Ad Revenue Report 2009

Ad Revenue Report A Supplemental Guide to the 2nd Annual Premium Publisher Conference

Ad Revenue 2009

presented by

OCTOBER 8TH, NEW YORK CITY

presented by

The 1st Channel is guaranteed inventory that is directly sold at premium rates by a publisher’s direct sales force

The 2nd Channel is non-guaranteed inventory sold through intermediaries, and is increasingly becoming a critical part of the premium publisher’s ad revenue strategy.

Ad Revenue 2009 is focused on improving 2nd Channel monetization strategies for premium publishers

Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

Table of Contents PRESENTATIONS & PANELS Welcome to Ad Revenue 2009, The Annual Premium Publisher Conference........ 4 Ad Revenue 2009 Conference Agenda: Agenda..................................................................................................................... 5 Speakers.................................................................................................................. 6

PREMIUM PUBLISHER TRENDS & DATA Ad Pricing Trends....................................................................................................... 25 The Premium Publisher Interviews........................................................................... 27 Demystifying Buzzwords........................................................................................... 31

THE 2ND CHANNEL ECOSYSTEM

An Interpretation of the 2nd Channel Ecosystem................................................... 37 Ad Inventory Naming Chart....................................................................................... 40 2nd Channel Ecosystem Map................................................................................... 41 2nd Channel Segment Guide..................................................................................... 43

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Thank you to our sponsors

interCLICK, Inc. operates the interCLICK Network, an online advertising platform that combines advanced behavioral targeting with complete data and inventory transparency, allowing advertisers to identify and track their desired audience on an unprecedented level. interCLICK offers advanced proprietary demographic, behavioral, contextual, geographic and retargeting technologies across a network of name brand publishers to ensure the right message is delivered to a precise audience in a brand friendly environment. For more information about the interCLICK Network, visit http://www.interclick.com.

AudienceScience (formerly Revenue Science) is a technology-centric media company focused on the science of online marketing. AudienceScience is the only company worldwide to offer both an audience technology platform and a targeting marketplace, recording billions of behavioral events daily and reaching over 385 million unique Internet users. AudienceScience technology empowers Web publishers, marketers, networks, exchanges, and agencies to create intelligent audience segments to connect people with relevant advertising driving the transition to data-driven audience marketing online. For more information, please visit www.audiencescience.com.

As a progressive online ad network and global marketing company, CPX Interactive is redefining the online advertising landscape. By layering the development and execution of cutting edge online strategies on top of its own global distribution model, CPX ensures advertisers success on any metric while efficiently monetizing 100% of its publishers’ inventory…from premium to remnant. Advertiser and Publisher offerings include Reach, Content and Premium Networks. Visit us at www.cpxinteractive.com.

MediaMath is the leading provider of digital media trading technology and services – helping forward-thinking ad agencies deliver breakthrough client results. The company’s automated buying platform provides advertising agencies with access to more than 10 billion impressions daily, and a simple workflow that manages the powerful analytics and rich data necessary to make best use of them. Founded in 2007, MediaMath is headquartered in New York.

The eXelate Targeting eXchange is the world’s first open marketplace for behavioral targeting data. Ad networks and agencies (buyers on the eXchange) build an instant BT function and optimize campaign delivery. Publishers (sellers on the eXchange) gain audience insight, control over data distribution, and generate new privacy–friendly income. Via its flexible technology platform and business model, eXelate fuels the targeting needs of 50+ networks, buying platforms and exchanges with data on 150MUV in verticals including Business-to-Business, Auto, Travel, Finance, Shopping and Demographic.

Pulse 360 is a trusted sponsored links network that connects marketers with a premium audience on partner sites including MSNBC.com, Weather.com, USAToday.com, Newsweek.com and more. Pulse 360 offers graphical images to augment traditional sponsored text links. Pulse 360 CPA Display Network offers standard banner ad units that can be deployed in both display banner inventory and fixed custom placements on publisher pages. Publishers interested in joining our network should call 1.877.785.7327. www.pulse360.com

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Presentations and Panels

Presentations & Panels

Welcome to Ad Revenue 2009, The Annual Premium Publisher Conference October 8th, New World Stages, NYC Ad Revenue 2009 attendees: I’d like to personally thank all of the attendees, participants, and sponsors of Ad Revenue 2009. This is our second year hosting the Ad Revenue conference and our focus remains the same – provide a forum where the brightest minds in the online display advertising ecosystem can come together and discuss the best strategies to increase advertising revenue made from premium publishers non-guaranteed inventory. Direct sales, for most premium publishers, accounts for the vast majority of advertising revenue. However, the amount of revenue that premium publishers can make from their non-guaranteed inventory is rapidly increasing, but that doesn’t mean that it is simple to manage that inventory. The Ad Revenue conference was created because the ecosystem that powers the premium publisher’s 2nd ad sales channel offers tremendous revenue making opportunities, but it is vast, complex, and challenging to navigate. It is our aim to have the premium publisher attendees learn from the panels and presentations at this event, and implement what they learn into an actionable monetization strategy. So, from everyone on the PubMatic team, welcome to Ad Revenue 2009, and may the strategies you implement based on today’s discussion help you make 2010 a breakthrough year for your ad revenue.

Rajeev Goel, Co-Founder & CEO, PubMatic

PubMatic is a global Ad Revenue Optimization company that provides premium online publishers with a full service solution to manage and monetize non-guaranteed ad inventory. PubMatic¹s real-time Ad Price Prediction technology ensures that online publishers get the most money from their advertising space by deciding in real-time which ad network or exchange can best monetize each impression. Please feel free to contact us: [email protected]

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Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

Ad Revenue 2009: Agenda 9:30

Opening Keynote: The 2009 Ad Revenue Report: Welcome to the 2nd Channel

10:00

Panel: The Blurring Lines of Ad Exchanges, Ad Marketplaces, and Ad Networks

10:45

Networking Break

11: 05 Presentation: Ad Effectiveness: A Closer Look at Ad Networks for Branding Campaigns 11:30 Panel: Standardization, Innovation, & Monetization: How New Ad Units Are Impacting Publishers 12:15

Lunch

1: 30

Presentation: Turning Your Ad Operations Into A Revenue Center

1:55

Panel: The Evolution of Media Buying and What That Means for Publishers

2:35

Networking Break

2:55 Presentation: Government Regulation & Internet Advertising: Everything Publishers Need to Know, and Nothing They Don’t 3:20

Panel: The New Economics And Revenue Opportunities of Data

4:00

Closing Keynote: The Future of Online Advertising and the 2nd Channel

4:25

Happy Hour & Networking presented by

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Presentations & Panels

9:30 AM

Welcome to the 2nd Channel

Amar Goel, Founder & Chairman, PubMatic

The 2nd Channel is the fastest growing segment of online advertising fueled by an ecosystem that is driving rapid innovation. This presentation will showcase the wide range of segments and companies in this ecosystem as well as present brand new quantitative and qualitative data from the in-depth Ad Revenue 2009 report.

About Amar:

Amar founded PubMatic in October 2006. He previously led a sales and service team at Microsoft/ MSN for the financial services and retail verticals. Amar previously founded and ran Chipshot.com, a leading online golf-etailer. He has also worked at McKinsey & Co and Netscape Communications. Amar is a graduate of Harvard University, with a Masters in computer science, and a Bachelors in economics. He loves to play golf and once fell in a creek while playing.

About PubMatic: PubMatic is a global Ad Revenue Optimization company that provides premium online publishers with a full service solution to manage and monetize non-guaranteed ad inventory. PubMatic’s realtime Ad Price Prediction technology ensures that online publishers get the most money from their advertising space by deciding in real-time which ad network or exchange can best monetize each impression. PubMatic is venture backed by Draper Fisher Jurvetson, Nexus India Capital, and Helion Ventures.

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Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

10:00 AM

 he Blurring Lines of Ad Exchanges, T Ad Marketplaces, and Ad Networks

Moderator: Michael Learmonth, Reporter, Digital Media & Advertising, Advertising Age

As advertising companies diversify the services they offer there is considerable overlap in what used to be more clear-cut roles. It is becoming more and more difficult, even for industry insiders, to maintain a firm grasp on what the differences are between major players in the space and how things are continuing to evolve. This panel will give premium publishers a better understanding of the roles, benefits, and challenges that the blurring segments provide.

Panelists: Jay Sears, EVP, Strategic Products & Business Development, Context Web

Jed Nahum, Director of Network Planning and Strategy, AdECN

Philip Smolin, GM, Platform Solutions, Turn

Rob Rasko, President and COO, CPX Interactive

Tom Sipple, VP, IAC/Dictionary.com

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Presentations & Panels

11:05 AM

Ad Effectiveness: A Closer Look at Ad Networks for Branding Campaigns

Michele Madansky, Michele Madansky Consulting

Ad Networks can serve as effective platforms for branding campaigns as well as direct response campaigns. We will share results from comScore, Insight Express and Dynamic Logic illustrating the significant brand impact across multiple campaigns across ad networks. In addition, we will highlight some of the factors that lead to these campaigns’ success.

About Michele: Michele runs a media and market research consultancy specializing in online media and measurement. Her clients have included Microsoft, PubMatic, MMA, ESPN, The New York Times, Martha Stewart Living Omnimedia, GSN, VideoEgg and Technorati.

From 2003 to 2007, Michele was Vice President of Global Market Research for Yahoo! She built and led a team that was responsible for all primary and syndicated research to support Yahoo!’s product, marketing, sales, and corporate needs.

Prior to joining Yahoo!, Michele spent her entire career in advertising. She worked at BBDO in their marketing sciences group and as the agency’s first interactive media specialist. Prior to joining Yahoo!, Michele was managing partner at Grey Insight Partners, an analytics consultancy.

Michele holds a Sc.B. from Brown University, and an MBA and Ph.D. from the University of Chicago’s Graduate School of Business and is a lecturer at the Haas School of Business.

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Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

11:30 AM

 tandardization, Innovation, & Monetization: S How New Ad Units Are Impacting Publishers

Moderator: Joe Mandese, Editor-In-Chief, MediaPost

New ad units present a great opportunity for publishers, advertisers, and ad networks. Questions remain, however, on whether standardization and innovation will remain mutually exclusive. Publishers and ad networks continue to innovate, but standardization can shift even more dollars offline from online – what is the solution, and how can all parties work together to ensure that publishers can earn the most revenue possible from new ad units?

