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Prepared by Greg StuartPrepared by Greg Stuart Confidential 1

review of the digital

advertising ecosystemby greg stuart

www.gregstuart.com

january 6th, 2010




purpose & agenda

Purpose: Provide background for a discussion onthe ever changing Advertising Ecosystem.Topics as follows:

1.Marketers’ Metrics discussion2.Digital Media Ecosystem review3.Data & Targeting discussion4.Three Screen discussion5.Privacy principles6.Appendix

o Terms & difinitionso Advertising Spending review

7.

Author’s Background: Greg StuartDecade as NYC Ad Agency Media Strategist

Decade+ as Sr Exec in Digital MediaCMO, VP Biz Dev, Ad Sales, CEO

Digital Media since 1993 (iTV & Web)CEO of IAB – Interactive Advertising BureauCo-Author What SticksAdvisor to VC’s & 15+ Net/Mobile BusinessesConsultant to Alcatel, AT&T, etc (see appendix)




main themes

1. Change is everywhere & constant2. Advertising has never been so complicated…and yet

so ill prepared for the future (tech, data, automation)

3. Exchanges are likely to tremendously transformthe

digital advertising & media world4. Data is the talk of the digital town; but the value of

data is still quite unclear

5. Marketer’s metrics were indeterminate before and

will be murky for awhile6. Privacy at a regulatory level is anyone’s call at thispoint (but can be managed)




confused?...not surp

rised

http://images.fanpop.com/images/image_uploads/Web-Trend-Map-2007-V2-0-web-2-0-95889_1600_1024.gif







Prepared by Greg StuartPrepared by Greg Stuart Confidential 5Prepared by Greg [email protected] Confidential 5

internet is a still evolving as a medium

First activitiesISP & easeInfo. searchLOTS of time

surfing

EmailIMPhoto sharing

Early socialnetworks

Online bankingSimple Travel

guys

Auto info

CDs/BooksComplex traveleBay Motors

Groceries

BlogsComments &

posting

Customer reviews

Ratings

Source: Nielsen/NetRatings

Web 1.0Web 1.0 Web 2.0Web 2.0 Web 3.Web 3.0




all media under assault – from consumers

Prepared by Greg [email protected] Confidential 6

How often do you surf the internet at the same time

as watching TV?

Never 26%

Always 17%

Sometimes

26%

Seldom 16%

Do you use your Tivo or DVR to skip

television ads? Skip

Some sds

36%

Skips AllAds 52%

Ne



Prepared by Greg StuartPrepared by Greg Stuart Confidential 7Prepared by Greg [email protected] Confidential 7

digital advertising more complex than ever andthe options more diverse

IM

Display

Outbound communication

iPhone apps

Influentials

Microblogging

Online WOM

Video - YouTube

SEO Widgets

Online advertising

Email marketingSMS/MMS marketing

Microsite development

Seeding

Blogs

RSSCRM applicationApp DevelopmentSearch engine mktg

Streaming

Podcasting

Website Development

Branded entertainment

Viral INTERACTIVE AD CHANNEL




Estimated 4,500,000,000,000

(4.5 trillion) online ads served annually

= 2,000 ads per person per

month

…and yet ads, ads, ads - everywhere



Prepared by Greg StuartPrepared by Greg Stuart

Confidential 9

marketers’ metrics

discussion




Confidential 10

metrics summary

Online is often more cost effective than other media. Haveseen 10x in cost per value versus TV. In part because TV is SO overspent

Internet is not a single medium (it’s really a platform of mediums)Click has been everything. But it is the bain of the internet

medium. Soon to mean nothing (or at least little)Only 8% of consumers click regularly (only 16% ever click)Publishers like CPM, as it’s easy to measure, control, etc.Marketers metrics are CPA, CPL, CPT, engagement, etc. -

Confused yet? Should be!




Confidential 11

35% of marketers use clicks; but click is such asmall percent of activity


Source: DoubleClick DART for Advertisers: 2008




Confidential 12Confidential 12

however; there is a MASSIVE decline in display-ad click through rates

Confidential

In 2008, comScoremeasured click rates

as less than 0.1%

Sources: DoubleClick, eMarketer, Eyeblaster, ABI Research estimates




Confidential 13

and virtually no one clicks anymore


Source: comScore, Inc. custom analysis, Total US Online Population, persons, July 2007 and March 2009 data periods




Confidential 14

but there is no question online ads work


Advertiser Site Visitation Among US InternetUsers Exposed to Online Display Ads, 2008

Online Advertising’s Effect on Brand Metricsin the US, Q4 2008* (% of Resp impacted)

2.1%

3.1%

3.9%

4.5%

3.5%

4.8%

5.8%

6.6%

65.0%

53.8%

49.1% 45.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Week following

1st ad exposure

Weeks

1-2 after 1st

exposure

Weeks

1-3 after 1st

exposure

Weeks

1-4 after 1st

exposure

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%Control Tes t Lift

(Δ 2.4)

(Δ 4.9)

(Δ 2.6)

(Δ 1.6)(Δ 1.3)

Note: home, work and university locationsSource: comScore Brand Metrix, “How Online Advertising Works: Whither the Click,” December 5, 2008

Note: n=2,380 campaigns and 3,889,602 respondents;*includes three years through Q4 2008; **delta ( Δ ) defined as point difference in exposed vs. control groupsSource: Dynamic Logic provided to eMarketer, April 27,2009




