Thomvest Advertising Technology overview - Sept 2014

Adver&sing Technology Overview

September 2014

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2011A 2012A 2013E 2014E 2015E 2016E

TV Print Radio Digital (Ex-‐Mobile) Mobile Other

US Adver&sing Spending By Format ($B)

Source: eMarketer, Jefferies

Total ad spend con&nues to grow, fueled by TV and Digital (display and mobile)

•  Total ad spending expected to reach $190.86B in 2013

•  TV captures the lion share of the market – 39.1% or $64.5B in 2012

Mobile and digital video are the fastest growing segment

•  By 2017, eMarketer expects mobile to be 13% of the market

•  Digital video (mobile and display) is the fastest-‐growing segment

Print con&nues to decline, mostly driven by decline in newspaper readership

•  Newspapers is expected to fall to $16.2B by 2016

•  Magazines are expected to stabilize at $15.1B per year for the foreseeable future

Despite growth in digital, consumers remain more resistant to digital formats

•  45% vs. 39% had a nega&ve a^tude towards digital vs. TV formats respec&vely

Note: Other includes outdoor and directories. Detailed defini&ons in appendix

Total US Adver&sing Spend

0%

10%

20%

30%

40%

50%

Search Display Banners

Classifieds Mobile Digital Video Lead Generation

Rich Media

2006 2007 2008 2009 2010 2011 2012

3 Source: IAB , eMarketer

Digital Ad Format Share (% of total US digital ad revenue)

Search retains the largest share of market •  Search has consistently owned more than 40% of the market, and will con&nue to grow steadily

Mobile is experiencing the most rapid growth in terms of ad budget alloca&on

•  Share of ad spend on mobile has grown the fastest since IAB began measuring in 2010

•  Widespread smartphone adop&on, faster connec&on speeds, new in-‐app ad formats contribute to growth

Digital video is also growing quickly but with caveats

•  75% of marke&ng professionals globally plan to increase their on video ad and content spend next year

•  However, Tremor Q3 2013 reports were lackluster, causing a 50% drop in share price

Google owns majority of internet display and mobile market share

•  According to eMarketer, Google owns 52.36% of net 2012 mobile internet ad revenues ($4.61B)

•  Twiger is growing the fastest in digital adver&sing, up 106.7% in 2012 at $290M in revenue, up from $140M in 2011

US Digital Ad Revenue Format Share

4

Adver&sing Technology Ecosystem

Source: Rubicon, Cantor Fitzgerald, Comscore, Thomvest Research

Adver+sin

g Ag

ency

Supp

ly Side Pla8

orm

Programma+c Guaranteed (Direct Order Automa+on)

Auc+on Markets (Ad Networks and

Exchanges)

Demand Side

Pla8o

rms

Adver+sers

Agen

cy Trading Desk

Publish

ers (Inventory)

$$

$$

$$ $$ $$

$$

$$

$$

$$

$$

$$

$$

5

How Things Work: Third-‐Party Ad Serving

User Publisher Web/ App Server

Publisher Ad Server

Marketer Ad Server

Source: Thomvest Research, AdOpsInsider

SSP

Ad Exchange

DSP1

DSP2

Content Distribu&on Network

User hits the website, publisher’s web server is called and sends back content and ad tag.

1 User’s browser sends ad request to publisher ad server along with cookie informa&on.

2

Publisher’s ad server sends back an ad tag for user’s browser to access SSP for ad auc&on.

3

SSP chooses winner and sends an ad tag to the user with marketer’s ad server informa&on.

4Marketer’s ad server sends ad tag to user’s browser to call the Content Distribu&on Network.

5

CDN delivers ad to user’s browser and the marketer’s ad server is called to inject a 1x1 tracking pixel.

6

6

How Things Work: Programma&c Ad Buying Programma&c buying is an automated transac&on between the buyer and the seller where:

•  the buyer can determine the quality and subsequently the price of the audience on the fly •  the seller can iden&fy the best value for their ad space •  the best sale price is determined through a mul&-‐party auc&on •  the best determined buyer gets to buy the ad spot

The auc&on between various par&es happens through an ad marketplace or an exchange and this auc&on leverages a protocol called Real Time Bidding (RTB) which helps various par&es communicate with one another.

The Benefits: The Process:

Source: Persicopix

Seconds

7

How Things Work: Real Time Bidding (RTB)

User clicks on URL and publisher’s content begins to load

Seconds

Publisher asks its ad server if an ad is available. If not, server asks Ad Exchange

0.04

Seconds

Ad Exchange federates ad request to mul&ple demand side planorms (DSPs)

0.08

Seconds

Ad Exchange sends user’s anonymous profile, website category, and page ad safety informa&on

0.10

Seconds

Each DSP overlays adver&ser targe&ng and budget rules, and applies third-‐party data

0.12

Seconds

Each DSP algorithm evaluates and computes op&mal bid for adver&ser

0.125

Seconds

Each DSP responds to Ad Exchange

0.13

Seconds

Ad Exchange runs a second-‐price auc&on and selects winning bid form DSP response

0.14

Seconds

Ad Exchange sends price and ad from winning bid to publisher’s ad server

0.18

Seconds

Publisher’s ad server tells browser which ad to display

0.19

Seconds

Adver&ser’s ad server sends winning ad to browser

0.23

Seconds

Browser displays web page including winning ad, and signals to winning DSP the ad was viewed

0.31

0.0

Seconds 0.36

The en+re RTB ad buying process takes ~ .36 seconds

Source: Turn, Thomvest Research

8

RTB Market Size

Source: eMarketer

RTB is currently 20% of the digital display ad market but will con&nue to grow as more premium content is distributed on RTB and agribu&on and targe&ng technology improves.