Panelists: Kirsten Rasanen, VP, Product Development, TV Guide

Jeremy Fain, VP Industry Services, IAB

Tom Bowman, VP, Strategy and Operations, Global Advertising Sales, BBC Worldwide

Ryan Whittington, VP, General Manager, bizjournals

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Presentations & Panels

1:30 PM

 urning Your Ad Operations T Into A Revenue Center

Rob Beeler, VP Content & Media, AdMonsters

An increasing number of companies are looking for their ad operations teams to help generate revenue by taking a more strategic role and working closer with sales. Rob Beeler will share best practices of turning a cost center into a revenue center.

About Rob: Rob Beeler joined AdMonsters in October 2008 and is responsible for development of content for AdMonsters events and training and for the AdMonsters website and working with others in the industry to discuss Ad Operations issues and best practices. Previously, Rob worked nearly 10 years at Advance Internet, a leading creator of local news and information web sites across the United States. At Advance Internet, Rob started as the only Ad Operations person and developed a department of 15 people in 8 locations across the country responsible for operations, project management, business development, web analytics and financial reporting, becoming Executive Director of Ad Operations and Analytics in early 2007.

About AdMonsters: Founded in 1999, AdMonsters is the only professional association dedicated exclusively to online advertising operations and technology. Through our events and training programs in both the United States and Europe as well as our website, AdMonsters provides a unique forum for Ad Operations professionals at publishers, agencies, networks and vendors to communicate, collaborate, and identify best practices. We focus primarily on topics such as ad serving and related technologies, yield management, policies, procedures, and standards.

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Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

1:55 PM

The Evolution of Media Buying and What That Means for Publishers Moderator: John Ebbert, Managing Editor, AdExchanger

A AdExchanger.com

There might not be a faster evolving segment of the 2nd Channel than media buying platforms and technologies. Real-time technologies are not only changing the way media is being bought and sold, but they are also helping to create audience segments in ways that were impossible just a few short years ago. Hear from the leaders of this segment on what is happing now, and what we can expect in the years to come, and how this will affect premium publishers.

Panelists: Andrew Kraft, VP Technology Solutions, Collective Media

Darren Herman, Founder & President, Varick Media Management

Joe Zawadzki, CEO, MediaMath

Matthew Greitzer, VP Search Marketing and Head of ATOM Systems, Razorfish

Sean Kegelman, SVP, Partnerships, VivaKi Nerve Center

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Presentations & Panels

2:55 PM

Government Regulation & Internet Advertising: Everything Publishers Need to Know, and Nothing They Don’t

Alan Chapell, President, Chapell & Associates

C h a p&p e l l Associates

When key government officials tell the online media business that we¹re down to our last strike, its hard not to take notice. What standards do regulators want the online media world to adopt? And what is the impact of state regulatory activity? Why is online media on the hot seat while other industries seemingly are not? And what is the potential impact of increased governmental scrutiny on publishers ­and is it necessarily a bad thing? This session will cover key legal issues that publishers need to be aware of when navigating the waters of interactive marketing.

About Alan: Alan Chapell founded Chapell & Associates in 2003. Since then, his firm has helped over 100 technology and media companies craft their privacy and data strategy ¬ from working with startups as an angel investor to building programs for some of the largest agencies and advertisers in the world.

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Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

3:20 PM

The New Economics And Revenue Opportunities of Data

Moderator: Greg Stuart, Digital Media Advisor

A brand new market has been growing around data over the past few years. The overall revenue potential for publishers that understand how to utilize it may be significant. This panel features the true game changers in the space that will give examples of how publishers can capitalize on their data now, and how they can build a long-term revenue strategy around leveraging their data in the future.

Panelists: Bill Wise, Vice President & General Manager, Advertising Platforms, Yahoo! Inc.

Eric Hippeau, CEO, Huffington Post

Jeanne Houweling, VP Ad Network Solutions Group, PubMatic

Jeff Hirsch, President & CEO, AudienceScience

Mark Zagorski, CRO, eXelate

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Presentations & Panels

4:00 PM

Closing Keynote: The Future of Online Advertising and the 2nd Channel

Jack Flanagan, Executive Vice President, comScore

About Jack: Jack Flanagan is the Executive Vice President for comScore Inc. responsible for the Media Metrix business for North America, Latin America and Europe. Jack has been with comScore since 2002 when they acquired the assets of the Media Metrix business. Jack is a ten year veteran of the online measurement space having started with Relevant Knowledge in 1997. In his current role, Jack works with leading media companies, advertising agencies, financial companies and marketers to help them utilize the Media Metrix services to achieve their business goals and objectives. Jack is a graduate of Loyola College in Maryland and holds Bachelors in Business Administration with a specialization in Marketing.

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Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

Ad Revenue 2009: Moderator & Panelist Bios

Andrew Q. Kraft, Vice President, Collective Media™ Technology Solutions Andrew Q. Kraft leads business development and support for AMP®, Collective Media’s ad network management and monetization platform. AMP allows publishers to create their own custom vertical ad networks or to better manage their owned and operated network of sites. Advertisers and agencies can utilize AMP to take full control of their cross-site and cross-network media spends. Kraft works closely with both advertisers and publishers to ensure their advertising needs are met through AMP. With more than 12 years of experience in the interactive sector, Kraft joined Collective Media from the Interactive Advertising Bureau (IAB) where he served as Vice President Member Services and Revenue Development for two years. In 2002, he founded Executivity, a digital marketing and management consulting firm specializing in revenue development strategies. Kraft has also held positions at VNU Expositions, Group Show Director, Digital Media Group; Basex, Inc, Executive Vice President, Sales & Marketing; Association of Internet Professionals, Executive Director; and Sapient Corporation, Manager, New Media Group. Kraft attended the Massachusetts Institute of Technology (MIT).

Bill Wise, Vice President & General Manager, Advertising Platforms, Yahoo! As Vice President and General Manager, Advertising Platforms, at Yahoo!, Bill Wise leads business development for Yahoo!’s platforms, including sales to advertisers, publishers, networks and data providers, as well as the Yahoo Publisher Network business. Wise is also responsible for managing the corporate relationships and overall platform business with ad agencies. Following Yahoo!’s acquisition of Right Media in 2007, Wise was named Vice President and General Manager of Yahoo!’s Marketing Technologies Solutions, which included the Right Media Exchange, Maven Video and APT, Yahoo!’s new ad management platform. Prior to that, he was President of Remix Media, Right Media’s media and services business. Before joining Right Media, Wise was CEO of Did-it, the largest independent search marketing firm, from 2005 to 2007. Under his tenure, Did-it was named to the Inc 500 as one of the fastest growing private companies. Prior to Did-it, he held various senior executive positions at leading online marketing companies, such as DoubleClick (VP/GM), MaxOnline (CEO), and Ask.com (SVP), now IAC Advertising Solutions.

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Presentations & Panels

Ad Revenue 2009: Moderator & Panelist Bios Darren Herman, President, Varick Media Management As the President of Varick Media Management and Head of Digital Media at MDC Partner’s leading media agency, The Media Kitchen (part of kbs+p), Herman brings 12 years of digital media experience, senior level leadership, and the ability to drive both simple and complex strategies to solve marketing problems using the Internet. Before joining The Media Kitchen in 2007, Herman was no stranger to Silicon Valley and Silicon Alley having raised over $50MM in venture capital for his own successful digital media startups and over $30MM for startups he was advising. From 2004-2007, he was the founder of IGA Worldwide, the leading independent in-game advertising platform for retail distributed video games.

Eric Hippeau, CEO, The Huffington Post Eric Hippeau is the Chief Executive Officer of The Huffington Post (www.huffingtonpost.com), a leading news and opinion site which in four years has become an influential media brand -- “The Internet Newspaper.” Hippeau joined HuffPost in June 2009. Prior to joining HuffPost, Hippeau was managing partner at Softbank Capital, a New York and Boston-based venture capital fund specializing in early stage investments in technology and digital media. Hippeau joined Softbank Capital in 2000 from Ziff-Davis, Inc., where he was Chairman and CEO. During his career at Ziff-Davis, Hippeau was early to recognize the growth potential of online media. Hippeau was also responsible for founding ZDTV, a cable channel dedicated to technology and the Internet. Hippeau serves on the boards of several public and private companies, including Yahoo!, Starwood Hotels and Resorts Worldwide, Thumbplay, The Huffington Post, BuddyMedia,and BuzzFeed. He is also on the investment committee for the SB Asia Infrastructure Fund. Hippeau graduated from the Lycee Francais de Londres and attended the Sorbonne University.

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Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

Ad Revenue 2009: Moderator & Panelist Bios Greg Stuart, Digital Media Advisor Greg Stuart is a recognized leader in digital media & advertising & was selected by Ad Age as one of “10 Who Made Their Mark” in 2006. Currently, he is conducting due diligence on a number of operating roles in early stage and one big corporation. In the last two years he has served as Advisor, Director & angel to venture-backed companies with $750 million in exits (all above 10x multiple). Greg’s also the former CEO of the Interactive Advertising Bureau (IAB). He grew the IAB’s revenues +500% while leading the industry from $6 billion to $17 billion in ad spending. Ad Age identified his book “What Sticks” as the “#1 book you should have read”. He currently serves on Board of Zimbio (Menlo Ventures & August Capital) and was on the Board of Rapt (Accel Partners), which sold to Microsoft, and the Board of Allyes (Oak VC) in China, which sold to Focus Media. He is based in NYC.

Jay Sears, EVP Strategic Products and Business Development, ContextWeb, Inc. / ADSDAQ Exchange Jay Sears is EVP Strategic Products and Business Development at ContextWeb, Inc., creators of the ADSDAQ Advertising Exchange. Mr. Sears is responsible for bringing new products to market as well as developing key strategic relationships that drive audience and revenue acquisition. Sears created the company’s original publisher development team and launched the self service ADSDAQ Exchange Selling Desk, in use by over 9,000 web publishers today. Currently he is managing ContextWeb’s Agency Trading Desk, used by leading ad agencies, and the company’s self service offerings for advertisers and publishers Mr. Sears created ContextWeb’s advisory board and speaks about internet advertising at various industry events. He co-chairs the Standards Work Group of the Interactive Advertising Bureau’s Ad Networks and Exchange Committee.

