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Digital Media Operations Review July 29, 2010
EXECUTIVE SUMMARY <ul><li>Dramatic changes in ad market and our internal operations have generated upside in revenues and ...
DIGITAL BUSINESS UPDATE <ul><li>2010 OBJECTIVES </li></ul><ul><li>ACCOMPLISHMENTS </li></ul><ul><li>SCALE OUR CONTENT MODE...
OVERVIEW +12% -7% Net Revenue ($ in millions) CAGR `08-`10 =  2% AOIBDA ($ in millions) +48% +63% Net Revenue Drivers ($ i...
2010 OBJECTIVES: FY 2010 FORECAST
2010 PROGRAMMING HIGHLIGHTS
<ul><li>Content Verticals </li></ul><ul><ul><li>TLC Home, Family, Style, Weddings </li></ul></ul><ul><ul><li>Health relaun...
KEY PRODUCT INITIATIVES: 1H10 <ul><li>New show site templates </li></ul><ul><li>New TLC and Health content verticals </li>...
SITE PERFORMANCE 1H10 [1] Includes Domestic and INTL for US Nets; Domestic only for HSW [2] Q2 Average SOURCE: Omniture Ju...
TRAFFIC AND INVENTORY FORECAST – 2010* *Ranked by Total Video IImpressions  [1] Includes only O&O performance [2] Includes...
VIDEO PERFORMANCE <ul><li>2010 Growth Drivers </li></ul><ul><li>New show site template </li></ul><ul><li>Google/SEO optimi...
1H 2010 ACHIEVEMENTS: AD SALES REVENUE <ul><li>1H 2010 Key Trends </li></ul><ul><li>38% Ad Sales Revenue  growth vs. PY </...
OUTPACING A RECOVERING MARKET <ul><li>US Online spending +10.8% v. 2009 </li></ul><ul><ul><li>Display market +8% </li></ul...
SELLING MORE THAN MEDIA <ul><li>Discovery Digital is now offering highly differentiated value  propositions in the digital...
2010 AD SALES TOP DEALS <ul><li>Increased Deal Sizes </li></ul><ul><ul><li>2010 average deal Size $158k gross, 105% YOY; 1...
FY 2010 FORECAST: AD SALES REVENUE <ul><li>Forecast </li></ul><ul><li>Revenue forecasted to exceed budget by 9%, and by 20...
DIGITAL DISTRIBUTION DRAFT EST Mobile Video Mobile Other BBS Total Forecast  (Jan-Dec) $7,608,849 $2,056,733 $291,617 $300...
2011 AND BEYOND: HOW DO WE GROW? <ul><li>PATH TO NEAR-TERM PROFITABILITY </li></ul><ul><li>GROWING THE WEBSITES </li></ul>...
2011 PATH TO PROFITABILITY <ul><li>18% growth in national ad sales v. 7% market forecast </li></ul><ul><ul><li>display and...
LEVERS TO DRIVE WEBSITE GROWTH  <ul><li>ON-AIR PROMOTION/RATINGS </li></ul><ul><li>CURIOSITY </li></ul><ul><li>SEO/CONTENT...
BEYOND THE WEBSITE <ul><li>LONG-FORM DISTRIBUTION/TV EVERYWHERE </li></ul><ul><ul><li>Could see scale in 2012 </li></ul></...
APPENDIX
ORGANIC GROWTH TIED TO RATINGS DSC UVs vs Ratings – Jan 2008 to Jun 2010 APL UVs vs Ratings – Jan 2008 to Jun 2010 TLC UVs...