9

Pricing Models in Digital Adver&sing

Effec-ve Cost Per 1000 Impressions (eCPM)

Publishers are paid under a common denominator, net

effec+ve CPM. For CPE, eCPM is calculated as (net revenue/# of impressions)*1000. eCPM is also known as RPM (revenue per mille)

Publisher

Adver+ser

Cost-‐Per Engagement (CPE)

Adver&ser only pays if a user completes an

ac&on. Common pricing models:

•  Cost-‐per-‐click (CPC) •  Cost-‐per-‐view (CPV) •  Cost-‐per-‐ac&on (CPA) •  Cost-‐per-‐install (CPI)

Cost-‐Per 1000 Impression (CPM) Adver&sers pay

whenever an ad is shown, regardless of

whether user converts. CPM is used more for brand lio rather than user engagement.

Source: IAB, AppFlood, Thomvest Research

CPM Pricing Model Example

Adver&ser

Buys 10,000 impressions at $5 gross CPM

Total cost: $5*10,000

= $50

Intermediary (ad network)

Takes 40% cut from publisher

Total revenue: 40%*$50=$20

Publisher

Earns a net CPM of $3 (60%*$5)

Total revenue: $3/1,000* 10,000=$30

CPE Pricing Model Example

Adver&ser

Buys app installs at $5 per install. 10 installs aoer

10,000 impressions.

Total cost: $5*10= $50

Intermediary (ad network)

Takes 40% cut from publisher

Total revenue : 40%*$50=$20

Publisher

Earns a net eCPM of $3 (60%*$50/

10,000)*1000

Total revenue: $3/1,000* 10,000=$30

Methods to Calculate CPM and eCPM eCPM (CPI) = Click-‐Through-‐Rate x Install-‐Rate x Bid (CPI) x 1000 eCPM (CPC) = Click-‐Through-‐Rate x Bid (CPC) x 1000 eCPM (CPM)= Bid (CPM) x 1000 Note: Adver&sers pay gross CPM, Publishers earn net CPM aoer intermediary costs.

10

Pricing Models in Digital Adver&sing

46% 48%

45%

39% 37%

33% 31% 32%

41%

47%

51%

57% 59%

62% 65%

66%

13%

5% 4% 4% 4% 5% 4%

2% 0%

10%

20%

30%

40%

50%

60%

70%

2005 2006 2007 2008 2009 2010 2011 2012

CPM Performance Hybrid

Ad Revenue by Pricing Model (% of Ad Revenue)

Source: IAB, Thomvest Research

Performance-‐based digital ads generate the largest por&on of ad revenue as compared to CPM and hybrid ads. Note: Performance-‐based ads are synonymous with cost-‐per-‐engagement pricing models.

11

Top 20 Ad Networks (ComScore)

Source: Comscore, Thomvest Research

0

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Sept. 2013 -‐ Top 20 Ad Networks and Buy Side Networks by Unique Visitor (000)

12

DataXu is a DSP for omnichannel targe&ng, guaranteed media, and private exchanges.

Employees & Status: 290+, Private Products: DX3 Planorm (DSP), DX Social (social DSP), DX Brand (brand management), DX Mobile (mobile DSP), and DX Video Investors: Atlas Ventures, Flybridge, Menlo Ventures, Thomvest Ventures

Turn is a DMP and DSP that uses online and offline sources to drive mul&-‐channel marke&ng decisions. Employees & Status: 341+, Private Products: Origin Digital Marke&ng Hub, Origin Media DSP, Origin Analy&cs, Origin Data Management Planorm, and Origin Site Investors: Norwest Ventures, Shasta, Trident Capital, Focus Ventures

MediaMath is a DSP and DMP that has been used by over 3,500 brands. Employees & Status: 395+, Private Products: TerminalOne (RTB, campaign management, targe&ng), Feature Spotlight (audience buying and private marketplace), and MathClarity (analy&cs). Investors: Silicon Valley bank, QED Investors, European Founders Fund, Safeguard Scien&sts

Rockenuel is a DSP ad network that generates two-‐thirds of its revenue from performance ads and the rest from brand ads.

Employees & Status: 1000+, Public (FUEL) Products: Rocket Fuel for display, video, mobile, social, marketers, publishers and networks Investors: MDV, Nokia Growth Partners, Labrador Ventures, Comerica Bank, Northgate, Summit Partners, Cross Creek

Criteo is an adver&sing retarge&ng and programma&c ad network (6,000 publishers). The company focuses on product-‐level recommenda&on ads based on a CPC model.

Employees & Status: 1000+, Public (CRTO) Products: Criteo’s Performance Op&miza&on Planorm (CPOP), Programma&c buying, FB Exchange, Mobile, Ad-‐X Tracking Investors: Bessemer Venture Partners, Index Ventures, IDInvest Partners, Elaia Partners

AdRoll is a retarge&ng company. Unlike Criteo, AdRoll does not use a media arbitrage model; AdRoll generates revenue based on % of media spend. Employees & Status: 640+, Private Features: Facebook retarge&ng, customer segmenta&on, analy&cs, Liquid Ads (dynamically retargeted ads) Investors: Founda&on Capital, Accel, Floodgate, Merus Capital, Peter Thiel

Notable DSPs and Retarge&ng Companies

Source: TechCrunch, AdExchanger, Inc., Businessweek, SEC, Linkedin, Forbes, Thomvest Note: All informa4on is publicly available

DSP 1 35%

DSP 2 13% DSP 3

12%

DSP 4 11%

DSP 5 7%

DSP 6 6%

DSP 7 4%

DSP 8 4%

DSP 9 4%

DSP 10 1%

Other 3%

Market Share by DSP, Q1’13

13 Source: CasaleMedia (Index Exchange)

DSP Market Share (Desktop & Mobile)

DSP 1 20%

DSP 2 17%

DSP 3 13%

DSP 4 12%

DSP 5 7%

DSP 6 7%

DSP 7 6%

DSP 8 5%

DSP 9 4%

DSP 10 3%

Other 6%

Market Share by DSP, Q2’13

Note: Index by CasaleMedia is an exchange layer that enables publishers and suppliers to sell their ad impressions in real &me (in essence, a SSP). Index tracks over 40,000 brands and adver&sers globally on a daily basis across RTB marketplaces. Index processes 3 to 4 billion bids per day.

