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  • 1. 2009 Internet Advertising Revenue Report Rethinking the Market Opportunity April 7, 2010 Terence Kawaja GCA Savvian Advisors
  • 2. Interactive Advertising is on a Long Term Growth Path… $40 $35 $30 GR = 12% $25 CA $23.4 $22.7 $ Billions $21.2 $20 $16.9 $15 $12.5 $9.6 $10 $8.1 $7.1 $7.3 $6.0 $5 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Online Ad Spend ($Bn) Notes: Source: IAB / PricewaterhouseCoopers internet advertising revenue reports.
  • 3. …But Has Much More Upside Potential Media Consumption vs. Ad Spend, 2009 TV Newspapers Radio Magazines Online 0% 10% 20% 30% 40% 50% % ad spending by media % of time households spend by media Notes: Source: Wall Street research, 2010. (1) As a percentage of ad spending on the media channels indicated above only: TV, Newspaper, Radio, Magazines and Online.
  • 4. The Crowded Display Ad Tech Landscape Agencies Media Buying Ad Ad Networks Sharing Data / DSPs Platforms Exchanges Social Tools Horizontal Trading Desk A P D U A Video / Rich Media Yield V Optimization B U E L D R Vertical I I T E S N I Targeted Publisher H C S Creative Data Optimization Data Exchanges / Tools E E Optimization Aggregators E R Performance R S S Ad Servers Ad Servers Analytics Verification / Data Suppliers Mobile Attribution Ad Ops / Infrastructure
  • 5. Deals are Back and Consolidation is Coming Recent Digital Media Acquisitions: Global Tech Transactions $10MM - $1.0Bn (1) 54 Transaction Volume ($Bn) $16 50 60 Number of Transactions 49 45 50 $12 34 40 30 30 $8 $10 $10 30 $9 20 $8 $7 20 $4 $4 $4 10 $3 $0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 Transaction Volume ($Bn) Number of Transactions Notes: (1) Source: FactSet as of 2/28/10; Includes global announced acquisitions in the specified range of transaction sizes; excludes minority investments, JVs etc.; includes all transactions with target in Electronic Technology, Technology Services, and Communications sectors as defined by FactSet.
  • 6. Convergence in the Purchase Funnel Purchase Funnel Metric Example Companies Impression CPM Search CPC Lead CPL Data Customer CPA Sale Transaction
  • 7. Going After the Elephant in the Room: TV US Video & Display Advertising, 2009 ($MM) • Online video is currently a $0.5 fraction of total TV and $6.7 online spending • The holy grail is achieved when digital video is part of the television budget • Much of the media $73.2 optimization techniques honed in online can be applied to TV audiences Television Display & In-Page Video In-Stream Video • Shift in agency dynamic and marketer mindset is key Notes: Source: VSS Communications, August 2009; eMarketer, December 2009.
  • 8. Achieving the Holy Grail: Solving for Attribution TELEVISION Several links in the attribution chain are missing: – Online to online (the last click phenomenon) – Online to offline – Offline to online Technology is improving data collection and analysis DIGITAL which will allow for the discovery of “digital footprints” Once attribution is achieved, there is no reason all media cannot be optimized Already, several interesting technologies have been RETAIL deployed: – TV set top box measurement – Mobile location-based services
  • 9. Rethinking the Market Opportunity Forecasts show the interactive channel growing to $50+ billion in 5 years – Represents an linear, evolutionary approach – The challenge is to think revolution, not evolution – How does interactive get to a $100 billion marketplace? – Think new definition for “interactive” to go beyond online • Digitally-addressable video (aka TV) • Offline commerce enablement • Mobile Several reasons for a revolution – Innovation (eg. media optimization, real time phenomenon) – Simplification (less point solutions) – Consolidation (entry of larger players) – Attribution (eg. TV, offline retail)
  • 10. Putting $100 Billion in Perspective Healthcare reform for one year War in Iraq and Afghanistan for a year Cost of recent bank failures to the FDIC A controlling stake in Google (at market)
  • 11. GCA Savvian’s Digital Media Advisory Business Terence Kawaja Managing Director +1 212.999.7082 tkawaja@gcasavvian.com John Lambros Managing Director +1 212.999.7083 jlambros@gcasavvian.com Steven Fletcher TOKYO • SAN FRANCISCO • CHICAGO • NEW YORK • LONDON Managing Director +1 415.318.3661 sfletcher@gcasavvian.com Leading investment banking firm with over 200 professionals worldwide Services include advice on mergers and acquisitions, private capital finance and restructurings Advised on over $60 billion in transactions since 2006 Advisor to media companies new and old