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Gridley & Company LLCGridley & Company LLC
Ad Exchanges, Targeting Ad Exchanges, Targeting & Optimization& Optimization
““From Mad Men to XFrom Mad Men to X--MenMen””
January 2010January 2010CONFIDENTIAL
2January 2010
Table of Contents
I. Industry Introduction and Overview
II. The Landscape of Players
III. The Opportunities
IV. How Gridley Can Help
3January 2010
I. Industry Introduction and Overview
4January 2010
Introduction • Almost every slice of the advertising pie is undergoing major transformation
• With new devices, channels, technologies, content, and formats, advertising has never been more complex
• Ad exchanges, ad networks, optimizers, targeting platforms, new forms of data, and the explosion of online inventory has forced massive changes in the old ways of Madison Avenue
• Today’s Don Draper needs to be part Wall Street trader, part techie, and part media maven – the new X-Men
• The stakes are high and new technologies are the hot topic
• The landscape has loads of interest with investment and M&A activity ready to take off
• This Gridley Industry Overview is designed to helpyou navigate this new landscape
5January 2010
A Lot at Stake in Online Display Advertising• Improving economy + re-entry of financial and auto advertisers = double digit
growth in 2010
• Display will represent more than 30% of total online spend next year, second only behind search
• Online display will continue to capture shifting ad spend from large brand marketers
U.S. Online Advertising Spending, by Format
Source: Interactive Advertising Bureau (IAB), PricewaterhouseCoopers (PwC), and Barclays Capital estimates.
($ in millions)
'09 - '10 '10 - '13Channel 2007 2008 2009 2010 Growth 2011 2012 2013 CAGR
Search $8,810 $10,528 $11,370 $12,507 10.0% $14,008 $15,549 $17,104 11.0%Display Advertising 7,153 7,639 7,544 7,740 2.6% 8,103 8,479 8,843 4.5%Classifieds/Auctions 3,271 3,147 2,908 2,878 (1.0%) 2,936 2,979 3,023 1.7%Lead Generation/E-mail 1,972 2,134 2,153 2,226 3.4% 2,315 2,393 2,459 3.4%
Total $21,206 $23,448 $23,975 $25,351 5.7% $27,362 $29,400 $31,429 7.4%
% Mix
Search 41.5% 44.9% 47.4% 49.3% 51.2% 52.9% 54.4%Display Advertising 33.7% 32.6% 31.5% 30.5% 29.6% 28.8% 28.1%Classifieds/Auctions 15.4% 13.4% 12.1% 11.4% 10.7% 10.1% 9.6%Lead Generation/E-mail 9.3% 9.1% 9.0% 8.8% 8.5% 8.1% 7.8%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
6January 2010
But Online Display Faces Challenges• Way too many vendors representing inventory
– Hundreds of ad networks in all shapes and sizes
– Horizontal, vertical, display, performance, video, in-game, social apps, and mobile
• Fragmented audiences– Traffic is dispersed across the entire “tail”
• Lack of transparency in ad networks– Advertisers don’t know where and when their ads run
– Publishers are not guaranteed “blind” inventory
• No standard KPI’s– How do you measure success and attribution? Clicks? Engagements?
