Display Advertising 2.

0:
New Perspectives on a Changing Landscape July 18, 2011

Joshua Wepman
GCA Savvian Advisors

Where We Are Today

Agencies Media Buying Desks DSPs Ad Exchanges Ad Networks Sharing Data/ Social Tools

A D V E R T I S E R S
Ad Servers

Video / Rich Media SSPs

Vertical Custom

Creative Optimization

Media Planning and Attribution

DMPs and Data Aggregators

Targeted Networks / AMPs

Publisher Tools

Performance

P U B L I S H E R S

A U D I E N C E

Retargeting

Measurement and Analytics Verification

Ad Servers Data Suppliers Mobile

Media Mgmt Systems

Ad Operations

Landscape Observations
Agencies Media Buying Platforms DSPs Ad Exchanges Ad Networks Horizontal Sharing Data / Social Tools

Trading Desk

A D V E R T I S E R S
Ad Servers

Video / Rich Media

Yield Optimization

Vertical

Targeted Creative Optimization Data Optimization Data Exchanges / Aggregators Performance

Publisher Tools

P U B L I S H E R S

A U D I E N C E

Ad Servers Verification / Attribution

Analytics

Data Suppliers

Mobile

Ad Ops / Infrastructure

Online Advertising Accelerating

Q1 2011 Was Highest Q1 Ever
$8 $7 $6 $5 ($Bn) $4 $3 $2 $1 $0

$7.3 Bn

The display advertising market is forecast to grow over 30% more than the overall online advertising market from 2009 to 2014
Notes: Source: Interactive Advertising Bureau (IAB).

 But Exchange-Based Buying is Still a Small Market

Agencies Media Buying Desks DSPs Ad Exchanges Ad Networks Sharing Data/ Social Tools

Exchange-Based Buying Market

A D V E R T I S E R S

$14.0 $12.3 $12.0 $10.0 ($ ($Bn) $8.0

Vertical Custom Video / Rich Media

$10.0

Yield Optimization

$6.0 Creative
Optimization

$4.0 $2.0 $0.0

Retargeting

Media Planning and Attribution

DMPs and Data Aggregators

Targeted Networks / AMPs

Publisher Tools

$0.7
Performance

$1.4

P U B L I S H E R S

A U D I E N C E

2010A
Measurement Display Advertising and Analytics Verification Data Suppliers

2011E Exchange-Based Buying

Mobile Ad Servers

Ad Servers

Despite doubling YoY, exchange-based ad buying is expected to continue to be a small part of the overall display ad market
Media Mgmt Systems Ad Operations

Notable Trends
Brands increasingly moving their ad spend online The rise of private exchanges, proprietary data sets and premium ad networks Brands fully embrace digital video and social Google (and others) continue to march across the display advertising landscape Agencies and ad networks recognize the challenges and respond Appearance of comprehensive marketing solutions providers
6

Brands Moving Online

DRIVERS: High impact formats (video, rich media and new, engaging formats) Increasing transparency and sense of brand safety Following the audience (time spent) Real ROI

 But There Are Challenges

Which metrics are most valuable for brand-building campaigns?

60% 50% 40% 30% 20% 10% 0%

Percent of Respondents

What brand marketers want

What brand marketers get

Notes: Source: Bain & Company

Brands Care About the Top of the Funnel

Brands focused here Brand Awareness Favorability

Awareness

Opinion Current metrics and new technologies focused here Clickthrough Time spent Interaction Conversion / sales

Consideration

Intention

Sales

The metrics that brands care about correspond to top of funnel activities rather than conversion and click throughs
9

Brands Care About Inventory Quality

By buying on longer tail sites, audience targeting exposes brands to the potential to advertise against questionable content
10

Brand-Oriented Solutions Offer Quality and Safety

Premium Networks High quality properties Brand-safe inventory Engaging formats

Video Networks Professional video content In-stream ad units Access to inventory at scale

Private Exchanges Leading publishers and advertisers RTB capabilities Proprietary, differentiated data

11

The Rise of Private Exchanges

Premium publisher inventory & data Optimized Pricing

Category 5 Private Exchange

Real time biddable inventory Transparent

Private exchanges enable brands to buy safe, targeted inventory while enabling publishers to enter RTB market and protect CPMs
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Video is Growing and Outpacing Other Formats

US Online Video Ad Spending ($Bn) (1) $8.0 $7.1

US Online Ad Spending Growth by Format (1)

Format 2010 Ad Spend ($Bn) $12.0 6.2 2015 Ad Spend ($Bn) $21.5 11.7 2010 ~ 2015 CAGR 12% 14%

Search

$6.0

$5.6

Banner Ads Classifieds and Directories

2.6

4.3

11%

$4.2 $4.0 $3.1 $2.2 $2.0 $1.4

Sponsorships Email 0.7 0.2 $26.0 1.5 0.2 $49.5 15% 2% 14% Rich Media Video Lead Generation 1.5 1.4 1.3 1.7 7.1 1.5 2% 38% 3%

$0.0 2010 2011 2012 2013 2014 2015

Total

Notes: Source: Wall Street Research.