Confidential 15

publishers may have better effectiveness


Ad Effectiveness DeltasDeltas by Site CategoryAided BrandAwareness

Online AdAwareness

MessageAssociation

BrandFavorability

PurchaseIntent

OPA BCD 3.2 5.7 3.4 2.4 1.8

MarketNorms 2.3 4.7 2.5 1.5 1.2

Portals 2.5 4.7 2.1 1.3 1.1

Ad Networks 1.2 3.8 2.0 0.6 0.2

Notes: Ad effectiveness deltas in red are statistically insignificant (i.e., there is no change) A/B/C/D indicate statistically significant difference between deltas at .90 CLSource: Dynamic Logic’s MarketNorms campaigns over last 3 years through Q1 2009OPA N=1,540 campaigns; MN = 2,255; Portals = 1,224; Ad Networks = 399




Confidential 17

best campaigns for sure work on ad networks

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

P

e r c e n t I m p a c

Aided Brand

Awareness

Online Ad

Awareness

Messsage

Allocation

Brand

Favorability

Purchase

Intent

Best / Worst Performers on Ad Networks

Market Norns Avg Top 20% Ad Networks Avg Ad Networks

Source: Dynamic Logic Market Norms database

But networks cost 1/5But networks cost 1/5thth to 1/20to 1/20thth of of

publisher inventory!!!publisher inventory!!!




Confidential 18

online is best able to measure but thehardest to measure

More than half of interactive marketers —51% — interviewed by Forrester say thatmeasuring ROI is their key challenge withdisplay ads…

…with 38% saying developing good creative is aproblem




Confidential 19

metrics simplified – there 3 elements

Promote + Foundo Mediao Search (natural & paid)o PRo Social Media +

Blogging

o

Converto Landing page

optimizationo Lead trackingo Lead management

o

Analysiso Marketing Analyticso Lead Scoring

Questions a marketer should beable to answer:

o How many visitors, leadsand customers am Igetting?

o What is driving thosevisitors, leads andcustomers?

o What are my best andworst sources of leadsand sales?

o

o

How can I grow sales? How can I lower marketing

costs?




Confidential 20

Brand Marketers Call to Action Marketers Direct ResponseMarketers

Goal is to increase brand awareness,imagery, and purchase intent

Spending to accomplish a near-termaction (traffic, order, etc)Mixes brand spend, but with amechanism to drive action too

Advertisers primarily focused oncapturing the immediate action,order, etc

National Brand

Local affiliate of a national chainadvertiser

Local“mom & pop”Retailers

different marketers have different needs


Cus

tom

erbas

e

Advertiser Orientation

1.364.0

3.376.4

9.18.9

1.3

30.2

1.3

53.2

Revenue, 2007 $ billions

CAGR, 2003-07percent




Confidential 21

metrics for measuring success


$1 million +(n=49)

All resp.(n=112)

Conversions or sales 82% 70%

Registrations/Subscriptions via organization’s Website 55% 52%

Click-throughs 51% 49%

Unique views to Website or page where ad or content was placed 51% 37%

Boost in search rank 39% 34%

Downloads of data or information 33% 37%

Change in target audience awareness/perception of brand 31% 25%

Customer feedback on Website 16% 26%

Number of target audience members reached 14% 13%Streams of video or audio content 8% 6%

Other 6% 3%

Note: 8respondents were primarily based in the US Source: Forbes, “2009 Ad Effectiveness Survey,” June 1, 2009




Confidential 22

advertising metrics - relationships




Confidential 23

expanded list of possible metrics

There are a number of possible metrics or points of measurement for marketers in digital media, 30 or more.

Impressio

ns

Clic

ks

Conversi o

ns

Reven

ue

UniqueIm

pressio

ns

UniqueClic

ks

UniqueC

onversio

ns

Clickthro

ughrate

Clicktoconversio

nrate

Impress

iontocon

versionrate

AdExpos

ureTime

View

Thr ou

gh

AdInteractionRa

te

Interactio

nTime

AdCo

mp

onentIn

teractio

ns

VideoPlayRate

Average

VideoVi e

w

Time

VideoCo

mpletio

ns

ReplayR

ate

Rea

ch

Frequen

cy

Fre

quenc

yvs.Re

spon

se

Freq

uencyvs.Co

nversion

Tim

eLagtoConv

ersion

AdDelive

ryRate

AttritionR

ate

LeadGe

neration

RevenueperSale

Revenue

perUse

r

Revenue

perImpression

RevenueperClic

k

Revenue

perVisi t

R

epeatP

urchase

Rate

LifetimeR

even

ue




Confidential 24

alt: msn’s engagement measurement

msn has popularized and development tech to support “engagementmeasurement”.

It recognizes that other advertising, might have played a role (delivered value)to the final click.




Confidential 25

alt: cross media analysis

Like MSN’s engagement mapping, somework has been done to isolate a medium’svalue, and in combination.

Research behind What Stick’s found thatInternet was most Cost Effective Mediumin 75% of campaigns

Optimized media plans delivered

+30% lift in media

http://www.whatsticks.net/

http://www.whatsticks.net/




Confidential 26

is there a blurring of search & display?

Traditionally:o Search=performance (clicks, action, etc)o Relevance, technology, ease

o Display=branding (attitude change)o Graphical, context, rich media

However, their objectives can be blurred:o Search been proven to provide brand valueo Display can provide performance

But they are different:o Ease of text – alteration, speed, pervasiveo Technology and scaleo Commensurate advertiser base (really important)

o




Confidential 27

final thoughts on metrics

Clicks have ruled (counterproductively so)Alternatives: Analytics systems permit reaching deeper o View thru (30 days post the activity)o Brand or performance later in process

Better tools coming: Factor TG, Market Share PartnersBut as a result of it’s inherent advantages, digital media

wins (ROI, immediacy, integration, optimization, more)o Mobile is just not ready, but is heading in the right direction.o iTV is likely a long ways off.




