future for the Turkish economy and its emerging Internet and Digital Media sectors.
th th
Turkey is the world's 15 , and Europe's 6 , biggest economy by GDP. According to the
Organization for Economic Co-operation and Development, Turkey is expected to overtake
India as the world’s second fastest growing economy by 2017.
EXHIBIT 1: TURKISH GDP, 2001-2013

$1,200bn

$1,000bn $912bn
$841bn
$800bn

$600bn

$400bn

$200bn

$0bn
2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E 2013E

Source: The World Bank

Since the Turkish economic crisis of 2001 and the reforms initiated by Kemal Dervis, the
Minister of Economic Affairs and the Treasury at the time, inflation has fallen from 18.4% in
2003 to around 7.4% (expected) in 2012, and unemployment has fallen from 13.3% in April
2009 to 9.2% in 2012 — the lowest level since 2005. Although the budget deficit and foreign
debt remain cause for concern, in November 2012 rating agency Fitch raised Turkey’s credit
rating to investment grade as a vote of confidence in Turkish officials’ efforts to transition the
country towards a more self-sustaining, export-driven economy.

There is an exponentially developing appetite for digital media consumption in Turkey. Use of
IP-based platforms such as web, social networks, and mobile Internet is growing at an
unprecedented pace. 36.5m Turks are Internet users — the fifth largest digital population in
Europe after Germany, UK, Russia and France, and with more room for growth. Broadband
Internet subscriptions have grown 38% year-on-year to 19.3m in 2012.

EXHIBIT 2: INTERNET BROADBAND PENETRATION IN TURKEY

30 30%
25.8%
25 25%
19.3
20 20%
14
15 15%
8.6
10 5.9 6.8 10%
5 5%
0 0%
2008A 2009A 2010A 2011A Q3 2012E
No. of Broadband Users (m) Penetration as % of Population

Source: IMF, The World Bank

Mobile penetration is high at 90% with 67m users. Turkcell, Vodafone, and Avea are the
dominant carriers with 52%, 28%, and 20% market shares respectively. 60% of mobile users
are currently on 3G data plans. According to Flurry, Turkey is one of the top ten fastest
growing iOS and Android markets at 185% year-on-year growth. 71% of mobile subscribers

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connect to the Internet via mobile phone at least once a day. Every major eCommerce and
Digital Media — and even traditional — company in Turkey is releasing new mobile initiatives
and experiencing significant upside from this rapidly growing medium.

EXHIBIT 3: MOBILE IS BECOMING MOBILE INTERNET – 3G SUBSCRIBER GROW TH

100 94%
90
92% 92%
80 90%
88% 89% 90%
70 87% 89%
85%
60
88%
28.5 26.9
50 33.9 30.8
42.4 86%
40
65.8 55.7
30 84%
20 37.7 40.3
31.4 34.9
82%
10 19.4
7.1
0 80%
2008 2009 2010 2011 Q1 2012 Q2 2012 Q3 2012
No. of 2G Subscribers (m) No. of 3G Subscribers (m) Mobile Penetration (%)

Source: www.tk.gov.tr

People in Turkey are extremely digitally engaged and social, evident on the ground and in the
statistics. Turkish people spend the third-longest time online in Europe after the Netherlands
and the UK, and with 32.4m Facebook users — 89% of all Internet users and 43% of the total
population — Turkey is ranked the seventh largest country on Facebook. With 9m users and
rapidly growing, Turkey is also becoming one of the largest Twitter-using countries. Just
recently, leading mobile operator Turkcell and Twitter reached an agreement to better
integrate Twitter into Turkcell’s mobile phone architecture.

Turkey's overall infrastructure is well developed. Credit-card penetration, at some 60%, is
higher than the European average of 50%. And, relative to for example Russia, logistics and
physical infrastructure are good. Thanks to heavy investment, communication links are strong.
The third-generation network, at least in major urban areas, is often faster than that found in
many other European countries.

Available data indicates that Turkey’s economic environment is, and appears likely to remain,
strong; likewise the political environment is, and appears likely to remain, stable. With more
"profit-focused" execution, innovation, and smart money/investors feeding into Turkey, these
positive digital media trends are on track to continue for years to come.

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TURKEY RUSSIA ISRAEL FINLAND SWEDEN BRAZIL UK US
Population and Area
Population 75.6m 143.4m 7.9m 5.4m 9.6m 193.3m 63.2m 315.6m
Population Density 97/km2 8/km2 360/km2 18/km2 23/km2 23/km2 255.6/km2 34/km2

Area 783,562/km2 17,075,400/km2 22,145/km2 303,893/km2 410,314/km2 8,514,877/km2 243,610/km2 9,161,074/km2
Largest Cities  Istanbul (13.3m)  Moscow (11.5m)  Jerusalem (0.8m)  Helsinki (0.6m)  Stockholm (1.3m)  S’Paulo (11.2m)  London (9.5m)  NY (8.2m)
 Ankara (4.3m)  St. P’burg (4.8m)  Tel Aviv (0.4m)  Tampere (0.2m)  Goth’burg (0.5m)  Rio de J. (6.3m)  B’ham (2.4m)  LA (3.8m)
 Izmir (2.8m)  Nov’birsk (1.5m)  Haifa (0.3m)  Turku (0.2m)  Malmӧ (0.3m)  Salvador (2.7m)  M’chester (1.9m)  Chicago (2.7m)
Economic Indicators (2011 Actuals, IMF)
GDP (PPP) $1,260bn $3,015bn $216bn $202bn $392bn $2,289bn $2,234bn $14,991bn