According to Index Exchange, over 70% of ad spend on its planorm was concentrated among only 5 DSPs. Top three DSPs accounted for 42% of the market.

14

Rubicon is a SSP and premium ad network. The company claims it powers 40% of the top 500 publishers and works with over 100,000 adver&sers.

Employees & Status: 450+, Public (RUBI) Products: Adver&sing Automa&on Cloud, Buyer Cloud, Seller Cloud Investors: Clearstone Ventures, Mayfield, IDG Ventures, Peacock Equity, SVB, Square 1

PubMa&c is a SSP. The company claims it works with 400+ adver&sing partners.

Employees & Status: 354+, Private Products: PubMa&c Premier (ad solu&ons for large media companies), AdFlex (ad purchasing system), REVV (yield op&miza&on planorm), PubConnect, and PubMa&c Ad Auc&on Engine Investors: Nexus VP, DFJ, Helion VP, August Capital, SVB

Admeld is an SSP that powers Google’s DoubleClick for Adver&sers. Admeld was acquired for ~$400M in 2011.

Employees & Status: N/A, Acquired by Google Features: Ad serving, yield and sales management, mobile, video, audience management, rich media Investors: Foundry Group, Spark Capital, Norwest Venture Partners, Time Warner Investments

MoPub is a mobile SSP and RTB ad exchange. As of May 2013, MoPub conducts +2b ad auc&ons each day and reaches more than 550m unique devices a month.

Employees & Status: 59+, Acquired by Twiger Products: Ad Serving, Network media&on, MoPub Marketplace, Demand-‐Side Planorm, Private Marketplace, Rich Media Investors: Jafco Ventures, Accel Partners, Harrison Metal Capital, Iris Capital

Nexage is a mobile SSP and private exchange. The company claims to work with 300+ publishers. 50% of ad spend through Nexage comes from DSPs, 40% from ad networks, and 10% from trading desks.

Employees & Status: 85+, Acquired by Millennial Media Products: RTB, Media&on, Private Exchange, Ad Server, Nexage Connect Investors: GrandBanks Capital, Relay Ventures, SingTel Inno8, Hearst Ventures

LioDNA powers OpenX’s publisher SSP solu&ons. OpenX is RTB ad exchange and SSP, ranked second behind Google in terms of publisher ad server install base.

Employees & Status: N/A, Acquired by OpenX Features: yield op&miza&on, cross-‐device targe&ng, transparency Investors: Ben Franklin Technology Partners, various Angel investors

Notable SSPs


15

Bluekai is a data exchange and DMP. Bluekai has data on +200m customers across 10,000 agributes and executes over 18m data traders per day.

Employees & Status: 139+, Acquired by Oracle Products: DMP, Audience Data Marketplace, Mobile DMP, Audience Analy&cs Suite Investors: Redpoint Ventures, e.ventures, Bagery Ventures, GGV Capital

eXelate is an data exchange for behavioral targe&ng data. eXelate has a 700m+ user database and 200+ data partnerships

Employees & Status: 100+, Private Products: Op&X (analy&cs), conneX (data sales infrastructure), eXchange (data marketplace), maX (custom model service) Investors: Carmel Ventures, Menlo Ventures, Trident Capital, NewSpring Capital\\

[X+1] is a DMP and DSP, among other marke&ng sooware offerings.

Employees & Status: 138+, Acquired by Rockenuel Products: Origin Digital Marke&ng Hub planorm includes the Origin Media DSP, Analy&cs, DMP, and site op&miza&on Investors: Advanced Technology Ventures, Hudson Ventures, Blue Chip, Intel Capital, Areas Capital

Aggregate Knowledge (AK) is a DMP. Most of AK’s customers are direct adver&sers charged on a fixed fee and/or per-‐impression basis. AK gets data from publishers and data providers but does not pay them, rather AK gives them visibility to adver&sers.

Employees & Status: 63+, Acquired by Neustar Products: Media Intelligence Planorm Investors: First Round Capital, NSV, KPCB, DAG Ventures, OVP, Founda&on Capital

Lotame is a data exchange and a DMP. The bulk of Lotame’s revenue comes is from a license fee plus usage model.

Employees & Status: 67+, Private Products: Crowd Control (audience DMP), Smart Data (audience targe&ng), Crowd Control Intelligence (audience insight) and G.O.A.L. (audience segment op&miza&on) Investors: Bagery Ventures, Hillcrest, Emergence, Pinnacle Ventures, beta works

Krux is a DMP with a focus on security. Krux’s planorm reaches more than 600 million users worldwide.

Employees & Status: 90+, Private Products: Data Sentry & Krux Inspector (security), SuperTag & ADM (analy&cs and management), Interchange (data mone&za&on) Investors: Accel Partners, IDG Ventures

Notable DMPs


16

Acxiom collects data on consumers from public filings, consumer surveys, magazine subscriber lists, warrant cards, and more. The company executes +1 tril. data transac&ons per week and maintains a database of 700 mil. customers.

Employees & Status: 6,300+, Public (ACXM) Business divisions: Marke&ng and data services, IT infrastructure, e-‐mail fulfillment, and outsourced call-‐centers

LiveRamp enables ad targe&ng based on offline customer data. The company is focused solely on data onboarding. LiveRamp’s services are mostly used by DSPs and DMPs.

