March 2013 Client Briefing


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JEGI provides key insights from its 9th annual Media & Technology Conference, which was held January 17th at the Time Warner Center in NYC. JEGI’s 2013 conference featured dynamic, world-class speakers, with more than 250 senior industry executives and investors from across the media, information, marketing and technology sectors. JEGI’s provided insightful overviews of our sectors – Smarter Marketing; Content Marketing; B2B Marketing Solutions; and Enterprise Marketing Management. Opening keynote Gracia Martore, President & CEO, Gannett, discussed Gannett’s growth in the digital marketing services space. Brian Longe, CEO of Wolters Kluwer Financial & Compliance Services, focused his keynote presentation on transforming a content-based organization. Closing keynote Lisa Hook, President & CEO of Neustar, ended the day by sharing her insights on trends in data and analytics. We heard from many more great speakers at the event, including insightful panel discussions on smarter marketing and social media, and a complete summary of the conference content can be found in this edition of the Client Briefing. Also, we were pleased to be ranked the #1 advisor by Bloomberg for the 7th consecutive year for number of M&A transactions completed in our core markets.

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March 2013 Client Briefing

  1. 1. The Jordan, Edmiston Group, Inc. (JEGI) hosted its ninth annual Media & Technology Conference on January 17th at the Time Warner Center in New York City. JEGI’s 2013 conference featured dynamic, world-class speakers, with more than 250 senior industry executives and investors from across the media, information, marketing and technology sectors. As always, JEGI is extremely grateful to the event’s sponsors for their support: The Boston Consulting Group; GE Capital; Morgan Lewis; The Howard-Sloan-Koller Group; IntraLinks; and Econsultancy, as well as the association sponsor, Software & Information Industry Association (SIIA). JEGI would also like to thank the A-list of speakers who con- tributed their time and effort to the conference program. Bios for all speakers and the full con- ference program can be found here: Fireside Chat Moderator: John Rose, Senior Partner & Managing Director, The Boston Consulting Group Keynote Speaker: Gracia Martore, President & CEO, Gannett Rose: Gannett has made a number of changes in its legacy businesses. What does Gannett look like now vs. two years ago? Martore: Since 2011, our senior leadership team has been focused on leveraging Gannett’s strengths to reposition the company. We weren’t just newspapers or broadcast; we had strong, long-term relationships in 120 local markets across the country, with highly-trusted brands built over 50 or 100 years. We engage with those communities in a very deep way, not only on the content side, but also through advertising and providing services to advertis- ers. As well, we had relationships with 150,000 small and medium-sized businesses throughout the country, and we also have 5,000 journalists nationwide – the largest in the country. We also had a financially strong company, and had spent a couple of years recasting our bal- ance sheet and reducing debt significantly. So we began to focus on digital marketing serv- ices and ways that we could leverage our rela- tionships with SMBs in a much more mean- ingful way. We have made some small acquisi- tions in digital marketing services, in social marketing and in loyalty programs, adding to our couponing business. USA Today has always been strong in sports, with an amazing amount of local sports content, but we ranked about 17th in digital audience in 2011. We made a couple of very strategic acquisitions, brought in some terrific folks in our sports group, renamed it USA Today Sports Media, and we cracked the top five by March 2012. Rose: Gannett appears to be the only owner of local community newspapers that has reversed what many thought was an inevitable set of declining trends. Martore: One of the first things the senior leadership team agreed was to focus on the consumer and the content. If we could provide relevant, engaging, important content to con- sumers on every platform, then our brand would be with those consumers throughout the day. We have to make sure that our extensive con- tent is structured correctly and is appropriate for the platform on which we’re providing it. We now let our customers choose which pay- ment option best fits their lifestyle and reading and viewing habits. We rolled this new model out over a several month period to close to 80 of our newspapers, and we saw our first ever increase in company- wide circulation revenues in Q3-12. The important thing was we focused on the con- sumer and the content that we were providing rather than the distribution mechanism. Rose: Are the people who are accessing your digital content paying for it? And, are they your traditional readership, or are you starting to access different pools of people? Martore: As we rolled this out, we found that consumers were willing to pay for content that they needed, wanted, and were engaged with on a digital platform. (continued on page 5) JEGI Media & Technology Conference March 2013 Independent Investment Banking for Media, Information, Marketing & Technology In This Issue... JEGI Media & Technology Conference Introduction . . . . . . . . . . . . . . . . . . . . .1 Fireside Chat . . . . . . . . . . . . . . . . . . . .1 Smarter Marketing . . . . . . . . . . . . . .2 At the Crossroads of Media . . . . . . .3 Credit Markets . . . . . . . . . . . . . . . . . .3 JEGI 2013 Sector Trends . . . . . . . . . .4 2012 M&A Overview . . . . . . . . . . . . .5 Transforming a Content-Based Organization . . . . . . . . . . . . . . . . . . . .6 Legal Update . . . . . . . . . . . . . . . . . . . .6 Four Predications & A Diatribe . . . .7 Media Growth Survey Results . . . .7 Getting to Revenue with Social Media . . . . . . . . . . . . . . . . . . . .8 To subscribe to JEGI’s Client Briefing Newsletter: Photo One: (from left) Dan Galpern, Partner,TZP Group; Wilma Jordan, Founder & CEO, JEGI; and Gracia Martore, President & CEO, Gannett PhotoTwo:(from left)Tolman Geffs,Co-President, JEGI; Lisa Hook, President & CEO, Neustar; Ryan McNally, Partner, Catalyst Investors; and Wilma Jordan, Founder & CEO, JEGI Follow JEGI on Twitter: For more information visit: JEGI’s Media & Technology Conference January 17 at The Time Warner Center, NYC