1H 2010 ACHIEVEMENTS: VS BUDGET AND PY
HEADCOUNT  <ul><li>$7M yoy savings in direct headcount to the division </li></ul>
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Operations review july 10

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Operations review july 10

  1. 1. Digital Media Operations Review July 29, 2010
  2. 2. EXECUTIVE SUMMARY <ul><li>Dramatic changes in ad market and our internal operations have generated upside in revenues and AOIBDA v. LY and v. Plan </li></ul><ul><li>Priorities now are PROFITABILITY and GROWTH </li></ul><ul><li>Critical Success Factors are: </li></ul><ul><ul><li>Audience/inventory growth </li></ul></ul><ul><ul><li>Ad systems/operations </li></ul></ul><ul><ul><li>Platform migration/stability </li></ul></ul><ul><ul><li>Meeting Network expectations </li></ul></ul><ul><ul><li>Developing expertise in emerging platforms </li></ul></ul>
  3. 3. DIGITAL BUSINESS UPDATE <ul><li>2010 OBJECTIVES </li></ul><ul><li>ACCOMPLISHMENTS </li></ul><ul><li>SCALE OUR CONTENT MODEL </li></ul><ul><li>GROW TRAFFIC/INVENTORY </li></ul><ul><li>MONETIZE BETTER </li></ul><ul><li>SUPPORT AUTHENTICATION AND SOCIAL MEDIA </li></ul><ul><li>Increased revenue by 21% while reducing OpEx </li></ul><ul><li>New TLC and Health sites, powered by HSW </li></ul><ul><li>Original, sponsored web series </li></ul><ul><li>Uniques +9% </li></ul><ul><li>Streams +66%, over 560M this year </li></ul><ul><li>STR on premium display nearly doubled </li></ul><ul><li>Avg deal size $158K, +105% v. LY </li></ul><ul><li>“ Anchor” deals have become standard </li></ul><ul><li>Significant growth in Digital Distribution business </li></ul><ul><li>Trials underway for authenticated long-form </li></ul><ul><li>Over 5MM fans across brands; sharing responsibility w/Corp Comm </li></ul>
  4. 4. OVERVIEW +12% -7% Net Revenue ($ in millions) CAGR `08-`10 = 2% AOIBDA ($ in millions) +48% +63% Net Revenue Drivers ($ in millions) AOIBDA Drivers ($ in millions) CAGR `08-`10 = 56% Other includes production & G&A expense cut-backs offset by increased behavioral targeting expenses
  5. 5. 2010 OBJECTIVES: FY 2010 FORECAST
  6. 6. 2010 PROGRAMMING HIGHLIGHTS
  7. 7. <ul><li>Content Verticals </li></ul><ul><ul><li>TLC Home, Family, Style, Weddings </li></ul></ul><ul><ul><li>Health relaunch </li></ul></ul>2010 PROGRAMMING HIGHLIGHTS <ul><li>Original Programming </li></ul><ul><ul><li>Conception Story with First Response </li></ul></ul><ul><ul><li>Gulf Oil Spill + Haiti earthquake coverage </li></ul></ul>
  8. 8. KEY PRODUCT INITIATIVES: 1H10 <ul><li>New show site templates </li></ul><ul><li>New TLC and Health content verticals </li></ul><ul><li>Discovery News enhancements </li></ul>
  9. 9. SITE PERFORMANCE 1H10 [1] Includes Domestic and INTL for US Nets; Domestic only for HSW [2] Q2 Average SOURCE: Omniture June: Record month in Video Impressions - 21.5M O&O (+73% v. LY) 1H 2010 Avg Monthly UVs Display Impressions[1] Video Impressions [1] Actual 40.6M 3.9B 106.8M Plan 39.4M 4.0B 89.5M % Variance to Plan 3.1% (1.2%) 19.3% LY 37.8M 4.0B 65.7M % Growth YoY 7.5% (0.7%) 62.5%
