Advertising Exchanges: Open the Market! Jay Sears Senior Vice President, Strategic Products and Business Development ContextWeb, Inc. 917-408-6300 or [email_address]

IAB Conference February, 2008

“ My Space is Your Space” Current state is “daunting but exhilarating” The “consumer is calling the shots” There are many “strange bedfellows” Let’s sell value, not price Let’s “distinguish between quality and commodity” We “must not trade our assets like pork bellies” Wenda Harris Millard IAB Conference February, 2008

Current state is “daunting but exhilarating”

The “consumer is calling the shots”

There are many “strange bedfellows”

Let’s sell value, not price

Let’s “distinguish between quality and commodity”

We “must not trade our assets like pork bellies”

Brian McAndrews SVP of Advertiser and Publisher Solutions Microsoft, Inc. Former CEO, aQuantive IAB Conference February, 2008

Rob Norman, Group M IAB Conference February, 2008 “ Holy crap!! What now?”

Ad Exchanges Why Now? Media Fragmentation Current Marketplace Responses Portals, Sites, Ad Networks React What is an Ad Exchange? What Problems are Being Solved Questions to Ask Your Ad Exchange

Why Now?

Media Fragmentation

Current Marketplace Responses

Portals, Sites, Ad Networks React

What is an Ad Exchange?

What Problems are Being Solved

Questions to Ask Your Ad Exchange

Media Fragmentation Started in the 1980s 2004 Friends – Series Finale 12.8 Nielsen rating Most-watched show in 4 years 1986 Head of the Class 12.8 Nielsen rating #40 show that year

Media Fragmentation Started in the 1980s

Today, media is fragmented 13,500 radio stations (4,400 in 1960) 17,300 magazine titles (8,400 in 1960) 82.4 TV channels per home (5.7 in 1960) And the Web… Millions of sites Billions of pages More Choice - The Proliferation of Media

Today, media is fragmented

13,500 radio stations (4,400 in 1960)

17,300 magazine titles (8,400 in 1960)

82.4 TV channels per home (5.7 in 1960)

And the Web…

Millions of sites

Billions of pages

Where Did Everybody Go? Decreased attention - consumers are tuning out Fragmented audience - there are more places for them to go Proactive advertising avoidance – less ability to be seen Decreased media efficiency – audiences going down, but prices are increasing or holding Increased consumer control - pull vs. push Evolution of a completely new set of consumer habits & expectations Democratization of content – consumers as creators as well as consumers: “Citizens Media”

Decreased attention - consumers are tuning out

Fragmented audience - there are more places for them to go

Proactive advertising avoidance – less ability to be seen

Decreased media efficiency – audiences going down, but prices are increasing or holding

Increased consumer control - pull vs. push

Evolution of a completely new set of consumer habits & expectations

Democratization of content – consumers as creators as well as consumers: “Citizens Media”

Media Fragmentation While portals were once the dominant source of news and information, page views on the top 3 portals declined 18% from August 2004 to August 2007 vs. an overall 21% total internet growth in page views. BUT, media spend is still lopsided—over 75% of media spend goes to the top 10 Internet properties

While portals were once the dominant source of news and information, page views on the top 3 portals declined 18% from August 2004 to August 2007 vs. an overall 21% total internet growth in page views.

BUT, media spend is still lopsided—over 75% of media spend goes to the top 10 Internet properties

15-month Trend Line

The Long Tail is The Passion Tail TheStreet.com & Cramers-Mad-Money.com FoodNetwork.com & JoyOfBaking.com SI.com & ChicagoHoops.com Consumers use the “Long Tail” to pursue their passions. Brands want passionate users. Passionate users are in the right mindset for a brand message. Consumers live their “passion” across sites of all sizes

TheStreet.com & Cramers-Mad-Money.com

FoodNetwork.com & JoyOfBaking.com

SI.com & ChicagoHoops.com

Consumers use the “Long Tail” to pursue their passions.

Brands want passionate users.

Passionate users are in the right mindset for a brand message.

Pages of “Passion” The “Passion Tail” is composed of pages – not sites. 75% of site entry is a “deep dive” via search. The Street.com Home Page Investing Mutual Funds Cramer’s Mad Money Google AOL TheStreet.com Cramers-mad-money.com # of Visits # of Visits The Web Passion Passion

The “Passion Tail” is composed of pages – not sites.

75% of site entry is a “deep dive” via search.

