ad revenue report 2010

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10.07.10 - - NYCPubMatic is a global Ad Revenue Optimization company that provides premium online publishers with a full service solution to

manage and monetize non-guaranteed ad inventory. PubMatic�s real-time Ad Price Prediction technology ensures that online

publishers get the most money from their advertising space by deciding in real-time which ad network or exchange can best

monetize each impression.

PubMatic is a global Ad Revenue Optimization company that provides premium online publishers with a full service solution to

manage and monetize non-guaranteed ad inventory. PubMatic�s real-time Ad Price Prediction technology ensures that online



A Supplemental Guide to the

3RD ANNUAL PREMIUM PUBLISHER CONFERENCE

N E W A D R E V E N U E M O D E L F O R P U B L I S H E R S

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10.07.10 - - NYC 10.07.10 - - NYCPubMatic is a global Ad Revenue Optimization company that provides premium online publishers with a full service solution to PubMatic is a global Ad Revenue Optimization company that provides premium online publishers with a full service solution to

manage and monetize non-guaranteed ad inventory. PubMaticmanage and monetize non-guaranteed ad inventory. PubMatic��s real-time Ad Price Prediction technology ensures that online s real-time Ad Price Prediction technology ensures that online ��s real-time Ad Price Prediction technology ensures that online ��

publishers get the most money from their advertising space by deciding in real-time which ad network or exchange can best publishers get the most money from their advertising space by deciding in real-time which ad network or exchange can best


manage and monetize non-guaranteed ad inventory. PubMatic s real-time Ad Price Prediction technology ensures that online


N E W A D R E V E N U E M O D E L F O R P U B L I S H E R S

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We’re on the brink of a seller’s market for the first time in a decade.

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Let’s talk about how publishers can take advantage of it.

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Dear Ad Revenue Conference Attendees,

Welcome to our 3rd annual premium publisher conference, Ad Revenue 2010. While this is our 3rd year in putting

together this event, our vision remains the same – that is to bring together the brightest people in on the online

advertising space and have a conference completely focused on the needs of the publisher.

This year there is a different feeling from the two previous years we’ve hosted this event. Even though just two years

ago our industry was hit hard by the recession, this year I feel confident that, for the first time in a decade, online

advertising is on the brink of becoming a seller’s market. There are some very smart and innovative companies in

our industry working hard to develop technologies that benefit the publisher first, rather than putting advertisers

and agencies first, which has been the status quo for too long. Moreover, after several difficult years, publishers are

starting to emerge from the challenging environment with optimism and a growth agenda that has been lacking for far

too long.

In the next few years, publishers will gain new ground that will give them equal footing to many of the players on

the buy-side in our ecosystem and allow them to sell their inventory with the same mix of art and science that other

companies have been using for the past several years. However, even as publishers gain new revenue advantages,

it is important for publishers to recognize the value of all of the opportunities in front of them. Our online advertising

ecosystem is complex, so understanding who truly brings value to publishers isn’t always easy.

We hope Ad Revenue 2010 will inspire publishers to take advantage of the favorable market opportunities by creating

a new ad revenue model – one that will make them more profitable entities in the near-term and long-term.

Enjoy the event!

Warm Regards,

Rajeev Goel

Co-Founder & CEO

PubMatic

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Conference Program Guide

Opening Keynote with Randall Rothenberg

On The Brink of A Seller’s Market: Equipping Publishers To Sell Audience Effectively Through Both Direct & Indirect Channels

How Will the Advancement of Agency Trading Desks & Programmatic Ad Buying Impact the Publishers’ Direct Sales?

Multi-Party RTB Case Study: Examining the Direct Impact of Real-Time Bidding from Advertiser to Publisher

Protecting Publishers’ Audience Data In The Age of 3rd Party Audience Targeting

Embracing Change: Exploring New Business Models For Publishers

Closing Keynote with Terence Kawaja

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61

60

56

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13

14

20

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42

48

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Overcoming Market Challenges

Taking Advantage of Real-Time Bidding

Direct Selling of Audience Targeted Campaigns

Monetizing Video

Going Mobile

Improving Cross Channel Sales Management

Next Steps

Educational Resources for Publishers

About PubMatic

Creating The New Ad Revenue Model

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6

Ad Operations SummitNovember 1, 2010 • New York, NY

Hear from the thought leaders, publishers, agency executives and ad ops experts who are leading the charge to wage—and win—the war on discrepancies. They will explore in-depth the enormous strides they’ve made to reach this common goal—in process improvements, quantitative research, system automation and integration solutions. For more information, visit www.iab.net/events_training.

Join Us for What’s Next

IAB Consumer Protection & Education Campaign

The IAB Consumer Protection and Education Campaign is an initiative dedicated to building a self-regulatory enforcement mechanism under the auspices of the Better Business Bureau, executing a large public education campaign to support consumer and business understanding and appreciation of the interactive advertising industry, and undertaking advocacy at the Federal and state levels.

An integral part of this effort, IAB’s Privacy Matters campaign is the industry’s first broad public education outreach. Twenty-four online publishers and ad networks have donated 620 million ad impressions, and more than 450 million impressions have already been served. We could use your help to reach our goal of 1 billion impressions.

We need you to:

Get involved by learning about IAB’s public policy efforts. Contact Mike Zaneis, Vice President, Public Policy, [email protected] or (202) 344-4652

Donate ad inventory to Privacy Matters. Contact Marla Aaron, Director, Marketing & Communications, [email protected] or (212) 380-4714

Learn more at www.iab.net/public_policy.

Join Us for What’s Ongoing

Join. Learn. Lead.The Interactive Advertising Bureau is dedicated to the growth of the interactive advertising marketplace, of interactive’s share of total marketing spend, and of its members’ share of total marketing spend.

PubMatic is a proud supporter of the IAB and the Consumer Protection & Education Campaign

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Special thanks to our sponsor

October 7, New York City

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9:30 AM

Brand advertising in the digital revolution

Opening Keynote: Randall Rothenberg, President & CEO, IAB

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9:55 AM

Can the sell side match the buy side in the data arms race?

On The Brink of A Seller’s Market: Equipping Publishers To Sell Audience Effectively Through Both Direct & Indirect Channels

Presented by Rajeev Goel, Co-Founder & CEO, PubMatic

Online advertising has been a buyer’s market for a decade. What will empower publishers enough to finally tip the

scale? PubMatic Co-Founder & CEO, Rajeev Goel, will argue the answer is enabling publishers to have the greatest

control of their audience data in order to effectively sell highly targeted audience campaigns through both direct and

indirect sales channels.

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Is programmatic ad buying bad for publishers…

10:50 AM

How Will the Advancement of Agency Trading Desks & Programmatic Ad Buying Impact the Publisher’s Direct Sales?

The initial benefits of RTB for the publisher are clear – significantly higher CPMs through indirect sales channels. But

some argue this method of ad buying has become so effective at targeting audience across the Web for advertisers

that it threatens the value of the publisher’s directly sold inventory. This panel will discuss whether this is a real threat,

or an over-exaggerated fear, and how publishers can effectively manage both channels.

Moderator

David Moore, IAB & 24/7 Real Media

Panelists

Nate Woodman, COO, Adnetik

Ian Wallin, SVP Sales, TV Guide

Chris Stevens, Sr. Director at Orbitz Worldwide

Matt Greitzer – Co-Founder, Accordant Media

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11:50 AM

…or is it good for both publishers and advertisers?

Multi-Party RTB Case Study: Examining the Direct Impact of Real-time Bidding from Advertiser to Publisher

RTB is still new and both advertisers and publishers have a lot of questions about it. PubMatic gathered some of its smartest demand side partners to examine some key questions for the industry. The result is the first multi-party, comprehensive, buyer’s case study that tracks how RTB works for different advertiser verticals as well as publishers.

