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Mad men to x men

The document provides an overview of the online display advertising industry and the landscape of players involved, including ad exchanges, demand side platforms, data providers, ad networks, and publishers. It discusses the opportunities in the growing online display market and how Gridley can help clients navigate this evolving landscape.

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Gridley & Company LLC Ad Exchanges, Targeting & Optimization “From Mad Men to X-Men” January 2010 CONFIDENTIAL
Table of Contents I. Industry Introduction and Overview II. The Landscape of Players III. The Opportunities IV. How Gridley Can Help January 2010 2
I. Industry Introduction and Overview January 2010 3
Introduction • Almost every slice of the advertising pie is undergoing major transformation • With new devices, channels, technologies, content, and formats, advertising has never been more complex • Ad exchanges, ad networks, optimizers, targeting platforms, new forms of data, and the explosion of online inventory has forced massive changes in the old ways of Madison Avenue • Today’s Don Draper needs to be part Wall Street trader, part techie, and part media maven – the new X-Men • The stakes are high and new technologies are the hot topic • The landscape has loads of interest with investment and M&A activity ready to take off • This Gridley Industry Overview is designed to help you navigate this new landscape January 2010 4
A Lot at Stake in Online Display Advertising • Improving economy + re-entry of financial and auto advertisers = double digit growth in 2010 • Display will represent more than 30% of total online spend next year, second only behind search • Online display will continue to capture shifting ad spend from large brand marketers U.S. Online Advertising Spending, by Format ($ in millions) '09 - '10 '10 - '13 Channel 2007 2008 2009 2010 Growth 2011 2012 2013 CAGR Search $8,810 $10,528 $11,370 $12,507 10.0% $14,008 $15,549 $17,104 11.0% Display Advertising 7,153 7,639 7,544 7,740 2.6% 8,103 8,479 8,843 4.5% Classifieds/Auctions 3,271 3,147 2,908 2,878 (1.0%) 2,936 2,979 3,023 1.7% Lead Generation/E-mail 1,972 2,134 2,153 2,226 3.4% 2,315 2,393 2,459 3.4% Total $21,206 $23,448 $23,975 $25,351 5.7% $27,362 $29,400 $31,429 7.4% % Mix Search 41.5% 44.9% 47.4% 49.3% 51.2% 52.9% 54.4% Display Advertising 33.7% 32.6% 31.5% 30.5% 29.6% 28.8% 28.1% Classifieds/Auctions 15.4% 13.4% 12.1% 11.4% 10.7% 10.1% 9.6% Lead Generation/E-mail 9.3% 9.1% 9.0% 8.8% 8.5% 8.1% 7.8% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Source: Interactive Advertising Bureau (IAB), PricewaterhouseCoopers (PwC), and Barclays Capital estimates. January 2010 5
But Online Display Faces Challenges • Way too many vendors representing inventory – Hundreds of ad networks in all shapes and sizes – Horizontal, vertical, display, performance, video, in-game, social apps, and mobile • Fragmented audiences – Traffic is dispersed across the entire “tail” • Lack of transparency in ad networks – Advertisers don’t know where and when their ads run – Publishers are not guaranteed “blind” inventory • No standard KPI’s – How do you measure success and attribution? Clicks? Engagements? • Little control over pricing – Advertisers want to maximize ROI = lower CPM + higher conversion – Publishers want to maximize yield = higher CPM + more premium inventory • Agencies / buyers are giving away a lot of margin to the ad networks – Ad networks are making 30% - 40% margins January 2010 6
Exchange Technologies are Taking the Lead • Real-time Exchanges offer transparency, market pricing, and liquidity • Demand Side Platforms are offering the holdcos and marketers a solution • Trading Desks at the agencies are becoming the experts at optimization • Data Providers and Exchanges offer online audience segmentation at a detailed level • Ad Creative Optimization allows dynamic ad serving of the right ad to the right audience at the right time • Social Targeting platforms enable marketers to target based on social interactions • Publishing Yield Optimizers aggregate inventory and maximize CPMs for publishers – looks a lot like the exchanges • Ad Networks are trying to hold on to their high margins by adding better targeting technologies, high value services, and / or going deep into a vertical January 2010 7
The New Players are Staking Out Positions • New ad targeting, optimization, and data companies are redefining the landscape Demand Side – Advertising $$ Supply Side - Inventory Ad Ad Direct Sales “Traders” “Traders” Force Agencies / Media Buyers Demand Demand Side Side Optimization Optimization Platforms Platforms The Ad The Ad Exchanges Exchanges Data Measurement Advertisers Data Data Publishers Providers & Providers & Exchanges Exchanges Display Ad Social Social Publishing Yield Publishing Yield Networks Targeting Targeting Optimizers Optimizers Rich Media Ad Creative Ad Creative Ad Platforms Optimizers Optimizers January 2010 8
The New Players are Staking Out Positions Demand Side – Advertising $$ Supply Side - Inventory Demand Side Optimization Ad Direct Sales Platforms Compete, comScore, Quantcast, Nielsen NetRatings Exchanges Force Agencies / Media Buyers Ad 24/7 “Traders” Adconion Adify Adroll Data Measurement Audience Science Bizo Brand.net Data Advertisers Publishers BrightRoll Providers & Burst Media Casale Exchanges Collective Media Connexus CPX Interactive Epic Advertising FOX Audience Network Google Ad Network Social Gorilla Nation InterCLICK Targeting Kontera Microsoft Media Network Platform-A Specific Media Tremor Media Eyeblaster Tribal Fusion Publishing Yield Turn Inc. EyeWonder Undertone Network Pointroll Ad Creative Optimizers ValueClick Unicast Optimizers Vibrant Media Yahoo Media Network VideoEgg Yume January 2010 9
