Digital Advertising Ecosystem 2010

review of the digital advertising ecosystem by greg stuart www.gregstuart.com january 6th, 2010 Prepared by Greg Stuart greg@gregstuart.com 1 Confidential

purpose & agenda Purpose: Provide background for a discussion on the ever changing Advertising Ecosystem. Topics as follows: 1. Marketers‘ Metrics discussion 2. Digital Media Ecosystem review 3. Data & Targeting discussion 4. Three Screen discussion 5. Privacy principles Author‘s Background: Greg Stuart Decade as NYC Ad Agency Media Strategist 6. Appendix Decade+ as Sr Exec in Digital Media CMO, VP Biz Dev, Ad Sales, CEO o Terms & difinitions Digital Media since 1993 (iTV & Web) o Advertising Spending review CEO of IAB – Interactive Advertising Bureau Co-Author What Sticks Advisor to VC‘s & 15+ Net/Mobile Businesses Consultant to Alcatel, AT&T, etc (see appendix) Prepared by Greg Stuart 2 greg@gregstuart.com Confidential

main themes 1. Change is everywhere & constant 2. Advertising has never been so complicated…and yet so ill prepared for the future (tech, data, automation) 3. Exchanges are likely to tremendously transform the digital advertising & media world 4. Data is the talk of the digital town; but the value of data is still quite unclear 5. Marketer‘s metrics were indeterminate before and will be murky for awhile 6. Privacy at a regulatory level is anyone‘s call at this point (but can be managed) Prepared by Greg Stuart 3 greg@gregstuart.com Confidential

confused?...not surprised Prepared by Greg Stuart 4 greg@gregstuart.com Confidential

internet is a still evolving as a medium „New to Net‟ Commun- Services Retail Contributor User ications • First activities • Email • Online • CDs/Books • Blogs • ISP & ease • IM banking • Complex • Comments & • Info. search • Photo sharing • Simple Travel travel posting • LOTS of time • Early social guys • eBay Motors • Customer surfing networks • Auto info • Groceries reviews • Ratings Web 1.0 Web 2.0 Web 3.0 Source: Nielsen/NetRatings Prepared by Greg Stuart 5 greg@gregstuart.com Confidential

all media under assault – from consumers o Lot‘s of multitasking + DVR‘s promote ad skipping television o The net result is that each ad is less effective as consumers mentally and physically tune them out How often do you surf the internet at the same time Do you use your Tivo or DVR to skip as watching TV? television ads? Skip Some sds 36% Seldom 16% Never 26% Watch Sometimes Most Ads 26% 6% Never Skip Ads 6% Always 17% Skips All Ads 52% Usually 15% Prepared by Greg Stuart 6 greg@gregstuart.com Confidential

digital advertising more complex than ever and the options more diverse Outbound IM communication iPhone apps Email SMS/MMS Streaming Display marketing marketing Podcasting Online Microsite advertising development Website Development Influentials Viral INTERACTIVE AD Seeding CHANNEL Online WOM Blogs Branded entertainment Microblogging Search App CRM Video - YouTube engine mktg Development RSS application SEO Widgets Prepared by Greg Stuart 7 greg@gregstuart.com Confidential

…and yet ads, ads, ads - everywhere Estimated 4,500,000,000,000 (4.5 trillion) online ads served annually = 2,000 ads per person per month Prepared by Greg Stuart 8 greg@gregstuart.com Confidential

marketers‟ metrics discussion Prepared by Greg Stuart greg@gregstuart.com 9 Confidential

metrics summary Online is often more cost effective than other media. Have seen 10x in cost per value versus TV. • In part because TV is SO overspent Internet is not a single medium (it‘s really a platform of mediums) Click has been everything. But it is the bain of the internet medium. Soon to mean nothing (or at least little) Only 8% of consumers click regularly (only 16% ever click) Publishers like CPM, as it‘s easy to measure, control, etc. Marketers metrics are CPA, CPL, CPT, engagement, etc. - Confused yet? Should be! Prepared by Greg Stuart 10 greg@gregstuart.com Confidential

35% of marketers use clicks; but click is such a small percent of activity Source: DoubleClick DART for Advertisers: 2008 Prepared by Greg Stuart 11 greg@gregstuart.com Confidential

however; there is a MASSIVE decline in display- ad click through rates In 2008, comScore measured click rates as less than 0.1% Sources: DoubleClick, eMarketer, Eyeblaster, ABI Research estimates Prepared by Greg Stuart 12 greg@gregstuart.com Confidential

and virtually no one clicks anymore There are Fewer Clickers and Fewer Heavy Clickers o There are fewer heavy clickers today: down from 6% to 4% of Internet users o Only 8% of all Internet users account for 85% of all clicks Source: comScore, Inc. custom analysis, Total US Online Population, persons, July 2007 and March 2009 data periods Prepared by Greg Stuart 13 greg@gregstuart.com Confidential

but there is no question online ads work Advertiser Site Visitation Among US Internet Online Advertising‟s Effect on Brand Metrics Users Exposed to Online Display Ads, 2008 in the US, Q4 2008* (% of Resp impacted) 7.0% 65.0% 70.0% Control Test Lift 6.6% 6.0% 53.8% 60.0% (Δ 2.4) 5.8% 5.0% 50.0% 49.1% 45.7% 4.8% 4.5% 4.0% 40.0% 3.9% (Δ 1.6) 3.5% (Δ 1.3) 3.0% 30.0% 3.1% (Δ 4.9) 2.0% 20.0% 2.1% (Δ 2.6) 1.0% 10.0% 0.0% 0.0% Week following Weeks Weeks Weeks 1st ad exposure 1-2 after 1st 1-3 after 1st 1-4 after 1st exposure exposure exposure Note: home, work and university locations Note: n=2,380 campaigns and 3,889,602 respondents; Source: comScore Brand Metrix, “How Online Advertising *includes three years through Q4 2008; **delta (Δ ) defined Works: Whither the Click,” December 5, 2008 as point difference in exposed vs. control groups Source: Dynamic Logic provided to eMarketer, April 27, Prepared by Greg Stuart 2009 Confidential 14 greg@gregstuart.com

publishers may have better effectiveness Ads on content sites have greatest impact o Ads on content sites raise Awareness, Message Association, Brand Favorability and Purchase Intent more than Portals and Networks o Ad Networks provide advertisers with the smallest change — including no change in Purchase Intent (i.e., 0.2 delta is statistically insignificant) Ad Effectiveness Deltas by Site Category Aided Brand Online Ad Message Brand Purchase Awareness Awareness Association Favorability Intent OPA BCD 3.2 5.7 3.4 2.4 1.8 MarketNorms 2.3 4.7 2.5 1.5 1.2 Portals 2.5 4.7 2.1 1.3 1.1 Ad Networks 1.2 3.8 2.0 0.6 0.2 Notes: Ad effectiveness deltas in red are statistically insignificant (i.e., there is no change) A/B/C/D indicate statistically significant difference between deltas at .90 CL Source: Dynamic Logic’s MarketNorms campaigns over last 3 years through Q1 2009 OPA N=1,540 campaigns; MN = 2,255; Portals = 1,224; Ad Networks = 399 Prepared by Greg Stuart 15 greg@gregstuart.com Confidential