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GDP Growth 8.5% 4.3% 4.6% 2.7% 3.9% 2.7% 0.8% 1.8%
Inflation Rate 6.5% 8.4% 3.5% 3.3% 2.9% 6.6% 4.5% 3.1%
Unemployment Rate 9.8% 6.5% 7.1% 7.8% 7.5% 5.9% 8.0% 8.9%
Users and Infrastructure
Internet Users* 36.5m (48%) 70.6m (49%) 5.4m (68%) 4.8m (89%) 8.7m (91%) 87.3m (45%) 51.6m (82%) 245.5m (78%)
3G Penetration** 20% 8% n.a. n.a. 73% 41% 53% 64%
Credit Card Penetration* 60% (45.4m) 5% (7.2m) n.a. n.a. n.a. 21% (40.6m) n.a. 33% (104.0m)
Social Media
Facebook Users*** 32.4m (89%) 7.7m (11%) 3.8m (70%) 2.3m (48%) 4.9m (56%) 65.2m (75%) 32.8m (64%) 167.4m (68%)
Twitter Users*** 9.0m (25%) 5.0m (7.1%) 0.1m (1.9%) 0.3m (6.3%) 0.3m (3.4%) 41.2m (47%) 10.0m (19%) 59.0m (24%)
Sample Success Stories
Turkey in Context

Joygame vKontakte Blocket.se Marcadolivre Rightmove Gilt Groupe
Local Successes - -
Markafoni Yandex Klarna Submarino Moneysupermarket Uber
Shopping.com Rovio Spotify Betfair Google
Global Successes - Kaspersky Terra
Waze Supercell Skype King.com Facebook
No. US-based Companies on
2 4 64 1 3 28 39 n/a
NASDAQ, NYSE and Amex
Sources: The World Bank, IMF, Capgemini, Socialbakers, Wired, Webrazzi, Beantin, Arabsocialmediareport.com, Semiocast Research VISA, KPCB, * As % of total population ** As % of mobile subscribers *** As % of
Internet users

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SWOT Analysis
EXHIBIT 4: SW OT ANALYSIS

Strengths Opportunities

 Strong macro trends and growing economy  Exponentially growing appetite for digital media
 Young, educated and engaged population  Pressing move in 2013 towards more
 Large Internet user base w/ room for growth innovative and profitable businesses
 90%+ mobile penetration  Money-spend online to catch up with time-
 Robust logistics, payments and Internet spend online (consumers and advertisers)
infrastructure  Massive growth trajectory in smartphone and
 Entrepreneurial energy and quick problem- broadband penetration
solving capability  Foreign investors looking to invest in Turkey
 Hard-working and low-cost labor force  Investment incentives from government
 East/West geographical and cultural magnet  Affluent professionals coming back home

Weaknesses Threats
 R

 Young Internet ecosystem  Immature business models failing with
 Lack of private capital, small set of smart potential chilling effect on new investment
institutional investors  Domestic challenges to modernization
 Insufficient innovation  Internet censorship by government agencies
 Unbalanced activity in eCommerce versus  Unstable conditions in nearby countries
other digital media segments
 Undue focus on revenue growth
 Dependence on Google user acquisition
 Lack of non-founding employee incentives
and stock options

Source: GP Bullhound

Emerging Internet Ecosystem in Turkey
New Internet startups are being formed and large traditional corporations are announcing new
online initiatives in Turkey virtually every day. Large conglomerates such as Dogan and
Dogus have numerous Internet companies under their umbrellas (such as Amazon-like
HepsiBurada and Hulu-like Tvyo). The spread of entrepreneurship in Turkey is taking place
not just at the corporate level, but at the startup level as well. Many Turkish professionals
have embraced the Internet as the forward-looking direction for growth. There is tremendous
energy behind a push to create what might one day become the Silicon Valley of Anatolia.

Entrepreneurship and Internet studies are being taught in every major university across
Turkey, and entrepreneurs and sector experts frequently attend panel discussions and give
lectures to stimulate debate and initiative. Arda Kutsal and his team at the very popular
Turkish tech portal Webrazzi are playing a major role in cultivating the Silicon Valley paradigm
in Turkey — by updating Turkish entrepreneurs on a daily basis as to what’s going on in
California, and how to emulate or localize these dynamic developments in Turkey.

Burak Buyukdemir has done an outstanding job of mentoring and incubating up-and-coming
entrepreneurs through his incubation platform eTohum. In fact, there are growing numbers of
incubators and accelerators (Fit Startup Factory, Dunya Invest, Inventram, among others).
The Turkish arm of Endeavor, which offers strategic advice, mentorship and global contacts to
promising startups, is working hard to help mature the entrepreneurial ecosystem.

The quality of advice available from some of the local counsels — such as Sidika Baysal
Hatipoglu of B+B or Enver Sezer Caliskan of Caliskan & Kizilyel — compares favorably to that
which one would get from seasoned professionals at Wilson Sonsini or Fenwick in Silicon
Valley.

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The Turkish government, recognizing these new developments as vital for boosting the
accelerated growth Turkey has been experiencing in recent years, has been initiating a host of
policies — legal and fiscal measures and infrastructure projects — to attract entrepreneurial
activity and job seekers to the Internet sector. Especially helpful for growing startups is
"Government R&D company status" incentivizing them to rent offices in numerous tax-exempt
‘technoparks’ located on university campuses throughout the country. Such government
support is aimed at overcoming some of the known liabilities inherited from the past, creating
a friendly, proactive and robust environment for new businesses.

Despite all these positive trends, the Turkish Internet ecosystem is still young and
inexperienced in regard to the mores and skill sets of Silicon Valley. The older generation is
still bound by tradition and this can hamper younger players from developing and deploying
the entrepreneurial spirit to which Silicon Valley is accustomed. Cronyism, lack of vision, fear
of failure, insufficient skill in planning and cooperation are formidable deterrents.

At times, new business leaders can be impatient and naïve, underestimating what it takes to
grow a sustainable enterprise. There is a lack of institutional private funding, and existing local
investors want too much control, being unwilling to allow entrepreneurs to chart untried
trajectories. This results in a lack of innovation, premature abandonment of good ideas, and
inadequate financial incentives.

Of course, all these shortcomings are natural part of continued growth and development. And
as the country’s new business leaders demonstrate that they are finding their feet in this newly
developing arena, Internet entrepreneurship in Turkey is increasingly acquiring a distinctive
flavor, both local and global, creating a new and as yet untapped sphere of opportunity for
investors.

