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Thomvest Native Advertising Overview

In this report we provide an overview of the native advertising ecosystem, with a specific focus on native advertising delivered programmatically. We touch on the native advertising market size, key vendors in the space, recent updates from incumbent advertising companies like Facebook, Google, Yahoo & Twitter, and key challenges and opportunities within the native ads market.

Thomvest Native Advertising Overview

  1. 1. Native Advertising Overview Q2 2016
  2. 2. Three key takeaways from this report Native is not ‘display 2.0’ — it’s a novel format with unique advantages and challenges - Native ad units conform to a site’s look and feel, often yielding better user engagement; in a recent Sharethrough/IPG study, consumers viewed native ads 52% more frequently than banner ads - However, the creative process, pricing model, success metrics, and user experience with native advertising programs challenge traditional display advertising execution patterns - According to IHS, native will account for 63% of all mobile advertising spend by 2020 - Facebook has reported that 83% of impressions on its mobile-only Audience Network are in the native format & that native ads perform 6x better than traditional banner ads - According to Business Insider, advertisers will spend $5.7B on programmatic native by 2018 — but large buying platforms have been slow to integrate native into their offerings - We expect the omnichannel demand-side platforms to accelerate integrations with native vendors in the back half of 2016 Native works best in mobile environments, where banner CTRs are near zero The rise of ‘programmatic native’ is being limited by sluggish adoption on the buy side
  3. 3. Agenda Native advertising overview & market size The rise of programmatic native Key native advertising vendors Appendix
  4. 4. What is native advertising? 4 Native advertising is a form of paid media where the ad experience follows the natural form & function of the user experience in which it is placed. Source: Sharethrough
  5. 5. Advertisers have reported better performance with native ad formats relative to display 5 - Engagement - - - Brand Lift Consumption Purchase Intent ROI for app installs & conversions 2x Native ad units conform to the design and feel of the sites on which they are shown, preserving the user experience while producing click-through rates similar to that of editorial content. Brand lift is an increase in interaction with a company as a result of an advertising campaign, and is used to pinpoint positive shifts in customer awareness and brand perception. Increase in depth of visit & 
 time spent 3x Marketers writing native ad copy need to tell stories in the same way that an article would. The only difference is that in this case, they’re telling the story of their brand. Source: StackAdapt, IPG & Sharethrough 3.2s Time spent viewing native ad Lift in purchase intent 18% Increase in brand affinity vs. display advertising 9% By providing complementary content to an audience on a relevant site, and providing context for the purchase, the chances of the ad being more successful are higher.
  6. 6. Native ad formats shine on mobile devices, where traditional display advertising is ineffective 6 Source: Sharethrough The rise of native advertising can be largely attributed to the dramatic shift in consumer attention away from desktop PCs to mobile devices & content feeds 1 2 3 Listening
 to Radio Watching
 Television 2.9 2.3 1.61.5 0.4 Daily Consumer Media Consumption, US HoursSpentperDay Newspapers/
 Magazines Online via 
 Desktop Using Mobile
 Device We spend nearly 3 hours per day on our mobile devices - Facebook reported that native inventory on its Audience Network fetches 6x higher CPMs compared to banner ads - Native ad units can adapt to the many novel user interfaces introduced on mobile devices, improving overall ad performance Mobile Native Ads Outperform Traditional Banners
  7. 7. As a result, native is expected to represent nearly two-thirds of mobile ad spend by 2020 7 25% 50% 75% 100% 2012 2013 2014 2015 2016 2017 2018 2019 2020 37%39%40%43%47%48% 54% 68% 86% 63%62%60%57%53%52% 46% 32% 14% Native Mobile Ad Spend Non-Native Mobile Ad Spend Native Share of Total Global Mobile Display Advertising Source: IHS ShareofSpend(%)
