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Marketplace Networks and Exchanges


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Marketplace Networks and Exchanges

  1. 1. IAB M k t l Marketplace: N t Networks and X h k d Xchanges March 31, 2008San Francisco New York Boston Chicago Minneapolis William Morrison 415-249-1989 Robert Coolbrith 415-249-6363 Member of the FINRA and SIPC.
  2. 2. Why Are We Here? Ad Dollars Are Still Moving Online $25.3B worldwide in 2006 $60.1B worldwide in 2011E (19% CAGR) Allocation gap: 8-10% of consumer media spend vs. 20-30% of consumer usage in U.S. The Good News Is… Marketers want to shift budgets sooner, not later The Challenge For Marketers/Agencies The Web is fragmenting at an accelerating rate Buying media on small sites can be time consuming Formats multiplying – Traditional Display, Video, Mobile, Widgets, Gadgets, Wadgets Evolving standards The Challenge For Publishers Bursty traffic unpredictable inventory supply uncertainty Low sell through usually reflects selling constraints, not intrinsic value of inventory Access to non-endemic advertisers Maximizing the value of their audience and advertising inventory Today’s conference will explore the role of Ad Networks and Ad Exchanges y p g 1
  3. 3. Hyper-Fragmentation on the Web 2
  4. 4. 160 Million Registered Websites, 4.031026 More To Go 180,000,000 160,000,000 140,000,000 120,000,000 100,000,000 100 000 000 80,000,000 60,000,000 40,000,000 20,000,000 Hostnames Active - Fe 0 Fe 1 Fe 2 Fe 3 Fe 4 Fe 5 Fe 6 Fe 7 M 1 M 2 M 3 M 4 M 5 M 6 M 7 08 No 0 01 No 2 03 04 No 5 06 No 7 0 Au 1 2 3 Au 4 5 Au 6 7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -0 -0 -0 -0 -0 -0 -0 -0 v- v- v- v- v- v- v- v- b- b- b- b- b- b- b- b- g- g- g- g- g- g- g- g- ay ay ay ay ay ay ay ay No No No No Au Au Au Au Au M Source: Netcraft , GoDaddy, and ThinkEquity Partners LLC research 3
  5. 5. 1.5 Blogs Being Created Every Second 4
  6. 6. Explosion of Social Network Usage 5
  7. 7. The Proliferation of Social Media Number of Social Networks Created at Ning com 200,000 180,000 160,000 140,000 120,000 120 000 100,000 80,000 60,000 40,000 20,000 20 000 0 07 07 08 07 7 08 7 07 07 07 7 7 7 -0 l-0 r- 0 -0 -0 v- n- n- b- b- g- p- c- ar ay ct Ju Ap No Ju Ja Fe Fe Au Se De M O M Source: Ning and ThinkEquity Partners LLC research 6
  8. 8. Fragmentation is Accelerating – The Widget Phenomenon 50 M) Registered Users (MM 40 30 20 R 10 0 1 3 5 7 9 11 13 15 17 19 21 23 (1) MonthsSource: RockYou Facebook, Yahoo!, and ThinkEquity Partners LLC RockYou, Facebook Yahoo!(1) Yahoo! starts Q1’95, Facebook starts Q4’04, and RockYou Starts Q4’05(2) Facebook data represents active users, which was disclosed on 12/05 and 12/06. Undisclosed active user data is implied based on ThinkEquity Analysis. 7
  9. 9. Media Fragmentation – Today Consumer Ad Market 2007E $258B Radio Yellow Pages TV Internet Search Display Classifieds RichMedia Email Direct Mail Print Source: McCann Erickson, IAB, and ThinkEquity Partners LLC research 8
  10. 10. Media Tomorrow Consumer Ad Market 2012E $268B Radio Internet Yellow Pages Search Display TV Classifieds Cl ifi d RichMedia Email Video Pre Roll Video Overlay In Game Mobile Mobile Video Social Media Widgets In Text Print Direct Mail Micro Sites UGC Ad Funded Apps IPTV Source: McCann Erickson, IAB, and ThinkEquity Partners LLC research 9
  11. 11. The Market Response to Fragmentation Ad Network G N t k Growth 2000-2007 th 2000 2007 350 300 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 Source: ThinkEquity Partners LLC research 10
  12. 12. What is an Ad Network? Somewhat analogous to the broadcast/affiliate television model g Aggregate and sell audiences on behalf of publishers to advertisers/agencies Complicated by inherent fragmentation of Internet Formats Targeting Pricing Business Model Display Vertical CPM Rev Share Text Contextual CPC Arbitrage cs haracteristic In-Text Behavioral CPL Rep Firm Video Demographic CPA Mobile Re-targeting g gAd Network Ch In-Game Geographic Blog Site Specific RSS N Email Audio/Podcast Widgets 11
