Us Tech

December 18, 2015
Americas: Technology: Internet

Equity Research
Expect continued internet outperformance; maintain Attractive coverage view

Internet outperformance narrows further
Remain focused on growth & returns
The internet sector is up 52% YTD compared to

the S&P down 0.8%, though excluding the top 4
outperformers the sector is up 0.3% with 16 of the
32 stocks in our universe down YTD. While the
lack of breadth in internet is largely reflective of
the broader market, we believe that there are
several internet-specific drivers that could allow
for broader outperformance next year.
We continue to believe that companies with some

of the best growth and return profiles like Amazon,
Alphabet, Facebook, PayPal, and LinkedIn, along
with GrubHub, Pandora, and Zillow among small
caps, will outperform (Exhibits 19-20), though we
expect investors will increasingly value strong
balance sheets (Exhibit 35). While the sector as a
whole generally ranks well on these factors
(Exhibits 28-30), valuation premiums reflect that
even as divergence within the sector widens.
Supply will continue to drive performance

We believe a major contributor to the internet
sectors outperformance in 2015 compared to the
underperformance in 2014 is related to the dramatic
change in equity supply (Exhibit 13). While early,
we believe 2016 is likely to have similar public
market dynamics and venture conditions more
favorable for small and midcap public companies.
The obligatory interest rates question

While the internet sector largely consists of long
duration stocks sensitive to changes in the rate
assumptions underlying valuations, we have seen
little historical performance correlation (Exhibit 5).
Heath P. Terry, CFA
(212) 3571849 heath.terry@gs.com Goldman, Sachs & Co.
Heather Bellini, CFA
(212) 357-7710 heather.bellini@gs.com Goldman, Sachs & Co.
Debra Schwartz
(212) 902-1879 debra.schwartz@gs.com Goldman, Sachs & Co.
Tina Sun
(212) 357-4810 tina.sun@gs.com Goldman, Sachs & Co.
The Goldman Sachs Group, Inc.
Evaluating where 2016 estimates are at risk

While at this time last year consensus forecasts
called for 27.5% yoy revenue growth on average
across the sector, initial 2015 guidance following
4Q14 results drove those forecasts down by
190bps. However, companies are on track to
deliver 26.3% growth in 2015 or +70bps vs. the
initial estimate revisions. We expect that a similar
storyline could play out for 2016 estimates as
management teams attempt to set the bar lower
following 4Q results. Separately, we make select
price target and estimates changes.
RATINGS AND 12-MONTH PRICE TARGETS
Company
Rating
AMZN
CRTO
EBAY
FB
GRUB
GOOGL
LNKD
NFLX
P
PCLN
PYPL
TWTR
ZG
IACI
MTCH
QUOT
RATE
Buy*
Buy
Buy
Buy
Buy
Buy*
Buy*
Buy
Buy
Buy
Buy*
Buy
Buy
Sell
Sell
Sell
Sell
12month %Upside/
PriceTarget (Downside)
$760
13%
$50
32%
$33
18%
$125
18%
$33
43%
$850
10%
$280
21%
$140
14%
$25
64%
$1,500
14%
$45
27%
$40
72%
$38
43%
$53
14%
$12
16%
$4
38%
$10
28%
* This stock is on the Americas Conviction List

Source: Goldman Sachs Global Investment Research
Goldman Sachs does and seeks to do business with companies

covered in its research reports. As a result, investors should be aware
that the firm may have a conflict of interest that could affect the
objectivity of this report. Investors should consider this report as only a
single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure
Appendix, or go to www.gs.com/research/hedge.html. Analysts
employed by non-US affiliates are not registered/qualified as research
analysts with FINRA in the U.S.
Global Investment Research
December 18, 2015
Portfolio manager summary

2015: Internet sector outperformance driven by large caps and lack of public supply
Year to date, the internet sector has significantly outperformed the broader market. On a market-cap-weighted basis, the internet
sector is up 52% while the S&P is down 0.8% YTD. However, the outperformance has been driven by four large-cap stocks with the
largest contribution to the sectors market cap Netflix (+146% YTD), Amazon (+117%), Alphabet (+45%), and Facebook (+35%).
Excluding these four outperformers, the rest of the sector was up 0.3% with 16 of the 32 stocks in our coverage (since January 1,
2014) down YTD.
Forward equal-weighted EV/EBITDA multiples have decreased 7% from 22X in December 2014 to 20.4X most recently, below the
three-year historical average after reaching highs of 27X in April. On a market-cap-weighted basis to account for the divergence in
multiple re-ratings across large and small/mid-cap stocks, the current Internet sector multiple of 19.8X is up from 16.0X in December
2014 and the three-year historical average of 17.7X.
Exhibit 1: Sector outperformance has been driven by large-cap stocks
Exhibit 2: Market-cap-weighted multiples are above the historical average
Internet sector performance by large-cap vs. small-/mid-cap (market-cap weighted)
Market-cap-weighted NTM EV/EBITDA multiples
180
22.0x
21.0x
160
20.0x
19.0x
140
18.0x
17.0x
120
16.0x
100
15.0x
14.0x
80
13.0x
Large cap internet
S&P 500
EV/EBITDA
Average
-1 STD
17-Dec-15
14-Dec-12
26-Jan-13
10-Mar-13
22-Apr-13
4-Jun-13
17-Jul-13
29-Aug-13
11-Oct-13
23-Nov-13
5-Jan-14
17-Feb-14
1-Apr-14
14-May-14
26-Jun-14
8-Aug-14
20-Sep-14
2-Nov-14
15-Dec-14
27-Jan-15
11-Mar-15
23-Apr-15
5-Jun-15
18-Jul-15
30-Aug-15
12-Oct-15
24-Nov-15
4-Dec-15
18-Nov-15
2-Nov-15
17-Oct-15
1-Oct-15
15-Sep-15
30-Aug-15
29-Jul-15
Smid cap internet
Source: FactSet, Goldman Sachs Global Investment Research
Goldman Sachs Global Investment Research
14-Aug-15
13-Jul-15
27-Jun-15
11-Jun-15
26-May-15
10-May-15
8-Apr-15
24-Apr-15
7-Mar-15
23-Mar-15
19-Feb-15
3-Feb-15
18-Jan-15
2-Jan-15
Internet
17-Dec-15
12.0x
60
+1 STD
December 18, 2015
2016: Watching the venture capital market for signs of small-cap recovery
Since the beginning of the year, multiples have diverged significantly across large-cap and small-/mid-cap stocks. Currently, the
average internet stock is trading at 20X NTM EV/EBITDA vs. the average large-cap stock at 25X and the average smid-cap stock at
18X (Exhibit 11). Growth among large caps averages 19% versus 16% among small/mid-caps (2015-18 revenue CAGR). While much
of the small-/mid-cap underperformance has been driven by company-specific issues, broadly we would also attribute this
underperformance to 1) less favorable supply/demand dynamics as the supply of private market equity among comparable
companies increased (Exhibit 3) and 2) a more challenging competitive environment as a result of these same private companies
aggressive marketing investments that are impacting public company competitors valuations if not yet financials.
In 2016, we believe the net impact of 1) continued favorable supply dynamics from low levels of public market equity supply, 2) the
ongoing increase in public market M&A that could benefit select small- and mid-cap stocks, and 3) the potential for a more rational
venture fundraising and cash burn environment (Exhibit 17) starting in 2016 could set up a positive backdrop for internet, and
specific smid-cap internet laggards, to outperform.
Exhibit 3: TTM VC investment in the US
Exhibit 4: US internet M&A value
$ in million
$bn in completed M&A deals in TTM