  2. 2. 2 JEGI Client Briefing – March 2013 moderator: Tolman Geffs, Co-President, JEGI panelists: Russell Glass, CEO, Bizo Jamie Egasti, CEO, Catalina Marketing Richard Harris, CEO, Intent Media Rich Tarrant, President & CEO, MyWebGrocer Harris: Intent Media helps commerce companies transform from being purely about transactions to an intelligent combination of media and transactions. Google has been the largest repository of consumer intent on the Internet – people type in whatever they’re thinking about, which is often what they want to buy. The premise we are proving out at Intent Media is that there is a larger, more granular, more valu- able repository of consumer intent – the aggregated intent of consumers on commerce sites. We help these sites monetize the value of this intent via high mar- gin media revenue streams. Glass: Bizo helps marketers and publishers reach business audi- ences across the web. We aggre- gate about 90% of the U.S. busi- ness audience and provide data for that entire audience set, in terms of location, job function, seniority,company size,industry to marketers and publishers that are look- ing to reach those business audiences via social media or display advertis- ing. We provide analytics to help measure what is working for these busi- ness marketers and then provide personalization capabilities to make sure the content served is right for the audience. Tarrant: MyWebGrocer is a combination of a software platform enabling brick and mortar supermarket retail companies, with an additional layer of marketing services for consumer packaged goods companies. We are ver- tically focused and leverage our technology platform into media and tar- geting, with very valuable data. Egasti: Catalina Marketing has a 30-year history and uses the largest shop- per data set from food, drug, and mass retailer stores to enable our retail and CPG brand partners to target and personalize their communications. We are moving from an exclusively in-store network to a multi-channel offering to engage with the shopper wherever, whenever, and how she chooses on the path to purchase, whether at home, online, in store, or with her mobile phone. Our precision database marketing capabilities close the loop to actually see what is sold and provide incredible analytics around ROI. Geffs: Jamie, of course every time I shop I get your coupons so you know a tremendous amount about what I buy for my household. How are you using that outside of the store to help marketers get closer to their cus- tomers before the purchase? Egasti: We are thinking about our in-store network and 50,000 stores real- ly as a personalized media network. We see 175 million consumers a month, and that data drives powerful insight to target display advertising via purchase behavior. We are able to target on your mobile device and as you plan your grocery shopping at home, and then we can close the loop with our in-store coupon products. Geffs: Going from groceries to the business world, how does Bizo learn more about me as a business person rather than a shopper and put that to work for a marketer? Glass: Bizo is similar to what Catalina did in the grocery world, collecting data about you as a shopper, organizing that data, and then being smarter about what messages to serve. Bizo has done this in the business world for the business audience. We have about 3,000 data providers contributing data to this ecosystem, like registration data and IP address information. We organize that into a rich set of profiles covering about 90% of the U.S. business audience to help marketers and publishers be much smarter about what content or ad to serve. Geffs: Well Richard, why would an online travel agency (OTA) sell ads to its competitors? Harris: An OTA could be spending tens of millions of dollars a year on per- formance marketing. A good chunk of that is likely going to Google for keyword terms like New York Hotels. Once the user gets inside the hotel path on the OTA’s website, the company learns it’s on these dates, in this neighborhood,this rating,this brand preference,and that is very rich intent data. Before Intent Media, the OTA would try to present relevant offerings, but that failed 97% of the time; the average conversion rate in travel. So, 97% of people will leave the OTA’s site without buying anything and yet the merchant has accumulated this much more detailed under- standing of intent than Google has access to. So before that person leaves, monetize them and earn search-like economics on that intent asset. Geffs: Rich, you are also helping companies do things that they didn’t know they could do before. Tarrant: Many companies are trying to piece together the layers of the digital purchase funnel. MyWebGrocer started with a commerce platform and then moved into marketing services, not unlike what Amazon is starting to do now. We have broad distribution of tools that are used in the path to purchase in the grocery vertical – if you are planning your shopping at your local grocer, you are probably going through one of our tools. We help marketers segment and target pur- chasers of products and identify what is a good spend or not a good spend. What is more personal than knowing exactly what you buy to the UPC level and then, when you are in the process, let- ting you know that your favorite items are on special or offering you a coupon. At the end of the day, being able to measure the efficacy of the media is where all of this is going. If you can provide ROI to the media spend, you will get the repeat media spend, and so that’s how we operate. Geffs: Well let’s follow that thought. How is media buying and measure- ment changing? Glass: You might even see the term media buying go away pretty soon. How media was bought in the past, campaign by campaign, is giving way to always on, always reaching your audience based on an understanding of where customers are in the funnel. Reach and targeting on social media, display or any digital channel becomes a by-product of programmatic buy- ing against those different data sets. Egasti: I have experienced the other side,with big CPG marketers spending hundreds of millions of dollars and wasting more than half because they had no tools. We’ve come a long way with the always-on tools to commu- nicate the right content at the right time to the right individual. We looked at the 400 largest brands and found that about 65% of television mass marketing was spent against shoppers that represent only 2% of the vol- ume. So the premise is simple:use the data,use the modeling and the ana- lytics on a closed loop model to much more effectively drive your market- ing spend. Tarrant: I would even take that a half a step deeper, because you can not only target based on that information but then you can also start dialing up the incentive to see what it’s going to take to switch them over. So, you know the segment of the population that might convert from one brand to another, based on a price point, and you can offer them a coupon and actu- ally start measuring what is going to work to flip them into your camp. Tying back to a purchase history and purchase data, not only can you tell if that marketing tactic is effective, you can then see the lifetime value of the consumer, and you can see when they leave you, so that you can retarget them to get back into their shopping basket. It’s enormously powerful. I JEGI Media & Technology Conference – Smarter Marketing (from left) Jamie Egasti, CEO, Catalina Marketing; Rich Tarrant, President & CEO, MyWebGrocer; Tolman Geffs, Co- President, JEGI; Russell Glass, CEO, Bizo; and Richard Harris, CEO, Intent Media “How media was bought in the past, campaign by campaign, is giving way to always on, always reaching your audience based on an understand- ing of where customers are in the funnel.”