But ad networks provide lots of brand lift also Ad Network Sites Publisher Sites Control Exposed Impact Control Exposed Impact Unaided Message Recall: XXXX 0% 13% +12.9 15% 16% +1.3 Message Association: XXXX 3% 8% +4.9 7% 7% +0.9 Message Association: XXXX 4% 8% +4.1 9% 9% 0.0 Online advertising recall 21% 31% +9.7 34% 39% +4.7 Purchase Intent 42% 53% +10.8 39% 45% +5.8 Recommendation Intent 8% 21% +13.6 13% 15% +1.4 Actions Taken Consider purchase 12% 24% +11.4 15% 15% +0.3 Download free trial 10% 20% +9.9 11% 12% +0.9 Visit website 11% 25% +14.2 19% 21% +2.0 Gather more info 15% 22% +7.1 17% 19% +1.7 T2 Box: Overall Opinion of Brand 48% 56% +7.8 43% 50% +6.9 Brand Opinions (Top Box) Is high quality 26% 29% +2.7 19% 24% +4.9 Always up-to-date 24% 29% +4.2 22% 25% +3.1 Is best in the category 16% 18% +2.3 10% 14% +3.9 Has improved their product 15% 17% +1.6 8% 11% +3.4 Prepared by Greg Stuart 16 greg@gregstuart.com Confidential Sig @ 90%

best campaigns for sure work on ad networks Best / Worst Performers on Ad Networks Market Norns Avg Top 20% Ad Networks Avg Ad Networks 16.00% 14.00% 12.00% Percent Impacted 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Aided Brand Online Ad Messsage Brand Purchase Awareness Awareness Allocation Favorability Intent Prepared by Greg Stuart 17 greg@gregstuart.com Confidential Source: Dynamic Logic Market Norms database

online is best able to measure but the hardest to measure More than half of interactive marketers — 51% — interviewed by Forrester say that measuring ROI is their key challenge with display ads… …with 38% saying developing good creative is a problem Prepared by Greg Stuart 18 greg@gregstuart.com Confidential

metrics simplified – there 3 elements Promote + Found o Media Questions a marketer should be o Search (natural & paid) able to answer: o PR o How many visitors, leads and o Social Media + Blogging customers am I getting? o What is driving those visitors, leads and customers? Convert o What are my best and worst o Landing page optimization sources of leads and sales? o Lead tracking o Lead management How can I grow sales? Analysis How can I lower marketing o Marketing Analytics costs? o Lead Scoring Prepared by Greg Stuart 19 greg@gregstuart.com Confidential

different marketers have different needs Advertiser Orientation Direct Response Brand Marketers Call to Action Marketers Marketers Goal is to increase brand awareness, Spending to accomplish a near- Advertisers primarily focused imagery, and purchase intent term action (traffic, order, etc) on capturing the immediate Mixes brand spend, but with a action, order, etc mechanism to drive action too National 64.0 76.4 8.9 Brand 1.3 3.3 9.1 Customer base Local affiliate of a national Revenue, 2007 $ billions chain 30.2 advertiser 1.3 CAGR, 2003-07 Local percent “mom & pop” 53.2 Retailers 1.3 Prepared by Greg Stuart 20 greg@gregstuart.com Confidential

metrics for measuring success Most important metrics for measuring online marketing campaign success according to US* Senior-Level Marketing Executives by budget size, Feb-Mar 2009 (% of respondents) $1 million All resp. + (n=49) (n=112) Conversions or sales 82% 70% Registrations/Subscriptions via organization‘s Website 55% 52% Click-throughs 51% 49% Unique views to Website or page where ad or content was placed 51% 37% Boost in search rank 39% 34% Downloads of data or information 33% 37% Change in target audience awareness/perception of brand 31% 25% Customer feedback on Website 16% 26% Number of target audience members reached 14% 13% Streams of video or audio content 8% 6% Other 6% 3% Note: 8respondents were primarily based in the US Source: Forbes, “2009 Ad Effectiveness Survey,” June 1, 2009 Prepared by Greg Stuart 21 greg@gregstuart.com Confidential

advertising metrics - relationships Measurement CPM CPC CPA CPI RPT LR Metric Customer & Profit Potential Cost Per Cost per Cost per Cost per Revenue per Lifetime Customer by Thousand Click Acquisition Inquiry Transaction Revenue = Source Guesstimated Relationship $ 1.00 $ 0.25 $ 0.75 $ 0.95 $ 1.50 $ 4.25 = $ 3.30 Allowable: $ 1.65 Allowable = What would company pay to acquire customers Prepared by Greg Stuart 22 greg@gregstuart.com Confidential

Impressions Clicks Conversions Revenue Unique Impressions greg@gregstuart.com Unique Clicks Prepared by Greg Stuart Unique Conversions Click through rate Click to conversion rate Impression to conversion rate Ad Exposure Time View Through Ad Interaction Rate Interaction Time Ad Component Interactions Video Play Rate Average Video View Time Video Completions Replay Rate Reach Confidential Frequency Frequency vs. Response Frequency vs. Conversion Time Lag to Conversion Ad Delivery Rate Attrition Rate Lead Generation Revenue per Sale Revenue per User Revenue per Impression There are a number of possible metrics or points of Revenue per Click Revenue per Visit Repeat Purchase Rate Lifetime Revenue expanded list of possible metrics measurement for marketers in digital media, 30 or more. 23

alt: msn‟s engagement measurement msn has popularized and development tech to support ―engagement measurement‖. It recognizes that other advertising, might have played a role (delivered value) to the final click. Prepared by Greg Stuart 24 greg@gregstuart.com Confidential

alt: cross media analysis Like MSN‘s engagement mapping, some work has been done to isolate a medium‘s value, and in combination. Research behind What Stick‘s found that Internet was most Cost Effective Medium in 75% of campaigns Optimized media plans delivered +30% lift in media Prepared by Greg Stuart 25 greg@gregstuart.com Confidential

is there a blurring of search & display? Traditionally: o Search=performance (clicks, action, etc) o Relevance, technology, ease o Display=branding (attitude change) o Graphical, context, rich media However, their objectives can be blurred: o Search been proven to provide brand value o Display can provide performance But they are different: o Ease of text – alteration, speed, pervasive o Technology and scale o Commensurate advertiser base (really important) Prepared by Greg Stuart 26 greg@gregstuart.com Confidential

final thoughts on metrics Clicks have ruled (counterproductively so) Alternatives: Analytics systems permit reaching deeper o View thru (30 days post the activity) o Brand or performance later in process Better tools coming: Factor TG, Market Share Partners But as a result of it‘s inherent advantages, digital media wins (ROI, immediacy, integration, optimization, more) o Mobile is just not ready, but is heading in the right direction. o iTV is likely a long ways off. Prepared by Greg Stuart 27 greg@gregstuart.com Confidential

digital media ecosystem review peeling the layers of an increasingly complicated ad ecosystem in the increasingly digital-networked advertising industry Prepared by Greg Stuart greg@gregstuart.com 28 Confidential

