The Critical Trends in Online Advertising: MIMA Summit 2014

The Critical Trends in Digital Media

By Eric Picard, CEO of Rare Crowds

Built around my deck – 5 Important Memes for the Digital Advertising Industry: http://www.slideshare.net/ericpicard/

History of Digital Advertising

1990 2000 2014

1991“Public” Birth of

The World Wide Web

1994First Clickable

Banner Ad

1997• Pop Up Ads• Paid Search

1998Ad Networks 1.0

(e.g. Value Click, Advertising.com)

2002• Behavioral Targeting• Google AdWords

2003AdExchanges

2005• Dynamic Creative• AdNetworks 2.0

2007Demand-Side Platform and Real-Time Biddiing

2004-2006 Video and Mobile Point Solutions

(e.g. Tremor, Millennial, YuMe)

2010Data Management

Platforms

2012Programmatic Direct

1995• Ad Servers• Rich Media Ads Emerge

2013Native Ads

MEDIA FRAGMENTATION

3

4

Huge and Fragmented Ecosystem

Worldwide – Approximately 6,000 Advertisers account for >80% of all ad spending (~5,000 in US account for >90% of US ad spending)

Omnicom WPP Interpublic Publicis Havas

Most of the WW ad spend controlled by 5 major agency holding companies (6 with Dentsu)

American Media Inc. Belo Corporation Bertelsmann AG Cablevision CanWest Global

CBSCitadel Broadcasting Clear Channel Comcast Community Newsp.

Copley Press Cox Enterprises Cumulus Media Dow Jones Corp. Emmis

Fisher Freedom Gannett General Electric Hachette Filapacchi

Hollinger Journal Register Knight Ridder Landmark Lee Enterprises

Liberty Media Lin TV Corp. McClatchy McGraw-Hill Media General

Meredith Corp. Morris News Corp New York TimesNews World

Primedia Pulitzer Reed Elsevier Rogers Scripps

Sinclair Standard Radio Stephens Media Time Warner Tribune Company

Advance Publications

Cisneros

Corus Entertainment

Entercom

Hearst

Liberty Group

Media News Group

Pearson

Sony Corporation

Viacom Vivendi Universal Vulcan Inc. Walt Disney Washington Post Young Broadcasting

Media ownership rolls up to approximately 60 companies WW – with thousands of holdings

Hundreds of vendors across thousands of implementations, and thousands of internal IT solutions – few of which communicate with each other

5

Number of Media Types (1700 – 2005)

6

Number of Websites

7

Number of Blogs (03-07)

8

Internet User Growth

9

Media Fragmentation Changes Power Base

9,000

Advertisers

6,000

Advertisers

6Agencies

MillionsPublishers

19772012

PublishersHundreds

>500,000Advertisers

>400,000Publishers

GoogleSearch & GDN

1Google

$750B

$6B

10

AUTOMATION IS THE FUTURE

11Associate Media

Buyer

Manual Buy/Sell Process for premium

Media Planning &

Buying Workflow

Campaign Management & Trafficking

Workflow

Billing & Reconcilliation

Inventory Availability & Reservations (Sales Tools)

Campaign Management

WorkflowReporting Billing

Media Research

Tools

Media Buyer Associate MediaBuyer Ad Operations Billing Coordinator

Ad Operations

Sales Executive

Sales Planner

1

2

3

3

5

7

Account Manager

6

Reporting & Analytics

8

1. Buyer decides what web sites to buy

2. Buyer and Seller negotiate deal

3. Hand off to internal teams for workflow

4. Buyer ad ops sends ads to publisher

5. Seller ad ops inputs ads

6. Buyer reviews results, compares reports, compiles

7. Seller sends bill to buyer

8. Buyer reconciles the bill and pays

4

How Impressions are Bought in RTB

Bid

Bid Amount #1 $.50

Bid Amount #2 $.65

Bid Amount #3(Winning Bid) $.80

Price Paid $.66

It works on a auction based model (think ebay). Each party makes their bid, the highest bid wins, and pays $0.01 more than the next highest bidder.

