The New Online Ad Ecosystem

By Olivier de La Mesliere, Venture Partner

Olivier@Leonardoventures.com

The Online Advertising Legacy Ecosystem…

Advertisers

Agencies

Websites

Users

Networks

What Has Changed?

Network Total funding (in millions)

Date of first

funding

Past 3 Years (in millions)

% Raised in past 3

years 1 Glam Media $124 July '04 $95 76% 2 Specific Media $110 June '06 $100 91%

3 Adconion Media Group

$86 Jan. '05 $85 99%

4 AudienceScience (Revenue Science)

$74 March '00 $0 0%

5 Federated Media $57 June '05 $55 95% 6 ContextWeb $52 June '04 $40 77% 7 Gorilla Nation $50 May '07 $50 100% 8 IGA Worldwide $48 Oct. '05 $30 62% 9 Adknowledge $48 March '06 $0 0% 10 AdMob $47 Sept. '06 $43 92% 11 Tremor Media $40 Sept. '06 $40 100% 12 Undertone Networks $40 March '08 $40 100% 13 Turn $38 Jan. '05 $23 61% 14 Double Fusion $37 Aug. '04 $26 71% 15 AdBrite $35 Sept. '04 $23 66% 16 VideoEgg $34 April '05 $30 88% 17 Kontera $33 July '06 $33 100% 18 Vibrant Media $32 July '00 $0 0% 19 Heavy.com $30 Dec. '05 $20 67% 20 Quattro Wireless $28 May '07 $28 100% 21 Grab Network $27 Feb. '05 $19 70% 22 Ripple $26 Aug. '06 $26 100% 23 Collective Media $25 Oct. '07 $25 100% 24 Adap.tv $24 Jan. '07 $24 100% 25 Lotame $23 Feb. '08 $23 100% Top 10 Total funding $697 $497 Average funding $70 $50 Top 25 Total funding $1,168 $878 Average funding $47 $35 All Networks

Total funding $1,491 $1,139

1. Networks Got Financed

Over 60 Ad Networks Received b$1.5 in VC Money in the past 5 years

+ $250m invested in acquired networks (Tacoda, Blue Lithium…)

2. Networks Became Smart

100% Yahoo!$300m, Sept 07

129 m unique monthly visitors

BlueLithiumProprietary

Private142 m unique monthly visitors

AdconionBlueKaï

Private130 m unique monthly visitors

ValueClick MediaProprietary

100% Akamaï$95m, Oct 2008

140 m shoppersAcernoProprietary

AOL$275m, July 2007

155 m unique monthly visitors

Advertising.comTacoda

Network / Techno. Reach Affiliation

3. Networks Transformed

• From aggregating Publishers’ inventory to sellingtargeted inventory & audience segments to marketers

• Networks’ targeting capacity increasingly supplantAgencies’ planning function (!)

• Networks increasingly appear positioned as Specialist Media Buyers, often directly competingwith Ad Agencies…

4. Ad Exchanges EmergedAd exchanges provide marketplace efficiencies between buyers (advertisers/agencies) and sellers (publishers & networks)

The first ad exchanges were AdECN ( purchased by Microsoft in August, 2007), Right Media ( purchased by Yahoo! in April 2007), and DoubleClick Ad Exchange (owned by Google since May 2007)

Next Gen Ad Exchanges are about Premiuminventory, and Real-Time Bidding full features.

And Now?

New Entrants Help Advertisers Buy

Future Buying Media Platform Will Focus on the

Global Advertising Reach

Future Media Platforms Will…

• compare campaigns across vendors and channels

• understand which campaigns are driving customeracquisition

• account for the multiple advertising contacts made prior conversion

Take the Whole Media « Buy » intoAccount to Improve Performance

• Advertising builds sales over time:

Brands reach customers at multiple times, across multiple channels, both online and offline , over extended periods of times…

• Display drives Search…

• Display leverages Offline Purchase…

Advertising builds sales over time:

The “Last Ad” Standard– Last Ad Clicked– Last Ad Viewed

The RealityCampaigns reach consumers multiple times, across multiple channels, over extended periods of time

$

$

$

$

$

SearchGoogle

BannerYahoo

Rich Media & Sponsorship MSN

BannerCNet

BannerSky Sports

$

Display drives Search:

Display leverages Offline Purchase

A Media Buying Vision

• Automate the media-planning process

• Collect proprietary data when ad is displayed

• Map the Lifetime Ad Exposure user by user, across multiple channels , online & offline, to deriveefficient retargeting and Conversion OptimizationModel

• Adjust the Buying process* dynamically according to the Ad Exposure Multidimensional Map

(*Both Ad Allocation & Price)

A Consistent Display of AdsThe Media Buying Platform should take into account

all prior advertising contacts to decide:

1. which Ad a user should view next to maximizeimpact

2. how much the brand should spend on such Ad atthis specific occurrence of the Ad ExposureSequence for this user profile…

Business Models

Media Buying Platforms could1. provide their Media Buying services on a

Freemium basis to Agencies & Marketers2. buy media on behalf of Agencies on a

commission 3. gradually evolve to an Arbitrage model as the

gap between market price and assessed spot values creates profit opportunity.