Outlook on Online Display Advertising Trends by Clipperton Finance


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This white paper covers the trends and evolutions in the online advertising technology space.

This report delves into the historical evolution of digital marketing and its underlying growth drivers. We look at how the convergence between branding and performance based online advertising will most likely accelerate further digital marketing growth creating value for all players across the value chain. The pursuit of this target will undoubtedly require players to leverage new technologies and formats to develop and standardize a comprehensive set of measurement tools for customers.

Which companies are best positioned to win in this changing market? Leaders of the first online advertisement generation or new comers? We have selected some of the European companies that may have a card to play in the upcoming ad tech landscape.

Clipperton Finance has been historically active in the adtech space as illustrated by the recent $12 million equity fundraise transaction for Videoplaza - a leading Swedish video ad serving company - and Dailymotion’s $150 million sale to Orange.

Outlook on Online Display Advertising Trends by Clipperton Finance

  1. 1. LONDON PARIS Clipperton Ad-Tech White Paper PART I: OUTLOOK ON ONLINE DISPLAY ADVERTISING TRENDS September, 2012 About Clipperton Finance Clipperton Finance is a leading European corporate finance Nicolas von Bülow, nvonbulow@clipperton.net boutique exclusively dedicated to the HighTech and Media industries. Clipperton Finance advises high growth Antoine Ganancia, aganancia@clipperton.net companies on financial transactions, fundraisings, capital increases and Mergers & Acquisitions. With a team based in London and Paris and an international reach, Clipperton Finance is a European leader in the sector.PARIS: 10 Rue Du Mont Thabor, Paris 75001 LONDON: 15 Stratton Street, London, W1J 8LQ Disclaimer: This document has been produced by Clipperton Finance (“Clipperton”) and is communicated to you solely for your information and should not be construed as a solicitation or offer to buy or sell any securities or related financial instruments. See more details page 50.LONDON: 15 StrattonMont Thabor, Paris 75001 PARIS: 10 Rue Du Street, London, W1J 8LQ Clipperton Finance Limited is authorised and regulated by the Financial Services Authority. Registered No. 523695 © 2012 Clipperton Finance Limited.
  2. 2. Executive Summary Insolent Online Advertising Spending have displayed insolent growth over the last 10 years and analysts Growth expect this trend to continue But a large discrepancy persists between Internet time allocation in total “media time” & online advertising revenues… Untapped Online advertising growth has been historically led by performance-based marketing Potential We believe that tapping into the huge reservoir of “branding-oriented” marketing spend will be key in closing the media discrepancy This will be done by further blurring the lines between branding & performance marketing through the use of innovative formats, measuring technologies and improved targetingNew Players We have selected a list of European ad tech companies that will be contenders in the coming battles. Question is: who will emerge as winners and leverage the vast inefficiencies of today’s online advertisement market? 2 © 2012 Clipperton Finance Limited.
  3. 3. Table of Content I. Overview of Internet Display Ad Spending II. Which Levers to Close the Media Time vs Ad Spend Discrepancy ? III. Notable Transactions in Ad Tech Landscape IV. Focus on Key European Players V. About Clipperton Finance 3 © 2012 Clipperton Finance Limited.
  4. 4. Online Advertising Spending has exhibited strong growth over recent years CAGR 12-14: +17% CAGR 02-11: +24% Source: Zenithoptimedia, JPMorgan "Nothing But Net" Online advertising spending has grown by a factor of 7x between 2002 and 2011 Forecasts predict double digit growth in online ad expenditure reaching close to $100B in 2014 The leading segment in online advertising remains “search” (~60% vs. ~40% for display), a segment dominated by Google. Analysts expect the current split between search and display to remain constant until 2014 4 © 2012 Clipperton Finance Limited.
  5. 5. This growth largely stems from strong market pull 1 Ever more Internet users… 2 … browsing from more devices… 3 … and spending more time online Internet Smartphones Tablets >2,2x in 5 years Source: World Bank Source: Clipperton Finance analysis, World Bank, Nielsen Source: Forrester Research Internet audience and usage are growing at a fast pace, a mechanic pull factor on online advertising In 2011, 2 billion individuals used the Internet on a regular basis, representing a 30% global online penetration The increasingly ubiquitous nature of the Internet supports the growth in time spent online by each individual 5 © 2012 Clipperton Finance Limited.
  6. 6. Internet usage seems to be growing at the same pace as online ad spending Usage = market pull Ad Spending & Pages Viewed growth is very similar (base 100 in 2002) 345 1 341 An increasing Pages Viewed number of Internet users in the world Display Ad Spending 2 A growing number of access points 100 3 An increasing amount of time 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 spent online Source: Clipperton Finance analysis, JPMorgan, Zenithoptimedia 6 © 2012 Clipperton Finance Limited.
  7. 7. But… … Page Views is of course far too rudimentary as a metric to gauge the Internet advertising potential 7 © 2012 Clipperton Finance Limited.
  8. 8. How big is the discrepancy between Internet usage time & online advertisingrevenue? 2010 Media Time vs Ad Spending discrepancy Internet displays a low time to advertising spending ratio compared to traditional media Discrepancy For a given amount of time, mature media like TV, newspapers or radio show higher monetization: Newspapers feature a time to ads spending 5x higher than Internet TV time to ads ratio is 2x higher Momentum Source: Clipperton Finance analysis, Forrester, Magna Global, IAB, Barclays Capital 8 © 2012 Clipperton Finance Limited.
  9. 9. So… … Is today’s Internet usage truly comparable to traditional media such as TV and radio? 9 © 2012 Clipperton Finance Limited.