  3. 3. 3JEGI Client Briefing – March 2013 I can’t imagine a more challenging or fascinat- ing time to stand at the crossroads of media, information, marketing, and the technology sectors, where JEGI stands. I also can’t imag- ine a more exciting time to be at Neustar. We manage over six billion physical and virtual addresses. We direct seven billion daily text messages – that’s every single message in North America – and manage 5.8 million domain names. We direct every telephone call in North America (about four billion daily). We are focused on becoming the trusted neu- tral provider of commercial insight and analyt- ics, offering services that enable CMOs to pro- mote their businesses, and COOs and CIOs to protect their businesses. We use unique data sets to enable our customers to identify, to locate, and to evaluate their customers. Now that lives are lived online and entire sectors are upended by upstarts, businesses today face increased volatility, uncertainty, and disrup- tion. In this new world, planning takes on a very different character, as businesses have to respond to a rapidly changing environment. This is manifest in the shift to just-in-time strategy, agile development, and iterative plan- ning. Near real time analytics across large data sets allow one to extract small, but important signals from a very noisy background, and lead to the insights needed to make better dynamic decisions. The winning companies will be the ones that figure out how best to analyze infor- mation to provide insight. The second trend I want to talk about can be referred to as predictive applications in the shrinking of the nanosecond. In a recent World Cup downhill ski race, the top four fin- ishers ended up within two one-hundredths of one second from each other. A split second isn’t what it used to be. In the information services business, data informing critical deci- sions and customer interactions can be served up in nanoseconds. In the network world, the race to provide sub second responses is a com- petitive imperative. Performance is also meas- ured by the quality of the insight. At Neustar, we operate robust and predictive applications with sub second response times over a network where we are queried with an identifier such as a phone number, an email address, or an IP address. We then return a score that measures the relevance of one or more of literally thou- sands of products or services or other attributes from data housed in independent vertical data sets. For example, a customer sends us an email address, and we’re able to return how many bathrooms the email owner has in their home and the likelihood that the owner will remodel a bathroom. Companies that are able to do more than simply access data, but also formulate insights utilizing predictive informa- tion will thrive in the coming years. And, so will the companies that enable them to do this. The third insight I want to offer is this: big data is not Big Brother. Businesses increasing- ly have access to information that enables them to know something about virtually everyone, but not everything about anyone. The trick is knowing how to use distributed bits of infor- mation about a lot of people to predict rele- vance for a particular customer – a segment of one. That’s the difference between companies being able to efficiently harness data to make the right offer to the right customer, and the privacy nightmare that is often projected, but truly is not real. There is no genome map for individuals that is stored in the cloud. There is instead an ephemeral piece of data that can help marketers identify, locate, and evaluate a poten- tial customer. And, coming from a company that has privacy design embedded in its DNA, this is a good and very exciting development. And, it’s something that I think about often. Historically, players were protected because they had unique sole source data. Today, how- ever, much of the massive capital expenditure necessary to access data and to create action- able insights from it, no longer exists. What matters now is the quality of the data, the smarts needed to understand how to derive insights from that data, and the ability to deliv- er those insights most efficiently, using an interface that is simple, elegant, and efficient – one that delights the CMO. I JEGI Media & Technology Conference – At the Crossroads of Media By Lisa Hook, President & CEO, Neustar 2012 Review 2012 was a banner year for the leveraged finance market. Driven by a strong technical environment from collateralized loan obligations (CLOs) and inflows to mutual and exchange traded funds, the total volume for the year ended at $812 billion, which surpassed the previous high of $679 billion that was seen in 2007. Looking at the media segment, volume increased to $26 billion for 2012,from $25 billion in 2011. Investors continue to show strong inter- est in the space. Opportunistic transactions for dividend recaps represent about 20% of the overall market,up from 6% in the previous year. Refinancings continue to represent the largest percentage of volume at 40%, and LBOs and acquisitions also experienced increases as a percentage of overall volume vs. 2011 levels. Considering the deals that closed in 2012, the common theme in terms of lending characteris- tics is companies that exhibit: • high barriers to entry; • competitive differentiation; • low customer and market concentration; • high renewal rates; • contractive revenue; and • low maintenance cap ex. Key Takeaways The key takeaway is that the markets continue to be receptive to the media, information, marketing and technology sectors. There remains significant liquidity to market through the CLO creation of mutual fund inflows. Current volatility remains low, and the financing window remains open, although it’s always subject to geopolitical shock. Multichannel media plat- forms with diversified revenue streams continue to be more attractive than single solution models. And, increased activity in growth sectors, as well as improved performances in traditional media sec- tors, provide for a favorable financing environment. Looking Ahead to 2013 In 2013, we anticipate a slow start in overall issuance. We expect a positive technical environ- ment to persist in the near term, and a continued low default rate environment to remain below his- torical averages. This should make for an issuer favorable market in early 2013. It should be noted that we do expect investors to focus on the progress of the debt ceiling discussions over the next month. And, depending on those outcomes, that could have an impact in the financing markets. Middle market activities are expected to continue at a modest rate. And, finally, as seen last year, financing opportuni- ties will continue to be available for growing sus- tainable businesses in this space. I Credit Markets: 2012 Review and 2013 Outlook By Garrett Ellsworth, Senior Vice President, GE Capital 2012 Volume: $25.7B media sector debt volume by purpose Refinancing, 40% Recap/ Dividend, 20% Acquisition, 18% LBO, 6% Exit Financing, 5% Recap/ Stock Purchase, 3% Recap/ General Recap, 1% Other, 7% “The winning companies will be the ones that figure out how best to analyze information to provide insight.”
