Tomorrow s programmatic landscape & how publishers can claim control

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1 Information Analytics Expertise CANNES, 18 JUNE 2014 Tomorrow s programmatic landscape & how publishers can claim control Daniel Knapp, Director Advertising Research / ALL RIGHTS RESERVED

2 Forecasting media & technology has a long tradition How we will live in the year 2000 (German artist 1908) Apple iphone 4 (2010)

3 Agenda Key trends in digital advertising The interface challenge: connected devices, fragmented consumers The infrastructure challenge: programmatic complexity Shaping the programmatic landscape of tomorrow 3

4 Online 2 nd biggest media category in Europe TOMORROW S PROGRAMMATIC LANDSCAPE/ JUNE 2014 Ad revenue across media in Europe 2013 ( bn) TV 32.3 Online 9.2 Newspapers 20.0 Display Magazines OOH Classifieds & Directories Search Radio 5.2 Cinema Source: Adex Benchmark, IAB Europe/IHS

5 Online ad market growth 40% TOMORROW S PROGRAMMATIC LANDSCAPE/ JUNE 2014 Growth in mature markets highlights capacity of digital advertising to innovate 35% 30% Russia Bubble size: market value in m 25% 20% 15% Turkey Slovakia Serbia Hungary Romania 10% Greece 5% Croatia Bulgaria Poland Spain Italy Austria Czech Republic Ireland Germany Finland Belgium France Switzerland Sweden Netherlands UK Denmark Norway 0% -5% -10% Slovenia Online ad spend per capita ( ) Source: Adex Benchmark, IAB Europe/IHS

6 Strongest growth not from a format, but a set of mechanisms Europe: CAGR online advertising Video programmatic 69.4% Mobile 40.1% Display programmatic 30.3% Video (all) 18.4% Display (all) 7.2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 6

7 Over 50% of display ad revenue will come from programmatic by 2018 Programmatic share of Display ad revenue in 2013 Programmatic share of Display ad revenue in % 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 20% 10% 0% 4.9% 18.5% 21.0% 29.0% 35.9% CEE Europe WE US UK 30% 20% 10% 0% 11.4% 33.7% 38.8% 51.4% 53.6% CEE Europe WE US UK Programmatic Non-programmatic Programmatic Non-programmatic 7

8 Mobile display ad revenues are catching up with app spend 5 Western European app revenue & display advertising* per mobile subscription ( ) Smartphone app revenue per mobile subscription Display advertising spend per mobile subscription *display includes banner, video both in-app and browser

9 Yet devices still beat content and advertising revenues iphone device revenues vs. mobile advertising ($m) iphone Mobile advertising

10 The global digital video market is now worth almost $15bn and predicted to double to $30bn by ,000 25,000 20,000 15,000 10,000 5,000 TOMORROW S PROGRAMMATIC LANDSCAPE/ JUNE 2014 Global digital video revenues (consumer/nar) - $m Digital Subscription (e.g. Netflix, Lovefilm, Hulu+) Digital Purchase (e.g. itunes, Microsoft) Other ad funded content (e.g. YouTube) Digital Rental (e.g. itunes, Vudu) Broadcast (e.g. ABC, Hulu Classic, RTL)

11 US-domestic and international markets are similar in size, but very different in business model composition 8,000 Consumer/NAR by bus model ($m)* 7,000 6,000 5,000 4,000 3,000 2,000 Other ad funded content Broadcast Purchase Rental Subscription 1,000 0 US *includes TV and movies, and pay TV based platforms ROW

12 Global ad-funded online video sector is hugely fragmented outside YouTube, but not at local level opportunity for publishers YouTube controls roughly 41% of the nearly $9bn global online video advertising market The remainder of the market remains highly fragmented at this level Online video advertising share World, 2013 YouTube 41% Others 53% ITV 1% ProSiebenSat1 M6 0% 2% France Télévision 0% Channel 4 1% Canal+ 0% TV4 0% TF1 1% RTL 1% However, examining market shares at a country-level reveals a different story Markets are far more consolidated, with the bulk of adrevenue derived from local groups Online video advertising share France, 2013 YouTube 31% Others 23% TF1 15% France Télévision 6% Canal+ 9% M6 Group 16%

13 Differences in local media buying ecosystems influence development of programmatic video 45% 40% 35% 30% Programmatic share of total video ad revenue (%) 33.2% 30.3% European leader in video technology Publishers are using alliance model developed in display to enter the video space 25% 25.8% 20% 15% 10% 12.2% 18.7% Centralised and consolidated structure of German media landscape make technology adoption slow 5% 0% 4.6% 0.0% 1.0% UK France Germany Italy Spain Europe Source: IHS/SpotXchange Despite low development, media owners awareness of programmatic is strong TV scarcity has given online video the opportunity to satisfy excess TV demand

14 Adoption of programmatic video depends on perceived value of inventory, scarcity, tech capabilities & pricing power Big 5: programmatic share of online video ad revenue (%) 60% 50% 40% 30% 25.8% 30.3% 33.2% 20% 18.7% 12.2% 10% 4.6% 0% Source: IHS Broadcasters YouTube Other Total 2013 IHS Source: IHS/SpotXchange

15 Agenda Key trends in digital advertising The interface challenge: connected devices, fragmented consumers The infrastructure challenge: programmatic complexity Shaping the programmatic landscape of tomorrow 15