  10. 10. Problem: Internet doesn’t fit the traditional definition of media The Internet has long surpassed its initial function as pure “media” delivery tool to become a fully-fledged and multi-faceted digital replication of the traditional world where one can communicate with friends, networks and professionals, watch videos, work, spend money, create, learn, consume media and services Social Networks have enabled and expanded online social interactions of all types and natures Social Although SNs account for a large amount of online display ads, total timeInteractions spent on SN far exceeds the allocated proportion of ad spending Value of basic ads on SN is structurally lower than on premium media But social targeting can lead to massive conversion value E-Commerce mimics/improves the traditional shopping experienceTransactions Advertising is not the business model of transaction sites and their audience will remain hard to monetize with traditional advertising Productivity usage doesn’t offer favourable ground for advertisersProductivity Mail services like Yahoo or Gmail monetize via ad placement but mostly serve as entry doors to more lucrative adjacent services 10 © 2012 Clipperton Finance Limited.
  11. 11. Top sites are not necessarily “advertisable”One third of Top 50 US sites are not available to advertisersTop 50 US Properties 2011 Rank Property 1 Google Sites 2 Microsoft Sites A significant portion of In 2011, as much as 27% of the 3 Yahoo! Sites Top 50 sites are not ad- top 50 US properties were non 4 Facebook.com based (or marginally) ad-based or marginally only 5 Amazon Sites 6 AOL, Inc. Hardly accessible to advertisers 7 Ask Network with conventional advertising 8 Turner Digital 9 Wikimedia Sites Time spent online is not 10 Glam Media necessarily “media-related” 11 CBS Interactive Users make significantly 12 NYTimes Digital broader use of the Internet 13 Apple Inc. and “non-media” time also 14 Viacom Digital needs to be taken into account 15 eBay 49 WebMD Health 50 Technorati Media Source: Comscore * Amazon Sites include pure media ad-based sites + performance based product advertising 11 © 2012 Clipperton Finance Limited.
  12. 12. Half of the time spent online is not advertisement friendly • Internet users are only receptive to ads for less than 50% of the time they spend online • Contrary to conventional wisdom, media- related activity conducted through the Internet is relatively limitedAd Friendly Not Ad Friendly Source: Clipperton Finance Analysis, Nielsen … and the surge of mobile has a two-fold negative effect on branding advertising: 1. It drives the amount of time devoted to media- related activity even lower 2. Screen-size is not well adapted to Branding ads Ad Friendly Not Ad Friendly 12 © 2012 Clipperton Finance Limited.
  13. 13. So what’s the real opportunity? A golden opportunity to grab Online usage is always expanding to new activities, meaning new pools and forms of audience Total Successfully bridging the discrepancy will be supported by Addressable Discrepancy technology to better adapt to use cases (multi-device, Discrepancy video, e-commerce), objectives (Branding/Direct Response) and consumer experience (far too sacrificed today) The opportunity is massive to further pull branding dollars into online advertising: Value: a multi-billion dollar addressable market Differentiation: by addressing more effectively the needs of advertisers and consumers, new business models and new players will come up, new leaders will emerge Source: Clipperton Finance analysis 13 © 2012 Clipperton Finance Limited.
  14. 14. Although only a portion of themedia time / Ad spendingdiscrepancy can be addressed, itstill makes a massive opportunity 14 © 2012 Clipperton Finance Limited.
  15. 15. Table of Content I. Overview of Internet Display Ad Spending II. Which Levers to Close the Media Time vs Ad Spend Discrepancy ? III. Notable Transactions in Ad Tech Landscape IV. Focus on Key European Players V. About Clipperton Finance 15 © 2012 Clipperton Finance Limited.
  16. 16. Future growth will be driven by 2 key drivers: Market Pull & Advertising Push Will Ad Spending manage to outgrow usage? 1 MARKET PULL Ad Spending Strong and robust growth in Internet usage will Source: Clipperton Finance analysis, JPMorgan, Zenithoptimedia continue to create a pull effect on online advertising investments New consumer-led Internet usage (mobile, video) will open more innovative ad placement Internet Usage + 2 ADVERTISER PUSH Push through innovation: tools, exchanges, measurement and formats Will performance and branding grow closer? “Branding”: historically less performance based and home turf of traditional media and agencies Ad spending and Internet usage have been growing at the same pace “Direct response”: historically brutal and ROI driven. But consumers grow Push drivers will be key to further fuelling growth in online spend more complex 16 © 2012 Clipperton Finance Limited.
  17. 17. 1- Branding has yet to become a growth driver – The US example 2009 US Total Media Spend: $147B Online Advertising Penetration Growth Break-down (US) Branding 2009 US >7pt $91B Online Media Spend:$24B (62%) (16% of total Ad Spending) Online = 6% of $6B Direct 16% Branding spending (25%) <4pt Response BrandingResponse Direct 5% $55B Online = 33% of $18B (38%) Direct Response (75%) spending 2003 2009 Source: Brand.net analysis, Barclays Capital, Think Equity Partners and DMA Source: Clipperton Finance Analysis, TNS Media Intelligence, IAB, JP MorganInternet differs from traditional media in terms of “Branding” contribution to online penetration is limited“Branding” vs. “Direct Response” structure: Growth in online advertising has been historically led by direct Branding = 60%+ of all ad spending… response marketing: … but only 25% of online ad spending one to one user link allowed for performance based marketing Search as key growth driver, rather than display 17 © 2012 Clipperton Finance Limited.
  18. 18. 2- Direct Response growth will continue to be challenged by a declining CTRs 0.34% Standard Banner CTR Evolution 0.25% 0.20% 0.20% 0.12% 0.09% 0.09% 0.07% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Clipperton Finance Analysis, MediaMind, eMarketer, Pearson Social Netw. yield poor CPM rates Traditional display out-dated More ads displayed per page $2.43 $2.99 Traditional ad formats and US Growth ‘09-’10 placements have led to increasing $0.53 Ad Impressions +23% “ad blindness”WHY? Pages Views +10% Average CPM Avg CPM w/o Urgent need to push innovative Source: CF analysis, Comscore, Zenithoptimedia Social Networks formats, placement and targeting Source: Comscore May 2010 to sustain reasonable CTR Ad Impressions are growing 2x Social networks dragging global Endorsement by the market faster than content CPM down due to very low CTRs (advertisers, agencies, etc.) is key Further pushes for lower CTRs 18 © 2012 Clipperton Finance Limited.
