1) Programmatic trading is a real technology that has disrupted the advertising industry over the past seven years, allowing for more efficient automated trading between buyers and sellers of digital ads. 2) However, the technology has been over-hyped and made seem more complicated than necessary by venture capitalists seeking big returns and new feature categories. 3) In reality, the value comes from operational efficiencies that reduce costs for buyers and sellers, as well as benefits like buyers using their own data and technology and sellers having more control over prices and ad quality.

1. Automated Trading: Beyond
the Hype
MIKE NOLET"
CTO & CO-FOUNDER @ APPNEXUS
www.mikeonads.com

2. I Have Three Messages for You Today
1
Programmatic trading is real; Time
to get on board
2
Hype makes this seem much more
complicated than it is
3
Time for action is now
2

3. 1
A technology with a new market and
value network
Disruptive
" 2
Different set of consumers
Technology
3
Often the “least profitable”
Shifts
4
Ignored by incumbents
5
Eventually technology becomes
“better” than existing market

4. VOIP
PHONE

5. Classic Disruptive Technology
Superior cross-device audio, video
compared to the telephone. Skype is
PERFORMANCE
becoming the business standard.
Video
Basic chat and
conference calls
“Free” international calls
5

6. Ok, so what does that have to
do with online advertising?

7. Let’s take a trip back in time…

8. “Original” Ad Model – Direct Sales
A
Advertiser
Publisher
P
A
Advertiser
Publisher
P
CPM Based
Negotiated
Adservers as “delivery engines”
Focused on “premium” inventory
8

9. The Problem with Traditional Media Sales
Relative to the corresponding
1
Operationally difficult
media budgets, the high-
volume, low-dollar, high-
2
Doesn’t scale past the
top-100 publishers
complexity nature of Digital
3
Low sell through
programs makes it the most
labor intensive medium "
in the advertising Industry
SOURCE: Joe Burton, MCCANN WORLDGROUP, AMERICAN ASSOCIATION OF ADVERTISING
AGENCIES, INC., 2009
9

10. Enter the Ad Network
Ad Network
A
P
Aggregators of supply SELL
BUY
& demand who try to A
N
P
solve the “remnant NETWORK
monetization” gap.
A
P
ADVERTISERS
PUBLISHERS
10

11. The Ad Network Problem
1
No standardized way A
of trading results in N
daisy chains
2
Serious ad quality
P
N
N
problems
N
P
3
Deep channel conflict
issues
N
A
11

12. Right Media: “Exchange 1.0”
A
P
ADVERTISER 1
PUBLISHER 1
1
Adserver for ad
N
networks
NETWORK 1
2
Link networks on one E
platform to provide EXCHANGE
balanced liquidity
A
N
N
A
ADVERTISER 2
NETWORK 2
NETWORK 3
ADVERTISER 3
P
P
PUBLISHER 2
PUBLISHER 3
12

13. Classic Disruption in the Making…
A NEW " Trading between "
MARKET
networks
A NEW " Trading + eCPM"
TECHNOLOGY
in the ad server
“LEAST PROFITABLE” customers (Networks)
Focused on “LOW QUALITY” (remnant/unsold) inventory
13

14. Competition Fast Followed…
1
Other ventures quickly
follow Right Media to
build exchanges
2
All exchanges
acquired by major
media companies in
2007
14

15. Enter SSPs & DSPs
N
A
P
P
A
PUBLISHERS
N
ADVERTISERS
DSP
SSP
P
SSP
A
PUBLISHER
ADVERTISERS
“Ad Trading Specialists” (ATS)
15

16. The Challenges
The SSP Challenge
No full insight into the demand pool
Prices are estimated
High latency
All the same problems with ad networks: channel conflict, ad quality,
malware, etc.
The DSP Challenge
Operational overheads
Lack of centralized budget/frequency control
Lack of transparency/visibility
Inconsistent targeting
Difficult to buy behaviorally
16

17. Enter RTB

18. Enter RTB"
a.k.a. “Interop”

19. Welcome to today’s world of
programmatic trading…

20. Exchange 2.0
1
Operationally more efficient: less manpower
2
Enables buyers to leverage their own data
and effectively remarket and frequency cap
3
Gives sellers control over price, quality and
better transparency and visibility
Programmatic trading is starting to be better
than traditional hand sold: higher revenue for
the seller, higher ROI for the buyer

21. Classic Disruptive Technology
PERFORMANCE
SSPs & DSPs gain
market adoption + RTB
Yahoo adopts SSPs & DSPs starting to bring
more premium supply/
exchange trading; demand
Adx long tail
Right Media: Automating
trading between networks
21

22. If exchange trading is so good,
why does it seem so damn
complicated?

23. Let’s talk about "
Venture Capitalists…

24. 1
They are on a constant quest for
How do the “Home Run”
VCs 2
They look for three things:
§ A growing or “hot” industry
invest § Category Leaders
capital?
3
§ Technology Companies
Tend to not truly understand the
technology
24

25. Result: Continuous
investment in new
“feature” categories

26. Let’s Look at the Latest “Eye Candy”
26

27. Let’s Make This a Bit Simpler..
Features / If lucky a standalone “delivery system / tool”
Irrelevant
27

28. Look at This… It’s Not Complicated at All!
Data Providers
R.I.P.
R.I.P.
Buyer
Buyer
Seller
Buyer & Seller
Seller
Buyer
Technology
as a service
Technology
as a service
Buyer
Buyer
Data Data
Seller
Provider
Provider
28

29. If you do not
understand what
someone is saying,"
it’s probably not real.

30. Ok… so what should you be
doing?

31. 1
Educate yourself and be able to
cut through the hype.
Let’s start 2
Start doing something. Sell
simple…
3
something. Buy something
Learn by doing.
31

32. But that doesn’t feel big
enough does it?

33. There is Hope in Sight…
33

34. 1
We are riding a seven year wave of
disruptive innovation in automated
trading
We have a hyped up market map
Let’s
2
fueled by the VC industry
Recap
3
The real value prop is simple:
§ Operational efficiencies reduce costs
Quickly
§ Buyers can use their own data/tech
§ Sellers have more control for reduced
channel conflict and increased quality
4
Now is the time to do something!

35. Thank you!
MIKE NOLET"
CTO & CO-FOUNDER @ APPNEXUS
www.mikeonads.com