• Little control over pricing– Advertisers want to maximize ROI = lower CPM + higher conversion
– Publishers want to maximize yield = higher CPM + more premium inventory
• Agencies / buyers are giving away a lot of margin to the ad networks– Ad networks are making 30% - 40% margins
7January 2010
Exchange Technologies are Taking the Lead• Real-time Exchanges offer transparency, market pricing, and liquidity
• Demand Side Platforms are offering the holdcos and marketers a solution
• Trading Desks at the agencies are becoming the experts at optimization
• Data Providers and Exchanges offer online audience segmentation at a detailed level
• Ad Creative Optimization allows dynamic ad serving of the right ad to the right audience at the right time
• Social Targeting platforms enable marketers to target based on social interactions
• Publishing Yield Optimizers aggregate inventory and maximize CPMs for publishers – looks a lot like the exchanges
• Ad Networks are trying to hold on to their high margins by adding better targeting technologies, high value services, and / or going deep into a vertical
8January 2010
• New ad targeting, optimization, and data companies are redefining the landscape
The New Players are Staking Out Positions
Ad“Traders”
Ad“Traders”
Age
ncie
s / M
edia
Buy
ers
Rich Media Ad Platforms
Ad Creative Optimizers
Ad Creative Optimizers
Data Providers & Exchanges
Data Providers & Exchanges
Demand Side
Optimization Platforms
Demand Side
Optimization Platforms
Social Targeting
Social Targeting
Demand Side – Advertising $$ Supply Side - Inventory
Adv
ertis
ers
Publishing Yield Optimizers
Publishing Yield Optimizers
The Ad Exchanges
The Ad Exchanges
Publishers
Data M
easurement
Direct Sales Force
Display Ad Networks
9January 2010
The New Players are Staking Out PositionsA
genc
ies
/ Med
ia B
uyer
s
EyeblasterEyeWonder
PointrollUnicast
VideoEgg
Demand Side – Advertising $$ Supply Side - Inventory
Adv
ertis
ers Publishers
Data M
easurement
Com
pete, comS
core, Quantcast, N
ielsen NetR
atings
24/7Adconion
AdifyAdroll
Audience ScienceBizo
Brand.netBrightRoll
Burst MediaCasale
Collective MediaConnexus
CPX InteractiveEpic AdvertisingFOX Audience
NetworkGoogle Ad Network
Gorilla NationInterCLICK
KonteraMicrosoft Media
NetworkPlatform-A
Specific MediaTremor MediaTribal Fusion
Turn Inc.Undertone Network
ValueClickVibrant Media
Yahoo Media NetworkYume
Ad“Traders”
Demand Side Optimization
Platforms
Data Providers & Exchanges
Social Targeting
Ad Creative Optimizers
Ad Exchanges
Publishing Yield Optimizers
Direct Sales Force
10January 2010
Key Factors for Success• “Industrial-grade” technology platforms that deliver true
real-time performance at scale
• Easy-to-use platform interfaces that minimize work flow disruptions
• Ability to provide transparency and “trustability” across platform or service offerings
• Strong “customer” services focus as new marketers and suppliers enter market
• Clear performance measurement and reports that don’t require a Ph.D. to understand
• Ability to draw actionable insights out of reports, activate vast stores of data, and implement the “call-to-action”
11January 2010
PRESENTATIONS PANELISTS ATTENDEES
Participants at 2010 Gridley Conference• Gridley has stayed in front of this emerging industry and continues to provide
thought leadership
12January 2010
II. The Landscape of Players
13January 2010
The Ad Traders are at the Agencies• The ad holdcos are actively positioning themselves in the landscape
– Evaluating all the players but have never been successful at buying technology companies
• Ultimately will stay gate keepers of the media spend and utilize their “traders” and technology for execution and analysis
Havas IPG MDC Partners Omnicom Group Publicis WPP Group
Trading Unit Adnetik Cadreon Varick Media Management
Omnicom Media Group Digital
VivaKi Nerve Center
Media Innovation Group / B3
N/A
Head of Unit Nathan Woodman Quentin George Darren Herman Matt Spiegel Curt Hecht Brian Lesser
Description Digital trading network and agency
Custom audience trading marketplace
Media traders using algorithms and data to trade in real-time
Partnering with Fox Audience Network (FAN) for access to audience targeting tools
Digital media optimization agency for premium inventory
Optimizer of ad network spend
TechnologyPlatform
DataXu Multiple platforms Multiple platforms FAN's Audience Insights, Audience Planner and Real-Time Bidding platforms
Private platform (Audience on Demand)ATOM Systems (Razorfish)
Private platform
Status Not operating in U.S. yet
Out of beta and serving clients
Established in 2008 Announced October 2009