Confidential 28

digital media

ecosystem reviewpeeling the layers of an increasingly

complicated ad ecosystem in the

increasingly digital-networkedadvertising industry




Confidential 29

summary ad ecosystem

More disruption than ever & at nearly every level &category - publishers, local, agencies, media...Exchanges potentially change everythingCritical to Exchanges is application of dataWhat could happen:

o Shift away from networks to exchanges

o Exchanges follow Direct Mail & Search goingdirect to Advertiser

o Agency media department becomes lessimportant




Confidential 30

the times, they are a-changin’

bob dylan

Traditional definitions range from thebroad to the specific…

“Brokers of online inventory. Ad networks will buy inventory from a publisher, then resell toan advertiser, pocketing the spread”

…But the landscape is evolving as new typesof players emerge

Ad Exchanges eliminate the typical“broker” role by linking publishers directlywith advertisers via a managedtransaction platform (e.g., Right Media)“Aggregates advertising inventory from a

number of websites and sells this inventory to advertisers or agencies.”

“Intermediaries that enable advertisers toreach audiences across the web, and allow

publishers to better monetize inventory.”

“Appliers of sophisticated targeting analyticsto serve advertising for third parties”

Rep firms market inventory from selectpublishers to advertisers, functioning moreas an outsourced sales force than a reseller (e.g., Glam)

Specialist providers of sophisticated value-add services such as targeting and ad-

serving (e.g., Revenue Science) serve bothpublishers and advertisers withoutbrokering any inventory

CIBC analyst report

CIBC analyst report

Piper Jaffray Investment Research

CIBC analyst report




Confidential 31Prepared by Greg Stuart

[email protected] Confidential 31

the digital value chain

Advertisers InventoryInfluencers

Programmer/publishers

Agencies(creative/strategy)

Distributionplatforms

Measurement






expansion of the value chain

InventoryInfluencers



Agencies

Measurement

Ad-vertisers

AgencySupport/

Buyers

DataClearing-

houses

Exchanges Prog./Publishers

Pub.Support

Networks

Distributionplatforms

Advertisers




Confidential 33Prepared by Greg [email protected] Confidential 33

players in expanded value chain

AgenciesAd-vertisers

AgencySupport/Buyers

DataClearing-houses

ExchangesProg./

PublishersPub.

SupportNetworks

SEMDigital media buying agency

ource bid-management tooled system that manages and optimizes bidwords for advertisers based on conversion rates-based platforms that maximize ROI on ad network and exchange inventory buys on behalf of brands

, but either facilitate the transfer of data between parties in the value chain, or aggregate data from several parties and make it availabl

Technology platforms that enable the buying and selling across multiple ad networks and publishers real time

Search engine aggregatorsCentralized ad selling entity that sells typically remnant ad inventory across multiple websites, either bliSearch engine

Website owner and operato

Yield optimization companies that enable publishers to maximize the value of their inventory acr

on AdWordsin Yellow Pages

ertiser focused on specific demographic






representative players in value chain

Agency Support / Buyer

BroadSc

aleMedi

a

Se

archIn

tentDrivenMedi a Ad Networks

DataClearinghouses

Exchanges Ad Networks Publisher Support

Agency Support /Buyer

AgencyAdvertiser Publisher/ Content

Advertiser Agency Publisher/Content

InventoryAggregators



MeasurementDistributionplatforms

Advertisers

http://iprospect.com/index.htm

http://www.icrossing.com/




Confidential 35

all the details – source gridley & co.




Confidential36

exchanges-likely biggest change ever




Confidential37

exchanges - new kids on the block

Question Answer

What do Exchanges permit? Publishers provide a slice of their inventory to exchanges so thatadvertisers can select just the inventory they want, sometimescalculating value from upwards of 50 data elements

What makes them so interestingto the industry

Real Time Bidding technologies that can both cherry pick inventory andprovide immediate feedback

What make exchanges work? In addition to RTB, the integration of data and access to data on thatuser or individual impression

What are typical exchangeCPMs?

No straightforward answer to this question, because exchangeinventory falls into buckets. That said, most inventory is acquired for $0.10 – $2.00 CPM

What are typical exchangemargins?

Exchanges typically receive (only) 5% to 10% of revenue onimpressions they serve. (Networks, the current middle man, are 25%to 50%). Too early to tell but likely will scale; it takes very little to runan exchangeHow much exchange inventory is

available?Hard to quantify, but generally reported to be tens of billions




Confidential38

how exchanges use data

Advertisers are able to sort through dozens of impression attributes (and cherry-pick

billions of impressions) to choose impressions to buy. Data are used to select andoptimize exchange impression attributes and bring high value than just context or timeof day

There appear to be two current data pricing models:o Cost per Cookie by BlueKai with is a simple auction model: Cookies with series of data

about users are auctioned for around $2-3 per thousand and buying can buy thatcookie for as long as cookie lives.

o Percent of Spend by eXcelate / % of value model: The data provider receives apercentage of the media value (currently 20%)

Other Internet data players:o Next Action (SKU level data)

o Acerno (eCommerce data owned by Akamai)

o Revenue Science (BT)

o Media6º (Social Media – Birds of a Feather )

o Lotame (Social Media)




Confidential39

will there be a network shakeout?

Yes, Likely.Supposedly 300+ networks. Some are generating~$100 million in revenue.

They do the work that agencies are too lazy, or economically unable, to do

Key elements: Tech, Marketing/Positionings, AdSales (Relationships), Publishers (Content)

Exchanges make the publisher segmentunnecessary. Tech is critical.