Key Factors for Success • “Industrial-grade” technology platforms that deliver true real-time performance at scale  • Easy-to-use platform interfaces that minimize work flow disruptions  • Ability to provide transparency and “trustability” across  platform or service offerings • Strong “customer” services focus as new marketers and  suppliers enter market • Clear performance measurement and reports that don’t  require a Ph.D. to understand • Ability to draw actionable insights out of reports, activate  vast stores of data, and implement the “call-to-action” January 2010 10
Participants at 2010 Gridley Conference • Gridley has stayed in front of this emerging industry and continues to provide thought leadership PRESENTATIONS PANELISTS ATTENDEES January 2010 11
II. The Landscape of Players January 2010 12
The Ad Traders are at the Agencies • The ad holdcos are actively positioning themselves in the landscape – Evaluating all the players but have never been successful at buying technology companies • Ultimately will stay gate keepers of the media spend and utilize their “traders” and technology for execution and analysis Havas IPG MDC Partners Omnicom Group Publicis WPP Group Varick Media Omnicom Media VivaKi Nerve Media Innovation Trading Unit Adnetik Cadreon Management Group Digital Center Group / B3 N/A Head of Unit Nathan Woodman Quentin George Darren Herman Matt Spiegel Curt Hecht Brian Lesser Description Digital trading Custom audience Media traders using Partnering with Fox Digital media Optimizer of ad network and agency trading marketplace algorithms and data Audience Network optimization agency network spend to trade in real-time (FAN) for access to for premium audience targeting inventory tools Technology DataXu Multiple platforms Multiple platforms FAN's Audience Private platform Private platform Platform Insights, Audience (Audience on Planner and Real- Demand) Time Bidding ATOM Systems platforms (Razorfish) Status Not operating in U.S. Out of beta and Established in 2008 Announced October Test mode in 2008; Went live in middle yet serving clients 2009 live clients today of 2008 January 2010 13
The Demand Side Optimization Platforms • New breed of trading technology platforms that combine bid optimization, data integration, analytics, and supply relationships to optimize display ad buys – “Bloomberg terminals” for the media buyers • “Trading desks” provide the execution – Adnetik, Cadreon, Varick Media, Living Segments, VivaKi, and B3 • Attracting a lot of interest from investors and strategic buyers Capital Year Raised Company Founded Investors ($mm) www.adbuyer.com NA NA NA New York, NY www.appnexus.com 2007 First Round Capital, Khosla Ventures, Kodiak $10.5 New York, NY Venture Partners, Venrock www.dataxu.com 2007 Atlas Venture LLP, Flybridge Capital Partners 6.0 Cambridge, MA www.invitemedia.com 2007 First Round Capital NA Philadelphia, PA www.mediamath.com 2007 Safeguard Scientifics, Inc.; QED Investors LLC; 16.6 New York, NY European Founders Fund www.turn.com 2005 Focus Ventures, Norwest Venture Partners, 38.5 Redwood City, CA Shasta Ventures, Trident Capital www.xplusone.com 1999 ATV, Blue Chip Ventures, Hudson Ventures, Seed 30.8 New York, NY Partners, WS Capital January 2010 14
Data Providers & Exchanges • Data exchanges provide cookie data to segment high value audiences – Allows media buyers to target only the impressions they want • Incorporating data from multiple sources – offline and online • Speaking the language of database marketers – data management, audience segmentation, new marketing cohorts Capital Year Raised Company Founded Investors ($mm) www.almondnet.com 1998 Argoquest Inc. $1.0 New York, NY www.bizo.com 2008 Ascent Ventures, Venrock NA San Francisco, CA www.bluekai.com 2007 Battery Ventures, Redpoint Ventures 13.7 Bellevue, WA www.brilig.com NA NA NA New York, NY www.datalogix.com 2002 Advantage Capital Partners, General Catalyst 15.2 Westminster, CO Partners, Sequel Venture Partners www.exelate.com 2006 Carmel Ventures 4.0 Petach Tikvah, Israel www.lotame.com 2006 Battery Ventures, Betaworks, Emergence Capital 25.0 Elkridge, MD Partners, Hillcrest Capital Partners www.quantcast.com 2005 Polaris Venture Partners, Inc., Revolution 25.7 San Francisco, CA Ventures, The Founders Fund www.permuto.com 2008 Onset Ventures, Rembrandt Venture Partners 6.0 Palo Alto, CA www.targusinfo.com 2005 TA Associates, Inc. 60.0 Vienna, VA January 2010 15
Ad Creative Optimizers • Dynamic ad creative optimizes ads using the best creative assets when the ad is served – Ability to serve ads in different colors, images, messaging, and lay-out to different audiences in real-time and at scale • Integrates third party data to determine most effective ad to serve to right audience at right time Capital Year Raised Company Founded Investors ($mm) www.adisn.com 2007 Battery Ventures $2.2 Long Beach, CA www.adroitinteractive.com NA NA NA Boston, MA www.aggregateknowledge.com 2005 DAG Ventures, First Round Capital, Kleiner 25.2 San Mateo, CA Perkins, Red Rock Ventures, VantagePoint www.teracent.com 2006 KPG Ventures, New Enterprise Associates 7.8 San Mateo, CA Acquired by Google on 11/23/09 www.tumri.com 2004 Accel Partners, Shasta Ventures, Tenaya Capital, 26.5 Mountain View, CA Time Warner Investments January 2010 16
The Ad Exchanges • Ad exchanges are the NASDAQ or NYSE for online ad inventory • Provides transparent, dynamic pricing for advertisers • Provides liquidity for publishers • Big players already own this market • Other exchanges are getting in the game • Sell-side yield optimizers / inventory aggregators look a lot like the exchanges • Today exchanges are for high volume, non-premium inventory • In the future, exchanges will list premium inventory too January 2010 17
