Open source de

1. Five important memes for the
digital advertising industry
By Eric Picard, CEO of Rare Crowds
This is an “open source” deck: My license request. If you improve any of these slides,
please send them to me. If you use any of these slides, please attribute them to me. These
slides have all been presented publicly in the past.
eric@ericpicard.com

2. 2011 IAB Data on Advertising
Online Advertising Revenue, 2011
Display-Banners 22% $6,974,000,000
Video 6% $1,902,000,000
Mobile 5% $1,585,000,000
Display Sponsorship 4% $1,268,000,000
Rich Media 4% $1,268,000,000
Online Classifieds 8% $2,536,000,000
Search 47% $14,899,000,000
Lead Gen 5% $1,585,000,000
Email 1% $317,000,000
Total $31,700,000,000
2

3. Expected Growth in Advertising
Global Online Advertising Spending (2006-2015P)
100
91.0
90
80 75.2
70 63.4
60 54.7
$ Billions
50 47.4
41.1
40 37.0 37.4
33.2
30 27.2
20
10
0
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
U.S. Online Advertising Spending (2006-2015P) Non-U.S. Online Advertising Spending (2006-2015P)
40
60 56.7
34.2
35 32.7
31.2
29.9 50
30 28.9
28.0
42.5
25.5 25.7
25 24.1 40
$ Billions
$ Billions
32.2
19.2
20 30
24.7
15 18.6
20
11.8 13.1
10 11.5
8.0 9.1
10
5
0
0 2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P 3
Source: AM. Mindpower Solutions Research, August 2011

4. Meme 1: Power Base in Advertising Ecosystem has shifted due to
Media Fragmentation (Buyers drive the market)
Seller Dilution
• Before 1984 <20 Media Channels, and few publishers per channel
• By 2005 this had doubled to 40, but with the Internet, the number of publishers
has significantly increased per channel
• Amount of inventory in the market has exploded
• Huge competition between publishers for dollars
Buyer Concentration
• ~6,000 Advertisers control >80% of ad spend
• In last ten years media buying has consolidated – now most dollars flow through
6 Agency Holding Companies worldwide
• Media Agencies control the market – and drive technology adoption
4

5. Huge and Fragmented Ecosystem
Worldwide – Approximately 6,000 Advertisers account for >80% of all ad spending
(~5,000 in US account for >90% of US ad spending)
Most of the WW ad spend controlled by 5 major agency holding companies (6 with Dentsu)
Omnicom WPP Interpublic Publicis Havas
12 holdings from $30M - 10 holdings from $30M - 20 holdings from $4.5M 10 holdings from $2.8M 4 holdings from $20.3M
$1.33B Annual Billings $1.32B Annual Billings - $1.44B Annual Billings - $1.01B Annual Billings - $528M Annual Billings
Hundreds of vendors across thousands of implementations, and thousands of internal IT
solutions – few of which communicate with each other
Media ownership rolls up to approximately 60 companies WW – with thousands of holdings
Advance Publications American Media Inc. Belo Corporation Bertelsmann AG Cablevision CanWest Global
Cisneros Citadel Broadcasting Clear Channel Comcast Community Newsp. CBS
Corus Entertainment Copley Press Cox Enterprises Cumulus Media Dow Jones Corp. Emmis
Entercom Fisher Freedom Gannett General Electric Hachette Filapacchi
Hearst Hollinger Journal Register Knight Ridder Landmark Lee Enterprises
Liberty Group Liberty Media Lin TV Corp. McClatchy McGraw-Hill Media General
Media News Group Meredith Corp. Morris News World News Corp New York Times
Pearson Primedia Pulitzer Reed Elsevier Rogers Scripps
Sony Corporation Sinclair Standard Radio Stephens Media Time Warner Tribune Company
Viacom Vivendi Universal Vulcan Inc. Walt Disney Washington Post Young Broadcasting
5

6. Media Fragmentation Changes Power Base
1977
2012
6,000 Hundreds
Advertisers Publishers 9,000 6 Millions
Advertisers Agencies Publishers
$750B
Google
Search & Contextual
>500,000 1 >400,000
Advertisers Google Publishers
$6B
6

