2020 Foresight

Jordan Rohan
jrohan@stifel.com
@jordanrohan
February 13, 2014
Stifel does and seeks to do business with co...
2020 Foresight

Who am I?

Why am I here?

What do I hope to accomplish today?

1
2020 Foresight
Introduction

Media and marketing are changing in profound ways –
marketers need to invest, experiment, and...
2020 Foresight

…What these buzzwords really describe

Context

Intent

Identity

Location and Proximity

3
2020 Foresight
Brief History of Advertising and Audience Targeting

1950s-70s – Broadcast television enables marketers to ...
2020 Foresight
Brief History of Advertising and Audience Targeting (cont’d)

1970s – Segmentation advances: Cable televisi...
2020 Foresight
Brief History of Advertising and Audience Targeting (cont’d)

2000-2010 – Google turned advertising on its ...
2020 Foresight
Paid Search Driven by Google, Monetizing Intent

Google’s dominance driven by massive scale, intent, data, ...
2020 Foresight
Brief History of Advertising and Audience Targeting (cont’d)
2010 and beyond – Millions of publishers offer...
2020 Foresight
Social Media Spend Driven by Facebook, Introducing Identity

Facebook’s growth driven by massive scale, ide...
2020 Foresight
Local Businesses Adopting Digital Marketing

No clear leader in local advertising… yet

Digital
Local
Spend...
2020 Foresight
… That page again, with the category leaders

Context

Intent

Identity

Location and Proximity
No winner y...
2020 Foresight
Brief History of Advertising and Audience Targeting (cont’d)

2010+ – Facebook ushers in a new era of Micro...
2020 Foresight
Many Players Trying to Win in Local and Proximity-based Marketing

13

Source: company websites
2020 Foresight

But local and proximity-based marketing is not solely about
keywords and bid prices

The approach requires...
2020 Foresight
Mobile Devices Make It Possible to Reach People Everywhere… Now what?

Smartphone shipments are expected to...
2020 Foresight
Internet Themes – Connected Devices

Connected Devices Now Outnumber People in the World By 2020, there cou...
2020 Foresight
Internet Themes – The Internet of Things

Situational Targeting of every person in every location based
on ...
2020 Foresight
How do we think about all this?

The best overall athlete wins
Lebron James Stats
Age: 29 years

Height: 6’...
2020 Foresight
Characteristics of the Best Athlete

Five common characteristics of the leading
consumer-facing Internet pl...
2020 Foresight
The Dominant Digital dozen
Each of our Dominant Digital Dozen companies exhibits at least 4 out of 5 key tr...
2020 Foresight
Future of Advertising

Minority Report

21

Source: Twentieth Century Fox
2020 Foresight
Conclusions

1. The proliferation of connected devices requires situational
targeting around location and p...
2020 Foresight
Important Disclosures and Certifications
Important Disclosures and Certifications
We, Jordan E. Rohan and M...
2020 Foresight
Important Disclosures and Certifications (Continued)
Stifel's research analysts receive compensation that i...
2020 Foresight
Important Disclosures and Certifications (Continued)
Additional Disclosures
Please visit the Research Page ...
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K^2 Presentation: 2020 Foresight - Jordan Rohan