Which bid will win the impression?

REVENUE DRIVERS FOR PROGRAMMATIC ADOPTION

14

Publisher revenue against inventory

Remnant “Wholesale” Inventory sold to Ad Networks

Targeted Inventory sold via Ad Exchanges

Hand Sold Audience Targeted Inventory

Hand Sold Premium Inventory

Hand Sold Sponsorships

Inventory Packages are made up of inventory from each layer in the ‘layer cake’.

15

Purchase Funnel to Display Advertising Volume & CPM

High Imp. Volume Low Imp. Volume

High CPMLow CPM

Category Awareness

Brand Awareness

Brand Consideration

Brand Preference

Purchase Intent Purchase Customer

RetentionCustomer Advocacy

16

Brand vs. DR by inventory and revenue

$$$$$

¢

Brand

DRDR Paid Search

Brand

DR

Inventory allocation of Online Advertising within the purchase funnel

Ball Size Represents Proportional Revenue

17

* Includes: Ad Networks, SSPs, Private Exchanges, and Ad Rep Firms** Includes: Media Agencies, Creative Agencies, Trading Desks*** Includes: Ad Exchanges and DSPsThis slide represents Display, Video, Mobile – based on Rare Crowds Analysis of Marketplace

Advertising Ecosystem Impression / Dollar Flow

Note: Ad Servers, Yield Management Systems, Analytics, DMPs, etc… Take out about 8-10% of spend in total as they pass through the ecosystem

20%

ADVERTISER AUDIENCEAgency**

Keeps 5-25%

Large Publisher(Direct Reserved “Premium”)

Keeps 75-95%

Large pub(Remnant)Keeps 40-80%

Publisher Aggregator*

Keep 10-80%

(May include multiple vendors)

Small-Med PublishersKeeps 20-60%

65%

25%

5%

20%

25%

25%

FLOW OF ADVERTISING IMPRESSIONS (US)Percent impressions

40%

35%

40%

35%

Ad spend100%

Exchanges, DSPs ***Keeps 10-20%(may include multiple vendors)

FLOW OF AD SPEND (US)Percent Dollars Captured (in yellow)

25%

5%

Per Impression Price D

rops

18

INFRASTRUCTURE AND ECOSYSTEM COMPLEXITY

Consolidation must happen

19

Hundreds of vendors in the ad tech ecosystem • Each sector has significant number of competitors• Probably not enough ecosystem scale to support more than 3 vendors per

category• Consolidation will happen quickly once it starts

Ultimately there will be a handful of platform ‘stacks’• One will be Google• The others will be some subset or consolidated mix of the following:

• Yahoo• MediaMath• Adobe• IBM• AppNexus• AOL• Facebook• Amazon

• SAS• SalesForce.com• Experian• Accenture• Ebay• Rubicon Project• Pubmatic• Etc…

20

Agencies Buy Side Technologies

Liquidity Pools

(exchange types)

Supply Aggregators (Networks types)

Sell Side Tech

PUBLISHERS

Marketers

21

22

Key Technology Players in the MarketBuy Side Ad Servers DSPs / Buying Tools Exchanges SSPs / Selling Tools Pub Side Ad Servers

24

The Google StackAd Networks

AdMob

Mobile

DFP

Publishers

DFA Google

Ad Sense

Ad Words AdSense

Advertisers

Ad Agencies

Other Vendors

Data Companies

Other vendors

AdMeld / EDA

Invite Media / DCLK Bid Manager

Google Display

Network

Google / Doubleclick Ad Exchange

We're just at the beginning of the digital revolution

25

• Tablets may be the biggest driver we have ever seen of transition from consumption of media (especially print) to digital delivery

• Connected Televisions are another huge driver of digital consumption• This includes Xbox, Roku and other set top boxes• Different media are good at different things, we’re still trying to determine what

new media types are good at• Traditional media companies have intentionally slowed adoption of digital

because they get so much more money per ‘impression’ in traditional media• The floodgates are opening up, and traditional media companies are embracing

digital completely• The world is moving toward a programmatic media future!