summary ad ecosystem More disruption than ever & at nearly every level & category - publishers, local, agencies, media... Exchanges potentially change everything Critical to Exchanges is application of data What could happen: o Shift away from networks to exchanges o Exchanges follow Direct Mail & Search going direct to Advertiser o Agency media department becomes less important Prepared by Greg Stuart 29 greg@gregstuart.com Confidential

the times, they are a-changin‟ bob dylan Traditional definitions range from the broad to the specific… “Intermediaries that enable advertisers to …But the landscape is evolving as new types reach audiences across the web, and allow of players emerge publishers to better monetize inventory.” CIBC analyst report Ad Exchanges eliminate the typical ―broker‖ role by linking publishers directly with advertisers via a managed transaction “Aggregates advertising inventory from a platform (e.g., Right Media) number of websites and sells this inventory to advertisers or agencies.” Rep firms market inventory from select publishers to advertisers, functioning more Piper Jaffray Investment Research as an outsourced sales force than a reseller (e.g., Glam) “Brokers of online inventory. Ad networks will buy inventory from a publisher, then resell to Specialist providers of sophisticated value- an advertiser, pocketing the spread” add services such as targeting and ad- serving (e.g., Revenue Science) serve both CIBC analyst report publishers and advertisers without brokering any inventory “Appliers of sophisticated targeting analytics to serve advertising for third parties” CIBC analyst report Prepared by Greg Stuart 30 greg@gregstuart.com Confidential

the digital value chain Advertisers Agencies Inventory Programmer/ Distribution Measurement (creative/strategy) Influencers publishers platforms Prepared by Greg Stuart 31 greg@gregstuart.com Confidential

expansion of the value chain Advertisers Agencies Inventory Programmer/ Distribution Measurement (creative/strategy) Influencers publishers platforms Ad- Agencies Agency Data Exchanges Networks Pub. Prog./ vertisers Support/ Clearing- Support Publishers Buyers houses Prepared by Greg Stuart 32 greg@gregstuart.com Confidential

players in expanded value chain Ad- Pub. Prog./ Agencies Agency Data Exchanges Networks vertisers Support Publishers Support/ Clearing- Buyers houses • SEM • Technology • Digital media platforms that buying agency enable the • Yield optimization • Single-source bid- companies that buying and management tool enable publishers to selling across • Automated system that maximize the value multiple ad • Ecommerce manages and optimizes of their inventory networks and site on bidwords for advertisers across multiple ad publishers real AdWords based on conversion rates networks and time • Local • Algorithm-based platforms exchanges real time storefront in that maximize ROI on ad Yellow Pages network and exchange • Major brand inventory buys on behalf of brands • Search engine advertiser aggregators focused on • Centralized ad selling specific demographic • Not directly involved in the buying and entity that sells • Search engine selling of advertising, but either facilitate typically remnant ad • Website the transfer of data between parties in inventory across owner and the value chain, or aggregate data from multiple websites, operator several parties and make it available to either blindly or Prepared byby Greg Stuart players in the value chain Confidential Greg Stuart transparently 33 Prepared greg@gregstuart.com Confidential greg@gregstuart.com

representative players in value chain Search Intent Driven Media Advertiser Agency Agency Support / Buyer Ad Networks Publisher/ Content Advertisers Agencies Inventory Programmer/ Distribution Measurement (creative/strategy) Aggregators publishers platforms Broad Scale Media Prepared by Greg Stuart 34 greg@gregstuart.com Advertiser Agency Agency Support / Confidential Data Exchanges Ad Networks Publisher Publisher/ Buyer Clearinghouses Support Content

all the details – source gridley & co. Prepared by Greg Stuart 35 greg@gregstuart.com Confidential

exchanges-likely biggest change ever Prepared by Greg Stuart 36 greg@gregstuart.com Confidential

exchanges - new kids on the block Question Answer Publishers provide a slice of their inventory to exchanges so that What do Exchanges permit? advertisers can select just the inventory they want, sometimes calculating value from upwards of 50 data elements What makes them so interesting Real Time Bidding technologies that can both cherry pick inventory to the industry and provide immediate feedback In addition to RTB, the integration of data and access to data on that What make exchanges work? user or individual impression No straightforward answer to this question, because exchange What are typical exchange inventory falls into buckets. That said, most inventory is acquired for CPMs? $0.10 – $2.00 CPM Exchanges typically receive (only) 5% to 10% of revenue on What are typical exchange impressions they serve. (Networks, the current middle man, are 25% margins? to 50%). Too early to tell but likely will scale; it takes very little to run an exchange How much exchange inventory Hard to quantify, but generally reported to be tens of billions is available? Prepared by Greg Stuart 37 greg@gregstuart.com Confidential

how exchanges use data Advertisers are able to sort through dozens of impression attributes (and cherry-pick billions of impressions) to choose impressions to buy. Data are used to select and optimize exchange impression attributes and bring high value than just context or time of day There appear to be two current data pricing models: o Cost per Cookie by BlueKai with is a simple auction model: Cookies with series of data about users are auctioned for around $2-3 per thousand and buying can buy that cookie for as long as cookie lives. o Percent of Spend by eXcelate / % of value model: The data provider receives a percentage of the media value (currently 20%) Other Internet data players: o Next Action (SKU level data) o Acerno (eCommerce data owned by Akamai) o Revenue Science (BT) o Media6º (Social Media – Birds of a Feather) o Lotame (Social Media) Prepared by Greg Stuart 38 greg@gregstuart.com Confidential

will there be a network shakeout? Yes, Likely. Supposedly 300+ networks. Some are generating ~$100 million in revenue. They do the work that agencies are too lazy, or economically unable, to do Key elements: Tech, Marketing/Positionings, Ad Sales (Relationships), Publishers (Content) Exchanges make the publisher segment unnecessary. Tech is critical. Positioning is really necessary for a network to survive. Possible positionings: Brand, Optimization, Category/sector, Metric, etc Prepared by Greg Stuart 39 greg@gregstuart.com Confidential

economics' of the ecosystem $1.5M-$3M per Sales Person Ad Serving (DART, Atlas) Ad Serving (DART, Atlas) CPM $1-5 2.00 CPM $0.10 CPM $0.50- $1.00 $0.01 5¢- 5¢-50*¢ 7¢- * Short term 5¢-10¢ 25¢-50¢ 12¢ arbitrage gain 15¢ Confidential 40 Prepared by Greg Stuart greg@gregstuart.com

underpinning data & targeting are cookies Cookies, or the tracking of users from one session to the next and one site to another, is critical to using data & targeting. Cookie deletion by users is rampant. Upwards of nearly 50% of users delete cookies a month. Private study conducted amongst trusted sites showed a real variation in deletion rates. Current industry thinking is that cookies are at great risk due to regulatory Prepared by Greg Stuart 41 greg@gregstuart.com Confidential

overall, 36% users delete cookies monthly “Multi-user computer” Rejecters 16% Selective 20% “Periodic” Users “Bipolar” Acceptors 64% This data is proprietary & confidential – do not forward. Prepared by Greg Stuart 42 greg@gregstuart.com Confidential

