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LUMApartners
Digital Brief
001
The Good, the Bad & the Ugly
of Digital Advertising
BAD: Digital Supply / Demand Imbalance
SUPPLY
 DEMAND
>
2,500  companies
 200  companies
UGLY: Digital Supply / Demand Imbalance
SUPPLY
 DEMAND
2,500  companies
 200  companies
LUMApartners150  priori3zed
 50  priori3zed
>
90+% FAILURE RATE
What’s the Good News?
3 Things:
1.  Secular Organic Growth
2.  Changing Business Models
3.  Scaled Exits
GOOD: Significant Growth in Digital Market
Source: eMarketer
($  in  billions)
$0
$50
$100
$150
$200
$250
$300
2012
 2014
 2016
Digital0Ad0Spend
 Total0Ad0Spend
$100
$0
$50
$200
$250
$150
US  Ad  Spend
 US  Digital  Ad  Spend
CAGR
35%
CAGR
10%
GOOD: Exceptional Growth in Programmatic
Source: eMarketer
($  in  billions)
$0
$50
$100
$150
$200
$250
$300
2012
 2014
 2016
Digital0Ad0Spend
 Total0Ad0Spend
US  Digital  Ad  Spend
ProgrammaAc
CAGR
53%
CAGR
216%
$20
$0
$10
$40
$50
$30
Programmatic as a Business Model
Media
Low
40-50%
Gross Margins
I/O Based Spend
SaaS Software
High
70-80%
Gross Margin
Contractual Spend
5 – 10 x REVENUE MULTIPLE 0.5 – 2 x
BUSINESS MODEL
DRIVERS
GROWTH
OPERATING
LEVERAGE
PREDICTABILITY
Programmatic Changes the Media Business Model
Programmatic
High Growth
70-80%
Gross Margin
Predictable Spend
4 – 8 x
WARNING: LUMA Decks Usually Call for More M&A
AD  TECH
CRM  SOFTWARE
INTERNET  GIANTS
ECOMMERCE
TELCO
MARKETING
MEDIA
DATA
REALLY GOOD: A Growing Pool of Strategic Buyers
CONSUMER  INTERNET
TECH  SERVICES
Right Time
Decisioning of
Consumer Data
  
(Ad  Tech  and  
MarTech)
AD  TECH
CRM  SOFTWARE
INTERNET  GIANTS
ECOMMERCE
TELCO
MARKETING
MEDIA
DATA
CONSUMER  INTERNET
TECH  SERVICES
Right Time
Decisioning of
Consumer Data
  
(Ad  Tech  and  
MarTech)
NEW  
ENTRANTS
REALLY GOOD: A Growing Pool of Strategic Buyers
New York – Palo Alto
lumapartners.com

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LUMA Digital Brief 001 - The Good, the Bad & the Ugly of Digital Advertising

  • 1. LUMApartners Digital Brief 001 The Good, the Bad & the Ugly of Digital Advertising
  • 2. BAD: Digital Supply / Demand Imbalance SUPPLY DEMAND > 2,500  companies 200  companies
  • 3. UGLY: Digital Supply / Demand Imbalance SUPPLY DEMAND 2,500  companies 200  companies LUMApartners150  priori3zed 50  priori3zed > 90+% FAILURE RATE
  • 4. What’s the Good News? 3 Things: 1.  Secular Organic Growth 2.  Changing Business Models 3.  Scaled Exits
  • 5. GOOD: Significant Growth in Digital Market Source: eMarketer ($  in  billions) $0 $50 $100 $150 $200 $250 $300 2012 2014 2016 Digital0Ad0Spend Total0Ad0Spend $100 $0 $50 $200 $250 $150 US  Ad  Spend US  Digital  Ad  Spend CAGR 35% CAGR 10%
  • 6. GOOD: Exceptional Growth in Programmatic Source: eMarketer ($  in  billions) $0 $50 $100 $150 $200 $250 $300 2012 2014 2016 Digital0Ad0Spend Total0Ad0Spend US  Digital  Ad  Spend ProgrammaAc CAGR 53% CAGR 216% $20 $0 $10 $40 $50 $30
  • 7. Programmatic as a Business Model Media Low 40-50% Gross Margins I/O Based Spend SaaS Software High 70-80% Gross Margin Contractual Spend 5 – 10 x REVENUE MULTIPLE 0.5 – 2 x BUSINESS MODEL DRIVERS GROWTH OPERATING LEVERAGE PREDICTABILITY
  • 8. Programmatic Changes the Media Business Model Programmatic High Growth 70-80% Gross Margin Predictable Spend 4 – 8 x
  • 9. WARNING: LUMA Decks Usually Call for More M&A
  • 10. AD  TECH CRM  SOFTWARE INTERNET  GIANTS ECOMMERCE TELCO MARKETING MEDIA DATA REALLY GOOD: A Growing Pool of Strategic Buyers CONSUMER  INTERNET TECH  SERVICES Right Time Decisioning of Consumer Data   (Ad  Tech  and   MarTech)
  • 11. AD  TECH CRM  SOFTWARE INTERNET  GIANTS ECOMMERCE TELCO MARKETING MEDIA DATA CONSUMER  INTERNET TECH  SERVICES Right Time Decisioning of Consumer Data   (Ad  Tech  and   MarTech) NEW   ENTRANTS REALLY GOOD: A Growing Pool of Strategic Buyers
  • 12. New York – Palo Alto lumapartners.com