  8. 8. Many publishers are embracing native as a means of driving digital revenue 8 Source: Digiday, Adweek - “With 60-plus percent of our digital revenue tied to sponsor content, it is important that we have similar capabilities to publish and promote natively in the format.” Kimberly Lau, VP and Digital GM - Vice has always been more successful when it's done native advertising and interesting custom partnerships with brands, and then you extend that idea to this TV network also. […] Viceland is hoping to have native ads as half its ad inventory within the year.” Guy Slattery, Viceland GM - “Already, most of BuzzFeed’s revenue is derived from BuzzFeed Creative, the company’s 75-person unit dedicated to creating for brands custom video and list-style advertising content that looks similar to its own editorial content.” Jonah Peretti, Founder & CEO Media companies like Buzzfeed were purpose-built to monetize using native ad formats, and many publishers are following suit
  9. 9. Several models for delivering native advertising have emerged to serve all publisher types 9 Lots of traffic consolidated to few sites Limited traffic distributed across many sites Native in-feed ad units have become popular across social networks, and many adtech vendors have emerged to help publishers integrate similar ad formats on their properties Social ad platforms Large publishers or social networks that have developed automated advertising tools for buying native ad placements 1 Sponsored content placements Premium publishers with dedicated “branded content” teams that work with advertisers to develop unique native content 2 Intermediated native platforms Technology platforms that can be integrated onto publisher sites that allow advertisers to programmatically purchase native placements 3
  10. 10. Native ad spend on intermediated (3rd party) ad platforms is expected to reach $5.7B by 2018 10 $5 $10 $15 $20 $25 2013 2014 2015 2016 2017 2018 $5.7 $3.9 $2.7 $1.9 $1.3 $1.0 $3.4 $3.7 $2.0 $1.3 $1.0 $0.8 $11.9 $10.7 $9.2 $7.5 $5.6 $2.9 Social Ad Platforms Sponsored Content Intermediated Native Platforms Native Advertising Spend by Type (US Desktop & Mobile) Source: Business Insider Intelligence estimates, Internet Advertising Bureau AdSpend(BillionsUSD) $21B Native Ad 
 Spend by 2018
  11. 11. - Low cost ad placements typically on long-tail sites - Demand sources are often “spammy” in nature (i.e. malware, weight loss supplements, or passing traffic to ad-heavy sites)
 - CPMs: $0.50-$1 - Advertising that is intended to drive a conversion event, typically an install, registration or transaction - Demand sources are often app developers or e-commerce sites
 - CPMs: $1-$4 - Content created by an advertiser that is designed to educate consumers or build awareness - The content is typically hosted by the advertiser and promoted across relevant publishers
 - CPMs: $8-$12 - Content created by the publisher or their in-house team tasked with developing content brands - The content is typically hosted on the publisher’s site and mimics the look-and-feel of a traditional article
 - CPMs: $20-$40 Many advertisers have embraced native, although CPMs & success metrics vary widely 11 High CPMsLow CPMs Content Marketing Branded ContentDirect ResponseTraffic Arbitrage Much of the early buyers of native inventory have been direct response advertisers focused on driving a specific action, like sign-ups 
 or app installs Source: Thomvest Research The Spectrum of Native Advertising Demand Sources
  12. 12. Agenda Native advertising overview & market size The rise of programmatic native Key native advertising vendors Appendix
  13. 13. What is ‘programmatic native’? 13 Programmatic native is the automated buying and selling of native ads across a range of platforms, devices & advertiser solutions, relying on an open specification to enable real-time bidding between multiple parties. Source: IAB Bid Response Icon Image Headline 1 Description ActionLink Bid Request Publisher User Information Context Placement Type Required Assets Real-time bidding 1, User opens app & impression sent to native exchange 2. The bid request
 is sent to buyers