Employees & Status: 80+, Acquired By Acxiom Investors: Ron Conway, North Bridge Ventures, SooTech VC, Rembrandt, Founders Fund, Felicis Ventures, Peter Thiel, Jeff Clavier

Datalogix collects data on customers mainly from agreements with companies that offer loyalty cards or membership programs. The company claims it holds data on almost every U.S. household and more than $1 tril. worth of transac&on data

Employees & Status: 370+, Private Products: DLX Planorm, DLX ROI, DLX Net Investors: General Catalyst, Costanoa, Sequel VP, IVP

Alliance Data’s Epsilon provides data management and loyalty marke&ng services for 750+ clients. By managing e-‐mail lists for their clients and mapping them to loyalty program data, Epsilon has built transac&on profiles on 130m households.

Employees & Status: 3800+, Public (ADS) Products: Marke&ng Data, Online Targe&ng, Agility Loyalty (loyalty programs), Agility Harmony (email), Aspen CRM (automo&ve)

Experian marke&ng services collects data from Hitwise (IP-‐based web traffic measurement) and CheetahMail (e-‐mail planorm) along with Experian’s extensive consumer credit databases that can be used to target customers online.

Employees & Status: 9800+, Public (EXPN) Features: Consumer insights, targe&ng, cross-‐channel marke&ng, data quality

Notable Data Providers

Neustar collects telco data that can be used to target customers offline and online. Notably, Neustar acquired TARGUSinfo in 2011 for $650M. At the &me, TARGUSinfo was responsible for 86% of all U.S. cable and VOIP caller ID subscribers.

Employees & Status: 1400+, Public (NSR) Features (marke&ng only): iden&fica&on & verifica&on, customer acquisi&on, customer iden&ty management, SMS messaging


17

Ad Formats – Global

0% 10% 20% 30% 40% 50%

120x600 160x600 180x150 300x250 300x600 468x60 728x90 Other

Display (% of Total Impressions)

0%

25%

50%

75%

100%

300x50 300x250 320x50 728x90

Mobile (% of Total Impressions)

0%

25%

50%

75%

15-‐second pre-‐roll

15-‐second pre-‐roll companion

30-‐second pre-‐roll

30-‐second pre-‐roll companion

Video (% of Total Impressions)

Source: Turn

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$1

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Display Mobile Video

eCPM – Global Ad Spend Jul-‐Sept. 2013

July August September

Defini&ons

Display: Ads that appear on website on Desktop, non –search

Mobile: In-‐app and mobile web adver&sements, includes sta&c, interac&ve, and video ads

Video: Video adver&sements that are displayed on desktop formats, non-‐mobile

89%

11%

% of Desktop Impressions Q2’13

Cookie

No Cookie

18

Cookie Prevalence

Source: Casale Media (Index Exchange)

38%

62%

% of Mobile Impressions Q2’13

Cookie

No Cookie

17%

47%

36%

% of Impressions by Cookie State Q2’13

No Cookie

Cookie & 3P Data

Cookie & No 3P Data

27%

31%

41%

1%

Distribu&on of Impressions without Cookies Q2’13

Windows Desktop

Mac Desktop

Mobile

Other Desktop

Cookie tracking is highly prevalent on desktop and much less prevalent on mobile. The majority of impressions served with the use of cookies, about half were served with cookies and third-‐party data.

19

Bid Volume and Avg. CPM (Desktop & Mobile) According to data from Index Exchange, there is a moderate degree of consistency in bid volumes and avg. CPMs across quarters.

Travel, Auto, and Telecom have the highest avg. CPMs while Retail, Telecom and Financial have the largest bid volumes.

0

10

20

30

40

50

60

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80

90

100

Bid Volume Avg. CPM

Top 10 Sectors by Bid Volume (Indexed), Q2’13

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10

20

30

40

50

60

70

80

90

100

Bid Volume Avg. CPM

Top 10 Sectors by Bid Volume (Indexed), Q1’13

Source: Casale Media (Index Exchange)

20

US Digital Display Ad Spending

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014 2015

Net US Digital Display Ad Revenue Share

Google

Facebook

Yahoo

Microsoo

Aol

Twiger

Other

Google and Facebook generate the largest por&on of US digital display ad revenue. Yahoo! is expected to decline substan&ally in the coming years while Twiger con&nues to grow display revenues at nearly 100% year over year.

$12.3B $23.9B $15B $17.7B $20.73B Total Revenue:

Source: eMarketer

21

Top 20 Video Ad Networks (ComScore)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

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45,000

0

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40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

August 2013 -‐ Top 20 Video Proper&es by Unique Visitors (000’s) -‐ (Comscore)

Total Unique Vieweres Average Daily Unique Viewers

Source: ComScore

Total U

niqu

e View

ers

Average Daily Uniqu

e View

ers

22

Notable Video Ad Tech Companies

Tremor is a video ad network that generates the majority of its revenue through media sales of premium digital video inventory.

Employees & Status: 345+, Public (TRMR) Products: Video Hub, Video Hub for Adver&sers (VHA), Tremor Video Network Investors: SV Angel, Canaan, Masthead, Meritech, SAP Ventures, DFJ, W Capital Partners, European Founders Fund

TubeMogul is a programma&c video ad SaaS planorm that allows adver&sers to buy media from public and private exchanges, instead of buying and reselling inventory.

