Outlook 2014: Data Driven Marketing in an. Senior Managing Director Chicago, IL October 15, 2013

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1 Outlook 2014: Data Driven Marketing in an Omnichannel ih World Bruce Biegel DMA Annual Conference Senior Managing Director Chicago, IL October 15, 2013

2 About Winterberry Group Corporate Strategy Marketing System Engineering M&A Due Diligence Support Market Intelligence Investment Banking, through

3 The Trends 2013 Pi Primary Themes for : Omnichannel Customer Engagement The Rise of Programmatic Marketing Our First Look at 2014

4 Here They Go Again And It s Bad for the U.S. Economy (and us too) Sources: Business Insider

5 GDP and Traditional Media Growth Slow No Elections, Olympics or World Cup Soccer 2013E U.S. Measured Media Spending: $122.7BB 4.3% Outdoor: $7.1BB Cinema: $0.6BB 2.0% 1.5% Radio: $16.1BB 1.9% Magazines: $13.7BB 0.9% Television: $66.4BB 2.8% 4.8% Newspapers: $18.8BB Source: Winterberry Group analysis of multiple sources Note: Arrows reflect expected percentage change in spend, by channel, from 2012 levels

6 Digital Captures New Budgets, Money from Print; Traditional Direct Slightly Down 2013E U.S. Direct & Digital Spending: $132.5BB 18.9% 22.7% Display: $17.6BB (Includes Mobile & Desktop) 10.1% Search: $19.6BB (Includes Mobile & Desktop) Other Digital: $5.4BB Insert Media: $0.8BB 4.4% Source: Winterberry Group analysis of multiple sources Note: Arrows reflect percentage change in spend, by channel, from 2012 levels; Insert Media includes FSIs and statement inserts; Display and search reflect spending on desktop and mobile 5.0% Other: $3.2BB 3.2% Direct Mail: $44.8BB Teleservices: $41.1BB 1.0% 0.9%

7 Its Really, Really The Year of Mobile Devices 2013E U.S. Digital Advertising Spending: $42.7BB 11.1% 18.9% 29.6% $2.0BB Display: $17.6BB (Includes Mobile & Desktop) Oh Other Mobile 2 : $.35BB 15.6% Social Technology and Services¹: $2.8BB 32.1% Lead Gen & Affiliate Services: $0.3BB 7.0% Search: $19.6BB 10.1% (Includes Mobile & Desktop) Source: Winterberry Group analysis of multiple sources Note: Arrows reflect expected percentage change in spend, by channel, from 2012 levels ¹Excludes social display and social search spend 2 Excludes mobile display and mobile search spend

8 Direct Mail Flat: It s About USPS; And Mobile Wherefore Art Thou O Postal Reform Act? The PMG needs your help exigent rate hike requested to help save the USPS Catalog mailers facing a 5.9% increase volume has to come out to make the math (analytics) work CreditCard Card mailers return, Telecoms up as competition increases, and standard class (ad mail) grows while first class decline continues QR Codes and Augmented Reality adoption and interaction accelerates acrossthemobile landscape $40.0 $20.0 $0.0 U.S. Direct Mail Marketing Spend ($BB) $43.8 $44.9 $45.2 $45.2 $ E Direct Mail CAGR.57% Source: Winterberry Group, Oct. 2013

9 Search: Accounts for ~46% of Digital Spend; Mobile Drives New Growth Spending overall rises with nearly all of the gain coming from the doubling of mobile search Desktop searching declines for the first time as consumers engagemore deeplyon mobile devices Tablet CTRs are rising (62% over last year) and the cost per click is higher than on desktops U.S. Search Marketing Spend, E ($BB) $15.6 $14.6 $16.9 $17.8 $0.7 $2.2 $19.6 $4.4 $14.6 $15.6 $16.2 $15.6 $ E Desktop search Mobile search CAGR measured from E Source: Winterberry Group, Oct Search CAGR 7.64%