  4. 4. 4 JEGI Client Briefing – March 2013 Richard Mead, Managing Director B2B Marketing Solutions Scott Peters, Co-President Content Marketing David Clark, Managing Director Marketing Services Tolman Geffs, Co-President Smarter Marketing B2B Marketing Solutions – Richard Mead The B2B Marketing Solutions sector is thriving,with leading B2B companies having grown organically at double-digit rates in 2012. This year, B2B rev- enues should exceed 2008 levels, with in-person events providing a solid platform for the ongoing evolution of B2B,with complementary year-round e-media online solutions. B2B is creating new products to leverage long-standing industry relation- ships and respective content. Development activity has focused on increas- ing customer retention and enhancing customer acceptance of new prod- ucts, while also improving the quality, quantity, and therefore value of leads for marketers. B2B companies are also exploring e-commerce oppor- tunities and marketing workforce solutions that combine owned and aggregated content delivered through software platforms. Customer Experience Freeman, which produces more than 4,000 events annually on behalf of its customers, has introduced its Technology Suite, combining six interactive tools that facilitate year-round interaction between event operators, exhibitors, and eventually attendees. Customer Engagement UBM Tech, a long-established B2B marketing infor- mation provider to the technology world, has created over 30 online com- munities for diverse technology topics that build participant engagement and provide strong informational marketing and social platforms for ven- dors and buyers. Lead Generation Hanley Wood, which serves the residential and commer- cial construction markets with leading events and media brands, uses Big Data (housed in a new centralized database) to fuel the recurring lead gen subscription business that now forms the core of its corporate strategy. Advanstar, whose MAGIC events are leading in the fashion industry, offers another lead gen model. Its Shop the Floor online service brings together buyers and sellers online, enhancing their in-person trade experience, pro- viding enhanced lead gen and, importantly, facilitating transactions. E-commerce Penton Media, with leading B2B positions in numerous heavy equipment markets, combined forces with AssetNation (an online market- place for salvage assets and equipment that was acquired by Ritchie Brothers in 2012) to accelerate its penetration in the heavy equipment auc- tion markets to facilitate e-commerce. Enterprise Workflow Business information companies like Bloomberg, IHS, and Thomson Reuters, have created successful workforce solutions for large, complex groups. These are embedded in the customer’s workflow and form a key part of the daily decision-making routine by providing real time business information. In conclusion, the Internet and technology are driving innovation and growth for B2B leading to new revenue streams and deeper customer rela- tionships. It is clear that scale really does matter: B2B companies need a broader base of products and skill sets as their customer marketing needs increase. As a result, we see further M&A consolidation in B2B in the next few years, with valuations increasing due to stronger revenue growth and margins, as well as more recurring and subscription revenue products and services. Content Marketing – Scott Peters Content marketing presents a very interesting opportunity for many of the companies in the sectors served by JEGI. By content marketing, I mean the creation and sharing of content to attract, acquire and engage customers, to drive profitable interaction. It includes all forms of content in the digital and traditional print ecosystems. This is a $40 billion industry, which one could argue is still flying under the radar. For example, the average annual brand investment in multi-channel con- tent marketing totals $1.7 million. 39% of marketing spend goes toward content marketing, up from 29% year over year. 42% of content marketing is print-based, but is rapidly evolving to multi-channel. Lastly, 56% of brands outsource content creation and marketing, and thus content mar- keting, so it presents a huge opportunity for companies playing in the ecosystem. High quality content that is linked and shared is key and, I would argue, critical to organic rankings on Google. If you want to be relevant in search, you need content, and that is driving a significant shift in thinking in the CMO suite. Social media and engagement are also driven by content. As content distribution channels continue expanding, it has become very complex in terms of managing the content across all available channels and understanding ROI. And lastly, content marketing ROI metrics are, in fact, emerging. Today’s brand marketing has evolved dramatically from the traditional media model, which pushed one-way communication out to the audience, and focused on reach, frequency, and awareness. Now, the focus has moved to engagement, loyalty, and advocacy. It requires an entirely differ- ent skill set, and with the number of distribution channels out there, it is getting more complicated. The content marketing ecosystem spans everything from email to maga- zines to websites to iPad apps to mobile to direct mail to blogs. Brands increasingly are stepping back and figuring out what their brands stand for and what the content message should be. Given the importance of this challenge, everyone from ad agencies to PR firms to social media agencies to publishing companies in-house and free- lance editorial is jumping in to help CMOs figure it out. JEGI’s view is that this challenge will spawn the rise of the content agency of record, which will have a holistic set of capabilities to develop the content strategy, cre- ate the content and the distribution plan, and importantly, measure it on the back end. The dashboard to measure ROC, return on content, is designed to help marketers measure whatever they are trying to solve for – be it brand loyalty, lead gen, customer engagement, or lower returns. Marketing Services – David Clark In 2012, we saw the continuing push of technology vendors into the mar- keting field,while the marketing technology sector underwent further con- solidation. Simply put, these vendors see the rate of technology adoption by CMOs as the next mega opportunity in enterprise technology spending. Technology adoption within the marketing function has had a profound impact on providers of marketing services. If you were to analyze recent marketing technology M&A deals, you would see the emergence of what we call the Enterprise Marketing Management (EMM) Stack, which is com- prised of systems that help marketers manage and measure ongoing inter- actions with their customers. Although the description of the Stack may seem simplistic, the process of building and integrating the EMM Stack is a complicated and expensive undertaking, as new needs are uncovered and new capabilities surface. And, it is made even more challenging by the fact that the definition of a “customer interaction” continues to transform. Customer interactions that really matter would, of course, include: Point- of-Sale (POS), e-commerce, loyalty programs and customer care channels, JEGI Media & Technology Conference – JEGI 2013 Sector Trends “The B2B Marketing Solutions sector is thriv- ing, with leading B2B companies having grown organically at double-digit rates in 2012.” Content Marketing Ecosystem
