2012 Alison Fennah, Vice President Research & Marketing

IAB Europe

ABOUT THE STUDY

3

A meta-analysis of online ad spend in Europe

RATECARD

Campaigns

x Ratecard

GROSS

Revenue Billed

NET

Revenue Billed

No Agency

commissions

4

Horizontal expansion: country coverage

2006: 13 countries

2008:19 countries

2012: 26 countries

5

26 countries in 2012

Austria

Belgium

Bulgaria

Czech Republic

Croatia

Denmark

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Netherlands

Norway

Poland

Russia

Romania

Serbia

Slovenia

Slovakia

Spain

Sweden

Switzerland

Turkey

UK

6

Vertical expansion: format granularity & context

BIG PICTURE AND CONTEXT

8

The value of the European online ad market 2012

24.3bn

9

Eurozone volatility casts spell on media economy

-8%

-6%

-4%

-2%

0%

2%

4%

6%

20

04

Q1

20

04

Q2

20

04

Q3

20

04

Q4

20

05

Q1

20

05

Q2

20

05

Q3

20

05

Q4

20

06

Q1

20

06

Q2

20

06

Q3

20

06

Q4

20

07

Q1

20

07

Q2

20

07

Q3

20

07

Q4

20

08

Q1

20

08

Q2

20

08

Q3

20

08

Q4

20

09

Q1

20

09

Q2

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09

Q3

20

09

Q4

20

10

Q1

20

10

Q2

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10

Q3

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10

Q4

20

11

Q1

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11

Q2

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11

Q3

20

11

Q4

20

12

Q1

20

12

Q2

20

12

Q3

20

12

Q4

20

13

Q1

20

13

Q2

20

13

Q3

20

13

Q4

GDP growth in Europe

Eurozone GDP Growth y-o-y France GDP Growth y-o-y Italy GDP Growth y-o-y Germany GDP Growth y-o-y

10

industrial production & household consumption are good indicators for advertising market prospects

-15%

-10%

-5%

0%

5%

10%

15%

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

UK advertising revenue growth

Actual NAR growth (yoy) Projected NAR growth (yoy)

11

tectonic shifts are characterizing ad markets

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Indonesia Argentina China Brazil Russia Mexico UK Germany France Spain Italy

CAGR of Total Media Ad Revenue (2011-2017)

12

but European online ad growth continues at a double-digit rate

21.8

24.3

0

5

10

15

20

25

30

2011 2012

Total online advertising (bn)

13

Indeed, online is more resilient to macro-pressure than other media

2.5%

9.4%

3.8%

-5.2%

2.9%

-4.0%

9.5%

26.6%

11.5%

-1.7%

7.2%

-0.4%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

WE CEE Total

2012: economic & advertising growth

GDP Total excl. Online Online Total

14

Overall ad spend shows volatility, TV is resilient, online shows linear growth trajectory

0

20

40

60

80

100

120

140

2006 2007 2008 2009 2010 2011 2012

Ad spend per capita by medium

Online ad spend per capita TV ad spend per capita Total ad spend per capita

15

There is no single factor for print decline & online does not absorb all print revenue, but budgets do migrate

0

10

20

30

40

50

60

70

2006 2007 2008 2009 2010 2011 2012

Ad spend per capita

Online ad spend per capita Print ad spend per capita

16

In 6 years online more than doubled its share of all media revenue: 1 in 4 ad s go to online in 2012

10.3%

19.0%

25.6%

0%

5%

10%

15%

20%

25%

30%

2006 2009 2012

Online market share of ad budgets: total Europe

17

Online for the first time overtakes print newspaper ad spend & becomes 2nd biggest media category in Europe

0.6

4.6

6.3

8.7

19.3

24.3

28.1

0 5 10 15 20 25 30

Cinema

Radio

OOH

Magazines

Newspapers

Online

TV

2012: European advertising market share by medium

Note: Source for non-online ad revenue is IHS. Print ad spend excludes direct mail.

18

Small number of markets make largest contribution to European ad spend

46.0%

69.5%

78.3%

86.7%

95.5%

0%

20%

40%

60%

80%

100%

Top 2 Top5 Top 7 Top 10 Top 15

Share of European online ad revenue by market

19

Russia climbs up to 4th largest spender as remaining top 10 maintain their position in the European ranking

6,642

4,551

2,770

1,536 1,418 1,207

920 841 617 591

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Total online ad spend (m)

20

What is driving growth?