…and some sites saw nearly 50% cookie deletion Cross Site User Breakdown 100% 18% 20% 17% 13% 13% 14% 90% 20% 80% 17% 13% 18% 19% 14% 26% Percentage of Users 70% 29% 60% 50% 74% 40% 63% 66% 69% 68% 30% 57% 51% 20% 10% Rejectors Inconsistent 0% Acceptors Site A (8-27-05 Site B (11-17- Site C (9-1-05 Site D (2-14-06 Site E (2-22-06 Site F (2-01-06 Site G (2-01-06 thru 4-20-06) 05 thru 4-19-06) thru 1-31-06) thru 4-20-06) thru 4-01-06) thru 4-20-06) thru 4-20-06) Prepared by Greg Stuart 43 greg@gregstuart.com Confidential

measuring cookie deletion – how it was done 1.) Large population of web users who regularly log into a 2.) A tracking pixel associates the registration oriented site. user’s persistent ID with the 3rd party cookie each time they login 3.) If users return with different 3rd party cookies, we know they must have deleted their cookie. P u b lis h e r ID 3 rd P a rty C o o k ie D a te ABC 123 5 /1 /2 0 0 5 ABC 123 5 /2 /2 0 0 5 ABC 123 5 /9 /2 0 0 5 Person who did not delete their cookies ABC 123 6 /5 /2 0 0 5 DEF 456 5 /8 /2 0 0 5 DEF 456 5 /1 6 /2 0 0 5 Person who deleted their cookies sometime between 5/16 and 5/20 DEF 789 5 /2 0 /2 0 0 5 Prepared by Greg Stuart 44 greg@gregstuart.com Confidential

the buy/sell process - today 1 Buyer decides 1. what web sites to buy 3 5 2 2. Buyer and Seller Publisher Side Sales Planner negotiate deal 3 3. Hand off to Sales Executive Pub Ad Operations Account Manager internal teams for workflow Inventory 4 4. Buyer ad ops Campaign sends ads to avails & mgmnt Reporting Billing publisher reservations 5 5. Seller ad ops workflow (sales tools) inputs ads 6 6. Buyer reviews 4 7 results, compares reports, compiles 2 Media Campaign 7 7. Seller sends bill Billing & planning & Mgmnt & Reporting & Agency Side to buyer recon- 8 8. Buyer reconciles buying trafficking analytics ciliation the bill and pays workflow workflow Pre Buy Media Research Tools 6 3 8 1 Media Buyer Associate Media Buyer Agency Ad Operations Associate Media Buyer Billing Coordinator Prepared by Greg Stuart 45 greg@gregstuart.com Confidential

What‟s moving where / when Exchanges are the most significant change to advertising since Google. 1. Loads of inventory (10‘s of Billions) 2. RTB (technology) drives the efficiency for system 3. Players and technologies are just being established Networks that are not differentiated or have some unique attribute likely to be squashed. DSP=Demand Side Platforms are taking the planning out of the media plan=affect on agencies Data here is critical and yet value is still unclear Prepared by Greg Stuart 46 greg@gregstuart.com Confidential

data & targeting discussion Prepared by Greg Stuart greg@gregstuart.com 47 Confidential

summary - why data has an allure Value of targeting & tech - Google $95 eCPM o Key is a intent-driven targeting system with 100k‘s of advertisers & self service Net, targeting (and the data to support) are very alluring to advertisers and publishers. Categories of data: Context, Intent, Identity o Content; ecommerce, social, non-web, etc. o Unclear as to where uniqueness might still be Some question the real value (but not sure yet) Requires new understanding of metrics, or at least analytics Prepared by Greg Stuart 48 greg@gregstuart.com Confidential

theory behind targeting – good for all Advertiser‘s out Media Cost per thousand Number of viewers of pocket spend provider‘s (CPM) revenue 1,000 viewers for a given media property Current TV $10/1,000 viewers 500 500 $10 $10 (example) Advertiser A really only wants to reach half of them but they can‘t be broken out . . . lower out of . . . higher total Increase CPM . . . pocket per revenue to media advertiser . . . provider 1,000 viewers $6 For Adv A Digital Addressable $12/1,000 viewers 500 500 $12 (example) $6 For Adv B Sell to Sell to Prepared by Greg Stuart Adv A Adv B 49 greg@gregstuart.com Confidential

how does „intent‟ affect pricing Index to CPM Implied CTR Exchanges High Transactional Value (e.g. CNET, ~$100 15.0% 15000 WebMD, private jet websites) Google Search $95* 12.2% 12000 Cars.com $30-40 4.7% 4700 Forbes $25 3.3% 3300 Branded News $15 2.0% 2000 (NYT) Portals $2.80 0.4% 400 Networks $1-2 0.2% 200 Exchanges $0.10-1.50 0.1% 100 Prepared by Greg Stuart 50 greg@gregstuart.com Confidential

ad spending trends-behaviorally-targeted In millions Source: eMarketer Prepared by Greg Stuart 51 greg@gregstuart.com Confidential

sources of data Web Visiting & Viewing Demographics • Self-reported and validated • All web site/page click stream • Appended segments (e.g. Claritas, Acxiom) • Content viewed • Individual & household level • Search engine queries • Keyword used Marketing Stimuli TV Viewing • Online ads • Link to digital set • Referral links top TV data using name and address Online Transactions Offline purchasing • All secure session activity • Linked using name and address • Purchases and subscriptions • Client CRM databases • Price paid, shipping & handling, promotions • Retailer loyalty card data • Applications/configurations • IRI Scanner panel data Prepared by Greg Stuart 52 greg@gregstuart.com Confidential

different data is available on platforms Consumer Info Data Example Mobile Internet TV GPS Location Store or street location (Main & 1st street) Context IP address 127.159.456.37 Concurrent media use Net & TV, Mobile & TV, etc Content Mazda review Daypart Lunch Breakfast or weekend shopping Zip code 11932 Calls placed (to who, frequency) Calls to order lunch from deli daily Family plans Family of five, etc Usage patterns (when & where) Uses phone in the car, Internet on the road Interests - Intent Type of handset or upgrade Bought an iPhone early, Brand buyer, not price # of e-mails/texts sent/received Sends ~xx texts/day indicates age/engagement Coupon activity Uses coupons for consumer package goods Location patterns Goes to shopping, mall, or restaurant Apps/downloads Downloaded ―mint‘ app Purchases Bought TV from Best Buy.com Shopping cart Considered TV from Amazon.com Content viewing history Frequent News viewer, Recent Auto Shopper Ads seen/clicked on Clicked on mortgage ad YP.com searches Sought: ―‖Plumber in Portland: Other searches Searched: for ―TV reviews‖, Used Cars, etc Identity # of unique people called Frequent callers are influencers Device owned Android owner Psychographic segment ―Urban Dweller‖ Registration (address, etc.) Name, address, etc Prepared by Greg Stuart 53 greg@gregstuart.com Confidential

the ability to drive incremental value from data and targeting depends on 4 key elements • Do the insights • Can the data be from data really used in ways that help advertisers consumers are ok meet key goals? with? Value Privacy • What unique data • Can the provider is available for process the data? use? Uniqueness Capability Prepared by Greg Stuart 54 greg@gregstuart.com Confidential

data helps advertisers better meet specific goals Category of Data Why is it valuable? Specific data types Provides insight on the setting • Contextual (what content are in which a consumer views they viewing) Context an ad (e.g., while reading a • Day Part (when) • Geographic (where are they) laptop review). Some think • System (with what device) context really matters. Allows marketers to direct ads • Actions (purchases, click/buy Behavior to consumers based on history, views) Interests-Intent actual behavior (e.g., in the • Preferences (affinities, interests, market for a house) intensions) Allows identification of • Demographic (who) Personal demographic & • Psychographic (market segment) Identity psychographic segments Prepared by Greg Stuart 55 greg@gregstuart.com Confidential