  19. 19. So, what will be done to sustainand accelerate the growth ofonline advertising? 19 © 2012 Clipperton Finance Limited.
  20. 20. 1- Direct Response: How can advertisers improve CTR ? 1- Direct Response Click Through Rate (US) 0.61% Studies have shown that display ads have a much higher CTR on alternative devices like mobile phones or tabletsAccess Points 0.07% These devices are gaining a lot of traction from users at the Standard Banner Mobile Standard Banner moment but will it be enough to sustain global CTR? 0.50% 0.25% Targeting 0.10% New ad technology enables advertisers to better target their 0.07% audience which ultimately leads to higher CTRs Tools Standard Interest-Based Contextual Retargeting Banner 1.19% Higher Performance: Rich Media ads outperform standard banner 0.07% 0.19% 0.17% 0.16% with higher CTR and engagement ratesAd Formats Standard Expandable Expandable Floating Push Down User experience: Rich Media ads do not force the user to leave Banner Banner Strip Expandable Banner the site Rich Media Sources : Clipperton Analysis, MediaMind Research DoubleClick for Advertisers, Criteo 20 © 2012 Clipperton Finance Limited.
  21. 21. 2- Branding: What are the untapped growth drivers ? 2- Branding Higher interaction rate: Increased interaction delivers significant uplifts in brand awareness, message association and purchase intent Rich Ad Brand awareness: Rich Media ads increase brand awareness for Formats online advertisers more effectively than other online ad formats Rich Media ads are measurable and scalable: Rich Media ads can empower advertisers to track and measure a variety of important browsing behaviors (beyond traditional CTR & impressions) Source : Forrester Research Digital technologies offer more sophisticated targeting Innovative & customization capabilities than traditional media Contextual/ Ad Tech players need to leverage these possibilities toTargeting Tools create tailored & highly-focused branding campaigns Branding campaigns lack adequate measuring tools The typical indicators used online (CTR, CPA, conversion rate, etc) New are suited for direct marketing and e-commerce, not for branding Measuring Tools “ARS Persuasion Score” New branding-focused players are emerging Integrated campaigns are becoming common (TV and online). There “Netratings measurement” is a need for cross-media strategies 21 © 2012 Clipperton Finance Limited.
  22. 22. Conclusion Take-aways on Online Advertising Trends (1) Online advertising has been primarily driven by performance-based marketing Branding Direct response spending will continue to grow, both mechanically and thanks to new avenues for innovation and improved, deeper analytics tools & But Internet will aggressively tap into the huge reservoir of branding-Performance oriented marketing spend…Convergence ... and technology will push for refined measurement and performance-based branding offerings Momentum shift: new generations of technologies, improved standardization, decline of traditional players and maturing executives should further accelerate changes As the distinction between TV and the Internet continues to blur, we expect the mainOpportunity growth driver of this evolution will be video in the broad sense: Online video streaming Mobile video Catch-Up TV Commoditisation of IPTV Connected TVs (Google TV, Apple TV, proprietary OS, …) 22 © 2012 Clipperton Finance Limited.
  23. 23. Take-aways on Online Advertising Trends (2) Closing the media time vs online advertising discrepancy means leveraging new technologies and formats to further develop and standardize a comprehensive set of measurement tools. Who will be able to achieve this? Will traditional online ad performance tools like CTR, CPC Open or CPA slowly be put aside?Questions Can branding-based spending ever reach the same market share as in traditional media? How blurry will the boundary between performance and branding be? Leaders of the first online advertisement generation or new comers? 23 © 2012 Clipperton Finance Limited.
  24. 24. Table of Content I. Overview of Internet Display Ad Spending II. Which Levers to Close the Media Time vs Ad Spend Discrepancy ? III. Notable Transactions in Ad Tech Landscape IV. Focus on Key European Players V. About Clipperton Finance 24 © 2012 Clipperton Finance Limited.
  25. 25. Selected M&A transactions – 2011/12Date Target Acquirer Deal Target EV/Rev Rationale Value Rev Vizu acquisition will complement Nielsens cross- platform advertising solutions by adding real-timeJul-12 - - - online effectiveness measurement. Real-time data will improve advertising efficiency Ad Effectiveness by enabling in-flight optimization. Measurement Build a total customer experience managementJun-12 $745m $100m (est. 2012 rev.) 7x solution to stay competitive after Oracle Social marketing acquisition of Vitrue Vitrue offers customers an unified experience for $100m social marketing campaignsMay-11 $300m (est. 2012 rev.) 3x Secure a first-mover position in the social Social marketing marketing space Leverage Yahoo’s reach with improved targeting technologiesNov-11 $270m $130m 2x Optimize Yahoo’s advertising strategy with concise Ad network audience data and analytics Expand Adconion’s inventory with SmartclipNov-11 - - - network of in-stream and connected TV distribution partners Video ad network Accelerate Adconion’s deployment in European emerging markets Benefit from enhanced multi-channel analytics and campaigns optimization solutions to challengeNov-11 c$400m $60-80m 5-6x Comscore offer Ad exchange / Social Mkt Add social advertising buying capability for FB 25 © 2012 Clipperton Finance Limited.
  26. 26. Selected M&A transactions – 2011/12Date Target Acquirer Deal Target EV/Rev Rationale Value Rev Strengthen Adobe’s Digital Marketing division (after Omniture acquisition)Nov-11 $120m - - Adobe is able to offer an end-to-end solution on Video Monetization the video segment (from creation to broadcasting to monetizing) Consolidate Velti’s mobile advertising dominance in Europe by acquiring MIG rich client baseNov-11 $59m $20m 3x (Vodafone, Skype, M&S …) Use Velti’s recent acquisition of Zaypay to leverage Mobile Solutions MIG m-commerce and billing techs Build an all-in-one solution for advertisersAug-11 $30m $5m 6x Tap into branding-focus players’ offline spending by providing them with adequate measuring & Ad Verification verification tools Expand TV business online to lever existing client- baseJun-11 $414m $100m 4x Generate value by enabling easier cross-media Ad Campaign Mngt campaigns for advertisers Following Omniture acquisition, Adobe adds a behavioral targeting brick to its Online Marketing SuiteJan-11 c$60m - - Compete with Comscore to become a major Behavioral Data player in the high-end “Swiss army knife” advertising solution 26 © 2012 Clipperton Finance Limited.