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Presentations & Panels

Ad Revenue 2009: Moderator & Panelist Bios Jeanne Houweling, VP, Ad Network Solutions Group, PubMatic Jeanne is responsible for leading PubMatic’s ad network solutions group. Jeanne is an online industry veteran and early pioneer with a dozen years in Internet advertising and strategic partnerships and more than two decades of experience in sales and business development. Jeanne has spent the past 12 years driving deals and building successful advertising sales and business development teams at leading online companies and start-ups such as NebuAd, Microsoft and Excite@Home. Most recently she led international market expansion for the NebuAd behavioral targeting solution as well as served as the online advertising expert for ISP partners. Jeanne led the team responsible for revenue generating content partnerships and distribution for Microsoft UK’s MSN division, significantly increasing page views and channel contribution margins. At Excite@Home she was involved in vertical channel management and ad product strategy, ultimately becoming the top ad sales producer and sales director. Jeanne holds a BA in Political Science from the University of California, Los Angeles.

Jed Nahum, Director of Network Planning and Strategy, AdECN Jed is Microsoft’s Director of Network Planning and Strategy. In that role he guides the value proposition of the Microsoft Media Network (MMN) and defines policy for Microsoft’s online display advertising business. He recently took on the management of Microsoft’s Third Party Ad Network team, MMN’s group charged with partnering with ad networks. Prior to these responsibilities, Jed oversaw the acquisition and integration of AdECN into Microsoft’s online advertising platform. He worked with the AdECN team to define strategy, goals, timelines and accountabilities for the exchange. Earlier, he was Director of Product Management for Microsoft’s adCenter advertising platform, where he and his team focused on product planning for search, contextual and other platform improvements. Prior to his work for Microsoft, Jed managed search engine marketing at SmartBargains.com, and spent several years in leadership roles in product management and finance at Amazon.com.

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Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

Ad Revenue 2009: Moderator & Panelist Bios Jeff Hirsch, President & CEO, AudienceScience An online media pioneer, Jeff Hirsch has spent the last 12 years building successful media companies and growing his knowledge and reputation as an Internet guru. As president and CEO of AudienceScience, Hirsch is responsible for building the company’s world class audience targeting marketplace by leveraging AudienceScience’s superior technology to deliver audiences for digital advertisers and real value for online publishers globally. Prior to joining AudienceScience, Hirsch was SVP of Business Development for ValueClick, Inc. where he orchestrated building and strengthening the company’s cross-divisional publisher relationships. Hirsch joined ValueClick from Fastclick, where he served as Chief Revenue Officer for over four years. While at Fastclick, Hirsch was instrumental in building and establishing the company as a premiere internet advertising network business that was purchased by ValueClick in 2005 for over $210M. Hirsch holds a bachelor’s degree from the University of California, Santa Barbara, where he graduated with honors.

Jeremy Fain, Vice President of Industry Services, IAB Jeremy Fain is the Vice President of Industry Services at the IAB where he is responsible for strategic industry initiatives across all interactive segments and the overall adoption of industry solutions. Since joining the IAB in 2005, he has led many of the industry’s top-priority initiatives, including digital video ad format standards, impression discrepancy detection and solutions, contract standardization, and the interactive industry’s first E-business solution. He is responsible for the strategic direction of the IAB’s member committees and councils. Mr. Fain began his career as an e-commerce and B2B consultant for PricewaterhouseCoopers and has previously worked in marketing strategy at the interactive agency Digitas in New York City and as the Director of Web Strategy at a startup company. He earned his undergraduate degree in Electrical Engineering from Yale University in New Haven, Connecticut and his MBA in Marketing and Media from Columbia University in New York City. Mr. Fain was recently named one of the Ad100 Most Influential People at the AdWorld 2009 Conference in Beijing, China.

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Ad Revenue 2009: Moderator & Panelist Bios Joe Mandese, Editor-in-Chief, Media Post Joe Mandese is editor-in-chief of MediaPost and its related publications (MediaDailyNews, Online Media Daily, Marketing Daily, MEDIA and OMMA magazines), which reach more than 125,000 advertising and media industry professionals daily. Prior to that, he was executive editor leading advertising industry news coverage for Primedia Business Magazines & Media. Earlier in his career, Mandese was a writer and top editor at leading industry publications such as Adweek, Advertising Age, Channels, Brill Media, Fortune, Inside.com, Marketing & Media Decisions, and Variety.

Joe Zawadzki, CEO, MediaMath Joe is Founder and CEO of MediaMath, the leading media-buying platform and services company that is helping to transform the modern agency. MediaMath provides over 20 leading agencies with the technology and back office services they need to trade effectively across over 10 billion display impressions per day. The company’s platform includes a common interface and workflow, data management layer that integrates marketer and third-party data, PhD-designed algorithms and bid optimization, and deep relationships with over a dozen major sources of quality supply. Joe was previously the Founder and President of [x+1], a marketing optimization company that was one of Inc 500’s fastest growing. He worked with AOL and Google/DoubleClick on their optimization and yield management strategies, was awarded a patent, and is an active investor in technology, media, real estate and film. In the more distant past, Joe was an investment banker and a Teaching Fellow at Harvard.

John Ebbert, Managing Editor, AdExchanger.com John Ebbert has worked in media for 15 years in digital sales, marketing and operations roles for companies such as Viacom’s Nickelodeon, Arkadium, Contextweb and as an entrepreneur. Consistently intrigued by the Internet’s inherent ability to empower individuals, he sees media optimization tools and the ad exchange model as another step forward in the Internet’s natural evolution, where each member of the exchange (buyers and sellers) is afforded transparency and control. Hence, he launched AdExchanger.com in July, 2008.

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Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

Ad Revenue 2009: Moderator & Panelist Bios Kirsten Rasanen, Vice President, Product Development, TV Guide Online Kirsten Rasanen joined the company in May 2006 and is currently Vice President of Product Development. She is responsible for development and management of large-scale projects on the company’s flagship site, TVGuide.com. Her team is responsible for new product creation and innovation in the area of entertainment guidance and immersion specifically related to TV listings, online video, entertainment news and TV show, movie and celebrity data. Kirsten’s team also works to introduce and implement new advertising formats and monetization avenues on the website.

Mark S. Zagorski, Chief Revenue Officer, eXelate With nearly 13 years of online experience, Mark brings seasoned leadership to the management of all marketing, business development, and client services activity for eXelate. Previously, he was Chief Marketing Officer/Corporate EVP of MediaSpan where he led marketing and business development as well as built the 1400+ affiliate Local Ad Network. Prior to MediaSpan, he was a Founder and President of WorldNow, the largest ad network and services provider for local TV station websites. Mark started his online adventure as a Group Director at Internet pioneer Modem Media – Poppe Tyson where his clients included IBM, MCI, HSBC, Standard & Poors and Priceline. His marketing career began in brand management working with clients including J Crew Group, Timberland and Jansport after receiving his MBA from the University of Rochester’s Simon School of Business and a BS in Finance from Gannon University, where he was awarded the University’s Distinguished Young Alumnus Award.

Matthew Greitzer, VP Search Marketing and Head of ATOM Systems, Razorfish Matthew Greitzer is Vice President of Search Marketing and Head of ATOM Systems at Razorfish, one of the largest global interactive ad agencies. Matt started Razorfish’s search marketing practice in 2002 helping to build it into one of the largest full service search marketing organizations in the world. Prior to this, Matt served in various operational and search-related roles at Razorfish since joining the company in 1998, and also founded Bin 55, an interactive consulting company focusing on web marketing for small businesses. Matt was named “40 Under 40” by Crain’s NY Business in 2007 and is a graduate of Bowdoin College.

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Ad Revenue 2009: Moderator & Panelist Bios Michael Learmonth, Reporter, Digital Media & Advertising, Advertising Age Michael Learmonth is a reporter covering Advertising and Digital Media. He was appointed to the staff as a reporter in September 2008. Previously, Michael was a senior editor for the Silicon Alley Insider since November 2007. Prior to joining SAI, Michael spent several years covering the media and entertainment business for Variety and Reuters America. He was an early hire at the Industry Standard and assisted in the launch (and shut-down) of its short-lived European edition in London. He started his career in journalism in the alternative press, covering Silicon Valley for Metro Newspaper. Michael was born in Washington, DC and graduated from Earlham College and UC Berkeley.

Philip Smolin, General Manager, Platform Solutions, Turn Philip is the General Manager of Turn’s Platform Solutions Group, which was created in 2009 to provide Turn’s media optimization technologies to global agency holding companies, independent agencies and direct advertisers. Previously Philip served as Vice President of Product & Marketing for Turn, and led product management for the company since its inception in 2005. Prior to Turn, Philip held product director positions at MatchLogic, Excite@Home and PayChoice, where he developed many of the industry’s first 3rd party ad serving platforms, rich media tools and CPM yield management systems for internet portals and top tier publishers. Having specialized in online advertising systems since 1997, Philip is a recognized industry expert on ad exchanges, behavioral targeting and performance optimization for display advertising. This background, combined with Turn’s leadership in the emerging field of Demand Optimization, has made Philip a frequently requested speaker for industry events such as OMMA Global, OMMA Behavioral, OMMA AdNets, iMedia Breakthrough, eM9 and others, and a columnist-at-large for iMedia and other industry trade publications. Originally from New York City, Philip now resides with his wife in the San Francisco bay area. Philip holds a bachelor’s degree from the University at Buffalo, and an MBA from Columbia University and the Haas School of Business, UC Berkeley.

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Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

Ad Revenue 2009: Moderator & Panelist Bios Rob Rasko, President & COO, CPX Interactive Rob Rasko began his career helping companies like Oppenheimer and AIG offer their clients advice on cash management, retirement plans, and personal and corporate investments. In 2002, Rob switched gears and became a principal at Internet ad agency, Endai Worldwide, driving businesses growth through sales and marketing. In early 2006, Rob joined CPX Interactive as CFO with the CPX goal of helping the company grow to the “next level”. In 2008, he was named President and COO, taking a lead role in the company’s day-to-day operations.

Ryan Whittington, VP, General Manager, bizjournals With over eight years of revenue operations experience, Ryan Whittington serves as Vice President, General Manager of bizjournals.com. Mr. Whittington has played an integral role in enabling 40 local business journals to successfully monetize their sites with both local and national advertising. Current responsibilities for Mr. Whittington include revenue strategies, product development, technology management, business operations and traffic analytics. Mr. Whittington lives in Huntersville, NC with his wife and two daughters.