Test mode in 2008; live clients today
Went live in middle of 2008
14January 2010
The Demand Side Optimization Platforms• New breed of trading technology platforms that combine bid optimization, data
integration, analytics, and supply relationships to optimize display ad buys
– “Bloomberg terminals” for the media buyers
• “Trading desks” provide the execution – Adnetik, Cadreon, Varick Media, Living Segments, VivaKi, and B3
• Attracting a lot of interest from investors and strategic buyers
Company Year
Founded Investors
Capital Raised($mm)
www.adbuyer.comNew York, NY
NA NA NA
www.appnexus.comNew York, NY
2007 First Round Capital, Khosla Ventures, Kodiak Venture Partners, Venrock
$10.5
www.dataxu.comCambridge, MA
2007 Atlas Venture LLP, Flybridge Capital Partners 6.0
www.invitemedia.com Philadelphia, PA
2007 First Round Capital NA
www.mediamath.comNew York, NY
2007 Safeguard Scientifics, Inc.; QED Investors LLC; European Founders Fund
16.6
www.turn.comRedwood City, CA
2005 Focus Ventures, Norwest Venture Partners, Shasta Ventures, Trident Capital
38.5
www.xplusone.comNew York, NY
1999 ATV, Blue Chip Ventures, Hudson Ventures, Seed Partners, WS Capital
30.8
15January 2010
Data Providers & Exchanges• Data exchanges provide cookie data to segment high value audiences
– Allows media buyers to target only the impressions they want
• Incorporating data from multiple sources – offline and online
• Speaking the language of database marketers – data management, audience segmentation, new marketing cohorts
Company Year
Founded Investors
Capital Raised($mm)
www.almondnet.comNew York, NY
1998 Argoquest Inc. $1.0
www.bizo.comSan Francisco, CA
2008 Ascent Ventures, Venrock NA
www.bluekai.comBellevue, WA
2007 Battery Ventures, Redpoint Ventures 13.7
www.brilig.comNew York, NY
NA NA NA
www.datalogix.comWestminster, CO
2002 Advantage Capital Partners, General Catalyst Partners, Sequel Venture Partners
15.2
www.exelate.comPetach Tikvah, Israel
2006 Carmel Ventures 4.0
www.lotame.comElkridge, MD
2006 Battery Ventures, Betaworks, Emergence Capital Partners, Hillcrest Capital Partners
25.0
www.quantcast.comSan Francisco, CA
2005 Polaris Venture Partners, Inc., Revolution Ventures, The Founders Fund
25.7
www.permuto.comPalo Alto, CA
2008 Onset Ventures, Rembrandt Venture Partners 6.0
www.targusinfo.comVienna, VA
2005 TA Associates, Inc. 60.0
16January 2010
Ad Creative Optimizers• Dynamic ad creative optimizes ads using the best creative assets when the ad is
served
– Ability to serve ads in different colors, images, messaging, and lay-out to different audiences in real-time and at scale
• Integrates third party data to determine most effective ad to serve to right audience at right time
Company Year
Founded Investors
Capital Raised($mm)
www.adisn.comLong Beach, CA
2007 Battery Ventures $2.2
www.adroitinteractive.comBoston, MA
NA NA NA
www.aggregateknowledge.comSan Mateo, CA
2005 DAG Ventures, First Round Capital, Kleiner Perkins, Red Rock Ventures, VantagePoint
25.2
www.teracent.comSan Mateo, CA
2006 KPG Ventures, New Enterprise AssociatesAcquired by Google on 11/23/09
7.8
www.tumri.comMountain View, CA
2004 Accel Partners, Shasta Ventures, Tenaya Capital, Time Warner Investments
26.5
17January 2010
The Ad Exchanges• Ad exchanges are the NASDAQ or NYSE for online ad inventory
• Provides transparent, dynamic pricing for advertisers
• Provides liquidity for publishers
• Big players already own this market
• Other exchanges are getting in the game
• Sell-side yield optimizers / inventory aggregators look a lot like the exchanges
• Today exchanges are for high volume, non-premium inventory
• In the future, exchanges will list premium inventory too
18January 2010
Publishing Yield Optimizers• New platform technologies aggregate publisher inventory and optimize yield on the
ad networks and exchanges
• Publishers sell impressions to the highest bidder
• Publishers can consolidate ad network relationships into a single optimizer
• Platforms operating in real-time bidding environment look like the exchanges
Company Year
Founded Investors
Capital Raised($mm)
www.admeld.comNew York, NY
2007 Foundry Group, Spark Capital $15.0
www.pubmatic.comPalo Alto, CA
2006 Draper Fisher Jurvetson, Helion Venture Partners, Nexus India
7.0
www.rubiconproject.comLos Angeles, CA
2007 Clearstone Ventures, IDG Ventures, Mayfield Fund, Peacock Fund, Stanford, UC Berkeley
33.0
19January 2010
Social Targeting• Optimizing ads based on social marketing data
– Identifying the influencers through social connections
– Did you download a song? How big is your friends network? Did you comment on a picture?