  27. 27. Selected European Adtech Fundraisings – 2011/12Invest. Founded Sum Invested Company Name Nat. Description InvestorsDate Year (M€)Sep-12 Mister Bell DE 2010 Ad Network A+ Finance, Omnes Capital 3.5Sep-12 Gamned FR 2009 Ad exchange platform Individual (Fréderic Chevalier) 1.5Aug-12 Semasio DE 2010 Ad data platform Bertelsmann DMI, Holtzbrinck, Project A, Gründerfonds n.a.Jul-12 Widespace SW 2007 Premium mobile advertising network Northzone, Industrifonden 3Jun-12 Kiosked SW 2010 Content activation platform Individual (Rovio Chairman) 5Jun-12 Ividence FR 2008 Innovative solutions fo E-mailing Campains Omnes Capital, A Plus Finance 3Apr-12 Les Nuages FR 2011 Digital and mobile marketing Sigma Gestion, Promelys Participations 2Apr-12 Adeven DE 2012 Mobile analytics & ad verification Target Partners n.a.Apr-12 TAPTAP Networks SP 2010 Premium mobile advertising network Nauta Capital, Undisclosed Firm 3.5Mar-12 MyThings UK 2005 Personalized display advertising T-Venture, Iris Capital, Carmel Ventures, Accel 12Jan-12 Crossvertise DE 2011 Cross-media advertising marketplace High-Tech Gruenderfonds, Bamboo Ventures 1Jan-12 Brainient UK 2008 Interactive video advertising platform Credo Ventures, Atlas Venture, Estag Capital, 500 Startups 1.4Jan-12 StrikeAd UK 2010 Mobile demand side platform DFJ Esprit 2.4Jan-12 Unruly Media UK 2006 Social video advertising platform Van den Ende & Deitmers, Business Growth Fund, Amadeus 19Jan-12 VideoPlaza SW 2007 Video ad-serving Innovacom, Qualcomm 10Nov-11 MNG Mobile Network Group FR 2003 Mobile marketing solutions TIME Equity Partners 4Nov-11 Skimbit UK 2008 Affiliate marketing 500 Startups, Sussex Place Ventures, NESTA, Bertelsman 3.5Nov-11 MADS BV NL 2006 Targeted campains for mobile OTM Investments BV 1Oct-11 madvertise DE 2008 Mobile ad network Blumberg Capital Ventures, Earlybird Venture Capital 8Sep-11 AD4SCREEN FR 2010 Performance network for mobile ads Backbone, Undisclosed Firm 4.5Sep-11 Apprupt DE 2008 Performance network for mobile ads T-Venture Holding, Neuhaus Partners n.aSep-11 Ezakus FR 2010 Audience targeting service Idinvest Partners SA 2Aug-11 Ebuzzing (former Wikio) LX 2006 Platform for seeding branded content Lightspeed Venture Partners, GIMV, Gemini Israel Funds 17Aug-11 Brandtone IR 2009 Voice-based mobile platform Enterprise Ireland, Unilever Ventures, Verlinvest, Vision 10Jul-11 SupersonicAds UK 2008 Social in-game advertising platform Greylock Partners 3Jun-11 Burt SW 2009 Analytics and data technology Stiftelsen Industrifonden, Undisclosed Firm 1.6May-11 Next Performance FR 2008 Retargeting Solutions Kennet Partners 16Mar-11 Qriously UK 2010 Real-time public sentiment Accel Partners, Undisclosed Firms 1.2Feb-11 SponsorPay DE 2009 Cross-platform advertising solution Hasso Plattner, Kite, Nokia Growth, Team Europe, IBB 4Feb-11 Applifier FIN 2008 Cross-promotion network for social games & apps Individuals, Lifeline, MHS, PROfounders, Tekes 1.6Jan-11 Celltick UK 2000 Mobile marketing solutions Amadeus Capital Partners, Elwin Capital, Noventi 6 Source : Thomson One Banker, Press Releases 27 >€10m © 2012 Clipperton Finance Limited.
