1. 2014 AudienceScience Inc. Demystifying programmatic buying: Whats really happening with trading desks and RTB Michael Greene Director of Research, AudienceScience 11 June, 2014

2. 2014 AudienceScience Inc. Programmatic buying is the future. But as it is practiced today, it is failing to live up to its potential for advertisers. 3. 2014 AudienceScience Inc. What is programmatic buying? Auction-based ad pricing (RTB) Automated workflow Advertiser control over where, when and why ads get delivered 4. 2014 AudienceScience Inc. The potential benefits for advertisers are massive Less media waste Better targeting Lower CPMs Frequency control Smarter optimization More efficiency from headcount More workflow efficiency for AOR fewer repeated, low-value tasks Real-time optimization means no need to predict the future in planning Deeper insights 5. 2014 AudienceScience Inc. Programmatic buying is big will total over $20B by 2017 Source: IDC, 2013 $3.5B $14.7B $2.2B Projected RTB ad spending, 2017 6. 2014 AudienceScience Inc. Agency trading desks are the centralized organizations that drive programmatic spending 7. 2014 AudienceScience Inc. Whats holding back even bigger growth today? Concerns over inventory quality. Premium publishers make only a subset of their inventory available programmatically/via RTB. Audience data limitations. Ecosystem largely dependent on third-party data of ranging quality. Uneven technology availability globally. Few programmatic technology companies have expanded their footprints globally, especially into smaller markets. 8. 2014 AudienceScience Inc. These are solvable problems and are being actively addressed today Inventory quality Data reliability Global applicability Premium publisher adoption is growing and technology companies are improving at combatting issues like viewability, fraud, and bots Nielsen and ComScore now offer data validation services and marketers are moving towards more reliable data sources Still an issue, but a couple tech providers have built out substantial global footprints 9. 2014 AudienceScience Inc. 10. 2014 AudienceScience Inc. Are advertisers getting the transparency they require? 11. 2014 AudienceScience Inc. What does transparency mean in digital media? 1. Where exactly are my ads running? 2. Why are they running there? 3. Who is seeing my ads? 4. How many times are they seeing them? 5. What intermediaries are involved in the process? 6. What am I paying for the intermediaries and the ads? 7. What was the result of the ads against my KPIs? Seven questions your digital media team should be able to easily answer: 12. 2014 AudienceScience Inc. 13. 2014 AudienceScience Inc. Transparency mattersand not just because it is written into your AOR agreement More efficiency and less waste Deeper insight Better governance Smarter strategies 14. 2014 AudienceScience Inc. What is arbitrage? arbitrage nounr-b-trzh The practice of buying something in one place and selling it almost immediately in another place where it is worth more 15. 2014 AudienceScience Inc. Arbitrage isnt new to digital: it provides the cash necessary to fuel an overly complex digital advertising supply chain Advertisers may deal with more than 20 intermediaries before getting to the media owners with access to eyeballs. - The Boston Consulting Group Cutting Complexity, adding value May 2013 16. 2014 AudienceScience Inc. Agency trading desks have allowed agencies to benefit from arbitragesome openly admit to it It doesn't say in Genesis that everything we do has to be on a fully disclosed basis to clients. - Irwin Gotlieb, CEO of Group M, speaking with regards to its trading desk business practices, March 2013 17. 2014 AudienceScience Inc. How arbitrage works in programmatic buying today AOR issues IO to trading desk at $5.00 CPM Trading desk takes 10% services fee, issues order to DSP to execute at a maximum $4.50 CPM DSP executes campaign at $2.00 CPM DSP charges trading desk $3.00 CPM, pockets $1.00 CPM as arbitrage margin Trading desk charges AOR/advertiser $5.00, takes $1.50 in arbitrage margin and $0.50 in fees $5 CPM = $1.50 in trading desk arbitrage + $0.50 in trading desk fees + $ 1 DSP arbitrage + $2 in working media 18. 2014 AudienceScience Inc. Media AOR Holding company trading desk DSP 1 DSP 2 DSP 3 Ad exchanges Publishers Data management (DMP) Advertiser Third-party data providers 10% flat fee 60% arbitrage margin 15% flat fee or 20%- 60% arbitrage margin Marked-up data fees by 10%-33% 19. 2014 AudienceScience Inc. What can we take away from this? A large % of your budget goes to middleman fees. A mix of transparent and non-transparent costs account for anywhere from 20% to 80% of your budget. You and your AOR likely have little insight into execution. Complexity leaves you and your agency far removed from what ads are actually being served, where, and why. Data is not secure. Advertiser customer data is typically pooled with other trading desk client data. This helps the trading desk scale, but leaves the advertiser with no control. 20. 2014 AudienceScience Inc. How can you put the right safeguards in place? 21. 2014 AudienceScience Inc. Ask your AOR and trading desk the tough questions What are the fees associated with using the trading desk? Does the trading desk arbitrage? What technology providers (DSPs, DMPs, data providers) does the trading desk use on our behalf? What are their fees and do they arbitrage? Does the trading desk use multiple DSPs on our behalf? Why? Have they evaluated the inefficiencies? Where is our data stored and with whom is it being shared? Can we get a login to the DSPs and DMPs used on my behalf so we can see what is happening with our campaigns and our data? 22. 2014 AudienceScience Inc. Alternative option #1: manage through contractual terms Alternative option Benefits Drawbacks Include contractual terms with AOR to cover trading desk arbitrage and data rights Maintains current workflow structure Allows easy access to programmatic technology Costly. Doesnt cover all arbitrage opportunities Trading desk still operates separate from AOR with limited business insight Still limited visibility due to supply chain complexity Global advertisers will likely have to manage multiple trading desk relationships 23. 2014 AudienceScience Inc. Alternative option #2: ask your AOR to manage programmatic technologies directly Alternative option Benefits Drawbacks Refuse trading desk services and ask your AOR to build relationships with programmatic vendors Simplifies supply chain and removes trading desk fees and arbitrage Allows for deeper insight and better planning as AOR sits closer to entire media plan and your business AOR may lack programmatic buying skills and resources Programmatic technology vendors may still arbitrage or work under trade rebate agreements with AOR Global advertisers with multiple AORs will end up with multiple regional technologies and limited governance 24. 2014 AudienceScience Inc. Alternative option #3: license programmatic technology directly Alternative option Benefits Drawbacks Build direct contractual relationship with DSP and DMP. Can be managed through combination of internal, AOR, and technology partner managed-services Cheapest by far. Limits supply chain complexity Can choose vendor who does not arbitrage (e.g. AudienceScience) Global governance/system of record. Choose a system that can scale across regions and agencies Best data security. You maintain all data rights AOR may lack programmatic knowledge/capability and may be resistant to working with tech of your choice Requires strategic leadership and vision from advertiser Need knowledge to vet technologies 25. 2014 AudienceScience Inc. Summary: whats the future for programmatic? Programmatic is here and it isnt going away. Arbitrage and uncertain data rights make the current trading desk model is far from optimal for advertisers. Advertisers should explore their options now and think globally as programmatic expands in scope and scale. 26. 2014 AudienceScience Inc. Thanks Michael Greene Michael.Greene@AudienceScience.com