13

Video Value Chain Fragmented Like Display

Delivery / Content Management Aggregation / Portals

Content Creators

Publishing Tools

Enablers

Monetization

Like display, there are several areas across the video value chain that will benefit from the growth in online brand advertising
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Online Video Growth Drivers

vs.

Audience viewing habits changing; moving to timeshifted media consumption Video streaming represents 32% of time spent online Online video advertising more engaging than TV Video advertising promotes greater brand recall Beginning to draw from TV budgets Improved targeting technology
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Impact of Social Media

Social media is altering the purchase funnel and creating a closed loop between awareness & branding Data from Facebook, Twitter, reviews, comments and other social platforms being used by marketers to drive branding and conversion Building a social presence is of increasing importance to brands

Awareness

Sales

Social is a key component of online brand advertising campaigns

16

Agencies Recognizing the Challenges

17

Google Gets It
Agencies Media Buying Desks DSPs Ad Exchanges Ad Networks Sharing Data/ Social Tools

A D V E R T I S E R S
Ad Servers

Video / Rich Media SSPs

Vertical Custom

Creative Optimization

Media Planning and Attribution

DMPs and Data Aggregators

Targeted Networks / AMPs

Publisher Tools

Performance

P U B L I S H E R S

A U D I E N C E

Retargeting

Measurement and Analytics Verification

Ad Servers Data Suppliers Mobile

Media Mgmt Systems

Ad Operations

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So Do Ad Networks
Networks creating new offerings, pivoting or acquiring businesses that bring desired capabilities
Ad Networks

Video / Rich Media

Some ad networks have attempted to transform their core business models to address new needs
Vertical Custom

Targeted Networks / AMPs

Others have acquired desired capabilities

Performance

Mobile

Networks need to evolve to survive and succeed

Media Mgmt Systems

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Who Else is Meeting the Needs of Brands?

20

The Quest for Integrated Solutions

CMO
Display Ad Tech Point Providers Creative Optimization Vendors Data Management Platforms

RTB

Retargeting

Integrated Display Advertising Optimization Solution Provider

While the landscape is full of point providers, todays CMO is looking for comprehensive solutions providers that can drive efficiencies
21

Decade of the CMO

Focus has moved from CTOs office to CMOs office in quest to grow business while maximizing ROI Ever increasing options for the CMO across multiple channels (TV, radio, print, online display, digital video, search, etc.) Increasing complexity and proliferation of technologies designed to drive efficiency Ever-evolving landscape with alphabet soup of vendors In todays constrained environment, the CMO is tasked with finding creative ways to grow top line while maximizing bottom line
22

CMO

Consolidation is Inevitable

Digital Media M&A Transactions

$8,000 Digital Media Deal Value ($ MM) (1)

Marketers are demanding comprehensive solutions to managing their online marketing spend

$6,000

Current landscape is too fragmented and confusing

$4,000

$2,000

New entrants, such as large cap enterprise software providers and ad networks, are becoming more active in ad tech M&A

$0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2009 2010 2011

Large technology companies have record amount of cash on balance sheet and are looking to deploy it for growth

Notes: (1) GCAS database.

23

Strategic M&A and Investment Activity

24

Private-to-Private Transactions Increasing

Recently, there has been an up-tick in private-to-private M&A deal activity Larger private companies using M&A to:
Increase scale in advance of IPO or other event Broaden suite of product offerings to meet needs of advertisers Evolve business Take advantage of price capitulation

Acquired

Acquired

Acquired

Acquired

Acquired

July 2011

April 2011

February 2011

February 2011

December 2010

Acquired

Acquired

Acquired

Acquired

Acquired

November 2010

November 2010

November 2010

October 2010

October 2010

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Return Formula More Important Now

Billions invested in ad tech landscape over last few years Focus on investment returns may drive near-term consolidation Time is important element of determining investment returns