  28. 28. Listed Advertising Comparables: Aging Models Lead to Low Valuations amongst Listed Web Medias CompaniesScale 1,000,000Currency USD Last Period Market Cap - Enterprise Sales Sales Sales EBITDA EBITDA EBITDA EV/Sales EV/Sales EV/EBITDA EV/EBITDA Name Ticker Count. End Date Consolidated Value TTM 2012E Year/Year TTM 2012E Margin%¹ TTM 2012E TTM 2012EGOOGLE GOOG-US USA Jun-12 226,369 189,043 43,018 42,769 29.6% 14,235.00 19,257.2 33.1% 4.4x 4.4x 13x 10xFACEBOOK FB-O USA Jun-12 41,626 32,144 4,327 4,925 53.2% 1,050.00 2,655.2 24.3% 7.4x 6.5x 31x 12xBAIDU BIDU-US CHN 37,470 35,470 2,895 3,586 (4.5%) 1,660.00 2,007.2 57.3% 12.3x 9.9x 21x 18xYAHOO! YHOO-O USA Jun-12 17,959 16,222 4,980 4,445 (10.6%) 1,310.00 1,487.3 26.3% 3.3x 3.6x 12x 11xYandex YNDX-O RUS Jun-12 6,892 6,524 748 888 54.7% - 401.9 45.0% 8.7x 7.3x - 16xTRIPADVISOR TRIP-O USA Jun-12 5,036 5,242 699 758 27.3% 297.54 339.1 42.5% 7.8x 6.9x 18x 15xIAC/INTERACTIVECORP IACI-O USA Jun-12 4,569 3,825 2,435 2,735 35.8% 346.03 492.6 14.2% 1.6x 1.4x 11x 8xAOL AOL-N USA Jun-12 3,110 1,763 2,169 2,148 60.0% 302.00 381.3 13.9% 0.8x 0.8x 6x 5xPANDORA MEDIA INC P-N USA Jul-12 1,674 1,591 338 430 66.4% (26.58) (1.5) (7.9%) 4.7x 3.7x NEG NEGYELP YELP-N USA Jun-12 1,604 1,481 107 136 67.7% (13.48) 1.0 NEG 13.8x 10.9x NEG -VALUECLICK VCLK-O USA Jun-12 1,247 1,331 632 685 32.6% 178.79 214.2 26.1% 2.1x 1.9x 7x 6xZILLOW Z-O USA Mar-12 1,186 1,103 78 115 113.3% 11.65 22.1 15.0% 14.2x 9.6x 95x 50xOPENTABLE OPEN-O USA Jun-12 1,063 991 150 162 22.0% 45.47 68.3 30.2% 6.6x 6.1x 22x 15xMILLENNIAL MEDIA MM-N USA Jun-12 1,041 808 132 178 79.2% (4.06) (1.3) (1.0%) 6.1x 4.5x NEG NEGDEMAND MEDIA DMD-N USA Jun-12 861 767 345 358 15.9% 58.89 100.0 17.1% 2.2x 2.1x 13x 8xANGIES LIST ANGI-O USA Jun-12 631 570 119 154 71.1% (55.81) (52.4) (46.9%) 4.8x 3.7x NEG NEGVELTI LIMITED VELT UK/US Jun-12 524 487 232 - - 31.31 31.0 13.5% 2.1x - 16x -DIGITAL GENERATION DGIT-O USA Jun-12 304 702 382 396 45.7% 99.23 128.5 26.0% 1.8x 1.8x 7x 5xTom orrow TFA-XE DEU Jun-12 250 256 175 197 0.6% 24.56 31.0 14.0% 1.5x 1.3x 10x 8xTradeDoubler Aktiebolag TRAD-SK SWE Jun-12 98 72 345 366 (18.2%) 11.47 12.7 3.3% 0.2x 0.2x 6x 6xWEBORAMA ALWEB-FR FRA Dec-11 90 85 29 35 47.5% 6.87 8.3 23.6% 2.9x 2.4x 12x 10xADVERLINE ALADV-FR FRA Dec-11 61 63 32 - 6.5% 7.20 6.0 22.3% 1.9x - 9x -¹TTM Average 27% 19% 5.1x 4.5x 18.2x 12.6xSources: Thomson, Yahoo Finance Median 41% 20% 3.8x 3.7x 12.4x 10.0x 28 © 2012 Clipperton Finance Limited.
  29. 29. Table of Content I. Overview of Internet Display Ad Spending II. Which Levers to Close the Media Time vs Ad Spend Discrepancy ? III. Notable Transactions in Ad Tech Landscape IV. Focus on Key European Players V. About Clipperton Finance 29 © 2012 Clipperton Finance Limited.
  30. 30. Clipperton List of Selected European Ad Tech Players Stars & emerging companies with a claim on new and existing online advertisement markets 30 © 2012 Clipperton Finance Limited.
  31. 31. Table of Content: Selected European Ad Tech PlayersADVERTISING PLATFORMS DEVICE & FORMAT ADVERTISING TECHNOLOGIESBranding Mobile Measurement DSP/SSP 37 45 32 47 37 45 47 32 46 48Social Advertising Video Targeting Ad Serving 40 43 33 41 43 33 41 34Ad Network & Analytics Widgets RTB 38 34 42 44 38 35 44 39 35 39 36 31 © 2012 Clipperton Finance Limited.
  32. 32. Selected European Players - Measurement Key Figures Presentation Key Figures Presentation Founded: 2007 Alenty provides ad-exposure Founded: 2009 Analytics and measurement efficiency measurement and platform for publishers and brand Nationality: FR Nationality: SW optimization technologies (how advertisers long is the ad viewed, etc.) for ad Application Suite with 5 apps Rev. 2011: €1.2m Rev. 2011: n.a. networks & agencies Rev. 2010: €800k Rev. 2010: n.a. Flagship product is Rich - a web Strong focus on branding-based analytics platform for advertising Funding: €400k online campaigns Funding: €2.7m allowing publishers to better monetize content & advertisers to Investors: BAs Competitors include Adxpose Investors: Industrifonden increase the visibility and impact (bought by comScore in 2011) Founders / Tornstaden of their digital campaigns Context & Positioning Context & Positioning Alenty solves a recurring issue that brand advertisers experience: display ads Billed as an “Omniture focused on web ads” not sites, Burt is a SaaS platform are priced by impression where TV ads are priced by exposure time. that helps brands and ad agencies measure and analyze online advertising by The company’s technology enables agencies and ad networks to provide their looking at where ads are displayed and which ads have been seen by users. clients with insightful reports on campaigns such as how long users have been exposed to the ad, what’s the optimal exposure time, etc. Measurement technologies will be key: as online advertising shifts away from pure performance to branding, advertisers expect to have more The comScore/Adxpose deal illustrates the importance of the measurement qualitative information on their campaigns. brick in the consolidating adtech ecosystem. 32 © 2012 Clipperton Finance Limited.