Moderator

Jeanne Houweling

VP Demand Partner Solutions

PubMatic

Panelists

Eric Simon, VP Media, [x+1]

Bruce Journey, Founder and CRO, DataXu

Ari Buchalter, COO, MediaMath

Maureen Little, VP Business Development, Turn

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1:35 PM

How can publishers gain greater control of their audience data?

Protecting Publishers’ Audience Data In The Age of 3rd Party Audience Targeting

Privacy concerns are not only a concern for consumers, but for publishers as well. How do publishers protect

their data from 3rd parties that use that data to sell advertising? Make no mistake, many publishers benefit greatly

from 3rd parties leveraging publisher data, but how much data collection is too much? And how can publishers be

better informed about who is collecting data from their sites?

1:30 PM

Moderator

Doug Weaver, CEO, Upstream Group

Panelists

Denise Colella, CRO, Audience Science

Bennett Zucker , SVP/GM, Data Solutions, Ziff Davis

Scott Meyer, CEO & Founder, Better Advertising

Peter Naylor, EVP Digital Media Sales, NBC

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3:05 PM

How can publishers adapt to today’s changing marketplace?

Embracing Change: Exploring New Business Models For Publishers

Business models need to change in order for today’s publisher, especially ones with more traditional roots, to

continue producing quality content and maintain relevancy and revenue growth. Salvation isn’t likely to come in

one form (i.e. paywall, iPad, etc.), so this panel will explore a combination of ideas and ideologies about what it

actually means to be a premium publisher in today’s digital age and how to best adapt to today’s competitive

marketplace.

Moderator

Jeff Jarvis

Associate Professor

CUNY & Columnist

Panelists

Andy Jacobson, VP Digital Sales, Gannett Digital/ USA Today

Jeremy Helfand, President, United Online Media Group

Kyoo Kim, VP Sales, MSNBC.com

Mark Josephson, CEO, outside.in

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4:05 PM

What does the future look like for online display advertising?

Closing Keynote:

Display Advertising Ecosystem Revisited: A Prospective Look

Terence Kawaja, President & CEO, LUMA Partners LLC

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4:30 PM

Happy Hour

Sponsored by

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Creating the New Ad Revenue Model

The 5 biggest ad revenue opportunities for publishers in 2011:

1 Taking Advantage of RTB

2

3

4

5


Monetizing Video

Going Mobile


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Don’t look now, but online advertising is on the brink of becoming a seller’s market. True, the economic environment

doesn’t feel much better than it did two years ago, but if you look at the data the longest recession since the Great

Depression is officially over, unemployment is decreasing, and corporate profitability is on the rise. For those of us

in the publishing industry, those that have made it through the past few years have likely made the gut-wrenching

changes to their business models that were needed to survive. With sustainable cost models in place, many

publishers are now focused on revenue growth, attracting new viewership, and growing their bonds with existing

content consumers.

Why are we on the verge of a seller’s market for online

advertising? Technology for publishers is finally catching

up to the sophistication of technology for advertisers.

Equally important, with smartphones, new tablet devices,

and growth in video consumption, more media than ever

is being consumed by the general public.

For the first time ever, the sophistication of publisher-

facing technology is on par with advertiser-focused

technology. Publishers can now use Real Time Bidding

technology to drive up their revenue just as advertisers

use RTB to target a granular audience.

Also now, for the first time ever, publishers can sell based on audience and not just context through both the direct

and indirect sales channels. As agencies and advertisers rapidly increase their audience based buying, publishers

now have the technology platform and tools to manage their own and 3rd party audience data to sell their inventory

at significant price premiums.

Lastly, while new devices have typically only led to a fragmentation of the publisher’s audience, they are now driving

explosive consumption of media. This gives publishers the ability to sell not just traditional display advertising but

growing amounts of mobile and video inventory that can lead to higher engagement with consumers and increased

monetization.

But all of this isn’t to say that taking advantage of the seller’s market is easy. Publishers must actively work to seize

this opportunity. Publishers must rethink and reinvent what they are selling, not just repackage the same ad units.

They must learn how to sell based on audience. They must also make bets on specific devices (to iPad or not to

iPad), not provide a generic user experience across dozens of different device footprints.

In sum, publishers must leverage the technology and data that the buyers have been utilizing for the past several

years in order to create a new ad revenue model.

Sell Side Technology is finally catching up to the sophistication of the Buy Side Technology

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On the brink of a seller’s marketFor the past 10 years the online advertising market conditions have been more favorable for advertisers than publishers, but that is changing

2001 2003 2005

Market Factors

Content is still king; Scarcity

keeps pricing high.

Market Factors

Internet adoption syrockets; Unsold inventory does too. Ad networks emerge to monetize via indirect sales.

Market Factors

Advertisers use ad networks to

get inventory at a cheaper price.

Effect on Publisher Ad Revenue



Direct Sales Direct Sales Direct Sales Indirect SalesIndirect Sales

While overall online ad spend is

small, ad pricing grows.

Premium Publishers are not gaining

a lot of money from ad networks, but

it does provide revenue that would

not otherwise be there.

Some premium publishers swear

off ad networks, accusing them

of cannibalizing their direct sold

inventory. Revenue from ad nets

becomes stagnant.

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2007 2009 2011

Market Factors

Ad networks grow, Ad Exchanges emerge; commoditization/arbitrage reaches all time high.

Market Factors

Rise of Sell Side Platforms,

DSPs, and Real-time bidding.

Market Factors

Market conditions improve. More overall dollars come online, mobile, video and display ad spends increase. Selling advertising with audience data gains big traction and improves publisher ad revenue for both indirect sales and direct sales.




Direct Sales Indirect Sales Direct Sales Indirect SalesDirect Sales Indirect Sales

Virtually every analyst forecast for

online advertising spend was lowered

for 2008; layoffs on the publisher and

agency side were all too common.

The online ad space shows its

resilience with a surprisingly strong

rebound in 2009; PubMatic data

shows a 111% increase in online ad

pricing in 2009 from 2008.

Publishers create a new

ad revenue model to take

advantage of favorable

market conditions and new

monetization opportunities.

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Overcoming Market Challenges

Advertisers are closer to the money. That’s what has been the collective conventional wisdom of the online advertising

technology community for a decade. So it is no surprise that for many years most of the innovation in online

advertising has been focused on the buy side.

More recently, a number of smart companies have been working to change the tide so that publishers can have more

control over how their advertising inventory is sold and how much it is sold for. Through technological innovation,

these sell side focused companies have begun to crack the code that will enable publishers to earn ad revenue more

efficiently than before and on their terms.

New opportunities are being developed, but there are of course many challenges that still exist.

The Need For Consolidation In The Online Advertising EcosystemAdvertisers are changing their buying habits faster than many publishers can keep up. For example, more and more

advertisers are seeking to buy audience rather than context. Currently, most publishers aren’t able to accommodate

that advertiser demand, so they rely on DSPs and ad networks to facilitate the transactions for them.

That example of publishers depending on another

segment in the online advertising space to help sell their

advertising isn’t an anomaly; in fact, advancements

on the buy side have made publishers more and more

dependent on third parties to help them stay competitive

and meet advertiser demand.

Publishers partner with companies that provide ad

operations, ad servicing, yield management, data

management, analytics, inventory management, and the

list goes on.

Meanwhile, the advancements on the buy side have developed so quickly and the companies have become so

competitive that innovation continues at a breakneck pace. So publishers aren’t the only ones dependent on third

parties to stay competitive.

Every time a consumer sees an ad on a Website, there can be up to 15 companies involved with the process

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Buy side companies are partnering with data suppliers, data exchanges, ad verification companies, dynamic creative

optimizers, and the list goes on here too.

It’s a vicious cycle, which has lead to the most complex marketplace online advertising has ever seen. Every time

a consumer sees an ad on a Website, there can be up to 15 companies involved with the process. That is neither

efficient nor economically sustainable.

