LynotechLynotech is a multiplatform audience knowledge system for premium publishers whichallows them to deliver targeted audiences directly to advertisers, provides useful userinsights to content creators and sales teams, and allows to build better services for users,driving superior digital revenues for publishers. Lynotech does what Google would do if it was a Premium Publisher.
The Problem¤ Premium Publishers have lost approximately 50% of their overall advertising revenues in the American Newspapers have lost 55,6% of past ﬁve years (2006-20011). their advertising revenues in the past 5¤ They haven’t been able to increase digital years (2006-2011). revenues enough to compensate this fall. Newspaper Assosiaciation of America¤ In the ofﬂine world, advertising revenues depend on Publisher’s brands and the size of their audiences. ¤ In the online world, user’s knowledge is the key driver for revenues. Spanish newspapers have lost 51% of their¤ Premium Publishers hardly know anything advertising revenues in the past 4 years. about their users, therefore they still sell Infoadex advertisement spaces, not audiences.
The Problem ¤ Other agents present in the display advertising market value chain retain most of the ﬁnal value paid by advertisers, reducing Premium Publishers revenues, by transforming advertising spaces into online audiences and delivering it directly to the market. ¤ Publishers can’t disintermediate the value chain to increase their share of the market because they don’t have advertising products demanded by advertisers.Terence Kawaja’s 2010 IAB presentation "Parsing the Mayhem: Developments in the AdvertisingTechnology Landscape.” outlined the distribution of revenue through the ad technology chain. SinceMay 2010 the situation has gotten worse as there are more players in the game.
Lynotech’s SolutionLynotech transforms user’s data generated by Premium Publishers into knowledge through state ofthe art data processing technologies, and provides publishers with adequate interfaces to managethat knowledge in order to enhance its value.Each Publisher is owner of the user’s knowledge generated in its sites. Lynotech will help publishersto use this knowledge to:¨ Design their editorial strategies based on users insights to increase their audience and therefore their inﬂuence.¨ Create a higher value advertisement product that allows publishers to sell segmented audiences instead of advertising spaces and develop new commercial strategies.¨ Capture more market value and disintermediate the advertising selling ecosystem by creating a bridge that reaches advertisers and agencies directly with premium targeted advertising products.
Market Size USA 2011 Europe 2010* Spain 2011PremiumPublishers Internet Ad Revenue (m$) 31.896,55 22.713,15 1.141,24Internet Total Available Market 11.100,00 7.495,34 550,44 Display Ad Revenue (m$) (34,8%) (33%) (48,23%)Displays Last Years Display AdAdvertising 15% 21,10% 12,60% Revenue Growth (%)Market Size in 9.102,00 523,75millions of Premium Publishers (m$) Not available (Top 50: 90%) (Top 30: 95%)dollars, Newspapers (m$) 3.249,40 Not available 148,40**according tothe Interactive Sources: IAB USA – Internet Advertising Revenue Report Full Year 2011: http://www.slideshare.net/pmereles/iab-internet-advertising-revenue-report-full-year-2011Advertising IAB Europe – European Online Advertising Expenditure 2010 (2011 Report not available yet*): http://www.slideshare.net/pmereles/iab- europe-2010Bureau (IAB) IAB Spain – Estudio sobre Inversión Publicitaria en Medios Digitales: http://www.slideshare.net/IAB_Spain/estudio-de-inversin-en-publicidad-digital-total- ao-2011-iab-spainpwcdata Newspaper Association of America **Deloitte–AEDE March 2012 Newspapers Digital Editions Ad Revenue x 12
Business ModelLynotech charges Premium Additionally, Lynotech chargesPublishers a monthly fee Premium Publishers a percentageaccording to the size of their of the advertisement revenuesaudience. achieved thanks to the user’s knowledge provided.
CompetitionApparently, there are many competitors, but… ¨ They all ﬁght to keep control of their piece of cake and increase market’s opacity. ¨ They all keep user’s knowledge for themselves in order to monetize it elsewhere. ¨ None of them really helps Publishers build better audiences. ¨ None of them maximize advertising revenues for Publishers, they maximize their own revenues. …none of them meets fully Premium Publishers needs.
Lynotech’s AdvantageNone of the players in the market addresses this matter from a Premium Publisherspoint of view: no agent meets fully their needs.Publishers need to own their user’s knowledge in order to drive growth in the onlinemarket: ¨ Delivering better contents to increase their online audiences. ¨ Delivering personalized services to increase user’s engagement. ¨ Delivering higher value products to advertisers (targeted audiences vs. spaces) to increase their revenues per user. ¨ Disintermediating the current value chain to capture more market value. ¨ Developing new commercial strategies to maximize in-site audiences monetization.