Offline vs. Online: Time Should Mean Money * Forrester Research, 2006 ** Internet Advertising Bureau Online Time Online Money 5.8% 19%

Fat Tail vs. Passion Tail 77% of dollars Size of Sites Passion # of Sites Pages of Passion CareerBuilder Gannett Fox Interactive IAC Monster AOL MSN eBay Yahoo! Google Property 26% 1 15% 2 8% 3 7% 4 7% 5 4% 6 3% 7 2% 8 2% 9 2% 10 2007(est)

Marketplace Response Portals Acquire to Create “Platforms” Yahoo! buys RightMedia ($850M), BlueLithium ($300M) Google buys DoubleClick ($3.1B) Microsoft buys aQuantive ($6.1B), AdECN ($75M) AOL buys Tacoda ($275M), Quigo ($300M) to create Platform A

Portals Acquire to Create “Platforms”

Yahoo! buys RightMedia ($850M), BlueLithium ($300M)

Google buys DoubleClick ($3.1B)

Microsoft buys aQuantive ($6.1B), AdECN ($75M)

AOL buys Tacoda ($275M), Quigo ($300M) to create Platform A

Marketplace Response Branded Sites create Extended Networks Martha Stewart creates Martha’s Circle Reader’s Digest, Forbes, Warner Brothers, Glam Media

Branded Sites create Extended Networks

Martha Stewart creates Martha’s Circle

Reader’s Digest, Forbes, Warner Brothers, Glam Media

Marketplace Response Ad Networks General networks are in decline Inefficiency Biased Category specialty Adify estimates there are @ 75 niche networks Travel Ad Network, Gay Ad Network Technology specialty Behavioral, contextual

Ad Networks

General networks are in decline

Inefficiency

Biased

Category specialty

Adify estimates there are @ 75 niche networks

Travel Ad Network, Gay Ad Network

Technology specialty

Behavioral, contextual

Vertical Ad Networks

Marketplace Response – Travel Vertical ComScore February 2008

Behavioral Targeting

Contextual Targeting

Remaining Issues But there is still FRICTION in the process Paper IOs, faxes, phone calls Lack of control, lack of transparency Ad Exchanges can automate and provide control and transparency to buyer and seller . Where is the Long Tail in these solutions? Portals have no “tail” Branded sites create small networks with limited scale Ad networks are typically “mid-tail” remnant solutions Ad Exchanges can allow Long Tail publishers to participate and control pricing. Where is brand-safe media that can scale for the advertiser? Advertisers that use portals and site specific buys need more reach More brand dollars are coming onto the web Ad Exchanges can allow the advertiser various placement controls.

But there is still FRICTION in the process

Paper IOs, faxes, phone calls

Lack of control, lack of transparency

Ad Exchanges can automate and provide control and transparency to buyer and seller .

Where is the Long Tail in these solutions?

Portals have no “tail”

Branded sites create small networks with limited scale

Ad networks are typically “mid-tail” remnant solutions

Ad Exchanges can allow Long Tail publishers to participate and control pricing.

Where is brand-safe media that can scale for the advertiser?

Advertisers that use portals and site specific buys need more reach

More brand dollars are coming onto the web

Ad Exchanges can allow the advertiser various placement controls.

Questions for Your Ad Exchange Inventory Remnant or premium inventory? Spot market (bided) vs. futures market (reserved inventory)? Safe for brands or direct only? Designed for agency and/or SEM workflow? Pricing Control of pricing for buyer and seller? Pricing models: CPM, CPC, CPA? Targeting available Contextual, behavioral, other? Graphical, rich media, text formats? Publisher types Long Tail and/or large site and/or ad network inventory? Inventory from content sites and/or social media?

Inventory

Remnant or premium inventory?

Spot market (bided) vs. futures market (reserved inventory)?

Safe for brands or direct only?

Designed for agency and/or SEM workflow?

Pricing

Control of pricing for buyer and seller?

Pricing models: CPM, CPC, CPA?

Targeting available

Contextual, behavioral, other?

Graphical, rich media, text formats?

Publisher types

Long Tail and/or large site and/or ad network inventory?

Inventory from content sites and/or social media?

Randall Rothenberg IAB Jerry Yang CEO, Yahoo! Sue Decker CFO, Yahoo! IAB Conference February, 2008

Randy Falco Chairman and CEO AOL

From Brian McAndrews Microsoft, Inc. IAB Conference February, 2008

Rob Norman, GroupM “ Today, we plan and trade on behalf of our clients. Tomorrow and in some places today we also trade on our own behalf where we can create value and deserve our place in the chain” “ We charge at the moment for the cost of inputs but again if we charge on the basis of the value of the outputs we are perfectly entitled to do that too.” Photo credit: IAB

“ Today, we plan and trade on behalf of our clients. Tomorrow and in some places today we also trade on our own behalf where we can create value and deserve our place in the chain”

“ We charge at the moment for the cost of inputs but again if we charge on the basis of the value of the outputs we are perfectly entitled to do that too.”

Get ADSDAQ-ified: Join ADSDAQ: http://www.ADSDAQ.com Read the Blog! http://blog.contextweb.com ContextWeb: http:// www.contextweb.com Jay Sears SVP, Strategic Products and Business Development 917-408-6300 or [email_address]