All markets experience times of expansion and contraction, and online advertising is in the midst of an epic expansion

—nonetheless, the seeds of consolidation have been sown.

Nobody has done a more compelling job of demonstrating how complex and convoluted the online advertising

ecosystem has become than Ad Revenue 2010 closing keynote speaker Terence Kawaja, President & CEO at LUMA

Partners LLC.

This is Mr. Kawaja’s latest Landscape rendering from October 2010.

In order for publishers to efficiently keep up with evolving advertiser demands, there needs to be consolidation of

services, solutions, and technology on the sell side. Ultimately publishers need to eliminate complexity by working

with fewer companies that provide more, rather than maintaining dozens of business relationships. Many analysts and

investors believe that consolidation is on the way.

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According to investment bank Petsky Prunier, merger and acquisition activity in Q3 2010 is up 27% from Q2. More

importantly, the most active sector for M&A in Q3 was—no surprise—Marketing Technology. So what does the future

hold? According to a Q&A on AdExchanger.com with Jay C. MacDonald, Partner, DeSilva + Phillips:

“There are a lot of variables: timing, funding levels, market conditions and more. But, we don’t see mass

consolidation happening until the first few bets are made and the industry absorbs the impact of those

and then decides if they are right or wrong.”

Mass consolidation hasn’t happened yet, but the drumbeats are getting louder.

Data Leakage is a $1 Billion Dollar Problem For Publishers Data leakage occurs when 3rd parties track a publisher’s audience by dropping pixels on their site without the

knowledge of the publisher. 3rd parties use publishers’ audience data in order to increase the value of the media

they are selling independently of the publisher. This is a problem that has grown considerably in the past year along

with advertiser demand for audience targeted advertising.

There are a lot of companies that have profited greatly from this practice at the expense of the publisher. The problem

is so prolific that PubMatic estimates that data leakage is costing publishers up to $ 1 billion annually in lost revenue.

“Leakage,” however, is not technically what is happening. PubMatic CEO, Rajeev Goel, has openly stated in an

article on AdExchanger.com in September 2010 that data leakage is not necessarily the most appropriate term for

the phenomenon, because their data is not actually being leaked—rather, it is being taken when the publisher isn’t

looking. This is an important factor to take into consideration, because not all pixel dropping is a bad thing.

Many publishers have benefited greatly from the pixel

dropping, and there are a lot legitimate companies doing

it. The legitimate companies use that data to help sell

audience targeted campaigns in which, in many cases,

the publisher lacks the ability to package that audience

data themselves.

Audience targeted campaigns provide ad revenue lift for

publishers – in fact, in the joint PubMatic + Digiday study

from September 2010, 80% of publisher respondents

stated they received a premium for audience campaigns

over non-audience campaigns.

Publishers need to see the

ratio between pixel dropping

and revenue contribution in

order to determine the value

trade-off

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There are some 3rd party companies, however, that take audience data from publishers but don’t contribute enough

revenue back to them. This is why publishers need to the ability to see if the value trade-off for the relationship with

the 3rd party is worth it. In order to do that, publishers need to do three things:

Get Transparency

Know who is dropping pixels on your site and how often

See Pricing:

Understand the revenue contributions from those dropping pixels on your site

Determine The Value of the Relationship with the 3rd Party

Look at the ratio between pixel dropping and revenue contribution and determine the value trade-off

with the 3rd party

Before the publisher makes any immediate choices regarding the value of their 3rd party relationships, they should

also consider ad quality and relevance. Now that the economy is starting to pick up again, ever so slowly, there

seems to be a renewed focus on the part of the publisher on the user experience and ad quality when compared

to several years ago. Publishers are no longer willing to tolerate slow loading ads, poor quality ads, malware, or

irrelevant ads that lead to a poor user experience. Again, these issues may not show up in the daily CPM statistics

but will certainly decrease the publisher’s audience, and therefore revenue, over time.

Lastly, the best relationships between publishers and 3rd party monetization sources are built over mutual respect,

trust, and understanding. The 3rd party should know who the publisher’s audience is, what the publisher’s brand

stands for, what’s acceptable creative and what’s not.

3

2

1

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Ad Quality Control & Malware Remain Growing Problems

Some information from this section provided by PubMatic’s Malware Protection partner

Malvertising is an ever-growing problem in online advertising, as the distribution of viruses and malicious code has

moved from the realm of nefarious links in email and websites into the delivery of advertising on the web. The effects

of malware on publishers go beyond revenues, impacting the publisher’s reputation as a safe environment for web

surfers to visit.

There are a myriad number of methods malvertisers use to spread malicious code, but three primary methods

malvertisers utilize to enter the online advertising ecosystem stand out:

• Fake advertisers/agencies: Firms posing as legitimate agencies or advertisers buy ad inventory through DSPs,

ad networks, or directly from web publishers. Often, these organizations are unknown or newly formed entities,

without a credit history or with inconsistent corporate information, that are looking for immediate distribution

of their campaigns. These campaigns may be launched with legitimate or altered ad creatives that contains

malicious code or the ability to execute such code.

• Hijacked ad creative: The creative for a legitimate campaign is hosted by a third-party server, which is swapped

or redirected by a malvertiser as it comes in contact with content during an ad call that passes through multiple

parties. This is often the result of lax security policies.

• Legitimate ads with malicious pixels or code: The creative is served by a legitimate advertiser/agency and is

a legitimate ad campaign, but the malvertiser is able to take control of the creative for a brief period of time to add

code or a pixel that calls additional content on creative load.

In any scenario, the majority of ad units being delivered appear to be legitimate but intermittently deliver malicious

payloads. The resulting harm to users, beyond financial loss, includes computer take-overs by computer bots and

identity theft.

Publishers are threatened by malware from two sources—through upstream partners where they do not control

what creative is served on the site, and through direct sales to malvertisers. The current trends in malvertising show

that malvertisers switch between attacking consumers through direct sales to publishers and utilizing DSP’s and

exchanges—depending on what their revenue models determine is successful in creating the largest numbers of

impressions. Malvertisers also utilize predictable timing lags to lull publishers into a false sense of security by NOT

buying inventory for stretches of up to 6 months to 1 year before coming back (under a different agency name).

Regardless of the tactics utilized, publishers need to be vigilant for both direct sales and through upstream partners

to be safe.

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What can publishers do to take control over the malvertising issue? Set up policies and checkpoints throughout your

ad sales and operations organization:

• Develop a set of vetting criteria for doing business with new partners: corporate background, domain

registrations, and business reference checks. Ensure that credit checks and client backgrounds are verified

against databases of known malvertisers.

• Publish your policies to potential advertisers and partners that communicate the economic consequences of their

involvement with malicious advertisers.

• Only work with third-party upstream ad sales partners such as Sell Side Platforms for representation firms who

have policies and technology in place to stop malvertising from reaching your website in the first place.

Advancements in technology that prevent malware have been a significant help to publishers as the problem

continues to evolve. Malware is not the only problem that publishers face while protecting their brands. Other key

problems include:

• Blocklist Management

• The inability to screen ads in real-time

• Identifying the source of creative violations and malicious ads

• Preventing advertising latency

There has been a lot of innovation in the area of brand control for publishers, especially from Sell Side Platforms

(SSPs). Unlike advertising exchanges, SSPs deal with only premium publishers and were pushed to innovate in order

to protect the brands of the publishers they work with.

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Opportunity #1

Taking Advantage of RTB

The Rapid Growth of RTB is UnprecedentedIn February 2009 PubMatic launched the world’s first Real-Time Bidding (RTB) API allowing publishers to give buyers

access to their inventory at the impression level. That enabled buyers to target the right audience, at the right time, in

the right context, and at the right price. At the time, it was expected that the adoption rate for advertisers leveraging RTB

would be strong and steady, but few predicted how rapid

the growth of RTB would be less than two years later.