90
$120,000.0
80
$100,000.0
70
60
$80,000.0
50
40
$60,000.0
30
$40,000.0
20
10
$20,000.0
0
1Q99
3Q99
1Q00
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
$0.0
Source: PwC/NVCA MoneyTree Report, Thomson Reuters
Private
Public
Source: Bloomberg, Goldman Sachs Global Investment Research
December 18, 2015
How could interest rates impact sector performance?

While the internet sector largely consists of long duration stocks sensitive to changes in the rate assumptions underlying valuations,
we have seen little historical performance correlation, with correlation during the 2000-2015 period of 0.17 and during the 2007-2015
period of -0.37. That said, the impact of a series of rate increases is likely to affect the companies in the sector in different ways as
investors raise the cost of capital in their underlying valuation work and companies see the impact on their end markets.
Exhibit 5: Internet sector EV/EBITDA vs. 10-year US Treasury
NTM market-cap-weighted EV/EBITDA based on GS estimates
80.0x
7.0%
70.0x
6.0%
60.0x
5.0%
50.0x
4.0%
40.0x
3.0%
30.0x
2.0%
20.0x
Internet
17-Dec-15
28-Sep-14
28-May-15
28-Jan-14
28-Sep-12
28-May-13
28-Jan-12
28-Sep-10
28-May-11
28-Jan-10
28-May-09
28-Sep-08
28-Jan-08
28-May-07
28-Sep-06
28-Jan-06
28-May-05
28-Jan-04
28-Sep-04
28-May-03
28-Jan-02
28-Sep-02
0.0%
28-May-01
0.0x
28-Jan-00
1.0%
28-Sep-00
10.0x
10 Yr US Treasury (Rt. Axis)
Source: FactSet, Goldman Sachs Global Investment Research.
The internet investing framework and select estimates/price target changes

We continue to believe that companies with some of the best growth and return profiles like Amazon, Alphabet, Facebook, PayPal,
and LinkedIn, along with GrubHub, Pandora, and Zillow among smaller caps, will outperform (Exhibits 19-20), though we expect
investors will increasingly value strong balance sheets (Exhibit 35). While the sector as a whole generally ranks well on these factors
(Exhibits 28-30), valuation premiums certainly reflect that even as divergence within the sector widens.
December 18, 2015
2015: Internet sector outperformance driven by large-cap stocks
Internet
Large cap internet
FANG
Internet ex-FANG
4-Dec-15
17-Dec-15
18-Nov-15
1-Oct-15
17-Oct-15
15-Sep-15
30-Aug-15
29-Jul-15
14-Aug-15
13-Jul-15
27-Jun-15
11-Jun-15
26-May-15
10-May-15
8-Apr-15
24-Apr-15
7-Mar-15
23-Mar-15
2-Jan-15
4-Dec-15
S&P 500
17-Dec-15
18-Nov-15
2-Nov-15
17-Oct-15
1-Oct-15
15-Sep-15
30-Aug-15
29-Jul-15
Smid cap internet
14-Aug-15
60.00
13-Jul-15
60
27-Jun-15
80.00
11-Jun-15
80
26-May-15
100.00
10-May-15
100
8-Apr-15
120.00
24-Apr-15
120
7-Mar-15
140.00
23-Mar-15
140
19-Feb-15
160.00
3-Feb-15
160
18-Jan-15
180.00
2-Jan-15
180
3-Feb-15
FANG (FB, AMZN, NFLX, GOOGL) vs. Internet ex-FANG vs. S&P 500
19-Feb-15
Exhibit 7: SpecificallyFANG
Internet sector performance (market-cap-weighted) vs. S&P500
18-Jan-15
Exhibit 6: Sector outperformance has been driven by large-cap stocks
2-Nov-15
Year to date, the internet sector has significantly outperformed the broader market. On a market-cap-weighted basis, the internet
sector is up 52% while the S&P is down 0.8% YTD. However, the outperformance has largely been driven by four large-cap stocks
with the largest contribution to the sectors market cap Netflix (+146% YTD), Amazon (+117%), Alphabet (+45%), and Facebook
(+35%). Excluding these four outperformers, the rest of the sector was up 0.3% with 16 of the 32 stocks in our coverage (since Jan 1,
2014) down YTD.
S&P 500
December 18, 2015
Forward equal-weighted EV/EBITDA multiples have decreased 8% from 22X in December 2014 to 20.4X most recently, below the
three-year historical average after reaching highs of 27X in April. On a market-cap-weighted basis to account for the divergence in
multiple re-ratings across large and small-/mid-cap stocks, the current Internet sector multiple of 19.8X is up from 16.0X in
December 2014 and the three-year historical average of 17.7X.
Exhibit 8: Equal-weighted multiples are below the historical average
Exhibit 9: Market-cap-weighted multiples are above the historical average
EV/EBITDA from December 2012-December 2015

Forward EV/EBITDA of GS Internet coverage equal weighted, based on consensus
estimates
Market-cap-weighted EV/EBITDA from December 2012-December 2015

