Media Fragmentation and Advertising Exchanges

Slide 1: Advertising Exchanges: Open the Market! Jay Sears Senior Vice President, Strategic Products and Business Development ContextWeb, Inc. 917-408-6300 or sears@contextweb.com

Slide 2: IAB Conference February, 2008

Slide 3: “My Space is Your Space” Wenda Harris Millard  Current state is “daunting but exhilarating” IAB Conference February, 2008  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”

Slide 4: Brian McAndrews SVP of Advertiser and Publisher Solutions Microsoft, Inc. Former CEO, aQuantive IAB Conference February, 2008

Slide 5: “Holy crap!! What now?” Rob Norman, Group M IAB Conference February, 2008

Slide 6: 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

Slide 7: Media Fragmentation Started in the 1980s 1986 2004 Head of the Class Friends – Series Finale 12.8 Nielsen rating 12.8 Nielsen rating #40 show that year Most-watched show in 4 years

Slide 8: 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

Slide 9: 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”

Slide 10: 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

Slide 11: 15-month Trend Line

Slide 13: The Long Tail is The Passion Tail  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

Slide 14: 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 The Web # of Visits # of Visits e om ge nd al L gl g M r’s ey m O Fu utu in Pa co oo t.c s on A ad e st . M ram ey M G ee e ve om on tr In C -m eS H ad Th m s- er Passion Passion m ra C

Slide 15: Offline vs. Online: Time Should Mean Money Online Time Online Money 19% 5.8% * Forrester Research, 2006 ** Internet Advertising Bureau

Slide 16: Fat Tail vs. Passion Tail Property 2007(est) 1 Google 26% 77% of dollars 2 Yahoo! 15% 3 eBay 8% Size of Sites 4 MSN 7% 5 AOL 7% Pages of Passion 6 Monster 4% 7 IAC 3% 8 Fox Interactive 2% 9 Gannett 2% 10 CareerBuilder 2% # of Sites Passion

Slide 17: 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

Slide 18: Marketplace Response  Branded Sites create Extended Networks  Martha Stewart creates Martha’s Circle  Reader’s Digest, Forbes, Warner Brothers, Glam Media

Slide 19: 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

Slide 20: Vertical Ad Networks

Slide 21: Marketplace Response – Travel Vertical ComScore February 2008

Slide 22: Behavioral Targeting

Slide 23: Contextual Targeting

Slide 24: 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.

Slide 25: 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?

Slide 26: Randall Jerry Yang Rothenberg CEO, Yahoo! IAB Sue Decker CFO, Yahoo! IAB Conference February, 2008

Slide 27: Randy Falco Chairman and CEO AOL

Slide 28: From Brian McAndrews Microsoft, Inc. IAB Conference February, 2008

Slide 29: 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 Photo credit: IAB of the outputs we are perfectly entitled to do that too.”

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