Sean Kegelman, SVP, Partnerships & Business Development, VivaKi As Director of Partnerships, Sean is the primary liaison between the Nerve Center and key digital media and technology partnerships. Sean oversees VivaKi’s partnerships with key digital media companies (e.g., Google, Yahoo, Microsoft, NBCU, Time Inc., etc.) with respect to leveraging scale and technological innovation for VivaKi. Sean is responsible for communicating overall strategy and ensuring implementation VivaKi’s agenda for global platforms (Performance Marketing, Social and Mobile) and Audience & Messaging solutions, such as Audience On Demand.

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Presentations & Panels

Ad Revenue 2009: Moderator & Panelist Bios Tom Bowman, Vice President, Strategy & Operations, Global Advertising Sales BBC Worldwide Tom is the Vice President of Strategy & Operations for Global Advertising Sales at BBC Worldwide. Tom heads up the team who advise internal clients and stakeholders across all BBC Worldwide’s platforms. These include BBC Global Channels and BBC World News on TV, online with the BBC’s international ad funded website BBC.com and its corresponding international mobile site. The team advises internal clients on ad sales strategy and is also responsible for Sales Operations and Custom solutions across TV, digital and mobile. Tom joined BBC Worldwide in November 2007 as the Vice President of International Advertising Sales for BBC.com. He is well-known across the business as a digital advertising specialist, having worked for some of the largest names in the industry over the last 12 years. Prior to joining BBC Worldwide, Tom held a number of commercial roles at MSN including leading the global sales team, opening new markets and heading up the EMEA sales team. Prior to his time at MSN, Tom was the launch sales director for Yahoo! in the UK.

Tom Sipple, VP, IAC/Dictionary.com Tom Sipple leads the Direct Sales, Ad Operations, Remnant and Mobile Monetization efforts for Dictionary.com (part of the IAC family of brands). Tom joined Dictionary.com from Yahoo! where he spent 9 years in various roles, but most recently as Managing Director of Yahoo, SE Asia. Prior to Yahoo, Tom worked at USA Today Newspaper leading circulation/advertising for the travel category. Tom holds his BA from Lynchburg College and his MBA from George Mason University. Tom lives outside of New York City with his wife and three children.

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Premium Publisher Trends & Data

Premium Publisher Trends & Data

Industry Analyst Forecasts While industry forecasts tend to vary significantly, nearly all analyst firms have forecasted dramatic growth for non-guaranteed display advertising over the next few years – some see the category doubling by 2013. There will be several contributors to the growth of the 2nd Channel: Ad Abundance: A continued abundance of available ad inventory that can be much better monetized than in previous years. D  ata Management: Premium publisher ability to better utilize their audience data and manage data across multiple data providers, which will allow them to sell pre-packed media + data. Pinpoint Targeting: Better audience targeting and segmenting, including a much more sophisticated method of reaching users by “intent.” A  Shift in Media Buying: As media agencies improve their technology and continue to see better performing campaigns through the 2nd Channel, they will proceed to use ad networks and ad exchanges more frequently than in previous years. Brand Protection: Significant gains in brand protection capabilities from intermediaries will allow premium publishers to consider the use of 3rd parties selling their inventory less risky. Better Ad Units: New ad units will be created and standardized that perform better than the banner ads that currently dominate the 2nd Channel. Premium Branding Campaigns: As all of the above points evolve, more premium priced branding campaigns will be sold via the 2nd Channel.

Non-Guaranteed Display Advertising Forecasts (Global) $B 16 14

Barclays Capital, June 2009 (1)

12

CreditSuisse, January 2009 (6) 10

eMarketer, April 2009 (5) 8

Forrester Research, April 2009 6

Interactive Advertising Bureau (IAB),  March 2009 (7)

4

JPMorgan, November 2008 (8) 2 0 2007

2008

2009

2010

2011

2012

25

2013

Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

PubMatic Premium Publisher Ad Price Data Premium publisher ad pricing has seen a steady recovery in 2009. While 2008 ad prices had precipitous drops due to the slow economy, the first three consecutive quarters in 2009 have shown a strong turnaround for ad pricing. Q3 2009 ad prices for premium publishers are 32% higher than they were one year ago, Q3 2008. About The Ad Price Data Methodology The PubMatic ad price data used in this report is comprised of pricing data from premium publishers. The data is analyzed by Albert Madansky, Ph.D., H.G.B. Alexander Professor Emeritus of Business Administration at the University of Chicago Graduate School of Business and recipient of the 2005 American Statistical Association Founders Award, and Michele Madansky, Ph.D., a media and market research consultant and former VP of Global Market Research for Yahoo! The pricing data reflects net publisher monetization via ad networks and excludes ad networks’ share of ad spend as well as inventory sold directly by publishers to ad agencies or advertisers. The pricing data is not representative of the performance of any particular ad network.

PremiumÊPublisherÊAdÊPricingÊQ3Ê2008ÊÐÊQ3Ê2009 150

Index

125

+32%

100

FromÊ1ÊYearÊAgo

75

50 3rdÊQTRÊ08

4thÊQTRÊ08

1stÊQTRÊ09

26

2ndÊQTRÊ09

3rdÊQTRÊ09

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Premium Publisher Trends & Data

The PubMatic Premium Publisher Interviews Overview: PubMatic recently commissioned Greg Stuart, Digital Media Consultant and Former CEO of the IAB, to conduct in-depth, face-to-face interviews with premium publisher executives in order to find out their key challenges in monetizing and managing non-guaranteed inventory. The goal of the interviews was to find out directly from some of the largest publishers in the US what these challenges are in order to allow PubMatic to continue to develop industry leading solutions. Methodology: All of the data was gathered during one hour sit-down interviews conducted over the course of four months (April 2009 – July 2009). The target publisher list included select members of the US comScore 250 list of publishers. Over 30 interviews were conducted with senior executives in the sales or ad operations function. Anonymity of the interviewees was guaranteed in order to receive open and candid input. Key Findings Revealed: PubMatic is revealing three key findings from the interview series. PubMatic believes these three findings are of most interest to publishers as they consider their own strategies and operational models for managing non-guaranteed inventory.

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Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

Key Finding #1: Revenue Matters Most Premium publishers overwhelmingly care more about increased revenue as compared to any other aspect of managing their non-guaranteed inventory. The fact that the interviewees held several different executive roles ranging from ad operations to sales, had a wide range of personalities, and dealt with different daily challenges, did not change the fact nearly everyone was significantly more concerned with revenue than anything else. However, as most people working in this industry already understand, there are clear differences of importance of issues between sales executives and ad operations executives as outlined in the graph below.

Sales

AdÊOperations

Technology Channel Conflict Long-term Monetization

Great Service Increased Revenue

Consolidated Reporting

Creative Control Saving Time

Discrepancies

WeightedÊresponsesÊonÊissuesÊexecutivesÊcareÊaboutÊmostÊ whenÊmanagingÊandÊmonetizingÊtheirÊnon-guaranteedÊinventory

Conclusion: While maximizing revenue is the number one stated objective for sales and ad operations executives, a holistic solution that takes into account all of the key benefit drivers is the most likely to generate a long term successful partnership. Several of the secondary benefit drivers, such as accurate reporting and creative control, are necessary components of a holistic solution.

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Premium Publisher Trends & Data

Key Finding #2: Drivers for Increased eCPM Not Clearly Understood Very few premium publishers can explain in detail what drives eCPM for non-guaranteed inventory. We asked the following question to the premium publisher executives: “What drives eCPM higher for non-guaranteed inventory?” Many of the answers did acknowledge certain factors that contribute to increased eCPM, but many were focused on one or two specific reasons and did not have a holistic understanding. Alternatively, a publisher might have identified several eCPM drivers but not clearly understood how to make those drivers actionable in order to generate more revenue. Select premium publisher answers on what drives eCPM for non-guaranteed inventory: • Inventory quality • Frequency caps - managing what you give the ad networks • How the inventory was sold. CPM, CPA, etc. Networks are like stocks, they move up and down. Then creative – it should not be done by humans • Negotiating better deals • Category relevance and the algorithms; it’s all about Real-Time • Just don’t know • Active management of networks facilitated by technology; then, understand the buy side and optimize for the highest bid; moving to be Real-Time • Clicks, behavioral targeting, technology, algorithms • Ad Network deals, efficiency of ad calls, frequency capping, defaults • Right ad to the right consumer, context, geography • Relevancy, reporting, optimization/learn, CTRs • Market conditions; networks vary a lot, good relationships with my network representatives • Minimums; tech should drive it • Low defaults; site needs to have good performance, lots of people to manage the ad networks Conclusion: Premium publisher executives have the right hypotheses about what drives eCPM lift. However, few publishers had a cohesive, data-driven understanding of the key drivers of lift, the priority of focus on those key drivers, and actionable strategies around driving higher revenue. This is not a surprise given the rapid innovation and fragmentation happening within the online display advertising space over the past few years. As a result, publishers should seek to partner with solution providers that can create a long term partnership in which education is a key component. 29

Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

Key Finding #3: Lack of Transparency and Trust There is a consistent sense of frustration and lack of trust from premium publisher executives when working with outside companies to increase non-guaranteed inventory revenue. Marketing from advertising companies is a problem for the executives at premium publishers because they believe that most companies exaggerate their capabilities. This has only gotten worse in the past two years as the ecosystem around non-guaranteed inventory has exploded along with the dollars and revenue flowing through this sub-category of online display advertising. Select Premium Publisher Answers on What They Believe Solution Providers Exaggerate About (sorted in priority order): • Creative management capabilities • Who the company’s allegiance is with (Premium Publisher or Advertiser) • Technological capabilities • Ability to monetize consistently • Reporting accuracy • Everything Conclusion: As premium publishers are pitched various solutions frequently, it comes as no surprise that many have heard outlandish claims from solution providers. They are therefore rightly skeptical of companies that present their solution as having no flaws. Many of the premium publisher executives chose not work with companies in the past because they just did not believe their claims. It is important to manage expectations so that solution providers do not over-promise and under-deliver. Similarly for publishers, it is important that solution providers come to them with a manageable test plan to prove out the viability of a solution before launching it at full scale.

