marketplace networks and exchanges
TRANSCRIPT
IAB M k t l N t k d X hIAB Marketplace: Networks and XchangesMarch 31, 2008
San Francisco ChicagoNew York MinneapolisBoston
William Morrison415-249-1989
Robert Coolbrith
Member of the FINRA and SIPC.
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/AgenciesThe Web is fragmenting at an accelerating rateThe Web is fragmenting at an accelerating rateBuying media on small sites can be time consumingFormats multiplying – Traditional Display, Video, Mobile, Widgets, Gadgets, WadgetsEvolving standards
The Challenge For PublishersBursty traffic unpredictable inventory supply uncertaintyLow sell through usually reflects selling constraints, not intrinsic value of inventoryAccess to non-endemic advertisersMaximizing the value of their audience and advertising inventory
Today’s conference will explore the role of Ad Networks and Ad Exchanges
1
y p g
Hyper-Fragmentation on the Web
2
1026160 Million Registered Websites, 4.031026 More To Go
180,000,000
140,000,000
160,000,000
100 000 000
120,000,000
80,000,000
100,000,000
40,000,000
60,000,000
-
20,000,000
May-00
Aug-00
Nov-00
Feb-01
May-01
Aug-01
Nov-01
Feb-02
May-02
Aug-02
Nov-02
Feb-03
May-03
Aug-03
Nov-03
Feb-04
May-04
Aug-04
Nov-04
Feb-05
May-05
Aug-05
Nov-05
Feb-06
May-06
Aug-06
Nov-06
Feb-07
May-07
Aug-07
Nov-07
Feb-08
Hostnames Active
3Source: Netcraft , GoDaddy, and ThinkEquity Partners LLC research
M A N F M A N F M A N F M A N F M A N F M A N F M A N F M A N F
1.5 Blogs Being Created Every Second
4
Explosion of Social Network Usage
5
The Proliferation of Social Media
Number of Social Networks Created at Ning comNumber of Social Networks Created at Ning.com
180,000
200,000
120 000
140,000
160,000
80,000
100,000
120,000
20 000
40,000
60,000
0
20,000
Feb-07
Mar-07
Apr-07
May-07
Jun-0
7
Jul-0
7
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-0
8
Feb-08
6Source: Ning and ThinkEquity Partners LLC research
Fragmentation is Accelerating – The Widget Phenomenon
40
50
M)
M)
30
40
Use
rs (M
MU
sers
(MM
20
Reg
iste
red
Reg
iste
red
0
10
RR
Source: RockYou Facebook Yahoo! and ThinkEquity Partners LLC
1 3 5 7 9 11 13 15 17 19 21 23Months (1)
Source: RockYou, Facebook, Yahoo!, and ThinkEquity Partners LLC(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
Media Fragmentation – Today
Consumer Ad Market 2007E$258B
Radio
TV
Internet
Yellow Pages
SearchDisplayClassifiedsRichMediaEmail
PrintDirect Mail
8Source: McCann Erickson, IAB, and ThinkEquity Partners LLC research
Media Tomorrow
Consumer Ad Market 2012E$268B
Internet Yellow PagesRadio
TVSearchDisplayCl ifi dClassifiedsRichMediaEmailVideo Pre RollVideo OverlayIn GameMobileMobile VideoSocial MediaWidgets
PrintDirect Mail
WidgetsIn TextMicro SitesUGCAd Funded AppsIPTV
9Source: McCann Erickson, IAB, and ThinkEquity Partners LLC research
IPTV
The Market Response to Fragmentation
Ad N t k G th 2000 2007
350
Ad Network Growth 2000-2007
250
300
150
200
50
100
02000 2001 2002 2003 2004 2005 2006 2007
10Source: ThinkEquity Partners LLC research
What is an Ad Network?