Publishing Yield Optimizers • New platform technologies aggregate publisher inventory and optimize yield on the ad networks and exchanges • Publishers sell impressions to the highest bidder • Publishers can consolidate ad network relationships into a single optimizer • Platforms operating in real-time bidding environment look like the exchanges Capital Year Raised Company Founded Investors ($mm) www.admeld.com 2007 Foundry Group, Spark Capital $15.0 New York, NY www.pubmatic.com 2006 Draper Fisher Jurvetson, Helion Venture Partners, 7.0 Palo Alto, CA Nexus India www.rubiconproject.com 2007 Clearstone Ventures, IDG Ventures, Mayfield 33.0 Los Angeles, CA Fund, Peacock Fund, Stanford, UC Berkeley January 2010 18
Social Targeting • Optimizing ads based on social marketing data – Identifying the influencers through social connections – Did you download a song? How big is your friends network? Did you comment on a picture? • Activating data based on social graph and engagement Capital Year Raised Company Founded Investors ($mm) www.33across.com 2007 First Round Capital, RoseTech Ventures, LLC NA New York, NY www.lotame.com 2006 Battery Ventures, Betaworks, Emergence Capital $25.0 Elkridge, MD Partners, Hillcrest Capital Partners www.media6degrees.com 2008 Contour Venture Partners, Coriolis Ventures, U.S. 11.8 New York, NY Venture Partners, Venrock www.seethroo.us 2007 NA NA Los Angeles, CA www.rapleaf.com 2005 Active Starts, Dace Ventures, Felicis Ventures, NA San Francisco, CA SoftTech VC, The Founders Fund January 2010 19
III. The Opportunities January 2010 20
Fewer Vendors, More Capabilities • Today, many companies offer pieces of the puzzle, but few offer the full suite – Marketers and publishers want fewer vendors, which will drive consolidation • Consolidators will seek to acquire stand-alone technologies or services to be the one-stop shop – Look for acquisitions of stand-alone platforms like the data exchanges & providers, ad creative optimizers, social targeting platforms, and publishing yield optimizers • Ad networks will begin to consolidate into a few power groups representing inventory and strong media relationships – The “Titans” Aren’t Going Anywhere: 24/7, FOX Audience Network, Google Ad Network, Microsoft Media Network, Platform A, and Yahoo Media Network – The Consolidators: Adconion, Collective Media, Connexus, Epic Advertising, Specific Media, ValueClick, and “Titans” – The Targets: Adroll, Audience Science, Bizo, Brand.net. BrightRoll, Gorilla Nation, InterCLICK, Kontera, Tremor Media, Turn, Vibrant Media, and Yume – The Question Marks: Burst Media, Casale, CPX Interactive, Tribal Fusion, Undertone Networks January 2010 21
Who Will Own What? • The Ad Holdcos – Specialized agencies with their own “trading desks” – Traders will trade on the exchanges through multiple primary optimization platforms – Will opportunistically acquire specialized technologies and services in online data, data analytics, market research, and ad creative technologies • The “Titans” – Google, Microsoft, AOL, and Yahoo will dominate the exchanges and networks – Will acquire across entire spectrum of landscape – Will compete for inventory listings by offering best execution and liquidity – Since all have multiple capabilities across online ad technologies, they will be interested in many areas including data providers & exchanges, secondary vertical exchanges, social targeting, yield optimization January 2010 22
Who Will Own What? • The Data Companies and Database Marketers – Will aggressively pursue all data-centric technology platforms across landscape – The data exchanges and platforms, demand side platforms, and social targeting companies will be their highest priority – Database marketers with multi-channel agency services will also look at ad creative optimizers and rich media ad serving • The Technology Players – Look for technology leaders like Adobe, Akamai, Cisco, IBM, and others to make “best- in-class” technology platform acquisitions across landscape – Some precedents have been set: Adobe / Omniture; Akamai / Acerno; Cisco / Tribe.net, Five Across, and Starent January 2010 23
Who Will Own What? • The Diversified Media Giants – Will continue to have a high level of interest across landscape – Already investing across entire spectrum • Meredith: Genex, New Media Strategies, Healia, The Hyperfactory • Gannett: Pointroll, 4INFO, Ripple6 • NBC Universal: 4INFO, Greystripe, EveryZing, Rubicon Project • Forbes.com: Investopedia, PublicPost • Cox Enterprises: Adify January 2010 24
Possible Strategic Buyers by Category Demand Side – Advertising $$ Supply Side - Inventory Demand Side Optimization Ad Ad Ad Platforms Exchanges Direct Sales “Traders” “Traders” Force Ad Holdcos Ad Holdcos Agencies / Media Buyers Data & Analytics Data & Analytics Database Database Marketing Marketing Diversified Media Diversified Media Internet Titans Internet Titans Technology Technology Internet Titans Internet Titans Technology Technology Data Measurement Ad Holdcos Ad Holdcos Advertisers Data & Analytics Data & Analytics Publishers Data Database Database Marketing Providers & Marketing Diversified Media Diversified Media Exchanges Internet Titans Internet Titans Technology Technology Ad Holdcos Ad Holdcos Data & Analytics Data & Analytics Display Ad Ad Holdcos Ad Holdcos Database Database Networks Social Marketing Marketing Diversified Media Diversified Media Diversified Media Internet Titans Internet Titans Targeting Diversified Media Technology Technology Internet Titans Internet Titans Technology Technology Ad Holdcos Ad Holdcos Publishing Yield Data & Analytics Data & Analytics Optimizers Rich Media Database Database Marketing Ad Creative Ad Platforms Marketing Diversified Media Diversified Media Optimizers Internet Titans Internet Titans January 2010 25
