PwC

IAB internet advertising revenue report

2014 full year results

www.pwc.com

www.iab.net

PwC PwC

Agenda

2

April 2015

Survey methodology

2014 full year results

Full year and quarterly trends

Advertising formats

Social media

Pricing models

Industry category spending

Historical advertising growth of media

About PwC

PwC PwC

Survey Methodology

3

April 2015

Survey Scope

The IAB Internet Advertising Revenue Report is part of an ongoing IAB mission to provide an accurate barometer of Internet advertising growth.

To achieve differentiation from existing estimates and accomplish industry-wide acceptance, key aspects of the survey include:

• Obtaining historical data directly from companies generating Internet/online/mobile advertising revenues;

• Making the survey as inclusive as possible, encompassing all forms of internet/online advertising, including websites, consumer online services, ad networks, mobile devices and e-mail providers; and

• Ensuring and maintaining a confidential process, only releasing aggregate data.

Methodology

Throughout the reporting process, PwC:

• Compiles a database of industry participants selling internet/online and mobile advertising revenues.

• Conducts a quantitative mailing survey with leading industry players, including web publishers, ad networks, commercial online service providers, mobile providers, e-mail providers and other online media companies.

• Acquires supplemental data through the use of publicly disclosed information.

• Requests and compiles several specific data items, including monthly gross commissionable advertising revenue by industry category and transaction.

• Identifies non-participating companies and applies a conservative revenue estimate based on available public sources.

• Analyzes the findings, identifies and reports key trends.

PwC PwC

Annual revenues totaled $49.5 billion in 2014

4

April 2015

Online advertising revenue increased 15.6% in 2014.

In b

illi

on

s $42.78

$49.45

FY 2013 FY 2014Source: IAB Internet Advertising Revenue Report, FY 2014

PwC PwC 5

April 2015

Annual revenues totaled $49.5 billion in 2014

Online advertising revenue increased 15.6% in 2014.

In b

illi

on

s $42.78

$49.45

FY 2013 FY 2014

15.6%

Source: IAB Internet Advertising Revenue Report, FY 2014

PwC PwC 6

April 2015

Fourth quarter revenues totaled $14.15 billion in 2014

Revenue in Q4 2014 was 16.9% higher than in Q4 2013.

In b

illi

on

s $12.11

$14.15

Q4 2013 Q4 2014Source: IAB Internet Advertising Revenue Report, FY 2014

PwC PwC 7

April 2015

Fourth quarter revenues totaled $14.15 billion in 2014

Revenue in Q4 2014 was 16.9% higher than in Q4 2013.

In b

illi

on

s $12.11

$14.15

Q4 2013 Q4 2014

16.9%

Source: IAB Internet Advertising Revenue Report, FY 2014

PwC PwC 8

April 2015

Strong Growth between Q3 2014 and Q4 2014

Revenue in Q4 2014 was $1.94 billion higher than in Q3 2014.

In b

illi

on

s

$12.21

$14.15

Q3 2014 Q4 2014Source: IAB Internet Advertising Revenue Report, FY 2014

PwC PwC

Source: IAB Internet Advertising Revenue Report, FY 2014

9

April 2015

Strong Growth between Q3 2014 and Q4 2014

In b

illi

on

s

$12.21

$14.15

Q3 2014 Q4 2014

15.9% Revenue in Q4 2014 was $1.94 billion higher than in Q3 2014.

PwC PwC

Source: IAB Internet Advertising Revenue Report, FY 2014

10

April 2015

Quarterly growth continues upward trend Quarterly growth comparison, 1996–2014

In b

illi

on

s

$14

Q4 2014 revenues crossed $14 billion

for the first time

’97 ’98 ’99 ’09 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’10 ’11 ’12 ’13 ’14 ’96

PwC PwC 11

April 2015

2014 shows record revenues Annual revenue 2005-2014

In b

illi

on

s

12.5

16.9

21.2 23.4 22.7

26.0

31.7

36.6

42.8

49.5

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Total Internet

Source: IAB Internet Advertising Revenue Report, FY 2014 * CAGR: Compound Annual Growth Rate

PwC PwC 12

April 2015

2014 shows record revenues Annual revenue 2005-2014

In b

illi

on

s

12.5 16.9

21.2 23.4 22.7 25.4

30.1 33.2

35.7 37.0

0.6

1.6

3.4

7.1

12.5

12.5

16.9

21.2 23.4 22.7

26.0

31.7

36.6

42.8

49.5

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Mobile

Non-Mobile110% Mobile CAGR

10% Non-mobile CAGR

Source: IAB Internet Advertising Revenue Report, FY 2014 * CAGR: Compound Annual Growth Rate

PwC PwC

$19.0

$2.7 $1.9

$12.5

$3.3

$8.0

$0.8 $1.4

3% 4% 7%

76%

17%

1% 1%

6%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

$-

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

Search Classifieds &Directories

Lead Generation Mobile Digital VideoCommercials

Banners Ads Sponsorship Rich Media

2014 Revenue 2014 vs. 2013 % Growth

Source: IAB Internet Advertising Revenue Report, FY 2014

13

April 2015

Mobile shows the strongest YoY growth Advertising formats – 2014 results and growth rates

In b

illi

on

s

PwC PwC

Source: IAB Internet Advertising Revenue Report, FY 2014

14

April 2015

Historical trends in internet advertising formats Revenue share by major ad formats, 2006–2014