• Activating data based on social graph and engagement
Company Year
Founded Investors
Capital Raised($mm)
www.33across.comNew York, NY
2007 First Round Capital, RoseTech Ventures, LLC NA
www.lotame.comElkridge, MD
2006 Battery Ventures, Betaworks, Emergence Capital Partners, Hillcrest Capital Partners
$25.0
www.media6degrees.comNew York, NY
2008 Contour Venture Partners, Coriolis Ventures, U.S. Venture Partners, Venrock
11.8
www.seethroo.usLos Angeles, CA
2007 NA NA
www.rapleaf.comSan Francisco, CA
2005 Active Starts, Dace Ventures, Felicis Ventures, SoftTech VC, The Founders Fund
NA
20January 2010
III. The Opportunities
21January 2010
Fewer Vendors, More Capabilities• Today, many companies offer pieces of the puzzle, but few offer the full suite
– Marketers and publishers want fewer vendors, which will drive consolidation
• Consolidators will seek to acquire stand-alone technologies or services to be the one-stop shop
– Look for acquisitions of stand-alone platforms like the data exchanges & providers, ad creative optimizers, social targeting platforms, and publishing yield optimizers
• Ad networks will begin to consolidate into a few power groups representing inventory and strong media relationships
– The “Titans” Aren’t Going Anywhere: 24/7, FOX Audience Network, Google Ad Network, Microsoft Media Network, Platform A, and Yahoo Media Network
– The Consolidators: Adconion, Collective Media, Connexus, Epic Advertising, Specific Media, ValueClick, and “Titans”
– The Targets: Adroll, Audience Science, Bizo, Brand.net. BrightRoll, Gorilla Nation, InterCLICK, Kontera, Tremor Media, Turn, Vibrant Media, and Yume
– The Question Marks: Burst Media, Casale, CPX Interactive, Tribal Fusion, Undertone Networks
22January 2010
Who Will Own What?
• The Ad Holdcos
– Specialized agencies with their own “trading desks”
– Traders will trade on the exchanges through multiple primary optimization platforms
– Will opportunistically acquire specialized technologies and services in online data, data analytics, market research, and ad creative technologies
• The “Titans”
– Google, Microsoft, AOL, and Yahoo will dominate the exchanges and networks
– Will acquire across entire spectrum of landscape
– Will compete for inventory listings by offering best execution and liquidity
– Since all have multiple capabilities across online ad technologies, they will be interested in many areas including data providers & exchanges, secondary vertical exchanges, social targeting, yield optimization
23January 2010
Who Will Own What?