 on the exchange 4. Assets from the winning bid are assembled 3. Buyers submit bid responses that include native ad assets How Programmatic Native Works
  14. 14. Programmatic native ad spend is expected to grow rapidly relative to display advertising 14 $5 $10 $15 2013 2014 2015 2016 2017 2018 $5.7 $3.9 $2.7 $1.9 $1.3$1.0 $6.4$6.5$6.1$5.8$5.3$5.2 Programmatic Display Spend Programmatic Native Spend Programmatic Native vs. Display Advertising Spend (US Desktop & Mobile) Source: Business Insider Intelligence estimates, Internet Advertising Bureau AdSpend(BillionsUSD) Native is projected to grow at a 42% CAGR
  15. 15. Programmatic native will allow for buying and selling at scale These factors enable 
 ‘Programmatic Native’ 1 Open, widely adopted, open standards for buying and selling native inventory 2 Broad availability of native ad formats that 
 conform to these standards 3 Native inventory available to advertisers on the buying platforms they use today (i.e. omnichannel DSPs) Key contributors to native advertising’s long-term sustainability include:
  16. 16. The OpenRTB spec provides standards for communication between ad buyers & sellers Source: Nexage, DataXu, IAB, Thomvest Research16 - The OpenRTB protocol provides open standards for the communication between buyers and sellers of ad inventory - Standards including the bidding protocol, information taxonomies, synchronization, and regulation - The IAB governs the OpenRTB specs and organizes updates with the help of contributing ad tech companies Standardizing RTB 
 Ad Buying The OpenRTB Ecosystem Data Management Platform Data Broker Ad Network Working for a buyer Advertiser
 Ad Server Ad Network Working for a publisher Publisher
 Ad Server Agency Trading Desk or In-House Team PublisherDSP OpenRTB Client SSP OpenRTB Server Sell-SideBuy-Side Open 
  17. 17. The OpenRTB 2.3 spec set the groundwork for programmatic native 17 Overview - Support for native ad units was introduced in the OpenRTB 2.3 spec - The Native 1.0 spec defined what goes in the native object introduced in OpenRTB 2.3 - Rather than image references for banners and video references for pre-roll, the native object includes the actual metadata for the ad, including: Headline, Description, Thumbnail & Brand Name Key Benefits - A single framework: The Native 1.0 spec created a generic framework by which a supply source (SSP/exchange) can request the specific items needed as part of the ad. - Native ad assets: A demand source (DSP/bidder) is then required to respond with assets that match the specifications of the supply source so that the native ad unit can be assembled. Concerns - More specifications needed: Native 1.0 does not specify what assets should look like, meaning each supply source is free to define their own standards for image, aspect ratio, headline length, brand name length, etc. - Unclear definitions: When applied to the native 1.0 spec, the classifications of the original playbook created confusion on the DSP side in terms of classifying inventory due to the unclear context and layout concepts and some overlapping definitions. - Limited scalability: Due to the lack of standard classifications, inventory is often still being purchased by named supply source, hampering scalability. March 2015: OpenRTB 2.3 & Native 1.0 - “The RTB 2.3 enables huge swaths of native inventory to be biddable and programmatically enabled.” Steve Katelman, EVP of Global Strategic Partnerships Open 
  18. 18. OpenRTB technology automatically assembles each component into a native ad 18 Components of a native ad unit Image Thumbnail Description Brand Name Rating Call to Action Open 
  19. 19. The OpenRTB 2.4 spec will further enable scalability within the native ecosystem 19 Overview - The Native 1.1 spec was released by the IAB for public comment in early 2016 - The spec introduces new classifications of native inventory, including: - Context: What type of content surrounds the ad unit? There are three primary classifications: content feeds, social feeds and product feeds. Each primary classification has sub-classifications. - Placement Type: What is the design of the ad unit being purchased? This list aligns similarly to the original playbook but in a streamlined fashion: in-feed, on an article page, outside of core content, or recommendation widget. Key Benefits - Classifications: These