Current EV/EBITDA of GS Internet coverage weighted by market cap, based on
consensus estimates
35.0x
22.0x
21.0x
30.0x
20.0x
19.0x
25.0x
18.0x
17.0x
20.0x
16.0x
15.0x
15.0x
14.0x
13.0x
10.0x
-1 STD
+1 STD
EV/EBITDA
Average
-1 STD
17-Dec-15
14-Dec-12
26-Jan-13
10-Mar-13
22-Apr-13
4-Jun-13
17-Jul-13
29-Aug-13
11-Oct-13
23-Nov-13
5-Jan-14
17-Feb-14
1-Apr-14
14-May-14
26-Jun-14
8-Aug-14
20-Sep-14
2-Nov-14
15-Dec-14
27-Jan-15
11-Mar-15
23-Apr-15
5-Jun-15
18-Jul-15
30-Aug-15
12-Oct-15
24-Nov-15
12-Oct-15
24-Nov-15
17-Dec-15
30-Aug-15
5-Jun-15
18-Jul-15
23-Apr-15
27-Jan-15
11-Mar-15
2-Nov-14
15-Dec-14
8-Aug-14
Average
20-Sep-14
26-Jun-14
1-Apr-14
14-May-14
5-Jan-14
17-Feb-14
11-Oct-13
EV/EBITDA
23-Nov-13
29-Aug-13
4-Jun-13
17-Jul-13
22-Apr-13
26-Jan-13
10-Mar-13
14-Dec-12
12.0x
+1 STD
December 18, 2015
Despite the significant outperformance across large-cap internet YTD, among the largest 10 internet companies under GS coverage
by market cap, 5/10 are trading below the three-year and five-year average NTM EV/EBITDA. The stocks trading below historical
averages include Amazon, PayPal eBay, LinkedIn, and Twitter. Netflix remains a notable exception given the depressed EBITDA
margin profile related to its accelerated international expansion timeline.
Exhibit 10: Current NTM EV/EBITDA multiple vs. historic three- and five-year averages
Top 10 companies in Internet coverage in terms of market cap
100.0X
90.0X
80.0X
70.0X
60.0X
Current EV/EBITDA
50.0X
3 year average
5 year average
40.0X
30.0X
20.0X
10.0X
0.0X
GOOGL AMZN
FB
PCLN
NFLX
PYPL
EBAY
YHOO
LNKD
TWTR
December 18, 2015
2016: Watch the venture environment for opportunity in small-/mid-cap recovery

What drove small-cap multiple compression in 2015?
Since the beginning of the year, multiples have diverged significantly across large-cap and small-/mid-cap stocks. Currently, the
average internet stock is trading at 20.4X NTM EV/EBITDA vs. the average large-cap stock at 26X and the average small-/mid-cap
stock at 18X (Exhibit 11). While much of the small-/mid-cap underperformance has been driven by company-specific issues, broadly
we would also attribute this underperformance to 1) less favorable supply/demand dynamics as the supply of private market equity
among comparable companies increased (Exhibit 12) and 2) a more challenging competitive environment as a result of these same
private companies aggressive marketing investments that are impacting public company competitors valuations if not yet
financials.
While public equity offerings have been limited, private company funding among public market investors is lessening demand for
equities in a way that is pressuring public internet valuations. According to the latest PwC/National Venture Capital Association
MoneyTree report, VC investment in private and emerging companies in the US on a LTM basis through 3Q15 reached $62bn, a
level not seen since 2001 (Exhibit 13).
Exhibit 11: Large-cap vs. smid-cap NTM EV/EBITDA
Exhibit 12: TTM VC investment in the US
NTM equal-weighted EV/EBITDA based on GS estimates
$ in million
$120,000.0
40.0x
35.0x
$100,000.0
30.0x
$80,000.0
25.0x
20.0x
$60,000.0
15.0x
$40,000.0
10.0x
12-Oct-15
24-Nov-15
17-Dec-15
30-Aug-15
5-Jun-15
SMID Cap
18-Jul-15
23-Apr-15
27-Jan-15
11-Mar-15
2-Nov-14
15-Dec-14
8-Aug-14
20-Sep-14
1-Apr-14
26-Jun-14
Large Cap
$20,000.0
$0.0
1Q99
3Q99
1Q00
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
EV/EBITDA
14-May-14
5-Jan-14
17-Feb-14
11-Oct-13
23-Nov-13
29-Aug-13
4-Jun-13
17-Jul-13
22-Apr-13
26-Jan-13
10-Mar-13
14-Dec-12
5.0x
Source: PwC/NVCA MoneyTree Report, Thomson Reuters
December 18, 2015
What could change in 2016?