10 Display: Expected to Rise to $17.6BB, Driven by Improved Audience (Re)Targeting Focus on audience targeting, primarily throughprogrammatic RTB solutions with retargeting and 3 rd party digital data RTB is expected to account for $3.34BB in spending in 2013, a 73.9% rise, reflecting 20% of all display media transacted U.S. Display Marketing Spend, E ($BB) $12.3 $14.8 $1.9 $17.6 display media transacted $13 8 Rich media and video format spending growing by an expected 21.7% from 2012 to 2014, banners decline by 3% $8.4 $8.4 $9.9 $9.9 $0.6 $11.8 $3.8 $13.0 $ E Desktop display Mobile display CAGR measured from E, Source: Winterberry Group, Oct * Includes social display, video, rich media and banner ad formats, as well as ad sponsorships Sources: IDC, emarketer, ComScore Display CAGR 20.3%

11 Social: Social Tech & Services Spend is Expected to Reach $2.8BB in % of CMOs say they are Spending on Social Media underprepared to deal with the Tech and Related Services impact of social media yet 82% plan ($BB) $2.8 to continue increasing investment in social media technology $2.1 Mobile devices fast becoming the platforms of choice for social interaction ti Social sites focus on easing onboarding of advertisers, campaign management and measurement Data driven social targeting beginning to challenge search for ROI Source: IBM CMO Survey; BIA/Kelsey; emarketer; Nielsen Wire; Bizo, Pew Research CAGR measured from E, Source: Winterberry Group, Oct $0.7 $0.9 $ E Social Tech/Services CAGR 41.4%

12 Mobile: Total Spending to Reach $8.5BB, Up From $4.4BB 4BB in 2012 Fastest growing channel spending nearly doubles YOY reflecting marketing s attempt to keep pace with consumer engagement with , social and shopping M Commerce is booming: transactions on mobile devices are expected to reach $41.6BB in 2013, growing 68% over last year Mobile targeting and measurement handicapped by a lack of unique identifiers (UIDs), a variety of solutions are on the horizon Mobile Marketing Spend Breakdown, E ($BB) $1.6 $0.3 $0.6 $0.7 $4.4 $0.3 $1.9 $2.2 $8.5 $0.4 $3.8 $ E Mobile search Mobile display Other mobile Mobile CAGR 130.5% CAGR measured from E, Source: Winterberry Group, Oct Source: emarketer

13 E mail: Steady Growth; Driven by Cost Effective, Targeted Marketing Channel Mobile design is key half of all s are openedona on mobile device Marketers begin to mature with respect to audience segmentation for seek more sophisticated analytics capabilities to improve use of the channel More robust lists presents opportunity to link to CRM and other customer engagement approaches Consolidation and new releases provide enhanced cross platform capabilities $2.0 $1.0 $0.00 U.S. Marketing Spend, E ($BB) $2.0 $1.8 $1.6 $1.4 $ E CAGR 13.6% CAGR measured from E, Source: Winterberry Group, Oct Source: Epsilon, Return Path

14 The Trends 2013 Pi Primary Themes for : Omnichannel Customer Engagement The Rise of Programmatic Marketing Our First Look at 2014

15 Three Evolving Dynamics Are Changing Marketer Thinking The fragmentation of media making it harder for marketers to engage valuable audiences The growth of customer centric marketing driven by consumers who manage information, consideration and purchasing on their own terms The challenge of retrofitting legacy marketing infrastructures to manage interactions driven by data & technology rather than by media channel

16 Omnichannel Originated in The Retail Segment To Address a Range of Challenges Customer Experience P&L Optimization Merchandising Management

17 Omnichannel Goes Beyond Integrated Marketing, It s an Approach to Empower Mutual Value Between Marketers and Consumers

18 But What Really Makes It Different? Driven by Made possible Aimed at driving enterprise business objectives not only by recent advances in data, technology and informed customer engagement tactical marketing requirements media delivery

19 And It s Very Much About Driving Profitable Interactions with the Brand Heightened Brand Awareness Which of the following do you believe are the likely benefits of adopting an omnichannel customer engagement strategy? Improved Customer Response Rates Revenue Growth 70% 75% 80% 85% 90% 95% Percentage of panelists who agree Source: Winterberry Group, Taking Cues From the Customer, 2013