new classifications should enable native to scale more broadly as DSPs can represent inventory by context and placement type, rather than needing to separately represent each supply source. - Scalability: Through better asset standardization and classification, advertisers will have more confidence to scale buys across multiple sources while maintaining control over what they buy. Concerns - Conforming to new standards: Given the free range of early native standards, many native platforms will need to dedicate resources to adapting to the new standards established in the Native 1.1 spec. - “The Native 1.1 extension both addresses asset standardization and classifies the context and layout of where the native ad will placed, which allows for greater confidence of a buyer to scale buys across multiple sources while maintaining control over what they buy.” Curt Larson, VP of Product Management January 2016: OpenRTB 2.4 & Native 1.1 Open 
  20. 20. OpenRTB 2.4 will provide clarification around how native ad units should be assembled 20 How Images Are Handled In OpenRTB 2.4How Text Elements Are Handled In OpenRTB 2.4 Source: Sharethrough Open 
  21. 21. The IAB has identified six main ad formats that are categorized as native 21 The formats were introduced in the “IAB Native Advertising Playbook”, which serves as a consistent framework for the discussion surrounding native advertising - In-feed ads have numerous variations in their execution – from story forms where the content is written by or in partnership with the publisher, to promotional ads which links off of the site to branded content. - The primary metric is brand awareness. 1. In-Feed Units - Search ads can be found above organic search results. They look exactly like the surrounding results and has been sold with a guaranteed placement so the advertiser knows exactly what context surrounds it. - Its primary conversion metric is direct response, such as purchase. 2. Paid Search Units - Recommendation widgets are a form of native advertising where an ad or paid content link is delivered via a 'widget'. - These units typically do not mimic the appearance of the editorial content feed, links off of the site, and are measured on brand engagement. 3. Recommendation Widgets Native Ad
  22. 22. 22 - In-Ad (IAB Standard) is an ad in a standard IAB container that contains contextually relevant content within the ad, links to an offsite page, and has been sold with a guaranteed placement. - This ad format is measured on brand metrics (interaction, brand lift). 4. In-Ad with Native Elements - Promoted listings are designed to fit seamlessly into the browsing experience, are presented to look identical to the products/services offered on a given site, & are typically bought directly via the publisher. - This ad format is measured on direct response metrics. 5. Promoted Listings - Custom/can’t be contained can take many forms, but in all instances are custom to a specific site. - Examples include platform-specific ads (i.e. Promoted Tweets or Sponsored Stories) or custom playlists. 6. Custom / “Can’t Be Contained” The formats were introduced in the “IAB Native Advertising Playbook”, which serves as a consistent framework for the discussion surrounding native advertising The IAB has identified six main ad formats that are categorized as nativeNative Ad
  23. 23. The IAB also defined six core criteria for evaluating native advertising units 23 The framework is designed to be used by marketers when considering native advertising options, in order to ensure that a unit will meet the brand’s objectives 1 Form 2 Function 3 Integration 4 Targeting 5 Measurement 6 Disclosure How does the ad fit with the overall page design? Is it in the viewer’s activity stream or not in-stream? Does the ad deliver the same type of experience, e.g., a video on a video page or story among stories, or is it different? How well do the ad unit’s behaviors match those of the surrounding content? Is the ad placement guaranteed on a specific page, section, or site, or will it be delivered across a network of sites? What type of targeting is available? What metrics are typically used to judge success? Top of funnel (views, shares, etc.) or bottom (sale, download, etc.)? Is the disclosure clear and prominent? In-Stream Out of Stream Brand Engagement Matches Function Mirrors Page Content Behavior Narrowly Targeting Placement Direct Response Doesn’t Match Function Introduces New Behaviors Broadly Targeted Placement Native Ad