  33. 33. Selected European Players – Targeting [1/4]Key Figures Presentation Key Figures Presentation Founded: 2010 Branding-oriented Semantic Founded: 2005 Leading Retargeting Player Advertising Web Service Nationality: Nationality: FR Criteo collects information Matches ads with similar about user online behavior Rev. 2011: <€1m (est.) emotional appeal thanks to Rev. 2011: (what product they look at on €150-200m content analysis & real-time retailers sites, etc.) & generates Rev. 2010: n.a. monitoring Rev. 2010: €50-60m dynamic banners in real time to fit a particular customer profile Funding: €3.2m As ADmantX provides semantic Funding: €17m analysis on the content of a site Founded in France but now Investors: Atlante and not the user, the solution is Investors: Index, headquartered in Palo Alto, CA Ventures cookie-less Bessemer, Idinvest, Elaia, 123VentureContext & Positioning Context & Positioning One barrier to branding advertising online is the fact that it is With its retargeting technology, Criteo is able to achieve very high CTR rates difficult for brands to be sure that their ads appear next to pieces (4-5x that of traditional banner ads). The company leverages this arbitrage opportunity by buying ad inventory on an CPM basis & selling on a CPC basis of content they want to be associated with: EG: Porsche wants its ads to appear next to « Fashion Week » content, but not Criteo aims to make display advertising perform like search on a pure CPC next to an article involving a car crash…) pricing model (and not CPM) thus providing an innovative and disruptive approach to display advertising ADmantX has developed a leading semantic technology and Probably Europe’s fastest growing adtech player (~$400m rev. in 2012) with a seems well positionned to succeed in this new segment significant opportunity in N. America (75% rev. are still Europe-based) 33 © 2012 Clipperton Finance Limited.
  34. 34. Selected European Players – Targeting [2/4]Key Figures Presentation Key Figures Presentation Predictive targeting using Founded: 2005 Performance-focused Founded: 2009 personalization algorithms personalized targeting provider Nationality: UK Nationality: UK Matches individual preferences Propels acquisition through with content in real time using Rev. 2011: retargeting, pre-targeting and Rev. 2011: <£50m (est.) $30-50m (est.) artificial intelligence and semantic look-alike targeting Rev. 2010: <£20m (est.) technologies Rev. 2010: $10m (est.) Extensive network of RTB 3 targeting products: AdMatch, providers (Google DoubleClick, Funding: £6.2m Funding: £22.4m SiteMatch & Media Solutions Appnexus, Rubicon and AdMeld) Investors: Dawn Capital, Investors: Accel, Iris, Founded in London, is now Top tier clients (PriceMinister, Antrax capital headquartered in New-York Dotcorp, Carmel, T-Ventures Orange, Microsoft, etc.)Context & Positioning Context & PositioningPersonalization and automation are two strong underlying trends in MyThings is positioned at crossroad of 3 fast growing segments:display advertising: publishers started showing the same ad to every personalized targeting, display advertising & real-time bidding (RTB)users, then came targeting and retargeting The company has taken a pure performance-led approach to display Cognitive Match is able to go one step further in personalization advertising similar to its main competitor Criteo & automation through complex targeting algorithms (that uses With its recent massive round – $15m led by Iris (Orange-Publicis) – psychology mathematics and semantic technologies) MyThings is in a great position to challenge Criteo internationally 34 © 2012 Clipperton Finance Limited.
  35. 35. Selected European Players – Targeting [3/4]Key Figures Presentation Key Figures Presentation Dynamic Retargeting Player Founded: 2007 Ad Personalization Platform Founded: 2008 Nationality: Nextperformance also offers Nationality: UK Allows advertisers to target new, other value added services such prospective and existing as social audience or real time Rev. 2011: customers with personalized and Rev. 2011: €20-50m (est.) <£50m (est.) targeting (however dynamic relevant advertising messages Rev. 2010: <€10m (est.) Rev. 2010: £10-15m (est.) that are created and customized retargeting still accounts for 70% of revenue) in real time. Funding: €16m Funding: £5.3m Claims to deliver 12 times higher High profile clients (Cdiscount, Investors: Pentech, click through rates than standard Investors: Kennet Etam, Orange, Spartoo, etc.) retargeted ads Reed Elsevier & Allen & Co.Context & Positioning Context & PositioningNext Performance is based on the same model as Criteo: buy on a CPM basis & With the declining click-through rate trend, publishers & advertiserssell on a CPC basis – monetizing the delta through innovative (re)targeting will actively look into new solutions that enable them to maintaintechnology The company is able to transform display inventory into display advertising CTR at a high ratelucrative performance-based inventory Struq’s innovative technology allows advertisers both to createAims to rapidly scale internationally – with a strong focus in Europe sharp users profiles and to dynamically create personalized ads inThe size of Kennet round shows that investors believe Next Performance can real-time leading to much higher CTRs than traditional display adsbe a serious contender to Criteo’s dominant position in the retargeting space 35 © 2012 Clipperton Finance Limited.
  36. 36. Selected European Players – Targeting [4/4]Key Figures Presentation Founded: 2011 Audience targeting software providing precise and real-time Nationality: UK social profiling Rev. 2011: <€1m (est.) Seasoned entrepreneurial team: Rev. 2010: founders also founded Steek, a n.a. Cloud pioneer acquired by F- Secure in 2009 for $39m Funding: €2.2m Investors: IDInvestContext & Positioning Early-stage funding enabled a significant technological edge in terms of profiling granularity, a key differentiating factor as current offerings do not match rising market expectations. 36 © 2012 Clipperton Finance Limited.
  37. 37. Selected European Players – BrandingKey Figures Presentation Key Figures Presentation Brand-Oriented Video Ad Founded: 2008 Brand-Oriented Video Founded: 2009 Network (focus on social games) Advertising Player (retargeting & Nationality: RO interactive video advertising) Nationality: DE GlipHippo leverages the rise of social gaming by distributing pre- Rev. 2011: n.a. Tools that help agencies turn Rev. 2011: <€5m (est.) roll video ads embedded in social existing video ads into interactive games, blogs or casual gaming Rev. 2010: n.a. experiences Rev. 2010: n.a. sites Two flagship products: Funding: n.a. The teams traditional ad agency Funding: £2.2m o Brainads: personalized video roots translate into brand- Investors: Arts Alliance, retargeting Investors: n.a. oriented analytics for customers 500 Startups, Credo o Brainrolls: interactive video Ventures, Estag, BAs advertising Strong presence in Scandinavia Context & Positioning Context & Positioning Internet is in the process of becoming the first consumer channel GlibHippo is positioned on a advertising “sweet-spot”, at the for video: there is a vast amount of potential advertising junction of strong secular trends: branding advertising online, inventory to tap and today’s video adtech is still in it’s infancy social gaming & video ads Brainient intends to play a major role in this transition by offering clients brand-focused turn-key solutions to make their video ads Audiences that were once captured by TV, in a single location, are more effective (through retargeting & interaction) now spreading over multiple sites 37 © 2012 Clipperton Finance Limited.