7. Media Fragmentation
7

8. Media Fragmentation
8

9. Meme 2: Market Complexity is driving automation to decrease cost of
media buying, selling, and management
Huge revenue drop between offline and online
• Almost one hundred percent revenue drop from traditional to digital
distribution for media companies
• Huge complexity in managing media sales in digital (ad operations, RFP
Response, etc…)
Agency Compensation based on hours spent, not value provided
• Because most agency compensation comes from billable hours, they have not
invested in workflow automation
• Media fragmentation is causing this model to break – digital media amplifies
this: agencies can’t hire enough bodies to do the work
• Market complexities need algorithmic and compute intensive solutions to
further growth – agencies need to change their game
9

10. Buy/Sell Process – Today for premium
Sales Executive
Sales Planner Ad Operations Account Manager
1. Buyer decides what
web sites to buy 3
2. Buyer and Seller
negotiate deal
3. Hand off to internal
teams for workflow
5
4. Buyer ad ops sends Inventory
ads to publisher Campaign
Availability &
5. Seller ad ops inputs Management Reporting Billing
Reservations
ads
Workflow
(Sales Tools)
6. Buyer reviews
results, compares
reports, compiles
7. Seller sends bill to
buyer 7
4
8. Buyer reconciles the
2
bill and pays
Media Campaign
Media Planning & Management Reporting & Billing &
Research Buying & Trafficking Analytics Reconcilliation
Tools Workflow Workflow
6
1 3
Associate Media
8
Media Buyer Associate Media
Buyer Ad Operations Buyer Billing Coordinator

11. Publisher revenue against inventory
Hand Sold
Sponsorships
Hand Sold Premium Inventory
Hand Sold Audience Targeted Inventory
Targeted Inventory sold via Ad Exchanges
Remnant “Wholesale” Inventory sold to Ad Networks
Display Ads, Video Ads, Mobile Ads, and Social
Media Ads are all sold this way. Packages are made
up of inventory from each layer in the ‘layer cake’.
11

12. Meme 3: Market inefficiency has created arbitrage opportunity
Existing buying processes leave lots of unsold inventory
• Only a minority of existing inventory is managed by a ‘direct’ human sales force
• Sell-through of any human sales force follows a similar curve – leaving a
significant amount of inventory unsold
• Traditional Ad Network model is to take risk on inventory by procuring
‘wholesale’ from publishers and selling to buyers
• Now with Ad Exchanges, networks can procure in real-time – a model designed
by default to reduce risk
• Agency model has begun to adopt the ad network model – with trading desks
12

13. Advertising Ecosystem Impression / Dollar Flow
FLOW OF AD SPEND (US) FLOW OF ADVERTISING IMPRESSIONS (US)
Percent Dollars Captured (in yellow) Percent impressions
5%
25%
Large
65% 20% Publisher
(Direct
Per Impression Price Drops
Reserved
“Premium”)
Agency** Keeps
ADVERTISER 75-90% AUDIENCE
Ad spend Keeps 25%
10-25%
100% Large pub 40%
Publisher 40%
(Remnant)
Exchanges, Aggregator* Keeps
20% DSPs *** 25%
40-80%
Keeps Keep
10-20% 10-80%
(may include Small-Med
5% multiple (May include 35% 35%
multiple
Publishers
vendors)
vendors) Keeps
25%
20-60%
* Includes: Ad Networks, SSPs, Private Exchanges, and Ad Rep Firms Note: Ad Servers, Yield Management Systems,
** Includes: Media Agencies, Creative Agencies, Trading Desks Analytics, DMPs, etc… Take out about 8-10% of spend
*** Includes: Ad Exchanges and DSPs in total as they pass through the ecosystem
This slide represents Display, Video, Mobile – based on Rare Crowds Analysis of Marketplace

14. Meme 4: Consolidation is about to happen
Hundreds of vendors in the ad tech ecosystem
• Each sector has significant number of competitors
• Probably not enough ecosystem scale to support more than 3 vendors per
category
• Consolidation will happen quickly once it starts
Ultimately there will be between 1 - 4 large platform ‘stacks’
• One will be Google
• The others will be some subset or consolidated mix of the following:
• Yahoo • SAS
• Microsoft • SalesForce.com
• Adobe • Experian
• IBM • Accenture
• AppNexus • Ebay
• AOL • Rubicon Project
• Facebook • Pubmatic
• Amazon • Etc…
14