Opportunities by Category • Buy-side Optimization Platforms – Platforms will power the trading desks of the media trading units – Near-term high growth opportunity for arbs – Long-term high growth opportunity as more $$$ is deployed on platforms – Likely Interested Buyers: technology-centric agencies, data & analytics companies, database marketers, diversified media, internet titans, technology companies • Data Providers & Exchanges – Near-term high growth opportunity as enhanced data drives high CPM and arbs can leverage spread – Long-term high growth opportunity as audience segmentation becomes fundamental buying approach – Getting high level of interest from all sides – Interested Buyers: technology-centric agencies, data & analytics companies, database marketers, diversified media, internet titans, technology companies January 2010 26
Opportunities by Category • Social Targeting – Near-term high growth opportunities as marketers seek social marketing buys – Companies will either become data providers or agencies – Likely Interested Buyers: technology-centric agencies, data & analytics companies, database marketers, diversified media, internet titans, technology companies • Ad Creative Optimizers – New breed of ad servers that optimize ad based on variable creative assets – Long-term high growth opportunity as marketers adopt creative dynamic ad serving – Likely Interested Buyers: technology-centric agencies, data & analytics companies, database marketers, diversified media, internet titans • Ad Exchanges – Look for the big, established exchanges to make strategic acquisitions to drive scale – Near-term consolidation of niche/vertical exchanges – Likely Interested Buyers: internet titans, technology companies January 2010 27
Opportunities by Category • Publishing Yield Optimizers – Aggregating publishing inventory and providing yield maximization from bidders – Need to pick the right horse – Near-term high growth opportunity for first-movers who aggregate high volume inventory – Likely Interested Buyers: technology-centric agencies, diversified media, internet titans, and technology companies January 2010 28
IV. How Gridley Can Help January 2010 29
About Gridley • Leading boutique Investment Bank specializing in Information Services – Comprehensive perspective on Advertising, Marketing , Financial Technology, Outsourcing and Information Services trends and transactions • Strong industry reputation on assignments led by senior bankers – Sellside = Excellent strategic positioning and valuation – Buyside = Deep knowledge and access to emerging companies and industry trends • Trusted advisor and strategic matchmaker – Thoughtful M&A ideas – not just the logical public company combinations – Deliver value to buyers and sellers alike • Broad industry network developed over 20+ years – Industry leaders, hot emerging growth companies, and senior investors – Senior executives on Gridley Advisory Board • Well-known thought leader – Host of leading Annual Information Services Conference and participant in industry events – Sought after commentator and resource for the media – Highly regarded quarterly newsletter – 2,500+ distribution January 2010 30
Gridley Can Help You… • Understand the dynamics of this industry in transition • Identify the companies on our market map that best fit your interest areas – we’ve met with these companies and know their CEOs – What their strengths, weaknesses, and key market positioning are – Who their management teams and investors are • Navigate the Ad Holding Company, Database Marketing, and Data Provider worlds • Identify the financial investors and strategic investors most interested in this emerging industry • Execute your financial objectives – Sellside Advisory Services – Buyside Advisory Services – Private Placement Agent Services January 2010 31
Gridley Can Help You… • Understand the dynamics of this industry in transition • Identify the companies on our market map that best fit your interest areas – we’ve met with these companies and know their CEOs – What their strengths, weaknesses, and key market positioning are – Who their management teams and investors are • Navigate the Ad Holding Company, Database Marketing, and Data Provider worlds • Identify the financial investors and strategic investors most interested in this emerging industry • Execute your financial objectives – Sellside Advisory Services – Buyside Advisory Services – Private Placement Agent Services January 2010 32
Gridley Has the Expertise • Decades of experience executing transactions at the nexus of database marketing and internet services Database Marketing Internet Services Undisclosed Undisclosed $20,000,000 Undisclosed Undisclosed Undisclosed Sold to Sold to Dun & Acquired Acquired Investment by Acquired Parthenon Capital LLC Bradstreet Corp. Pepperjam Silverlign Group TZP Group LLC Ward Media, Inc. Advisor Advisor Advisor Advisor Placement Agent Advisor August 2006 April 2001 September 2009 April 2009 December 2008 March 2008 $112,400,000 $157,000,000 Undisclosed Undisclosed $113,189,337 $20,000,000 Ad-serving Business of Email Business of The M/A/R/C Strategic Group Acquired Sold to Sold to Secondary Offering Investment by Sold to Omnicom e-Dialog, Inc. One to One Aegis plc Young & Rubicam Group Interactive, Inc. Advisor Advisor Co-manager Advisor Advisor Advisor March 2000 November 1999 January 2008 July 2007 June 2007 May 2006 $101,000,000 $175,000,000 $138,000,000 $58,000,000 $50,000,000 $31,000,000 Sold CMG Direct Corp. Acquired Acquired Initial Public Sold to Young & Modem Media, Inc. Performics, Inc. Offering Preferred Stock to Marketing Services Group Inc. Rubicam Inc. Advisor Advisor Co-manager Sole Agent Advisor Advisor May 2004 September 1999 September 1999 June 1999 May 1999 October 2004 January 2010 33
Linda Gridley Stan Sandberg President & CEO Managing Director 212.400.9710 tel 212.400.9709 linda.gridley@gridleyco.com stan.sandberg@gridleyco.com Gridley & Company LLC 10 East 53rd Street, 24th Floor New York, NY 10022 212.400.9720 tel 212.400.9717 fax www.gridleyco.com January 2010 34

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Mad men to x men

  • 1.
    Gridley & CompanyLLC Ad Exchanges, Targeting & Optimization “From Mad Men to X-Men” January 2010 CONFIDENTIAL
  • 2.