In 2016, we believe the net impact of 1) continued favorable supply dynamics from a reduction in equity supply, 2) a pickup in public
market M&A that could benefit select small and midcap stocks, and 3) a rationalizing venture fundraising and cash burn environment
starting in 2016 are setting up a positive backdrop for internet, and specific small-/mid-cap internet laggards, to outperform.
We believe a major contributor to the outperformance of internet in 2015 compared to the underperformance in 2014 is related to
the dramatic change in equity supply (Exhibit 13). While early, we believe 2016 is likely to have similar public market characteristics
and venture conditions more favorable for small and midcap public companies. While M&A is an unknown, we believe supply of
new issues over the next 12 months could continue to be considerably less demanding than in 2014, where we have seen YTD new
issuances, follow-on offerings, and stock M&A reaching post-2000 highs. While we include stock M&A as an impact to equity supply,
in instances of public company targets, the net change to equity supply is overstated.
Exhibit 13: Total equity issuance and stock M&A in the internet sector
$mn of equity issuances in the US by companies in the internet sector, $mn in completed M&A deals
$120,000
Total issuance/ M&A value ($mn)
$100,000
$80,000
$60,000
Follow-on
IPO
M&A
$40,000
$20,000
$0
December 18, 2015
While the number of US M&A deals has remained roughly flat over the past few years, the value of M&A deals in 2014 and 2015
YTD has increased to levels not seen since 2001. This leads us to believe we are entering into a more M&A-friendly environment
across the sector. M&A activity across the US internet sector reached $24bn in total deal value in the trailing 12 months as of 4Q15
to date, which represents a moderation from $25bn and $40bn in the prior two quarters on a trailing 12-month basis.
Further, 2014-2015 proved to be a period of accelerating public company M&A, calling to mind recent deals and announced
transactions involving HomeAway, Zulily, AOL, Orbitz, Move, Conversant, Trulia, Wotif, and OpenTable all within the past two years.
M&A activity across the US internet sector involving public company targets reached $13bn in total deal value in the trailing 12
months as of 4Q15 to date, compared to $14bn and $20bn in the previous two quarters on a trailing 12-month basis. Though not
comprehensive, Exhibit 15 highlights some of the major announced and completed M&A transactions across global internet since
the beginning of 2014.
Exhibit 14: US Internet M&A value
Exhibit 15: 2014-2015 M&A comps over $500mn in value
$bn in completed M&A deals in TTM
Completed deals and announced transactions
90
Target
Deal Value
NTM
NTM
company
($mn)
EV/Revenue EV/EBITDA
status
Nov-15
Expedia Inc
HomeAway Inc
Public
$3,300
5.3X
21.3X
Endurance International (EIGI Constant Contact Public
Nov-15
$1,100
12.0X
7.0X
Aug-15
Liberty Interactive Corp
Zulily
Public
$2,100
1.4X
20.4X
Aug-15
Envestnet
Yodlee
Public
$590
4.4X
37.6X
Jul-15
IAC/InterActive Corp
PlentyofFish.com Private
$575
5.8X
NA
May-15
Verizon
AOL
Public
$4,400
1.6X
8.7X
Apr-15
Twitter
TellApart
Private
$533
2.7X
NA
Apr-15
LinkedIn Corp
lynda.com
Private
$1,500
8.0X
NA
Mar-15
Yoox
Net-A-Porter
Private
$1,600
1.6X
22.6X
Feb-15
Expedia
Orbitz
Public
$1,340
1.3X
7.9X
Dec-14
Oracle Corp
Datalogix
Private
$1,200
7.7X
NA
Nov-14
Yahoo!, Inc.
BrightRoll
Private
$640
4.9X
NA
Sep-14
News Corp.
Move
Public
$950
3.8X
34.1X
Sep-14
Alliance Data Systems
Conversant, Inc. Public
$2,300
3.5X
NA
Sep-14
Rakuten, Inc.
Ebates
Private
$1,000
3.9X
NA
Sep-14
Microsoft
Mojang AB
Private
$2,500
5.9X
NA
Jul-14
Zillow, Inc.
Trulia, Inc.
Public
$2,000
5.8X
40.5X
Jul-14
Expedia
Wotif.com
Public
$658
4.7X
10.5X
Jul-14
Facebook
LiveRail
Private
$500
2.5X
16.7X
Jun-14
Priceline.com
Opentable
Public
$2,488
11.3X
27.8X
Mar-14
CoStar Group, Inc.
Apartments.com Private
$585
5.6X
NA
Mar-14
Facebook
Oculus VR
Private
$2,180
NA
NA
Feb-14
Facebook
WhatsApp
Private
$19,500
NA
NA
Jan-14
Zynga
Natural Motion
Private
$527
6.6X
26.4X
Average
$2,253
5.0X
21.6X
Median
$1,270
4.8X
21.3X
Date
80
70
60
50
40
30
20
10
0
Private
Public
Acquirer
Target
Source: Company data, Goldman Sachs Global Investment Research
10
December 18, 2015
Across our coverage universe, we examine stocks using an M&A framework, considering both qualitative factors (IRR and
theoretical returns following a buyout, using our standardized departmental LBO framework) and qualitative factors (exposure to
key markets/products, asset mix, and growth potential) to incorporate the potential that certain companies could be acquired at a
premium to current share prices.
We then assign an M&A score as a means of ranking companies under coverage from 1 to 4, with 1 representing high (30-50%)
probability of M&A activity, 2 representing medium (15-30%) probability, 3 representing low (10-15%) probability and 4 representing
minimal to no probability (0-10%). For companies ranked 1 or 2, in line with our standard departmental guidelines, we incorporate
an M&A component into our price target. Within this context we rank the following companies 1 or 2 and apply a 15% or 30%
weight to the M&A component as a part of the overall valuation. The companies ranked 1 include Criteo, Pandora, and Zynga.
Additionally, we believe 2016 could prove to be the beginning of rationalizing private investments, thereby potentially improving
demand for public equities, as well as rationalizing marketing investments across the private companies. According to the First
Round Capital Founders Survey, the vast majority (95-99%) of founders believe raising money will be more difficult in the next 12
months. More difficulty in fundraising could incentivize entrepreneurs to reduce their cash burn rates by limiting marketing
expenses and slowing overly expensive growth. These dynamics could position small-cap stocks well from a fundamental (less
irrational competition) and valuation perspective (improving demand for public market equities).
Exhibit 16: GS M&A rank 1 and 2 companies
GS US internet coverage companies with medium to high M&A probability
Exhibit 17: Vast majority of founders believe raising money will be more
difficult in the next 12 months
Survey of 500 founders
Company
Criteo SA
Pandora Media Inc.
Zynga Inc.
Bankrate Inc.
eBay Inc.
Etsy Inc.
GrubHub Inc.
LendingClub Corp.
MaxPoint Interactive Inc.
PayPal Holdings
RetailMeNot Inc.
Rocket Fuel Inc.
Rubicon Project Inc.
Shutterfly Inc.
TrueCar
Twitter, Inc.
WebMD Health Corp.
Yelp Inc.
M&A Rank
12-month
M&A
Weight
Price Target
Valuation
1
1
1
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
$56
$27
$4
$14
$35
$16
$36
$24
$4
$50
$17
$5
$19
$54
$15
$48
$65
$39
Source: Goldman Sachs Global Investment Research;
30%
30%
30%
15%
15%
15%
15%
15%
15%
15%
15%
15%
15%
15%
15%
15%
15%
15%
$50.0
$25.0
$3.0
$10.0
$33.0
$11.0
$33.0
$15.0
$2.5
$45.0
$12.0
$4.0
$18.0
$40.0
$9.0
$40.0
$48.0
$26.0
NTM EV/Sales
(M&A
component)
2.8X
4.0X
3.0X
3.0X
11.0X*
5.0X
6.0X
12.0X
1.0X
20.0X*
2.9X
1.0X
3.5X
2.0X
5.0X
10.0X
4.0X
4.0X
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
5%
3%
1%
SeriesSeed
SeriesA
LateStage
Hardertoraisemoneyin2016
Easiertoraisemoneyin2016
Source: First Round Capital Founders Survey
*NTM EV/EBITDA
11
December 18, 2015
How can interest rates impact the sector?

While the internet sector largely consists of long duration stocks sensitive to changes in the rate assumptions underlying valuations,
we have seen little historical performance correlation with correlation during the 2000-2015 period of 0.17 and during the 2007-2015
period of -0.37. That said, the impact of a series of rate increases is likely to impact the companies in the sector in different ways as
investors raise the cost of capital in their underlying valuation work and companies see the impact on their end markets.
Exhibit 18: Internet sector EV/EBITDA vs. 10-year US Treasury
NTM market-cap-weighted EV/EBITDA based on GS estimates
80.0x
7.0%
70.0x
6.0%
60.0x
5.0%
50.0x
4.0%
40.0x
3.0%
30.0x
2.0%
20.0x
Internet
17-Dec-15
28-Sep-14
28-May-15
28-Jan-14
28-May-13
28-Sep-12
28-Jan-12
28-May-11
28-Jan-10
28-Sep-10
28-Sep-08
28-May-09
28-Jan-08
28-Sep-06
28-May-07
28-Jan-06
28-Sep-04
28-May-05
28-Jan-04
28-May-03
28-Jan-02
28-Sep-02
0.0%
28-May-01
0.0x
28-Jan-00
1.0%
28-Sep-00
10.0x
10 Yr US Treasury (Rt. Axis)
12
December 18, 2015
Internet investing framework