20 Not Surprisingly, Interest in Omnichannel is Surging Across All Verticals 83% of panelists said their company would likely invest in omnichannel approaches in the near future 92% agree there is real value to be gained from pursuing an omnichannel approach to customer engagement Source: IAB Winterberry Group White Paper, Omnichannel Audience Engagement, June 2013

21 What's Required for Successful Adoption? Customer Analytics & Multiplatform Attribution Rich Content Optimized for Context & Strategic Intent Operational Infrastructure Geared to the Needs of Customer Engagement Cross Platform, Audience Driven Media Placements Integration ti of Deeply Engaging Yet Yt Effectively Disconnected Media Elevation of the Omnichannel Strategist as a Senior Elevation of the Omnichannel Strategist as a Senior Role

22 The Trends 2013 Pi Primary Themes for : Omnichannel Customer Engagement The Rise of Programmatic Marketing Our First Look at 2014

23 Once Upon A Time, Buying and Placing Media Was a Manual, Negotiated Practice

24 And Then Came Search, Giving Us Auctions for Media Inventory and Audience Impressions Behavioral Algorithms Machine driven bidding & price optimization Workflow Automation

25 But When It Came to Display, The Proliferation of Formats Made Buying More Complex

26 Complexity that the Ad Tech Market Set Out to Solve Massive investments in the development of media and marketing automation followed Harnessing of Big CRM and online behavioral data would be deployed to identify and message unique individuals with relevant content and offers Decisioning engines and machine driven analytics Decisioning engines and machine driven analytics moved beyond trigger marketing and into biddable auctions and optimization models

27 And Programmatic Marketing Solutions Began to Emerge Content Optimization Audience Insight/ Segmentation Media Operations Execution Auction Auction Based Media Buying

28 To Date, the Programmatic Value Proposition Has Been Closely Linked to Auction What does programmatic mean to you? Machine driven Automation Real time Bidding (RTB) Auction based approach to media buying 0% 20% 40% 60% Percent of panelists who mentioned each in their top 3 WG and IAB Programmatic Everywhere white paper, Nov 2013; survey N=263

29 And a New Lexicon Has Emerged Around Programmatic Media Buying

30 Yet More Marketers Are Coming to Realize Substantial Benefits of Driving Efficiency Efficiently i Value & Transact Digital Media My organization is interested in programmatic because of the ability to Improve Operational Efficiency Target consumers across digital it media 0% 20% 40% 60% Percent of panelists who mentioned each in their top 3 WG and IAB Programmatic Everywhere white paper, Nov 2013; survey N=263

31 So Programmatic Approaches Are Becoming A Real Priority Has your organization pursued a programmatic approach to the following use cases? Are you likely to do so within two years? 85% 81% 64% 58% years years Today In two Audience dienceinsight Development elopment Today In two Automation of Back end Processes WG and IAB Programmatic Everywhere white paper, Nov 2013; survey N=263

32 And Programmatic Solutions Are Going to Continue to Evolve Across Channels Today Tomorrow Search Rdi Radio Display TV Direct mail and e mail Print

33 Resulting in Programmatic as a Foundation for Sophisticated Data Driven Marketing Cookies will recede as the fundamental programmatic control point as the mobile device assumes a central role as the audience touchpoint The programmatic approach is growing addressable to all media types paid, paid, owned and earned Data is the fuel that powers audience centered programmatic efforts, heighteningitsimportanceand its importance and value Which will lead to a major wave of innovation focused reengineeringand optimization of businessprocessesand organizational design And the complex ecosystem of Ad Tech vendors will evolve into a set of programmatic stacks

34 The Trends 2013 Pi Primary Themes for : Omnichannel Customer Engagement The Rise of Programmatic Marketing Our First Look at 2014