    Table of Contents I. Industry Introduction and Overview II. The Landscape of Players III. The Opportunities IV. How Gridley Can Help January 2010 2
  • 3.
    I. Industry Introductionand Overview January 2010 3
  • 4.
    Introduction • Almost every slice of the advertising pie is undergoing major transformation • With new devices, channels, technologies, content, and formats, advertising has never been more complex • Ad exchanges, ad networks, optimizers, targeting platforms, new forms of data, and the explosion of online inventory has forced massive changes in the old ways of Madison Avenue • Today’s Don Draper needs to be part Wall Street trader, part techie, and part media maven – the new X-Men • The stakes are high and new technologies are the hot topic • The landscape has loads of interest with investment and M&A activity ready to take off • This Gridley Industry Overview is designed to help you navigate this new landscape January 2010 4
  • 5.
    A Lot atStake in Online Display Advertising • Improving economy + re-entry of financial and auto advertisers = double digit growth in 2010 • Display will represent more than 30% of total online spend next year, second only behind search • Online display will continue to capture shifting ad spend from large brand marketers U.S. Online Advertising Spending, by Format ($ in millions) '09 - '10 '10 - '13 Channel 2007 2008 2009 2010 Growth 2011 2012 2013 CAGR Search $8,810 $10,528 $11,370 $12,507 10.0% $14,008 $15,549 $17,104 11.0% Display Advertising 7,153 7,639 7,544 7,740 2.6% 8,103 8,479 8,843 4.5% Classifieds/Auctions 3,271 3,147 2,908 2,878 (1.0%) 2,936 2,979 3,023 1.7% Lead Generation/E-mail 1,972 2,134 2,153 2,226 3.4% 2,315 2,393 2,459 3.4% Total $21,206 $23,448 $23,975 $25,351 5.7% $27,362 $29,400 $31,429 7.4% % Mix Search 41.5% 44.9% 47.4% 49.3% 51.2% 52.9% 54.4% Display Advertising 33.7% 32.6% 31.5% 30.5% 29.6% 28.8% 28.1% Classifieds/Auctions 15.4% 13.4% 12.1% 11.4% 10.7% 10.1% 9.6% Lead Generation/E-mail 9.3% 9.1% 9.0% 8.8% 8.5% 8.1% 7.8% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Source: Interactive Advertising Bureau (IAB), PricewaterhouseCoopers (PwC), and Barclays Capital estimates. January 2010 5
  • 6.
    But Online DisplayFaces Challenges • Way too many vendors representing inventory – Hundreds of ad networks in all shapes and sizes – Horizontal, vertical, display, performance, video, in-game, social apps, and mobile • Fragmented audiences – Traffic is dispersed across the entire “tail” • Lack of transparency in ad networks – Advertisers don’t know where and when their ads run – Publishers are not guaranteed “blind” inventory • No standard KPI’s – How do you measure success and attribution? Clicks? Engagements? • Little control over pricing – Advertisers want to maximize ROI = lower CPM + higher conversion – Publishers want to maximize yield = higher CPM + more premium inventory • Agencies / buyers are giving away a lot of margin to the ad networks – Ad networks are making 30% - 40% margins January 2010 6
  • 7.
    Exchange Technologies areTaking the Lead • Real-time Exchanges offer transparency, market pricing, and liquidity • Demand Side Platforms are offering the holdcos and marketers a solution • Trading Desks at the agencies are becoming the experts at optimization • Data Providers and Exchanges offer online audience segmentation at a detailed level • Ad Creative Optimization allows dynamic ad serving of the right ad to the right audience at the right time • Social Targeting platforms enable marketers to target based on social interactions • Publishing Yield Optimizers aggregate inventory and maximize CPMs for publishers – looks a lot like the exchanges • Ad Networks are trying to hold on to their high margins by adding better targeting technologies, high value services, and / or going deep into a vertical January 2010 7
  • 8.
    The New Playersare Staking Out Positions • New ad targeting, optimization, and data companies are redefining the landscape Demand Side – Advertising $$ Supply Side - Inventory Ad Ad Direct Sales “Traders” “Traders” Force Agencies / Media Buyers Demand Demand Side Side Optimization Optimization Platforms Platforms The Ad The Ad Exchanges Exchanges Data Measurement Advertisers Data Data Publishers Providers & Providers & Exchanges Exchanges Display Ad Social Social Publishing Yield Publishing Yield Networks Targeting Targeting Optimizers Optimizers Rich Media Ad Creative Ad Creative Ad Platforms Optimizers Optimizers January 2010 8
  • 9.
    The New Playersare Staking Out Positions Demand Side – Advertising $$ Supply Side - Inventory Demand Side Optimization Ad Direct Sales Platforms Compete, comScore, Quantcast, Nielsen NetRatings Exchanges Force Agencies / Media Buyers Ad 24/7 “Traders” Adconion Adify Adroll Data Measurement Audience Science Bizo Brand.net Data Advertisers Publishers BrightRoll Providers & Burst Media Casale Exchanges Collective Media Connexus CPX Interactive Epic Advertising FOX Audience Network Google Ad Network Social Gorilla Nation InterCLICK Targeting Kontera Microsoft Media Network Platform-A Specific Media Tremor Media Eyeblaster Tribal Fusion Publishing Yield Turn Inc. EyeWonder Undertone Network Pointroll Ad Creative Optimizers ValueClick Unicast Optimizers Vibrant Media Yahoo Media Network VideoEgg Yume January 2010 9
  • 10.