  1. 1. 2020 Foresight Jordan Rohan jrohan@stifel.com @jordanrohan February 13, 2014 Stifel does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. All relevant disclosures and certifications appear on pages 23-25 of this report.
  2. 2. 2020 Foresight Who am I? Why am I here? What do I hope to accomplish today? 1
  3. 3. 2020 Foresight Introduction Media and marketing are changing in profound ways – marketers need to invest, experiment, and adapt quickly. Drivers of Change Social Local Media and other forms of influence-based marketing Local digital marketing, including proximity Mobile Programmatic Proliferation of mobile connected devices Ability to target consumers using programmatic approach 2
  4. 4. 2020 Foresight …What these buzzwords really describe Context Intent Identity Location and Proximity 3
  5. 5. 2020 Foresight Brief History of Advertising and Audience Targeting 1950s-70s – Broadcast television enables marketers to reach mass audiences for the first time. Sponsorships emerge, aligning brands with specific television programs. Advertisers Agencies Networks “The Big Three” Shows Very Basic Audience Segments J. Walter Thompson NBC McCann-Erickson Young & Rubicam CBS Barton, Durstine & Osborn 4 Source: Company websites
  6. 6. 2020 Foresight Brief History of Advertising and Audience Targeting (cont’d) 1970s – Segmentation advances: Cable television enables marketers to narrow focus around targeted programs on specific channels Television – dozens of large advertisers, working w/ a dozen large agencies Agencies Networks Channels Fourth network Advertisers 50+ by 1990 J. Walter Thompson A Few More Audience Segments Young & Rubicam NBC Barton, Durstine & Osborn Leo Burnett Ted Bates Mostly based on gender, age, income 5 Source: Company websites
  7. 7. 2020 Foresight Brief History of Advertising and Audience Targeting (cont’d) 2000-2010 – Google turned advertising on its head, as it leveraged the ultimate “database of human intent.” Keyword-based targeting emerged. Advertisers Several Million Search Destinations Keyword Targeting Reigns Harness Human Intent Major Corporations Small/Medium-Sized Businesses 6 Source: Company websites
  8. 8. 2020 Foresight Paid Search Driven by Google, Monetizing Intent Google’s dominance driven by massive scale, intent, data, and a bit of context and identity Google U.S. Search Revenues % of Total 7 Source: BI/Kelsey, Stifel estimates
  9. 9. 2020 Foresight Brief History of Advertising and Audience Targeting (cont’d) 2010 and beyond – Millions of publishers offer inventory on dozens of exchanges with hundreds of intermediaries using cookie-based tracking to combine intent with demographics Facebook ushers in a new era of micro-segmentation of audience by verified personal information and becomes the largest publisher Agencies DSPs Exchanges #1 Publisher Networks Intent-Aware Audience Targeting Re-Emerges Auto Health - Used/New /Imported car buyers - Fitness buffs - Individuals on a diets Lifestyle - Football fans - Singles - Parents - Ex-military Travel - Business/ vacation/ winter sports travelers Technology - Early adopters - Computer shoppers - Gadget lovers Finance - Loan seekers - Stock traders - Retirement planners Entertainment - Book readers - TV enthusiasts - Comedy fans - Video game players Shopping - Budget conscious - Affluent consumers 8 Source: Company websites
  10. 10. 2020 Foresight Social Media Spend Driven by Facebook, Introducing Identity Facebook’s growth driven by massive scale, identity, and data Facebook U.S. Ad Revenues % of Total 9 Source: BI/Kelsey, Stifel estimates
  11. 11. 2020 Foresight Local Businesses Adopting Digital Marketing No clear leader in local advertising… yet Digital Local Spending % of Total 10 Source: BI/Kelsey, Stifel estimates
  12. 12. 2020 Foresight … That page again, with the category leaders Context Intent Identity Location and Proximity No winner yet 11
  13. 13. 2020 Foresight Brief History of Advertising and Audience Targeting (cont’d) 2010+ – Facebook ushers in a new era of Micro-segmentation of Audience by Verified Personal Information Advertisers – Anyone and Everyone Corporations SMBs Individuals Publishers – Newsfeeds Hundreds of millions of users log billions of impressions in social media newsfeeds on multiple devices Audience Segments – Down to the individual regardless of device The various “graphs” mapped by major platforms can triangulate specific, actionable characteristics to create a robust identity that marketers can target across any device 12 Source: Company websites, enterprise20
  14. 14. 2020 Foresight Many Players Trying to Win in Local and Proximity-based Marketing 13 Source: company websites
  15. 15. 2020 Foresight But local and proximity-based marketing is not solely about keywords and bid prices The approach requires data-infused logic, testing and iteration, and machine learning And … “Situational Targeting” 14
  16. 16. 2020 Foresight Mobile Devices Make It Possible to Reach People Everywhere… Now what? Smartphone shipments are expected to grow from 826 million to 2.5 billion units globally by 2020, an estimated 17% CAGR 15 Source: Seo4Site.com, statista
  17. 17. 2020 Foresight Internet Themes – Connected Devices Connected Devices Now Outnumber People in the World By 2020, there could be 5-10 connected devices per person millions Smartphones Computers Tablets Integrated Cars Smart TVs Video Game Consoles Other Connected Devices Total Total Population Number of Devices per Person 2006 Devices Penetration 328 5% 1,540 24% 500 8% 0 0% 0 0% 15 0% 13 0% 2,395 6,552 0.4 2013E Devices Penetration 1,430 20% 2,200 31% 500 7% 23 0% 150 2% 250 4% 2,700 38% 7,253 7,098 1.0 2020E Devices Penetration 5,037 66% 1,168 15% 1,095 14% 152 2% 537 7% 352 5% 40,000 NM 48,342 7,631 6.3 Other connected devices include household appliances, medical devices, wearable technology, and automated systems (public transportation, security, automated manufacturing, etc.) among many other categories All statements in this report attributable to Gartner represent Stifel's interpretation of data, research opinion or viewpoints published as part of a syndicated subscription service by Gartner, Inc., and have not been reviewed by Gartner. Each Gartner publication speaks as of its original publication date (and not as of the date of this report). The opinions expressed in Gartner publications are not representations of fact, and are subject to change without notice. 16 Source: Stifel estimates, Gartner, Statista, World Census, Various news articles