Employees & Status: 375+, Public (TUBE) Products: Play&me Video Adver&sing, OneLoad Investors: Trinity, Founda&on Capital, Knight’s Bridge, SingTel, Northgate

YuMe is a video ad network that offers publisher-‐ and agency-‐side technologies. YuMe is ooen used in conjunc&on with primary ad serving planorms such as DoubleClick and Freewheel. Employees & Status: 500+, Public (YUME) Products: Connected Audience Network, Service Providers, Publishers Investors: SV Angel, Accel, Kholsa, DAG, Intel, Samsung, Translink, WestSummit

Videology is a video DSP for RTB through exchanges, including their own exchange. Videology generates revenue through arbitrage of guaranteed inventory.

Employees & Status: 320+, Private Technology: Ad decisioning, advanced targe&ng, repor&ng & analy&cs Investors: NEA, Valhalla, Comcast, Pinnacle

Adap.tv provides programma&c exchange technology to adver&sers and publishers. Adapt.tv does not sell media but rather takes a cut of transac&ons. Adap.tv offers premium inventory via private exchanges

Employees & Status: 300+, Acquired by AOL Products: Pathway Planorm, Marketplace Investors: Gemini Israel, Redpoint, BVP, Spark Capital

BrightRoll is a programma&c video ad network and private & public exchange. According to comScore, BrightRoll is second to Google (Youtube) in terms of unique visitors.

Employees & Status: 425+, Private Products: Brightroll Exchange (BRX), BRIQ (ad buying), Targe&ng, Op&miza&on Engine Investors: True Ventures, Adam Street Partners, Scale VP, KPG, Comerica, Trident Capital, Felicis Ventures

Premium brand network, scager, non-‐programma&c

Performance brand network, scager, programma&c

Video DSP, programma+c

Video DSP for RTB, video ad exchange

Video DSP, private and public exchange, programma+c

Video ad market, private and public exchange, programma&c


23

Mobile eCPMs

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

May-‐12 Jun-‐12 Jul-‐12 Aug-‐12 Sep-‐12 Oct-‐12 Nov-‐12 Dec-‐12 Jan-‐13 Feb-‐13 Mar-‐13 Apr-‐13 May-‐13 Jun-‐13 Jul-‐13 Aug-‐13 Sep-‐13

MoPub Marketplace eCPM (Banner + Inters&&als)

0

2

4

6

8

Q1 '13 Q2 '13 Jul-‐13 Aug-‐13 Sep-‐13

Compe&&ve Factor (Avg. Bids Per Auc&on Won)

According to MoPub, eCPMs and bidding compe&&on are rising for mobile adver&sing formats. Furthermore, iOS consistently provides higher eCPMs than Android.

Source: MoPub

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

iOS vs. Android eCPM

iOS Android

24

Mobile Ad Network Landscape

Source: Mobyaffiliates, MobiThinking, Kargo, Thomvest Research

Mobile Exchanges

Mobile Ad Networks

Demand Side Planorms

Ad Servers & Supply Side Planorm

Rewards Networks

Rich Media and Video Networks

Premium Mobile Ad Network

Local Mobile Networks

Cross Promo&on Networks Data Partners

CPA Ad Networks

Acquired

Brands & Agencies

25

26

Top 10 Adver&sers by Ad Spend

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

INTERNET DISPLAY

RADIO

TV

OUTDOOR

NEWSP.

MAGAZINES

UNMEASURED

Aoer many years of growth, top adver&sers’ ‘Internet’ spend remained consistent at 9% between 2011-‐12 Note: this figure includes display only (excluding search, video and mobile channels)

Source: AdAge

Top Adver&sers by Ad Spend in 2012 ($MM)

27

Digital vs. Analog % of Spend

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Fast Moving Consumer Goods

Retail

Healthcare

Auto

Leisure/Luxury/Energy

TMT

Financial Services

Publicis Clients’ % of Spend to Digital/IP vs. Analog By Industry Ver&cal

Digital/IP Analog

Source: Publicis Groupe

28

Top 15 Agencies Holding Co.'s by Revenue

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

WPP Omnicom Group

Publicis Groupe

Interpublic Group of Cos.

Dentsu Inc.* 1

Havas Hakuhodo DY

Holdings*

Alliance Data

Systems Corp.'s

Epsilon* 2

MDC Partners

Experian's Experian Marke&ng Services

Acxiom Corp.

Sapient Corp.'s

SapientNitro

IBM Corp.'s IBM

Interac&ve*

DJE Holdings 3

Cheil Worldwide

Top 15 Agency Holding Co. Ranked by 2012 Revenue ($M)

Worldwide US

1. Es&mated pro forma revenue including Aegis Group (acquired in March 2013) and Roundarch (acquired by Aegis in March 2012). 2. Es&mated pro forma revenue including Hyper Marke&ng (acquired in November 2012) and Aspen Marke&ng Services (acquired in May 2011). 3. Owns Edelman.ca

Source: AdAge DataCenter

Top 10 agency holding companies generate 42% of the worldwide and 42% of the US revenues of the top 50 agency holding companies. Overall, revenues grew 4.5% worldwide and 5.3% in the US.

29

Agency Revenue Composi&on

CRM , 35%

PR, 10% Specialty, 10%

Media Buying, 15%

Crea&ve, 30%

Adver&sing 45%

Marke&n

g Services 55%

Source: AdAge, J.P. Morgan

Agency Discipline 2012 Revenue

Growth Rate (vs. 2011)

Digital (From All Disciplines) $11.6B 6.9%

Adver&sing $11B 4.8%

CRM/Direct $6.6B 3.6%

Public Rela&ons $3.9B 5.6%

Health Care $3.6B 2.1%

Media $3.3B 7.4%

Promo&on $2.9B 9.2%

U.S. Agency Revenue by Category – Ad Age Est. Agency Revenue Breakdown – J.P. Morgan

30

Top 5 Agencies Worldwide by Category

Source: AdAge DataCenter, 2013

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Dentsu [Dentsu] BBDO Worldwide* [Omnicom]

McCann Erickson Worldwide [Interpublic]

Hakuhodo [Hakuhodo DY Holdings]

DDB Worldwide [Omnicom]

Agencies by 2012 Wordwide Revenue ($M)

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Epsilon [ Alliance Data Systems]

Wunderman [WPP]

Experian Marke&ng Services (Experian)

Acxiom Corp. DigitasLBi [Publicis]

CRM/Direct-‐Marke&ng Networks by 2012 Worldwide Rev. ($M)

$0

$200

$400

$600

$800

$1,000

$1,200

Wunderman [WPP]

Digital@Ogilvy [WPP]

DigitasLBi [Publicis]

SapientNitro [Sapient Corp.]