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Private Capital Environment
To date, the Turkish private capital environment has been largely dominated by local
investors and a small set of outside investors. Many of these are angel investors in the form
of successful entrepreneurs such as Emre Kurttepeli, founder of leading Internet portal
Mynet, Hasan Aslanoba, CEO of Aslanoba, and Tolga Tatari, Ahmet Emre Sari, and Sina
Afra, co-founders of eCommerce giant Markafoni. Turkish angels have generally invested in
rounds of up to $1m so far, although in some cases they have joined larger rounds alongside
non-angel investors.
We see significant deal activity from a number of key local digital media investors. 212 and
iLab in particular have been highly active and have played a key role in building awareness
of and confidence in the Turkish tech scene.
212 is the largest early-stage VC fund dedicated to making investments in Internet and
technology companies in Turkey, investing in a broad range of verticals including social
gaming, eCommerce, cloud services and social media.
iLab is unique in being both an investor and incubator, and focuses primarily on the
classifieds, comparison, e-commerce and content categories – all proven models and highly
scalable businesses. Founded in 2000, iLab is an icon of the Turkish tech scene - it has
holdings in 12 businesses with a combined total of over 700 employees, more than 400m
page views, 24m users, 6m unique monthly visitors, and a reach of 25% of the Turkish
Internet market. iLab invested in GittiGidiyor in 2006 and still owns a minority stake.
Generally speaking, the serious money has been provided by a small set of international
investors, with the largest raises to date coming from General Atlantic ($44m for Yemek
Sepeti, together with Endeavor Global) and Tiger Global Management (large stakes in Mynet
and Trendyol). Hummingbird and Earlybird have also made multiple investments. As global
investors get comfortable with the idea of investing in Turkey, we expect foreign capital
inflows to increase significantly.
EXHIBIT 5: SELECTED VC FIRMS W ITH TURKISH INTERNET INVESTMENTS

Investor Key Investments

Source: CapitalIQ, Webrazzi, GP Bullhound

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eCommerce Advertising Content Gaming
eTailers & Social Media
Private Shopping Digital Creative Agencies Console Gaming
Marketplaces
MMO
Group Buying & Price
Internet-Only Media Companies
Daily Deals Comparison
Web / Download

Brand and Brand and
Performance Ads Performance
Vertical eCommerce - Sellside Ads - Buyside Traditional News Outlets Social Network Gaming

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Online Video & Music
Mobile Gaming
Video Ad Networks
Licensed Betting
Online Dating
Mobile
eMail Marketing
Marketing
3rd Party Services
Digital Media Landscape

Vertical Content
Enabling Technologies
Online Video
Classifieds, Yellow Pages, and HR
Payments
Mobile Internet

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Hot Topics

Three Paths to Success
For an emerging country such as Turkey, we see three major routes to entrepreneurial
success. The first is to clone existing products/services that are already successful in
developed markets, but need a lot of work to flower in new territory. To date this has been a
common strategy for many Turkish entrepreneurs, and has been highly profitable for first-
movers such as eBay-clone Gittigidiyor and Gilt-clone Markafoni.

The second route is to create a unique or differentiated product/service for the local market
only — in this case, offerings with specific appeal to the Turkish population. Peak Gaming’s
flagship title Okey, for instance, has created unique appeal for Turkish gamers by
successfully porting the tea house experience of playing tile games to the Internet. Players
can also send each other topical gifts such as Turkish coffee, a nargila water pipe and even
a belly dancer!

The third and less well trodden route is to create a product/service with global appeal which
can compete outside of Turkey as well as within it — here the most innovation is required.
Already we see a number of success stories in the making. In mobile Internet games, for
instance, we see promising, high-quality, products such as Picnic Hippo's Bucketz, Duello's
iSlash, and Fugo's Wordz.

Leadership Position and More Innovation
Naturally, Turkish entrepreneurs and investors at first directed most of their attention and
money into types of businesses with which they and consumers are most familiar and
comfortable. That is, selling offline goods through online channels with a new make-up and
social mechanics. Accordingly, the majority of Internet-based businesses in Turkey and
MENA have been about selling offline goods online. And this has been fine, as a start.

However, we have to keep in mind that by their nature online shopping businesses have
relatively lower margins. In addition, low barriers to entry result in intense competition and
additional margin pressure. This means that only companies in the leading position by a high
margin and/or offering proprietary products will be embraced by consumers over the long
term.

Thus there are two ways to move forward in creating more local and global online success
stories in Turkey. Either the leading players further ramp up to widen the margin between
themselves and the competition, or entrepreneurs retool and come up with a wider range of
innovative, diversified, differentiated, and disruptive businesses — both in eCommerce and
other under-penetrated Internet sectors — that can in due course reach scale and
profitability.

In Turkey so far, Hepsiburada.com (online retailer), Sahibinden (online classifieds), Cicek
Sepeti (online flower delivery), Yemek Sepeti (online food delivery), Mynet (online portal),
Joygame (online gaming), Kariyer.net (online recruitment) have revenue scale and profitable
growth. All these companies offer differentiated products and are distinguished leaders of
their respective sectors. What is needed is more of them.

“Copy Now” and “Sell Fast” Does Not Work
Being inspired by and “cloning” a business that has been successful elsewhere can be a
smart move for entrepreneurs, and may bring considerable success. And it may at first
appear that this route is a shortcut compared with launching an enterprise that is brand new
on the scene. This perception may, however, be deceptive. Whether it is cloning a winning
business model or innovating from the ground up, local case studies support the common
experience of excessive workloads before payback can be expected.

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In other words, successful and enduring companies are not built easily or overnight. When
we look at the time span of some of the successful online businesses in Turkey, where there
is both revenue scale and profitability (or a successful exit), this point becomes evident:
EXHIBIT 6: SELECTED COMPANIES W ITH REVENUE SCALE AND PROFITABILITY

1998 2000 2002 2004 2006 2008 2010 2012 2013

LEGEND
7 years old Amazon
Private Placement M&A (Exit)

6 years old Hummingbird
Ventures

iLab Ventures eBay $235m
13 years old eBay

15 years old

$15m (50% stake)
4 years old CJ Games

iLab Ventures iLab Ventures
14 years old

5 years old $7.2m Allegro
Trayas (Naspers)

Tiger Global
14 years old Management

$2.5m
11 years old Intel Capital

13 years old

European Founders $44m
Fund Management General Atlantic
12 years old Endeavor Global

Source: CapitalIQ, GP Bullhound

Chicken-and-Egg Paradox
Today, investors all over the world are looking for growth, but with developed countries in
abeyance and many developing countries (such as Brazil and India) experiencing lower than
anticipated growth, attractive opportunities without high risk are few and far between.