Positioning is really necessary for a network tosurvive. Possible positionings: Brand,Optimization, Category/sector, Metric, etc




Confidential40

economics' of the ecosystem

5¢-12¢

5¢-50*¢* Short termarbitrage gain

25¢-50¢7¢-15¢

$ 1 . 0 0

5¢-10¢$0.10 CPM

2.00CPM

$1-5CPM

$1.5M-$3M per Sales Person

AdServing(DART,A

t las)

AdServing

(DART

,Atlas)

$ 0 . 5 0

-

$ 0 . 0 1




Confidential41

underpinning data & targeting are cookies

Cookies, or the tracking of users from one sessionto the next and one site to another, is critical tousing data & targeting.

Cookie deletion by users is rampant. Upwards of

nearly 50% of users delete cookies a month.Private study conducted amongst trusted sites

showed a real variation in deletion rates.Current industry thinking is that cookies are at

great risk due to regulatory




Confidential42

16%

64%

20%

Acceptors

Rejecters

SelectiveUsers

“Periodic”

“Multi-user computer”

“Bipolar”

This data is proprietary & confidential – do not forward.

overall, 36% users delete cookies monthly




Confidential43

C ross Site User Breakd

63 66

57

69

51

74 68

19 14 2617

29

13 18

20 17 13 2013 1418

0%

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100%

S ite A (8-27-05

thru 4-20-06 )

Si te B (11-17-

05 thru 4-19-06 )

S i te C (9-1-05

thru 1-31-06 )

Si te D (2-14-06

thru 4-20-06 )

Site E (2-22-06

thru 4-01-06 )

S ite F (2-01-06

thru 4-20-06 )

S i te G (2-01-

thru 4-20-0 6

P

e r c e n t a g e

o f U s e r s

Rejec tors

Inconsiste

Acceptor

…and some sites saw nearly 50% cookie deletion




Confidential44

2.) A tracking pixel associates theuser’s persistent ID with the 3rd party cookie each time they login

1.) Large population of web

users who regularly log into aregistration oriented site.

3.) If users return with different 3rd party cookies,we know they must have deleted their cookie.Publisher ID 3rd Party Cookie Date

ABC 123 5/1/2005

ABC 123 5/2/2005

ABC 123 5/9/2005

ABC 123 6/5/2005

DEF 456 5/8/2005

DEF 456 5/16/2005

DEF 789 5/20/2005

Person who did not delete their cookies

Person who deleted their cookies sometime between 5/16 and 5/20

measuring cookie deletion – how it was done




Confidential45

the buy/sell process - today

Confidential

Inventory avails & reservations (sales tools)Campaign mgmnt workflowReporting Billing

Media planning & buying workflow Reporting & analyticsBilling & recon-ciliatioCampaign Mgmnt & trafficking workflow

es what web sites to buyeller negotiate dealnternal teams for workflows sends ads to publisher s inputs ads

s results, compares reports, compilesbill to buyer ciles the bill and pays

Buy Media Research Tools

Sales Executive

Media Buyer Associate

Media Buyer Associate

Media Buyer Billing

Coordinator

Sales Planner

Agency AdOperations

Pub Ad Operations Account Manager

1

Agency

Side

Publishe

rSide

2

1

3

5

6

7

8

2

3

4

5

6

7

8

3

4




Confidential46

What’s moving where / when

Exchanges are the most significant change to advertisingsince Google.

1. Loads of inventory (10’s of Billions)

2. RTB (technology) drives the efficiency for system

3. Players and technologies are just being established

Networks that are not differentiated or have some uniqueattribute likely to be squashed.

DSP=Demand Side Platforms are taking the planning outof the media plan=affect on agencies

Data here is critical and yet value is still unclear




Confidential47

data & targeting

discussion




Confidential48

summary - why data has an allure

Value of targeting & tech - Google $95 eCPMo Key is a intent-driven targeting system with 100k’s of advertisers & self service

Net, targeting (and the data to support) are veryalluring to advertisers and publishers.

Categories of data: Context, Intent, Identityo Content; ecommerce, social, non-web, etc.o Unclear as to where uniqueness might still be

Some question the real value (but not sure yet)Requires new understanding of metrics, or at least

analytics




Confidential49

Cost per thousand(CPM) Number of viewers

Advertiser’s out

of pocket spend

Media

provider’srevenue

Current TV (example)

al Addressable (example)

$10/1,000 viewers $10 $10

Advertiser A really only wants toreach half of them but they can’tbe broken out

Increase CPM . . .

$12/1,000 viewers $12

$6

$6

For Adv A

For Adv B

. . . lower out of pocket per

advertiser . . .

. . . higher totalrevenue to media

provider

500 500

1,000 viewers

Sell toAdv A

Sell toAdv B

1,000 viewers for agiven media property

500 500

theory behind targeting – good for all




how does ‘intent’ affect pricing

CPM Implied CTR Index to Exchanges

High TransactionalValue (e.g. CNET,WebMD, private jetwebsites)

~$100 15.0% 15000

Google Search $95* 12.2% 12000

Cars.com $30-40 4.7% 4700

Forbes $25 3.3% 3300Branded News (NYT) $15 2.0% 2000

Portals $2.80 0.4% 400

Networks $1-2 0.2% 200

Exchanges $0.10-1.50 0.1% 100



Prepared by Greg StuartPrepared by Greg Stuart Confidential 51Prepared by Greg Stuart

[email protected] 51Prepared by Greg Stuart

[email protected] 51

ad spending trends-behaviorally-targeted

Source: eMarketer

In millions



Prepared by Greg StuartPrepared by Greg Stuart Confidential 52Prepared by Greg Stuart


sources of data

Web Visiting & ViewingAll web site/page click streamContent viewedSearch engine queriesKeyword used

Online TransactionsAll secure session activity

Purchases and subscriptionsPrice paid, shipping & handling, promotionsApplications/configurations

Marketing StimuliOnline adsReferral links

TV ViewingLink to digital set top

TV data usingname and address

DemographicsSelf-reported and validatedAppended segments (e.g. Claritas, Acxiom)Individual & household level