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Premium Publisher Trends & Data Demystifying Buzzwords

2nd Channel

Ad Network Defaulting (aka passbacks)

Attribution (of conversion)

IS

IS NOT

Generally speaking, large premium publishers have two ad sales channels. Ads in the 1st Channel are directly sold at premium rates by a publisher’s direct sales force. The 2nd Channel is inventory sold through intermediaries, such as ad networks and ad exchanges. The 2nd Channel is completely non-guaranteed inventory so it may also include nonpremium inventory that has been sold by a publisher’s direct sales force such as performance campaigns (CPC, CPA). The 2nd Channel ecosystem is made up of many segments, including ad networks, ad exchanges, data exchanges, yield optimizers, dynamic ad creative technologies, buy side optimization platforms and more.

The 2nd Channel is not just another name for “remnant” inventory. It is comprised of an ever- increasing amount of more valuable inventory (see Secondary Premium below) which is a result of the technological innovation from companies that power the 2nd Channel ecosystem, and the continually growing trend of advertisers working with intermediaries to purchase inventory.

Ad networks are becoming increasingly selective about the types of impressions they monetize. If an impression doesn’t match the desired criteria of any of an ad network’s advertising campaigns, then it either shows a public service announcement, a blank spot, or returns the impression to the publisher. All three of these actions are known as defaulting, as the ad network has chosen not to display an ad for which the publisher will be paid. Ad network defaulting happens very often and is responsible for billions of dollars being left on the table each year for premium online publishers.

When an ad network defaults and does not serve an ad, it does not mean that the next ad network in a publisher’s daisy chain will serve the ad. A 2008 PubMatic study revealed that the average default rate of ad networks exceeds 56% rising as high as 87%. In many cases with a static daisy chain, an ad will not be shown until it goes all the way down the chain to the guaranteed ad network, or the network that generally serves the lowest paying ads. You can download PubMatic’s white paper on ad network defaulting and how to end it at:

Attribution is the determination of relative value or weight given to multiple, trackable elements (e.g., display, search, email, links) and click- and view-through events in a time-based path to a conversion event, such as a form submission or purchase. Examples: last (or first) ad clicked = 100%; last ad clicked = 50%, all others in path = 50% in equal parts

Attribution is easier to describe than execute. Only parties with visibility into all measurable actions and elements can account for the contribution of each to a conversion. In spite of many years of progress, assigning values to each contributor remains more of an art than science.

31

http://www.PubMatic.com/whitepapers

Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

Audience Extension

Brand Protection

IS

IS NOT

Audience extension is a strategy that can be employed by either a premium publisher or an ad network. For a premium publisher it refers to the use of network technology to increase the publisher’s user-targeted inventory and improve the advertiser’s ability to reach them and others with similar characteristics with greater frequency. This is accomplished by segmenting the publisher’s users on site by behaviors, interests, demos or content consumption and targeting them in the network’s external inventory or on the publisher’s own extended network. Publishers create their own network of owned and affiliated sites in order to sell into it directly, allowing them to accommodate larger advertiser or network buys. Ad networks can also leverage ad revenue optimizers to extend their audience when they lack sufficient qualified inventory to fulfill large media buys. In such cases, ad networks can spot buy from premium publishers outside of their standard network to satisfy the needs of specific campaigns.

Advertisers expect the publisher to deliver the promised audience, so it is imperative that publishers create large enough segments with sufficient overlap on partner sites to deliver the impressions ordered. It is generally not sufficient to simply serve any of the publisher’s users when seen on external inventory.

Brand Protection refers to a series of technology, process, and personnel layers that work together to protect a publisher’s brand. With respect to the 2nd channel, key challenges to the publisher’s brand include channel conflict, objectionable ads, and a poor end-user experience. Brand Protection is the set of technologies, processes, and personnel that prevent these unwanted occurrences. They include processes to prevent the same advertiser from buying a publisher’s media inventory via the direct sales force and ad networks; technology and personnel to continuously monitor and block unwanted ads; and the systems required to ensure a high quality end-user experience through relevant, fast-loading ads from around the world.

It is not a single tool or service that can protect a publisher’s brand from unwanted blemishes 100% of the time. Threats to a publisher’s brand are constantly evolving as the 2nd channel ecosystem grows and changes. As a result, publishers need a long-term partner who has their best interests in mind and the resources to continually invest in giving publishers the tools they need to protect their brands.

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Premium Publisher Trends & Data

IS

Channel Conflict

Data Optimization/ Data Management

Transparency (of inventory)

IS NOT

Channel conflict happens when both a premium publisher’s direct sales force and an intermediary sales force sell the same thing. For example, a publisher’s sales force sells a premium priced campaign for Brand X. Meanwhile an ad network working with that publisher sells comparable inventory to Brand X at a lower price, devaluing the publisher’s premium inventory and potentially damaging reputations and credibility of both sellers and buyers.

Channel conflict is not something that can be solved with technology alone. It requires a combination of human processes and technology where available.

While the amount of data available to improve publisher yield is more abundant than ever, there is no standardization across 3rd party data providers. This creates a huge challenge for premium publishers that want to take advantage of data from multiple sources to increase their eCPMs. Data optimization/management is a term recently heard at online advertising conferences and refers to a premium publisher’s ability to take advantage of several types of data from several different data sources to increase the value of their of their ad space.

2010 will likely be the breakaway year for data optimization as the ability to optimize several data platforms on behalf of premium publishers is still in its infancy and not yet a viable or proven option. According to public comments, the leading ad revenue optimizers are actively working on strategies for implementation in the near future.

Generally a term used by ad networks, transparency is a reference to how much a seller reveals to a buyer about (1) where an ad will appear, including site, section, nature of content (e.g., user-generated, adult), position on page, presence of competitive or objectionable ads on same page, etc.; and (2) characteristics of audience reached, such as qualifications to view the ad (e.g., “aged 18+” and “U.S. only”)

In the past, a list of sites on which ads might appear was acceptable as a measure of transparency. Today, advertisers want much more transparency. This is a key reason why agencies are adopting their own buying platforms, which give them more control over site selection, placement and pricing, as well as the ability to use multiple data sources for optimization.

33

Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

Real-Time Bidding (RTB)

Verification

IS

IS NOT

Real Time Bidding (RTB) technology allows a buyer to uniquely value the combination of page context, audience attributes, and timing at the moment they converge. In a typical RTB environment, an ad impression at the intersection of context, audience, and timing is made available to multiple buyers who value that impression in real time. Through various mechanisms, they then signal their unique valuation for that ad impression to the seller, and the highest bidder wins. This approach to monetizing online media can be a win for the user, the publisher, and the buyer as it allows media to be valued at the highest possible price consistent with the advertiser’s needs and requirements. Publishers should ensure they have a strategy to take advantage of the accelerating movement of ad dollars into the RTB mechanism of buying media.

Today, RTB is not the dominant mechanism of trading media nor is it likely to be the only one. It is challenging to scale RTB to billions of daily ad impressions, and many legacy media management platforms used today do not support it. Therefore, it will likely be several years before a significant portion of online media is traded via RTB mechanisms. Long after RTB reaches scale, we will likely continue to see buying patterns that take advantage of other trading mechanisms such as guaranteed sales.

Verification is a process of tracking and reporting an ad campaign’s placements to assure an advertiser that a network or publisher is delivering the campaign as specified by insertion order. Such services generally include a system for alerting a buyer about any variations from terms, which may include: placements on prohibited sites or in objectionable content; deliveries to excluded users, such as international visitors for a “U.S. only” campaign; handoffs to unknown or excluded exchanges, networks or sites, etc.

Verification depends on very close cooperation of both the agency and the advertiser with the service provider. Current models rely on use of unique identifiers on every version and format of ad creatives in a given campaign. Ad deliveries will be tracked with or without participation by the networks and publishers on the buy; therefore, it is important to follow developments in this segment and to understand the advantages and disadvantages of actively working with providers to support advertisers’ demand for verification services.

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35

The 2nd Channel Ecosystem

The 2nd Channel Ecosystem

The 2nd Channel Ecosystem: An Interpretation Bennett Zucker, Digital Media Consultant

Is technology innovation the online premium publisher’s friend or foe? The speed of change, lack of documented successes with new services, and noise in the marketplace make it tough at times to know where to turn for help. Online premium publishers tend to accumulate new challenges with every advance in media and technology. Pricing pressure? Most ad networks know more about your not so unique visitors than you do, and they can sell them for less and reach them in places you can’t. New buying methods? As buying becomes more automated, your sales and support organization looks outmoded. Ad clients becoming competitors? Many brands attract mass audiences to their sites and you can hardly blame them for putting more resources there. But you have trusted brands of your own, edited content that’s hard to find elsewhere, and the ability to package your inventory in unique ways that fetch a premium from your best advertisers. Now you also have network-like capabilities to reach your own visitors on someone else’s site. You can know much more about your audience thanks to multiple data services. And you can manage an array of exchanges, networks and advertisers more easily than ever through a single user interface. That’s life in the ecosystem. Every interdependent organism has opportunity and motive to contribute value at every step along the media delivery chain. Darwinian principles apply, so you must remain alert. Ecosystems in technology tend to grow from the success of an innovative company that provides a nurturing and open environment in which all participants benefit and the initiator becomes dominator. Think eBay, Google, Facebook. When it comes to online advertising in the 2nd Channel, much credit can go to companies such as Right Media, which developed the first large-scale open media exchange. Following the 2005 launch of the Right Media Exchange, dozens of new networks and technology providers sprang to life to take advantage of the market of inventory and enough buyers to ensure that every display ad impression would be worth something to somebody. Fast forward … With an estimated 70 percent or more of ad inventory going unsold on even elite web sites, with multiple ad exchanges each working with hundreds of networks, publishers and advertisers, there emerged a need for companies such as PubMatic to help publishers manage and optimize the swarm of monetization options.