IBM Interac&ve [IBM Corp.]

Digital Agency Networks by 2012 Worldwide Revenue ($M)

$0

$200

$400

$600

$800

$1,000

$1,200

Starcon MediaVest [Publicis]

OMD Worldwide [Omnicom]

Mindshare Worldwide [WPP]

Carat [Dentsu] ZenithOp&media [Publicis]

Media Agencies by 2012 Worldwide Revenue ($M)

31

Top 5 US Agencies by Category

Source: AdAge DataCenter, 2013

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

iCrossing [Hearst Corp]

360i [Dentsu] iProspect [Dentsu]

Pla�orm Adver&sing

Performics [Publicis]

US Search-‐Marke&ng Agencies by 2012 Revenue (000’s)

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Wunderman [WPP]

SapientNitro [Sapient Corp.]

Deloige Digital [Deloige Touche

Tohmatsu]

Razorfish [Publicis]

Ogilvy & Mather Adver&sing [WPP]

US Mobile-‐Marke&ng Agencies by 2012 Revenue (000’s)

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

George P. Johnson [Project WorldWide]

GMR Marke&ng [Omnicom]

Jack Morton Worldwide [Interpublic]

Derse Team Enteprises [MDC Partners]

US Experien&al/Event-‐Marke&ng Agencies by 2012 Rev. (000’s)

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

Integer Group [Omnicom]

MarketStar [Omnicom]

George P. Johnson [Project WorldWide]

Momentum Worldwide [Interpublic]

GMR Marke&ng [Omnicom]

US Promo&on Agencies by 2012 Revenue (000’s)

32

Agency Holding Company Structure

Source: BMO Capital Markets

Adver&sing Marke&ng Services Key Clients

Major: JWT, Ogilvy & Mather, Y&R, Grey

Other: United Group, Bates Asia, CHI, Tapsa

Media Buying: GroupM (Mediaedge:cia, Mindshare,MediaCom, Maxus)

CRM/Direct: Wunderman, OgilvyOne, 141 Worldwide, G2, 24/7 Real Media

PR: Hill & Knowlton, Burson-‐Marsteller, Ogilvy Public Rela&ons, Cohn & Wolfe

Market Research/Other: Kantar Group, CommonHealth, Landor

Ford, Unilever, P&G, Microsoo, Dell, J&J, Colgate, Nestle, GSK, BP, Allianz, Pfizer, IBM, HSBC


Global Adver&sing Network: BBDO, BBD, TBWA

Other: Goodby Silverstein, GSD&M, Merkley + Partners

Media Planning and Buying: OMD, PHD, Prometheus

Direct marke&ng and digital: Rapp

Promo&on and events: Integer

PR: Fleishman-‐Hillard

McDonald’s, Pepsi, Nissan, AT&T, Hewleg-‐Packard, Johnson & Johnson, Chevrolet, Mars


Global Adver&sing Network: McCann Erickson, Draofcb, Lowe + Partners

Other: Compbell-‐Ewald, Hill Holiday, Gotham

Media Planning and Buying: Universal McCann, Ini&a&ve

Interac&ve: R/GA, MRM Worldwide

Draofcb, Jack Morton, Weber Shandwick

General Motors, Johnson & Johnson, Microsoo, Mastercard, P&G, Verizon, Unilever, Coca-‐Cola


Major: Publicis WW, Saatchi & Saatchi, Leo Burneg

Other: Fallon Worldwide, Kaplan Thaler, Bartle Bogle Hegarty

Media Buying: Publicis Groupe Media, Zenith Op&media, Starcom MediaVest

CRM/Direct: Digitas, ARC Worldwide, Razorfish, Rosega

PR: Manning, Selvage & Lee

Other: Publicis Healthcare Group, Bromley, iSE

P&G, Toyota, Ferrero, Coca-‐Cola, General Mills, Disney, Nestle, Sanofi-‐Aven&s, L’Oreal, Carrefour

33

Agency Trading Desks Holding Company

Source: BMO Capital Markets, Thomvest Research

Media Group Agency Trading

Desk Other Tech-‐Focused Specialty Agencies

Relevant IPG Umbrella Agencies: Universal McCann, Ini&a&ve

•  Reprise Media – SEO, SEM, SMM and custom solu&ons •  Ansible – Full-‐service mobile marke&ng agency; crea&ve, strategy, analy&cs, texts, QR codes •  Geomentum – Hyper-‐local marke&ng and media strategy •  Shopper Sciences – Full-‐service shopper marke&ng consultancy •  IPG Media Lab – New product analysis and development, planorm resource

Relevant WPP Umbrella Agencies: GroupM (Mindshare, MEC, MediaCom, Maxus)

•  24/7 Media – Digital ad management planorm for adver&sers and publishers. SSP is called Open AdStream. 24/7 provides ad network and analy&cs

•  Media Innova&on Group – Develops new technology for acquiring, op&mizing and measure digital media

•  GroupM Next – Research agency focused on online, search, social, mobile and emerging markets