Most emerging types of advertising have been met by

advertisers with caution, if not skepticism. In many cases

new ways for advertisers to reach consumers takes

several years before there is wide enough acceptance in

the media buying community to warrant a single advertiser

spending millions of dollars per year—let alone for one

campaign. This has not been the case for real-time

bidding.

Thousands of advertisers are actively using real-time

bidding to reach the specific audience they want and

are spending significant percentages of their advertising

budgets to do so.

Online advertising experts would be hard pressed to find a similar success story as RTB with respect to its lightning

fast growth. Online video advertising, for example, is growing very rapidly, but it did not grow as fast in its first two

years of availability as RTB.

35%of their 2011 online advertising budgets, on average, will be spent on RTB campaigns

+

For marketers that have used RTB before,

Media Study, September 2010

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The Bad Economy Forced Advertisers To Demand More Accountability From Their Advertising Spend

Nearly everyone in the advertising industry felt the

pressure of the recession during its peak in 2007 and

2008 as advertising budgets shrank across the board.

Advertisers were forced to spend significantly less

while still being expected to show positive results from

their smaller advertising spends.

While far from perfect, online advertising allows

advertisers to better track performance and ROI

than offline advertising. As a result, online advertising

became a bigger percentage of advertising budgets

for many advertisers.

Higher Expectations From Advertisers Led To Expedited Innovation And Buying Expertise From Media Agencies

Better accountability and higher ROI expectations

from advertisers put pressure on the media buying

community to find better solutions for the advertisers

they represented. Advertisers wanted more from their

media buying agencies than simply putting more

advertising dollars online.

Advertisers wanted to work with media agencies that

were the foremost experts for online media buying.

This led to the rise of media trading desks. These

specialized units within large media agencies created

a ready source of talent and resources that could

specialize in working with the RTB ecosystem to drive

rapid adoption.

RTB Reduced Media Waste and Increased ROI By Allowing Advertisers To Reach Only The Audience They Wanted

Media trading desks and more advanced media agencies

found great success by working closely with media trading

experts on the buy side—soon dubbed Demand Side

Platforms (DSPs). DSPs provided the technology to media

buyers, which enabled them to reach a specific audience at

the impression level, and in real time.

By leveraging audience data, online advertising campaigns via

DSPs consistently outperformed other types of media buying,

resulting in consistently greater ROI, and greater advertising

spending from advertisers.

Publishers Benefited From Significantly Higher eCPMs And Opened Up More Inventory To RTB

The benefits from the rise of RTB were not exclusive to

advertisers. Not only did users get more relevant advertising,

but publishers that participated in RTB campaigns began

to see their advertising revenue from indirect sales increase

dramatically. PubMatic reported in Real-Time Bidding from The

Publisher Perspective, a white paper released in February of

2010, that most publishers experience much greater eCPM

from RTB campaigns than from non-RTB campaigns, and some

PubMatic publishers have seen gains of over 300%.

Similar to how consistently better performing campaigns led to a

continued increase in budgets for RTB campaigns for advertisers,

publishers saw consistent increases in revenue and made more

inventory available for advertisers to bid on in real-time.

Contributing Factors in RTB’s Rapid Growth How the widespread adoption of RTB, and the advertising dollars associated with it, grew this quickly is something of

a unique story. Some would argue that it was a perfect storm that catapulted the rise of RTB. Those factors include:

1 2

3 4

28

Despite all of the benefits that real-time bidding (RTB) has provided for advertisers and publishers over the past year,

it is still a relatively new method for online advertising targeting.

Advertisers want to know how much better the performance and return on investment is for RTB campaigns

compared to other types of targeted online advertising campaigns. Advertisers also want to know if RTB campaigns

experienced similar results across different advertising

verticals. Similarly, many publishers want to know how

much more revenue they can expect from RTB campaigns

compared to other media campaigns.

PubMatic collaborated with four Demand Side Platform (DSP)

partners, [x+1], DataXu, MediaMath, and Turn, in order to

answer those questions. The result is the first multi-party RTB

case study that tracks performance and ROI across several

advertising verticals, and also tracks how much revenue lift

participating publishers experienced in comparison to non-

RTB campaigns.

Multi-Party, Multi-Vertical Real-Time Bidding Case Study

46% of those who use DSPs or ad networks to buy targeted audience inventory have never leveraged RTB

+

29

A Group Effort, Not An “Apples to Apples” Test For DSPs

Each DSP executed different campaigns with significantly different variables including different verticals, different client

objectives, and different creative—all of which have significant impact on the outcome of a campaign.

Moreover, this study was a group effort by all participants, which have a similar goal of educating the online

advertising marketplace about RTB. All participants agreed that the best way to demonstrate how RTB performs

against other targeting methods would be to discover the differences in performance by the different campaigns across

completely different advertiser verticals. Therefore, it would be impossible to compare the performance of any DSP

against another in this study.

Case Study Objectives

1. Track RTB Performance vs. Non-RTB Performance For Each Advertising Campaign

2. Track Similarities in RTB vs. Non-RTB Campaign Performances Across Multiple Advertising Verticals

3. Track Publisher Ad Revenue Lift (eCPM) From RTB Campaigns vs. Non-RTB Campaigns

Hypotheses

1. PubMatic publishers would see higher eCPM from RTB campaigns vs Non-RTB campaigns.

2. RTB would outperform the other targeting methods across very different advertising

verticals despite the fact that each DSP had a vastly different advertiser objective and campaign

scenario.

While the campaign variables prevent comparison of DSP performance, they do allow for the tracking

of 3 different targeting methods across different advertising verticals

Campaign Variables

Campaign Constants

Advertising Vertical

Advertiser Advertisement Creative

Campaign Objectives

Audience & Geo Target

Campaign Scale & Budget

3 Targeting Types Time Frame For Test All Inventory Processed Via PubMatic

30

Case Study Methodology

Tracking the Performance of Different Targeting Methods for the Same Campaign

Leveraging PubMatic for publisher inventory, each DSP focused on managing one campaign for a single, specific

advertiser, but purchased publisher inventory for the campaign in three different ways. Each DSP then tracked how

the same campaign performed by the following media buying methods:

Tracking The Performance of Different Targeting Methods Across Different Advertiser Verticals

Each DSP also focused on a specific industry, selected by PubMatic, in order to see if RTB had similar results across

different advertising verticals.

PubMatic Publishers

RTBImpression-Level

Optimization

Non-RTBAudience Targeting

Non-RTBRun of Network

Targeting Method 1 Targeting Method 2 Targeting Method 3

Step 1 4 advertising verticals are selected

Step 2Each DSP studies 1 vertical selected by PubMatic

Step 3Each DSP tracks the performance of 1 advertiser’s campaign across 3 different targeting methods

Step 4All 4 DSPs access publisher inventory through PubMatic and PubMatic tracks eCPM of participating publishers

RTBImpression-Level

Optimization

RTBImpression-Level

Optimization

RTBImpression-Level

Optimization

RTBImpression-Level

Optimization









Finance TelecomCPGAuto

31

Key Takeaways

• Publishers generated significantly higher CPM from the RTB campaigns in comparison to Non-RTB campaigns, across all advertising verticals, by an average of 64%

• RTB outperformed the non-RTB (RON) media buying methods across all four advertising verticals by an average of 749%

• Non-RTB campaigns that were audience targeted outperformed Non-RTB campaigns that were not audience targeted by an average of 324%

• Based on cost-per-success metric as outlined by the advertisers for each campaign, RTB provided better ROI than non-RTB audience targeted campaigns by 101% on average

PubMatic publisher eCPM from RTB was 64% higher on average than from Non-RTB campaigns during the same time frame

180

160

140

120

100

80

60

40

20

0

RTBNon-RTB

CP

M In

dex

(Non

-RTB

= 1

00)

32

Automotive

Campaign performance by targeting method conducted by

Campaign OverviewDataXu’s client is a large auto manufacturer, who ran a National US campaign designed to promote their seasonal

sales clearance event. The campaigns goals were to drive user engagement with specific pages on the auto

manufacturer’s website including the event details, special offers, design a vehicle, and inventory search landing

pages. The campaign had a CPA goal of $5.