Both emerging markets growing from low basis and

established markets that demonstrate sustainability of

online ad momentum

Video

Mobile

RTB has the potential to be a driver

Social networking sites

Europeanisation and consolidation of classifieds &

directories

Localisation & individualisation of search, mobile search

21

CEE leads growth, but remarkable is the sustainability of growth in mature markets

12%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Online ad growth

22

Bulgaria

Croatia

Czech Republic

Denmark

Finland France Germany

Greece

Hungary

Ireland

Italy Netherlands

Norway

Poland Romania

Russia

Serbia

Slovenia

Spain

Austria

Belgium

Sweden

Switzerland

Turkey

UK

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0 20 40 60 80 100 120

Note: country bubbles represent market size

23

Bulgaria

Croatia

Czech Republic

Denmark

Finland France Germany

Greece

Hungary

Ireland

Italy Netherlands

Norway

Poland

Romania

Russia

Serbia

Slovenia

Spain

Austria

Belgium

Sweden

Switzerland

Turkey

UK

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0 20 40 60 80 100 120

Online ad spend per capita ()

Onlin

e a

d m

ark

et gro

wth

Note: country bubbles represent market size

FORMATS

25

Search outperforms, display still high single digit, classifieds & directories pick up pace

17.9%

15.3%

5.7%

14.5% 15.5%

9.1%

6.3%

11.5%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Search Display Classifieds & directories Grand total

Year-on-year growth by format

2011 2012

26

Search remains strongest segment in 2012

47.1% 48.8%

32.7% 32.4%

19.6% 18.5%

0%

20%

40%

60%

80%

100%

2011 2012

Format shares of online

Others Classifieds and directories Display Search

27

Display growth shows few strong outliers above average rate, yet more outliers below average rate

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

28

The average broadband HH now watches between 8 & 27 minutes of online video per day in Western Europe

23

16

26

0 5 10 15 20 25 30 35 40 45 50

Sweden

Netherlands

Germany

USA

UK

Mins of online video viewed per broadband HH per day

Source: IHS Elecronics & Media

29

Online video is now 13% of all online display

13%

0%

5%

10%

15%

20%

25%

Italy Spain Europeanaverage

Poland UK Finland Russia Sweden Turkey

Online video share of display

30

but range of growth varies tremendously

50.6%

-50%

0%

50%

100%

150%

200%

250%

Online video growth

31

and so do absolute video market sizes

0

20

40

60

80

100

120

140

160

180

2012: size of online video advertising by market

32

Smartphones continue to proliferate

Source: IHS Elecronics & Media

0

200

400

600

800

1,000

1,200

1,400

World: smartphone shipments by OS (m)

Android iOS Windows Blackberry Bada Symbian Others

33

Smartphone screen sizes grow - increasing opportunity for mobile content

Source: Electronics & Media- Mobile Technology Intelligence, 05/2013

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12

Share of smartphone launches by screen size (%)

Less than 3.5 3.5-4 4.1-4.5 4.6-5.1 5.2+

34

Mobile revenues are becoming significant, but are still lagging behind consumption

5%

0%

2%

4%

6%

8%

10%

12%

14% Mobile display share of total online display

2011 2012

35

Just how crucial video and mobile are becomes clear if factoring them out from display

-30%

-20%

-10%

0%

10%

20%

30%

40%

display display excl. video display excl. video and mobile

36

Classifieds & Directories sees group of countries with strong positive outliers above average rate

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

37

Majority of markets outperform average search growth, largest search market just shy of average

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

38

What may the future hold? Addressable market is not only growing in mobile, but fixed-line as well

Source: IHS Electronics & Media

20

30

40

50

60

70

80

90

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Fixed Broadband penetration of households (%)

France Germany Italy Spain UK Nordics total Western Europe

39

yet the emerging multi-device landscape creates new opportunities

0 100 200 300 400 500

PC

Connected TV sets

Games consoles

Blu-ray disc players

STBs

Tablets and eReaders

Smartphones

Western Europe: Connected Devices (m)

2016

2012

Source: IHS Elecronics & Media

Thank you

@IABEurope

IAB Europe Research