We continue to believe that companies with some the best growth and return profiles like Amazon, Alphabet, Facebook, PayPal, and
LinkedIn, along with GrubHub, Pandora, and Zillow among small caps, will outperform (Exhibits 19-20), though we expect investors
will increasingly value strong balance sheets (Exhibit 35). While the sector as a whole generally ranks well on these factors (Exhibits
28-30), valuation premiums certainly reflect that even as divergence within the sector widens.
Exhibit 19: 2015-2018 revenue CAGR
Exhibit 20: 2015 cash returns on cash invested
US internet coverage
Excluding MXPT and MTCH

50.0%
60%
55%
40.0%
50%
45%
30.0%
40%
20.0%
35%
30%
10.0%
25%
20%
0.0%
15%
-10.0%
10%
5%
PYPL
BABA
AMZN
TRIP
EBAY
PCLN
CRTO
RUBI
WBMD
LNKD
FB
YELP
GOOGL
SFLY
RATE
ETSY
EIGI
EXPE
GRPN
IACI
GRUB
TWTR
LC
SALE
ZG
QUOT
YHOO
ZNGA
TRUE
FUEL
LC
TWTR
FB
ZG
LNKD
NFLX
P
AMZN
GRUB
W
RUBI
ETSY
TRUE
CRTO
YELP
GOOGL
PCLN
MXPT
PYPL
TRIP
EXPE
SALE
SFLY
EIGI
MTCH
ZNGA
EBAY
QUOT
FUEL
WBMD
GRPN
RATE
IACI
YHOO
-5%
NFLX
-20.0%
0%
CROCI
13
December 18, 2015
While at this time last year consensus forecasts called for 27.5% yoy revenue growth on average across the sector, initial 2015
guidance following 4Q14 results drove those forecasts down by 190bps to 25.6% yoy revenue growth on average. However,
companies are on track to actually deliver 26.3% growth in 2015, which represents an improvement of 70bps from the initial
estimate revisions following 4Q14 results. We expect that a similar storyline could play out for 2016 estimates as consensus looks
for 18.6% of revenue growth in 2016 and management teams attempt to set the bar lower following 4Q results.
In Exhibits 21-22, we highlight the companies that exhibit sales growth acceleration or margin expansion in 2015 to reflect the stocks
that may have higher expectations going into 4Q earnings and preliminary 2016 guidance.
Exhibit 21: Companies with the most sales growth acceleration expected in
2016: ZG, ZNGA, SALE, EXPE, EBAY
Exhibit 22: Companies with the most margin expansion expected in 2016:
ZNGA, MTCH, RATE, QUOT, ZG
Sales growth acceleration/(deceleration) in bps; consensus estimates for FY2016
EBITDA margin expansion/(contraction) in bps; consensus estimates for FY2016
1,500
1,000
1,000
800
500
600
0
400
(500)
(1,000)
200
(1,500)
(2,000)
(200)
(2,500)
(400)
(3,000)
LC
RUBI
W
MXPT
YELP
RATE
TWTR
GRUB
BABA
ETSY
TRUE
FUEL
P
TRIP
LNKD
IACI
EIGI
GRPN
FB
SFLY
WBMD
AMZN
PYPL
GOOGL
YHOO
MTCH
CRTO
NFLX
PCLN
EBAY
QUOT
EXPE
SALE
ZNGA
ZG
GRPN
BABA
RUBI
GRUB
NFLX
YHOO
MXPT
EBAY
PYPL
ETSY
TRIP
GOOGL
FB
SALE
WBMD
PCLN
AMZN
P
SFLY
W
LNKD
EXPE
EIGI
CRTO
TWTR
YELP
FUEL
LC
IACI
TRUE
ZG
QUOT
RATE
MTCH
ZNGA
(600)
(3,500)
EBITDA margin expansion/(contraction)
Sales growth acceleration/(deceleration)
Source: FactSet
Source: FactSet
14
December 18, 2015
Within our investment framework, we look for companies exposed to the strongest growth drivers, high degrees of leverage in the
business model, management focus on innovations that are disrupting a large underlying industry, and, in an industry that offers
few of them, real competitive barriers or sustainable advantages in technology, scale, and/or business model. In particular, we look
for strong network effects, a high ratio of revenue to customer acquisition costs, and strategies to exploit the growth in internet as a
whole and mobile, social, and local in particular.
Upon determining attractive and sustainable business models, we layer on valuation to determine our best investment ideas. We
look for attractive valuations relative to growth rates and returns on invested capital that we believe the companies can sustain.
Those are the companies we believe investors will be best served owning, particularly when their current growth multiple
undervalues those opportunities.
Exhibit 23: Internet investing framework
Growth, leverage, innovation, and competitive advantage
Influencingfactors
Industrylevel
Multiple
leversof
growth
Companylevel
Secularshiftofonlineandretail:
local
mobile
social
video
Scale
highrevenuepercustomer
lowcustomeracquisitioncost
Lowstartupcosts
Quickachievementofprofitability
Highincrementalmargins
Salesandmarketing
Technologyandproduct
HighRankingCompanies
Ecommerce:
Advertising:
Travel:
Operating
leverage
Ecommerce:
Advertising:
Travel:
Innovator/
Disruptor
Strategicacquisitionstechnology,
userbase,otheruniqueassets
Toleranceformoderate
cannibalization
Weakentrenchedinfrastructure
Nimblenessoforganization,
management,capital
Easyaccesstocapital
Networkeffects
Technology/infrastructure
Highcostofcontent
Brandvalue
Ecommerce:
Advertising:
Travel:
Competitive
advantage
Engtalentinabundance/
technologyreplicable
Ecommerce:
Advertising:
Travel:
LendingClub,GrubHub
Netflix,Etsy,Amazon
Twitter,LinkedIn
Rubicon,Pandora,Zillow
Criteo,Facebook,Alphabet
TripAdvisor,Priceline
GrubHub,PayPal,Groupon
Alphabet,WebMD
Facebook,Criteo,RetailMeNot
Zillow,Twitter,LinkedIn
Priceline,HomeAway
Amazon,eBay,PayPal
Groupon,Wayfair
Yahoo,Twitter,LinkedIn
Zillow,Alphabet,Facebook
Expedia,TripAdvisor
KeyInvestmentIdeas
Valuation
Amazon
Alphabet
eBay
Criteo
Facebook
GrubHub
LinkedIn
Netflix
Pandora
PayPal
Priceline
Twitter
Zillow
Amazon,eBay,Netflix,PayPal
Alphabet,Facebook,LinkedIn
Twitter,Yahoo,TripAdvisor
Priceline,Expedia
To provide a quantitative guide to this process, we rank the companies across our coverage by the four factors of the framework:
growth, leverage, innovation, and competition using financial measurements where we have them to supplement the qualitative.
Growth is measured by 2015-2018 revenue CAGR.
Leverage is measured by NTM/LTM incremental margin.
Innovation is measured by a 50%/50% blend of TTM product development as a % of gross profit and in absolute dollars.
Competitive advantage is measured by a 50%/50% blend of a qualitative (1-4) rank where 4 represents high levels of
competitive advantage and LTM market share for respective addressable markets.
15
December 18, 2015
Exhibit 24: Ranking our coverage across the internet investing framework
Growth, leverage, innovation, competitive advantage
Ranking
Growth
Company
FB
GOOGL
LNKD
ZG
AMZN
TWTR
NFLX
CRTO
TRIP
PCLN
EXPE
WBMD
W
ZNGA
P
SALE
LC
YHOO
EBAY
PYPL
MXPT
RUBI
YELP
FUEL
MTCH
IACI
QUOT
GRPN
GRUB
EIGI
ETSY
SFLY
TRUE
RATE
Leverage
Rank
'15-'18 sales
CAGR
NTM / LTM
incremental
margin
1
2
3
4
5
6
7
8
9
9
11
12
13
13
15
15
17
18
18
18
18
22
23
24
25
26
27
27
29
30
31
32
32
34
3
16
5
4
8
2
6
14
20
17
21
30
10
26
7
22
1
34
27
19
18
11
15
29
25
33
28
31
9
24
12
23
13
32
4
3
14
11
24
28
26
8
12
5
17
6
32
7
30
1
20
29
25
21
2
19
22
9
10
13
18
16
23
15
34
33
27
31
Innovation
Competition
50%/50% blend of
50%/50% blend of
LTM product
competitive
development and
advantage and
as % of gross
market share
profit
11
3
7
1
6
5
5
13
3
2
2
8
7
4
20
15
18
9
30
7
13
12
13
16
9
18
3
33
20
14
19
29
26
25
1
10
16
6
12
22
20
34
25
21
17
24
20
25
31
18
28
11
13
31
26
17
33
27
34
20
20
28
10
32
28
30
32
22
Growth
Leverage
Innovation
'15-'18 sales
CAGR
NTM / LTM
incremental
margin
LTM Product
Development
Spend ($mn)
LTM Product
Development
spend as a %
of Gross Profit
34%
17%
32%
23%
23%
45%
27%
33%
16%
15%
17%
7%
37%
6%
29%
4%
74%
-5%
3%
16%
23%
41%
29%
4%
13%
2%
6%
2%
30%
13%
27%
13%
23%
0%
55%
57%
31%
36%
13%
11%
12%
44%
36%
55%
23%
49%
5%
44%
10%
63%
20%
10%
12%
19%
62%
20%
16%
41%
40%
32%
21%
24%
16%
30%
2%
5%
11%
9%
$1,980
$8,900
$709
$211
$8,990
$778
$596
$66
$199
$176
$734
$95
$169
$382
$71
$51
$58
$1,211
$930
$809
$21
$38
$98
$47
$64
$181
$48
$171
$31
$25
$41
$148
$43
$35
14.7%
19.5%
29.7%
35.3%
27.6%
58.1%
28.6%
17.4%
14.1%
2.1%
14.6%
25.9%
36.5%
70.3%
16.3%
22.0%
16.1%
38.8%
13.5%
14.4%
30.1%
25.1%
21.2%
24.2%
7.8%
7.5%
34.2%
12.3%
12.9%
8.3%
25.6%
30.2%
18.7%
14.2%
Competition
Competitive
advantage
Market Share
4
4
4
3
4
3
4
3
3
4
3
2
2
1
2
1
2
2
4
3
1
2
1
1
1
2
1
2
2
1
2
1
1
1
11.22%
40.74%
2.41%
0.47%
11.98%
1.40%
2.50%
0.30%
1.04%
0.81%
0.56%
0.43%
0.23%
0.08%
0.77%
0.18%
0.04%
3.01%
1.02%
0.03%
0.06%
0.13%
0.36%
0.34%
0.70%
2.26%
0.16%
0.37%
0.04%
0.51%
0.03%
0.12%
0.18%
0.39%
Source: Goldman Sachs Global Investment Research.
For a more detailed version of this analysis, we refer readers to our September 8 report, Internet up 18% YTD: Revisiting the GLIC Framework Looking for
Opportunities.
16
December 18, 2015
Select changes to price targets and estimates