In many respects, Turkey is becoming a standout place to look for high growth opportunities,
and investors are now keen on investing in Turkey. However, many are sitting on the
sidelines, waiting for more definitive signs. Optimistic and willing though they may be, they
remain cautious.

On the other hand, Turkish entrepreneurs require early-stage capital and seasoned investors
backing them up to unlock the ecosystem’s underlying value, to maturate the nascent
developments into the solid opportunities the investors are waiting for. Thus we have at the
moment something of a chicken-and-egg paradox, awaiting bold moves on the part of
frontrunner investors to break into a new and profitable arena.

Undue Focus on User/Revenue Growth
As commonly experienced in the western European and Silicon Valley start-up community, we
see many examples in Turkey where Turkish entrepreneurs focus on customer acquisition
and revenue growth as markers of success. However, this mentality can prove to be short-
sighted. Investors, on the other hand, anticipating changes wrought by maturity, need to see
not just revenue growth but a path to profitability.

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For example, for long-term value, Turkish e-commerce entrepreneurs need to look beyond
simply acquiring large numbers of users, instead focusing on the lifetime value of customers,
conversion rates, user royalty, and organic channels of customer acquisition and other key
performance indicators.

Emre Aydin, founder and CEO of Cicek Sepeti, has successfully demonstrated this by a
relentless focus on analyzing customer data and leveraging it to make operational
enhancements, as well as ongoing product innovation. And the result is clear — over the
years, Cicek Sepeti has enjoyed strong revenue growth with unprecedented EBITDA margins
of around 20%, delivering flowers online, in many respects, better than its global counterparts.

Appointing Additional Leadership When Needed
It is very common, both in Turkey and globally, for founders of Internet companies to be
wearing lots of hats. Although these talented leaders have had what it takes to get their
enterprises off the ground to considerable acclaim, Turkish entrepreneurs sometimes
underestimate the need to delegate authority and to widen the talent pool by bringing in
professional personnel with additive experience and complementary responsibilities. Such
limitation can prove to be damaging. Not only does it constrain the scope of realizable
potential for the enterprise, but the leader may be blindsided by the success they’ve enjoyed,
becoming overwhelmed and spending a lot of their time where they are not needed or as
valuable.

It was a smart decision, when Burak Balik, the founder of the highly successful online gaming
company Joygame, brought in Baris Ozistek as CEO in March 2011, two years after the
company’s founding. Today Burak is leading the product teams, game selection and on-going
platform innovation with Baris leading day-to-day execution and dealing with the corporate
development needs of the business. We expect this leadership to continue to translate to
exciting milestones for Joygame that the Turkish ecosystem as a whole can be proud of —
Korean entertainment and media company CJ E&M recently acquired 50% of Joygame for
$15m.

Another great example of successful additional leader appointment is in the case of Sina Afra
joining Tolga Tatari and Ahmet Sari in order to bring organizational experience and discipline
to the initial Markafoni team. The three leaders truly complemented each other with their
respective roles and turned Markafoni into the great success story it has become. Naspers
acquired 66% of Markafoni in 2011 and continues to back Markafoni with their new initiatives.
The collective goal is to turn Markafoni into a billion dollar company and have an IPO in a few
years.

One-way Ticket Back Home
A fairly recent phenomenon of significance for the tech sector in Turkey is the accelerating
“reverse brain transfer,” whereby Turkish professionals who have been studying and working
abroad are returning home to seek newly emerging opportunities. The tech sector has been a
major beneficiary of this trend.

For example, after 17 successful years in the US — having sold SelectMinds to Oracle —
entrepreneur Cem Sertoglu returned home in 2006 and became one of the early pioneers of
the (then non-existent) VC community. Two companies Sertoglu invested in — Gittigidiyor and
Grupanya — have already enjoyed exits.

In addition, well-regarded sector executives such as Hakan Bas of Lidyana, Rina Onur of
Peak Games, and Demet Mutlu of Trendyol studied in leading US universities and returned
home after a few years of investment banking experience to participate in this rapidly growing
sector. In another manifestation of coming back home, there are numerous Turkish executives
working abroad for US-based enterprises being asked by their companies to return to Turkey
to lead their operations in the region. Just recently, Baris Aksoy was asked by Intel Capital to
relocate from Silicon Valley to head their new offices in Istanbul.

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Selected Sector Overviews

eCommerce
eCommerce is arguably the sector in the Turkish digital media landscape which has attracted
the most attention and investment. The combination of a young and affluent demographic,
rapid economic growth, developed infrastructure and strong Internet, mobile and credit card
penetration has created fertile ground for eCommerce players to thrive. As penetration has
risen, the value of domestic eCommerce transactions has dramatically increased, from
around $3.1bn in 2007 to over $17bn in 2012, representing a 41% CAGR. Likewise, the
volume of such transactions has surged from 54m in 2007 to 162m in 2012, a 24.5% CAGR.
Even in 2012, when other sectors slowed down, domestic eCommerce spending rose by
34%, and volumes by 29%.

EXHIBIT 7: VOLUME AND VALUE OF DOMESTIC ECOMMERCE TRANSACTIONS

25 162.0 180
160
20 125.9 17.3 140
120
15 91.9 12.9
100
64.6 66.5 80
10 54.1 8.6
5.8 60
5.1
5 3.1 40
20
0 0
2007A 2008A 2009A 2010A 2011A 2012A
Transaction Value ($bn) Transaction Volume (m)

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

Turkish people are spending more online not only in aggregate terms, but also per transaction –
average basket sizes have grown 13.1% in 2012 alone. Turkey already has around 10m online
shoppers. Assuming Turkish Internet penetration will continue towards EU averages, this number
should reach around 16m by 2016.

