LUMA partners

Digital Brief 001 The Good, the Bad & the Ugly of Digital Advertising

BAD: Digital Supply / Demand Imbalance SUPPLY DEMAND

>

2,500  companies 200  companies

UGLY: Digital Supply / Demand Imbalance SUPPLY DEMAND

2,500  companies 200  companies LUMA

partners150  priori3zed 50  priori3zed

>90+% FAILURE RATE

What’s the Good News?

3 Things: 1.  Secular Organic Growth

2.  Changing Business Models

3.  Scaled Exits

GOOD: Significant Growth in Digital Market

Source: eMarketer

Source: eMarketer

Source: eMarketer

Source: eMarketer

($  in  billions)

$0

$50

$100

$150

$200

$250

$300

2012 2014 2016

Digital0Ad0Spend Total0Ad0Spend

$100

$0

$50

$200

$250

$150

US  Ad  Spend US  Digital  Ad  Spend

CAGR 35%

CAGR 10%

GOOD: Exceptional Growth in Programmatic

Source: eMarketer

Source: eMarketer

Source: eMarketer

Source: eMarketer

($  in  billions)

$0

$50

$100

$150

$200

$250

$300

2012 2014 2016

Digital0Ad0Spend Total0Ad0Spend US  Digital  Ad  Spend ProgrammaAc

CAGR 53%

CAGR 216%

$20

$0

$10

$40

$50

$30

Programmatic as a Business Model

Media

Low

40-50% Gross Margins

I/O Based Spend

SaaS Software

High

70-80% Gross Margin

Contractual Spend

5 – 10 x REVENUE MULTIPLE 0.5 – 2 x

BUSINESS MODEL DRIVERS

GROWTH

OPERATING LEVERAGE

PREDICTABILITY

Programmatic Changes the Media Business Model

Programmatic

High Growth

70-80% Gross Margin

Predictable Spend

4 – 8 x

WARNING: LUMA Decks Usually Call for More M&A

AD  TECH

CRM  SOFTWARE

INTERNET  GIANTS

ECOMMERCE

TELCO

MARKETING

MEDIA

DATA

REALLY GOOD: A Growing Pool of Strategic Buyers CONSUMER  INTERNET

TECH  SERVICES

Right Time Decisioning of

Consumer Data  

(Ad  Tech  and   MarTech)

AD  TECH

CRM  SOFTWARE

INTERNET  GIANTS

ECOMMERCE

TELCO

MARKETING

MEDIA

DATA

CONSUMER  INTERNET

TECH  SERVICES

Right Time Decisioning of

Consumer Data  

(Ad  Tech  and   MarTech)

NEW  ENTRANTS

REALLY GOOD: A Growing Pool of Strategic Buyers

New York – Palo Alto lumapartners.com