  38. 38. Selected European Players – Advertising Platforms [1/3]Key Figures Presentation Key Figures Presentation Web, mobile and social analytics Founded: 1998 Ad Network with strong tech Founded: 1995 provider, including real-time and components integrating analytics Nationality: FR multi-channel audience Nationality: UK & audience profiling services, ad measurement, performance serving & media services Rev. 2011: €10m monitoring, and e-reputation Rev. 2011: €22m Leveraged its 90m profiles Rev. 2010: €9m Rev. 2010: €15m Network of 3,500+ customers database to form a behavioral and 350,000 audited websites in targeting ad network of 200,000 Funding: €4m more than 20 countries Funding: Listed sites generating 34M UVs/month Investors: ICSO/ Investors: N.A. Mkt Cap (as of 07/12/12): €65m IRDI GroupContext & Positioning Context & Positioning AT Internet is recognized as a European leader in Web Analytics Focus on R&D in behavioral targeting (1st geolocalized service) solutions, particularly known for the quality of its partnership Leveraged its technology through M&A: Acquired ad newtork C- network, which forms a community of 350,000 users Marketing in 2007, rich-media solution Adrime in 2010, and merged The company expects to double its sales in 2012 with 40% of sales with ad exchange Hi-Media in the UK in 2011. The recent (May-12) coming from outside France. They currently have a strong focus on acquisition of Datvantage combines Weborama’s user profiling Germany, Austria and Switzerland with customers including Axel expertise with a data collection and management platform Springer, Deutsche Telekom, SoundCloud and Netto Q2 2012 revenue grew 37% yoy. to €5.6m 38 © 2012 Clipperton Finance Limited.
  39. 39. Selected European Players – Ad Network & Analytics [2/3]Key Figures Presentation Key Figures Presentation Founded: 2005 Independent global audience Founded: 2008 Preference-based advertising UK and content network Nationality: DE network (using targeting tools) Nationality: (advertising distribution Boasts very high CTR (>7%) Rev. 2011: £200-300m platform delivering targeted ads Rev. 2011: €30-50m (est.) and content across display, Strong presence in German Rev. 2010: ~£150m email, social, in-banner and in- Rev. 2010: €10-20m (est.) speaking countries (over 40 video) million visitors per month in the FTEs: ~80 DACH region alone) Funding: £70m Reaches nearly 700 million Funding: €2.8m+ Experienced founders: Matyka Investors: Index Venture, unique users across 17 launched Hiclip.tv (sold toWellington, S. Valley Bank countries Investors: CAPE, NWZ, Adconion in 2008) & is engaged in HTGF, Dumont, BAs a number of DE tech start-upsContext & Positioning Context & Positioning As a holding group, Adconion owns a portfolio of companies Plista is building its success thanks to a user-friendly platform, spanning numerous growing segments such as Smartclip (online innovative preference-based display ads as well as a strong video network, all stock acquisition), Joost (video and content network of advertisers & publishers in German speaking countries syndication), and Redlever (brand integrated content) Adconion is already leveraging it’s acquisitions as Smartclip partners The use of innovative display ad formats along with precise with Playjam (smart tv gaming platform) to ensure Adconion is also targeted preference-based technology allows the company to active in ad distribution for connected TV display very high CTR rates of 7% - well above industry standards 39 © 2012 Clipperton Finance Limited.
  40. 40. Selected European Players – Advertising Platforms [3/3]Key Figures Presentation Founded: 2006 Technology platform delivering social video campaigns for Nationality: UK global brands Reaches an audience of over Rev. 2011: £10-20m (est.) 725m MAUs, distributing Rev. 2010: <£5m (est.) campaigns across platforms including YouTube, Facebook Funding: £16m and Twitter Investors: BGF, Van den Competitors include GoViral (acquired by AOL for nearly Ende, Amadeus $100m) & French eBuzzingContext & Positioning Video shares are experiencing exponential growth rising from 40m video shares per month during October 2010 to 270m shares during October 2011. Branded video content is making up an increasing proportion of these shares Unruly currently has over 14,000 distribution partners globally launching social video campaigns for blue chip brands including T- Mobile, Samsung and Skype 40 © 2012 Clipperton Finance Limited.
  41. 41. Selected European Players – Ad Serving Key Figures Presentation Key Figures Presentation Provides ad serving and audience Founded: 2007 Video ad-serving platform Founded: 2008 measurement technologies to Nationality: BE CDNs, agencies, ad networks and Nationality: Enables sales and delivery of online audio publishers. video advertising beyond in- Rev. 2011: n.a. Rev. 2011: <€15m browser video (PC) to the New IP Adswizz enables the creation of delivered TV, whenever and on Rev. 2010: €1-5m (est.) Rev. 2010: n.s. online ad campaigns across whichever devices users wish to audio, video and display formats consume it Funding: €2m with social media integration Funding: €13m Investors: Angel Investors: Northzone, funding Creandum, Qualcomm, Innovacom Context & Positioning Context & Positioning Adswizz has a strong presence in the online audio marketplace allowing Television remains the dominant advertising media attracting on-line radios / ad networks to fully monetize their internet radio $160m of global ad spend in 2010 audience. Ease of use and breadth of content is leading to rapid growth in online Meanwhile, the industry transitions from the linear broadcasting audio positioning Adswizz for strong growth going forward Adswizz is currently entering the US and Canadian markets having model to dynamic IP delivered content and Videoplaza intends to recently partnered with online audio streaming service StreamOn play a leading role in this new IP delivered TV ad server space 41 © 2012 Clipperton Finance Limited.