  24. 24. Many vendors have adopted new ad serving techniques, known as “server-side stitching” 24 Standard Ad ServingModern Native Ad Serving AD CMS Content Ad Server Ad A 3rd party call is made to the publisher’s ad server in order to fetch an ad Site content is loaded AD Content & Ad The ad server is integrated into the CMS, which renders the ad content in the same way it does editorial content Ad Server CMS Ad - Bypasses ad blockers, which are growing in popularity across both desktop & mobile - Faster ad load times compared to traditional ad serving methods - More seamless user experience Key Benefits Native Ad
 Formats2 Server-side sticking improves performance and renders native ads in a format that mimics the look and feel of publisher sites
  25. 25. Multichannel demand-side platforms have been slow to integrate native supply 25 In order to bring more brand dollars into the native ecosystem, native adtech vendors must integrate into existing buying platforms, which are typically multichannel DSPs Buying
 Platforms3 Brand programmatic
 media budgets Spend across display, mobile, social, video, etc. - Native integrations require more development time than typical display integrations, which impacts their priority among DSPs - Adoption of OpenRTB 2.3 standards was slower than expected (due in part to limitations described in prior slides) - Limited interest from brand advertisers relative to other digital advertising formats (especially video) - There is a lack of scale of on the supply side relative to other formats - The assets required to assemble native ads are often unique to the format; brands and agencies have yet to adapt Primary Limitations to DSP Adoption Much of a brand’s programmatic media spend flows through multichannel DSPs
  26. 26. However, some DSPs have signaled a willingness to ramp up native integrations in 2016 26 We expect the large DSPs to accelerate integrations into the native ecosystem; brand spend into native will follow - “Native is one of our top priorities, particularly as dynamic creative takes off, and we are investing heavily in growing the capability” Eric Picard, VP of Omnichannel Media - Once buyers can plan and test native ads alongside banner ads through the big digital exchanges, “native will be a part of every campaign. […] The future DSP has video, native, mobile, cinemagraphs, and the DSP will decision accordingly” Ari Lewine, Co-Founder - "Programmatic advertising is about delivering an organic, personal ad experience, and native is a natural outgrowth of that capability” Tim Sims, VP of Inventory Partnerships Buying
  27. 27. Agenda Native advertising overview & market size The rise of programmatic native Key native advertising vendors Appendix
  28. 28. The programmatic native ad stack 28 Demand Side Platforms Agency Trading Desks Advertisers Ad Networks Ad Exchanges Supply Side Platforms Publishers Buy Side Sell Side Many early pure-play native vendors built out full-stack solutions in order to jump-start the native marketplace — we may begin to see some specialization as larger buy-side vendors embrace native Omnichannel DSPs (DataXu, MediaMath, Turn, etc.) were slow to embrace native, but have begun more actively integrating with native vendors Most pure-play native vendors have focused on integrating with publishers and developing supply-side capabilities
  29. 29. Competitive positioning of pure-play native advertising vendors 29 Low CPMs High CPMs SupplyfocusedDemandfocused There are few buy-side vendors focused on top-of-funnel brand advertising; we expect the omnichannel DSPs to play a role in bringing large brands into programmatic native
  30. 30. Competitive positioning of pure-play native advertising vendors 30 Low CPMs High CPMs SupplyfocusedDemandfocused Vendors focused on buy-side Long-tail native supply platforms Building out both sides of native marketplace SSPs focused on premium publishers Premium native marketplaces There are few buy-side vendors focused on top-of-funnel brand advertising; we expect the omnichannel DSPs to play a role in bringing large brands into programmatic native