  10. 10. TRAFFIC AND INVENTORY FORECAST – 2010* *Ranked by Total Video IImpressions [1] Includes only O&O performance [2] Includes Discovery News [3] SCI, MIL, ID, DHLTH, PG [4] Includes domestic IMPs on HSW only SOURCE: Omniture Avg. Monthly UVs Total Display IMPs Total Video IMPs [1] MM Vs 2009 MM Vs 2009 MM Vs 2009 Discovery.com [2] 6.4 16.2% 970.8 (3.9%) 72.4 72.4% TLC.com 3.2 10.9% 530.2 (35.4%) 66.1 68.0% AnimalPlanet.com 2.0 14.9% 496.2 0.2% 62.9 106.5% Emerging Nets [3] 3.6 12.8% 845.7 (22.1%) 20.3 37.4% HowStuffWorks.com [4] 17.2 6.6% 1,464.4 2.2% 13.4 (10.8%) Petfinder 4.9 5.6% 3,343.0 1.9% 1.1 71.7%- TreeHugger 3.2 8.4% 351.1 23.2% -- -- Total 40.5 9.3% 7,639.6 (3.6%) 236.1 66.1%
  11. 11. VIDEO PERFORMANCE <ul><li>2010 Growth Drivers </li></ul><ul><li>New show site template </li></ul><ul><li>Google/SEO optimization </li></ul><ul><li>Social media/sharing </li></ul><ul><li>Improved video player design, performance & promotion </li></ul><ul><li>Smarter production investments </li></ul><ul><li>MySpace & MSN syndication deals </li></ul>
  12. 12. 1H 2010 ACHIEVEMENTS: AD SALES REVENUE <ul><li>1H 2010 Key Trends </li></ul><ul><li>38% Ad Sales Revenue growth vs. PY </li></ul><ul><li>75% Sold Impression growth vs. PY </li></ul><ul><li>Premium sell-through rate increased by 79% vs. PY </li></ul>
  13. 13. OUTPACING A RECOVERING MARKET <ul><li>US Online spending +10.8% v. 2009 </li></ul><ul><ul><li>Display market +8% </li></ul></ul><ul><li>Discovery Digital +60% in display revenue </li></ul><ul><li>Premium display STR +78% v. 1H09; Use of ad networks -27% v. 1H09 </li></ul><ul><li>Average CPMs down YOY as a result increased sell through and 2009 upfront bundling </li></ul><ul><li>Display CPMs are recovering; 4Q10 booked CPMs are 12% higher than 1Q10 booked CPMs </li></ul>
  14. 14. SELLING MORE THAN MEDIA <ul><li>Discovery Digital is now offering highly differentiated value propositions in the digital ad marketplace </li></ul><ul><ul><li>We’re not simply selling banners and buttons </li></ul></ul><ul><li>85% + of sold deals include customized services </li></ul><ul><li>Sales team is empowered with and regularly trained to sell pre-packaged solutions </li></ul><ul><ul><li>Packages optimal mix of media elements </li></ul></ul><ul><li>Established new roles focused on intense client stewardship and account management </li></ul><ul><ul><li>Driving client retention and renewal </li></ul></ul><ul><ul><li>We’re winning with scalable strategies that make use of our brands and digital capabilities and expertise - giving brands unique opportunities to have digital presence </li></ul></ul>
  15. 15. 2010 AD SALES TOP DEALS <ul><li>Increased Deal Sizes </li></ul><ul><ul><li>2010 average deal Size $158k gross, 105% YOY; 19% increase in number of advertisers spending $250k+ </li></ul></ul><ul><li>Attracting New Advertisers </li></ul><ul><ul><li>94 New Advertisers in 2010 </li></ul></ul><ul><ul><li>Top 10 New Advertisers generated $3.7M in revenue, 11% of booked revenue to date </li></ul></ul>
