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 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
6. 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
7. 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
8. The New Players are Staking Out Positions
• New ad targeting, optimization, and data companies are redefining the landscape
Demand Side – Advertising $$ Supply Side - Inventory
Ad
Ad Direct Sales
“Traders”
“Traders” Force
Agencies / Media Buyers
Demand
Demand
Side
Side
Optimization
Optimization
Platforms
Platforms The Ad
The Ad
Exchanges
Exchanges
Data Measurement
Advertisers
Data
Data
Publishers
Providers &
Providers &
Exchanges
Exchanges
Display Ad
Social
Social Publishing Yield
Publishing Yield Networks
Targeting
Targeting Optimizers
Optimizers
Rich Media Ad Creative
Ad Creative
Ad Platforms Optimizers
Optimizers
January 2010 8
9. The New Players are Staking Out Positions
Demand Side – Advertising $$ 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
10. 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
11. 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
13. 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
14. 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 $10.5
New York, NY Venture Partners, Venrock
www.dataxu.com 2007 Atlas Venture LLP, Flybridge Capital Partners 6.0
Cambridge, MA
www.invitemedia.com 2007 First Round Capital NA
Philadelphia, PA
www.mediamath.com 2007 Safeguard Scientifics, Inc.; QED Investors LLC; 16.6
New York, NY European Founders Fund
www.turn.com 2005 Focus Ventures, Norwest Venture Partners, 38.5
Redwood City, CA Shasta Ventures, Trident Capital
www.xplusone.com 1999 ATV, Blue Chip Ventures, Hudson Ventures, Seed 30.8
New York, NY Partners, WS Capital
January 2010 14
15. Data Providers & Exchanges
• Data exchanges provide cookie data to segment high value audiences
– Allows media buyers to target only the impressions they want
• Incorporating data from multiple sources – offline and online
• Speaking the language of database marketers – data management, audience
segmentation, new marketing cohorts
Capital
Year Raised
Company Founded Investors ($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
21. 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
22. 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
23. 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
24. 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
25. Possible Strategic Buyers by Category
Demand Side – Advertising $$ Supply Side - Inventory
Demand Side
Optimization Ad
Ad
Ad
Platforms Exchanges Direct Sales
“Traders”
“Traders” Force
Ad Holdcos
Ad Holdcos
Agencies / Media Buyers
Data & Analytics
Data & Analytics
Database
Database
Marketing
Marketing
Diversified Media
Diversified Media
Internet Titans
Internet Titans
Technology
Technology Internet Titans
Internet Titans
Technology
Technology
Data Measurement
Ad Holdcos
Ad Holdcos
Advertisers
Data & Analytics
Data & Analytics
Publishers
Data Database
Database
Marketing
Providers & Marketing
Diversified Media
Diversified Media
Exchanges Internet Titans
Internet Titans
Technology
Technology
Ad Holdcos
Ad Holdcos
Data & Analytics
Data & Analytics
Display Ad
Ad Holdcos
Ad Holdcos
Database
Database Networks
Social Marketing
Marketing
Diversified Media
Diversified Media
Diversified Media Internet Titans
Internet Titans
Targeting Diversified Media Technology
Technology
Internet Titans
Internet Titans
Technology
Technology
Ad Holdcos
Ad Holdcos
Publishing Yield
Data & Analytics
Data & Analytics Optimizers
Rich Media Database
Database
Marketing Ad Creative
Ad Platforms Marketing
Diversified Media
Diversified Media Optimizers
Internet Titans
Internet Titans
January 2010 25
26. Opportunities by Category
• Buy-side Optimization Platforms
– Platforms will power the trading desks of the media trading units
– Near-term high growth opportunity for arbs
– Long-term high growth opportunity as more $$$ 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
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 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
32. 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
33. 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
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