• The Data Companies and Database Marketers
– Will aggressively pursue all data-centric technology platforms across landscape
– The data exchanges and platforms, demand side platforms, and social targeting companies will be their highest priority
– Database marketers with multi-channel agency services will also look at ad creative optimizers and rich media ad serving
• The Technology Players
– Look for technology leaders like Adobe, Akamai, Cisco, IBM, and others to make “best-in-class” technology platform acquisitions across landscape
– Some precedents have been set: Adobe / Omniture; Akamai / Acerno; Cisco / Tribe.net, Five Across, and Starent
24January 2010
Who Will Own What?
• The Diversified Media Giants
– Will continue to have a high level of interest across landscape
– Already investing across entire spectrum
• Meredith: Genex, New Media Strategies, Healia, The Hyperfactory
• Gannett: Pointroll, 4INFO, Ripple6
• NBC Universal: 4INFO, Greystripe, EveryZing, Rubicon Project
• Forbes.com: Investopedia, PublicPost
• Cox Enterprises: Adify
25January 2010
Possible Strategic Buyers by Category
Ad“Traders”
Ad“Traders”
Age
ncie
s / M
edia
Buy
ers
Rich Media Ad Platforms
Ad HoldcosData & Analytics
Database Marketing
Diversified MediaInternet Titans
Ad HoldcosData & Analytics
Database Marketing
Diversified MediaInternet Titans
Ad HoldcosData & Analytics
Database Marketing
Diversified MediaInternet Titans
Technology
Ad HoldcosData & Analytics
Database Marketing
Diversified MediaInternet Titans
Technology
Ad HoldcosData & Analytics
Database Marketing
Diversified MediaInternet Titans
Technology
Ad HoldcosData & Analytics
Database Marketing
Diversified MediaInternet Titans
Technology
Ad HoldcosData & Analytics
Database Marketing
Diversified MediaInternet Titans
Technology
Ad HoldcosData & Analytics
Database Marketing
Diversified MediaInternet Titans
Technology
Demand Side – Advertising $$ Supply Side - Inventory
Adv
ertis
ers
Ad HoldcosDiversified Media
Internet TitansTechnology
Ad HoldcosDiversified Media
Internet TitansTechnology
Internet TitansTechnology
Internet TitansTechnology
Publishers
Data M
easurement
Direct Sales Force
Display Ad Networks
Demand Side Optimization
Platforms
Data Providers & Exchanges
Social Targeting
Publishing Yield Optimizers
Ad Creative Optimizers
Ad Exchanges
26January 2010
Opportunities by Category• Buy-side Optimization Platforms
– Platforms will power the trading desks of the media trading units
– Near-term high growth opportunity for arbs
– Long-term high growth opportunity as more $$$ is deployed on platforms
– Likely Interested Buyers: technology-centric agencies, data & analytics companies, database marketers, diversified media, internet titans, technology companies
• Data Providers & Exchanges
– Near-term high growth opportunity as enhanced data drives high CPM and arbs can leverage spread
– Long-term high growth opportunity as audience segmentation becomes fundamental buying approach
– Getting high level of interest from all sides
– Interested Buyers: technology-centric agencies, data & analytics companies, database marketers, diversified media, internet titans, technology companies
27January 2010
Opportunities by Category• Social Targeting
– Near-term high growth opportunities as marketers seek social marketing buys
– Companies will either become data providers or agencies
– Likely Interested Buyers: technology-centric agencies, data & analytics companies, database marketers, diversified media, internet titans, technology companies
• Ad Creative Optimizers
– New breed of ad servers that optimize ad based on variable creative assets
– Long-term high growth opportunity as marketers adopt creative dynamic ad serving
– Likely Interested Buyers: technology-centric agencies, data & analytics companies, database marketers, diversified media, internet titans
• Ad Exchanges
– Look for the big, established exchanges to make strategic acquisitions to drive scale
– Near-term consolidation of niche/vertical exchanges
– Likely Interested Buyers: internet titans, technology companies
28January 2010
Opportunities by Category• Publishing Yield Optimizers
