Gen2Media Corp. (GTWO) â

Gen2Media (GTWO) was formally created when e360 LLC and Media Evolution joined forces in 2007. e360 LLC is a digital media technology company with an industry leading, patentpending solution for online video delivery and was owned and operated by Gen2Media co-founders Mary Spio, Mark Argenti and Ian McDaniel. Media Evolution is a highly respected, high-end video production and content creation company. Gen2Media completed an S-1 Registration Statement (self-underwriting) with the U.S. Securities and Exchange Commission in the fall of 2008 and began trading on the OTC Bulletin
Board under the symbol “GTWO”.

Headquartered in Orlando, Florida with field offices in New York City and Southern California, the Company is today an emerging leader in the fastest growing media platform in history – online video. Led by a team of highly accomplished digital media experts, Gen2Media has created an industry leading end-to-end, interactive, digital media technology platform enabling web publishers to build, own and manage online video networks with TV-like quality. As detailed in the image above, during its relatively short history, Gen2Media has built an extensive Digital Media Network that is currently reaching millions of Internet users across a wide range of web publishing partners, including Clear Channel, Emmis Communications, Regent Communications, Salem Communications, Tribune, Varsity Brands and Foot Locker, among others. In addition, the Company continues to expand its video production and content creation client list. Gen2Media has created and marketed content for renowned brands such as Coca Cola and Toyota Scion, and high profile entertainers including Mary J. Blige, Justin Timberlake and Britney Spears.

Key to Gen2Media’s value and future growth potential is the Company’s patentpending technology (video player) for the display/streaming and the management of online video. The image at the left is a Clear Channel web site with the Gen2Media player embedded in the center of the site. The technology underlying Gen2Media’s video player is the creation of digital media pioneer and Company President Mary Spio and her team. The technology platform allows the desired video content to be streamed without the apparent buffering that is so much a part of current online video streaming offerings currently experienced across the Internet. The Company’s primary product is its Digital Video Publishing Platform which includes the Smart Content Management System. Gen2Media offers this product through a licensing arrangement or in partnership with high traffic web publishers on a revenue sharing basis. The revenues are derived from multiple advertising types served in or around the video player. The advertisements include pre-roll, mid-roll and post-roll units plus overlays, companion and brandcasting units – all served on Gen2Media’s video publishing platform. The elegance of the offering is that the video content can be proprietary or licensed and the content is easily managed with back-end tools that include full customization of the player, time of day programming, search technology, and drag and drop functionality. In addition, the Company has a media/ad sales group to aid in monetizing the traffic generated around its video player and also generates revenues on a fee basis for content creation and large scale entertainment production services.

The Gen2 Network is a true online TV network with numerous entertainment video channels for visitors to choose from and enjoy. Currently the Gen2 Network’s content includes more than 26,000 music videos, concerts, varied events (sports and concerts) and many exclusives.

Founded just more than two years ago, the Company has a relatively short history of financial operations. Revenues are just beginning to ramp and we anticipate very rapid growth in fiscal 2010, 2011 and beyond as the marketplace discovers the advantages of the Gen2Media platform.

GTWO Keeping Good Company

Gen2Media is a fully integrated technology, production and marketing company whose proprietary and patent-pending technology has earned the trust of a growing, globally diversified customer base, comprised of leading media companies, corporations, chart-topping artists, entertainment companies, advertising agencies and national brands such as Mary J. Blige, Britney Spears, Justin Timberlake, Microsoft Xbox LIVE, Coca-Cola Company, Toyota, Clear Channel, and others.

Investment Highlights

Gen2Media is an emerging technology leader in the online video market. Through its proprietary, leading-edge video streaming platform, the Company enables its licensees and channel partners to easily create and manage online video networks with true High-Definition quality. Gen2Media’s flagship product is its Digital Video Publisher which includes the Smart Content Management System. In the past year, more than 200 radio stations have embedded Gen2Media’s video streaming platform on their respective web sites, providing an enhanced visual experience and improved audience metrics. The Company has licensed this technology to companies such The Tribune and Coca-Cola and recently signed a significant contract with Foot Locker. In addition, the Company provides content production services for renowned performing artists and major advertising brands. Though a relatively young company, the success of Gen2Media’s video publishing offering has led to impressive partnerships and an increasing number of online users of its Gen2 network. Main drivers of the Company’s expected future growth include:

• patent-pending video streaming technology that allows for enhanced quality of online video without the buffering found in other providers;
• exploding growth of online video which according to the Ipsos MediaCT’s MOTION study, has become mainstream in the U.S., with 67% of web users now streaming digital video content;
• the Company’s ad-supported business model with revenues from media sales in and around the video player and the growing user base across a wide range of web publishing partners including Clear Channel, Emmis Communications, Regent Communications, and Varisity.com; and
• a management team of highly accomplished digital media experts, including Mary Spio, Ian McDaniel and Mark Argenti.

Market Opportunity

According to PricewaterhouseCoopers’ Global Entertainment and Media Outlook 2009-2013, the global entertainment & media (E&M) industry is anticipated to grow at a 2.7% compound annual rate to $1.6 trillion by 2013. During the forecast period, digital technologies are expected to become increasingly pervasive across all segments of the E&M industry with the proportion of digital spending rising from 21% in 2008 to 31% in 2013. In addition, PwC believes that advances in digital technology are reinforcing changing consumer habits as consumers want more control over where, when and how they consume content and seek higher value from their entertainment and media choices. As a result, end-user spending through digital and mobile platforms is expected to increase. These new industry dynamics are creating a shift in advertising spending towards the venues that will capture new consumer behavior (see chart above). While the overall advertising industry is expected to decline over the forecast period, the proportion of Internet and mobile advertising in the overall global advertising mix will rise from approximately 12% in 2008 to 19% in 2013 according to PwC findings. In addition, the soft economy is forcing ad spending to be more efficacious and creating a push towards more targeted and measurable ad models. Such choices could include personalized online video advertising, a largely untapped method by which to target potential customers. The eMarketer chart on the right shows an incipient online video advertising market that is already third in the rankings of preferred advertising formats.

As eMarketer’s predictions show, search marketing spending will continue to be the most popular online advertising method in the U.S. during the next five years. However, online video advertising is expected to grow from nearly $0.9 billion in 2009 or about 3% of total U.S. Internet ad spending to $4.6 billion in 2013, or 11% of total spending in that year. This is a growth rate of 400% in the next four years. eMarketer cites two reasons for the growth in video advertising; one is the escalation of professional video content on the web and the second is the need for advertisers to reach consumers with a more engaging/captivating format. And what better way to achieve this than through increasingly popular digital video.

In fact, watching video content via the Internet is no longer a novelty as nearly 152 million unique viewers (or 79% of the total U.S. Internet audience) viewed a record 16.8 billion videos online in April 2009 according to comScore’s Video Metrix. This equates to an average of 111 videos and 6.4 hours of video per viewer. Overall, video streaming in April was up 16% versus March 2009. More importantly, a Kelsey Group study (March 2008) shows that of those consumers who see a video ad, more than 47% visit the company’s website, 18% go to a store to check out a product and 17% actually make a purchase.

The increasing popularity of online video streaming is being driven by the growing adoption of household broadband. Pew Internet & American Life Project research shows that in April 2009 63% of adult Americans had broadband internet connections at home, representing a 15% increase from 2008. Increased broadband penetration is enabling Internet users to get what they want from wherever they want while improvements in technology allow better downloading and streaming. The potential market size and growth metrics are impressive and point to a huge opportunity for entities such as Gen2Media that are focused on this segment of online advertising and the rising demand for video content on the web.