Somewhat analogous to the broadcast/affiliate television modelgAggregate and sell audiences on behalf of publishers to advertisers/agenciesComplicated by inherent fragmentation of Internet
TargetingVerticalContextual
FormatsDisplayText
PricingCPMCPCcs
Business ModelRev ShareArbitrage
BehavioralDemographicRe-targeting
In-TextVideoMobile
CPLCPA
hara
cter
istic Rep Firm
g gGeographicSite Specific
In-GameBlogRSSN
etw
ork
Ch
RSSEmailAudio/PodcastWidgets
Ad
N
11
Widgets
Why Are Marketers Using/Choosing Ad Networks?
2007 Collective Media Study of 100 marketers agencies and media planners2007 Collective Media Study of 100 marketers, agencies and media planners
What is the primary reason you use ad networks?Efficiency – 66%yReach – 52%Targeting – 38%Optimization – 25%Other 6%Other – 6%
What best differentiates one ad network from another?Targeting – 57%Optimization – 47%Inventory – 44%Price – 45%Reach – 33%Reach – 33%Other – 12%
12Source: Collective Media
Key Concerns Among Marketers/Agencies
Wh t’ th i li it d ’t d t k ?What’s the primary reason you limit or don’t use ad networks?Editorial control – 59%Audience duplication – 38%Ad iti 21%Ad position – 21%Type of ad – 18%Client dictates – 17% Other – 10%
Other Considerations for marketers/agenciesQuality/reputation of networkSite targeting capabilitiesCampaign pacing against budgetSales support and customer serviceIntegrated and/or customized campaignsCreative testing
13
gSource: Collective Media and ThinkEquity Partners LLC research
The Publisher Perspective
Wh bli h i d t k ?Why are publishers using ad networks?Too small for internal sales/low impression volumeAbility to create inventory tiersU di t bl i t l / tiUnpredictable inventory supply/creationMechanism to monetize excess or unsold (aka remnant) inventoryAbility to add value through targeting and optimization
Other considerations/concerns for publishersLack of control (branded sites in particular)Sales channel conflictRisk vs. rewardManaging networks can add complexity All ad networks/exchanges not created equal
14
Vertical Networks Proliferating
15Source: Company web sites and ThinkEquity Partners LLC research
Next New Trend – Branded Sites Creating Extended Networks
16Source: Company web sites and ThinkEquity Partners LLC research
Online Ad Exchanges Evolve
A ti b d k t l f d i tAuction based marketplaces for ad inventory
Many different takes on the ad exchange model currently developingReal-time spot marketsReal time spot marketsYield optimization specialistsForward and futures marketsBehavioral and contextual data markets
Current focus improving efficiency of remnant display market
Future possibilitiesFuture possibilities“Secondary” premium marketRe-vending inventory to add value or minimize wasteInventory securitizationInventory securitization
17
How Exchanges and Auction Based Marketplaces Work
Auction platforms sell each impression in real timeExchanges may also optimize off-exchange relationshipsCan create more competition for publisher inventory
Netw ork or
Advertiser
Netw ork or
Advertiser
Network or
Advertiser
Netw ork or
AdvertiserPUBLISHERAD SERVER
Broader Exchange
Environment
Netw ork or
Network or
OR
HARD-CODED AD TAGS
Dynamic Yield Management System
or Advertiser
Netw ork or
Netw ork or
or Advertiser
AdvertiserAdvertiser
Network Netw ork Network Network
Off-exchange Monetization PartnersHistorical eCPM used as proxy for real time bid
18
Historical eCPM used as proxy for real-time bid.