EXHIBIT 8: AVERAGE DOMESTIC ECOMMERCE TRANSACTION VALUES ($)

102.7 107.0
93.6
87.3
79.6
57.8

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

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

Investor interest in Turkish eCommerce has been heightened by a series of landmark transactions
which took place in 2011. First, eBay acquired 83% of Turkey’s largest auction site GittiGidiyor, in a
deal rumoured to value the company at $215m. Then South African media conglomerate Naspers
acquired 70% of Markafoni, one of Turkey’s largest private shopping companies, in a deal valuing it

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around $200m. Lastly, Amazon invested in leading online flower store Ciceksepeti. Since then,
Turkish fundraising activity has been dominated by e-commerce plays as investors seek to tap the
sector’s long-term growth potential (see Selected M&A Transactions and Private Placements on
pages 30-32 for details).

At the same time, the sector faces a number of challenges. The success of and hype surrounding
leading companies such as Markafoni, Yemek Sepeti, Grupfoni and Lidyana has spawned
numerous imitations, creating intense competition for market share and driving down (already low)
gross margins for the market as a whole. There are hundreds of small-scale firms in each
eCommerce segment, but many lack distinctive sustainable business models and are too small to
attract investment.

That said, the overall long-term picture is still one of considerable optimism. Turkish per capita
income currently stands at c. $10,000, and is projected to reach $60,000 by 2050. GDP growth will
further the infrastructure investment needed to bring increasing numbers of Turks online. High
mobile penetration will go a long way to overcoming current infrastructure issues. In addition, the
ongoing and anticipated demise of large numbers of companies will bring maturity to the Turkish
eCommerce sector. Entrepreneurs and investors will need to have a more considered and
disciplined approach, and will need to focus more on product differentiation, sustainability, unit level
economics, and paths to profitability along with revenue growth. With eCommerce penetration
standing at around 0.6% of retail sales, the sector is still in its infancy with a long and profitable way
to catch up with the consumption levels of already mature European counterparts.

EXHIBIT 9: E-COMMERCE SHARE OF RETAIL SALES (2011, NON-TRAVEL)

10.7%

8.0%
7.4% 7.0% 6.8%
6.0% 5.8%
4.3%
3.3% 3.0% 2.5%
0.6%

Source: Center for Retail Research

General eTailers and Horizontal Marketplaces
Leading general business-to-consumer eTailers serving Turkish customers, such as Dogan Group’s
Hepsiburada and Amazon, work with large numbers of merchants and sell hundreds of thousands of
products across a broad range of categories. Founded in 1998, hepsiburada.com is the largest
eCommerce site in Turkey with over 6m monthly unique visitors, 900,000 monthly purchases and
annual revenues of over $300m. The Company offers 350 SKUs in 32 categories and employs 250
employees. Although much smaller, Sabanci Group’s Kliksa and Hurriyet’s newcomer Yenicarsim are
other prominent players in this segment.

Horizontal marketplaces act as virtual bazaars that bring together merchants, small businesses, and
individuals to trade almost anything. Sahibinden is currently the leading marketplace and classifieds
destination in Turkey, with over 13m monthly unique visitors. It claims over 3m listings at any one
time and around 50,000 new listings a day. eBay’s GittiGidiyor is currently second in the space with
over 6m monthly unique visitors. eBay’s 2011 acquisition of GittiGidiyor remains the largest Internet
acquisition in Turkey, with a deal value of $217m.

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Online Private Shopping
Online private shopping clubs offer an environment that hosts sales of designer brands for members
at deep discounts. They often encourage members to introduce friends in their online social networks
with additional savings and offers. UK-based Vente Privee offered this model to online customers for
the first time in 2001 and remains one of the most valuable private companies in the world, with
revenues in 2011 of $773m and valuations estimated between two to three billion dollars. Gilt Groupe,
the first to bring the luxury sample sale to the US online market when launched in 2007, has also
experienced extraordinary growth. Realizing this massive opportunity, Turks were fast to follow, with
private shopping clubs Markafoni and Trendyol launching in 2008 and 2009, respectively. Other
sizable (and somewhat challenged) players are Limango, Vipdükkan, Morhippo, and 1v1y.com.

Group Buying and Daily Deals
Group buying sites offer products and services at significantly reduced prices providing that a
minimum number of buyers purchase the same item. They are viral versions of traditional
daily deal sites, bolstered by integration with Facebook and various social features. Huge
consumer demand and hype for this segment was reflected in the creation of 150+ new
players and a rash of deals in Turkey in 2011. That year, Intel invested in Grupanya, Quants
Financial Services took a majority stake in Grupfoni, and betting site Bilyoner acquired
Grupca. However, with intense competition, low barriers to entry, and questionable ROI, this
market has been shrinking. Currently, Istanbul-based Grupanya and Chicago-based Groupon
are the leading players in Turkey, with Yakala.co, Grupfoni, and Bonubon chasing after them.

Price Comparison and Lead Generation
Price comparison services allow individuals to see different lists of prices for specific products from
large numbers of retailers. These sites typically do not charge users to use the service, but charge the
retailers a flat fee or have them pay every time a user clicks through to the retailers’ product (CPC).
Since price is a big value driver of eCommerce for Turkish consumers (in many instances versus
convenience), price comparison sites are quite popular. The price comparison sites with the most
traffic are Akakce, Ucuzu, and iLab’s Cimri.

Vertical eCommerce Companies
In Turkey, 2010 was the year of private shopping, 2011 was all about group buying sites, and in 2012
vertical eTailers and Marketplaces grabbed most of the attention. These are destinations where
consumers go to buy products or services in a specific vertical, varying from cars, consumer
electronics, cosmetics, accessories, baby products, and home decoration.

Certain verticals, such as food and flowers, already have their well-established leaders. Yemeksepeti,
founded in 2001, and Ciceksepeti, founded in 2006, have done an excellent job of executing their
business plans and attracting high quality investors such as General Atlantic, Amazon, and
Hummingbird. Benefiting from the company’s strong and influential investor and celebrity network,
Lidyana is emerging as the leading player in the accessories market. There is both huge growth and
intense competition going after the “golden mom” in the baby and home decoration verticals. The
travel vertical is still largely owned by offline players, and there is huge room for growth online.