“Project Canoe” has been formed to bolster MSO advertising revenue through set top box targeting What is Project What is the What is the Canoe? aspiration? status? No single Telco / IPTV providers manages sufficient scale of subs to effectively • Consortium of six • The cable • David Verklin was counter the breadth of Project Canoe reach cable providers companies currently named CEO and (Charter, Cox, Time capture just7% of piloting has begun in Warner Cable, total TV ad spend select demographics Cablevision, but hope to increase • Project has garnered Comcast & Bright ad revenue by 3 $150M in initial House Networks) to times to nearly $15B funding from the deliver targeted, consortium partners interactive ads to viewers (estimated 60M set top boxes) • The consortium will sell data to networks, who in turn will sell to advertisers Prepared by Greg Stuart 56 greg@gregstuart.com Confidential

who get‟s the value from Data Currently: • Marketers should get the value. Perceptually they do. Word on the street, in reality they are not right now. • Publishers ultimately should get the value. But they don‘t cause they can‘t sell that small inventory • Networks/Exchanges probably get most of the value. They have the scale and need the differentiation. Future: • Ultimately, those that hold and process the data probably get the most value. If that data is unique and not acquirable elsewhere. Data turned in insights likely matters most. Prepared by Greg Stuart 57 greg@gregstuart.com Confidential

three screen discussion Prepared by Greg Stuart greg@gregstuart.com 58 Confidential

it‟s supposed to be media planning; not medium planning Three screen holds allure because: o Access to a consumer cross-media at their different access points via different messaging value is intriguing o Some companies (cable & Telco's) have multiple media/distribution platforms and want to use them to get more share from advertisers Facts o Each consumer has different media habits o Cross media optimization can improve performance o Collection of data/insights is better in some channels than others and communication value is better in some channels than others (and priced differently) o There is a large internet ad spend, but not much spend or expertise in mobile and/or addressable TV Reality o Unlikely that three screen will become a big deal anytime soon. o There is not enough expertise or spend in 2 of the 3 channels and there are few/no tools to manage/optimize or insure value in 3 screen approach. Prepared by Greg Stuart 59 greg@gregstuart.com Confidential

significant time is spent on the various screens Big growth in channels that consumers have more control over, such as TiVo, Net and Mobile and where addressability resides Prepared by Greg Stuart 60 greg@gregstuart.com Confidential

3 screen ad approach The value may be in the value exchanged. Internet for data, TV for communications impact and mobile for personal & proximity. o Data richness of data collection o Richness of video o Contextual advertising o Long form of TV Commercials o Richness of targeting available o Production values of TV o Multiple forms Prepared by Greg Stuart o Personal nature of phone Confidential 61 greg@gregstuart.com o Individualism o Proximity to retail/location

who wants things to change & why Television Industry Advertisers/Agencies o TV‘s ―virtue‖ is to sell lots of o A/A are not oriented to small inventory at bulk ($10s of buys either, or to know the millions) value of targeted media o $70B category that‘s been o They don‘t have the tools in doing ―just fine‖ managing, or optimizing, or o Controlled by networks that measuring to commit large are not digitally oriented sums o The ‗pipes‘ might want to o They aren‘t good at cross solve given the unique value media now this brings them o They will likely apply test o Comcast and NBC deal budgets cause they like to be viewed as ―first‖ Only Nielsen is focused on addressing 3 screen with their A2/M2 (Anywhere Anytime Media Measurement) Initiative Prepared by Greg Stuart 62 greg@gregstuart.com Confidential

what would need to happen to get TV to change? Cable and TV would have to be willing to work together • Lack of standards & consistency is a big issue • Lack of geographic coverage is an issue Ability to get cooperation or to go around them (force coop) • Potentially advertisers can drive the change • Exchange business commitment of $50 million by Chrysler Super strong business case or desperation • Probably still not enough to create change • Upfront spending falls by significant amount, forcing change Prepared by Greg Stuart 63 greg@gregstuart.com Confidential

privacy principles Prepared by Greg Stuart greg@gregstuart.com 64 Confidential

privacy summary Consumer control is everything in privacy But that is not a proven science yet o Focus needs to be on value, trust & control Various approaches being developed. o Unclear if self regulation is enough Government might intervene - soon Prepared by Greg Stuart 65 greg@gregstuart.com Confidential

effective privacy policy must satisfy 4 elements Value Consumer permits implicit or explicitly data use in exchange for a personal benefit – more relevance or convenience – and some clear value Consumer trusts the Brand to use permitted data Trust only within agreed-upon limits. Identity kept anonymous or confidential and Anonymity assurances and proof of such Opt-out (partially or wholly) at will must be Control employed Prepared by Greg Stuart 66 greg@gregstuart.com Confidential

EXISTING SUBS NEW SUBS OPT-IN Written or mailed consent, sent to ATT Written or mailed consent sent to ATT Sign-up on xxxx.com website (un-checked box) Permission on service order. Checkbox on service form. Ad-campaign about opt-in All-in when subscribing to service. greg@gregstuart.com Permission granted on website. Prepared by Greg Stuart All-in when subscribing to service. Recorded on phone. Part of Service/Account Activation process. (unchecked checkbox) Download software/toolbar. Agree to TOS. Download software/toolbar. Pop-up box to opt-in and Agree to TOS. TOS agreement change Ad-campaign about opt-out Ad-campaign about opt-out Email notice for opt-out Opt-out when subscribing. (with checked box) (Deselect checkbox) Mailer with TOS change 1. Notice within Mailer Options: Pop-up TOS change and 2. Sent to website Confidential bill opt-out button 3. Separate insert w/ bill privacy is not an exact science – range of options Agree to TOS – highlighted in Email notice of change in TOS - application documents explicit (with unchecked box) NAI notification NAI notification Explicit opt-out on xxxx.com Explicit opt-out on xxxx.com In TOS, no explicit notification Buried in TOS agreement that this can be done No opt-out option No opt-out option Low feasibility High feasibility Low feasibility High feasibility Moderate feasibility 67 Moderate feasibility = Height of bar assesses feasibility EXISTING SUBS NEW SUBS OPT-OUT

novel approach-Blue Kai registry Blue Kai gives the consumer access to what they know about them and the opportunity to opt out or modify that profile Prepared by Greg Stuart 68 greg@gregstuart.com Confidential