Etsy (Neutral): Lowering 12-month price target to $11 from $14
Estimates. Our 2015-2017 revenue estimates are roughly unchanged as we adjust for the net impact of signs of accelerating traffic
growth at Etsy quarter to date and the impact of current FX rates on their international business. Our EBITDA estimates decline by
3% on average, to reflect investments in marketing and product.
Valuation. We lower our 12-month price target to $11 from $14, based on an 85%/15% blend of 3X 2016E EV/Sales (3.5X prior)
fundamental and 5X 2016E EV/Sales (6X prior) M&A value due to less operating leverage than expected and a slower path to longterm target margins. We see ETSY growing revenue 22% over the next three years vs. the internet sector growing revenue at a
median of 17% and trading at 2.9X 2016E EV/Sales.
Risks. (+) Buyer growth, monetization, international; (-) Buyer and seller engagement.
Exhibit 26: Etsy M&A comp table
Exhibit 25: 2015-2017 new vs. old estimates

$mn except per share data
ETSY
New
2015
Old
%change
New
2016
Old
Revenue($mn)
YoYGrowth%
$269.6
37.8%
AdjustedEBITDA
Margin
GAAPEPS
AdjustedEPS
%change
New
2017
Old
$269.6
37.8%
0.0%
$331.0
22.8%
$331.0
22.8%
0.0%
$403.5
21.9%
$408.4
23.4%
1.2%
$27.0
10.0%
$27.5
10.2%
2.1%
$34.0
10.3%
$34.4
10.4%
1.0%
$47.1
11.7%
$50.3
12.3%
6.3%
($0.51)
($0.17)
($0.52)
($0.18)
2.0%
6.1%
($0.24)
($0.08)
($0.22)
($0.07)
5.4%
17.1%
($0.14)
$0.03
($0.12)
$0.05
21.5%
45.4%
%change
M&AValuationAnalysis
Date
Acquirer
Target
Value
NTMEV/Rev
Jul15
Apr15
Sep14
Sep14
Jul14
Jul14
Jun14
Jan14
Sep13
Dec12
Nov12
Jul10
PlentyofFish.com
lynda.com
Move
Ebates
Trulia,Inc.
Wotif.com
Opentable
NaturalMotion
Braintree
trivagoGmbH
KayakSoftwareCorp.
ITASoftware,Inc.
$575
$1,500
$950
$1,000
$2,500
$658
$2,488
$527
$800
$631
$1,486
$700
5.8X
8.0X
3.8X
3.9X
5.8X
4.7X
11.3X
6.6X
6.4X
4.2X
6.3X
3.5X
IAC/InterActiveCorp
LinkedInCorp
NewsCorp.
Rakuten,Inc.
Zillow,Inc.
Expedia
Priceline.com
Zynga
eBay
Expedia,Inc.
Priceline.com,Inc.
Google,Inc.
Average
Premium(Discount)
TargetMultiple
Etsy2016Sales
M&AscenarioimpliedValue
6.2x
19%
5.0x
$331.0
$16
Source: Company data, Goldman Sachs Global Investment Research
17
December 18, 2015
Groupon (Neutral): Adjusting 12-month price target to $3.60 from $4.00