Relevant Omnicom Umbrella Agencies: Omnicom Media Group, PHD, OMD

•  Annalect – Data and analy&cs driven marke&ng technology planorm. Used by nearly all of Omnicom’s media planning and buying clients to build insights and dash boards. Includes the following:

•  Resolu&on Media – Behavior, search, social media, mobile and display marke&ng •  BrandScience – Business and marke&ng consultancy, econometrics

•  TargetBase – Database marke&ng agency, provides crea&ve, analy&cs, tech, strategy •  Promoetheus – Spun off from OMD in 2005, focused on ROI and accountable media

Relevant Publicis Umbrella Agencies: Vivaki (Starcom MediaVest, ZenithOp&media)

•  Digitas – Number one digital agency in the US by revenue •  Razorfish – All aspects of digital campaigns from crea&ve to ad buying across channels •  Big Fuel – Social marke&ng agency •  CRM365 – Social/mobile data-‐lead offering •  Performics – SEO and SMO services •  Vivaki Nerve Center – Used by en&re Vivaki network; tests new technologies, tracking, bid management, data partnerships, analy&cs

Investments and Exits

34

35

Global VC Investment in Ad Tech

Source: Crunchbase, Pitchbook Data

74

105

159

193

157

201

222

237

217

139

0

50

100

150

200

250

$0

$500

$1,000

$1,500

$2,000

$2,500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Total Capital Invested ($M) Deal Count

Venture capital investment in adver&sing technology reached an all-‐&me high in 2011. VC investment in ad tech declined in 2013 as compared to 2012 and 2011.

Ad Tech VC Deal Count and Amount Raised 2005-‐2014 ($MM)

36

Recent US VC Financings in Ad Tech

Source: Pitchbook Data

Company Deal Date Deal Size Raised to Date VC Round HQ Loca&on Adjust 08-‐Sep-‐2014 7.60 11.90 4th Round Berlin, Germany

BlueCava 04-‐Sep-‐2014 1.50 36.87 6th Round Irvine, CA

Netser&ve 04-‐Sep-‐2014 3.00 21.27 3rd Round Morrisville, NC

xAd 04-‐Sep-‐2014 50.00 92.19 7th Round New York, NY

Adinch 03-‐Sep-‐2014 3.00 4.00 2nd Round San Francisco, CA

Verve Mobile 26-‐Aug-‐2014 4.10 41.57 7th Round Carlsbad, CA

Datanyze 25-‐Aug-‐2014 2.00 2.00 1st Round San Mateo, CA

AdStage 13-‐Aug-‐2014 6.25 8.78 4th Round San Francisco, CA

Adello 12-‐Aug-‐2014 2.00 2.00 1st Round Redwood City, CA

EverString 12-‐Aug-‐2014 12.00 12.00 2nd Round San Mateo, CA

Windsor Circle 12-‐Aug-‐2014 5.25 7.69 4th Round Durham, NC

July Systems 08-‐Aug-‐2014 3.25 58.18 7th Round Burlingame, CA

JoopLoop 07-‐Aug-‐2014 0.03 0.03 1st Round Hoboken, NJ

VentureBeat 07-‐Aug-‐2014 3.28 3.64 2nd Round San Francisco, CA

Reten&on Science 05-‐Aug-‐2014 7.00 9.05 3rd Round Santa Monica, CA

Smaato 05-‐Aug-‐2014 25.00 47.00 4th Round San Francisco, CA

ADmantX 31-‐Jul-‐2014 2.40 6.60 3rd Round West Harnord, VT

Ds&llery 30-‐Jul-‐2014 24.32 56.00 3rd Round New York, NY

Kixer 29-‐Jul-‐2014 1.00 1.00 1st Round Los Angeles, CA

Mobile Ac&on 23-‐Jul-‐2014 0.81 0.81 1st Round San Francisco, CA

SmartZip Analy&cs 23-‐Jul-‐2014 12.00 23.05 3rd Round Pleasanton, CA

Glow Digital Media 22-‐Jul-‐2014 7.00 8.30 2nd Round London, United Kingdom

Intent Media 21-‐Jul-‐2014 22.70 50.99 3rd Round New York, NY

Supersonic 21-‐Jul-‐2014 15.00 23.20 3rd Round San Bruno, CA

Monetology 18-‐Jul-‐2014 1.50 1.50 1st Round Atlanta, GA

37

Recent US VC Financings in Ad Tech Cont.


Company Deal Date Deal Size Raised to Date VC Round HQ Loca&on Capillary Technologies 17-‐Jul-‐2014 14.00 35.60 4th Round Bangalore, India