    Key Factors forSuccess • “Industrial-grade” technology platforms that deliver true real-time performance at scale  • Easy-to-use platform interfaces that minimize work flow disruptions  • Ability to provide transparency and “trustability” across  platform or service offerings • Strong “customer” services focus as new marketers and  suppliers enter market • Clear performance measurement and reports that don’t  require a Ph.D. to understand • Ability to draw actionable insights out of reports, activate  vast stores of data, and implement the “call-to-action” January 2010 10
  • 11.
    Participants at 2010Gridley Conference • Gridley has stayed in front of this emerging industry and continues to provide thought leadership PRESENTATIONS PANELISTS ATTENDEES January 2010 11
  • 12.
    II. The Landscapeof Players January 2010 12
  • 13.
    The Ad Tradersare at the Agencies • The ad holdcos are actively positioning themselves in the landscape – Evaluating all the players but have never been successful at buying technology companies • Ultimately will stay gate keepers of the media spend and utilize their “traders” and technology for execution and analysis Havas IPG MDC Partners Omnicom Group Publicis WPP Group Varick Media Omnicom Media VivaKi Nerve Media Innovation Trading Unit Adnetik Cadreon Management Group Digital Center Group / B3 N/A Head of Unit Nathan Woodman Quentin George Darren Herman Matt Spiegel Curt Hecht Brian Lesser Description Digital trading Custom audience Media traders using Partnering with Fox Digital media Optimizer of ad network and agency trading marketplace algorithms and data Audience Network optimization agency network spend to trade in real-time (FAN) for access to for premium audience targeting inventory tools Technology DataXu Multiple platforms Multiple platforms FAN's Audience Private platform Private platform Platform Insights, Audience (Audience on Planner and Real- Demand) Time Bidding ATOM Systems platforms (Razorfish) Status Not operating in U.S. Out of beta and Established in 2008 Announced October Test mode in 2008; Went live in middle yet serving clients 2009 live clients today of 2008 January 2010 13
  • 14.
    The Demand SideOptimization Platforms • New breed of trading technology platforms that combine bid optimization, data integration, analytics, and supply relationships to optimize display ad buys – “Bloomberg terminals” for the media buyers • “Trading desks” provide the execution – Adnetik, Cadreon, Varick Media, Living Segments, VivaKi, and B3 • Attracting a lot of interest from investors and strategic buyers Capital Year Raised Company Founded Investors ($mm) www.adbuyer.com NA NA NA New York, NY www.appnexus.com 2007 First Round Capital, Khosla Ventures, Kodiak $10.5 New York, NY Venture Partners, Venrock www.dataxu.com 2007 Atlas Venture LLP, Flybridge Capital Partners 6.0 Cambridge, MA www.invitemedia.com 2007 First Round Capital NA Philadelphia, PA www.mediamath.com 2007 Safeguard Scientifics, Inc.; QED Investors LLC; 16.6 New York, NY European Founders Fund www.turn.com 2005 Focus Ventures, Norwest Venture Partners, 38.5 Redwood City, CA Shasta Ventures, Trident Capital www.xplusone.com 1999 ATV, Blue Chip Ventures, Hudson Ventures, Seed 30.8 New York, NY Partners, WS Capital January 2010 14
  • 15.
    Data Providers &Exchanges • Data exchanges provide cookie data to segment high value audiences – Allows media buyers to target only the impressions they want • Incorporating data from multiple sources – offline and online • Speaking the language of database marketers – data management, audience segmentation, new marketing cohorts Capital Year Raised Company Founded Investors ($mm) www.almondnet.com 1998 Argoquest Inc. $1.0 New York, NY www.bizo.com 2008 Ascent Ventures, Venrock NA San Francisco, CA www.bluekai.com 2007 Battery Ventures, Redpoint Ventures 13.7 Bellevue, WA www.brilig.com NA NA NA New York, NY www.datalogix.com 2002 Advantage Capital Partners, General Catalyst 15.2 Westminster, CO Partners, Sequel Venture Partners www.exelate.com 2006 Carmel Ventures 4.0 Petach Tikvah, Israel www.lotame.com 2006 Battery Ventures, Betaworks, Emergence Capital 25.0 Elkridge, MD Partners, Hillcrest Capital Partners www.quantcast.com 2005 Polaris Venture Partners, Inc., Revolution 25.7 San Francisco, CA Ventures, The Founders Fund www.permuto.com 2008 Onset Ventures, Rembrandt Venture Partners 6.0 Palo Alto, CA www.targusinfo.com 2005 TA Associates, Inc. 60.0 Vienna, VA January 2010 15
  • 16.
    Ad Creative Optimizers • Dynamic ad creative optimizes ads using the best creative assets when the ad is served – Ability to serve ads in different colors, images, messaging, and lay-out to different audiences in real-time and at scale • Integrates third party data to determine most effective ad to serve to right audience at right time Capital Year Raised Company Founded Investors ($mm) www.adisn.com 2007 Battery Ventures $2.2 Long Beach, CA www.adroitinteractive.com NA NA NA Boston, MA www.aggregateknowledge.com 2005 DAG Ventures, First Round Capital, Kleiner 25.2 San Mateo, CA Perkins, Red Rock Ventures, VantagePoint www.teracent.com 2006 KPG Ventures, New Enterprise Associates 7.8 San Mateo, CA Acquired by Google on 11/23/09 www.tumri.com 2004 Accel Partners, Shasta Ventures, Tenaya Capital, 26.5 Mountain View, CA Time Warner Investments January 2010 16
  • 17.
    The Ad Exchanges • Ad exchanges are the NASDAQ or NYSE for online ad inventory • Provides transparent, dynamic pricing for advertisers • Provides liquidity for publishers • Big players already own this market • Other exchanges are getting in the game • Sell-side yield optimizers / inventory aggregators look a lot like the exchanges • Today exchanges are for high volume, non-premium inventory • In the future, exchanges will list premium inventory too January 2010 17
  • 18.