Offline purchasing

Linked using name and addressClient CRM databasesRetailer loyalty card dataIRI Scanner panel data

DA TA




different data is available on platforms

Prepared by Greg Stuart


Mobile Internet TV

Consumer Info Data Example

GPS Location Store or street location (Main & 1st street)IP address 127.159.456.37Concurrent media use Net & TV, Mobile & TV, etcContent Mazda reviewDaypart Lunch Breakfast or weekend shoppingZip code 11932Calls placed (to who, frequency) Calls to order lunch from deli dailyFamily plans Family of five, etcUsage patterns (when & where) Uses phone in the car, Internet on the road

Type of handset or upgrade Bought an iPhone early, Brand buyer, not price# of e-mails/texts sent/received Sends ~xx texts/day indicates age/engagementCoupon activity Uses coupons for consumer package goodsLocation patterns Goes to shopping, mall, or restaurantApps/downloads Downloaded “mint’ appPurchases Bought TV from Best Buy.comShopping cart Considered TV from Amazon.comContent viewing history Frequent News viewer, Recent Auto Shopper Ads seen/clicked on Clicked on mortgage adYP.com searches Sought: “”Plumber in Portland:

Other searches Searched: for “TV reviews”, Used Cars, etc# of unique people called Frequent callers are influencersDevice owned Android owner Psychographic segment “Urban Dweller”Registration (address, etc.) Name, address, etc

Context

Interests-Intent

Identity

the ability to drive incremental value from data




the ability to drive incremental value from dataand targeting depends on 4 key elements

Prepared by Greg Stuart


data helps advertisers better meet specific goals




data helps advertisers better meet specific goals

Behavior Interests-Intent

Context

Category of Data Why is it valuable?Why is it valuable? Specific data types

•Contextual (what content are they viewing)

•Day Part (when)

•Geographic (where arethey)

•System (with what device)

•Demographic (who)

•Psychographic (market segment)

•

•Actions (purchases,click/buy history, views)

•Preferences (affinities,interests, intensions)

•

Provides insight on the settingin which a consumer viewsan ad (e.g., while reading alaptop review). Some thinkcontext really matters.

Allows marketers to direct adsto consumers based onactual behavior (e.g., in themarket for a house)

Allows identification of demographic &psychographic segments

PersonalIdentity




“Project Canoe” has been formed to bolster MSO advertisingrevenue through set top box targeting

Confidential 56




who get’s the value from Data

Currently: Marketers should get the value. Perceptually they do. Word

on the street, in reality they are not right now.

Publishers ultimately should get the value. But they don’tcause they can’t sell that small inventory

Networks/Exchanges probably get most of the value. Theyhave the scale and need the differentiation.

Future: Ultimately, those that hold and process the data probably get

the most value. If that data is unique and not acquirableelsewhere. Data turned in insights likely matters most.




three screen discussion

it’s supposed to be media planning; not medium




it s supposed to be media planning; not mediumplanning

Three screen holds allure because:

o Access to a consumer cross-media at their different access points viadifferent messaging value is intriguing

o Some companies (cable & Telco's) have multiple media/distributionplatforms and want to use them to get more share from advertisers

Factso Each consumer has different media habits

o Cross media optimization can improve performanceo Collection of data/insights is better in some channels than others and

communication value is better in some channels than others (andpriced differently)

o There is a large internet ad spend, but not much spend or expertise inmobile and/or addressable TV

Realityo Unlikely that three screen will become a big deal anytime soon.

o There is not enough expertise or spend in 2 of the 3 channels and there arefew/no tools to manage/optimize or insure value in 3 screen approach.




significant time is spent on the various screens

Big growth in channels that consumers have more controlover, such as TiVo, Net and Mobile and whereaddressability resides




3 screen ad approach

oRichness of videooLong form of TV CommercialsoProduction values of TVo

oData richness of data collectionoContextual advertisingoRichness of targeting availableoMultiple formso

o

oPersonal nature of phoneo

IndividualismoProximity to retail/location

The value may be in the value exchanged. Internet for

data, TV for communications impact and mobile for personal & proximity.

http://www.bhphotovideo.com/bnh/controller/home?O=ProductDetail&A=showMultipleImages&Q=&sku=472427&is=REG

http://www.bhphotovideo.com/bnh/controller/home?O=ProductDetail&A=showMultipleImages&Q=&sku=472427&is=REG




who wants things to change & why

Television Industryo TV’s “virtue” is to sell lots

of inventory at bulk($10s of millions)

o $70B category that’s beendoing “just fine”

o Controlled by networksthat are not digitallyoriented

o The ‘pipes’ might want tosolve given the unique

value this brings themo Comcast and NBC

deal

o

Advertisers/Agencieso A/A are not oriented to

small buys either, or toknow the value of targeted media

o They don’t have the tools

in managing, or optimizing, or measuring to commitlarge sums

o They aren’t good at cross

media nowo They will likely apply test

budgets cause they liketo be viewed as “first”

o

Only Nielsen is focused on addressing 3 screen with their A2/M2(Anywhere Anytime Media Measurement) Initiative




what would need to happen to get TV to change?

Cable and TV would have to be willing to work together Lack of standards & consistency is a big issue

Lack of geographic coverage is an issue

Ability to get cooperation or to go around them (force coop) Potentially advertisers can drive the change

Exchange business commitment of $50 million by Chrysler Super strong business case or desperation

Probably still not enough to create change

Upfront spending falls by significant amount, forcing change




privacy principles

i




privacy summary

Consumer control is everything in privacyBut that is not a proven science yet

o Focus needs to be on value, trust & control

Various approaches being developed.o Unclear if self regulation is enough

Government might intervene - soon




effective privacy policy must satisfy 4 elements

Value Consumer permits implicit or explicitly data use inexchange for a personal benefit – more relevanceor convenience – and some clear value

Trust Consumer trusts the Brand to use permitted dataonly within agreed-upon limits.