  16. 16. FY 2010 FORECAST: AD SALES REVENUE <ul><li>Forecast </li></ul><ul><li>Revenue forecasted to exceed budget by 9%, and by 2009 by 59% </li></ul><ul><li>Continued growth in impressions sold in line with 1H 2010 </li></ul><ul><li>Opportunity </li></ul><ul><li>Utilize all new ad inventory, display and video </li></ul><ul><li>Continue to differentiate our value props and offer brands access to customized services and opportunities </li></ul><ul><li>Continued reduction of 3 rd party remnant share of inventory </li></ul>
  17. 17. DIGITAL DISTRIBUTION DRAFT EST Mobile Video Mobile Other BBS Total Forecast (Jan-Dec) $7,608,849 $2,056,733 $291,617 $300,783 $9,995,532 % of Plan 205% 100% 114% 150% 161% Partners Apple X-Box Sony PS3 Amazon Netflix V-Cast Sprint Fox Mobile Quickplay MobiTV Flo TV Applications Ringtones YouTube MySpace MSN Fancast Drivers <ul><li>Apple pacing above ‘09 </li></ul><ul><li>Netflix renewal </li></ul><ul><li>Fox Mobile deal </li></ul><ul><li>Flo TV deal </li></ul><ul><li>Sub losses for V-Cast & Sprint </li></ul><ul><li>Ad supported applications </li></ul><ul><li>Paid applications </li></ul><ul><li>YouTube monetization enhancements </li></ul><ul><li>MSN Deal </li></ul>
  18. 18. 2011 AND BEYOND: HOW DO WE GROW? <ul><li>PATH TO NEAR-TERM PROFITABILITY </li></ul><ul><li>GROWING THE WEBSITES </li></ul><ul><li>GROWING PLATFORMS BEYOND THE WEB </li></ul>
  19. 19. 2011 PATH TO PROFITABILITY <ul><li>18% growth in national ad sales v. 7% market forecast </li></ul><ul><ul><li>display and video inventory </li></ul></ul><ul><ul><li>CPMs </li></ul></ul><ul><ul><li>investment in ad operations infrastructure </li></ul></ul><ul><li>3% increase in COR </li></ul><ul><li>3% decrease in SG&A </li></ul><ul><ul><li>plane expenses </li></ul></ul><ul><ul><li>* Challenge is to continue to reduce/shift costs on unmonetizable assets while investing in new platforms, higher CPM/sold-out areas of the sites </li></ul></ul>
  20. 20. LEVERS TO DRIVE WEBSITE GROWTH <ul><li>ON-AIR PROMOTION/RATINGS </li></ul><ul><li>CURIOSITY </li></ul><ul><li>SEO/CONTENT PRODUCTION </li></ul><ul><li>SOCIAL MEDIA </li></ul><ul><li>PAID MEDIA </li></ul><ul><li>ACQUISITION/PARTNERSHIPS – BIG IDEAS! </li></ul>
  21. 21. BEYOND THE WEBSITE <ul><li>LONG-FORM DISTRIBUTION/TV EVERYWHERE </li></ul><ul><ul><li>Could see scale in 2012 </li></ul></ul><ul><ul><li>Need to determine windowing strategy, sales strategy </li></ul></ul><ul><ul><li>C3 ratings in 2011, what about beyond C3? </li></ul></ul><ul><li>OVER THE TOP </li></ul><ul><ul><li>Netflix </li></ul></ul><ul><ul><li>Hulu Plus </li></ul></ul><ul><ul><li>Google TV </li></ul></ul><ul><li>EMERGING PLATFORMS (iPAD, MOBILE) </li></ul><ul><ul><li>Hub and Spoke Model </li></ul></ul><ul><ul><li>Paid v. Ad-Supported </li></ul></ul><ul><ul><li>In-house v. Licensed </li></ul></ul><ul><ul><li>Apps v. HTML5 </li></ul></ul><ul><ul><li>Android/Chrome </li></ul></ul><ul><ul><li>Building in-house expertise </li></ul></ul>
  22. 22. APPENDIX
  23. 23. ORGANIC GROWTH TIED TO RATINGS DSC UVs vs Ratings – Jan 2008 to Jun 2010 APL UVs vs Ratings – Jan 2008 to Jun 2010 TLC UVs vs Ratings – Jan 2008 to Jun 2010
  24. 24. 1H 2010 ACHIEVEMENTS: VS BUDGET AND PY
  25. 25. HEADCOUNT <ul><li>$7M yoy savings in direct headcount to the division </li></ul>

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