  13. 13. Why Are Marketers Using/Choosing Ad Networks? 2007 Collective Media Study of 100 marketers agencies and media planners marketers, What is the primary reason you use ad networks? Efficiency – 66% y Reach – 52% Targeting – 38% Optimization – 25% Other – 6% What best differentiates one ad network from another? Targeting – 57% Optimization – 47% Inventory – 44% Price – 45% Reach – 33% Other – 12% Source: Collective Media 12
  14. 14. Key Concerns Among Marketers/Agencies What’s th Wh t’ the primary reason you li it or d ’t use ad networks? i limit don’t d t k ? Editorial control – 59% Audience duplication – 38% Ad position – 21% iti Type of ad – 18% Client dictates – 17% Other – 10% Other Considerations for marketers/agencies Quality/reputation of network Site targeting capabilities Campaign pacing against budget Sales support and customer service Integrated and/or customized campaigns Creative testing g Source: Collective Media and ThinkEquity Partners LLC research 13
  15. 15. The Publisher Perspective Why Wh are publishers using ad networks? bli h i d t k ? Too small for internal sales/low impression volume Ability to create inventory tiers Unpredictable i U di t bl inventory supply/creation t l / ti Mechanism to monetize excess or unsold (aka remnant) inventory Ability to add value through targeting and optimization Other considerations/concerns for publishers Lack of control (branded sites in particular) Sales channel conflict Risk vs. reward Managing networks can add complexity All ad networks/exchanges not created equal 14
  16. 16. Vertical Networks Proliferating Source: Company web sites and ThinkEquity Partners LLC research 15
  17. 17. Next New Trend – Branded Sites Creating Extended Networks Source: Company web sites and ThinkEquity Partners LLC research 16
  18. 18. Online Ad Exchanges Evolve Auction based marketplaces f ad i A ti b d k t l for d inventory t Many different takes on the ad exchange model currently developing Real time Real-time spot markets Yield optimization specialists Forward and futures markets Behavioral and contextual data markets Current focus improving efficiency of remnant display market Future possibilities “Secondary” premium market Re-vending inventory to add value or minimize waste Inventory securitization 17
  19. 19. How Exchanges and Auction Based Marketplaces Work Auction platforms sell each impression in real time Exchanges may also optimize off-exchange relationships Can create more competition for publisher inventory Netw ork Netw ork or or Advertiser Advertiser Netw ork Netw ork or or PUBLISHER Advertiser Advertiser AD SERVER Broader Dynamic Yield OR Exchange Management System Environment HARD-CODED AD TAGS Netw ork Netw ork or or Advertiser Advertiser Netw ork Netw ork or or Advertiser Advertiser Netw ork Netw ork Netw ork Netw ork Off-exchange Monetization Partners Historical eCPM used as proxy for real time bid real-time bid. 18
  20. 20. Exchange Benefits for Ecosystem Participants Publisher Potentially higher inventory yield P t ti ll hi h i t i ld Promote competition among monetization partners Manage existing off-exchange relationships simultaneously Effective for long-tail sites (ad networks are typically “mid-tail” solutions) Advertiser/Agency Improved transparency Some ad network functions can be performed in-house Single cookie can create efficiency benefits Some exchanges allow for various placement controls Ad Network Increased arbitrage opportunities for networks who add value Market innovators can achieve scale Eliminate expenses related to publisher recruitment/development/service Ecosystem Reduced friction (IOs, faxes, phone calls) Improved transparency 19
  21. 21. Exchange Concerns for Ecosystem Participants Publisher Potential lack of control Potential sales channel conflict Complexity Advertiser/Agency Potential lack of control Complexity Ad Network Commoditization Increased competition Ecosystem Additional complexity No standards Potential devaluation 20