  31. 31. All of the “big four” have a native ad offering, both on their properties and across 3rd party sites 31 Native inventory on owned properties (first-party) Native inventory across partner sites (third-party) - Google’s primary revenue stream is its sponsored search results, which are considered a form of native advertising - Yahoo! rolled out native inventory across its properties in 2013 - The company reported that mobile native ads see a 2.6X higher CTR than other Yahoo mobile display ads - Most of the company’s ad units are in the native format, including its News Feed ads - 80% of Facebook’s advertising revenue comes from mobile; the company reported $4.5B in mobile ad revenue in Q4 2015 - Twitter’s primary ad format is its native in-stream ad, known as a Promoted Tweet - 86% of the company’s ad revenue comes from mobile, which represented $641M in ad revenue in Q4 2015 - The company also offers native inventory across 3rd party mobile apps via its Gemini Exchange - In Q4 2015, Yahoo! reported 350 billion native ad requests for third-party mobile app inventory on Gemini, accounting for more than 50% of total Gemini impressions - Additionally, the company offers native ads on 3rd party apps through its Audience Network; the network reached a $1B run rate in Q4 2015 - 83% of impressions on the Audience Network are in the native format - Through its acquisition of MoPub, the company also offers native inventory across 3rd party apps - In June 2015, MoPub reported that native ad inventory across its 3rd party apps had increased by 8x from the previous year - In late 2015, Google announced that it was exposing native ads in mobile apps to buyers on its exchange - Primary buyers of native inventory on the exchange today are performance focused (i.e. driving app installs) - In 2016, Google is expected to expose additional native ad formats on its exchange, including desktop and mobile web, which may bring more brand dollars to the format
  32. 32. 32 Facebook is making a strong push into native on third-party apps with its Audience Network - “Facebook's Audience Network has been an incredible force in driving ad revenue for LOVOO. With native ads that fit well with the look and feel of our app and accurate people-based targeting, we've seen CPMs up to 120% higher than other ad networks. Over half of our ad revenue can be attributed to the Audience Network.” Eric Jangor, Head of Corporate Affairs & BD - In March 2016, Facebook announced integration of FAN with common mediation platforms like Fyber, Mopub & Opera Scale Focus Recent Developments - Facebook bills its Audience Network (FAN) as the largest native ad network on mobile; in Q4 2015, Facebook announced that FAN had reached a $1 billion annual run rate - Although multiple ad units are available, Facebook has reported that 83% of ad units on FAN are in the native format - FAN is currently mobile app focused, but the company is expected to launch on mobile web in 2016 (FAN for mobile web is currently in beta) - Advertisers can buy inventory across the Audience Network using the same tools and workflow as they would on Facebook properties; most advertisers are performance-focused, including app developers focused on driving installs
  33. 33. The challenge for native ad startups will be competing with Facebook on third-party sites 33 Source: IHS Facebook’s Audience Network, along with similar offerings from other large competitors, may make it difficult for independent native advertising companies to compete for access to publishers inventory Forecasted Mobile App Advertising Spend in 2018 (Global) AdvertisingSpend(inBillions) $25B $50B $75B $1.6B $4.7B $28.9B $33.6B $62.9B Total Mobile 
 Display Ad Spend Mobile Native
 Ad Spend More than half of mobile spend will be in the native format First-Party 
 Ad Spend Third-Party 
 Ad Spend Most of the spend will be on platforms like Facebook & Twitter The remaining native ad spend will be on publisher sites that are monetized by third parties, like FAN We project about $1.6B available to independent native ad vendors Ad Spend Funneled
 Through Independent
 Native Ad Vendors
