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  • 1. Ad Revenue 2009Presentations and Panel Summariesfrom the Premium PublisherConference - October 8th, NYC
  • 2. The Conference for Premium Publishers Over 400 exectuives representing the world’s biggest online publishers and advertising companies gathered at New World Stages in NYC on October 8th to discuss how premium publishers can earn more advertising revenue from the non-guaranteed inventory. The conference included presenatations and panels featuring top executives from companies in the 2nd Channel ecocystem - or intermediaries that work with premium publishers to increase ad revenue. Greg Stuart (left), Former CEO of the IAB hosted.Hundreds of online advertising executives listen to a presentation PubMatic team members and attendees enjoying the cocktail hourSeveral companies had booths at Ad Revenue 2009 to show demos. 1 PubMatic CEO, Rajeev Goel (right), welcomes attendees to the event
  • 3. Ad Revenue 2009 Presentations and Panel SummariesOpening KeynotePresenter:Amar Goel, Founder and Chairman, PubMaticAmar commented on findings and trends in the 2nd Channel. As the 2nd Channel was the theme of the conference, Amardefined the 1st and 2nd Channels: the 1st Channel is the guaranteed inventory is what premium publishers sell directly to adver-tisers and agencies with their own direct sales force, while the 2nd Channel is the non-guaranteed inventory that a publisher sellsthrough intermediaries like ad networks and ad exchanges. The 2nd channel is growing significantly, according to ThinkEquity, aleading analyst in this space. They estimate that in 3 years the 2nd channel will make up 34% of publisher’s ad revenue, or ap-proximately $10B annually. This is up from roughly 10% just a few years back.To better understand what publishers think about the 2nd Channel, PubMatic commissioned Greg Stuart, former CEO of theiab, a totally publisher focused organization, to conduct 30+ interviews with executives of premium publishers over 4 months.The most important finding was that publishers really value revenue in the 2nd Channel, more than anything. But when publish-ers thought about what drives eCPM lift, it was not clearly understood. Almost every interview had a different answer. And thatbrings us to the 3rd point. Publishers feel that in the 2nd channel, there is a real lack of transparency and trust. Vendors arepromising the moon, and then not delivering.Amar then talked about what is going to drive the 2nd Channel and revenue as we go forward. First off, in the 2nd Channel, wehave a shift in how media is being bought and sold. This is very different than traditional ad sales in the first channel, where youare selling your audience in aggregate. In the 2nd channel it is very dynamic. Buyers in the 2nd channel are looking for the rightimpression and the right user at the right time. And all this has to happen in real-time because it changes impression to impres-sion and so much of the 2nd channel is performance oriented. In addition, innovation will continue to be a hallmark of this space.If you look at just the last few years entities such as ad exchanges, media buying platforms, dynamic creative, and ad revenueoptimizers have all popped up. Last, Amar mentioned that the industry is hoping for an ad price recovery as the economy comesback to life. PubMatic, from its own data, has seen CPMs increase 32% year over year.PubMatic sees 9 segments in the 2nd Channel, from exchanges to ad revenue optimizers to dynamic creative. It is important thatpublishers learn about these segments and understand how they are impacting the 2nd Channel and 34% of their revenue.Panel 1: The Blurring Lines of Ad Exchanges, Ad Marketplaces, and Ad NetworksModerator:Michael Learmonth, Reporter, Digital Media & Advertising, Advertising AgePanelists:Jay Sears, EVP, Strategic Products & Business Development, Context WebPhilip Smolin, GM, Platform Solutions, TurnTom Sipple, VP, IAC/Dictionary.comJed Nahum, Director of Network Planning and Strategy, AdECNRob Rasko, President and COO, CPX InteractiveThis panel sorted out the ever-evolving and bewildering landscape of ad exchanges, ad networks, ad marketplaces, and otherdemand solutions that publishers can choose from when considering how to monetize their 2nd channel inventory. The panelistsgenerally agreed that the lines that divide ad exchanges from ad networks and media buying platforms are gray and companies 2