    Publishing Yield Optimizers • New platform technologies aggregate publisher inventory and optimize yield on the ad networks and exchanges • Publishers sell impressions to the highest bidder • Publishers can consolidate ad network relationships into a single optimizer • Platforms operating in real-time bidding environment look like the exchanges Capital Year Raised Company Founded Investors ($mm) www.admeld.com 2007 Foundry Group, Spark Capital $15.0 New York, NY www.pubmatic.com 2006 Draper Fisher Jurvetson, Helion Venture Partners, 7.0 Palo Alto, CA Nexus India www.rubiconproject.com 2007 Clearstone Ventures, IDG Ventures, Mayfield 33.0 Los Angeles, CA Fund, Peacock Fund, Stanford, UC Berkeley January 2010 18
  • 19.
    Social Targeting •Optimizing ads based on social marketing data – Identifying the influencers through social connections – Did you download a song? How big is your friends network? Did you comment on a picture? • Activating data based on social graph and engagement Capital Year Raised Company Founded Investors ($mm) www.33across.com 2007 First Round Capital, RoseTech Ventures, LLC NA New York, NY www.lotame.com 2006 Battery Ventures, Betaworks, Emergence Capital $25.0 Elkridge, MD Partners, Hillcrest Capital Partners www.media6degrees.com 2008 Contour Venture Partners, Coriolis Ventures, U.S. 11.8 New York, NY Venture Partners, Venrock www.seethroo.us 2007 NA NA Los Angeles, CA www.rapleaf.com 2005 Active Starts, Dace Ventures, Felicis Ventures, NA San Francisco, CA SoftTech VC, The Founders Fund January 2010 19
  • 20.
  • 21.
    Fewer Vendors, MoreCapabilities • Today, many companies offer pieces of the puzzle, but few offer the full suite – Marketers and publishers want fewer vendors, which will drive consolidation • Consolidators will seek to acquire stand-alone technologies or services to be the one-stop shop – Look for acquisitions of stand-alone platforms like the data exchanges & providers, ad creative optimizers, social targeting platforms, and publishing yield optimizers • Ad networks will begin to consolidate into a few power groups representing inventory and strong media relationships – The “Titans” Aren’t Going Anywhere: 24/7, FOX Audience Network, Google Ad Network, Microsoft Media Network, Platform A, and Yahoo Media Network – The Consolidators: Adconion, Collective Media, Connexus, Epic Advertising, Specific Media, ValueClick, and “Titans” – The Targets: Adroll, Audience Science, Bizo, Brand.net. BrightRoll, Gorilla Nation, InterCLICK, Kontera, Tremor Media, Turn, Vibrant Media, and Yume – The Question Marks: Burst Media, Casale, CPX Interactive, Tribal Fusion, Undertone Networks January 2010 21
  • 22.
    Who Will OwnWhat? • The Ad Holdcos – Specialized agencies with their own “trading desks” – Traders will trade on the exchanges through multiple primary optimization platforms – Will opportunistically acquire specialized technologies and services in online data, data analytics, market research, and ad creative technologies • The “Titans” – Google, Microsoft, AOL, and Yahoo will dominate the exchanges and networks – Will acquire across entire spectrum of landscape – Will compete for inventory listings by offering best execution and liquidity – Since all have multiple capabilities across online ad technologies, they will be interested in many areas including data providers & exchanges, secondary vertical exchanges, social targeting, yield optimization January 2010 22
  • 23.
    Who Will OwnWhat? • The Data Companies and Database Marketers – Will aggressively pursue all data-centric technology platforms across landscape – The data exchanges and platforms, demand side platforms, and social targeting companies will be their highest priority – Database marketers with multi-channel agency services will also look at ad creative optimizers and rich media ad serving • The Technology Players – Look for technology leaders like Adobe, Akamai, Cisco, IBM, and others to make “best- in-class” technology platform acquisitions across landscape – Some precedents have been set: Adobe / Omniture; Akamai / Acerno; Cisco / Tribe.net, Five Across, and Starent January 2010 23
  • 24.
    Who Will OwnWhat? • The Diversified Media Giants – Will continue to have a high level of interest across landscape – Already investing across entire spectrum • Meredith: Genex, New Media Strategies, Healia, The Hyperfactory • Gannett: Pointroll, 4INFO, Ripple6 • NBC Universal: 4INFO, Greystripe, EveryZing, Rubicon Project • Forbes.com: Investopedia, PublicPost • Cox Enterprises: Adify January 2010 24
  • 25.
    Possible Strategic Buyersby Category Demand Side – Advertising $$ Supply Side - Inventory Demand Side Optimization Ad Ad Ad Platforms Exchanges Direct Sales “Traders” “Traders” Force Ad Holdcos Ad Holdcos Agencies / Media Buyers Data & Analytics Data & Analytics Database Database Marketing Marketing Diversified Media Diversified Media Internet Titans Internet Titans Technology Technology Internet Titans Internet Titans Technology Technology Data Measurement Ad Holdcos Ad Holdcos Advertisers Data & Analytics Data & Analytics Publishers Data Database Database Marketing Providers & Marketing Diversified Media Diversified Media Exchanges Internet Titans Internet Titans Technology Technology Ad Holdcos Ad Holdcos Data & Analytics Data & Analytics Display Ad Ad Holdcos Ad Holdcos Database Database Networks Social Marketing Marketing Diversified Media Diversified Media Diversified Media Internet Titans Internet Titans Targeting Diversified Media Technology Technology Internet Titans Internet Titans Technology Technology Ad Holdcos Ad Holdcos Publishing Yield Data & Analytics Data & Analytics Optimizers Rich Media Database Database Marketing Ad Creative Ad Platforms Marketing Diversified Media Diversified Media Optimizers Internet Titans Internet Titans January 2010 25
  • 26.