Valuation. Due to a change in our rounding mechanism, our 12-month price target goes to $3.60 from $4.00 and is still based on
15X 2016E EV/EBITDA.
Risks. (+) Turnaround in core business; (-) Competition, execution, investment needs, macro.
LendingClub (Neutral): Lowering 12-month price target to $15 from $17

Valuation. We lower our 12-month price target to $15 from $17, based on an 85%/15% blend of 35X 2016E EV/EBITDA (40X prior) on
multiple contraction in the comp group and 12X 2016E EV/Sales M&A value (unchanged).
Risks. (+) Standard and custom loans growth, acquisition; (-) Credit risk, rising customer acquisition costs, take rate, competition.
WebMD (Neutral): Raising 12-month price target to $48 from $45

Valuation. We raise our 12-month price target to $48 from $45, based on an 85%/15% blend of 8X 2016E EV/EBITDA (7X prior) on an
incrementally more positive outlook for around Medscape and 4X 2016E EV/Sales M&A value (unchanged).
Risks. (+) Acquisition, improving monetization, easing limitations on mobile ads; (-) Pharma patent expirations, regulatory
uncertainty around pharmaceutical advertising
YELP (Neutral): Lowering estimates, but 12-month price target remains $26
Valuation. We lower our 2016-2017 adjusted EBITDA estimates by 7.5% on average, as we expect the company to continue
investing to drive growth in local after the 2016 sunsetting of the brand business. Our 12-month price target is unchanged at $26
based on an 85%/15% blend of 14X 2016E EV/EBITDA (12X prior as investors look through the incremental investment in 2016) and
4X 2016E EV/Sales M&A value (unchanged).
Risks. Competition, monetization, international expansion, mobile shift.
18
December 18, 2015
Appendix
Exhibit 27: While Internet trades at a relatively higher EV/EBITDA
Exhibit 28: there is outsized cash returns on cash invested in Internet
2015 median EV/EBITDA in each sector
Median 2015 CROCI across GS Coverage
25.0X
25.0%
23.0%
21.2X
20.0X
18.4X
20.0%
13.8X
15.0X
12.9X
17.0%
14.3%
15.0%
12.2X
10.5X
10.0X
9.4X
9.4X
9.4X
8.3X
7.6X
7.1X
12.2% 11.9% 11.4%

11.2%
8.7%
10.0%
5.0X
5.0%
0.0X
0.0%
8.7%
7.5%
Exhibit 29: Internet grows EBITDA at 2X the market median
Exhibit 30: Internet grows sales at more than 4X the market median
2014-2017 adjusted EBITDA CAGR
2014-2017 revenue CAGR
25%
20%
22.5%
18%
17%
16%
20%
14%
12%
15%
11.4%
10%
10%
10.5%
8%
8.9%
6.8%
6.6%
5%
6.5%
5.6%
5.4%
6%
4.9%
4.9%
10%
8%
5%
5%
5%
4%
2%
0%
3%
3%
2%
2%
1%
0%
19
December 18, 2015
Exhibit 31: Companies with highest FCF growth over the next three years:
ZG, GRPN, LNKD, QUOT, YELP
2015-18 FCF CAGR (%)
Exhibit 32: Companies with highest FCF Yield: RUBI, SALE, SFLY, EBAY, IACI
2015 FCF Yield (%)
120%
12.0%
100%
10.0%
80%
8.0%
60%
6.0%
40%
4.0%
20%
2.0%
0%
0.0%
'15-'18 FCF CAGR (%)
2015 FCF Yield (%)
Note: 2014-17 FCF CAGR shown for ZG
20
December 18, 2015
Exhibit 33: Short interest as a % of shares outstanding
Exhibit 34: Short interest as a % of shares outstanding
Average short interest as a percentage of shares outstanding across GS internet

coverage
Short interest as a percentage of shares outstanding
8.0%
30.0%
7.5%
25.0%
7.0%
20.0%
6.5%
15.0%
6.0%
10.0%
5.0%
5.0%
SectorSI
Average
Source: FactSet
+1STD
0.0%
GRUB
TRUE
W
YELP
LC
NFLX
P
TRIP
EXPE
QUOT
SFLY
GRPN
TWTR
WBMD
ZG
EIGI
FUEL
YHOO
ETSY
CRTO
IACI
RATE
RUBI
BABA
SALE
LNKD
ZNGA
PCLN
EBAY
PYPL
AMZN
MXPT
FB
MTCH
GOOGL
01/03/2014
02/03/2014
03/03/2014
04/03/2014
05/03/2014
06/03/2014
07/03/2014
08/03/2014
09/03/2014
10/03/2014
11/03/2014
12/03/2014
01/03/2015
02/03/2015
03/03/2015
04/03/2015
05/03/2015
06/03/2015
07/03/2015
08/03/2015
09/03/2015
10/03/2015
11/03/2015
12/03/2015
5.5%
1STD
%ShortInterest
Source: FactSet
21
December 18, 2015
The GS US Portfolio Strategy team uses the Altman Z-score to measure balance sheet strength. The Z-score is a weighted sum of
five financial ratios and was original developed to forecast bankruptcies. The five ratios are working capital to assets, retained
earnings to assets, operating income to assets, leverage ratio, and sales to assets. Companies with high Z-scores will have the
necessary funds on their balance sheets to invest for growth through capex spending or strategic acquisition. In the case of WebMD,
the companys negative score is impacted by the accumulated deficit from the companys former parent company, HLTH
Corporation.
Exhibit 35: Altman Z-Score
Measure of balance sheet strength
25.00
20.00
15.00
10.00
5.00
0.00
5.00
10.00
YELP
TRIP
W
LNKD
GRUB
PCLN
CRTO
QUOT
AMZN
ZG
P
TWTR
NFLX
TRUE
ZNGA
EBAY
SALE
ETSY
IACI
PYPL
RATE
SFLY
YHOO
RUBI
EXPE
GRPN
MTCH
LC
EIGI
MXPT
FUEL
WBMD
15.00
AltmanZScore
22
December 18, 2015
Exhibit 36: 2016E EV/EBITDA vs. 2015-2018 sales CAGR