Campaign Type: Performance

Audience Target: Auto intenders

Success Metric: All executions measured on a CPA basis named above.

Campaign StrategyTo drive the most efficient and effective performance, DataXu’s media management platform evaluates over 100

different attributes and bids in real time on an impression by impression level. The campaign launched across multiple

ad exchanges evaluating over 5 billion impressions, finding the most relevant impressions, at the most affordable

price. The campaign also included automotive behavioral segments and retargeting. The overall campaign beat the

CPA target by over 100%.

Unique advanced analytics derived from campaign data:

• Ads shown in the beginning of the week were more valuable.

• Campaign appealed to consumers interested in news & current events.

• Urban consumers showed highest level of interest.

• Campaign performed best on coastal states.

33

About DataXu

DataXu is the leading media management platform for online display advertisers. Combining media buying and

analytics, DataXu has a transformative approach to digital advertising, helping brands and their agencies use

dynamic ad decisioning intelligence for better media effectiveness, operational efficiencies and audience insights.

For more information visit: www.dataxu.com

DataXu Headquarters:

281 Summer Street

Boston, MA 02210

Contact

(857) 244-6200

Email: [email protected]

Campaign performance by targeting method— Auto: DataXu

Performance percentage differences by targeting method for specific Automotive campaign

• RTB outperformed Non-RTB Run Of Network by 975%

• RTB outperformed Non-RTB Audience Targeted by 155%

12.00

10.00

8.00

6.00

4.00

2.00

0

RTBNon RTB RON

Non RTB Audience Targeted

Per

form

ance

Inde

x (T

radi

tiona

l Med

ia P

lace

men

t = 1

,0)

Campaign Results

34

Consumer Packaged Goods (CPG)


Campaign OverviewA leading US CPG marketer turned to its digital agency to drive measureable growth in online consumer engagement

for one of its national prepared-foods brands. The client wished to target 25-50 year old females with the goal of

driving email registrations to the brand’s Web site, at which members could find coupons & special offers, email

newsletters, recipes & tips, discussion boards, and other rewards. The client hoped to exceed benchmarks from prior

display efforts, both in terms of cost-per-signup (CPS) performance, as well as significantly surpass previous levels of

overall signup volume.

Campaign Type: Brand Engagement

Audience Target: Females 25-50 with interest in flagship client brand

Success Metric: User registration with online brand community – grow volume and lower CPS

Campaign StrategyHaving achieved mixed results from traditional media placements and network buys, the agency looked to

MediaMath’s TerminalOne® platform to deliver breakthrough performance through a combination of broad access

to biddable media inventory, integration of numerous 3rd party data providers, and proven bid optimization by

MediaMath’s Brain™ algorithm. To highlight the benefits of bid optimization and real-time bidding (RTB), three

different strategies were pursued in parallel: (1) Non-RTB “run-of-network”, (2) Non-RTB audience targeting, and (3)

RTB impression-level optimization. In each case the results were benchmarked to an average of prior display results,

normalized to the prior monthly spend levels.

The results, displayed in the Figure, were impressive. At fixed spend levels, strategy (1) performed over 3x worse

than the benchmark, at a 360 CPS index. Strategy (2) performed slightly better than the benchmark, with an 88

CPS index. Strategy (3) significantly outperformed the benchmark at a 39 CPS index – blowing prior performance

levels away—and was nearly 10x more efficient than the non-optimized buying of Strategy (1). And with a simple

adjustment to the TerminalOne campaign optimization settings for Strategy (3) the MediaMath Brain algorithm was

able to “re-invest” some of those performance gains to grow volume by 3.2x while achieving a CPS index of 59,

delivering improvements in both performance and scale.

35

About MediaMath

MediaMath’s TerminalOne™ platform powers the new marketing professional by integrating media, data,

optimization, analytics, and workflow automation to return focus to marketing strategy rather than media execution.

MediaMath’s technology has driven breakthrough results for dozens of agencies representing the world’s leading

brands on thousands of campaigns.

For more information visit: www.mediamath.com

MediaMath Headquarters

415 Madison Avenue 3rd Floor New York, NY 10017

Contact

(646) 840-4200 Email: [email protected]

Campaign Results

Campaign performance by targeting method— CPG: MediaMath

10.00

9.00

8.00

7.00

6.00

5.00

4.00

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2.00

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RTBNon RTB RON


Per

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,0)

Performance percentage differences by targeting method for specific

CPG campaign


• Non-RTB Audience Targeted by 126%

36

Finance


Campaign OverviewThe Internet today is transforming the way financial services companies market and interact, turning their websites

into dynamic information hubs. For consumers seeking new and better financial products, financial service company

websites have become the source for the latest, most relevant product information. And, for the companies

themselves, the Internet has become the information and service superhighway, allowing them in real-time to

message consumers and prospects.

To succeed in this 21st century, ever-changing landscape, the biggest challenge for the financial services industry has

been to maintain the need for scale while achieving cost effectiveness and message relevancy across three core goals:


Audience Target: High value prospects

Success Metric: Submission of a completed application

Campaign StrategyIn the PubMatic case study, [x+1] used Platform+1, its universal Demand Side Platform, to automate a targeted

and real-time bidding campaign. Set up in Platform+1 included establishing client-specific business rules such as

geographic location and time of day along with [x+1]’s patented Predictive Optimization Engine (POE™). This allowed

[x+1] to automatically find and optimize audiences at scale across various data sources, both client-supplied and

third party, with results tracked in real time.

A crucial success factor in the campaign was finding a diverse and large mix of inventory and price points. This in turn

enabled [x+1] to find the optimal balance of audience composition and price points to build a sound ROI solution.

Utilizing POE™, [x+1] was able to further refine the best performing audiences, driving even stronger conversion lift

going forward. PubMatic’s inventory exceeded expectations and led to positive results almost immediately, due to

the quality of its audience composition. Had the campaign run longer, [x+1] believes it would have seen a continuing

trend of improved scale, efficiency and performance based on the combination of PubMatic’s strong inventory and

POE™’s predictive decisioning.

37

About [x+1]

[x+1] helps brands, agencies and media companies connect with consumers in more meaningful, actionable ways,

delivering offers where they’re most relevant. [x+1] uses its Predictive Optimization Engine (POETM) to enable

automated, real-time decision making to ensure that the right message is delivered to the right person at the right time.

For more information visit: www.xplusone.com

[x+1] Headquarters 470 Park Avenue South Suite 17S New York, NY 10016

Contact (212) 741-4222 Email: [email protected]

Campaign Results

Campaign performance by targeting method— Finance: [x+1]

8.00

7.00

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RTBNon RTB RON


Per

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t = 1

,0)

Performance percentage differences by targeting method for specific

Finance campaign



38

Telecommunications

Campaign OverviewTurn’s customer is a prominent telecommunications provider whose campaign employs geo-targeting across 14

Western states including Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North

Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. The campaign goal is the successful launch and

rebranding of the brand’s flagship high-speed internet service with a focus of driving efficient transactions. The

emphasis was on new customer acquisition for high-speed internet, but also included a strong up-sell incentive to

existing subscribers to bundle existing packages. The campaign goal is based on cost per transaction (CPT).