privacy experts Jules Polonetsky (WA DC) o Future of Privacy Forum Alan Chapell (NYC) o Chapell & Associates J. Trevor Hughes (VT) o IAPP-International Association of Privacy Professionals Prepared by Greg Stuart 69 greg@gregstuart.com Confidential

final thoughts Prepared by Greg Stuart greg@gregstuart.com 70 Confidential

case study context: Google revolutionized on-line advertising by solving the two-sided value proposition equation Online ad Online search, landscape, 1999 2003+ • Complex user experience, often • Elegant user interface, limited clutter, cluttered user interface integrated into browser toolbar Consumers • Intrusive ad formats (pop-up ads, • Increased focus on contextual ads, banners) and direct marketing relevant to end-users campaigns (spam e-mail) • Limited search capabilities (site lists, • Better algorithm – gateway to the web poor search engines) • CPM-based advertising • Pay-per-click pricing • Unclear ROI, limited campaign • Best-in-class measurement for Advertisers results for advertisers advertisers • Limited targeting • Highly focused based on customer browsing / search behavior • Clutter • Simplicity, site guidelines Prepared by Greg Stuart 71 greg@gregstuart.com Confidential

Thank You More questions? Greg Stuart greg@gregstuart.com +1 631 702 0682 Prepared by Greg Stuart 72 greg@gregstuart.com Confidential

appendix Author‘s (Greg Stuart) Bio Terms & Definitions Advertising Spend review Prepared by Greg Stuart greg@gregstuart.com 73 Confidential

greg stuart bio Greg Stuart is a recognized leader in digital media & advertising and was selected by Ad Age as one of ―10 Who Made Their Mark‖ in 2006. He is the former CEO of the Interactive Advertising Bureau (IAB), the trade group for the interactive advertising & marketing industry. He grew the IAB‘s revenues with a CAGR of 37% (overall +500%) while leading the industry from $6 billion to $17 billion in ad spending. The IAB customers included AOL, CNET, Google, Disney, NBD, Yahoo! & 400 others. Greg has more than two decades of hands-on operating experience as a proven business builder in the Digital Media and Technology arenas since 1993. He has extensive experience as CEO/Director/senior executive roles with Y&R, Sony Online Ventures, Cars.com, Flycast Ad Network and venture-backed DeltaClick. In the last two years he has served as Advisor, Director and angel investor to venture-backed companies with a resulting $750 million in exits, each at least at a 10x multiple. He‘s also worked with AT&T, Alcatel Lucent & Meredith in redefining their digital media opportunities for the future. Ad Age identified his book, ―What Sticks: Why Most Advertising Fails and How to Guarantee Yours Succeeds,‖ as the ―Number one of 10 books you should have read‖. Aside from his industry leading status in advertising and digital media, his operating expertise is in leading cross-functional teams in product development, go-to-market strategy, company positioning, business development/deal making, marketing, and scalable revenue generation with a record of success in both rapid growth businesses and turnarounds. He currently serves on the Board of Zimbio, a next generation webzine with nearly 20 million uniques and backed by Menlo Ventures and August Capital. He had served on the Board of Rapt (Accel backed), Inc. in SF, sold to Microsoft; and Board of Allyes (Oak backed) in China, sold to Focus Media. Greg has also served on the Advisory Boards of a dozen venture-backed companies in Search, Mobile, Video, Research, & Social Media backed by Intel, Greylock, Sierra, Conway, TimeWarner, USVP, Union Square, Oak VC, DFJ, Canaan, Spark, Intel, First Round Capital and others. He is a member of the National Speakers Association and speaks around the world on the failings, and thus opportunities, of advertising - Istanbul, Israel, Germany, Mexico City, Jakarta, Sao Paulo, Switzerland, Zurich, Shanghai, Sydney, Barcelona, Monaco, Tokyo and others. Greg has a BA in Economics from the University of Washington and completed Wharton‘s intensive Advanced Management Program in 2008. He lives happily outside of New York City in Bridgehampton, NY with his wife Pamela, twin daughters and son. http://www.linkedin.com/in/gregstuart Prepared by Greg Stuart 74 greg@gregstuart.com Confidential

Glossary Term Description CPM "cost per thousand" ad impressions. the price that is charged to advertisers by ―publishers‖ for 1000 ad impressions RPM ―Revenue per thousand" ad impressions. the revenue that is generated for 1000 ad impressions Impression Web: a measure of how many times an advertisement is displayed. Mobile: each individual ad unit viewed on a mobile publisher's deck (web site). TV: how many times ad is played Inventory the total number of impressions that a Web site has available for sale over a given period of time (usually, inventory is figured by the month). Upfront Annual sale of network ad inventory, typically at a slight discount to scatter prices, and guaranteeing placement in specific show time and position in pod Scatter Day-to-day market for network ad inventory. Majority of sales occur between 3 and 9 months prior to airtime, and on similar terms to upfront Remnant Day-to-day market for ad inventory not sold in upfront or scatter markets. Typically discounted 30-70% on scatter market rates on a preemptible basis and without specific airing time Ad Currency Nielsen Rating Points Unique Visitor Someone with a unique address who is entering a Web site for the first time that day (or some other specified period). Cost-Per- what an advertiser pays for each visitor that takes some specifically defined action in response to an ad Action (CPA) Cost-Per-Click the cost or cost-equivalent paid to a publisher per click-through. The amount paid by the advertiser each (CPC) Prepared by Greg time a user clicks on his/her ad. Stuart Confidential 75 greg@gregstuart.com

cost per X detailed definitions CPM (cost per thousand impressions) has been popular since the start of online advertising. CPM remains one of the most popular cost metrics used, though these days it‘s rarely the only metric employed for a campaign. It allows simple comparisons between campaigns and future opportunities (many publishers use this on their public rate cards).9 For example, even if marketers pay for a campaign on a cost-per-click basis, they can get reporting on total impressions and simply divide their total spend by impressions and multiply by 1,000, thereby generating a similar metric across differing campaigns. Nonmarketers such as CEOs or CTOs can often more easily relate to this type of measure than to online-specific metrics, such as time spent interacting with an ad, that are less directly related to costs. CPC is a very popular metric for marketers trying to drive direct action from an advert. More than 65% of database marketers in a recent Forrester survey say they use response rates as a key metric.10 However, it can also lead to advertisers paying for many clicks that are not from the target audience, such as clicks by mistake or invalid clicks from Web crawlers, and even expose them to click fraud. As a marketer, using your own ad serving tool for measuring clicks (and visitors) can help establish a standard measure, rather than trying to compare metrics from a variety of tools for each campaign. CPV (cost per visitor) gives insight to Web site owners. CPV is where advertisers pay publishers based on how many viewers of display ads then actually visit the advertiser‘s Web site. These metrics are most useful for advertisers aiming at driving further interaction from consumers, rather than general brand awareness or attitude, and of course take no account of what the visitors do when they get to the Web site; they could, for example, leave immediately once they arrive on the landing page. Some marketers now impose stricter rules on what counts as a ―visit‖ (which is sometimes still called a ―click‖), such as ―visitors spend at least 3 seconds on the landing page,‖ to get over some of these problems. CPA (cost per acquisition/conversion) gives a metric comparable across channels. CPA metrics allow marketers to measure success based on customers acquired through a campaign. Of course, ―acquired‖ may have different meanings for different marketers: For a retailer it may simply mean a site visitor or someone who puts goods in the shop‘s online basket or perhaps only those who actually buy. For brand marketers, it may be measuring those who click through to a certain area on a Web site, those who sign up for an email newsletter, or those who take some other type of direct response activity via the ad landing page like asking for more information on debt management, for example. Google has heavily promoted this as a metric, with CPA management tools included in its AdWords product and within the affiliate network (previously known as DoubleClick Performics Affiliate). Introducing some type of ―quality‖ measurement within the definition of acquisition — so, for example, only counting those email subscribers who remain subscribers for three months — helps marketers assess success on a more valuable scale than simply volume. CPE (cost per engagement) is emerging as a metric. CPE is a newer ad model whereby advertising is offered free, with advertisers paying only when viewers actually engage with the ad itself (thus differing from CPA, which looks at consumer activity post exposure). ―Engagement‖ can be defined in a number of ways, such as completing a survey within the ad, entering a competition, or watching a certain amount of video. Online video ad provider VideoEgg pioneered this payment system in 2008.11 This method is seen to push back more responsibility for ad performance onto the ad creative than other methods such as CPC, which were thought to place the bulk of the burden of performance onto the publisher. It is also a way of measuring interaction with newer types of creative — such as video ads or ads with product comparison tools within them — that may drive significant interaction but not actually click-throughs. However, as ―engagement‖ means something different for every marketer, such metrics are not comparable across campaigns even for the same marketer, limiting their value. Prepared by Greg Stuart 76 greg@gregstuart.com Confidential