37

Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

Advances in data processing, management and storage have opened access to targeting data from a subset of new companies as well as offline data providers making their first real forays online. As the rush of data began feeding nimbler targeting, the shift to buying and selling audiences wherever they go has accelerated. With network tools built for scale now available to all, buyers have seized the opportunity to define their own audience segments and find and target and measure them from the buy side. And so here we are: Agencies form their own ad networks while networks and tech providers assume roles that once were the exclusive province of agencies. Advertisers publish sites that draw mass audiences. Publishers create ads. Third parties assemble ads on the fly from user data, page context, geography and other criteria. There may no longer be a useful distinction between the buy side and the sell side in online advertising, especially in the vast 2nd Channel. But there is a continuous need for innovation from every segment until we wring out all the inefficiency inherent in this complex business. Billions of display ad dollars are at stake. Will the ecosystem continue to evolve and bring the transparency, efficiency, scale and targetability that may unleash more billions from television budgets? Stay tuned. If you blink, you may miss the spontaneous evolution of a new organism …

Bennett Zucker is a consultant, investor and advisor on market development, data strategy and revenue management for digital media and ad technology companies. Bennett was on executive teams that launched and built behavioral targeting network Tacoda (VP Customer Success, VP Global Affiliate & Technology Sales), ad exchange Right Media (VP/GM & Tech Evangelist), and predictive targeting network Acerno (VP Sales & Marketing). These were acquired by AOL, Yahoo! and Akamai, respectively, for more than $1 billion. Bennett blogs at MediaTechBusiness. com, contributes to iMediaConnection, MediaPost and other publications, and is a frequent speaker at industry conferences. Contact: [email protected]

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The 2nd Channel Ecosystem

2nd Channel Ecosystem Interviews: Acknowledgements When PubMatic decided to help premium publishers better navigate the segments and companies within the 2nd Channel ecosystem as objectively as possible, it was clear this would need to be a collaborative effort. PubMatic commissioned Bennett Zucker, a well-known veteran and thought leader in the digital media space, to conduct a series of interviews with some of the brightest minds in online display advertising to get their take on the evolution of the 2nd Channel. The following pages are filled with information and viewpoints from those interviews. We wish to acknowledge the following executives for their enthusiasm and generosity in sharing their viewpoints and ideas about the online advertising ecosystem and how their companies support its continued growth. We couldn’t have done this without them. Jon Aizen, COO, Dapper Larry Allen, President, Yieldex Joe Apprendi, CEO, Collective Media Pascal Bensoussan, VP Products & Marketing, Aggregate Knowledge Steve Ennen, Managing Director, Wharton Interactive Media Initiative Rajeev Goel, CEO, PubMatic Darren Herman, President, Varick Media Mgt (MDC Partners) Jeff Hirsch, CEO, Audience Science Alex Hooshmand, VP Client Services, BlueKai Bill Jaris, SVP Sales, Vizu Steven Jones, Founder, Digital Marketing Advisors A.J. Kintner, Sr. Director Sales, Tumri Joe Laszlo, Director of Research, IAB Maureen Little, VP Business Development, Turn Calvin Lui, CEO, Tumri Howard Manus, VP Marketing & Operations, CNNMoney.com Josh McFarland, Founder, TellApart Lana McGilvray, VP Marketing, Datran Media Ramsey McGrory, VP Corporate Partnerships, Yahoo! Randy Nicolau, CEO, Demdex Brian O’Kelley, CEO, AppNexus Andrew Pancer, COO, Media6 Degrees Eric Picard, Director Ad Platform R&D Group, Microsoft Corp. Eric Porres, President, Underscore Marketing Mark Portugal, SVP Global Business Development, Traffiq Chris Scoggins, VP Digital, NextAction Jay Sears, EVP Strategic Products & Business Development, ContextWeb Nat Turner, President, Invite Media Joe Wilson, VP Strategic Product Development, Turner Broadcasting Bill Wise, SVP, Ad Platforms, Yahoo! Nathan Woodman, Managing Director, Adnetik (Havas Digital) Joe Zawadski, CEO, MediaMath Mark Zagorski, Chief Revenue Officer, eXelate 39

Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

Inventory Naming Chart IF IT’S NOT:

...THEN IT’S:

Premium

Non-premium Secondary premium Less premium

Rate card

Discounted / off-rate Cost per whatever

Priority

Must run Guaranteed Futures Priority 1 Class 1

Pre-emptible Un / non-guaranteed Spot Priority 2 Class 2

Placement

Guaranteed Reserved

Run of Site Discretionary Untargeted

Sold

Unsold / undersold Available

Reserved

Un / non-reserved

Publisher / direct-sold Independent sales rep

3rd party ad network

NAMES BASED ON:

Price

Availability

Sales channel

Ad exchange

Advertiser objective

Uncategorized

Brand impact

Direct response

Targeted audience reach Promotion

Action / Performance

Ad inventory

Bulk / wholesale Excess High frequency Internal / house Remnant Run of network Unallocated Unoptimized 40

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Rapidly Innovating for Revenue The 2nd Channel Ecosystem is comprised of nine primary segments that are driving up the value of premium online publisher ad inventory

IN M & VE A S NT N A O A L R G E Y EM S EN T

D

AT & A P EX LA C TF HA O N R G M E S S

A

D

S

ER

VE

R

S

A O DR P E TI V M E IZ NU ER E S

In 3 years the 2nd Channel is estimated to make up 34% of all publisher ad revenue*

41

Color represents venture capital investment in segment within the past two years.**

M E & AS A U N R A E LY M TI EN C T S

A

D

N

ET T P AR & W LA G O TF E RK O TIN S R G M S

M E P DI LA A TF BU O Y R IN M G S

D

AT & A P EX LA C TF HA O N R G M E S S

A

D

EX

C

H

A

N

G

ES

TE AD DY C C NA H R M N E I O AT C LO IV G E IE S

A

D

S

ER

VE

R

S

AD CALL / SELLSIDE AD DELIVERY / BUYSIDE METRICS & ANALYTICS

$

$$

$$$

Height Represents Number of Leading Companies within the Category **Funding sources include Crunchbase, company press releases and SEC filings. *ThinkEquity LLC, “The Opportunity in Non-Premium Display Advertising,” 2009

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The 2nd Channel Ecosystem

Media Buying Platforms Also known as:

• Agency

• Demand-side

• Meta

• Audience

trading systems marketplaces • Buy-side platforms/optimizers

• Exchange

platforms/optimizers buyers • Media traders

• Specialist

ad networks traders

Which ENTITIES use it? Advertiser

Agency

√

√

Network

Technology Provider

Publisher

What FUNCTIONAL AREAS does it serve, support, impact? Ad Operations

Ad Sales

Finance and Administration

√

Marketing

Media Buying

√

√

Which OUTCOMES does it affect or influence? Ad Performance

Ad Pricing

Yield or Spend Management

Operational Efficiency

√

√

√

√

Sales Effectiveness

ACTIVE & ANNOUNCED OFFERINGS & COMPANIES INCLUDE Agency holding companies:

Third parties:

Adnetik (Havas Digital) Atom Systems (Razorfish, Publicis) Audience on Demand (VivaKi Nerve Center, Publicis Groupe) B3 (Media Innovation Group, WPP) Cadreon (Mediabrands, Interpublic Group) OMG Digital (OMD) Varick Media Management (MDC Partners)

[x+1] DataXu Invite Media MediaMath Turn

INTERACTS WITH • Ad

networks & targeting platforms • Data sources, exchanges & platforms

• Ad

exchanges • Dynamic ad creative technologies

43

• Ad

servers

Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

WHAT IT DOES Media buying platforms are evolving with a mission to improve online advertising efficiency and effectiveness for advertisers. They enable buyers to aggregate data from many sources and to create and target audiences customized to advertisers’ specifications, rather than the segmentation proffered by publishers, networks and targeting providers. Agencies seek to improve decisioning on every ad call whether they are procuring biddable inventory on exchanges, fulfilling reach requirements via network buys, or making direct placements on web sites. The tool suites enable them to access inventory, data and analytics, as well as manage optimization of creative, media, performance and audience, all through a single user interface. These nascent agency platforms rely on technologies provided by partner companies. Don’t be surprised, however, if you see agency execs chatting up engineers at the next interactive media association drinkfest in your town: Agencies adore algorithms and covet coders. IMPORTANCE TO PUBLISHERS As things stand, media buying platforms aim to make it easier for more advertisers to take advantage of efficient buying through ad exchanges. This should result in more advertisers for more publishers with inventory available through ad exchanges. If agencies use the platforms to produce insights and analytics that “light up the darkness of the cookie database,” as Varick’s Darren Herman describes the goal, it could help bring the long hoped-for flood of television ad dollars to the web at last.

WHAT’S COMING “Buyers who understand performance and what the algorithms can do for them will flourish.” Nat Turner, President & Co-Founder, Invite Media “With the unbundling of data, media and audiences, and the addition of analytics and market pricing, agencies with integrated platforms are becoming more efficient and evolving into digital media traders.” Joe Zawadski, CEO, MediaMath “Networks and publishers that continue to bring unique data, inventory and reach to our clients will welcome these systems, which make us more efficient planners and buyers.” Nathan Woodman, Managing Director, Adnetik, Havas Digital “The next generation ad agency will have technology at its core. It will operate in the background and enable us to stay focused on doing what agencies do best: managing successful client relationships.” Darren Herman, President, Varick Media Management

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The 2nd Channel Ecosystem

Dynamic Ad Creative Technologies Also known as:

• Creative

• Dynamic

• Creative

optimization versioning • Dynamic ads

• Dynamically-generated

ad serving advertising

Which ENTITIES use it? Advertiser

Agency

Network

√

√

√

Publisher

Technology Provider

What FUNCTIONAL AREAS does it serve, support, impact? Ad Operations

Ad Sales

√

√

Finance and Administration

Marketing

Media Buying

√

√

Operational Efficiency

Sales Effectiveness

Which OUTCOMES does it affect or influence? Ad Performance

Ad Pricing

√

√

Yield or Spend Management

ACTIVE & ANNOUNCED OFFERINGS & COMPANIES INCLUDE Adaptive Ads (Glam Media) AdReady Adroit Adtuitive Aggregate Knowledge Dapper

Teracent Tumri

INTERACTS WITH • Ad

networks & targeting platforms • Ad servers

• Data

sources, exchanges & platforms buying platforms

• Media

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Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