15. The Google Stack
Ad Networks
Ad Sense
Google
Other Display Data
vendors Network Companies
Advertisers Publishers
Ad Invite Google
DFA Advertising AdMeld DFP AdSense
Words Media
Platform
Ad Other
Agencies AdMob Vendors
Mobile
Google / Doubleclick Ad Exchange
15

16. 16

17. 17

18. Meme 5: We're just at the beginning of the digital revolution
Traditional Media is transitioning to digital distribution
• Tablets are the biggest driver we have ever seen of transition from consumption
of media (especially print) to digital delivery
• Connected Televisions are another huge driver of digital consumption
• This includes Xbox, Roku and other set top boxes
• Different media are good at different things, we’re still trying to determine what
new media types are good at
• Until we can drive revenue to traditional media companies closer to what they
get from traditional, they will intentionally slow this transition
We have significant upside across the board for display, mobile,
video and social – Search will continue to grow too!
• Display advertising is a good catch-all for most media types
• Display is easily broken down into two large buckets: Brand and Direct Response
• Direct Response in display inventory that sits high in the purchase funnel will
always sell at a very low price (low yield for publishers)
• Better sell-through in display through increased efficiency of the buying and
18
selling process will drive brand adoption

19. Purchase Funnel to Advertising Vehicle You should
I love my Sony
= Appropriate / Effective Sony = I Need a Who has the HD Radio, I also buy a
Sony makes Sony vs. Quality & Sony HD best price on want other Sony HD
Example: HD Radio HD Radios Philips Prestige Radio Now! Sony HDR? Sony products! Radio!
Impression Vehicle Category Brand Brand Brand Purchase Purchase Retention Customer
Volume Awareness Awareness Consideration Preference Intent (Customer Loyalty) Advocacy
Huge TV
Huge Radio
Huge Newspaper
Huge Out of Home
(Billboards)
Very Large Magazines
Large Online
Display
Medium to Direct Mail
Large
Small to Mobile
Medium Advertising
Small to Web Site
Medium
Small Search
Small Email
Medium Online Video
Tiny (potential Word of 19
to ‘catch fire’) Mouth / Viral

20. Purchase Funnel to Display Advertising Volume & CPM
Low CPM High CPM
Category Brand Brand Brand Purchase Customer Customer
Purchase
Awareness Awareness Consideration Preference Intent Retention Advocacy
High Imp. Volume Low Imp. Volume
20

21. One Advertiser - $20M Budget & Target Avg. CPM Allocations
Category Brand Brand Brand Purchase Purchase Retention Customer
Awareness Awareness Consideration Preference Intent Advocacy
Brand Focus
$11M $3M $.75M $.25M
$15.00 CPM $18.50 CPM $14.50 CPM $11.00 CPM
$.5M $1M $3M $.5M
DR Focus
$0.20 CPM $0.50 CPM $30.00 CPM $18.00 CPM
$90 CPA $90 CPA $90 CPA $90 CPA
21

22. Other platforms are focused on limited market
segments
Category Brand Brand Brand Purchase Purchase Retention Customer
Awareness Awareness Consideration Preference Intent Advocacy
Brand Focus
High High Med. Med
Yield Yield Yield Yield
Low Low High High
DR Focus
Yield Yield Yield Yield
22

23. Search focuses on Direct Response near the
Purchase
Category Brand Brand Brand Purchase Purchase Retention Customer
Awareness Awareness Consideration Preference Intent Advocacy
23

24. Display Marketplaces focus on DR advertisers

25. Industry must take a holistic view
25

26. Creating a virtuous cycle on yield
26

27. Brand vs. DR by inventory and revenue
Brand $$ Brand Display
DR $$$ Paid Search
DR ¢ DR
Display
Inventory allocation of Online Advertising Ball Size Represents Proportional Revenue as
within the purchase funnel in 2012 of 2012
27

28. Mobile has huge upside especially with
tablets!
DR Display
Mobile Ads Brand Display Paid Search
(includes Video and Rich Media)
Ball Size Represents Proportional Revenue as of 2012
28