verbiage on digital ad metrics View-based metrics simply look to track exposure. These measures, such as number of impressions or unique viewers, generally appeal more to advertisers with a branding goal, as they mirror the basic offline measures for brand exposure of readership in print or viewers on TV. Even the smallest of advertisers can track this with free analytics packages such as Google Analytics. However, these metrics reveal very little about the impact of advertising on consumers, and with almost two-thirds of marketers using these as a metric, it‘s hardly surprising that half of interactive marketers say extracting ROI is their biggest challenge with display advertising, and 60% of marketers say that they struggle to build the case for interactive marketing in their organizations. Performance-based metrics aim to expose true interactions. Metrics such as number of click-throughs or video views give an indication of how many consumers actually took some action upon seeing an ad and appeal to advertisers looking to drive direct action, though are unlikely to be very insightful for marketers with a branding goal or to indicate real ROI. One of the reasons for the prevalence of both of these types of basic metrics, despite their lack of real insight, is the relative ease of benchmarking across your own campaigns and with the industry as a whole; DoubleClick, for example, supplies some ad click-through rates. Cost-Based Metrics Generate More Insight Evaluating display ad campaigns on a cost basis allows marketers to track the efficiency of the channel and begin some simple comparisons, such as comparing banner ads and search on their ―cost per click‖ (CPC) or even television and banners on ―cost per unique viewer.‖ Prepared by Greg Stuart 77 greg@gregstuart.com Confidential

ad spending review Prepared by Greg Stuart greg@gregstuart.com 78 Confidential

ad spending by channel summary Media Channels ~$300 billion dollar industry (U.S.) Television: 60/40 national / local o Broadcast TV o Cable TV 50/50 brand / direct marketing o Spot TV o Interactive TV Online is ~$25 billion, mobile is <$1B Internet: Online display/brand is only 1/4 o Search o Display Growth opportunities online: o Digital Video o Games 1. Online video is up & growing (+115% in ‗09) Magazines 2. Behavior/Audience targeting still growing Business Press 3. Performance & ROI rules Newspaper Radio 4. Local online will grow, eventually Out of Home Digital OOH Direct Mail Net, Digital is growth medium Yellow Pages Mobile Others declining; & will continue to fall Prepared by Greg Stuart 79 greg@gregstuart.com Confidential

ad spending trends – the details 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009(E) 2010(E) Newspapers 48,670 44,305 44,102 44,939 46,712 47,407 46,611 42,209 34,740 26,045 23,434 -9.0% -0.5% 1.9% 3.9% 1.5% -1.7% -9.4% -17.7% -25.0% -10.0% Magazines 12,370 11,095 10,995 11,435 12,247 12,847 13,168 13,787 12,753 10,202 9,182 -10.3% -0.9% 4.0% 7.1% 4.9% 2.5% 4.7% -7.5% -20.0% -10.0% Broadcast TV 44,802 38,881 42,068 41,932 46,264 44,293 46,880 44,521 43,734 35,430 36,849 -13.2% 8.2% -0.3% 10.3% -4.3% 5.8% -5.0% -1.8% -19.0% 4.0% Cable Networks 15,455 15,736 16,297 18,814 21,527 23,654 25,025 26,319 26,973 25,625 27,034 1.8% 3.6% 15.4% 14.4% 9.9% 5.8% 5.2% 2.5% -5.0% 5.5% Radio 19,848 18,369 19,369 20,863 21,411 21,455 21,665 21,310 19,599 16,639 15,978 -7.5% 5.4% 7.7% 2.6% 0.2% 1.0% -1.6% -8.0% -15.1% -4.0% Yellow Pages 13,704 14,384 14,709 14,906 15,486 15,970 16,289 16,477 15,052 13,096 11,917 5.0% 2.3% 1.3% 3.9% 3.1% 2.0% 1.2% -8.6% -13.0% -9.0% Direct Mail 44,591 44,725 46,067 48,370 52,191 55,218 58,642 60,225 58,117 52,305 52,305 0.3% 3.0% 5.0% 7.9% 5.8% 6.2% 2.7% -3.5% -10.0% 0.0% Business Papers 4,915 4,468 3,976 4,004 4,072 4,170 4,195 4,111 3,700 2,960 2,664 -9.1% -11.0% 0.7% 1.7% 2.4% 0.6% -2.0% -10.0% -20.0% -10.0% Outdoor 5,235 5,193 5,232 5,504 5,834 6,301 6,805 7,251 6,595 5,983 5,983 -0.8% 0.8% 5.2% 6.0% 8.0% 8.0% 6.6% -9.0% -9.3% 0.0% Internet 8,087 7,134 6,010 7,267 9,626 12,542 16,879 21,206 23,448 23,976 25,353 -11.8% -15.8% 20.9% 32.5% 30.3% 34.6% 25.6% 10.6% 2.3% 5.7% Miscellaneous 32,083 29,895 30,730 31,990 34,645 35,592 37,321 37,383 34,615 29,700 30,474 -6.8% 2.8% 4.1% 8.3% 2.7% 4.9% 0.2% -7.4% -14.2% 2.6% Total Spending 249,760 234,184 239,555 250,025 270,016 279,450 293,481 294,799 279,325 241,960 241,173 -6.2% 2.3% 4.4% 8.0% 3.5% 5.0% 0.4% -5.2% -13.4% -0.3% Total National 135,767 125,609 128,373 136,086 150,192 156,314 167,138 171,739 168,434 148,628 150,280 -7.5% 2.2% 6.0% 10.4% 4.1% 6.9% 2.8% -1.9% -11.8% 1.1% Total Local 113,993 108,576 111,222 113,938 119,823 123,236 126,343 123,060 111,257 93,332 90,894 -4.8% 2.4% 2.4% 5.2% 2.8% 2.5% -2.6% -9.6% -16.1% -2.6% Prepared by Greg Stuart 80 62% Nat'l vs. Local greg@gregstuart.com 54% 54% 54% 54% Confidential 56% 56% 57% 58% 60% 61% Source: Universal McCann, NAA, IAB RAB & Barclays Capital