Locket 17-‐Jul-‐2014 0.02 0.52 3rd Round New York, NY

AdAdapted 11-‐Jul-‐2014 0.75 1st Round Ann Arbor, MI

Ohana Companies 11-‐Jul-‐2014 0.79 15.91 5th Round Wilmington, DE

Tapad 30-‐Jun-‐2014 7.00 16.80 5th Round New York, NY

BrightFunnel 29-‐Jun-‐2014 1.00 1st Round San Francisco, CA

App Annie 27-‐Jun-‐2014 17.00 39.00 4th Round Beijing, China

ContextLogic 27-‐Jun-‐2014 50.00 74.70 4th Round San Francisco, CA

LiquidM 27-‐Jun-‐2014 3.67 5.45 2nd Round San Francisco, CA

White Ops 24-‐Jun-‐2014 11.09 11.09 1st Round New York, NY

OwnerIQ 20-‐Jun-‐2014 11.00 39.36 6th Round Boston, MA

TapFwd 19-‐Jun-‐2014 0.15 0.15 1st Round San Francisco, CA

Appier 18-‐Jun-‐2014 6.00 7.00 2nd Round Taipei, Taiwan

Pixability 18-‐Jun-‐2014 1.80 10.97 4th Round Boston, MA

Rhiza 17-‐Jun-‐2014 3.00 3.00 1st Round Pigsburgh, PA

Wayin 17-‐Jun-‐2014 13.10 34.24 2nd Round Denver, CO

LaunchHub 16-‐Jun-‐2014 1.83 1.83 1st Round Redwood City, CA

mNectar 16-‐Jun-‐2014 7.00 7.08 1st Round San Francisco, CA

BrightRoll 13-‐Jun-‐2014 1.24 37.52 5th Round San Francisco, CA

Snipi 12-‐Jun-‐2014 3.10 7.42 3rd Round Philadelphia, PA

Placed 10-‐Jun-‐2014 10.00 13.40 3rd Round Seagle, WA

Yieldbot 05-‐Jun-‐2014 18.00 30.35 4th Round New York, NY

Yext 04-‐Jun-‐2014 50.25 116.44 7th Round New York, NY

Free ATM 03-‐Jun-‐2014 0.75 1.09 3rd Round Brooklyn, NY

MediaMath 03-‐Jun-‐2014 176.00 222.92 7th Round New York, NY

BlueConic 28-‐May-‐2014 4.00 8.00 3rd Round Boston, MA

Datalogix 28-‐May-‐2014 45.25 91.97 6th Round Westminster, CO

38

Global Ad Tech M&A Ac&vity


Note: Transac&on amounts do not encompass every recorded deal; some private market acquisi&ons are not disclosed. However, deal count encompasses disclosed and undisclosed transac&ons.

Global Ad Tech M&A Ac&vity by Deal Count (2008-‐2013)

24

20

34 35

46

39 42

2008 2009 2010 2011 2012 2013 2014

39

Recent Ad Tech M&A Ac&vity


Company Deal Date Deal Size Total Raised Acquirer HQ Loca&on [x+1] 05-‐Sep-‐2014 230.00 67.78 Rocket Fuel New York, NY

Luminate 05-‐Sep-‐2014 30.00 Yahoo Mountain View, CA

InsightExpress 26-‐Aug-‐2014 25.00 Milward Brown Stamford, CT

adSage 21-‐Aug-‐2014 100.00 20.00 BesTV Beijing, China

LiveRail 15-‐Aug-‐2014 500.00 5.00 Facebook San Francisco, CA

OnSwipe 05-‐Aug-‐2014 19.40 Beanstock Media New York, NY

BlueKai 23-‐Jul-‐2014 425.00 37.49 Oracle Cuper&no, CA

Grow Mobile 16-‐Jul-‐2014 42.00 1.00 Perion San Francisco, CA

Zoove 14-‐Jul-‐2014 67.87 Mblox Palo Alto, CA

LiveRamp 01-‐Jul-‐2014 310.00 32.00 Acxiom San Francisco, CA

Jirbo 24-‐Jun-‐2014 350.00 2.00 Opera Sooware Los Angeles, CA

mDialog 19-‐Jun-‐2014 8.15 Google Toronto, Canada

Kontera 11-‐Jun-‐2014 150.00 36.16 SingTel San Francisco, CA

Namo Media 05-‐Jun-‐2014 50.00 1.90 Twiger San Francisco, CA

NowSpots 02-‐Jun-‐2014 25.50 1.10 Marin Sooware Chicago, IL

Dis&mo 28-‐May-‐2014 1.00 App Annie Utrecht, Netherlands

MarketVibe 21-‐May-‐2014 OwnLocal Aus&n, TX

PrecisionDemand 21-‐May-‐2014 16.72 Adap.tv Seagle, WA

Mocean Mobile 19-‐May-‐2014 15.50 46.59 PubMa&c New York, NY

Convertro 07-‐May-‐2014 91.00 10.25 AOL Santa Monica, CA

Adometry 06-‐May-‐2014 30.61 Google Aus&n, TX

Adchemy 05-‐May-‐2014 119.22 WalmartLabs Foster City, CA

AcuityAds 25-‐Apr-‐2014 5.75 Wildlaw Capital Toronto, Canada

Korrelate 23-‐Apr-‐2014 9.55 JD Power New York, NY

40

Global Ad Tech IPO Ac&vity


2013 was a breakout year for ad tech IPOs with five companies raising a combined ~$630M from public markets. Several more adver&sing technology companies are expected to IPO in 2014.

Note: Transac&on amounts do not encompass every recorded deal; some private market acquisi&ons are not disclosed. However, deal count encompasses disclosed and undisclosed transac&ons.

Global Ad Tech IPO Ac&vity (2009-‐2013)

0

1

0

1

5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

$0

$100

$200

$300

$400

$500

$600

$700

2009 2010 2011 2012 2013

IPO Transac+on ($M) IPO Deal Count

Company Date Amount Raised ($M)

Criteo (CRTO) 29-‐Oct-‐2013 288.10

Rocket Fuel (FUEL) 20-‐Sep-‐2013 116.00

YuMe (YUME) 06-‐Aug-‐2013 46.13

Tremor Video (TRMR) 28-‐Jun-‐2013 75.00

Marin Sooware (MRIN) 22-‐Mar-‐2013 105.00

Millennial Media (MM) 29-‐Mar-‐2012 132.60

MediaMind Technologies (MDMD) – Acquired by Digital Genera&on

11-‐Aug-‐2010 57.50

41

Thank you

Don Butler [email protected]

Andrew Tweed [email protected]

Daphne Ewing-‐Chow [email protected]

A special thanks to Eric Liu and Natasha Osborne for their contribu&ons to the research

203 Redwood Shores Parkway Suite 680 Redwood City, CA 94065