  22. 22. Clearing Up Some Misperceptions Misperception: Auctions drive down prices Source: Factset, and ThinkEquity Partners LLC research 21
  23. 23. Clearing Up Some Misperceptions Misperception: “Marketplaces” are for “commodities” Source: eBay 22
  24. 24. One Thing is for Certain – The Ecosystem Will Continue to Evolve The Publisher’s Media Inventory Order Management Inventory Forecasting Inventory Provisioning Secondary Premium Remnant Inventory Premium Inventory Yield Management/Optimization D I R Network Auction Exchange Agency E C T Agency Agency Agency Advertisers/Marketers Negotiated Automated 23
  25. 25. Marketer/Agency Questions for Your Ad Network or Exchange Inventory Premium ( P i (guaranteed) or N P t d) Non-Premium ( i (remnant, pre-emptible) i t tibl ) inventory? t ? Spot market (bided) vs. futures market (reserved inventory)? Safe for brands or direct response only? Control over content adjacency ( j y (blind versus site targeting)? g g) How much reach can you offer on run of network basis? Pricing Control of pricing for buyer and seller? Pricing models: CPM, CPC, CPL, CPA? Targeting Contextual, behavioral, demographic, geographic, Contextual behavioral demographic geographic other? Formats Banners, video, text, mobile? Publisher types Long tail, mid tail, large sites Inventory from content sites and/or social media? y 24
  26. 26. Publisher Questions For Your Ad Network or Exchange Advertisers and campaigns How will you prevent channel conflict with my i t H ill t h l fli t ith internal sales f l l force?? Who are your advertiser clients? What types of campaigns do you run? Do you offer site targeting, or publish/share your site list Pricing Pricing models: CPM, CPC, CPL, CPA? What kind of eCPM can I expect for my inventory? How do you charge publishers for your services? Yield Management How do I work with multiple ad networks and/or exchanges? Can yield management be automated/optimized? Formats What formats can you sell (video, display, text)? Control Can I review and prevent certain advertisers from showing up on my site? 25
  27. 27. Key Takeaways Ad Networks and Exchanges Are Creating New Ways to Buy and Sell Inventory Ad Exchanges Could Change The Role of Ad Networks Over Time Ad networks could become specialized media buyers, focused on performance/arbitrage Old model: brokerage New model: hedge fund Value-added networks should continue to thrive Key differentiators: data, technology, relationships For Marketers/Agencies Determine your goals, ask questions, interview heavily No two networks or exchanges are created alike Lines between brand and direct response likely to blur For Publishers Manage Inventory strategically Leverage ad networks and exchanges to complement not replace direct relationships complement, More competition for inventory could be a good thing New yield management and optimization approaches could help maximize inventory value Review strengths/weaknesses, examine business opportunities, determine role in ecosystem 26
  28. 28. DisclosuresInformation contained herein, including but not limited to research, market valuations,calculations, estimates and other material obtained from ThinkEquity Partners, LLC(“ThinkEquity”) and other sources is believed to be reliable, however ThinkEquity does notwarrant its accuracy or completeness. These materials are provided for informationalpurposes onlyp rposes onl and sho ld not be used or constr ed as an offer to sell or a solicitation of should sed construedan offer to buy any security. Opinions and estimates constitute the judgment ofThinkEquity and are subject to change without notice. Past performance is not indicativeof future results. ThinkEquity Partners LLC is a member of FINRA and SIPC results SIPC. 27
  29. 29. ContactsWilliam MorrisonPartner, Sr. 249-1989Robert CoolbrithSr. 249-6363 28