35 2014 Will Balance Increased Activity With Increased Scrutiny The economy will continue to recover fueling higher GDP growth and as a result marketing budgets will expand Increasing utilization of digital data for customer engagement and Washington getting to normal, will combine to re focus attention on the regulatory agenda Scrutiny will be most acute in the first half of the year, prior to the midterm elections

36 More Slow Growth in Traditional Channels 2014E U.S. Measured Media Spending: $123.7BB 3.5% Outdoor: $7.3BB Cinema: $0.6BB 2.0% 1.7% Radio: $16.4BB 1.5% Magazines: 0.8% $13.5BB Television: $68.5BB 3.3% 8.2% Newspapers: $17.3BB Source: Winterberry Group analysis of multiple sources Note: Arrows reflect expected percentage change in spend, by channel, from 2013E levels

37 Data Driven Marketing Continues To Take Share and Growth Accelerates 2014E U.S. Direct & Digital Spending: $139.5BB 18.5% Other Digital: $6.4BB Insert Media: $0.8BB 1.0% Other: $3.4BB 6.2% 17.0% Display: $20.6BB (Includes Mobile & Desktop) 5.3% Direct Mail: $45.2BB 1.0% 7.4% Search: $21.6BB (Includes Mobile & Desktop) Teleservices: $41.5BB 1.0% Source: Winterberry Group analysis of multiple sources Note: Arrows reflect percentage change in spend, by channel, from 2013E levels; Insert Media includes FSIs and statement inserts

38 And Digital Spend Chases Digital Adoption 2014E U.S. Digital Advertising Spending: $48.5BB Social Technology Lead Gen & and Services¹: 22.5% Affiliate $3.4BB Services: $0.3BB Mobile 2 : 25.7% $.44BB 7.4% 10.0% $2.2BB 13.6% Search: $21.6BB 10.2% (Includes Mobile & Desktop) 17.0% Display: $20.6BB (Includes Mobile & Desktop) Source: Winterberry Group analysis of multiple sources Note: Arrows reflect expected percentage change in spend, by channel, from 2013E levels ¹Excludes social display and social search spend 2 Excludes mobile display and mobile search spend

39 7 for 14: Content The King of Relationships 1 60% of Corporations are doing content marketing they will finally define it in 2014 Mobile content marketing strategies will lead the way instore to see the ROI Director of Content becomes a marketing gjob Source: Jayson DeMers, Forbes

40 7 for 14: Social Everywhere 2 Social interactions on mobile devices continue to increase Social targeting gon Facebook, Twitter, Instagram outperform branded sites - and is very measureable No one can make a decision without crowd sourcing opinions

41 7 for 14: The Continuing Evolution of Loyalty 3 From points to engagement, loyalty programs begin to add new incentives (currencies) whether social causes, health or lifestyle rewards Loyalty goes mobile, so you CAN take it with you carry it or wear it! The question: When does q loyalty start?

42 7 for 14: TV and Video Platforms Evolve 4 Second screen tablet adoption combines with smart connected TVs and game consoles fueling cross platform video advertising i Programmatic delivery and viewing data propels growth in this key channel for consumer engagement TV tdt th I t t tdt h 759MM b TV s connected to the Internet expected to reach 759MM by 2018, up from 307MM for 26.4% market share (Digital TV Research)

43 7 for 14: Cycle Times Shrink 5 Consumer expectation: I want it now Marketer expectation: I need to respond/react faster Reality: Campaign and interaction cycle times from planning to execution continue to shrink pressuring suppliers to be more agile - from development to delivery

44 7 for 14: Data Utilization Accelerates 6 Programmatic display, omnichannel demand, drive digital data use cases Databases become more sophisticated repositories of online and offline data Technologies to activate the data mature along with the talent to use it BIG DATA STAYS BIG.

45 7 for 14: Consolidation, IPOs and Digital Stacks has seen lower deal volume (-16% YOY) but increased value - up 36%, led by a few blockbuster deals Valuation remains high driven by IPO comps Will a return to more normal valuation bring more PE players back to a market dominated by cash heavy strategic buyers? Source: PPLLC data on enterprise software M&A transactions

46 Questions? Bruce Biegel Senior Managing Director