Return

n(

1 t-1

26

Diverse Strategic Interest in Ad Tech Innovators

Marketing Agency Targets

Technology Network / Data

Ad Networks

27

Diverse Strategic Interest in Demand-Side Ad Tech

Strategic Fit

Ability / Willingness to Pay

28

Key Takeaways

Exchange-based buying will be an important component of display but only a component Real revenue will continue come from direct buys and brandoriented solutions Private exchanges and programmatic premium buys will continue to proliferate and grow Video and social will become dominant branding markets Maybe agencies and networks will be okay The CMO needs help and comprehensive solutions This will continue to be a strategically important market Thank You
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GCA Savvians Digital Media Advisory Business

TOKYO SAN FRANCISCO MENLO PARK CHICAGO NEW YORK LONDON MUMBAI SHANGHAI

Leading investment banking firm with over 200 professionals worldwide Services include advice on mergers and acquisitions, private capital finance and restructurings Advised on over $70 billion in transactions since 2006 Leading advisor to media companies new and old

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Leading Global Independent Advisory Firm

Selected Cross-Border Transactions

Acquisition of Divestiture of U.S. Venture Portfolio

Acquired by

Acquired by

Acquired by

Formation of JV with

Tender Offer

Semiconductor Business

$150MM

$522MM

$5.9Bn
Preferred Equity Investment and Credit Facility

$9Bn

Acquired by Sold Stake in to

TOB of Common Stock of

Acquired by

Acquired by

Acquired by

$448MM

$75MM $500MM

$10.8Bn

$747MM

$300MM

$493MM

$1.3Bn
Acquisition of Formation of JV with Acquisition of
GmB H Automotive ATE Operations

Acquired by

Acquisition of

Acquisition of

Acquisition of
Next Gen. Mobile Comm. Systems Assets

Acquisition of

Yamakawa Trading Co.

$690MM

$1.6Bn

$400MM

PVOH Business

$125MM

Acquisition of

Acquired by

Acquired by

Over 50 successful cross-border transactions representing nearly 15 different countries

Acquisition of

Select OP-1 Assets & Manufacturing Facility

$1.1Bn

Offices in San Francisco, Menlo Park, Chicago, New York, London, Mumbai, Shanghai and Tokyo

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Proven Leadership in Digital Media Transactions

Acquired By

Acquired By

Sale of Subscription Music Service to

Acquisition of JV from Mogae Consultants

Sale of Business Unit Six Apart KK to

Secondary Sale

Preferred Stock

Acquired by

Acquisition of

We Advised the Seller May 2011

We Advised the Seller April 2011

We Advised the Seller

We Advised the Buyer

We Advised the Seller

We Advised the Founders

Financial Advisor

We Advised the Seller

We Advised the Buyer

March 2011

January 2011

January 2011

January 2011

December 2010

December 2010

November 2010

Preferred Stock

Acquired by

Acquisition of

Preferred Stock

Acquired by

Acquired by

Acquired by

Acquired by

Acquired by

Financial Adviser

We advised the seller

We Advised the Buyer

Financial Advisor

We Advised the Seller

We Advised the Seller

We Advised the Seller

We Advised the Seller

We Advised the Seller

October 2010

October 2010

October 2010

August 2010

July 2010

June 2010

June 2010

June 2010

January 2010

1UP Digital Netw ork

Sold Stake in Preferred Stock Acquired by

a Subsidiary of

Preferred Stock

Preferred Stock

Acquired by

Minority Preferred Investment in

Preferred Stock
to

Preferred Stock

Financial Advisor

We Advised the Seller

Financial Advisor

Financial Advisor

We Advised the Seller

Financial Advisor

Financial Advisor

We Advised the Seller

Financial Advisor

October 2009

April 2009

February 2009

January 2009

January 2009

November 2008

November 2008

October 2008

August 2008

Preferred Stock

Preferred Stock

Preferred Stock

Preferred Stock

Preferred Stock

Acquired by

Preferred Stock

Preferred Stock & Recapitalization

Acquisition of

Financial Advisor

Financial Advisor

Financial Advisor

Placement Agent

Financial Advisor

We Advised the Seller

Placement Agent

Placem ent Agent

Mobile Services Business We Advised the Buyer

July 2008

July 2008

June 2008

April 2008

March 2008

February 2008

January 2008

January 2008

December 2007

Acquired by

Acquired by

Acquired by

Acquisition of

Acquired by

Senior Credit Facility

Preferred Stock

Merger with

Minority Investment in
FRONTLINE MANAGEMENT

We Advised the Seller

We Advised the Seller

We Advised the Seller

We Advised the Buyer

We Advised the Seller

Financial Advisor

Placement Agent

We Advised INTAC

Financial Advisor

December 2007

December 2007

December 2007

October 2007

October 2007

October 2007

October 2007

October 2007

August 2007

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