Vertical eCommerce in Turkey has had some consolidation — Dogan’s acquisition of Evmanya and
Pera Bulvari buying WestWing — but has yet to see large M&A transactions. The investment
landscape, on the other hand, has been very active as investors have started to follow companies
that identify a niche and become proficient in catering to it.

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EXHIBIT 10: LEADING TURKISH VERTICAL ECOMMERCE COMPANIES

Vertical Leading Player(s) Selected Investor(s)

Accessories and
Jewellery

Automotive

Books

Conservative
Fashion

Consumer
Electronics

Cosmetics

Flowers and Gifts

Food

Home Decoration

Mother and Baby

Personalised
Fashion

Shoes

Travel Bookings

Rentals

Local Events

Source: GP Bullhound

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Payments
The Turkish payments industry has benefited greatly from the eCommerce boom of the last
few years. As we discussed at the outset, Turkey’s continued GDP growth, 60% credit card
and near 50% Internet penetration generated 162m eCommerce transactions in 2012, with a
total transaction value of $17.3bn and a per-transaction average of $107. However, as we’ve
also noted, only 0.6% of Turkish retail sales take place online, so the balance of payments is
firmly weighted towards offline for the time being. This is not just a matter of economic
development; there are important market factors which have caused eCommerce to lag
behind. Many small businesses which would otherwise sell online lack an appropriate point
of sale. Ability to absorb chargebacks is also a concern for small vendors, who may struggle
to meet shipping deadlines for large volumes of purchases in a time and cost effective
manner. Prior to 2009, eCommerce was largely limited to retail in small-ticket consumer
electronics purchases – thin margins meant that few saw an opportunity. A number of large
online retailers were also badly damaged by the 2008-2009 financial crisis, which did little to
raise confidence in eCommerce. On the demand side, trust and security are important
concerns for Turkish consumers.

Despite all this, things are clearly changing. The explosive growth of private shopping and
group buying sites has been a major boon for Turkish eCommerce. By leveraging social
networks and an attractive sense of exclusivity, they have succeeded in creating
environments where Turkish users feel comfortable making high-ticket purchases they would
previously have made in-store.

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

i) Leading micro/mobile payment solutions are Mikro Odeme, Paybyme, PaytoGo /
GameSultan, This segment has seen the most transaction activity. On January 25,
2012, Mikro Odeme, Turkey’s leading mobile payment service, received a majority
investment from London-based private equity house Mediterra Capital. And in
February 2013, Asian e-payments giant MOL acquired a majority stake in
PaytoGo/GameSultan.

ii) Leading digital wallet solutions are Interbank Card Center’s BKM Express,
Turkcell’s Cuzdan (Wallet), Paypal, and Vodafone’s Cuzdan (Wallet). These digital
wallet platforms make eCommerce purchases easier and faster by letting users
register their debit, credit and/or prepaid cards on the platform in advance.

iii) Rapidly growing pre-paid solutions include Ininal Mastercard, Vodafone’s CepNakit
Kart, Turkcell’s Cep-T Para Cart, Magir Kart, and Paysafecard. Ininal is the only
independent player that offers reloadable prepaid cards with 90% market reach
given its large merchant ecosystem and retail distribution system.

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

Given the rising acceptance of eCommerce in Turkey and considerable room for growth in
terms of Internet, mobile and credit card penetration, the payments vertical will continue to
remain a competitive but exciting space.

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Gaming
Turkish gamers — a quarter of the population — are proud to call themselves gamers, and
have always embraced gaming without limits. There was a point in 2008, however, when the
Ministry of Finance banned Knight Online, Irvine-based K2 Networks’ micro-transaction-
based F2P massively-multiplayer online game on the basis that, “there were thousands of
people in Turkey that were becoming addicted to games and companies were earning profits
without being taxed.” Knight Online was a victim of its success — the profits from Turkish
players were reaching $1m a month. The ban was unfortunate, but the game’s popularity is
an indicator of the very promising online gaming sector in Turkey.

EXHIBIT 11: TURKEY’S GAMING POPULATION (2012)

76 m (100%)
Total Turkish population
37 m (48%)
Internet Population
22 m (29%)
Active Gamers

11 m (15%)
Paying
Gamers

Source: Newzoo

Turkey is estimated to have approximately 22m active gamers, or 29% of its total population
of 75.6m. Of these 22m, more than half are estimated by Newzoo to be spending money on
games.

EXHIBIT 12: MONEY SPENT ON GAMES IN 2012 - DISTRIBUTION

Casual
websites Console
Social games
9%
networks 24%
9%

Mobile
phones
10%

PC/Mac boxed MMO games
12% 21%
PC/Mac
download
15%

Source: Newzoo

According to recent Newzoo research, the Turkish gaming market is estimated to reach
$450m in 2012. Although more traditional genres (console, PC, and massively-multiplayer
online games) still comprise the largest share (at 24%, 21% and 12% respectively), emerging
platforms such as social networks and mobile Internet are already at 20% levels with
projections for much higher growth and innovative vehicles, such as in-app purchases, for
monetization.

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EXHIBIT 13: GROW TH IN MENA INTERNET USERS

150m

70m

15m

2006A 2011A 2015E

Source: Arabnet and Discover Digital Arabica

In addition to Turkey, the Middle East and North Africa (MENA) region offers attractive
conditions for gaming growth and a significant area of expansion for Turkish gaming
companies. According to Arabnet and Discover Digital Arabica, in 2011 the MENA region
had around 72m Internet users and is expected to have 150m by 2015, representing an
annual growth rate of 21%. Turkey is also a young demographic; the average age is 28.
Utilizing the new opportunities afforded by global app store distribution on social networks
and Mobile Internet devices, small players in atypical locations have been developing gaming
app revenues of a million dollars a day. Turkish gaming companies are becoming alert to
such opportunities, and investors are on the lookout for those most likely to break through.

PC/Console Gaming
According to Newzoo, PC and console gaming currently occupies the largest share of the
Turkish gaming market, estimated at around $170m each generating around $85m.

Playstation 3 was the dominant console platform with 80% market share by hardware and
software sales in H1 2012, with Xbox and Wii sharing the rest of the console market.

