1. The London Book Fair 2013 Digital Minds Conference Lisa Liping Zhang Director, Intl. Dept., Cloudary Corp. The Digital Publishing Business Model of China

2. Overview of China Book Market in 2012  Print books sales: RMB46 billion (US$7.3 billion)  Sales by online orders: RMB12-13 billion (US$2 billion)  Kinds of new different titles sold: 200,000  Total kinds of titles sold: 1.25 million  Growth of annual sales by traditional bookstores: -1.05%  Online orders (e-commerce):  RMB4-5 billion in 2010  RMB8-9 billion in 2011  RMB12-13 billion in 2012

3. Overview of China Book Market in 2012  Large or strong publishers: 15% sales are from online orders  Middle performance publishers: 30% sales from online orders  Small publishers: 50% sales from online orders  Mostly due to the online orders, total sales of print books increased by 8% to 10%

4. P-Book vs E-Book  E-book industry has taken a different route in China from the rest of the world  Direct publishing/Self publishing is taking the lead in the digital publishing transition  E-Book sales players: Cloudary, Hanvon, Chinese- all, Dangdang, 360buy, taobao, Suning, Amazon, douban, 3 mobile phone operators, etc.  So far, no platform has established yet in China as what Amazon has done in the rest of the world  Online literature is a unique term from China

5. Data based on the 30 th CNNIC China Internet Growth Statistics Report （ 2012.7 ） (RMB Million) Online Literature Users in China 1 and Market Size 2 2011-2014E Compound Annual Growth Rate of Online Literature Market Size: 72.3% 1.Data based on iresearch 2.Data based on iresearch 3.Baidu search ranking (2011) 4.Baidu search ranking (2011) 5.As on 31 Dec 2011 2011.12—2012.6 Utilization Ratio of Different Internet Applications in China 203 million of online literature users in China more than the number of E-commerce Application User Size （ Million ） Utilization Ratio Instant Messaging415.09880.90% Search Engines407.40179.40% Online Music385.85175.20% Online News366.86771.50% Online Videos325.30563.40% Online Gaming324.27963.20% Blogs / Spaces318.63562.10% Weibo (Twitter)249.8848.70% Emails245.77547.90% Social Network Websites244.23647.60% Online Literature202.67539.50% Online Shopping193.95237.80% Online Paying166.75832.50% Online Banking166.24432.40% Forums / BBS144.69428.20% Group-go64.65112.60% Travel Bookings42.0748.20% Online Stock Trading40.0227.80% User Analysis of Online Literature in China

6. Carrier Operators Mobile Internet Users in China * 3 mobile phone companies: China Mobile, China Unicom, China Telecom China Mobile is the largest one Mobile Devices and Apps The cloud bookstore and Client Apps in Android and Apple Apps are widely adopted in China. Reading devices: Smart phones, e- Readers like Bambook, Kindle, and other local brands. (Million) 2008-2011 Compound Annual Growth Rate of Mobile Internet Users: 44.5% WAP WAP sites are also widely available in China. * Data based on China Internet Growth Report Mobile Internet

7. 1. Data based on OpenBook report 2. Data based on OpenBook report The first 5 private book publishers in China have increased their market shares Based on retail sales in 2011, Cloudary is the largest private book publisher in China 1 Published 2 of the 3 most popular literary works in 2010 1 The most popular book that had been published by private publishers in 2011 1 (RMB million) 2009-2011 Revenue Compound Growth Rate 28.3% Print Book Publishing

8.  The LARGEST community driven online literature platform in China  72.1% market share of Chinese online literature market 1  Parent company: Shanda Interactive Entertainment Ltd. (SNDA)  Founded in July 2008 128% 09-11 Yearly Revenue Compound Growth Rate 1.6 Million Writers 2 6 Million Titles 2 66.9 Million Average Users per Month 3 68 Million Mobile Readers 4 ￥ 700 Million Revenue in 2011 1. Data based on iresearch 《 China online literature industry growth analysis 2011-2012 》 2. As on 31 Dec 2011 3. Data based on iresearch 2011 Monthly user access statistics 4. Data based on China Mobile Reading Base 2011 Independent Access Users Case Analysis: Cloudary

9. Online Paid Reading Our Community-Generated ContentContent from Partners Community-driven platform for storage and discovery, analysis / recommendation, and distribution of content Multiple Revenue Channels Mobile Reading Online Advertising Copyright Licensing Offline Publishing Cloudary Platform

10. Qidian (www.qidian.com)  Largest online original Chinese literature website  Mainly focuses on fantasy, sci-fi, martial-arts & military genres  Targets male readers  The top 10 novels have collectively got 680 million page views and 1640 comments Analysis of the Largest Direct Publishing Website

11. Hongxiu (www.hongxiu.com)  Mainly focuses on feminine literature  Especially influential in romance & career genres  Targets female readers  Writers are also mostly women Analysis of Another Direct Publishing Website

12.  Using Shanda virtual currency  Supporting different payment tools: Alipay, PayPal Online banking (international bank cards supported) Mobile phone bill/top up cards Etc. Business Model and Payment Tools

13.  ￥ 0.05 per 1,000 characters (Non-members)  ￥ 0.04 per 1,000 characters (Basic members)  ￥ 0.03 per 1,000 characters (Intermediate members)  ￥ 0.02 per 1,000 characters (Supreme members) (Membership requirements vary slightly among different websites) Micro-payment policy: Payment System

14. Other pricing policies:  Monthly subscription: (available in Hongxiu, Xiaoxiang Shuyuan and Jinjiang) 1 Month ￥ 15.00 3 Months ￥ 36.00 6 Months ￥ 63.00 12 Months ￥ 108.00 24 Months ￥ 180.00 (Subscribers may read all chapters of the ‘monthly subscribed books’. Prices vary slightly among different websites.)  Complete eBook purchase: (available for some completed books) From ￥ 1.00 to ￥ 10.00, depending on the titles Payment System

15. Categories Micro-paymentComplete eBook purchase Supports all types of reading devices Webpage Snapshot (Yuncheng Homepage)

16. 1. Data based on iresearch 2. Data based on Yi En Advisory 3. Data based on Screen Digest 4. Data based on IDC In 2011 ， Cloudary has sold 651 copyrighted works. Nearly 100 movies/TV series adapted from Cloudary works are being made or launched Among the 10 most popular TV episodes in 2011, 4 are related to online literature. Among the adapted online original literary works, most of them are from Cloudary 1 Box Office Revenue of Metropolitan Cinemas in China 2 (RMB Billion) 2009-2012E Yearly Revenue Compound Growth Rate: 50.2% Authorization & Advertisements Revenue of Television Market in China 3 2010-2015E Yearly Revenue Compound Growth Rate of TV: 13.3% (RMB Billion) Business in Adaptation Rights

17. Thanks Dank u Gratias Vielen Dank Tänan teid Спасибо Dziękuję Je vous remercie 谢谢