Anonymity Identity kept anonymous or confidential andassurances and proof of such

Control Opt-out (partially or wholly) at will must beemployed

privacy is not an exact science – range of options= Height of bar assesses

feasibility that this can bedone




-PT IN -PT OUT

:ailer Options.1 Notice within bill.2 Sent to website. /3 Separate insert w bill

-

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l h Bl K i i t




novel approach-Blue Kai registry

Blue Kai gives the consumer access to whatthey know about them and the opportunityto opt out or modify that profile

i t




privacy experts

Jules Polonetsky (WA DC)o Future of Privacy Forum

Alan Chapell (NYC)o Chapell & Associates

J. Trevor Hughes (VT)o IAPP-International Association of Privacy

Professionals




final thoughts

6

case study context: Google revolutionized on-line advertising by




Consumers

Advertisers

•Limited targeting

•Clutter

•Intrusive ad formats (pop-upads, banners) and directmarketing campaigns (spam e-mail)

•Increased focus on contextualads, relevant to end-users

•CPM-based advertising •Pay-per-click pricing

•Highly focused based oncustomer browsing / searchbehavior

•Simplicity, site guidelines

Online ad landscape, 1999

Online search,2003+

•Complex user experience, oftencluttered user interface

•Elegant user interface, limitedclutter, integrated into browser toolbar

•Limited search capabilities (sitelists, poor search engines)

•Better algorithm – gateway to theweb

•Unclear ROI, limitedcampaign results for

advertisers

•Best-in-class measurement for advertisers

solving the two-sided value proposition equation

Th k Y




Thank You

More questions?

Greg Stuart

[email protected]+1 631 702 0682

mailto:[email protected]

mailto:[email protected]




appendix

Author’s (Greg Stuart) Bio

Terms & Definitions

Advertising Spend review

greg st art bio




greg stuart bioGreg Stuart is a recognized leader in digital media & advertising and was selected by Ad Age as one of “10 Who Made Their

Mark” in 2006.

He is the former CEO of the Interactive Advertising Bureau (IAB), the trade group for the interactive advertising & marketingindustry. He grew the IAB’s revenues with a CAGR of 37% (overall +500%) while leading the industry from $6 billion to $17billion in ad spending. The IAB customers included AOL, CNET, Google, Disney, NBD, Yahoo! & 400 others.

Greg has more than two decades of hands-on operating experience as a proven business builder in the Digital Media andTechnology arenas since 1993. He has extensive experience as CEO/Director/senior executive roles with Y&R, Sony OnlineVentures, Cars.com, Flycast Ad Network and venture-backed DeltaClick.

In the last two years he has served as Advisor, Director and angel investor to venture-backed companies with a resulting $750million in exits, each at least at a 10x multiple. He’s also worked with AT&T, Alcatel Lucent & Meredith in redefining their digital media opportunities for the future.

Ad Age identified his book, “What Sticks: Why Most Advertising Fails and How to Guarantee Yours Succeeds,” as the “Number one of 10 books you should have read”.

Aside from his industry leading status in advertising and digital media, his operating expertise is in leading cross-functional teamsin product development, go-to-market strategy, company positioning, business development/deal making, marketing, andscalable revenue generation with a record of success in both rapid growth businesses and turnarounds.

He currently serves on the Board of Zimbio, a next generation webzine with nearly 20 million uniques and backed by MenloVentures and August Capital. He had served on the Board of Rapt (Accel backed), Inc. in SF, sold to Microsoft; and Board of Allyes (Oak backed) in China, sold to Focus Media. Greg has also served on the Advisory Boards of a dozen venture-backedcompanies in Search, Mobile, Video, Research, & Social Media backed by Intel, Greylock, Sierra, Conway, TimeWarner,USVP, Union Square, Oak VC, DFJ, Canaan, Spark, Intel, First Round Capital and others.

He is a member of the National Speakers Association and speaks around the world on the failings, and thus opportunities, of advertising - Istanbul, Israel, Germany, Mexico City, Jakarta, Sao Paulo, Switzerland, Zurich, Shanghai, Sydney, Barcelona,Monaco, Tokyo and others.

Greg has a BA in Economics from the University of Washington and completed Wharton’s intensive Advanced ManagementProgram in 2008. He lives happily outside of New York City in Bridgehampton, NY with his wife Pamela, twin daughters andson.

http://www.linkedin.com/in/gregstuart

Glossary




Term Description

CPM "cost per thousand" ad impressions. the price that is charged to advertisers by “publishers” for 1000 adimpressions

RPM “Revenue per thousand" ad impressions. the revenue that is generated for 1000 ad impressions

Impression Web: a measure of how many times an advertisement is displayed.Mobile: each individual ad unit viewed on a mobile publisher's deck (web site).TV: how many times ad is playedInventory the total number of impressions that a Web site has available for sale over a given period of time (usually,inventory is figured by the month).

Upfront Annual sale of network ad inventory, typically at a slight discount to scatter prices, and guaranteeingplacement in specific show time and position in pod

Scatter Day-to-day market for network ad inventory. Majority of sales occur between 3 and 9 months prior to

airtime, and on similar terms to upfrontRemnant Day-to-day market for ad inventory not sold in upfront or scatter markets. Typically discounted 30-70% on

scatter market rates on a preemptible basis and without specific airing time

Ad Currency Nielsen Rating Points

Unique Visitor Someone with a unique address who is entering a Web site for the first time that day (or some other specified period).