WHAT IT DOES Say you have thousands of products, but limited resources to create, manage and deploy a vast range of ads to assure better matches between consumers and offers. To up the odds of getting the right product in front of the right user, check out the dynamic ad creative applications that create new messages on the fly. Using context and/or data about consumers’ online shopping and product research behavior and inferred or declared interests, these offerings can assemble and serve an ad targeted to your consumer’s interest right down to the product level. Some of the services operate as self-service tools that include media buys. Others put the ads together for you to deliver to your own media buys or on your own site. A common application: A shopper has been looking at air travel offers between two cities. Multiple airlines and booking engines now bid for the opportunity to serve this shopper their own special offers for the route. With data and ample biddable inventory on exchanges, competing advertisers can feed our traveler different ad versions everywhere they see the cookie for the next 24 to 48 hours, the optimum time to clinch a travel booking. You may still need to maintain an extensive database of products and offers, geo-location data, and a large number of ad templates, but now you can let the technology do the data sifting and heavy lifting. IMPORTANCE TO PUBLISHERS Publishers who offer access to their users’ anonymous data – especially data related to shopping and purchase activities – may find their sites attract new ads from well-known retailers and marketers with extensive product lines. If you have a site with a lot of general interest or user generated content, this may be your best chance to acquire top brand advertisers who would otherwise not be interested in your sales proposition. WHAT’S COMING “The web publisher is the marketer’s last chance to reach the consumer with the right message. We’ve been able to use technology to target and reach that consumer for some time, but now we are also able to marry art and science to create the right message at the right moment for that consumer. Everyone can have access to technology that makes ads smarter.” Calvin Lui, CEO, Tumri “Now you have a decision layer between the buyer’s ad server and the inventory provider that validates data in real time and serves the correct ad dynamically. This means that agencies get more control over targeting and optimization, publishers get better CPMs, and viewers see ads that are more relevant to their immediate interests.” Pascal Bensoussan, VP of Products & Marketing, Aggregate Knowledge “Online advertising is still largely about serving static billboards. This was necessary when we didn’t have a practical way to personalize ads, but it’s changing now that we can combine intent cues from behavior, context, geography, and many others to determine which ad is best suited for every impression and which offer is best suited for that impression.” Jon Aizen, COO, Dapper

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The 2nd Channel Ecosystem

Data Exchanges & Platforms Also known as:

• Audience

• In-market

• Behavioral

purchase intent data data management • Data targeting exchange

• Online

consumers data exchanges

Which ENTITIES use it? Advertiser

Agency

Network

Publisher

Technology Provider

√

√

√

√

√

What FUNCTIONAL AREAS does it serve, support, impact? Ad Operations

Finance and Administration

Ad Sales

Marketing

Media Buying

√

√

Operational Efficiency

Sales Effectiveness

√ Which OUTCOMES does it affect or influence? Ad Performance

Ad Pricing

√

√

Yield or Spend Management

ACTIVE & ANNOUNCED OFFERINGS & COMPANIES INCLUDE Data exchanges & platforms:

Data sources:

BlueKai Demdex eXelate

Acxiom Experian IXI NextAction Nielsen RL Polk TargusINFO

INTERACTS WITH • Ad

exchanges • Ad networks & targeting platforms

• Ad

servers • Dynamic ad creative technologies

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• Media

buying platforms

Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

WHAT IT DOES Data is now widely available that can be applied to enriching user profiles maintained by advertisers, web site publishers, networks and service providers. Because the value of targetable data begins to decay almost as soon as it is generated, advertisers and networks have an almost insatiable demand for data that is continuously replenished. Generally, data from outside sources is ingested by other systems asynchronously. That is, new data is fed into an existing database and matched to individual records, cookies, etc. at some regular interval that is outside the immediate process of selecting and delivering a particular ad to an individual user at any given time. IMPORTANCE TO PUBLISHERS For many years, the primary aggregators and users of data for cross-site targeting and optimization were ad networks. Advertisers and agencies, as well as publishers, today have ready access to anonymous consumer data as well as tools that can tap the data for more effective buying, targeting, optimizing and reporting. Publishers that provide access to their audience data as well as their inventory – directly and through networks and exchanges – benefit from better performing and higher-paying ads that are bought in open markets and placed on their sites whenever the data match, the right ads are available, and business rules permit the delivery. There is a downside in the form of mixed-up food metaphors: When ad networks cherry-pick their own cookies to serve high-value ads, they generally have a poor fill rate – as low as 10 percent. That is, only one-in-ten opportunities to serve a higher CPM ad results in an actual ad being served for a price above the much lower default rate. These default ads often are low quality offers that publishers sought to avoid in the first place when they signed with the networks that promised well-targeted, high quality brand advertisers. Publishers can manage multiple data partners and networks more effectively with platform tools. And if you sell your anonymous data to exchanges and other companies that resell it, you may earn additional revenue for your audience. WHAT’S COMING “Data is the fuel that drives targeting engines. Publishers, networks and others that can capture interesting consumer activities, behaviors and purchase intentions can take advantage of open platforms to help themselves and others in the ecosystem to always do a better job of serving the consumer’s interests with more relevant ads.” Mark Zagorski, Chief Revenue Officer, eXelate “To be effective as a seller of audiences, you need access to multiple sources of data. Now that the data is everywhere, you’re starting to see the emergence of better tools that can stitch it all together.” Randy Nicolau, Chief Executive Officer, Demdex

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The 2nd Channel Ecosystem

Ad Networks & Targeting Platforms Also known as:

• Audience

• Media

• Behavioral

networks targeting networks • Inventory aggregators

• Retargeting

networks / remarketing networks

Which ENTITIES use it? Advertiser

Agency

Network

Publisher

Technology Provider

√

√

√

√

√

What FUNCTIONAL AREAS does it serve, support, impact? Ad Operations

Ad Sales

√

√

Finance and Administration

Marketing

Media Buying

√

√ Sales Effectiveness

Which OUTCOMES does it affect or influence? Ad Performance

Ad Pricing

Yield or Spend Management

Operational Efficiency

√

√

√

√

comScore Top 25 Advertising Networks (in alpha order) July 2009 - Total Audience – US 24/7 Real Media AdBrite Adconion Media Group Adify ADSDAQ by ContextWeb AOL Advertising AudienceScience (formerly Revenue Science) Burst Media Casale Media - MediaNet Collective Network by Collective Media CPX Interactive FOX Audience Network Google Ad Network

interCLICK Microsoft Media Network US Monster Career Ad Network Pulse 360 Specific Media Traffic Marketplace Tribal Fusion Turn, Inc Undertone Networks ValueClick Networks Vibrant Media Yahoo! Network

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Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

INTERACTS WITH • Ad

exchanges • Ad networks & targeting platforms

• Ad

servers • Data sources, exchanges & platforms

• Yield

optimizers

WHAT IT DOES Online ad networks used to create their own marketplaces of advertisers and publishers. As aggregators of inventory, they made it easier for advertisers to acquire needed reach cost-effectively from fewer sellers, while enabling publishers to better monetize more of their undersold inventory. Then along came optimization, targeting, data wholesaling, actionable audience analytics, exchanges and network optimizers. Today’s leading ad networks are technology innovators that increasingly blur the lines between the sell side and the buy side. With access to tens of millions of web users in the U.S. monthly, many networks offer audience segments with real heft and depth for any marketing objective. It’s still a challenge, however, for any single network to see enough of those valuable visitors with enough frequency each month to satisfy demand in key categories. Hence, the rise of media exchanges that potentially offer every network access to the entire marketplace of supply and demand. IMPORTANCE TO PUBLISHERS Whether you’re a publisher, marketer or agency, everybody loves to hate networks. But nobody hates a good business partner who delivers known advertisers at a fair, if less than ideal, rate. For publishers, a well-managed group of networks can monetize most of your impressions at an acceptable price. For short-staffed agencies, networks still represent the path of least resistance to acquire the greatest volume of acceptable inventory at the best price in the smallest number of steps. WHAT’S COMING “Before, publishers who wanted to use targeting technology were limited by their own data and inventory. Now they can monetize their data and reach their own users on networks. They can bring their own data and their own data strategy, and they can tap data from many other sources. Advertisers will continue to buy context as a proxy for audience, but as demand grows in the future, there will always be a need to buy around sold-out premium inventory. The only way to do this is to buy audiences at scale.” Jeff Hirsch, Chief Executive Officer, AudienceScience “Marketers are moving from a publisher-centric, audience-composition mindset to a more scaleable audience-centric mode. Publishers have to be thinking about how they participate successfully in both. If an advertiser sees that publishers or networks of publishers fulfill their audience requirements better than their agency, those publishers and networks will continue to thrive.” Joe Apprendi, Chief Executive Officer, Collective Media

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The 2nd Channel Ecosystem

Ad Exchanges Also known as:

• Media

• Open

• Media

exchanges marketplaces • Media trading desks

• Spot

ad markets media exchanges / markets

Which ENTITIES use it? Advertiser

Agency

Network

Publisher

Technology Provider

√

√

√

√

√

What FUNCTIONAL AREAS does it serve, support, impact? Ad Operations

Finance and Administration

Ad Sales

√

Marketing

Media Buying

√

√

Which OUTCOMES does it affect or influence? Ad Performance

Ad Pricing

Yield or Spend Management

Operational Efficiency

√

√

√

√

Sales Effectiveness

ACTIVE & ANNOUNCED OFFERINGS & COMPANIES INCLUDE AdECN (Microsoft) AdNexus (AppNexus) ADSDAQ (ContextWeb) Doubleclick Ad Exchange (Google) OpenX Right Media Exchange (Yahoo!) Rubicon Project INTERACTS WITH • Ad

networks & targeting platforms • Ad servers

• Data

sources, exchanges & platforms • Dynamic ad creative technologies

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• Media

buying platforms • Yield optimizers

Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

WHAT IT DOES Ad exchanges bring advertisers, publishers and networks together, typically on an automated bidding platform. Exchanges for display advertising came into being to address inefficiency and lack of transparency in the use of ad networks. When a publisher plugs directly into a media exchange, or participates in an exchange through one or more networks, it gains access to new advertisers that will bid for the opportunity to serve an ad to a visitor on its site. Exchanges also provide inventory access to value-adding technology providers. If you have a better tool for targeting users or optimizing campaigns, for validating data or using it to create ads on the fly, you can bring it to the entire marketplace by partnering with one or more exchanges.

IMPORTANCE TO PUBLISHERS Exchanges are evolving from pure performance-oriented remnant fillers to brand-safe marketplaces. They have demonstrated their ability to turn tough-to-monetize ad impressions into revenue by bringing market liquidity in the form of demand equal to the abundance of supply. Publishers need to be prepared to tolerate low bids until their inventory value becomes well established in the exchange environment. This is where a yield optimizer such as PubMatic can help by always selecting the best, highest paying ad from multiple networks and exchanges.