  • 4. Ad Revenue 2009 Presentations and Panel Summariesshift from one category to the next not infrequently. At the same time though, all of the panelists agreed that the 2nd channelopportunity is increasingly about allowing ad buyers to use proprietary data to uniquely value a specific user on a specific pageat a point in time – the combination of the user in a certain context is what ultimately creates value for the advertiser. As the pub-lisher representative on the panel, Tom Sipple of IAC/ commented that the evolving landscaping can be difficult forpublishers to manage due to the breadth and depth of players involved, and that clearly there was no one-stop solution.Presentation: Ad Networks for Branding CampaignsPresenter:Michele Madansky, Michele Madansky ConsultingMichelle Madansky, a statistician, presented data that showed how Ad Networks can be effective for branding oriented marketingcampaigns. Using the fact Ad Networks today rival single publisher sites in reach (70%+ reach for each of the top 10 Ad Net-works vs. only 2 publisher sites above 58% reach), Michelle leveraged three separate studies by comScore, Insight Express andDynamic Logic to make a case that Ad Networks have a positive brand impact.The studies used quantitative results with control groups to determine the brand impact of Ad Network buys vs. direct publishersite buys. Insight Express showed Ad Networks had positive brand impact, and for some areas they actually outperformed directpublisher sites. Dynamic Logic’s study showed that the top 20% of ad networks delivered better results than publisher sites whilethe bottom 20% of ad networks were detrimental. In short, Ad Networks are effective channels for brand based campaigns.Panel 2: Standardization, Innovation, & Monetization: How New Ad Units Are Impacting PublishersModerator:Joe Mandese, Editor-In-Chief, MediaPostPanelists:Kirsten Rasanen, VP, Product Development, TV GuideTom Bowman, VP, Strategy and Operations, Global Advertising Sales, BBC WorldwideJeremy Fain, VP Industry Services, IABRyan Whittington, VP, General Manager, bizjournalsNearly every single large publisher today is experiementing with new ad untis. Those new units range from the new OPA units toad that include dynamicly inserted creative, to full page takeovers, yet despite the revenue opportunity behind these units, thereare many challenges involved with using them.Overall, most of the panel was optmistic about using new ad units for the following reason: Only their direct sales team can sellthem, not ad networks. That said, the lack of standardization from those exclusive units means that fewer overall dollars go intothem. Jeremy Fain, VP of Industry Servicies at IAB, noted that is one of the reasons OPA is working so hard to get new ad units offthe ground is because those units can be “standardized” amongst premium publishers that work with OPA, and can be sold acrossmultiple sites, but not through ad networks.Also pointed out by the panel was that new units do bring in significant dollar amounts, but there is a challenge in getting theproduct team and sales team on the same page in terms of what can be sold and what can delivered in a timely way. The big-gest overarching theme of the panel, however, was that the biggest challenge in working with new ad units is balancing betweenbring in the most revenue possible, while maintaining a good user experience. And at the end of the day, direct sales teams sellagainst the reputation of the publishers they work for, so if they users rebel because of obtrusive ads that bring in a lot of money,then in the long-term, the publisher loses out. 3
  • 5. Ad Revenue 2009 Presentations and Panel SummariesPresentation: Ad Ops as a Revenue CenterPresenter:Rob BeelerAd ops is in a tricky spot, they are all about revenue, but there is immense complexity involved in the situation. He uses an imageof a car completely disassembled to drive the point home. Ad ops is in a position somewhere between sales, finance, editorialand technology and they are pulled in all of these directions for different reasons. Often there is so much confusion and frustrationthat nothing gets done. His suggestion is to OWN the inventory and he suggest the best way is to segment into 3 buckets.Premier inventory, the main focus of the ad ops team, and don’t be afraid to work with salespeople and agencies to do things“outside the box” innovative products. The 2nd is the middle Tier, this is “the new frontier” where ad ops can help build in ad-ditional revenue, and the utilize the use of a Network optimizer for the remnant inventory. In order to best build the new frontier hesuggests that you build a business around building quality relationships with partners that help build the business. Then, learn fromthe partners and focus on innovation and