Cost-Per-Action

(CPA)

what an advertiser pays for each visitor that takes some specifically defined action in response to an ad

Cost-Per-Click (CPC)

the cost or cost-equivalent paid to a publisher per click-through. The amount paid by the advertiser each

time a user clicks on his/her ad.

cost per X detailed definitions




cost per X detailed definitionsCPM (cost per thousand impressions) has been popular since the start of online advertising. CPM remains one of the most popular cost metrics

used, though these days it’s rarely the only metric employed for a campaign. It allows simple comparisons between campaigns and futureopportunities (many publishers use this on their public rate cards).9 For example, even if marketers pay for a campaign on a cost-per-click basis, they

can get reporting on total impressions and simply divide their total spend by impressions and multiply by 1,000, thereby generating a similar metricacross differing campaigns. Nonmarketers such as CEOs or CTOs can often more easily relate to this type of measure than to online-specific metrics,such as time spent interacting with an ad, that are less directly related to costs.

CPC is a very popular metric for marketers trying to drive direct action from an advert. More than 65% of database marketers in a recentForrester survey say they use response rates as a key metric.10 However, it can also lead to advertisers paying for many clicks that are not from thetarget audience, such as clicks by mistake or invalid clicks from Web crawlers, and even expose them to click fraud. As a marketer, using your own adserving tool for measuring clicks (and visitors) can help establish a standard measure, rather than trying to compare metrics from a variety of tools for each campaign.

CPV (cost per visitor) gives insight to Web site owners.CPV is where advertisers pay publishers based on how many viewers of display ads thenactually visit the advertiser’s Web site. These metrics are most useful for advertisers aiming at driving further interaction from consumers, rather thangeneral brand awareness or attitude, and of course take no account of what the visitors do when they get to the Web site; they could, for example,leave immediately once they arrive on the landing page. Some marketers now impose stricter rules on what counts as a “visit” (which is sometimes stillcalled a “click”), such as “visitors spend at least 3 seconds on the landing page,” to get over some of these problems.

CPA (cost per acquisition/conversion) gives a metric comparable across channels.CPA metrics allow marketers to measure success based oncustomers acquired through a campaign. Of course, “acquired” may have different meanings for different marketers: For a retailer it may simply meana site visitor or someone who puts goods in the shop’s online basket or perhaps only those who actually buy. For brand marketers, it may bemeasuring those who click through to a certain area on a Web site, those who sign up for an email newsletter, or those who take some other type of direct response activity via the ad landing page like asking for more information on debt management, for example. Google has heavily promoted thisas a metric, with CPA management tools included in its AdWords product and within the affiliate network (previously known as DoubleClick PerformicsAffiliate). Introducing some type of “quality” measurement within the definition of acquisition — so, for example, only counting those email subscriberswho remain subscribers for three months — helps marketers assess success on a more valuable scale than simply volume.

CPE (cost per engagement) is emerging as a metric.CPE is a newer ad model whereby advertising is offered free, with advertisers paying only whenviewers actually engage with the ad itself (thus differing from CPA, which looks at consumer activity post exposure). “Engagement” can be defined in anumber of ways, such as completing a survey within the ad, entering a competition, or watching a certain amount of video. Online video ad provider VideoEgg pioneered this payment system in 2008.11 This method is seen to push back more responsibility for ad performance onto the ad creativethan other methods such as CPC, which were thought to place the bulk of the burden of performance onto the publisher. It is also a way of measuringinteraction with newer types of creative — such as video ads or ads with product comparison tools within them — that may drive significant interaction

but not actually click-throughs. However, as “engagement” means something different for every marketer, such metrics are not comparable acrosscampaigns even for the same marketer, limiting their value.

verbiage on digital ad metrics




verbiage on digital ad metricsView-based metrics simply look to track exposure. These measures, such as number of impressions or unique viewers, generally appeal more to advertisers with a branding goal, asthey mirror the basic offline measures for brand exposure of readership in print or viewerson TV. Even the smallest of advertisers can track this with free analytics packages such asGoogle Analytics. However, these metrics reveal very little about the impact of advertisingon consumers, and with almost two-thirds of marketers using these as a metric, it’s hardlysurprising that half of interactive marketers say extracting ROI is their biggest challenge withdisplay advertising, and 60% of marketers say that they struggle to build the case for interactivemarketing in their organizations.

Performance-based metrics aim to expose true interactions. Metrics such as number of click-throughs or video views give an indication of how many consumers actually took someaction upon seeing an ad and appeal to advertisers looking to drive direct action, though areunlikely to be very insightful for marketers with a branding goal or to indicate real ROI. One of the reasons for the prevalence of both of these types of basic metrics, despite their lack of realinsight, is the relative ease of benchmarking across your own campaigns and with the industryas a whole; DoubleClick, for example, supplies some ad click-through rates.Cost-Based Metrics Generate More Insight

Evaluating display ad campaigns on a cost basis allows marketers to track the efficiency of thechannel and begin some simple comparisons, such as comparing banner ads and search on their “cost per click” (CPC) or even television and banners on “cost per unique viewer.”




ad spending review

ad spending by channel summary




ad spending by channel summary

~$300 billion dollar industry (U.S.) 60/40 national / local 50/50 brand / direct marketingOnline is ~$25 billion, mobile is <$1B Online display/brand is only 1/4

Growth opportunities online:1. Online video is up & growing (+115% in‘09)

2. Behavior/Audience targeting stillgrowing

3. Performance & ROI rules4. Local online will grow, eventually5.

Net, Digital is growth medium Others declining; & will continue to fall

Media ChannelsTelevision:o Broadcast TVo Cable TVo Spot TVo Interactive TVInternet:o Searcho Displayo