On the PC and console gaming side, we cannot point to a successful Turkish game developer
since the large global developers/publishers dominate the Turkish market. Top publishers are
EA, Activision, Konami, Take 2, and UBISOFT. As per 2012 sales, Turkish players favored the
following games the most: Pro Evolution Soccer, Fifa, Call of Duty, Medal of Honour, and
Need for Speed. In addition to these multi-platform games, Diablo 3, Football Manager and
Sims 3 were the most popular titles on PC.

The only semi-Turkish global success story is German-based Crytec, led by three Turkish-
German brothers, Cevat, Faruk, and Avni Yerli. The company is known for creating
exceptionally high-quality games for the PC and next-generation consoles, powered by
proprietary 3D-game technology CryENGINE. The company has been on an aggressive
expansion spree over the last several years opening offices in the United States, Ukraine,
South Korea and, most recently, in the founding brothers’ ancestral Turkey. It is worth
mentioning that, Mr. Yerli recently announced that all Crytek games would be free-to-play
going forward. It is rumored that the Company’s most recent free-to-play first person shooter
game Warface — still in beta — is generating a few million dollars a month in Russia alone.

MMO Games
Massive multiplayer online (MMO) games in Turkey are hugely popular. According to
Newzoo, more than one in five dollars spent on games in Turkey goes to MMO, higher than
in many other countries. Turkey is estimated to have around 9.8m regular MMO gamers,
80% of whom are under 35. The share of paying MMO gamers is high at 46%, although
average monthly spending is several times lower than in the US. 96% of MMO gamers play
free-to-play and 27% play subscription-based MMO games. In revenue terms, free-to-play
games take slightly more than half. Spending on MMO and console games at gaming cafes
is estimated to add at least another $30m to the picture. The growth and popularity of MMO

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games has been driven by the same factors driving social gaming – a young population, high
Internet penetration and usage, and rising disposable income - important for covering the
cost of subscriptions. That said, ultimately MMO in Turkey, like MMORPGs, caters more to
hardcore gamers than casual ones.

Established in 2009, the leading Turkish MMO publisher is Joygame. Unlike social gaming
company Peak Games, Joygame does not produce any titles, but localizes and publishes
existing ones into the local market. However, the company truly shines when it comes to
publishing foreign titles in Turkey, and the user metrics, revenue growth, and strong margin
profile speak to this fact. The team spend days working on the graphics, language, local
jargon, and analyzing user data as part of the localization process. The company currently
has 15m registered users, 2.5m monthly active users and 400,000 daily active users.
Wolfteam is the biggest title of Joygame and actually the most popular MMO first-person
shooter (FPS) game in the region, estimated to be generating above $2m in monthly
revenues. Joygame started out by publishing localized titles for the Turkish market only, but
in 2011 it expanded its operations into MENA, first by opening an office in Egypt. Korea-
based CJ E&M acquired 50% of Joygame in March 2013.

Sobee is a truly Turkish multiplayer game development company founded by highly regarded
video game developer Mevlut Dinc. Mr. Dinc moved to his homeland after developing global
hits such as the First Samurai and Street Racer to share his wealth of knowledge with the
Turkish game developers and gamers. The company develops server based multiplayer
games that are available and customised for a Turkish audience.

Social Network Gaming
Social network gaming typically includes games that are played on social networks and/or
have some type of social graph integration. These games are generally monetized through
virtual currency, free-to-play and have strong virality components attached to them.
Facebook, which went from 100m users in 2008 to 1bn in 2012, has been the main driving
force in the surge of social network gaming.
EXHIBIT 14: TOP FACEBOOK DEVELOPERS BY DAU (JAN 2013)

Company Company
Rank Name Country Rank Name Country
Metrics Metrics
MAU DAU MAU DAU

1 Zynga US 142.3m 16.5m 13 FreshPlanet US 10.2m 1.0m

2 King.com UK 38.3m 4.7m 14 Rovio Finland 10.3m 1.0m

3 Electronic Arts US 17.4m 3.7m 15 Geewa Czech Rep. 10.1m 1.0m

4 Peak Games Turkey 11.8m 3.4m 16 Tetris Online US 5.1m 1.0m

5 Wooga Germany 21.6m 3.2m 17 Kiloo Games Denmark 5.0m 1.0m

6 Social Point Spain 21.3m 2.1m 18 SGN US 6.4m 1.0m

7 FunPlus Game China 9.8m 2.0m 19 6waves Hong Kong 2.2m 0.8m

8 Playdom US 7.4m 1.7m 20 THX Games Hungary 2.8m 0.7m

9 RockYou! US 2.9m 1.2m 21 Boyaa China 4.3m 0.7m

10 Playtika Israel 6.1m 1.1m 22 Digital Chocolate US 4.4m 0.5m

11 PlayQ US 5.6m 1.1m 23 Mynet Turkey 3.8m 0.5m

12 Miniclip.comz UK 6.1m 1.1m 24 Qublix Canada 3.6m 0.4m

Source: Appdata.com

Out of 32.4m Turkish Facebook users, 89% play games. After three years of operations,
Zynga’s smash hit Farmville franchise is still the most successful franchise on Facebook,
which speaks to the retention and monetization potential of successful social network games.
Turkish people are participants in the success of Farmville - 1 out of 8 Internet users in
Turkey plays Farmville.

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The Turkish poster child of global social gaming is Istanbul-based Peak Games, a company
which in little over three years has become the world’s fourth largest gaming company on
Facebook by daily active users (DAUs). This is impressive, since DAU is a metric that
measures highly engaged users and is a proxy for monetization potential. The company’s
flagship title is Okey, a digital version of a popular Turkish tile-based game usually played
with four people. After resounding domestic success with Okey, Peak released Turkey and
MENA focused Happy Farm, a farming simulation game in the style of Zynga’s Farmville.
While Happy Farm’s core mechanics are similar to Farmville’s, notable modifications include
the use of Arabic instead of English, and characters in local dress (and the absence of pigs).

Mynet is another Turkish company that gets a top-25 spot on Facebook’s developer
leaderboard. Whereas Peak Games is a dedicated game development and localization
studio, Mynet is a diversified Internet media company with a massive user base on its web
portal, mobile apps and Facebook, from which online games can be distributed.