finally make data the rational way to make decisions. Obviously, it is important to buildthe right ad ops team, right people + responsibility + resources = REVENUE.Panel 3: The Evolution of Media Buying and What That Means for PublishersModerator:John Ebbert, Managing Editor, AdExchangerPanelists:Andrew Kraft, VP Technology Solutions, Collective MediaJoe Zawadzki, CEO, MEdiaMathSean Kegelman, SVP, Partnerships, VivaKi Nerve CenterDarren Herman, Founder & President, Varick Media ManagementMatthew Gretizer, VP Search Marketing and Head of ATOM Systems, RazorfishThis panel examined how media buying is changing as a result of real time bidding capabilities that are in the process of beingscaled up across the industry. Increasingly advertisers are interested in uniquely valuing a particular user, based on their propri-etary understanding of that user, along with the context or web page that the user is on and serving the right ad at the right price.The panel agreed that ultimately as this process becomes widespread, it should increase revenue for all players as improvedtargeting will lead to higher CPMs. As this shift to audience targeting occurs though, there is a possibility that premium brandedpublishers may suffer CPM and sell-through reductions in the near term as the buying model shifts. Many of the panelists agreedthat the role of the ad network in this future world of media buying platforms working with exchanges was far from certain. 4
  • 6. Ad Revenue 2009 Presentations and Panel SummariesPresentation: Government RegulationsPresenter:Alan ChapellGovernment regulation online and consumer privacy is a topic that remains top of mind for major online publishers and advertisersas the online ad ecosystem metamorphosis is in full swing. Renewed government scrutiny on the topic of privacy and consumerprotection online has come about as new ad technologies, new behavioral targeting functionality and increased demand for site-side publisher data is reaching new heights.The online advertising industry has always been ‘self-regulated’ and has done an ‘ok’ job of gaining the active support of thepublisher community in privacy groups such as the IAB/AAAA and NAI. However, if the government is going to continue to allowthe internet industry to be self-regulated, there needs to be a significant amount of additional work from the publishing communityto inform and protect consumers online. The concepts of providing consumers privacy “opt-out notice/choice” and non-PII adtargeting remain at the core of online privacy fundamentals. Industry accepted definitions of core concepts (i.e. ad networks, thirdparty, behavioral, etc) must be understood by publisher/advertisers and consumers (and Washington DC). Increased educationon the industry at large is still required, at scale in order to be successful.New innovative privacy certified advertising ‘notice’ practices (ad notification and opt-out outside the ad) is starting to become thenew recommended ‘best practice’ for leading online publishers. Every major publisher without an informed stance/strategy onprivacy needs to make adopting these best practices a priority immediately. Online publishers need to take a more active role inthe process and should consider joining some of the industry privacy groups to ensure this industry continues to be self-regulatedand protected from restrictive government regulation.Panel 4: The New Economics and Revenue Opportunities of DataModerator:Greg Stuart, Digital Media AdvisorPanelists:Bill Wise GM, Global Exchange at Yahoo!Eric Hippeau, CEO, Huffington PostJeanne Houweling, VP Ad Network Solutions Group, PubMaticJeff Hirsch, President & CEO, AudienceScienceMark Zagorski, CRO, eXelateGreg opened discussion by posing the question, “Who owns the data”. This seemingly innocuous little question is at the very coreof all privacy debates that surround data on the web currently, and it certainly aroused some smiles from the panelists as well asuncomfortable responses. It was answered by most, that ultimately the user is the owner of the data, and publishers can use thisdata to help build a better product for the user whether through targeted advertising or actual product features. Companies likeExelate, BlueKai, and Audience Science acquire and aggregate data which is in turn sold to demand partners like ad networksand advertisers either coupled with media or as a standalone cookie. This is ultimately supposed to provide the end user with abetter experience on any given publisher in addition to increasing the value of any given impression. As online advertising shiftsfrom contextual based targeting to audience targeting, identifying target audiences and finding these users becomes increasinglyimportant. When used properly, data can help increase lift and maximize every ad impression to the fullest; however, finding thecorrect balance of micro targeting and reach can prove to be the most difficult aspect of using data. 5
