Broadband and Digital MediaAustralian Broadband Conference

Grace HotelApril 29th – May 1st, 2008

Roger Kermode

CTO/COO iPrime

Individuals’ Behaviour will drive broadband not technology

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Online Media Spending Growth Outstrips Traditional Media Spending

Media Consumption (Net Nielsen March 2008)• Internet 13.7 hrs/week• TV 13.3 hrs/week

Media Consumption (Net Nielsen March 2008)• Internet 13.7 hrs/week• TV 13.3 hrs/week

Source: BRW

Advertising accounts for 5% of US GDPAdvertising accounts for 5% of US GDP

50% of all ICs production is used by Consumer Electronics devices50% of all ICs production is used by Consumer Electronics devices

Targeting Increasingly Drives Advertiser Buying Behaviour

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3 Takeaways from this Talk

1. Technology Enable & Accelerate Existing Behaviours

2. The Long Tail increasingly drives Media Innovation

3. Net Neutrality is Essential for Growth

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1) Technology Enables & Accelerates Existing Behaviours

TQuestion: Which of these is technology? Refrigerator Motor Car Computer Mobile Phone iPhone

Technology isn’t technology for those under 30

Each generation adopts / exploits what is available

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2) The Long Tail Increasingly Drives Media Innovation

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BroadcastMass Media

InternetMe/We Media

3) Net Neutrality is Essential for Growth

Net Neutrality (def’n) "Network neutrality is best defined as a network design principle. The idea is that a maximally useful public information network aspires to treat all content, sites, and platforms equally” – Prof Tim Wu. Columbia Law School

In other words Network operators allow all comers to deliver content Users decide which content is important Internet returns to what it was designed to be

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Technologies Enable & Accelerate Existing

Behaviours

Ask not what things are

but what they mean

Anyone can now be a content creator…

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… and Media Fragmentation means consumption takes place anywhere, anytime…Gen X & Y spend less time with traditional media

Multi tasking has increased.. Internet & TV – 58% Internet & Radio – 48%

Key factor engagement

IPTV

iPods

Mobile TV

Digital still /video cameras

Social internet sites12

…which then changeshow we navigate through the web.

• Most users (up to 75%) bypass a home page completely.

• Means any page is a “home” page.

• Search, social networks, blogs, and RSS driving more and more

users deep into sites directly.

• Every page accessed in any manner & conceivable order. Can’t

design properties to control user flow anymore.

• Users increasingly willing to embrace multiple devices.

• Unwilling to make compromises with an all-in-one device.

• Users expect seamless transitions from offline to online.

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Thus, Video Releases happen faster…

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..and Online Video becomes about the Now

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Social Networking is how big?The latest fad?

Broad Adoption Many Networks

• MySpace – Music• Facebook – College • LinkedIn – Business • Bebo – Social • Open Social….

Perhaps not….

An increasing driver of traffic

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MySpace is all about ME

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Facebook is all about “US”

• Opened its network for developers to build & sell new applications.

• 20 weeks, hundreds of developers launched more than 6,000 + new applications, 392 m installs

• 192 sponsored groups

• Largest app = 19m users

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Sportsplay is all about our local stories

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The Long Tail increasingly Drives Media Innovation

How and why data-centric online media is driving Internet usage

and Media in general

The Conversation has Changed

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So what does the Long Tail mean?

US portals lost 5% online revenue in 2007 lost 5% online revenue in 2007 to narrower content sites & search engines as spending followed consumers down the tail across a more fragmented Web

22Business of Content

BroadcastMass Media

InternetMe/We Media

How the Internet Enables “New” Media

Broadcast Media

Choices made for you by taste makers

Mass Consumption / Hits

Hundreds of markets of Millions

Concentration of smarts in the Core

Interactive Media

Choices made by you

Niches everywhere

Millions of markets of Hundreds

Shift of smarts to the Edge in Access Devices

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Why Online Ads threaten the TV ModelPrice to reach 1000 consumersTV

Highest Rate ~$30 Lowest Rate ~$10 Ratio ~3 times

Online Highest Rate $160.00+$160.00+ Lowest Rate $0.50 Ratio 300 times300 times Same inventory can be sold many ways Aim is to maximise yield via better targeting

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Targeting vs. Reach: The Big Picture