Go To Market ¤ Lynotech already has an agreement with a premium local newspaper publisher to develop and enhance it’s user’s knowledge technology: months 1-6.Trojan Horse ¤ Lynotech will silently develop and polish the sales and editorial interfaces that Strategy will help publishers enhance their incomes and audiences: months 6-9. ¤ Lynotech will start testing targeted campaigns without advance: months 6-9. ¤ With results in it’s hands, Lynotech will try to impulse a wide agreement with the Spanish Premium Publishers to add as many Editorial Groups as possible Silent to it’s initiative, in order to avoid other online advertising agentsConcentration countermeasures: months 9-12. ¤ At the same time, Lynotech will start to impulse similar editorial agreements in different European markets and in the US.
Lynotech’s Team¤ Paul de Mulder ¤ Guillermo Ramos Freelance business consultant specialized in Economist with extensive experience in media groups with four years of experience Venture Capital, Private Equity, Fundraising, working in the industries transformation. Strategy, Start Ups, Valuations and Business Plans.¤ Luis Fajardo ¤ José Rizo IT Engineer specialized in Software Experienced IT/engineering professional Development Management with ﬁve years of focused on Real Time System developments for experience developing communication the Aerospace Industry. systems and air navigation aids.¤ Key Hire: ¤ Key Hire: One Artiﬁcial Intelligence Specialist to help Two experienced coders in systems polish the user’s knowledge system. Already integration to connect the user’s knowledge Identiﬁed. system with the rest of Lynotech’s tools.
First StepsLynotech has applied to Wayra, Telefonica’s startup accelerator program, which offers:¤ Funding: Up to EUR 50,000 and alternative ways of funding, such as external VCs and internal funds from other Telefonica’s ventures.¤ Advisory: technical and speciﬁc advisors in topics like marketing, taxes, patents and intellectual property, legal frameworks, business regulations and ﬁnancial issues.¤ Infrastructure and working space: world-class co-working space.¤ Mentoring & Networking: a good opportunity to beneﬁt from synergies and access to valuable knowledge.¤ Training: from top universities, technical and business schools¤ Technical Development: regular talks and consultancy from Telefonica I+D engineers.
IntroductionIn order to test Lynotech’s value proposition we’ve conducted several personalinterviews not only with potential customers but also with other signiﬁcant players inthe digital advertising industry like Google and Agencies. We tried to ﬁnd out if there isa real need, what other needs hadn’t we identiﬁed, and the difﬁculties to get to themarket.Potential customers quickly started talking about their necessities and how unsatisﬁedthey are with current solutions and what would they need in order to succeed, whichmakes us think there is a big market opportunity. Other related players in the Industrylike Google or Agencies focused on the technical and environmental difﬁculties to carryout our project, which we also think points out that there is an opportunity for ourdifferential approach.
Personal Interviews European Display Advertising EcosystemMedia Group AgencyLocal NewspaperGeneral ManagerDigital ManagerAd Sales Manager Google
Personal Interviews¤ Google Manager ¤ Agency Manager Guillermo Ramos and Paul de Mulder Luis Fajardo, Guillermo Ramos and Paul de Mulder May 4th 2012, Madrid. 1,5 h. May 11th 2012, Madrid. 4 h.¤ Premium Publisher ¤ Premium Publisher National Media Group Corporative Director Local Newspaper General Manager Luis Fajardo, Guillermo Ramos and Paul de Mulder Scheduled May 21st 2012 Via Google Hangout May 11th 2012, Madrid. 1,5 h. ¤ Premium Publisher¤ Premium Publisher Local Newspaper Advertising Sales Manager Local Newspaper Digital Manager May 17th 2012 Paul de Mulder, Valladolid. 1h Scheduled May 21st 2012 Via Google Hangout ¤ Premium Publisher¤ Amazon Data Warehouse Manager Largest Spanish Blog Publisher CEO Full team Scheduled May 23rd 2012 Madrid May 17st 2012, Via Google Hangout
Google Manager¨ Local premium publishers may have a big opportunity with our approach: big online advertising players don’t reach local advertisers and currently there is no online advertising product for them. ¨ Local newspapers have the local audience and a local sales force, and Lynotech will provide them with products suitable for local market.¨ National premium publishers will have to ﬁght against the rest of the players involved in the online ad market (for example AdSense) for the same advertisers and with inferior targeting technology but higher quality advertising inventory.¨ The project is not technically easy, specially if we consider to allow different customers share their data to drive higher incomes.
Agency Manager¨ The market opportunity exists, as premium publishers have the necessity of increasing their online advertising revenues and they’ll only achieve this by developing a system that helps them know their users and start selling “audience” instead of “space”, and to deliver better contents and services to their audiences to achieve higher user engagement, better trafﬁc, and more ads.¨ There’s been several attempts to develop similar solutions for publishers, but current advertising ecosystem has prevented them from succeeding as it reduces the part of the market value they manage and capture, and therefore their proﬁtability. Any similar solution would be boycotted by current agents, leading to damages on premium publishers short term incomes (not only in digital advertising but also in other medias like paper).
Agency Manager¨ Don’t let other market agents ﬁgure out Lynotech’s intentions to disintermediate the display advertising market in order to avoid their pressures and countermeasures. He suggests to keep a very low proﬁle (zero promotion and communication to the market). Refer to Lynotech’s solution as an audience analysis tool that helps premium publishers gather users insights from their audiences to deliver better contents and new editorial services.¨ In order to impose to the market an advertising solution like the one proposed it’s important to add as many premium publishers to the project as possible before it goes live. It needs to become a standard as soon as possible and without advance in order to protect publishers from any possible attacks from other agents involved.