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Search Mobile Banner Classifieds Digital Video LeadGeneration

Rich Media

2006 2007 2008 2009 2010 2011 2012 2013 2014

% o

f to

tal

re

ve

nu

e

PwC

Distributing Mobile across formats demonstrates its importance to Search and Display

38%

27%

10%

25%

Search Display Other Mobile

Formats –2014 (Mobile separated)

15

April 2015 Source: IAB Internet Advertising Revenue Report, FY 2014

PwC

Distributing Mobile across formats demonstrates its importance to Search and Display

38%

27%

10%

25%

Search Display Other Mobile

Formats –2014 (Mobile separated)

Formats –2014 (Mobile included)

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April 2015

50%

40%

10%

Search Display Other

Source: IAB Internet Advertising Revenue Report, FY 2014

PwC PwC

Social media demonstrates continued growth Social media ad revenues, 2012 –2014

Source: IAB Internet Advertising Revenue Report, FY 2014

17

April 2015

In b

illi

on

s

* CAGR: Compound Annual Growth Rate

PwC PwC

Source: IAB Internet Advertising Revenue Report, FY 2014

18

April 2015

Performance-based pricing shows slight uptick Internet ad revenues by pricing model, 2013 vs. 2014

Total – $42.8 billion

Total – $49.5 billion

PwC

Historical pricing model trends Internet ad revenues by pricing model, 2005–2014

46% 48%

45%

39% 37%

33% 31% 32% 33% 33%

41%

47%

51%

57% 59%

62% 65% 66% 65% 66%

13%

5% 4% 4% 4% 5% 4% 2% 2% 1%

0%

10%

20%

30%

40%

50%

60%

70%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

CPM Performance Hybrid

% o

f to

tal

re

ve

nu

e

Note: Pricing model definitions may have changed over the time period depicted both within the survey process and as interpreted by respondents

19

April 2015

Source: IAB Internet Advertising Revenue Report, FY 2014

PwC

4% 5% 5%

7% 6%

9% 9%

12% 13%

21%

4% 5% 5%

6% 7%

8% 9%

12% 13%

21%

EntertainmentPharma &Healthcare

MediaConsumerElectronics &

Computers

ConsumerPackaged

Goods

Leisure TravelTelecomAutoFinancialServices

Retail

FY 2014 FY 2013

Internet ad revenues by major industry category $42.8 B in 2013 vs. $49.5 B in 2014

% o

f to

tal

re

ve

nu

e †

20

April 2015

† Amounts do not total to 100% as minor categories are not displayed.

Source: IAB Internet Advertising Revenue Report, FY 2014

PwC PwC

Historical advertising growth of media Comparative U.S. advertising media annual ad revenue growth for first 5 years (In billions)

21

$0

$2

$4

$6

$8

$10

$12

$14

Broadcast TV*(1949-52)

Cable TV*(1980-83)

Internet*(1996-99)

Mobile(2010-14)

Year 1 Year 2 Year 3 Year 4 Year 5

110% CAGR

135% CAGR

79% CAGR

69% CAGR

Compound Annual Growth Rate (CAGR)

Sources: IAB/PwC Internet Ad Revenue Report, FY 2014; McCann-Erickson Sources: IAB/PwC Internet Ad Revenue Report, FY 2014; McCann-Erickson

April 2015 *Adjusted for Inflation

PwC PwC October 9, 2013

PwC New Media Group

As business, accounting, and tax advisors to many of the world’s leading Entertainment, Media, and Communications (EMC) and Technology (Tech) companies, PwC (www.pwc.com) has an insider’s view of trends and developments driving the industry. With approximately 1200 practitioners serving EMC and Tech clients in the United States, PwC is deeply committed to providing clients with industry expertise and resources. In recent years, our pioneering work in EMC and Tech has included developing strategies to leverage digital technology, identifying new sources of financing, and marketplace positioning in industries characterized by consolidation and transformation. Our experience reaches across all geographies and segments of the EMC and Tech sectors, including broadband, wireless, the Internet, music, film, television, publishing, advertising, gaming, theme parks, computers and networking, and software. With thousands of practitioners around the world, we are always close at hand to provide deep industry expertise and resources.

PwC’s New Media Group was the first practice of its kind at a Big Four firm. Currently located in New York, Los Angeles, Boston, Seattle and the Bay Area, our New Media Group includes accounting, tax and consulting professionals who have broad and deep experience in the three areas that converge to form new media: advanced telecommunications, enabling software and content development/distribution.

Our services include:

• Business assurance services

• Web audience measurement and advertising delivery auditing and advisory

• IAB Measurement Certification Compliance auditing

• Privacy policy structuring, attestation and compliance advisory

• Mergers & Acquisition assistance

• Tax planning and compliance

• Capital sourcing and IPO assistance

22

April 2015 Source: IAB Internet Advertising Revenue Report, FY 2014

PwC PwC October 9, 2013

For information about our New Media Group, contact one of the following PwC professionals: New York

David Silverman Partner, Assurance Services 646.471.5421 david.silverman@us.pwc.com York

Russ Sapienza Partner, Advisory Services 646.471.1517 russell.j.sapienza@us.pwc.com Stephanie Faskow Manager, Advisory Services 954.604.1968 Stephanie.faskow@us.pwc.com

23

PwC New Media Group Contacts

April 2015 Source: IAB Internet Advertising Revenue Report, FY 2014

PwC

www.pwc.com/e&m

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