    Opportunities by Category • Buy-side Optimization Platforms – Platforms will power the trading desks of the media trading units – Near-term high growth opportunity for arbs – Long-term high growth opportunity as more $$$ is deployed on platforms – Likely Interested Buyers: technology-centric agencies, data & analytics companies, database marketers, diversified media, internet titans, technology companies • Data Providers & Exchanges – Near-term high growth opportunity as enhanced data drives high CPM and arbs can leverage spread – Long-term high growth opportunity as audience segmentation becomes fundamental buying approach – Getting high level of interest from all sides – Interested Buyers: technology-centric agencies, data & analytics companies, database marketers, diversified media, internet titans, technology companies January 2010 26
  • 27.
    Opportunities by Category • Social Targeting – Near-term high growth opportunities as marketers seek social marketing buys – Companies will either become data providers or agencies – Likely Interested Buyers: technology-centric agencies, data & analytics companies, database marketers, diversified media, internet titans, technology companies • Ad Creative Optimizers – New breed of ad servers that optimize ad based on variable creative assets – Long-term high growth opportunity as marketers adopt creative dynamic ad serving – Likely Interested Buyers: technology-centric agencies, data & analytics companies, database marketers, diversified media, internet titans • Ad Exchanges – Look for the big, established exchanges to make strategic acquisitions to drive scale – Near-term consolidation of niche/vertical exchanges – Likely Interested Buyers: internet titans, technology companies January 2010 27
  • 28.
    Opportunities by Category • Publishing Yield Optimizers – Aggregating publishing inventory and providing yield maximization from bidders – Need to pick the right horse – Near-term high growth opportunity for first-movers who aggregate high volume inventory – Likely Interested Buyers: technology-centric agencies, diversified media, internet titans, and technology companies January 2010 28
  • 29.
    IV. How GridleyCan Help January 2010 29
  • 30.
    About Gridley • Leading boutique Investment Bank specializing in Information Services – Comprehensive perspective on Advertising, Marketing , Financial Technology, Outsourcing and Information Services trends and transactions • Strong industry reputation on assignments led by senior bankers – Sellside = Excellent strategic positioning and valuation – Buyside = Deep knowledge and access to emerging companies and industry trends • Trusted advisor and strategic matchmaker – Thoughtful M&A ideas – not just the logical public company combinations – Deliver value to buyers and sellers alike • Broad industry network developed over 20+ years – Industry leaders, hot emerging growth companies, and senior investors – Senior executives on Gridley Advisory Board • Well-known thought leader – Host of leading Annual Information Services Conference and participant in industry events – Sought after commentator and resource for the media – Highly regarded quarterly newsletter – 2,500+ distribution January 2010 30
  • 31.
    Gridley Can HelpYou… • Understand the dynamics of this industry in transition • Identify the companies on our market map that best fit your interest areas – we’ve met with these companies and know their CEOs – What their strengths, weaknesses, and key market positioning are – Who their management teams and investors are • Navigate the Ad Holding Company, Database Marketing, and Data Provider worlds • Identify the financial investors and strategic investors most interested in this emerging industry • Execute your financial objectives – Sellside Advisory Services – Buyside Advisory Services – Private Placement Agent Services January 2010 31
  • 32.
    Gridley Can HelpYou… • Understand the dynamics of this industry in transition • Identify the companies on our market map that best fit your interest areas – we’ve met with these companies and know their CEOs – What their strengths, weaknesses, and key market positioning are – Who their management teams and investors are • Navigate the Ad Holding Company, Database Marketing, and Data Provider worlds • Identify the financial investors and strategic investors most interested in this emerging industry • Execute your financial objectives – Sellside Advisory Services – Buyside Advisory Services – Private Placement Agent Services January 2010 32
  • 33.
    Gridley Has theExpertise • Decades of experience executing transactions at the nexus of database marketing and internet services Database Marketing Internet Services Undisclosed Undisclosed $20,000,000 Undisclosed Undisclosed Undisclosed Sold to Sold to Dun & Acquired Acquired Investment by Acquired Parthenon Capital LLC Bradstreet Corp. Pepperjam Silverlign Group TZP Group LLC Ward Media, Inc. Advisor Advisor Advisor Advisor Placement Agent Advisor August 2006 April 2001 September 2009 April 2009 December 2008 March 2008 $112,400,000 $157,000,000 Undisclosed Undisclosed $113,189,337 $20,000,000 Ad-serving Business of Email Business of The M/A/R/C Strategic Group Acquired Sold to Sold to Secondary Offering Investment by Sold to Omnicom e-Dialog, Inc. One to One Aegis plc Young & Rubicam Group Interactive, Inc. Advisor Advisor Co-manager Advisor Advisor Advisor March 2000 November 1999 January 2008 July 2007 June 2007 May 2006 $101,000,000 $175,000,000 $138,000,000 $58,000,000 $50,000,000 $31,000,000 Sold CMG Direct Corp. Acquired Acquired Initial Public Sold to Young & Modem Media, Inc. Performics, Inc. Offering Preferred Stock to Marketing Services Group Inc. Rubicam Inc. Advisor Advisor Co-manager Sole Agent Advisor Advisor May 2004 September 1999 September 1999 June 1999 May 1999 October 2004 January 2010 33
  • 34.
    Linda Gridley Stan Sandberg President & CEO Managing Director 212.400.9710 tel 212.400.9709 linda.gridley@gridleyco.com stan.sandberg@gridleyco.com Gridley & Company LLC 10 East 53rd Street, 24th Floor New York, NY 10022 212.400.9720 tel 212.400.9717 fax www.gridleyco.com January 2010 34