CANTO

R FITZGERALD

Internet & Media Sector

1

Youssef H. Squali Global Head of Internet & Media Equity Research ysquali@cantor.com

July 15, 2013

Who Wins/Who Loses from the Rise of Programmatic Buying?

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The View from Wall Street

Mission:

Identify investable trends early, and ride them hard

Internet has turned many a business model on its head by:

Eliminating one or more intermediary layers

Doing it faster and cheaper

Bringing more convenience

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The Big Picture around RTB

The rapid adoption of RTB is …

Transforming the way ads are bought and sold – NASDAQ as proxy

Allowing/enhancing price discovery

Bringing intelligence to every impression

Enabling scale beyond what existed before

In time, it will allow the sale of premium display, video and mobile

But… several issues need to be resolved before RTB enters prime time

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U.S. RTB Digital Display Ad Spending Forecast

RTB by the Numbers:

Roughly $3.5 billion revenue in 2013

Growing at 70+% Y/Y

At a 5 year CAGR of ~34%

~20% of digital display advertising

or, ~8% of total Internet advertising

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U.S. RTB Digital Display Ad Spending Forecast

In 5 years, RTB could account for 30-50% of total display ad spending

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So Why Does Wall Street Care?

• The Cantor Internet Index (equal-weighted index of 60+ Internet cos) vs. the S&P 500.

• Over the last 5 years, the CII has dramatically outperformed the S&P 500.

Source: FactSet and Cantor Fitzgerald research

Source: FactSet and Cantor Fitzgerald research

07/2012 09/2012 11/2012 01/2013 03/2013 05/2013859095

100105

110115120

125130

135

119.33

130.63

Source: FactSet Prices

Indexed Price Performance Price (Indexed to 100)

Internet S&P 500

01/2009 01/2010 01/2011 01/2012 01/20130

50

100

150

200

250

300

129.22

258.31

Source: FactSet Prices

Indexed Price Performance Price (Indexed to 100)

Internet S&P 500

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So Why Does Wall Street Care?

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RTB is Growing Significantly Faster than Overall Internet Advertising

Source: IAB, eMarketer, and Cantor Fitzgerald research

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2012 2013E 2014E 2015E 2016E 2017E

US Internet Ad Revenue Growth

US RTB Display Ad Spend Growth

RTB CAGR: 34.3%Internet CAGR:

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The Digital Display & RTB Ecosystem

PUBLISH

ER INVEN

TORY

SSP (SELLER PLATFORM

)

DSP (BU

YER PLATFORM

)

AGEN

CY TRADIN

G D

ESK

ADVERTISER

ADVERTISING

AGEN

CY

AUCTION MARKET

PROGRAMMATIC GUARANTEED DIRECT ORDER AUTOMATION

$

$

$$

$

$ $ $

$

Source: Rubicon and Cantor Fitzgerald research

You’ve got to simplify the story!

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Consolidation is Inevitable

Source: MergerStat, FactSet, and Cantor Fitzgerald research

• Consolidation around publishers, large integrated ad exchanges and advertisers likely.

• As larger players build their tech stacks, point solutions to be acquired or wither away.

• Google is currently in the lead with a full service stack, but Facebook’s FBX is likely another big beneficiary.

Select Ad Technology and Marketing Services M&A Activity - To Date Announced Target Name Target Description Base Equity Value(USD) Acquirer Name

5/17/2013 Acquity Group Ltd. Digital strategy, multi-channel digital marketing, brand e-commerce 305.71 Accenture Plc12/12/2012 CyberAgent FX, Inc. Internet media and advertising 254.89 Yahoo Japan Corp.

9/20/2012 LBi International NV Digital communication services 558.92 Publicis Groupe SA7/31/2012 Wildfire Interactive, Inc. Social media marketing software provider 250 Google, Inc.

6/4/2012 Buddy Media, Inc. Social marketing and content management 689 salesforce.com, inc.11/30/2011 Effi cient Frontier, Inc. Online performance and social media marketing 374.7 Adobe Systems, Inc.

11/1/2011 interCLICK, Inc. Data driven advertising solutions 226.88 Yahoo!, Inc.8/2/2011 Dotomi, Inc. Personalized and pertinent marketing 287.38 ValueClick, Inc.

6/16/2011 MediaMind Technologies, Inc. Ad management and distribution platform 429.63 DG FastChannel, Inc.6/13/2011 Admeld, Inc. Supply Side Platform (SSP) 400 Google, Inc.4/21/2011 GreyStripe Selling and serving mobile ads 70.6 ValueClick, Inc.9/17/2010 AKQA, Inc. Interactive marketing agency 600 Dentsu, Inc.

8/4/2010 Slide, Inc. Widgets on social networks, blogs and desktops 179 Google, Inc.1/4/2010 Quattro Wireless, Inc. Mobile advertising company - iAds 275 Apple, Inc.

9/15/2009 Omniture Web analytics and marketing services company 1656.5 Adobe8/9/2009 Razorfish, Inc. Interactive marketing/tech and digital ad buying 530 Publicis Groupe SA

9/27/2007 Traffi x, Inc. Internet, mobile technology, and traditional marketing 160.49 New Motion, Inc.9/4/2007 BlueLithium, Inc. Advertising network - behavioral targeting 300 Yahoo!, Inc.

7/24/2007 TACODA, Inc. Online advertising services - behavioral targeting 273.9 Time Warner, Inc.5/18/2007 aQuantive, Inc. Advertising network 5,373.63 Microsoft Corp.5/17/2007 24/7 Real Media, Inc. Digital display marketing solutions 603.57 WPP Group Plc5/16/2007 Acxiom Corp. Enterprise data, analytics and SAAS company 1,843.40 Silver Lake Partners LP4/30/2007 Right Media, Inc. Right Media ad exchange 680 Yahoo!, Inc.4/13/2007 DoubleClick, Inc. Ad exchange and other digital marketing tech/services 3,100 Google, Inc.1/15/2007 TradeDoubler AB Performance-based digital marketing and technology 839.97 Time Warner, Inc.

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In Summary:

1. The trend toward automated direct buying is only in its infancy, but the shift has begun.

2. Automation, data and effectiveness that RTB brought to the auction market will be utilized for premium direct ad buys as well

3. Video and mobile are the next frontier

4. Consolidation will happen. Scale matters; point solutions will give way to integrated offerings.

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Internet & Media Sector

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Youssef H. Squali Global Head of Internet & Media Equity Research ysquali@cantor.com

July 15, 2013

Who Wins/Who Loses from the Rise of Programmatic Buying?