  5. 5. JEGI Client Briefing – March 2013 5 and all variety of “traditional” digital media (search, social, etc.). However, in today’s world, where media has fragmented down to the level of JavaScript tags and pixels, “interactions that matter” also include: mobile ads…running in applications…across multiple ad networks…in ad units built for a specific device. These types of interactions are exploding in volume, and they rely upon very complex “plumbing” and an entirely separate group of applications, platforms, and application programming interfaces (APIs), which enable disparate software components to communicate with each other. So, the Stack just keeps getting bigger and the data exchanges more com- plicated. As a result, we anticipate CMOs will continue to spend heavily in the coming months on technology that accomplishes two things: first, to make these interactions work – from both a creative and technical perspec- tive; and second, to collect and analyze the marketing data that gets gen- erated along the way. The task of building and managing all of this marketing management infrastructure involves a lot complexity…and a lot of investment risk…and therefore will continue to create demand for an expanded array of highly- specialized marketing-related services… On the one hand, more technically advanced Agency and Creative Services; and on the other,IT and Consulting Services that are useful to both the CMO and the IT department. This explains why Agencies and IT Consultants are increasingly going to market with a shared vocabulary. This is about shifting budgets; a new, sizeable area of spending on technology driven marketing services, and the capabilities required to grab a share of that wallet. Smarter Marketing – Tolman Geffs A very interesting array of emerging companies are helping marketers, merchants, and publishers move closer to their customers, leveraging the data that they already own but could put to much better use. Wherever you look at the classic audience marketing funnel (starting with aware- ness, then moving down to consideration, preference, purchase and finally retention), there’s a set of customer data that lines up against it. Whether it’s interest data at the top of the funnel (demographic, psychographic, social, contextual) or intent data at the bottom (shopping, search retarget- ing, remarketing), the Web is absolutely awash in consumer data. It is remarkable how much data is being collected. In addition to classic click-stream data, there are other very interesting data sources online: search data, social interactions, online shopping, and e-commerce transac- tions that say a lot about my interests and intentions. There is also a wealth of offline data owned by the merchants, publishers and marketers who often don’t know they have it or know what to do with it. Email registrations,catalog and direct marketing transactions,print sub- scriptions, retail and financial transactions, membership and loyalty data and even down to geo-data, pinpointing where I am at any given moment. This is a much wider data universe that could be put to work enriching the marketing message and making it a lot more relevant. One excellent example of a company that did this is I-Behavior, which we sold to WPP in 2010. They work with direct marketers and catalog compa- nies that actually share their consumer transaction data with each other. It was an astonishing idea. These are direct competitors who are sharing transaction data, sharing their customer lists in order to better understand their customers as a whole and then make better offers to them; it works extremely well. We believe this more effective approach, whereby publish- ers and merchants share their first party data or leverage their first party data and then supplement it with third party data, is the way to go. There have been quite a few recent M&A transactions against this idea of smarter marketing, of leveraging the data that merchants and publishers already own, and even more financings. Looking ahead, we expect quite a few more transactions in the area of smarter marketing, with some of the big data aggregators (e.g., Acxiom, Epsilon, Merkle and Experian) playing a role, as you might expect. We also expect big systems integrators (e.g., Accenture, IBM, Oracle and Salesforce) to enter this space as well, helping merchants and publishers leverage the data that they already have. Likewise, some of the big insights players, like Adobe, Neustar and Nielsen, are coming into this area, and finally consumer platforms, like Amazon, Ebay and Google, who own an astonishing amount of data themselves, but are also powerful marketing platforms, are entering the market. So, stay tuned, a lot more M&A is going to be happening in the world of smarter marketing. I Fireside Chat (cont. from page 1) Martore (cont.):We spent 2012 rolling this out to all of our markets, and we gained about 40,000 new digital only subscribers. We have a goal in 2013 to increase the number of digital subscribers by 5-7x. And interestingly, digital only subscribers are much younger, more affluent and better educated, which certainly defines a sweet spot for some of the advertisers and marketers that we are looking to attract. So, it has been both a circulation subscription opportunity, as well as a developing advertising opportunity. Rose: Can you talk a bit about how advertising and marketing serv- ices are changing in the local and small to medium enterprise world? Martore: Five years ago, the average small business heard from the local newspaper, television station and radio station, plus direct mail and the yellow pages. Today, those same SMBs are hearing from 25- 30 different vendors wanting to sell them search and web site servic- es, loyalty card programs, etc. We built a product suite to provide all digital marketing services. For example, we bought a loyalty card company and a social marketing company called Blink. Given the depth of reach and scale we have in local markets, we saw an incred- ible opportunity to help these businesses by being a one-stop shop, allowing us to go after the total marketing pie. I Annual M&A due diligence volume was up 18% in 2012 vs. 2011. However, overall deal volume was flat, meaning there was deal making trying to happen, but not as many deals coming to fruition. There are bigger spreads and a more difficult environment overall, making it hard- er to get deals done. There was a spike in activity in Q2 2012 (especially in North America). Since IntraLinks is typically involved about six months before a deal closing, this implies that a lot of companies were trying to close deals in 2012 likely to avoid the fiscal cliff and tax implications in the U.S. There was a significant pull back in the initiation of due diligence in the North American market in Q3 and Q4, and that may have an impact on the number of deal closings for Q1 and Q2 of 2013. However, ini- tiation of due diligence increased in Q3 and Q4 in EMEA and Latin America, so deal announcements should be more prevalent in those markets in the first half of 2013. As a macro trend, there was a larger volume of middle market deals in 2012. Since it’s more difficult for companies to IPO than it used to be, M&A is a strategy for smaller companies, and strategic buyers are tak- ing selective looks within the middle market for acquisitions. I 2012 M&A Overview By Rick Smolen, SVP, North America Advisory Business, IntraLinks