National Media Group Corporative Director¨ Publishers need a solution like the one proposed by Lynotech. Users knowledge will be critical for media survival and publishers haven’t moved yet. There’s a market opportunity, but Lynotech has to move fast.¨ Advertising market is depressed, so publishers are right now concerned about gaining audience and inﬂuence, as these will be the drivers for revenues when the market grows and the economic crisis is over. Lynotech should not only focus on advertising but also on helping publishers gain inﬂuence and increase their audiences based on users insights: new services, better contents, etc.¨ Proprietary data: every single user insights and data generated in premium publishers sites must be owned by publishers. They must be the only ones to decide what to do with it, and Lynotech must offer them different solutions for their different needs.¨ It’s critical to be compliant with all European users privacy laws, or even more strict, as premium publishers brand could be seriously damaged in case any privacy scandal takes place.
National Media Group Corporative Director¨ Premium Publishers won’t buy developments, they’ll buy products, so its basic to go to the market with a fully developed solution.¨ Premium publishers may be willing to share data with other premium publishers as long as it drives higher incomes for them, but it’s not fundamental in this point. That should be phase three, or four of Lynotech’s road map.¨ Lynotech’s proposal has a signiﬁcant impact on media group’s workﬂows. It has editorial and commercial implications that will force to change working methods in areas of the organization and persons with aversion to change. In order to address this issue we need a very high commitment from our customers.¨ It would be very helpful to count with some of the Spanish traditional editorial shareholders as Lynotech’s investors.
Local Newspaper Advertising Sales Manager¨ Newspapers don’t have digital advertising products suitable for local advertisers. ¨ In their traditional paper business model, local advertisers represent the biggest part of their incomes (even after the crisis), but nearly have no presence in their digital advertising because they cant offer them access to speciﬁc audiences. ¨ They still sell digital advertising the same way than ofﬂine advertising, basically spaces, because they cant do anything else. Therefore they agreed that Lynotech’s proposal would allow them to start selling local digital advertising, recovering a great potential market, and stop managing spaces and start managing audiences.¨ In his own words, "I would buy this service tomorrow if it was possible". Data ownership was essential for him, but also the commercial scorecard possibilities. He also pointed out that he would be very interested in some type of exclusivity agreement for his territory, in order to surpass his competitors in this new local digital market.
Amazon Data Warehouse Manager¨ Lynotech’s value proposition makes sense not only for premium publishers, but it’s also a need for other online players with digital advertising¨ Lynotech should start with simple techniques and tools that can deliver great results in minimum time (minimum viable product).¨ There will always be time to develop a more complex solution, but it’s basic to reduce time to market.¨ Try to use open source as much as possible.¨ Semantic techniques are complex to develop, so we should consider it later on.
Lessons Learnt from the Interviews¨ 1) Premium Publishers have the need of solution to their problems with Lynotech’s approach.¨ 2) The market has already expelled a similar solution because they we’re born weak. We need strong customers that can impose their standards to the market.¨ 3) Keep a very low proﬁle until the system is completely functional. Talk publicly about it as a “content enhancer” for Publishers.¨ 4) Try to add as many Premium Publishers you can in each market before going live.¨ 5) Don’t focus only in using user’s knowledge to increase advertising sales. For Premium Publishers gaining audience is at least as important as increasing revenues.¨ 6) There will be some forces inside Premium Publishers opposing to Lynotech’s solution because of the implications of the proposal and their aversion to change the way they work.¨ 7) Publishers are interested in some sort of exclusivity period by territory.
Value Proposition Modiﬁcations¨ According to the lessons learnt during the validation process with customers, and although it was part of our value proposition, we’ve decided to give equal importance to helping Premium Publishers increase and engage their audiences in order to help them deliver higher value advertising products.
Strategy Modiﬁcations¨ According to the lessons learnt during the validation process with customers, we’ve decided to keep the lowest proﬁle as possible in order to not alert other agents in the online display advertising market.¨ We’ve also decided to talk publicly about it as a “content enhancer” for publishers, keeping out of the conversion our advertising intentions.¨ We will approach traditional Premium Publishers shareholders for the ﬁrst ﬁnancing round due to their market knowledge and their ability to act as really smart money in this market.¨ We are considering guaranteeing an exclusivity period for our initial customers in their market territories.
Conclusions¨ The market opportunity exists, but we have to move fast. We have time, but we need to hurry up.¨ We will pursue Lynotech’s value proposition for the OEP, and hopefully for the real market.¨ We need to keep a low proﬁle strategy to avoid other agent’s countermeasures.¨ In early stages: ¤ our solution will be primary focused in tools integration instead of development in order to reduce costs and time to market (minimum viable product). ¤ we will focus on helping publishers know and understand their users to increase their audience rather than in advertising sales.