16 The pathways to the consumer are ever-increasing globally, with greater connectivity every year 9,000 8,000 TOMORROW S PROGRAMMATIC LANDSCAPE/ JUNE 2014 World Connected device installed base (m) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Other connected devices FTA set-top boxes BD players Smart TVs DMAs Pay-TV set-top boxes Game Consoles Tablets PCs Smartphones 0

17 Screen size (diagonal inches) TOMORROW S PROGRAMMATIC LANDSCAPE/ JUNE 2014 What this means is that there will be a huge increase in very small screens in homes, sub-15 Average Screen Size by 5" category 110"-114" 90"-94" 80"-84" 70"-74" 60"-64" 50"-54" 40"-44" 30"-34" 20"-24" 10"-14" 0"-4" Shipments (m)

18 Shipments (m) This contrasts with TVs, where all sizes over 40 inches are growing and all smaller sizes are falling, fast 140 TOMORROW S PROGRAMMATIC LANDSCAPE/ JUNE "-19" 20"-29" 30"-39" 40"-49" 50"-59" 60"-69" 70"-79" 80"-89" 90"-99" 100"-109" 110"-119"

19 So, TVs are getting bigger and small screens are getting more numerous

20 Agenda Key trends in digital advertising The interface challenge: connected devices, fragmented consumers The infrastructure challenge: programmatic complexity Shaping the programmatic landscape of tomorrow 20

21 Funing vloume in USD TOMORROW S PROGRAMMATIC LANDSCAPE/ JUNE 2014 Digital advertising infrastructure funding historically spli across nearly 1700 companies 300,000,000 Voltari AdKnowledge 250,000,000 Millenial Media InMobi 200,000,000 Extreme Reach Allyes Advertisement Network 1.7% 150,000,000 Turn AppNexus 100,000,000 Videology 3.4% 50,000, % ,000 1,200 1,400 1,600 1,800 Source: Crunchbase, company reports, IHS calculations 75.4% *excl. e-commerce (e.g. Groupon) and publisher sites (e.g. Angie s List) 21

22 Ad tech funding exploded in 2013 due to a series of IPOs 600 Ad tech funding in USDm Other DMP Exchange SSP DSP Source: Crunchbase, company reports, GP Bullhound, IHS interviews & calculations 22

23 There is an algorithm for that ad techs struggle to tell their USP, investors fail to identify reliable business metrics 1 Ad tech stocks indexed against peak value CRTO FUEL MM TRMR YUME

24 What s next? Source: Twitter

25 Agenda Key trends in digital advertising The interface challenge: connected devices, fragmented consumers The infrastructure challenge: programmatic complexity Shaping the programmatic landscape of tomorrow 25

26 Q Q Q Q Q Q Q Q Q Q Q Q Q TOMORROW S PROGRAMMATIC LANDSCAPE/ JUNE 2014 New York Times digital ad struggle symptomatic for industry at large 25% Year-on-year digital advertising revenue growth (%) 20% 15% 10% 5% 0% -5% -10% New York Times Total US online display 26

27 While the market nearly doubles between 2012 and ,000 US Display ad revenue ($m) 20,000 15,000 10,000 5,

28 media concentration increases, few companies benefit 25,000 20,000 15,000 10,000 Facebook Google Microsoft AOL Yahoo! Others US Display ad revenue ($m) 5,

29 Ecosystem wars to lock in customers Ecosystems reach/ customers (m) Apple itunes accounts with credit cards Amazon active accounts Google Android activations Facebook Monthly active users WeChat/Weixin users Q Q3 2013

30 The intermediary ladder: publisher influence comes too late in the value chain, majority has already been siphoned off 100% 90% $1.00 $0.10 $ % 20% TOMORROW S PROGRAMMATIC LANDSCAPE/ JUNE % $ % 60% $ % 15% $ % 15% $ % 20% $ % 0% Advertiser Agency Trading desk DMP/Data provider DSP Ad exchange SSP/Ad network Publisher 30

31 Most European publishers do not have data strategy as organisational, logistical, strategic factors hold them back Publishers in Europe in H2 2013* Publishers in the US 2013** 23% 28% 77% 72% No data strategy Data strategy No data strategy Data strategy * source: IHS biannual publisher survey ** source: IAB/Winterberry Group Whitepaper

32 Why a data strategy? A. Demand-side innovations B. Competition from online giants C. Adding transparency to existing data regime D. Connecting audiences across screens

33 Publisher cooperatives technology is a commodity, adapting ownership & operating policies to local markets key 1.) Participant model 2.) Co-ownership model Owned & operated by Videoplaza Tech from Videoplaza and 3 rd parties Publishers invited to join Broadcasters at start, expanding to other publisher types Rival commercial broadcasters participate Remnant inventory Sold blind, post-campaign reports where ads were shown as ex post transparency Mostly 1 st party data Video only Publishers have joint ownership, place cooperatives in separate companies 3 rd party technology (e.g. Rubicon, StickyAds.tv) Broadcasters & other publisher types Rival broadcasters do not mix, are in separate coops Broadcasters are separately building private exchanges for themselves, only out remant in coop Sold blind, aim to make URLs more transparent 1 st and 3 rd party data Started with display, since end 2013 move into video 33

34 Some players realise that tech stack is liquid, can be moved across the value chain, creating new points of entry & flows Ad tech transforms from intermediary to enabler through SaaS Advertiser Agency Trading desk DMP/Data provider DSP Ad exchange SSP/Ad network Publisher 34

35 technology.ihs.com 35

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