  18. 18. 2020 Foresight Internet Themes – The Internet of Things Situational Targeting of every person in every location based on every available source of data Transportation Home Security E-Commerce Efficiency Health 17 Source: company websites
  19. 19. 2020 Foresight How do we think about all this? The best overall athlete wins Lebron James Stats Age: 29 years Height: 6’ 8” Weight: 245lbs Wingspan: 7’ Body Fat: 6.7% Points/Game: 26 * Sincere apologies to Warriors fans, after last night’s buzzer beater 18 Source: NBA
  20. 20. 2020 Foresight Characteristics of the Best Athlete Five common characteristics of the leading consumer-facing Internet platforms 1. Audience Dominance 2. Mobile Engagement 3. Facility with Big Data 4. Dual Platform Monetization 5. Attractive Margin Structure 19
  21. 21. 2020 Foresight The Dominant Digital dozen Each of our Dominant Digital Dozen companies exhibits at least 4 out of 5 key traits 20 Source: Company websites, Stifel estimates
  22. 22. 2020 Foresight Future of Advertising Minority Report 21 Source: Twentieth Century Fox
  23. 23. 2020 Foresight Conclusions 1. The proliferation of connected devices requires situational targeting around location and proximity 2. Given that challenge, it is important to ally with the best marketing “athletes” 3. Marketers and software platforms also need to invest in proprietary data, tracking, and analytics Context Intent Identity Location and Proximity 22 Source: silabs.com
  24. 24. 2020 Foresight Important Disclosures and Certifications Important Disclosures and Certifications We, Jordan E. Rohan and Michael B. Purcell, certify that our respective views expressed in this research report accurately reflect our respective personal views about the subject securities or issuers; and we, Michael B. Purcell and Jordan E. Rohan, certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. For our European Conflicts Management Policy go to the research page at www.stifel.com. 23
  25. 25. 2020 Foresight Important Disclosures and Certifications (Continued) Stifel's research analysts receive compensation that is based upon (among other factors) Stifel's overall investment banking revenues. Our investment rating system is three tiered, defined as follows: BUY -For U.S. securities we expect the stock to outperform the S&P 500 by more than 10% over the next 12 months. For Canadian securities we expect the stock to outperform the S&P/TSX Composite Index by more than 10% over the next 12 months. For other non-U.S. securities we expect the stock to outperform the MSCI World Index by more than 10% over the next 12 months. For yield-sensitive securities, we expect a total return in excess of 12% over the next 12 months for U.S. securities as compared to the S&P 500, for Canadian securities as compared to the S&P/TSX Composite Index, and for other non-U.S. securities as compared to the MSCI World Index. HOLD -For U.S. securities we expect the stock to perform within 10% (plus or minus) of the S&P 500 over the next 12 months. For Canadian securities we expect the stock to perform within 10% (plus or minus) of the S&P/TSX Composite Index. For other non-U.S. securities we expect the stock to perform within 10% (plus or minus) of the MSCI World Index. A Hold rating is also used for yield-sensitive securities where we are comfortable with the safety of the dividend, but believe that upside in the share price is limited. SELL -For U.S. securities we expect the stock to underperform the S&P 500 by more than 10% over the next 12 months and believe the stock could decline in value. For Canadian securities we expect the stock to underperform the S&P/TSX Composite Index by more than 10% over the next 12 months and believe the stock could decline in value. For other non-U.S. securities we expect the stock to underperform the MSCI World Index by more than 10% over the next 12 months and believe the stock could decline in value. Of the securities we rate, 49% are rated Buy, 49% are rated Hold, and 2% are rated Sell. Within the last 12 months, Stifel or an affiliate has provided investment banking services for 19%, 9% and 0% of the companies whose shares are rated Buy, Hold and Sell, respectively. 24
  26. 26. 2020 Foresight Important Disclosures and Certifications (Continued) Additional Disclosures Please visit the Research Page at www.stifel.com for the current research disclosures and respective target price methodology applicable to the companies mentioned in this publication that are within Stifel's coverage universe. For a discussion of risks to target price please see our stand-alone company reports and notes for all Buy-rated stocks. The information contained herein has been prepared from sources believed to be reliable but is not guaranteed by us and is not a complete summary or statement of all available data, nor is it considered an offer to buy or sell any securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors. Employees of Stifel or its affiliates may, at times, release written or oral commentary, technical analysis or trading strategies that differ from the opinions expressed within. Past performance should not and cannot be viewed as an indicator of future performance. Stifel is a multi-disciplined financial services firm that regularly seeks investment banking assignments and compensation from issuers for services including, but not limited to, acting as an underwriter in an offering or financial advisor in a merger or acquisition, or serving as a placement agent in private transactions. Moreover, Stifel and its affiliates and their respective shareholders, directors, officers and/or employees, may from time to time have long or short positions in such securities or in options or other derivative instruments based thereon. These materials have been approved by Stifel Europe Limited, authorized and regulated by the Financial Conduct Authority (FCA) in the UK, in connection with its distribution to professional clients and eligible counterparties in the European Economic Area. (Stifel Europe Limited home office: London +44 20 7557 6030.) No investments or services mentioned are available in the European Economic Area to retail clients or to anyone in Canada other than a Designated Institution. This investment research report is classified as objective for the purposes of the FCA rules. Please contact a Stifel entity in your jurisdiction if you require additional information. Additional Information Is Available Upon Request © 2014 Stifel, Nicolaus & Company, Incorporated, One South Street, Baltimore, MD 21202. © 2014 Stifel Nicolaus Canada Inc. 79 Wellington Street West, 21st Floor Toronto, ON M5K 1B7 All rights reserved. 25

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