Embedded Specialized Accomplished

OMMA DDM ConferenceJuly 24, 2013

The Imminent Ad Tech Shakeout: Is Consolidation in the

Horizon?

2

VC Investment in Ad Tech Declining

Source: Headwaters MB

Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013$0.0

$200.0

$400.0

$600.0

$800.0

$1,000.0

$1,200.0

$1,400.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

$645.3

$786.9

$1,242.0

$543.1

$431.0

$945.9

$573.3

$257.8 $253.3

$324.5

109

9890

99 96

75

6357

4856

$7.3 $8.8

$17.7

$6.8 $5.3

$14.6$11.5

$5.5 $6.2 $7.1

Aggregate Deal Value Number of Deals Avg. Deal Size

Valu

e (in

$ m

m)

Num

ber o

f Dea

ls

Ad tech businesses have largely proven to be unprofitable and challenging businesses to exit successfully

3

M&A Activity Increasing as Investors Lose Patience

Ad tech transactions for the first half of 2013 doubled YoY from the beginning of 2012― Investors in the ad tech space are losing patience with slow returns, pushing their companies to

either find buyers or show a clear path to profitability

H1 2012 H1 20130.0

10.0

20.0

30.0

40.0

$0.0

$400.0

$800.0

$1,200.0

$1,600.0

17

34

$163

$1,246

Number of Deals Deal Size

Num

ber o

f Dea

ls

Valu

e (in

$ m

m)

4

Recent M&A Activity

Date Target Buyer / Investor CommentsJul 2013 IgnitionOne

(spinout from Dentsu led by management)

ABS Capital, Persimmon Capital

• Buyside marketing tech platform• Single stack solution for multi-

channel media buying in search, display, mobile, and social

• Competes with Turn, MediaMath, Adobe, Marin Software, Kenshoo, Criteo and Rocketfuel.

• $100M revenueApr 2013 Dedicated Media LIN TV • Multichannel ad buying platformJan 2013 Akamai’s Advertising

Decision Solutions Unit

MediaMath • Akamai’s data co-op and management platform

• Pixel-free tracking technologyJan 2013 MediaWhiz - $10M Matomy • Multichannel performance marketing

platformJan 2013 TapIt! Media - $23M Phunware • Mobile display ad mediation

5

What’s Driving This?Investors have realized that Ad Tech Businesses are generally profit-challenged

Too many “point solutions” funded – Too much overlap and competition

Not enough revenue / profit in the market – unnecessary duplicative costs

― Every dollar of agency spend nets a publisher $0.45 on average

― Remainder gets cut up among trading desks, DSPs, exchanges, networks, data suppliers, data aggregators, ad verification, tag management, retargeters, optimization, SSPs, etc.

Agencies used to be able to manage multiple vendors – now they all want to consolidate their vendor relationships

Only a handful of players are achieving size, scale, profitability (AppNexus)

― Often play the role of consolidator(s) in the space and stepping in where large media strategics have bowed out; can attract growth capital

Most players are running out of funding and not in a position to receive more

Many driven by impatient investors to exit – oftentimes at unattractive valuations

Too large ? … go IPO Too small or undifferentiated? … wind down (AdBrite)

6

Ad Tech IPOs

Tremor Video’s recent IPO suggests previous unsuccessful attempts at securing buyers as those with interest in the space – strategic or financial – become scarce ― Tremor raised only $75.0mm of the $90.0mm it was seeking; unprofitable - $16.0mm loss in 2012

YuMe has recently filed S-1 and others are expecting to follow suit

Recent IPOs Indicative of “Last Resort” Options for Ad Tech Companies

Tremor Video Stock Price Performance since IPO

28-Ju

n-13

29-Ju

n-13

30-Ju

n-13

1-Jul-1

3

2-Jul-1

3

3-Jul-1

3

4-Jul-1

3

5-Jul-1

3

6-Jul-1

3

7-Jul-1

3

8-Jul-1

3

9-Jul-1

3

10-Ju

l-13

11-Ju

l-13

12-Ju

l-13

13-Ju

l-13

14-Ju

l-13

15-Ju

l-13

16-Ju

l-13

17-Ju

l-13

18-Ju

l-13

19-Ju

l-13

20-Ju

l-13

21-Ju

l-13

22-Ju

l-13

$6.50

$7.00

$7.50

$8.00

$8.50

$9.00

$9.50

Clos

ing

Pric

e

Performance

- 16% from IPO open of

$10.00

7

Ad Tech Public Companies

Few ad tech companies are publicly traded; few that are public are performing well― Millennial Media currently at $9.00 vs IPO open $13.00, close $23.50 (down 60%) – unprofitable― Velti currently at $1.00 vs Mar 2012 price of $13.55 (down 92%)― ValueClick is the rare exception – its stock has risen over 30% since Mar 2012 price of $19.74

Publicly traded pure play ad tech companies are few and rare; not many are performing well

Stock Price Performance

Performance

ValueClick+30%

Millennial Media- 60%

Velti- 95%

1-Mar-

12

1-Apr-1

2

1-May

-12

1-Jun-12

1-Jul-1

2

1-Aug-12

1-Sep

-12

1-Oct-

12

1-Nov-1

2

1-Dec

-12

1-Jan

-13

1-Feb

-13

1-Mar-

13

1-Apr-1

3

1-May

-13

1-Jun-13

1-Jul-1

3$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

Millennial Media Velti ValueClick

Clos

ing

Pric

e

8

Market Still Controlled by Small Number of Top Vendors

Advertising agencies agree there is too much overlap amongst companies that only provide simple point solutions over sustainable services