  42. 42. Selected European Players – Real Time Market PlaceKey Figures Presentation Founded: 2007 Online advertising market enables real-time bidding (RTB) Nationality: DE for ad impressions Rev. 2011: €30-50m (est.) In 2011 sold just under 55bn ad impressions with it’s online Rev. 2010: <€20m (est.) market reaching 52% utilisation (5% greater than 2010) Funding: €5m Investors: Time Equity Currently deal with more than 1,400 advertisers placing ads on Partners around 5,000 websitesContext & Positioning With CPM’s rising on average 10% between 2010 & 2011, effective targeting is increasingly important RTB will play an important role in this change (estimates suggesting RTB will account for >20% of display market volume in the next three years). Adscale already puts two thirds of its available inventory through its RTB platform (180m ad impressions per day) 42 © 2012 Clipperton Finance Limited.
  43. 43. Selected European Players – Format: Video Key Figures Presentation Key Figures Presentation Premium multiscreen video ad In-stream ad server providing Founded: 2010 Founded: 2009 network and server, providing multiscreen ads, geolocalization, Nationality: FR targeting services and analytics Nationality: ad selection across multiple brand offers, and interactive ad players Rev. 2011: €5-10m (est.) Targets urban upper class Rev. 2011: <€10m (est.) audience from more than 200 Connects 150+ premium Rev. 2010: <€3m (est.) publishers, and provides Rev. 2010: n.a. publishers to 200+ advertisers, verticalized offers (entertainment, generating 100m views/month Funding: - news, youth, men, women etc.) Funding: €1.25m Investors: - Investors: ISAI Context & Positioning Context & Positioning Strong R&D strategy: launched Le Lab in 2011, a center dedicated to innovative video ad formats Tablet, connected TV and social media usage is booming in Europe, pushing online video market growth Rising demand / limited competition: with 75m in-stream ads seen monthly, already accounts for 10% French video content market Meets strong demand for engagement drivers: provides Advideum is well placed in a growing segment with 63% of advertisers multiscreen, geolocalized and interactive players, and features ad expecting to use video in 2012 and viewers 20 times more likely to click on selection offer across multiple brands in-stream ads compared to banners (according to Mediamind) 43 © 2012 Clipperton Finance Limited.
  44. 44. Selected European Players – Format: Widgets Key Figures Presentation Key Figures Presentation Provides Transactional Founded: 2008 Founded: 2010 Innovative affiliation platform Advertising Tools for Advertisers Nationality: CH Nationality: through e-commerce widget Platform allows e-commerce Allows advertisers to link their transactions to be conducted products to relevant images Rev. 2011: <€5m (est.) Est. Rev. 2012: >€1m inside banner advertising units and multimedia within online Rev. 2010: <€1m (est.) (which can be deployed on Rev. 2011: €200k content, so that consumers can traditional websites, blogs, buy those items directly Funding: <€1m Facebook, etc.) Funding: €4.5m Publishers can monetize their Investors: BAs 6 products in total Investors: Tekes, content by becoming brands Flagship product is nextpromote affiliates (promotion tool in Facebook Fanpage Kaj Hed (Rovio’schairman)Context & Positioning Context & Positioning Until recently, online transactions were limited to the sole “sandbox” of Brands look for new ways to engage consumers through display e-commerce site. advertising NextWidgets is disrupting the market by opening up new online sales Publishers are also looking for smarter and innovative ways to channels for e-retailers: monetize their audience This is done by creating new ad formats that allow e-commerce transactions to be done “in-banner” (often on social sites thus Ambition is to turn any media content (image, video…) into a maximizing the impact of social media marketing for advertisers) monetizable digital storefront for consumers. 44 © 2012 Clipperton Finance Limited.
  45. 45. Selected European Players – Mobile [1/2]Key Figures Presentation Key Figures Presentation Founded: 2008 Global mobile advertising The fastest growing mobile Founded: 2008 marketplace advertising marketplace in the Nationality: UK Nationality: German-speaking markets Maximises display advertising Rev. 2011: £1-3m (est.) campaigns and mobile traffic Rev. 2011: <€5m (est.) Targeted advertising – delivers 2 results billion ad impressions monthly Rev. 2010: £0.8m Rev. 2010: €1m (est.) across Europe (DACH, FR, UK, SP) Offices in London, New-York, Funding: £5m Paris, San Francisco, Madrid Funding: €7.3m Successful App Store rankings Investors: Gordon Investors: EarlyBird, booster service Shields Team Europe, BlumbergContext & Positioning Context & Positioning Strong recent focus on data analytics to monitor and boost ad inventory A leading European mobile advertising marketplace covering social, performance (for example, providing an engagement score for each ad gaming and premium content based on metrics such as CTR and time spent watching). In April 2012, the company acquired Turkish mobile ad company Adfonic has recently launched its first video ad units – unique in that Mobilike who covers 60% of the Turkish mobile ad market. The they play in the native iOS or Android player rather than needing to open acquisition positions Madvertise to enter the Middle East separate apps such as YouTube Madvertise also provides app ranking optimisation through the Currently receives 35bn ad requests per month averaging 4000 brand "Katappult" service which guarantees a top 25 app ranking listing in a campaigns p/month, reaching a global audience of 200m mobile users specific category for fixed price within 3 business days 45 © 2012 Clipperton Finance Limited.
  46. 46. Selected European Players – Mobile [2/2]Key Figures Presentation Founded: 2010 Mobile performance marketing solutions for app monetization, Nationality: UK leads and downloads acquisition, audience retention and global Rev. 2011: <€5m (est.) mobile strategy Rev. 2010: n.a. Experienced founders: launched the online marketing agency Funding: €4.5m+ Directinet, sold for $42m in 2006 Investors: Backbone (Agregator Capital) Competitors include Velti or Yoc BAs (UK-based)Context & Positioning Aims to be active across the entire mobile marketing value chain: following the acquisition of app sponsoring network Bemyapp. Recent funding fuels their external growth strategy, starting with mobile marketing agency Systeme Polaire in 2012 Has a total of more than 125 customers including Procter & Gamble, Yellow Pages, Renault, Orange and Nokia 46 © 2012 Clipperton Finance Limited.