Exchange Benefits for Ecosystem Participants
PublisherP t ti ll hi h i t i ldPotentially higher inventory yieldPromote competition among monetization partnersManage existing off-exchange relationships simultaneouslyEffective for long-tail sites (ad networks are typically “mid-tail” solutions)
Advertiser/AgencyImproved transparencySome ad network functions can be performed in-houseSingle cookie can create efficiency benefitsSome exchanges allow for various placement controls
Ad NetworkIncreased arbitrage opportunities for networks who add valueMarket innovators can achieve scaleEliminate expenses related to publisher recruitment/development/service
EcosystemReduced friction (IOs, faxes, phone calls)Improved transparency
19
Exchange Concerns for Ecosystem Participants
PublisherPublisherPotential lack of controlPotential sales channel conflictComplexity
Advertiser/AgencyPotential lack of controlComplexity
Ad NetworkCommoditizationIncreased competition
EcosystemAdditional complexityNo standardsPotential devaluation
20
Clearing Up Some Misperceptions
Misperception: Auctions drive down prices
21Source: Factset, and ThinkEquity Partners LLC research
Clearing Up Some Misperceptions
Misperception: “Marketplaces” are for “commodities”
22Source: eBay
One Thing is for Certain – The Ecosystem Will Continue to Evolve
The Publisher’s Media Inventory
Order Management Inventory Forecasting Inventory Provisioning
Premium InventorySecondary Premium Remnant Inventory
Yield Management/Optimization
DIRE Agency Network Auction Exchange
CT
Advertisers/Marketers
Agency Agency Agency
Negotiated
Automated
23
Marketer/Agency Questions for Your Ad Network or Exchange
InventoryP i ( t d) N P i ( t tibl ) i t ?Premium (guaranteed) or Non-Premium (remnant, pre-emptible) inventory?Spot market (bided) vs. futures market (reserved inventory)?Safe for brands or direct response only?Control over content adjacency (blind versus site targeting)?j y ( g g)How much reach can you offer on run of network basis?
PricingControl of pricing for buyer and seller?Control of pricing for buyer and seller?Pricing models: CPM, CPC, CPL, CPA?
TargetingContextual behavioral demographic geographic other?Contextual, behavioral, demographic, geographic, other?
FormatsBanners, video, text, mobile?
Publisher typesLong tail, mid tail, large sites Inventory from content sites and/or social media?
24
y
Publisher Questions For Your Ad Network or Exchange
Advertisers and campaignsH ill t h l fli t ith i t l l f ?How will you prevent channel conflict with my internal sales force?Who are your advertiser clients? What types of campaigns do you run?Do you offer site targeting, or publish/share your site list
PricingPricing models: CPM, CPC, CPL, CPA?What kind of eCPM can I expect for my inventory?How do you charge publishers for your services?How do you charge publishers for your services?
Yield ManagementHow do I work with multiple ad networks and/or exchanges?Can yield management be automated/optimized?Can yield management be automated/optimized?
FormatsWhat formats can you sell (video, display, text)?
Control Can I review and prevent certain advertisers from showing up on my site?
25
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 TimeAd networks could become specialized media buyers, focused on performance/arbitrage
Old model: brokerage New model: hedge fundOld model: brokerage New model: hedge fundValue-added networks should continue to thrive
Key differentiators: data, technology, relationships
For Marketers/AgenciesDetermine your goals, ask questions, interview heavilyNo two networks or exchanges are created alikeLines between brand and direct response likely to blurLines between brand and direct response likely to blur
For PublishersManage Inventory strategicallyLeverage ad networks and exchanges to complement not replace direct relationshipsLeverage ad networks and exchanges to complement, not replace direct relationshipsMore competition for inventory could be a good thingNew yield management and optimization approaches could help maximize inventory valueReview strengths/weaknesses, examine business opportunities, determine role in ecosystem
26
Disclosures
Information 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 not warrant its accuracy or completeness. These materials are provided for informational p rposes onl and sho ld not be sed or constr ed as an offer to sell or a solicitation ofpurposes only and should not be used or construed as an offer to sell or a solicitation of an offer to buy any security. Opinions and estimates constitute the judgment of ThinkEquity and are subject to change without notice. Past performance is not indicative of future results ThinkEquity Partners LLC is a member of FINRA and SIPCof future results. ThinkEquity Partners LLC is a member of FINRA and SIPC.
27
Contacts
William MorrisonPartner, Sr. [email protected](415) 249-1989
Robert CoolbrithSr. [email protected](415) 249-6363
28