commercial in confidence 25

Reach

Targeting

1,000,000s

100,000s

1,000s

10,000s

1

10s

10,000,000s

BillionsMillionsThousands

100s

Smallest individually Addressable Market in

terms of Unique Browsers

Aggregated Total Addressable Market in

terms of Unique Browsers

Too Small To SellUnless Content is

Highly Unique

Site Traffic needs to be Aggregated

within a Publisher Network

Too Small To SellUnless Content is

Highly Unique

Site Traffic needs to be Aggregated

within a Publisher Network

Massive Reachbut little targeting

Run of Network Salesat lower CPMs

Massive Reachbut little targeting

Run of Network Salesat lower CPMs

Critical Mass ReachAND Highly Targeted

Very high CPMsBut Requires High Technology

for scale

Critical Mass ReachAND Highly Targeted

Very high CPMsBut Requires High Technology

for scale

Medium to Large ReachAND Some Targeting

Variable CPMs depending onTarget Parameters and Advertiser Interest

But Requires Medium Technology for scale

Medium to Large ReachAND Some Targeting

Variable CPMs depending onTarget Parameters and Advertiser Interest

But Requires Medium Technology for scale

Targeting vs. Reach: Where the Players Fit

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Reach

Targeting

1,000,000s

100,000s

1,000s

10,000s

1

10s

10,000,000s

BillionsMillionsThousands

100s

Smallest individually Addressable Market in

terms of Unique Browsers

Aggregated Total Addressable Market in

terms of Unique Browsers

NicheIndividualPublishers

NicheIndividualPublishersVariable Variable

CPMsCPMs

Tier 2 /PerformanceAd Networks

Tier 2 /PerformanceAd Networks

Low CPMsLow CPMsHighly AutomatedHighly AutomatedMinimal Human SalesMinimal Human Sales

Tier 1 /Full ServiceAd Networks

Tier 1 /Full ServiceAd Networks

High CPMsHigh CPMsDedicated Sales Dedicated Sales TeamTeamPopular

VerticalIndividualPublishers

Variable Variable CPMsCPMs

Major PortalsMajor Portals

Variable CPMs

Variable CPMs

CustomisedAggregation Sites

CustomisedAggregation Sites

Variable Variable CPMsCPMs

“Hundreds of markets of Millions”

“Millions of markets of Hundreds”

Where the money is…

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Winners and losers

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Source: IBM

Value of Targeting has Increased2007 saw the Biggest media boom ever

$12 billion invested in 120 days Microsoft buys aQuantive for $6 bn, up 11,000% from 2001 WPP Group buys 24/7 Real Media for USD$649 million AOL buys Adtech AG Publicis buys Digitas for $1.3 billion Yahoo buys ad exchange Right Media Inc. for USD$680m Google buys DoubleClick Inc. for $3.1 billion News Corp buys Strategic Data Corporation Hitwise bought by Experian for $USD240m NBC sets up USD$250m tech fund

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So… what does this all mean?Platform and Content must be Integrated

TV and Online media experience will become increasingly intertwined IP delivery will eventually supplant broadcast…. but not just yet

Content must be Organised Relevant Easy to access / share across multiple platforms

Advertising must be Targeted (personal, relevant, anticipated, timely) Increasingly Integrated Cross Platform (follow the consumer) Easy to buy

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iPrime (Hyperlocal)Content

Custom filtered Multi source aggregation Bespoke additional content Focus on conversation

Advertising Integrated placement with

offline media TV / Radio Deep Quant Analytics Hyper Targeted Accessible

Markets for advertisers

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Net Neutrality

Why this is important for continued economic prosperity

Implications of Net NeutralityNet Neutrality (def’n)

"Network neutrality is best defined as a network design principle. The idea is that a maximally useful public information network aspires to treat all content, sites, and platforms equally” – Prof Tim Wu. Columbia Law School

Implications Open Access for all Content and Service providers Reasonable and fair access costs to consumer Increased Global Competition….

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Not All Bits are Created Equal Media Unit Size Cost Cost/Mbyte

SMS 160 bytes 20c $1,250.00 Email (Text) 500 – 2000 bytes $0.002 Banner Ad 20 – 40 Kbytes $0.002 Web Page 200 – 600 Kbytes $0.002 MP3 Song (3 mins) 2 – 4 Mbytes $0.002 You Tube Video (2mins) 5 Mbytes $0.002 SD Movie 300 Mbytes / hr $0.002 DVD Movie 2.2 Gbytes / hr $10 (90mins) $0.003 Blu Ray HD Movie 5.6 Gbytes / hr $45 (90mins) $0.005

$129.95 Bband Plan60 Gbyte/ Month limit17 Mbps

5

1.5Mbps

10Mbps

30 4020 50

512kbps

256kbps

17Mbps

Cable Modem / DSL2+Cable Modem / DSL2+

10 Mbps

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Broadband has enabled many Web2.0 Businesses…

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…that have created a lot of value

Source: esnips.com 36

.. But Broadband Isn’t Just About the Bits

Broadband Creates Channels for Conversation… Rich Media (video, audio) Two Way Communication

…Web 2.0 Adds Smarts to Manage Them…. Timely, Relevant, Engaging Group communication

…the Result: What once were Functions now become Emotions When this happens

• Communication Frequency Accelerates• Social Capital Growth accelerates• Value Creation Accelerates

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Global Trends Drive IT Services

Source: rs.resialliance.org

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The Next Wave of OpportunitiesConsumer

(Yet More) Convergence• Integrated Cross Platform Media• Content and Advertising blur

Mobile Applications Emerge• Predominantly Social Focus• Increasing use of hi-res screens and rich media

Search Dominates (Still)• Until Semantic Web takes off…

BusinessSocial Networking / Enterprise2.0 takes off

• Group Communication within business processes

Right Sourcing Continues• Increased use of internationally remote teams / skilled labour

Software As A Service (SAAS)• Increasing use of externally administered applications

Immersive Interfaces Appear• Increasing use of Larger Screens and Touch in Business

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Thank You

Roger Kermode

CTO/COO iPrimeRoger.Kermode@iprime.com.au