  34. 34. The four largest mobile advertising companies together account for nearly 60% of total revenue 34 25% 50% 75% 100% 2014 2015 2016 2017 33%34%32% 27% 2%3%3% 3% 4%4%4% 4% 20%19%19% 19% 32%32%33%36% Google Facebook Twitter Yahoo! Apple (iAd) Pandora YP Yelp LinkedIn Amazon Millenial Media Other U.S. Mobile Ad Revenue Share, by Company GOOG & FB account for >50% of mobile ad revenue Source: eMarketer, September 2015 Much of this advertising revenue comes from these companies’ native ad formats
  35. 35. Agenda Native advertising overview & market size The rise of programmatic native Key native advertising vendors Appendix
  36. 36. TripleLift 36 Company Profile ‣ Founded: 2012 ‣ Headquarters: New York, NY ‣ Employees: 100 ‣ Total Funding: $16.5M ‣ Latest Financing: $10.5M Series B, July 2015 Company Updates ‣ January 2016 — Joins Integral Ad Science Certified Viewability Partner Program ‣ November 2015 — Announces expansion into EMEA and office opening in London ‣ December 2014 — Announces deal with The Atlantic to power publisher’s native ad offerings ‣ July 2014 — Announces partnership with BazaarVoice to power native advertising on e- commerce sites Positioning Key Features TripleLift is the only native programmatic platform with true RTB capabilities for buying and selling native advertising, seamlessly transforming visual content into native ads. Image-Optimizing Technology Computer vision allows for automated reassembly of ad content (image, text, video) to adapt to look and feel across multiple publishers RTB-Enabled Ad Exchange Allows advertisers buying media programmatically to leverage their existing buying platforms to access premium, in-feed native ads. Full-Stack Native Offering Offers capabilities for both advertisers and publishers, as well as integrations with major demand- side platforms Notable Customers - 1,500+ publishers, including: - Conde Nast - The Atlantic - Hearst Newspapers Target Customer Groups - Large web publishers - F2000 consumer advertisers
  37. 37. Nativo 37 Company Profile ‣ Founded: 2010 ‣ Headquarters: Long Beach, CA ‣ Employees: 31 ‣ Total Funding: $32M ‣ Latest Financing: $20M Series B, June 2015 Company Updates ‣ November 2015 — Announces additional native ad formats, including native video, slideshow & collections ‣ August 2015 — Announces partnership with IDG Communications, Native@Scale ‣ April 2015 — Adds optimization technology to ad platform, including real-time A/B testing ‣ June 2013 — VivaKi, Publicis Groupe's ad tech solutions agency, announces a strategic partnership with Nativo Positioning Key Features Nativo operates a branded content network that serves ads within publisher editorial streams, matched to the look and feel of each publication. Premium Native Marketplace Nativo focuses on top-of-funnel brand campaigns on premium sites Advertiser Landing Pages Unique landing pages on publisher sites for advertising content that resembles native editorial content Ad Optimization Capabilities The company applies A/B testing, geotargeting, frequency capping and other features to further optimize the content across screens Notable Customers - 400+ publishers, including: - Entrepreneur - Maxim - Reader's Digest - Kiplinger Target Customer Groups - Large web publishers - F2000 consumer advertisers
  38. 38. Sharethrough 38 Company Profile ‣ Founded: 2008 ‣ Headquarters: San Francisco, CA ‣ Employees: 172 ‣ Total Funding: $38M ‣ Latest Financing: $10M Series D, Sep. 2014 Company Updates ‣ March 2016 — Trade Desks announces integration with Sharethrough SSP ‣ October 2015 — Announces native video ads that silent autoplay on publisher sites ‣ May 2015 — Sharethrough and Nudge Analytics announce partnership to measure audience attention on sponsored content ‣ February 2015 — Announces $80M+ annual run rate Positioning Key Features All-in-one native advertising software for publishers, app developers and advertisers. Sharethrough for Publishers Supply-side platform that allows publishers to manage and execute full-stack native advertising campaigns Sharethrough Ad Manager Advertisers can turn any brand content into unique native ad experiences. Includes content optimization suite and reporting dashboard Sharethrough Exchange Native advertising exchange with over 3 billion monthly impressions across 270 million global uniques Notable Customers - Real Simple - Forbes - USA Today Sports - People Magazine - Time, Inc. Target Customer Groups - Large web publishers - F2000 consumer advertisers (46 of the top 50 AdAge Megabrands use SAM)