Audience Target: Geo-targeted across 14 states

Success Metric: All executions were measured on a CPT basis. Performance was measured based off of orders

through the “Order Confirmation Page Conversions”

Campaign StrategyLaunched across fourteen pre-selected states, this telecom brand focused on targeting the right audience through

re-marketing segments in order to help establish new acquisitions and up-sell existing customers. Its goal for the

campaign was a CPT lower than $100. Because it was highly geo-targeted with a limited re-marketing segment, the

campaign’s success hinged on the Turn Platform’s algorithmic intelligence that crunches more than 2,000 behavioral,

contextual, inventory, and ad selections variables within 25 milliseconds to guarantee winning bids for the most

valuable impressions available. The Turn Platform then automatically optimized and adjusted pacing to achieve the

desired spend. To boost the campaign’s reach and drive new acquisitions, Turn used its Audience Extension tool to

define additional segments of tech savvy consumers and families with moderate to high internet consumption.

Results speak for themselves: The dynamic cost per thousand (dCPM) was nearly a $60.00 better effective

cost per action (eCPA) for re-marketing. Additionally, the dCPM had a 562% lift over flat RON and 44% lift over

flat CPM re-marketing.


39

About Turn

Turn was founded to bring the efficiencies of search advertising to online display and empower the world’s premier

advertising agencies and brands to reach custom audiences at scale. We are a software and services company with

the industry’s only end-to-end platform for delivering the most effective data-driven digital advertising in the world.

Our self-service interface, optimization algorithms, real-time analytics, interoperability, and scalable infrastructure

represent the future of media and data management.

For more information visit: www.turn.com

Turn Headquarters:

835 Main St. Redwood City, CA 94063-1901

Contact:

(650) 353-4399 Email: [email protected]

Campaign performance by targeting method— Telco: Turn

7.00

6.00

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RTBNon RTB RON


Per

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Campaign Results

Performance percentage differences by targeting method for specific Telecom campaign



40

Study ConclusionWhile there are many individual case studies that highlight the benefits of RTB, this case study marks the first time

that multiple online advertising companies worked together to demonstrate that RTB has significant benefits for both

publishers and advertisers.

During the course of this study, RTB consistently outperformed, and provided greater ROI to the advertisers, than

other types of media buying methods for all participants. RTB has enabled the advertiser, for the first time, to reach

the right audience, in the right context, at the right time, and for the right price. Perhaps somewhat surprisingly, this

ability to precisely target an audience allows the advertiser to pay more for ad inventory because of the improved

return on investment.

All participants hypothesized that RTB would be

the media buying method that would provide the

most satisfactory results to the advertiser—and that

is because all participants recognize that RTB has

significant advantages over the other methods. Those

advantages include impression-level audience targeting

technology, dynamic creative optimization, and more

intelligent pricing.

PubMatic publishers that participated in these RTB

campaigns consistently achieved greater eCPMs than

if had they not participated in the campaigns. The

results of this study are consistent with the eCPM lifts

that PubMatic publishers are experiencing on a regular

basis. RTB continues to gain wide acceptance from

the premium publisher community, and it is not uncommon for publishers that previously chose not to work with ad

networks to show interest in making inventory available for RTB-only campaigns.

Given that PubMatic continues to see a rapid rise in RTB advertising campaigns, it would be reasonable to conclude

that the results of this study are consistent with what the online

advertising industry as a whole has experienced with RTB.

It would be reasonable to conclude that the results of this study are consistent with what the online advertising industry as a whole has experienced with RTB

41

The Future of RTBDriven by positive results for marketers across the industry, advertiser budgets for RTB campaigns are growing

exponentially. Rajeev Goel, PubMatic’s CEO, estimates that RTB will account for up to 20% of non-guaranteed

advertising by the end of 2011.

PubMatic has insight into several key indicators leading to that conclusion, including experiencing advertiser budgets

for RTB increasing over 100% each quarter for the past several quarters.

Another key indicator for PubMatic’s forecast is a large spike in the number of RTB branding campaigns. While

PubMatic has been facilitating RTB brand campaigns since RTB’s inception, the early adopters for RTB were

skewed heavily towards performance advertising. There is now high demand for RTB campaigns for both brand and

performance campaigns. This finding is significant because it not only leads to larger advertising budgets in the short

term, but it also underscores how quickly RTB has become accepted across the industry.

Platform expansion for RTB is also on the horizon and gaining a lot of interest among publishers that intend to

capitalize on the revenue opportunities provided by the iPad, smartphones, and other portable devices. While still in

very early stages, in the next year RTB will expand to mobile and video inventory at scale. Even publishers that were

previously opposed to ad networks have expressed interest in selling inventory via RTB because of the more granular

quality and channel controls provided via RTB.

Over 95% of PubMatic publishers allow access to real-time bidders and they continue to open up more of their

inventory every day. On the advertiser side, the spending also continues to grow at a pace that may very well usher

in the RTB era quicker than previously expected—where 100% of online publisher inventory sold through indirect

channels is purchased via RTB.

RTB will account for up to 20% of all non-guaranteed advertising by the end of 2011

– Rajeev Goel, CEO, PubMatic

42

Opportunity #2


If RTB was, in fact, the biggest story in online advertising in 2010, then enabling publishers to sell audience

campaigns at scale will be the biggest story in online advertising in 2011 and 2012. It is the Holy Grail for publishers

and advertisers alike.

It will combine two important ingredients that online markets are looking for:

• The applied science of audience targeting currently available through indirect channels, such as through DSPs, ad

networks, and ad exchanges.

• The guaranteed premium placement that only a publisher’s direct sales force can provide, including transparency

and advertiser safety.

It will also provide publishers two new opportunities for long-term ad revenue monetization:

• More ad revenue from higher valued ad campaigns

• More control over when and how their advertising inventory is used for audience targeted campaigns

For the past several years, publishers have been sidelined, depending on 3rd parties to monetize their audience -

even while advertiser demand for audience-targeted campaigns has begun to eclipse the demand for contextual

targeted campaigns.

For advertisers, “who” is watching their ads is becoming more important than “where” they are watched.

AudienceScience declared at the beginning of 2010 that 77% of advertisers were planning on using audience

targeting this year, and PubMatic can confirm that campaigns leveraging audience targeting have grown exponentially

in the past year.

However, the growth of “who” doesn’t mean that the “where” isn’t important. Marketers want both. Marketers

control the budgets, and they will dictate how media buying will evolve. As such, the number of companies that are

stepping up to help publishers sell advertising with audience data is growing at a pace reminiscent of the growth of

ad networks several years ago.

This will create both opportunity and challenges for publishers, but the opportunities are too great for smart

publishers to ignore. And that means that publishers will have to understand how to best monetize their audience

data, and who to partner with in order to best monetize it efficiently.

43

Audience Selling DefinedAudience selling leverages anonymous data collected throughout the Web, which give insight into audience behavior.

This enables audiences to be segmented in many different ways, including by demographics, interests, purchase

intent, and more. Personally identifiable information is not collected about the audience.

The Buy Side, The Sell Side, & The Data Arms RaceTo provide some context as to how the demand for audience targeted campaigns has grown over the past two years,

one only needs to look at the most advanced ad networks and DSPs – referred to here as “The Buy Side.”

The Buy Side has moved quickly to help advertisers find the audience they want to reach, at scale, and with

efficiency. And they’ve done a remarkable job because they’ve become experts at leveraging audience data for

improved targeting and vastly superior campaign performance.

If there were an actual “data arms race” The Buy Side would have an overwhelming advantage over The Sell Side, in

2010.

To give insight into just how lopsided The Buy Side

data advantage is, the joint PubMatic + Digiday study

conducted September 2010 asked both publishers and

intermediaries (DSPs + ad networks) how many data

partners they work with.

On average, publishers have 0.5 data partners, while the

average number of data partners for The Buy Side is more

than 5. The result wasn’t surprising. If you were to visit

the Website of the most advanced companies on The Buy

Side, you would likely find somewhere on the Website an

area that highlights all of the data partners they have. And

understandably so, because the ability to leverage that data through multiple partners is what has given them the

edge for so long.