  6. 6. 6 Wolters Kluwer is a $4.7 billion revenue com- pany with four divisions – legal, health, tax, and financial and compliance services. When I joined in 2005, we were a provider of compli- ance documentation and research for the financial services market, with 1,500 employ- ees. Our revenue was 100% in the U.S., 40+% print. We had about 10,000 customers – all financial services firms. Today, Wolters Kluwer Financial Services is a global leader in finance, risk compliance and audit solutions, with com- prehensive and cohesive solutions at the inter- section of content, expertise, technology, and services. We have offices in 20 countries and customers in over 100, and we’re 6% print. In 2005, our customers found it difficult to manage the static content we delivered in print or to a database. And, while our mortgage and banking clients knew the data was accurate, they needed us to advance our technology, because it was difficult to process, given the volume of regulatory change in the U.S. We were losing market share, because we hadn’t evolved the delivery system. Furthermore, even though we offered the most trusted and comprehensive compliance content on the market, what we found was that the majority of that content wasn’t being used. So, we start- ed to transform the business. Our content, while accurate, was not always being used because it wasn’t integrated into our clients’ workflow at the point of decision. We needed to build technology systems to expand our relevance. But first, we had to earn the right to command the investment needed to re-invent the business. We embarked on a plan to systematically make us the most opera- tionally efficient provider of B-to-B services and software in the world. We adopted a lean Six Sigma approach and rolled out a program that ensured that every employee on all levels be trained. What we found was that the front line employees loved it, and the reticence came from the executive and middle level staff. This spoke to the leadership changes needed to transform the business. Over the past eight years, we transformed our management teams at all levels of the organization by bringing in and cultivating leaders who understood the need to transform and were change-agents in that process. We embarked on the transformational content strategy, looking at what actionable content and best practices should be, and we went to the point of use. Our hypothesis had been that all of these businesses stopped at the point of use inside of our customer, the financial insti- tution. So, we adopted a strategy that was no longer focused on what we originally sold, which was cost, efficiency, and effectiveness, but rather asked “At the point of use, how do we impact the customer’s customer? For exam- ple, how do we make it easier for the person getting a mortgage, and in turn be more mis- sion critical by satisfying the customer’s cus- tomer?” We moved down this path through a series of acquisitions and investments and by building technology teams, and we added actionable content and best practices. We also realized that being focused on compliance was too confining, so we added to it, with broader risk and finance capabilities, specialist tech- nologies, dynamic documents, intelligent workflow, rules, data, regulations, and auto- mated dashboards. We also set up customer excellence centers around the United States and collapsed this all into one key operational center. We still needed to solve the higher level risk and performance management needs within financial institutions. This has to do with understanding and managing the risk and con- trols across a business. We knew that we need- ed to build and acquire to expand our adjacen- cies and give us a stronger position across this area, which we did by asking ourselves, “What else needs to go across this continuum for enterprise risk management, and where do we need to fill in the adjacencies around these?” We acquired an internal audit company and connected and developed from our existing component solutions to create this enterprise view. As a result, through a series of acquisi- tions, innovation and building out of our tech- nology, we built a leadership position around knowledge-based technology solutions. And our approach has been validated by the market. In 2012 alone, we won 16 awards or place- ments for our solutions and our company. For the past two years, we have also been named a top 10 risk management firm by Chartis. I JEGI Media & Technology Conference – Transforming a Content-Based Organization By Brian Longe, CEO,Wolters Kluwer Financial & Compliance Services Crowd Funding The JOBS Act, passed in April 2012, does several things to facilitate capital raising by smaller com- panies, including legitimizing crowd funding. Once the SEC issues its rules, crowd funding will permit U.S. companies to raise up to $1 million in 12 months. Investors with less than $100,000 in annual income or net worth can contribute up to $2,000,or 5% of income or net worth,whichever is bigger. Investors with more than $100,000 of income or net worth can contribute up to $100,000, or 10% of income or net worth. Emerging Growth Companies The JOBS Act also creates“emerging growth com- panies,”which can have annual gross revenues up to $1 billion. A company can qualify as an emerg- ing growth company if it is not publicly traded or up until five years after its IPO. If the company qualifies as an emerging growth company, it will be subject to certain less burdensome obligations as a result of becoming public, including: • Less extensive disclosure requirements; • Two years of audited financial statements; • Exemption from new accounting standards; • “Testing the waters”permitted; • Confidential SEC review of IPO registration statement; and • No filing fee for draft registration statement. Other JOBS Act Changes Companies can now generally solicit for private placements. As long as companies sell to accred- ited investors,they are no longer subject to having a pre-existing relationship with the investors. Another funding avenue was developed, called Super Regulation A. This allows companies that are bigger than emerging growth companies to raise up to $50 million in 12 months. Ongoing public reporting is now only required for companies with 2,000 equity class holders or 500 non-accredited investors, with crowd funding securities exempted. Implications for M&A One important change is that it will be a lot easi- er for companies that want to achieve a liquidity event to do a dual track between an IPO and a sale. There will be less due diligence and less rep- resentations and warranties. Companies will feel that as long as the market is amenable, they can go down the IPO path and achieve liquidity that way, without the risk of indemnification to a potential buyer. On the other hand, there is some assurance that the companies have gone through an underwriting process and have been vetted a bit, which is an advantage. There will also be some additional complexities in acquisitions, including: • More complex basic deal structures to address larger shareholder populations; • Public company precedents will be even more relevant; and • Increased litigation risk. I By Charles Engros, Managing Partner, Morgan Lewis Legal Update 2013 JEGI Client Briefing – March 2013 (from left) Ray Shu, Managing Director, GE Capital and Scott Peters, Co-President, JEGI JEGI’s 9th Annual Media & Technology Conference “We knew that we needed to build and acquire to expand our adjacencies and give us a stronger position.”