Mobile Internet Gaming
In terms of the number of new games in development, media consumption and monetization,
mobile Internet is the current rising star in the Turkish gaming landscape. Despite local
complaints with regard to the lack of local developer talent (those who can write code in
objective C or Unity) we expect to see more and more high quality games developed in
Turkey targeting local and global mobile audiences through Mobile Internet devices such as
iPhone, iPad, and Android.

EXHIBIT 15: TOP 15 GROSSING IPHONE GAMES IN TURKEY (JAN 2013)

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

1

8 15
14

Source: Apple iOS and Google Play App Stores

Although there are a large number of Turkish game developers offering their games on the
Turkish app store, only Peak Games finds itself a spot in the top 15 grossing rankings with its
highly successful mobile game, Okey Plus. Out of 15 top-grossing games, eight of them are
localized for Turkish players, which shows the importance of localization. Two other important
points to highlight from our analysis concern the file size and business model. When a mobile
game is more than 50 megabytes, consumers cannot download it on the fly, through 3G
mobile networks, which creates significant friction. Numbers speak to this fact. 14 of the 15
top-grossing games on the Turkish app store are less than 50 megabytes. In terms of the
business model, all of the 15 top-grossing games are free-to-download and monetize through
in-app purchases. Finland-based Supercell has the perfect recipe. The company’s highly
successful social mobile games, Clash of Clans and Hayday — which are both localized, less
than 50 megabytes, and free-to-play — have been consistently ranked first and second in the
top-grossing charts in the last few months.

Turkish mobile game developers have not only achieved some domestic success, but global
recognition as well—with studios such as FUGO, Duello and Picnic Hippo achieving good
traction in a very short time. Founded in 2009, FUGO has been a global name in mobile
gaming through its popular word challenge game Wordz, which has been distributed in 35
languages downloaded over five million times. Duello, a developer of casual mobile games for

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all ages, was founded in 2010 and has accumulated over 17m installations to date, over one
million paid downloads and close to 3m monthly active users through its popular iSlash
franchise. Moreover, it has already reached profitability with no outside financing, and is
preparing to roll out additional titles to capitalise on its success to date. Picnic Hippo, which
was founded in 2011, has also become a global success story with Bucketz, a simple and
humorous touch screen game which has been featured by Apple on 146 app stores worldwide
and is the number one ranking game by iPhone Quality Index, a site which condenses critical
opinion on apps from across the web into a definitive score. All of these studios have
produced innovative, popular and internationally accessible titles. They are also small and
lean, with no more than ten staff each.

Licensed Online Betting
Turkey has a complicated relationship with gambling. Although betting is officially illegal under
Turkish law, licensed online betting is permitted in a number of selective cases including the
state lottery (Piyango), sports betting (Sportoto) and gambling on horse racing. The national
lottery is something of an institution for Turkish people and forms a billion dollar market.
Soccer and horse racing are also highly popular - and the sports lottery generates in excess of
$1.5bn yearly, with track-side betting bringing in around $700m. The sports lottery has been
the primary driver behind the shift in Turkey towards betting online – unsurprising given that
the Internet provides a constant stream of sports news and insight. Licensed online players
are estimated to represent approximately 15% of total betting spend, and growing. The
leading “legal” players are Bilyoner.com, Nesine, Tuttur, Oley, and Birebin.

Similar to the United States, several changes have been made to Turkish gambling laws in the
last decade making it illegal for gambling companies to target Turkish citizens with their
products. While there are no legally-licensed Internet gambling websites operating out of the
country, foreign operators continue to target Turkish players. Betsson, for example, received
more than a quarter of its revenue from Turkey last year. In addition, Sportingbet recently sold
its highly popular Turkish bookmaking service Superbahis.com to GVC Sports for
approximately $200m, despite attempts from Turkish regulations to stop the sale.

The Turkish government has recently announced its intention to sell Sportoto - its only legal
sports betting organization - as part of a privatization bid expected to raise in excess of $10bn.

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Digital Agencies, Online Advertising and Marketing
Both globally and in Turkey, the Internet is the fastest growing advertising medium, attracting
advertisers with its rapidly expanding audience, extensive reach, interactive nature and
ability to target specific demographics and performance.

EXHIBIT 16: GROW TH AND ALLOCATION OF TURKISH ADVERTISING SPEND ($BN)

3.2 Radio 2011A:
Billboards 3% $2.4bn
2.8 7%
2.4 Internet
2.0 8%

1.5

TV
Print Adverts
Media 57%
24%

2009A 2010A 2011A 2012E 2013E
Source: Turkish Association of Advertising Agencies, GP
Bullhound

Overall advertising in Turkey is estimated to be growing at a nearly 20% CAGR from $1.5bn
in 2009 to $3.2bn in 2013, with online advertising representing 10% of the market. Other
online verticals and online advertising can be expected to benefit each other in turn: as more
and more media consumption and spending shifts online, so will advertising dollars.
Conversely, with increased online ad spend, Internet companies and online retailers can be
expected to capture new consumers through both brand, performance, and video
advertising. According to Mediascope Europe, users spend more time with the Internet and
TV than any other media (18 hours per week on each), but last year, advertisers still spent
three times more on print media and six times more on television than they do on online
advertising. In addition, most Turkish advertisers still allocate far less of their marketing
budgets to digital and online marketing – around only 10% compared to a global average of
27%. These disparities are expected to be the driving force of double-digit growth rates in
online and video advertising spend in the years ahead.

EXHIBIT 17: AVERAGE HOURS SPENT ONLINE PER MONTH PER USER (2012)

39.1

30.7
28.9 27.8 27.6 26.3 25.5 25.2 24.7 24.5

UK Turkey France Finland Europe Spain Russia Germany Sweden Worldwide

Source: Turkish Association of Advertising Agencies

People in Turkey spend more time online than any other European nation except the UK –
this gives advertisers a potentially long window of opportunity within which to engage and
capture consumers. In addition, online media consumption habits are shifting dramatically.
Passive, traditional, one-way media consumption is rapidly evolving towards active

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GP Bullhound Turkish Internet Report

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