In the next year publishers with the right strategy in place will gain significant ground on The Buy Side. In two to three

years, the data playing field will be leveled, if not tilted in favor of the publisher.

That is not to suggest that publishers should not have an indirect audience selling strategy; In fact, indirect audience

selling will remain a key component of their overall ad revenue strategy. However, once publishers have more control

over their audience data, they will have more control over when to work with 3rd parvties for audience selling and

when not to.

On average, publishers have 0.5 data partners, while the average number of data partners for The Buy Side is more than 5

+

44

Selling With Audience Data is a Three Part ProcessIn order for publishers to sell audience targeted campaigns directly, they will need to have a strategy for acquiring

data, managing it, and monetizing it. As simple as a 3-part process might sound, this is a brand new opportunity for

publishers and there is a learning curve.

Acquiring Data & Selecting Data PartnersIn many cases advertisers prefer working with 3rd party data over, or in addition to, a publisher’s own data because it

is verified by another source beyond the one selling it.

One of the reasons that DSPs and ad networks have been so successful with selling audience-targeted campaigns is

the fact they have mastered the art of working with many data partners. They know what data provider to work with

• Understanding what data to acquire

• Collecting data from your audience

• Purchasing data from 3rd parties

• Analytics from 3rd pary data providers

• Leveraging inventory and pricing forecasting

• Protecting your data from “data leakage”

• Direct sales on your site

• Audience extension—retargeting

• Audience extension—look alike targeting

Manage Monetize

Acquire

45

for certain campaigns, and more importantly for their return on investment, when they need a specific type of data,

they know where they can find it for the most appropriate price point.

Publishers are less familiar with where to find data at the right price. In the PubMatic + Digiday study, 60%

of publisher respondents said they need better

understanding of how data pricing works. One of the best

ways publisher can gain insight into data pricing is to have

aggregated access to multiple data providers.

Data pricing and quality is different depending on the

provider, but having an overview of how different data

providers view the publisher’s audience along with the

ability to compare pricing will help guide publishers in the

right direction—especially in cases where an advertiser

insertion order calls for a specific type of data to be used.

Managing Data & The Rise of Data Management Platform (DMPs)2010 has seen a proliferation of data focused companies. Most of these companies work with The Buy Side primarily,

but many also are beginning to work with publishers as their secondary, but growing, client base. A smaller number

are focused primarily on the publisher.

As a result of publishers beginning to leverage 3rd party audience data more and more, we can expect to see new

companies as well as existing companies begin to offer Data Management Platforms (DMPs) for publishers.

Managing data can be complex, and these companies will play an important role in the publisher’s audience selling

strategy. Publishers will need help with understanding inventory availability, inventory forecasting, and pricing

guidance in order to maximize the revenue made from audience campaigns.

The more audience data a publisher efficiently manages, the more potential ways that inventory can be segmented.

This is significant because it could make a publisher’s inventory attractive to an entirely new set of advertisers.

60% of publishers need better understanding of how data pricing works

+

46

1AudienceOn Site

Advanced Audience Targeting+

Guaranteed Premium Placement =

Greatest Ad Revenue Potential For Publishers

2Audience

Extension via Retargeting

3Audience

Extension via Look Alike Targeting

Direct Audience Selling on Site & via Audience ExtensionOnce publishers have the ability to acquire the right data and manage it, they will have several options for how to sell it.

1. Audience On Site: The first option that publishers have is the ability to sell audience targeting against their own audience on their own site.

This opportunity presents the greatest ad revenue potential—at least on a CPM basis—because it offers both

advanced audience targeting with a guaranteed premium placement. Depending on the publisher this may not have

the potential for scale in terms of impression availability.

However, if the publisher works with multiple 3rd party data providers, which would enable a greater variety of

audience segmentation against the same inventory, that inventory would have more potential advertisers interested in

purchasing it.

1 2 3

47

2. Audience Extension via Retargeting Retargeting is a form of online advertising in which ads are shown to consumers based on previous online actions

that did not result in a conversion. In other words, an advertiser can run a campaign to reach users that had

previously viewed a site after the user has left the site. The user can be identified via a cookie, which tracks the

user’s movement across the web. The ad will then be shown to the user while the user is on another site. This helps

companies advertise to the 98% of people who visit a site but leave without making a purchase, filling out a form, or

converting in some other way.

Audience Extension via Retargeting allows publishers to expand their monetization pool. In particular, this makes

sense for publishers who have sold out of their inventory for specific audience segments. This especially benefits

publishers with large amounts of traffic but a relatively smaller percentage of repeat users.

3. Audience Extension via Look Alike Targeting With look-alike targeting, advertisers can take an audience from a particular site and target new users that look

like the users on the original site. The look-alike audience is defined using specific web behaviors or through

demographic-based attributes, such as age, gender, or specific interest areas. The basis for look-alike targeting is the

idea that if an existing customer exhibits specific behaviors or attributes, then prospects with similar attributes would

be good candidates to become customers, as well.

Although not completely new, look-alike targeting has been showing up more frequently in recent digital media buys

as an additional service or line item.

Somewhat similar to the case for retargeting, publishers with sold out inventory can take advantage of Audience

Extension via Look-alike Targeting to monetize users not on their site. However, unlike with retargeting, publishers

with smaller amounts of traffic may particularly benefit from this type of targeting, since it allows publishers to

significantly extend their monetizable user base.

A number of recent studies, such as this case study from Quantcast (below), have demonstrated the effectiveness of

look-alike targeting.

Finding the Right Balance of Direct and Indirect Audience Selling While having the ability to sell audience directly will give publishers an advantage to compete for audience-targeted

advertising dollars, they shouldn’t make the mistake of thinking they will have 100% sell through without help.

Publishers will need to find the right balance between what audience campaigns are sold indirectly and what is sold

directly. Selling indirectly will need to remain a key part of publisher revenue strategy for several reasons

48

Opportunity #3

Monetizing Video

Online Brand Campaigns at ScaleVideo advertising is widely recognized by analysts as the highest growth segment in online advertising. Consumers

are watching more videos and watching them longer. This provides a great revenue potential for publishers as video

advertising consistently fetches significantly higher CPMs than most other digital ad units.

To advertisers, video presents an advertising format that is superior in effectiveness to other mediums. According to

Dynamic Logic, video advertising—both display and pre-roll—leads to purchase intent for 1.1% of all viewers that

saw an ad, a number that is significantly higher than average click-through rates (CTR) of performance campaigns for

online display advertising.

While the opportunity is ripe for publishers to take advantage of the growth of online advertising, not all publisher

categories are experiencing the same growth in video viewership. In fact, some publisher categories fair far better

than others. It will be key for publishers to understand how online video is consumed in order to create a strategy that

will provide the most views and the best performance.

Some information from this section provided by

49

Video Viewership Varies by Publisher Type and Video ContentIn terms of growth in the number of streams for media companies’ video content, traditional broadcasters that have

repurposed video content originally shown on television are more popular than Web media brands, or publishers

that only have a presence online, according to Brightcove. Newspapers, magazine publishers, and online media

properties (i.e. Huffington Post) are all growing their video audiences in 2010, however.

While the type of content may contribute greatly to the numbers, traditional broadcasters - which are generally

recognized as having more “professional” video content—also garner longer than average viewing times as compared

to most other categories.

Broadcasters are also the best at getting people to watch in-stream video advertising. According to research by

TubeMogul, the rate at which people click away from a pre-roll ad before completion is lower on broadcaster sites

than magazine and newspaper sites. The lowest completion rates occur on video sharing sites.