― For every one successful company, there are 35-40 unprofitable companies offering redundant products, splitting a revenue pie that is too small to sustain the entire ecosystem

Few end up achieving the size and scale needed to become attractive acquisition targets or to be consolidators in the space

2008A 2009A 2010A 2011A 2012A0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

73.0%

82.0%

90.0%

Top 50Top 25Top 10

Indu

stry

Rev

enue

%

Top 10 Ad Companies Command 73.0% of Industry Revenues

9

Display Ad Landscape – Unsustainable Number of Players

Source: LUMAscape

10

Search Ad Landscape – Same Here

Source: LUMAscape

11

Video Ad Landscape – … and Here

Source: LUMAscape

12

Mobile Ad Landscape – and it’s becoming an issue Here

Source: LUMAscape

13

Social Advertising Landscape – as well as Here

Source: LUMAscape

14

Agencies / Advertisers Want to Deal with Fewer Vendors and More Single Stack, Multichannel Solutions

Source: LUMAscape

DYNAMIC ADINTELLIGENCE

PLATFORM

CENTRALIZEDAD-SERVING

OPTIMIZATIONRE-TARGETING

DATA MGMTREPORTING

ACCESS INVENTORY TO REACH AUDIENCE

ACROSS PREMIUM PUBLISHERS ANDAD NETWORKS:

VERTICALSBEHAVORIALCONTEXTUAL

VIDEOSMOBILESOCIAL

15

So What’s Happening? Consolidation of Point Solutions toward Broader Platform Offering

Source: LUMAscape

16

Potential Consolidators?

Company Capital Raised Investors CommentsAppNexus $75.0M (Jan 2013) TCV, Venrock, Tribeca • DSPVideology $68.3M (May 2013) NEA, Comcast, Valhalla, Pinnacle,

Catalyst• Video advertising• DSP

RocketFuel $50.0M (Jun 2012) Mohr Davidow, Summit, Northgate, Nokia

• Multichannel DSP

PubMatic $45.0M (Jun 2012) August, DFJ, Nexus, Helion • SSPOpenX $27.5M (Dec 2012) Accel, SAP, Index, Samsung, Mitsui • Ad Exchange and

DSPJumpTap $27.5M (Jun 2012) Summerhill, Redpoint, Valhalla,

General Catalyst• Mobile RTB

Flurry $25.3M (Nov 2012) DFJ, InterWest, Menlo, CrossLink, Union Square

• Mobile analytics and advertising

DataLogix $25.0M (April 2013) IVP, Sequel, General Catalyst • DSPCollective Media $20.0M (May 2013) Accel, Samsung, Cox • Ad exchangeNexage $15.0M (May 2012) Hearst, GrandBanks Capital, Relay,

SingTel• Ad exchange,

mediation and DSP

17 Spring 2013Online Advertising Report

Strategic Buyer Interests

Low Interest / Valuation High

Mobile /Video

Social

Online

Str

ateg

ic I

nte

rest

/ P

rio

rity

RTB Auction

ExchangesDSPs

Self-ServePlatforms

Local / SMB

Search

Agency

SMS / MMS

Marketing

In-AppDisplay

FB Game Ads

Ad NetworksAffiliate Networks

Display

User Acquisition Marketing

In-App

Video

Ad tech companies with strong technology and high potential for scalability in the areas of mobile, video and / or social attract highest interest

18

DMP Trends

DMPs have become fragmented as well – need for a DMP for DMPs / DSPs to emerge― Validate and “cleanse” data from multiple DMPs / DSPs― Provide mediation across various DMPs / DSPs in order to maximize targeting accuracy, reach― Provide integrated DCO, tag management, ad verification capabilities as part of solution

Key trend is the separation of the data layer from the execution layer in the marketing stack― Brands want to leverage learnings of their audience profiles and customer data and apply that to

all marketing and consumer touch-points – online and offline

Biggest opportunity for growth lies in ability to use accurate data profiles across all consumer marketing channels― Huge opportunity in using data to inform offline media buying― Important areas of focus also include social, video and mobile

Current implementation efforts are focused on the core purpose of targeted media buying

Long-term potential for DMPs to be integrated into core business software systems to facilitate data-driven decision making on sales, product dev, fin mgmt

19

DMP Trends

Advertising Yield Optimization

Site Content Optimization

Creative Content Optimization

CRM Program Optimization

Channel Optimization

Emerging Channel Deployment

Multichannel Integration & Optimization

Campaign Channel Attribution

Targeted Media Buying

Customer Insight Development

0.0% 20.0% 40.0% 60.0% 80.0% 100.0%

59.0%

69.0%

73.0%

76.0%

83.0%

84.0%

84.0%

86.0%

90.0%

93.0%

Priority Applications for Future DMPsGenerally Supported Applications by Existing DMPs

Emerging Channel Deployment

Creative Content Optimization

Site Content Optimization

CRM Program Optimization

Advertising Yield Optimization

Multichannel Integration & Optimization

Campaign Channel Attribution

Channel Optimization

Customer Insight Development

Targeted Media Buying

0% 20% 40% 60% 80%

23.0%

32.0%

32.0%

36.0%

37.0%

40.0%

44.0%

45.0%

78.0%

82.0%

Survey conducted by IAP & Winterberry Group