All Internet companies except MXPT and W
80.0x
NFLX
70.0x
60.0x
2016 EV/EBITDA
50.0x
40.0x
LC
TRUE
30.0x
ZNGA
QUOT
ETSY
AMZN
FB
TRIP
20.0x
FUEL
EBAY
YHOO
0.0x
-1%
TWTR
YELP
PCLN
MTCH
PYPL
GOOGL
IACI
EXPE
GRPN
RATE
WBMD EIGI
SFLY
10.0x
ZG
LNKD
BABA
RUBI
GRUB
CRTO
SALE
9%
19%
29%
39%
49%
59%
69%
2015-2018 Sales CAGR (%)
23
December 18, 2015
Exhibit 37: 2016E EV/EBITDA vs. 2015-2018 EBITDA CAGR

All Internet companies except FUEL, MXPT and W
80.0x
NFLX
70.0x
60.0x
2016 EV/EBITDA
50.0x
40.0x
LC
30.0x
ZNGA
TRUE
P
ZG
QUOT
BABA
AMZN
TRIP
FB
20.0x
ETSY
LNKD
TWTR
EBAY
MTCH
RATE
IACI
GOOGL
EIGI
10.0x
GRPN
PYPL
WBMD
YELP
PCLN
EXPE
GRUB
CRTO
RUBI
SFLY
YHOO
SALE
0.0x
-10%
10%
30%
50%
70%
90%
110%
2015-2018 EBITDA CAGR (%)
24
December 18, 2015
Rating and pricing information

Alphabet Inc. (B/A, $769.83), Amazon.com Inc. (B/A, $670.65), Bankrate Inc. (S/A, $13.89), Criteo SA (B/A, $37.94), eBay Inc. (B/A,
$28.05), Etsy Inc. (N/A, $9.59), Facebook Inc. (B/A, $106.22), Groupon Inc. (N/A, $3.17), GrubHub Inc. (B/A, $23.07),
IAC/InterActiveCorp (S/A, $61.52), LendingClub Corp. (N/A, $12.16), LinkedIn Corp. (B/A, $231.15), Match Group (S/A, $14.28), Netflix
Inc. (B/A, $122.51), Pandora Media Inc. (B/A, $15.26), PayPal Holdings (B/A, $35.54), Priceline.com Inc. (B/A, $1,313.74), Quotient
Technology Inc. (S/A, $6.47), Twitter Inc. (B/A, $23.31), WebMD Health Corp. (N/A, $46.75), Yelp Inc. (N/A, $27.42) and Zillow Group
(B/A, $26.62)
25
December 18, 2015
Disclosure Appendix
Reg AC
We, Heath P. Terry, CFA, Heather Bellini, CFA and Debra Schwartz, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or
companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
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Disclosures
Coverage group(s) of stocks by primary analyst(s)
Heath P. Terry, CFA: America-Internet. Heather Bellini, CFA: America-Software. Debra Schwartz: America-Internet.
America-Internet: Amazon.com Inc., Bankrate Inc., Criteo SA, eBay Inc., Endurance International Group, Etsy Inc., Expedia Inc., Groupon Inc., GrubHub Inc., IAC/InterActiveCorp, LendingClub Corp.,
LinkedIn Corp., Match Group, MaxPoint Interactive Inc., Netflix Inc., Pandora Media Inc., PayPal Holdings, Priceline.com Inc., Quotient Technology Inc., RetailMeNot Inc., Rocket Fuel Inc., Rubicon
Project Inc., Shutterfly Inc., TripAdvisor Inc., TrueCar, Twitter Inc., Wayfair Inc., WebMD Health Corp., Yahoo! Inc., Yelp Inc., Zillow Group, Zynga Inc..
America-Software: Adobe Systems Inc., Akamai Technologies Inc., Alarm.com Holdings, Alphabet Inc., Autodesk Inc., Citrix Systems Inc., Facebook Inc., Microsoft Corp., Mimecast Ltd., MobileIron Inc.,
Oracle Corp., Red Hat Inc., RingCentral, Salesforce.com Inc., VMware Inc., Workday Inc..
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Rating Distribution
Buy
Hold
Investment Banking Relationships
Sell
Buy
Hold
Sell
Global
32%
53%
15%
63%
57%
52%
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26
December 18, 2015
Price target and rating history chart(s)

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27
December 18, 2015
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December 18, 2015

Americas: Technology: Internet

Expect continued internet outperformance; maintain Attractive coverage view

Remain focused on growth & returns

The internet sector is up 52% YTD compared to

We continue to believe that companies with some

Supply will continue to drive performance

The obligatory interest rates question

The Goldman Sachs Group, Inc.

Evaluating where 2016 estimates are at risk

RATINGS AND 12-MONTH PRICE TARGETS

* This stock is on the Americas Conviction List

Goldman Sachs does and seeks to do business with companies

December 18, 2015

Americas: Technology: Internet

Portfolio manager summary

Exhibit 2: Market-cap-weighted multiples are above the historical average

Internet sector performance by large-cap vs. small-/mid-cap (market-cap weighted)

Market-cap-weighted NTM EV/EBITDA multiples

Large cap internet

Smid cap internet

Source: FactSet, Goldman Sachs Global Investment Research

Goldman Sachs Global Investment Research

Source: FactSet, Goldman Sachs Global Investment Research

December 18, 2015

Americas: Technology: Internet

Exhibit 4: US internet M&A value

$bn in completed M&A deals in TTM

Source: PwC/NVCA MoneyTree Report, Thomson Reuters

Goldman Sachs Global Investment Research

Source: Bloomberg, Goldman Sachs Global Investment Research

December 18, 2015

Americas: Technology: Internet

How could interest rates impact sector performance?

10 Yr US Treasury (Rt. Axis)

Source: FactSet, Goldman Sachs Global Investment Research.

The internet investing framework and select estimates/price target changes

Goldman Sachs Global Investment Research

December 18, 2015

Americas: Technology: Internet

2015: Internet sector outperformance driven by large-cap stocks

Large cap internet

Smid cap internet

Source: FactSet, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

Internet sector performance (market-cap-weighted) vs. S&P500

Exhibit 6: Sector outperformance has been driven by large-cap stocks

Source: FactSet, Goldman Sachs Global Investment Research.

December 18, 2015

Americas: Technology: Internet

Exhibit 9: Market-cap-weighted multiples are above the historical average

EV/EBITDA from December 2012-December 2015

Market-cap-weighted EV/EBITDA from December 2012-December 2015

Source: FactSet, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

Source: FactSet, Goldman Sachs Global Investment Research.

December 18, 2015

Americas: Technology: Internet

Source: FactSet, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

December 18, 2015

Americas: Technology: Internet

2016: Watch the venture environment for opportunity in small-/mid-cap recovery