Digital Videoo GamesMagazinesBusiness PressNewspaper RadioOut of HomeDigital OOH

Direct MailYellow PagesMobile

ad spending trends the details




ad spending trends – the details

Source: Universal McCann, NAA, IAB RAB & Barclays Capital

Newspapers 4

Magazines 1

onlineonline and cablecable have experienced the most growth in adspend while newspapers’’ revenues have plummeted

0




spend while newspapersnewspapers’’ revenues have plummeted

44.9 46.7 47.4 46.6 41.9 35.7 31.2

11.4 12.2 12.8 13.213.8

13.012.1

56.3 58.9 60.2 59.8 55.648.7

43.2

41.946.3 44.3 46.9

44.5

45.3

41.8

18.5

21.2 23.1 24.9

26.227.5

27.4

19.4

19.9 19.9 20.019.4

17.9

16.7

13.9

14.0 14.2 14.414.2

13.8

13.2

12.516.8

21.2

23.8

25.4

6.3

09/08 /2010

Yellow Pages

Radio

09/08/2010

Outdoor

Online

Cable TV

Broadcast TV

Total Print(Consumer Mag +Newspaper)

Magazine

Newspaper

09/08 /2010

2008

09/08/2010

09/08 /201009/08 /2010

09/08/2010

09/08/2010

09/08/2010

09/08 /201009/08

/201009/08/2010

09/08/2010

09/08/2010

09/08/2010

09/08/2010

09/

08/2010

09/08/2010

09/08/2010

09/08/2010

09/08 /2010

2003-09 CAGR

Percent

4.9

23.2

-0.9

-2.5

6.7

0

-4.3

0.9

U.S. MAJOR media spend by type, 2003-09 - $ Billions

Does not include Direct Mail, Business Press or Miscellaneous

-5.9

-0.1

Source: Universal McCann; SNL Kagan; Veronis Suhler; Wachovia; Morgan Stanley, Deutsche Bank; team analyses

national vs. local (online is lowest local but

7




(most growth overall)

Prepared by Greg [email protected]

Confidential 82

CAGR***

Percent, 2003-07

* Includes newspapers and consumer magazines** Definit ions of local and national vary slightly by media

*** Compound annual growth rate for total ad spend Source: Universal McCann; SNL Kagan; Veronis Suhler; Wachovia; Morgan Stanley, Deutsche Bank; team analyses

Media type

Local and national advertising spend**

$ Billions, 2007

•$90 billion in local-oriented ad spend(~50% of total excluding

mail), much fromsmall & mediumbusinesses’ (SMB)

advertisers•But local online ad

spend is only 15%of total online spend

56

45

26

19

14

21

7

48

addressable media vehicles continue to capture value




Mass-reachoNewspap

er

o Television

oRadio

Highly targetedoDirect mail

oCable

o

InternetoAdvanced

TV

Source: Veronis Suhler, 2007; PWC (2008)

09/08/2010 09/08/201009/08/201009/08/201009/08/2010

addressable media vehicles continue to capture value

to be clear web is mass medium



Prepared by Greg StuartPrepared by Greg Stuart Confidential 84Prepared by Greg [email protected]

Confidential 84

to be clear…web is mass medium

….There is NO question - online is a mass medium

Source: Ball State University Center for Media Design – A Day in the Life: An Ethnographic Study of Media Consumption

Daily Reach and Duration for Various Media Outlets

Magazine

Newspaper

Web 1995

Web 2005

Radio

0%

20%

40%

60%

80%

100%

0 60 120 180 240

Daily Duration: Average Minutes per User

?

different channels play different roles against




Less-Less-addressableaddressable

AddressableAddressableMediac

apabilities

Yellowpages

Directmail

Online display Online search

Interactive television

Mobilesearch

Mobiledisplay

Broadcast & CableTelevision

Brand BuildingBrand Building Driving ActionDriving Action

DigitalOOH

marketers’ goals

OnlineVideo

A w a r e n e s s I m a g e r y C o n s i d e r a t i o n P u r c h a s e

Print – Magazines &

Newspapers

online ad spending projections vs. overall




ad spending projections


Confidential 86

$23.4 (10.6%)

$22.4 (-4.6%)

$23.6 (5.5%)

$25.2 (6.8%)

$28.3 (12.3 %)

$31.0 (9.5%)

$34.0 (9.7%)

2008

2009

2010e

2011e

2012e

2013e

2014e

US Online Advertising Spending, 2008-2014 (billions and % change)

Source: eMarketer, December 2009

U S T o ta l M e d i a A d v e r

S p e n d in g 2 0 0 8 -2 0 1 4 (%

0 .3

0 .

- 6 . 4

- 1 4 . 6

- 0 . 5

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4



online is not yet a major brand channel




online is not yet a major brand channel


Confidential 88

$146 B(~50%)

$159 B(~50%)

$6 B (~25%)

$18 B (~75%)

4%

11%

2008 U.S. Measured Media Spend:

$186 Billion

Online Spend as

Percent of Total

2008 U.S. Measured Media Spen

$24 BillionBra

nding

DirectR

esponse

Source: JP Morgan estimates, ThinkEquity Partners

ww online share




Allocation to onlinead spendingvaries greatly bycountry

Top countries:o U.S.o Nordic EU Countries

o UKo Czeck & Polando Aus. & Japan

o So Korea

ww online share

sources of ad spending data



sources of ad spending data

Various methodologies, some are better than others:o Best is probably is eMarketer

o Compilation of all others’ data & projections

o Universal McCann data ok for most mediao Zenith Media is good tooo Jack Myers is good but paid for

Suggested caution:o TNS for Online (poor methodology & not the whole

interactive ad channel – used for per brand generally)o Nielsen NetRatings data not representative either (same as

TNS)

o Some of the Wall Street dataAdditionally, there is NO good CPM data

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