  39. 39. AdsNative 39 Company Profile ‣ Founded: 2012 ‣ Headquarters: San Francisco, CA ‣ Employees: 28 ‣ Total Funding: $10.5M ‣ Latest Financing: $8.5M Series A, Sep. 2015 Company Updates ‣ September 2015 — Launches enterprise native ad-server with ‘server-side stitching’ capabilities ‣ May 2015 — AdsNative named “2015 TiE50 Top Start-UP” ‣ April 2015 — Partners with Zemanta to expand programmatic native advertising exchange ‣ November 2014 — Launches native advertising mediation platform Positioning Key Features End-to-end native ads management solution for publishers. Manage all of direct and indirect revenue with one integration. AdsNative Enterprise A platform that integrates an open and flexible ad serving technology within the framework of a publisher’s existing CMS Demand Manager Supply-side platform for native that includes yield optimization & tag management capabilities Marketplace Native advertising exchange that runs across AdsNative’s network of 1000+ publishers Notable Customers - 100s of publishers, including: - Reuters - Disqus - - Politico Target Customer Groups - Large web publishers - Mobile app developers with feed-based content
  40. 40. In-app advertising represents more than three-fourths of total ad spend on mobile 40 $10 $20 $30 $40 2013 2014 2015 2016 2017 2018 2019 2020 $7.8 $7.4 $6.4 $5.1 $3.9 $2.8 $1.7 $1.0 $27.1 $23.8 $20.1 $16.0 $12.1 $8.5 $4.7 $2.1 Mobile in-app ad spend Mobile web ad spend Mobile Ad Spend by Type (In-App vs. Mobile Web) — North America Source: IHS AdSpend(BillionsUSD) - By 2020, 78% of mobile ad spend in North America will be in-app
  41. 41. The majority of in-app advertising will be in the native format 41 $10 $20 $30 $40 2013 2014 2015 2016 2017 2018 2019 2020 $3.4 $2.8 $2.3 $1.8 $1.2 $1.0 $0.7 $0.6 $23.8 $21.0 $17.8 $14.2 $10.9 $7.5 $4.0 $1.5 In-app native ad spend In-app display ad spend In-App Ad Spend by Format (Native vs. Display) — North America Source: IHS AdSpend(BillionsUSD) - By 2020, 88% of 
 in-app advertising in North America will be native
  42. 42. In-app native will primarily be driven by direct (first-party) ad spend 42 $10 $20 $30 2014 2015 2016 2017 2018 2019 2020 $3.9 $2.9 $2.2 $1.5 $0.9 $0.4 $0.1 $19.8 $18.1 $15.6 $12.7 $10.0 $7.1 $3.9 In-app first-party native ad spend In-app third-party native ad spend Source: IHS First party native advertising is advertising that is operated and served within the company’s proprietary app (e.g. a Facebook news feed ad or a promoted Tweet). Third party native advertising is operated and served by a third party onto a publisher’s or app developer’s inventory (e.g. an in- stream NY Times ad served by a native ad vendor). In-App Native Ad Spend by Type (First-Party vs. Third Party) — North America AdSpend(BillionsUSD)
  43. 43. Users have yet to acclimate to the native format, often mistaking it for publisher content 43 - When asked if they recalled seeing the brand’s content on the publisher page, a majority of consumers said they noticed the brand’s content Q: Did you notice the recipe content for Sargento? Q: Did you know that the recipe content for Sargento was a paid advertisement? - However, despite clear disclosure language in the ad unit, more than half of those that noticed the brand content did not recognize that the content as a paid advertisement No 29% Yes 71% No 62% Yes 38% A recent study of native ad campaigns highlighted both its performance and consumer confusion around ads versus content Source: TripleLift, “The State of Native Advertising Disclosure"
  44. 44. Thank you! For questions or comments, please contact: Don Butler Nima Wedlake Mark Prior Thomvest Ventures 203 Redwood Shores Parkway, Suite 680 Redwood City, CA 94065 44

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In this report we provide an overview of the native advertising ecosystem, with a specific focus on native advertising delivered programmatically. We touch on the native advertising market size, key vendors in the space, recent updates from incumbent advertising companies like Facebook, Google, Yahoo & Twitter, and key challenges and opportunities within the native ads market.


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