  7. 7. 7JEGI Client Briefing – March 2013 Media industry executives seem to be figuring out solutions to the disrup- tion caused by the digital revolution, according to the third annual Media Growth Survey from JEGI and Econsultancy, a global independent publish- er focused on best practice digital marketing and e-commerce. The survey results indicate an optimistic outlook for 2013. The findings are based on research results from a survey of more than 225 industry thought leaders and influencers (83% of whom are c-level execu- tives), followed by one-on-one interviews. Growth and Challenges Creating new products is the number one growth factor,as shown in the accompanying chart. As for the number one systemic barrier to growth, the entry of new competitors takes the lead. Because of the focus on new product development, it also means there is more competition. The dominant internal issues for executives are around people, not technology, which is secondary to finding and retaining the people who will keep their companies growing.The challenge of finding great senior managers was especially acute for this year’s respondents. Some of them have found success by looking for talent in non-traditional places, hiring through acquiring (or“acqui-hiring”) and not forgetting to sometimes train vs. hire. One executive noted, “We’re really looking at acqui-hiring as essential in the product areas that are key to us.” Outlook for M&A We expect to see a strong year in M&A.Virtually every respondent organization with over $250 million in rev- enues describes itself as likely to make an acquisition in 2013. However, the sharpest increase on a percent- age basis can be seen in those organizations with $10- $50 million of revenue, where nearly 50% more com- panies are planning an acquisition in 2013, as com- pared to 2012. Many of these companies are looking for new process technologies, content engines and tools for manipulating and packaging data. Trends in Data and Social Media Data is critical for all executives, but they struggle to analyze data and create meaningful value and insights from the data.When it comes to social media, the consensus among CEOs is that social media is valuable for awareness, but many leaders are still having difficulty pointing to revenue from their social media spend. One respondent said, “Great for research/keeping up with our customers. No straight line to revenue, maybe no line at all.” Click here for the complete Media Growth Survey Report: 3rd Annual Media Growth Survey Results Prediction #1: Advertising standards will grow the marketplace; native ad units will not. Advertising requires scale to be economically efficient for clients, and scale requires standard- ization. Native ad units, by definition, are cus- tomized, and while customized ads are a very important part of the overall media mix, they cannot be economically efficient, because they do not scale, making them an impossibly expensive part of any advertising program. The IAB Rising Stars program has created scalable ad units that use the full canvas and palette of digital environments and enable creative oppor- tunities that are superior to banners. Our research shows that IAB Rising Stars outper- form classic banners significantly in both inter- action rate and time, because of the creative opportunities they offer. Prediction #2: Digital audience measure- ment will finally make sense in 2013. 3MS (Making Measurement Make Sense), a $6 mil- lion joint cross-industry initiative among IAB, ANA (Association of National Advertisers) and the 4As (American Association of Advertising Agencies), is aimed at unifying buyers, sellers and primary intermediaries around identifying and measuring audiences in digital environ- ments. The biggest obstacle to the growth of digital display advertising, which includes video, is that it is the only medium that does not work according to “viewability” standards. Our standard is served impressions, but, because there are no guarantees that impres- sions actually end up on someone’s screen, the industry is an outlier in the world of marketing and media, especially to brand marketers. In essence, we are currently not able to create the functional equivalent of a gross rating point online. So, we’re working on developing a gross rating point metric enabling the reporting of reach and frequency of viewable impressions, and also to implement a classification system so that we can understand the value of different kinds of inventory. Online display growth is dependent upon the adoption of standards that can improve data transparency and analytics. Prediction #3: The wild west of mobile will be tamed, but it’s going to take three years. Mobile is an enormously valuable medium, but it has some short-term structural challenges that differ from those in online, and the indus- try must coalesce to address them. The problem with digital display from a pricing standpoint is a massive oversupply relative to fairly stable demand (about 2% of GDP since 1917, according to the Commerce Department). In digital, however, there’s no incremental cost for creating new inventory, bringing enormous oversupply into the marketplace; hence, rates decrease. That’s not true in mobile; there is no oversupply of inventory. In fact, it’s the oppo- site – there are so many obstacles, so much complexity in the marketplace, it’s very difficult to advertise in mobile. Structural problems with distribution are what’s holding back mobile advertising. Mobile is largely a cookie- less environment; there are no standards for identifiers because the ability to use unique user IDs is constrained by regulation. Mobile is a very complex ecosystem, with several massive, highly bureaucratic entities (device manufac- turers and telecommunications networks) inter- posing themselves in it. And, that is why we have a problem of digital dimes going to mobile pennies; it’s just too difficult to work here. About 30 IAB members have funded IAB’s new Mobile Marketing Center of Excellence; its mission is to work on mobile standards – things like mobile video ad metrics definitions and taxonomy; etc. We’re creating HTML5 best practices and a standard for mobile rich media interface so that very rich multidimensional ads can be used with different mobile devices on different mobile operating systems. In this environment, consumer trust is even more important than in display, because location data is enormously sensitive. Prediction #4:Digital video will be an explo- sive ad market, and this will happen sooner than in mobile, because it’s a simpler market- place, and one that is much more readily under- stood by major brand marketers. Another fac- tor is that most televisions will be connected. According to Irwin Gotlieb, Group M Global CEO, within 18 to 24 months, 66 million homes in the U.S. will have IP televisions. So, growth of digital video seems less like a technol- ogy issue and more of a rights issue. Diatribe: Complexity is the enemy of the dig- ital advertising industry, and standardization is generally the solution. While we continue to see an enormous amount of innovation, all this innovation is not actually leading to increasing margins for brand marketers and their partners in the value chain. In fact, advertising rates are going down because there is way too much supply. I JEGI Media & Technology Conference – Four Predictions & A Diatribe By Randall Rothenberg, President & CEO, Interactive Advertising Bureau (IAB) By Stefan Tornquist,Vice President, Research (US), Econsultancy Key Growth Drivers