  • 7. Ad Revenue 2009 Presentations and Panel SummariesThe main talking points from the panel were primarily on how to best make sense of data and have it become a vehicle for in-creasing overall CPMs of inventory by better targeting via various means; cookie, profile, demographic, segment. Data can helpturn ad space that would otherwise be impossible to target into highly targeted, extremely high converting inventory. The examplewas brought up by Mark Zagorski, Chief Revenue Officer, of Exelate, that you could be on ESPN watching a college football gameand even though only 70% of the audience is male, ALL of the ads are targeted to men. With demographic profile data every adimpression can be both targeted to the correct gender, age, ethnicity, and even inform specific creative for that given user. This inturn of course drives up eCPM significantly and everyone benefits. Eric Hippeau of the Huffington post said they are not currentlyusing data from third parties like BlueKai, Exelate, Audience Science, however they do actively use their own data for customizedcampaigns for their direct advertisers. Huffington post, it was said is more sophisticated than most publishers in their online datastrategy. Many publishers will be turning to trusted third parties to help them understand the value of their data as well as to man-age the many 3rd party data relationships that could enhance the value of their inventory.Closing Keynote:Presenter:Jack Flanagan, Executive Vice President, North America, comScoreJack spoke about two main topics: 1) an industry snapshot of display advertising, and 2) the role ad networks are playing in this.He began by describing the current state of display advertising. Today, in the US, approximately 33% of total media time is spentonline, but online only receives 14% of the dollars. And when you look at the $186B US media spend annually, direct responseadvertising is doing quite well when it comes to internet spending, but internet is not. 30% of direct response has moved online,but only 5% of the $118B in brand spend has moved online. So, clearly, brand marketers do not yet see the internet as a greatplace to spend money. comScore believes part of this issue is that while many marketers are still using CTRs for evaluating brandcampaigns (Forrester says 35% of marketers do this), that click rates are really quite low – the industry average is 0.1%. 1 in 1000impressions. According to comScore’s data fewer people are clicking on ads now as well; in March 2009 only 16% of consumersclicked on a display ad. Further segmentation shows that Heavy and Moderate clickers are approximately 8% of the population,but drive 85% of the clicks. So is CTR a great measure, or maybe it is and display is just not a good medium for brand advertisers?The Online Publishers Assocation (OPA) and comScore then did a study and looked at the View Thru Impact of display advertising.And the results were quite interesting. They exposed a group of consumers to display ads from at least one of 20 advertisers andmonitored their behavior on the top 50 sites. They found that within 30 days of being exposed to these ads almost 20% searchedon the advertiser’s brand name, and nearly a third visited the site. And those visitors spent more time on the advertiser’s site thanthe average consumer to the site. Maybe most importantly, consumers who were exposed to the advertiser’s ads, spent more onthose advertisers. In the travel category, exposed consumers spent 9% more, while in consumer electronics they spent 22% more.Net net, maybe view thru is worth taking a 2nd look at.When it comes to ad networks, Jack discussed that ad networks have grown because publishers have approximately 80% oftheir inventory going unsold. Still, ad networks have come under some fire and Jack mentioned “Are they friend or foe?”. com-Score’s data shows that the number of ad networks it reports on has grown from less than 10 in 2005 to almost 70 in 2009, andtheir reach is significant. The ad network business model appears to be strong, and advertisers can use them to get scale andefficiency. For publishers, they need to choose their partners wisely. While there have been a lot of questions about display, com-Score sees display as having proven it’s value, so the 1st and 2nd Channels should only continue to grow. 6