WHAT’S COMING “The next big challenge for exchanges is to make certain we’re getting our share of business from the top 200 ad spenders. These are the types of advertisers that demand detailed data and audience insights and who want to see exactly what you contributed to every conversion.” Bill Wise, Senior Vice President, Ad Platforms, Yahoo! “Exchanges offer opportunities to buy and sell guaranteed as well as spot inventory, contextual as well as audience targeting, self-service or outsourced. Publishers can be buyers on the exchange to help extend advertisers’ reach against their audiences, and of course they can be sellers, with full control of pricing. This kind of flexibility ensures the continuing growth of exchanges.” Jay Sears, Executive Vice President, Strategic Products & Business Development, ContextWeb

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The 2nd Channel Ecosystem

Ad Servers Also known as:

• Ad

campaign management ad servers • Rich media servers

• Video

ad servers

• Display

Which ENTITIES use it? Advertiser

Agency

Network

Publisher

Technology Provider

√

√

√

√

√

What FUNCTIONAL AREAS does it serve, support, impact? Ad Operations

Ad Sales

Finance and Administration

Marketing

Media Buying

√

√

√

√

√

Yield or Spend Management

Operational Efficiency

Sales Effectiveness

√

√

√

Which OUTCOMES does it affect or influence? Ad Performance

Ad Pricing

√

ACTIVE & ANNOUNCED OFFERINGS & COMPANIES INCLUDE Display

Rich media / video

AdConductor (Burst) AdTech (AOL) Atlas Suite (Microsoft) CheckM8 DART (DoubleClick / Google) Google AdManager Mediaplex Mojo (Valueclick) OpenAdStream (24/7 Real Media / WPP) OpenX Yield Manager (Right Media / Yahoo!) Zedo

Atlas (Microsoft) Bluestreak (Aegis) BBE Brightroll DART (DoubleClick / Google) Eyeblaster Eyewonder Freewheel Lightningcast (AOL) Pointroll (Gannett) VideoEgg

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Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

INTERACTS WITH • Ad

• Measurement

• Ad

exchanges networks & targeting platforms • Ad servers • Data sources, exchanges & platforms • Dynamic ad creative technologies

• Media

& analytics Buying Platforms (Agency, Third party) • Site inventory & sales management tools • Ad revenue optimizers

WHAT IT DOES Ad servers are the workhorses of online advertising. We depend on them 24/7 to ingest and interpret complex instructions from data sources, web servers, browsers, other ad servers, and to pick, serve and track ads in milliseconds - billions of times per day for the largest sites and networks. Publishers can choose from among stable commercial releases and newer open source ad servers that have begun to offer capabilities rivaling those of the big established servers. You’ll also need to decide whether to keep all your ad serving with your current vendor or to use specialists for video and rich media.

IMPORTANCE TO PUBLISHERS Ad server’s down? So’s your ad revenue, and if it’s not back up soon, you may start owing penalties on top of makegoods to some of your advertisers. This is mission critical and your vendor’s security, redundancy, 24-hour service, 99.99% uptime pledges, etc., are the main reasons that major ad-dependent sites continue to pay for ad serving when it’s available for free.

WHAT’S COMING In one more demonstration of the blurring of functional lines, commercial ad servers are beginning to morph or merge into full-fledged buy-sell-optimize-report campaign management systems.

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The 2nd Channel Ecosystem

Ad Revenue Optimizers Also known as:

• Exchange

optimizers optimizers • Revenue optimizers • Ad network optimizers • Yield

Which ENTITIES use it? Advertiser

Agency

Network

Publisher

Technology Provider

√

√

√

What FUNCTIONAL AREAS does it serve, support, impact? Ad Operations

Ad Sales

Finance and Administration

√

√

√

Marketing

Media Buying

Sales Effectiveness

Which OUTCOMES does it affect or influence? Ad Performance

Ad Pricing

Yield or Spend Management

Operational Efficiency

√

√

√

√

ACTIVE & ANNOUNCED OFFERINGS & COMPANIES INCLUDE PubMatic AdMeld YieldBuild

INTERACTS WITH • Ad

• Ad networks & targeting platforms exchanges • Data sources, exchanges & platforms • Dynamic ad creative technologies • Media Buying Platforms (Agency, Third party)

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• Ad

servers

• Measurement

& Analytics

Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

WHAT IT DOES This segment was generally known for the ability help to premium publishers manage ad networks, but value propositions extend far beyond that. PubMatic is the only ad revenue optimizer that is able to choose the highest paying ad network or ad exchange for a premium publisher in real-time, and for every single impression. This propriety technology is called Ad Price Prediction™ and it is a combination of machine learning algorithms and RTB capabilities. RTB allows for buyers to bid on ad space in real-time, which increases the value of that ad space. However, RTB is still very new and because so few ad networks can utilize it, it cannot optimize every impression. Another huge value proposition from this category includes protecting the premium publisher’s brand from unwanted advertising and streamlining ad operations functions such as reporting.

IMPORTANCE TO PUBLISHERS There’s been much hand-wringing from some sellers and buyers over the perception that ad networks don’t earn the high margins they sometimes collect due to an inefficient ad ecosystem. Real-time revenue optimization from PubMatic gives more control to publishers to get the most for every impression, helping them realize better margins while also enabling the best ad networks, exchanges and other 2nd channel sources to rise to the top and increase their own sales. Best of all, since every performance metric and pricing model are evaluated in the algorithms, the process also results in the best-performing and most relevant ad being served to the site visitor.

WHAT’S COMING “Data management and optimization for premium publishers is already in the works, at least for PubMatic. It is not entirely unlike how our segment in the ecosystem helps premium publishers manage and optimize ad networks, only we’ll be doing it for data as well in order to further increase the value of 2nd Channel ad space. For premium publishers it will not only significantly raise CPMs, but improve user experience. For advertisers, they’ll get much better performing campaigns.” Rajeev Goel, CEO, PubMatic

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The 2nd Channel Ecosystem

Site Inventory & Sales Management Tools Also known as:

• Inventory

forecasters analysis & prediction • Revenue / yield management

• Sales

optimization

• Pricing

Which ENTITIES use it? Advertiser

Agency

Network

Publisher

Technology Provider

√ What FUNCTIONAL AREAS does it serve, support, impact? Ad Operations

Ad Sales

Finance and Administration

Marketing

√

√

√

√

Media Buying

Which OUTCOMES does it affect or influence? Ad Performance

Ad Pricing

Yield or Spend Management

Operational Efficiency

Sales Effectiveness

√

√

√

√

ACTIVE & ANNOUNCED OFFERINGS & COMPANIES INCLUDE APT (Yahoo!) Doubleclick DART (Google) FatTail Microsoft Operative Solbright Yieldex

INTERACTS WITH • Ad

networks & targeting platforms • Ad servers

• Measurement

& Analytics

57

Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

WHAT IT DOES These are the backroom business functions of web publishing – billing, order entry, inventory tracking and prediction, sales analysis and forecasting. They are utterly essential but inherently difficult for technology companies to generalize to the needs of large numbers of potential customers. Site inventory management is still largely a tangle of legacy processes, systems and manual effort addressing old problems of the online medium itself. While investment has flowed to technology providers who are working to simplify 2nd Channel inventory management at the network, exchange and optimizer levels, much less has been done on the publisher side. Large media companies develop their own decision support systems for optimal inventory use, and a few startups have taken on specific functions such as billing and reconciliation, availability forecasting, and yield management.

IMPORTANCE TO PUBLISHERS For premium publishers, these tools are a sort of monitoring system responsible for maintaining the overall health of the site (i.e., its profitability) by keeping all the other systems in proper balance. Investors like the scalability of 2nd Channel solutions that crunch thousands of data points to select the highest-paying ad from among tens of thousands available. The publisher, on the other hand, needs help deciding, say, which of six comparably priced campaigns should deliver to an impression that simultaneously meets requirements for contextual or sponsored placement, geo- , demo- or behavioral targeting, an underdelivering advertiser, etc.

WHAT’S COMING “Publishers have long needed visibility into the availability of inventory they can best package, price and sell. Now the technology enables granularity that considers all attributes and guides the sales executive to recommend packaging based on highest value deliverable.” Larry Allen, President, Yieldex

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The 2nd Channel Ecosystem

Measurement & Analytics

Which ENTITIES use it? Advertiser

Agency

Network

Publisher

√

√

√

√

Technology Provider

What FUNCTIONAL AREAS does it serve, support, impact? Ad Operations

Ad Sales

Finance and Administration

Marketing

Media Buying

√

√

Operational Efficiency

Sales Effectiveness

Which OUTCOMES does it affect or influence? Ad Performance

Ad Pricing

Yield or Spend Management

√ Ad effectiveness & campaign verification:

Web analytics & planning metrics:

AdXpose (mPire) Asoc8 comScore Dimestore DoubleVerify Dynamic Logic Factor TG Insight Express MediaTrust Vizu

Compete comScore MediaMetrix Coremetrics Connect Google Ad Planner Google Analytics Nielsen//NetRatings Omniture Genesis Quantcast TNS Media Intelligence Unica WebTrends Open Exchange

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√

Ad Revenue 2009 OCTOBER 8TH, NEW YORK CITY

INTERACTS WITH • Ad • Ad

networks & targeting platforms servers

• Data

sources, exchanges & platforms Buying Platforms (Agency, Third party)

• Media

WHAT IT DOES We love our numbers. Fortunately, we have hundreds of data flavors from dozens of providers. Whether you are deep diving into the implications of your current web traffic patterns as part of a site overhaul, measuring your advertising market share, or discovering new audiences, there are tools that collect, score, manage, store and report it all a thousand ways. Measurement and analytics products and services are becoming both more specialized and more adaptable to new uses. Among recent developments are lightweight services for measuring brand effectiveness, ad delivery verification services, and the emergence of site metrics providers as ad networks. The industry is still struggling with metrics standards, however, so innovation is key and competition is fierce, not least because of the availability of well established and commercially viable open source analytics applications.

IMPORTANCE TO PUBLISHERS Core applications for every site include those that provide deep web traffic analysis. Many sales departments have annual budgets for media planning data tools and ad effectiveness surveys. Fighting for mindshare at agencies and networks are new tools for validating ad deliveries that will discover and report any non-compliance with insertion order terms and conditions.

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Special thanks to Kapeesh Saraf, PubMatic’s rockstar summer intern, for all his help with this report

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Ad Revenue Optimization



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