– Aggregating publishing inventory and providing yield maximization from bidders
– Need to pick the right horse
– Near-term high growth opportunity for first-movers who aggregate high volume inventory
– Likely Interested Buyers: technology-centric agencies, diversified media, internet titans, and technology companies
29January 2010
IV. How Gridley Can Help
30January 2010
About Gridley• Leading boutique Investment Bank specializing in Information Services
– Comprehensive perspective on Advertising, Marketing , Financial Technology, Outsourcing and Information Services trends and transactions
• Strong industry reputation on assignments led by senior bankers– Sellside = Excellent strategic positioning and valuation– Buyside = Deep knowledge and access to emerging companies and industry trends
• Trusted advisor and strategic matchmaker– Thoughtful M&A ideas – not just the logical public company combinations– Deliver value to buyers and sellers alike
• Broad industry network developed over 20+ years– Industry leaders, hot emerging growth companies, and senior investors– Senior executives on Gridley Advisory Board
• Well-known thought leader– Host of leading Annual Information Services Conference and participant in industry
events– Sought after commentator and resource for the media– Highly regarded quarterly newsletter – 2,500+ distribution
31January 2010
Gridley Can Help You…• Understand the dynamics of this industry in transition
• Identify the companies on our market map that best fit your interest areas – we’ve met with these companies and know their CEOs
– What their strengths, weaknesses, and key market positioning are
– Who their management teams and investors are
• Navigate the Ad Holding Company, Database Marketing, and Data Provider worlds
• Identify the financial investors and strategic investors most interested in this emerging industry
• Execute your financial objectives
– Sellside Advisory Services
– Buyside Advisory Services
– Private Placement Agent Services
32January 2010
Gridley Can Help You…• Understand the dynamics of this industry in transition
• Identify the companies on our market map that best fit your interest areas – we’ve met with these companies and know their CEOs
– What their strengths, weaknesses, and key market positioning are
– Who their management teams and investors are
• Navigate the Ad Holding Company, Database Marketing, and Data Provider worlds
• Identify the financial investors and strategic investors most interested in this emerging industry
• Execute your financial objectives
– Sellside Advisory Services
– Buyside Advisory Services
– Private Placement Agent Services
33January 2010
Gridley Has the Expertise• Decades of experience executing transactions at the nexus of database marketing
and internet services
Sole Agent
$31,000,000
Preferred Stock
September 1999Co-manager
$50,000,000
Initial Public Offering
September 1999Advisor
$58,000,000
AcquiredPerformics, Inc.
May 2004Advisor
$138,000,000
AcquiredModem Media, Inc.
October 2004
Co-managerMay 2006
$113,189,337
Secondary Offering
Ad-serving Business of
Advisor
Undisclosed
Sold toAegis plc
June 2007
Email Business of
Advisor
Undisclosed
Sold toOne to One
Interactive, Inc.
July 2007Advisor
$157,000,000
Acquirede-Dialog, Inc.
January 2008
$20,000,000
Placement Agent
Investment byTZP Group LLC
December 2008
Undisclosed
Advisor
AcquiredWard Media, Inc.
March 2008Advisor
Undisclosed
AcquiredSilverlign Group
April 2009Advisor
Undisclosed
AcquiredPepperjam
September 2009
Advisor
$101,000,000
Sold CMG Direct Corp. to Marketing Services
Group Inc.
June 1999
Advisor
Undisclosed
Sold to
August 2006
Parthenon Capital LLCAdvisor
Undisclosed
Sold to Dun & Bradstreet Corp.
April 2001
Advisor
$175,000,000
Sold to Young & Rubicam Inc.
May 1999
Advisor
$112,400,000
Sold to Omnicom Group
November 1999
The M/A/R/C Group
Advisor
$20,000,000
Strategic Investment by
Young & Rubicam
March 2000
Database Marketing Internet Services
34January 2010
Gridley & Company LLC10 East 53rd Street, 24th Floor
New York, NY 10022212.400.9720 tel212.400.9717 fax
www.gridleyco.com
Linda GridleyPresident & CEO212.400.9710 tel
Stan SandbergManaging Director