online and cable have experienced the most growth in ad spend while newspapers‟ revenues have plummeted U.S. MAJOR media spend by type, 2003-09 - $ Billions 2003-09 CAGR Does not include Direct Mail, Business Press or Miscellaneous Percent 240.8 249.2 6.3 244.1 234.6 6.8 -0.1 7.3 233.0 5.8 16.8 7.3 219.3 9.6 12.5 21.2 218.3 Outdoor 5.5 14.2 14.4 7.3 Online 7.3 14.0 23.8 4.9 14.2 13.9 19.9 20.0 25.4 Yellow Pages 19.9 19.4 13.8 23.2 Radio 19.4 24.9 17.9 13.2 21.2 23.1 26.2 -0.9 Cable TV 18.5 16.7 27.5 -2.5 46.3 44.3 46.9 27.4 Broadcast TV 41.9 44.5 6.7 45.3 41.8 0 Total Print 58.9 60.2 59.8 (Consumer Mag + 56.3 55.6 Newspaper) 48.7 43.2 -4.3 Magazine 11.4 12.2 12.8 13.2 13.8 13.0 0.9 12.1 Newspaper 44.9 46.7 47.4 46.6 41.9 35.7 31.2 -5.9 2003 2004 2005 2006 2007 2008 2009E Source: Universal McCann; SNL Kagan; Veronis Suhler; Wachovia; Morgan Stanley, Deutsche Bank; team analyses Prepared by Greg Stuart 81 greg@gregstuart.com Confidential

national vs. local (online is lowest local but most growth overall) Local and national advertising spend** CAGR*** Media type $ Billions, 2007 Percent, 2003-07 56 45 26 • $90 billion in local- 19 oriented ad spend (~50% of total excluding 14 mail), much from small & medium 21 businesses‘ (SMB) advertisers 7 • But local online ad spend is only 15% * Includes newspapers and consumer magazines ** Definitions of local and national vary slightly by media of total online spend *** Compound annual growth rate for total ad spend Source: Universal McCann; SNL Kagan; Veronis Suhler; Wachovia; Morgan Stanley, Deutsche Bank; team analyses Prepared by Greg Stuart 82 greg@gregstuart.com Confidential

addressable media vehicles continue to capture value Mass-reach o Newspaper 51 48 56 o Television 67 62 o Radio Highly targeted o Direct mail 52 o Cable 44 49 33 38 o Internet o Advanced TV 2003 2005 2007E 2009E 2011E Source: Veronis Suhler, 2007; PWC (2008) Prepared by Greg Stuart 83 greg@gregstuart.com Confidential

to be clear…web is mass medium ….There is NO question - online is a mass medium Daily Reach and Duration for Various Media Outlets 100% Television 80% Radio ? 60% Web 2005 Newspaper 40% Magazine 20% Web 1995 0% 0 60 120 180 240 300 Daily Duration: Average Minutes per User Source: Ball State University Center for Media Design – A Day in the Life: An Ethnographic Study of Media Consumption Prepared by Greg Stuart 84 greg@gregstuart.com Confidential

different channels play different roles against marketers‟ goals Marketer Goal Awareness Imagery Consideration Purchase Brand Building Driving Action Media capabilities Less- Broadcast & Cable Yellow pages addressable Television Digital Print – Magazines & OOH Newspapers Online Video Direct mail Addressable Online display Online search Interactive television Mobile display Mobile search Prepared by Greg Stuart 85 greg@gregstuart.com Confidential

online ad spending projections vs. overall ad spending projections US Online Advertising Spending, 2008-2014 (billions and % change) 2008 $23.4 (10.6%) 2009 $22.4 (-4.6%) 2010e $23.6 (5.5%) 2011e $25.2 (6.8%) US Total Media Advertising Spending 2008-2014 (% change) 2012e $28.3 (12.3 %) -6.4% 2008 -14.6% 2009 2013e $31.0 (9.5%) -0.5% 2010 2011 0.3% 2014e $34.0 (9.7%) 2012 2.4% 2013 0.6% 2014 2.7% Source: eMarketer, December 2009 Prepared by Greg Stuart 86 greg@gregstuart.com Confidential

details - online spending by format US Online Advertising Spending, by Format, 2008-2014 (millions) 2008 2009e 2010e 2011e 2012e 2013e 2014e Search $10,546 $10,782 $11,422 $12,172 $13,641 $14,694 $15,810 Display $4,877 $4,765 $4,923 $5,090 $5,411 $5,630 $5,800 Classifieds $3,174 $2,215 $2,030 $1,915 $1,981 $2,077 $2,176 Lead Gen $1,683 $1,521 $1,628 $1,739 $1,868 $1,984 $2,108 Rich media $1,642 $1,476 $1,558 $1,688 $1,868 $2,046 $2,142 Video $734 $1,029 $1,440 $1,966 $2,858 $3,844 $5,202 Sponsorship $387 $313 $316 $328 $351 $372 $388 E-mail $405 $268 $283 $302 $323 $353 $374 Total: $23,448 $22,370 $23,600 $25,200 $28,300 $31,000 $34,000 Note: numbers may not add up to total due to rounding Source: eMarketer, December 2009 Prepared by Greg Stuart 87 greg@gregstuart.com Confidential

online is not yet a major brand channel 2008 U.S. Measured Media Spend: $186 Billion Branding $146 B Online Spend as 2008 U.S. Measured Media Spend: (~50%) Percent of Total $24 Billion 4% $6 B (~25%) 11% $18 B (~75%) Response Direct $159 B (~50%) Source: JP Morgan estimates, ThinkEquity Partners Prepared by Greg Stuart 88 greg@gregstuart.com Confidential

ww online share Allocation to online ad spending varies greatly by country Top countries: o U.S. o Nordic EU Countries o UK o Czeck & Poland o Aus. & Japan o So Korea Prepared by Greg Stuart 89 greg@gregstuart.com Confidential

sources of ad spending data Various methodologies, some are better than others: o Best is probably is eMarketer o Compilation of all others‘ data & projections o Universal McCann data ok for most media o Zenith Media is good too o Jack Myers is good but paid for Suggested caution: o TNS for Online (poor methodology & not the whole interactive ad channel – used for per brand generally) o Nielsen NetRatings data not representative either (same as TNS) o Some of the Wall Street data Additionally, there is NO good CPM data Prepared by Greg Stuart 90 greg@gregstuart.com Confidential

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Digital Advertising Ecosystem 2010

by Greg Stuart on Feb 06, 2010

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Digital Advertising Ecosystem 2010 Presentation Transcript