  8. 8. JEGI Media & Technology Conference – Getting to Revenue with Social Media 8 JEGI Client Briefing – March 2013 moderator: Amir Akhavan, Director, JEGI panelists: Michael Lazerow, CMO, Salesforce Marketing Cloud Sheldon Owen, CEO & Co-Founder, Unified Social Michael Wiley, Chief Social Media Officer,VivaKi Ben Elowitz, CEO & Co-Founder,Wetpaint Lazerow:The Marketing Cloud is a new division of Salesforce,which acts as an innovation partner for the CMO. There are a lot of exciting things hap- pening in marketing, and we’re looking to do what Salesforce has been doing for the past 14 years across primarily sales and the Chief Revenue Officer. Owen: Unified Social is 18 months old, with offices in Chicago, San Francisco, Australia, and London (later this year). We solve the interesting problem of bringing business intelligence to advertisers.We can take engagement metrics and social investments and quantify it back through a cloud-based system for brands and agencies. Wiley: VivaKi is a unit of the Publicis Groupe, pri- marily focused on accelerating the digital trans- formation and expertise of Publicis and its agen- cies. In my role, I look for companies that can bring value to our agencies and clients. Today, we are the global leader in digital advertising solutions. Elowitz: Wetpaint is both a media company and a technology company. We started working on a platform to systematically build audiences in the social networks and then drive them to destination media properties, including our own. Wetpaint Entertainment is one of the fastest growing media destinations of all time. We have also been building loyal audiences for selected strategic partners, using the social web. Akhavan: Sheldon, what does the concept of a social media operating sys- tem mean to Unified? Owen: We have a patent pending technology around quantification of social engagement and social sharing, which we can integrate into any marketing program. Our operating platform offers full transparency to pro- fessional marketers, from audience acquisition to engagement, all the way down to transactions, which allows us to deliver business intelligence. We’ve layered that on top of social engagement strategies, so companies use us as their cloud-based system of record. Akhavan: Mike, a promise of Buddy Media’s acquisition by Salesforce was being able to market to your CRM database. How is that actually being exe- cuted and where is Salesforce going with its marketing solution? Lazerow: There is no promise about marketing your CRM database. If you, as a business, are not marketing to, listening to, and engaging with your customers,you’re probably going to go out of business. Customers are now connected to your vendors, to your employees, and to your partners, and you have to connect with them in a fundamentally new way, with the cus- tomer in the center, via social nets, local, collaboration, communities, and ecosystems. Wiley: As the social media industry has grown up, we’ve seen a proliferation of “point solutions”. You have a lis- tening solution, a CRM solution, a social commerce solu- tion, and none of these technologies have interoperable APIs. Corporations have email lists they’re using and their CRM database, and they’ve got millions of people talking about them, but there’s no harmonization of who those social identities are with the CRM database. That’s what we’re working on,to create harmony and power effective marketing. Lazerow: Being able to take your email database, identify who they are on Facebook, and market to them as a custom audience – that’s a great exam- ple of what we’re doing every day for clients, which is fundamentally differ- ent. This is all about communicating to people that you know, in terms of who they are to your business, to their friends and to the world. Elowitz: It’s not all that rosy right now. The interest in social is 90% for its potential and 10% for results. When people get results, it can be inspiring, but most of the ads I see online are for things I’m not interested in. We’re still at the very beginning, in terms of turning insights into results. Owen: Unified’s system can set quantification values for any sort of engagement. Our philosophy is that we’re not going to set that metric for advertisers or marketers. The CMOs of Coke and Pepsi have created lifetime value analyses on their email lists and their audiences, and they have their own metrics by which they measure success. So,we let them access the sys- tem and let them set those parameters, and then deploy those shares or viral affects or amplifica- tion initiatives out in the social web or the open web. And, then we track it from impression to engagement. Elowitz: It’s still just analysis and measurement. There’s very little out there to help you tune and improve marketing spend. When it comes to owned and earned, marketers don’t have a lot of control, nor do publishers, because their tool sets don’t help optimize and improve media.And,that is such a different proposition than just measur- ing it. Measuring tells you where you are.To actu- ally optimize and tune, you move all the way up to doing really, really impressive marketing. For example, we’ve seen tenfold improvements when we talk to our Facebook fans. In the last year, we’ve run over 200 A/B tests (timing, pack- aging, volume of posts, frequency), each one repeated hundreds of times. We’re very practical folks focused on finding out what consumers respond to and doing more of those things. It takes a sophisticated tool set to do it. Akhavan: What do you think about Facebook’s move to work on a search product? Elowitz: I love it, not because Facebook search is ready to take over Google search. It’s not. But, when you look at how they can take those very narrow searches, where you can get 10x more meaningful results than via Google – it’s a great way for them to leverage all the data they have and provide users a great service. It will also serve publishers and advertisers well, because it gives them the ability to match identity, personality, and interests. Wiley: I’m a little less bullish. It’s a great idea, but with some serious short- comings. For example, many of us link primarily to third party content. So, if I check in via Foursquare,post a YouTube video,post content from my own website, these are not going to appear in the search results. So, it creates a dilemma for brands, because now you have another content management challenge. You need to decide if you are going to put all your content on Facebook. Still, I’m pretty excited about it. Owen: If I were in the generation that relies on Facebook and Facebook con- nections, I probably wouldn’t switch windows to go search on Google. I’d probably stay in the same window and live my life on Facebook. So, I think there’s a bright future for it and a huge monetization value that we’re just barely seeing now. It’s early. Akhavan: Will there be a new category of companies emerging that are social search engines or social search agencies? Owen: I think you’re going to see any agency that does search now try to evolve and call themselves a social search agency. If a company is not touching social, I don’t think they’re going to survive. Akhavan: What are the trends you’re seeing that will be really exciting and generate the next wave of investing? Lazerow: Companies that are solving real business issues and have real management teams have a bright future. When I look for trends, it starts with social. I’ve always thought that social is so much bigger than just advertising, and that it was also about internal and external collaboration. For example,GE airplane engines are now hooked up to a collaboration plat- form, Chatter, and if there are any issues, service teams from the airline and GE can instantly collaborate and work together to solve the problem. Everything from yourTV to your health records is moving into the cloud,and every company has to have an app platform. I (from left) Amir Akhavan, Director, JEGI; Ben Elowitz, CEO & Co-Founder,Wetpaint; Michael Wiley, Chief Social Media Officer, VivaKi; Sheldon Owen, CEO & Co-Founder, Unified Social; and Michael Lazerow, CMO, Salesforce Marketing Cloud “If a company is not touch- ing social, I don’t think they’re going to survive.”