Overall, a disproportionate share of online video viewing (42%) occurs during the eight-hour workday, according

to Brightcove and TubeMogul, making online video one of the best ways to reach people at work. Broken out by

category, an interesting trend emerges: broadcasters, unlike other media companies, have a “primetime” that mirrors

broadcast television.

Creating The Best Strategy To Increase ViewsAmong media companies, 81.9% of video streams were discovered via direct traffic or navigation within a publisher’s

own site, according to Brightcove and TubeMogul. With 81 percent of videos being viewed through on-site

navigation, publishers should consider how video fits into their regular content flow.

From third party referral traffic, traditional search is still king, but things are changing. Currently, 64 percent of video

views on publisher sites that are via referral come from Google, followed by Yahoo (11.9 percent), Facebook (4.3

percent), Bing (2.6 percent), and Twitter (1.2 percent).

Facebook and Twitter, which currently don’t account for as many viewing referrals as traditional search, are the

fastest growing. At current rates, Facebook will surpass Yahoo! within the year to be second only to Google in referral

traffic to online video content for media companies. Referrals from Facebook also view videos longer.

This trend is largely good for publishers. According to the same joint Brightcove and TubeMogul report, viewers

coming from Facebook and Twitter watch longer than viewers coming from search.

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More Video Advertising Will Be Sold Through Indirect Sales ChannelsWith more places for publishers to have video watched coupled with the rapid increase of overall viewership, it is

likely that in the near future there will be an abundance of online video ad inventory not entirely unlike the online

display adverting category. This will lead to more online advertising being sold through indirect channels as publishers

need help to better monetize their unsold inventory and advertisers look for more efficient ways to reach their target

audience at scale.

Similarlto display advertising, as more online video adverting inventory is purchased through indirect sales channels,

such as ad networks, the way in which it is bought and sold will change. Even for the most premium publishers, what

was once reserved for direct sales only will likely open up to intermediaries as buying efficiency improves. Online

video advertising exchanges already exist, but in the near future, so will Real-Time Bidding for those exchanges.

Publishers will need to consider what type of content will remain available only through direct sales vs. what will be

made available for indirect sales.

Average Monthly Growth in Referred Video Streams (Q2)

Bing

3.21%

Google

15.53%

Yahoo

35.20%

Twitter

38.72%

Facebook

48.31%

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More on Video...As the role of Sell Side Platforms continues to evolve, video will play an important part. Publishers should explore

platforms which help publishers with all of the key revenue opportunities for monetization.

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Opportunity #4

Going Mobile

Mobile Advertising Is Finally Reaching ScaleMobile advertising revenue opportunities for publishers are another contributing factor that is helping to shift online

advertising from a buyer’s market to a seller’s market. According to a report last year from Juniper Research, mobile

advertising spend is expected to grow to $5.7 billion by 2014. Publishers that want to capitalize on the growth of

mobile advertising should understand where the best opportunities for their particular brand exist.

However, because mobile brings the potential for even more advertising inventory, publishers will need to find the

right balance between selling mobile advertising alongside their traditional display advertising to ensure the overall

value of their advertising continues to improve.

Several Key Drivers Leading To Increased Mobile Advertising Spend The potential ad revenue that can be generated from the mobile channel is worth careful consideration for publishers

that anticipate rapid mobile viewership in the next few years. As investment in the mobile space continues, marketers

can expect to see rapid innovations in mobile advertising formats and targeting capabilities. According to a report by

Borrell Associates, mobile may account for as much as 20% of every dollar spent on digital advertising.

Some information from this section provided by

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After a slow start, there are several key drivers that will usher in a new, higher-growth era for mobile advertising

SCALE: Smartphone & Digital Tablet Adoption is Skyrocketing

According to Gartner, smartphone global sales have experienced a 48.7 percent year-over-year increase.

Smartphones, such as the iPhone, BlackBerrys, and phones running on the Android operating system,

have applications, which provide a digital canvass that improves user experience for advertising.

Tablets, such as iPad, offer similar opportunities. At least one research company, USB, projects iPad

sales alone will surpass 28 million units.

ENGAGEMENT: More Engaging Ad Units For Brand Campaigns

With apps come more engaging advertising units, which lead to better performing mobile advertising

campaigns. Mobile advertising formats via applications include video, interactive, expandable, and more.

This is a far superior opportunity for advertisers, especially brand advertisers, than the options the mobile

web provided marketers.

TARGETING: Better Audience Targeting Including Hyper Local

Audience targeting with mobile phones has improved significantly in the past few years. Location-aware

phones, which most smartphones are, allow marketers to target locally in ways that cannot be done

with online advertising including click-to-call campaigns for local businesses and coupon redemption

campaigns. Last year Starbucks ran a mobile redemption campaign with 60% redemption rate—a rate

that cannot be matched with online advertising. Starbucks is not the only advertiser excited by the

opportunity. ABI research expects advertisers to spend $1.8 Billion on location-based mobile campaigns

per year by 2015.

PERFORMANCE: Ad Network Optimization Improves Performance

As mobile ad inventory grows, so does the need for publishers to use mobile ad networks to fill the

unsold inventory. Similar to how Ad Network Optimizers work for display campaigns, Mobile Ad Network

Optimizers have real-time decision making technology that provide advertisers with better performing

campaigns while increasing ad revenue for the publisher. As a testament to the growth of this segment,

mobile Ad Optimizer Smaato now serves over 16 billion ad impressions per month.

EFFICIENCY: Marketers Can Purchase Mobile Inventory More Efficiently

Similar to how improved methods for buying display media has increased online advertising spend,

making mobile advertising buying more efficient will improve overall mobile ad spend. In the near future,

marketers will be able to purchase mobile inventory at the impression level via Real-Time Bidding (RTB),

which has proven to be a very successful strategy for online display marketers.

2

1

3

4

5

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Preparing For Mobile Platform ExpansionWhile overall advertising dollars in the mobile space are relatively small compared to traditional display advertising,

smart publishers are carefully considering their mobile advertising strategy now. And of course, the mobile advertising

strategy starts with the overall mobile experience, not just the monetization component.

Publishers should start by considering the key platforms that they want to support in the future. There are multiple

mobile platforms, from iPhone to BlackBerry to Android to iPad and more. Because of the different audience

composition for each platform and the significant variation in technical capabilities of each platform, publishers should

carefully consider the major mobile platforms in which they will make strategic investments. For remaining mobile

platforms, a compromise “one-size-fits-all” investment can be made.

Once the specific platforms for investment are identifies, publishers must invest in building out platform-specific

experiences. For example, New York Times content viewed via the iPad should have a very different experience as

compared to the same content viewed via a BlackBerry device. While this may seem obvious, in far too many cases

publishers provide only a generic browser experience for all mobile platforms.

While the first several years of mobile platform buildout will require investing in acquiring substantial viewership,

ultimately a monetization strategy must be created. That strategy should take into account the advertiser’s desire

to not only reach an audience in a differentiated way on a specific platform, but in addition the desire to reach an

audience across multiple channels such as print, browser, and mobile. This requires thoughtful investment in a cross-

channel ad sales platform, process, and organization.

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Stay on the Lookout...In order to provide more detailed guidance, PubMatic and Mobile Ad Optimization partner, Smaato, will release a

white paper focused on the mobile opportunities for premium publishers.

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Opportunity #5


Traditionally, cross channel sales management has been of limited interest to publisher companies. Sure, both direct

sales (ad sales made via the publisher’s sales force, typically with a guarantee of delivery) and indirect sales (ad sales

made via intermediaries such as ad networks, exchanges, and demand side platforms, typically on a best efforts

basis) are managed independently by the sales and ad operations teams. But holistic management ACROSS these

two sales channels has largely been missing.

As recently as a few years ago, the majority of a premium publisher’s ad inventory was sold via the direct sales

channel. And that inventory accounted for 80% or even 90% of the publisher’s revenue. For the typical VP of Sales,

why bother spending a disproportionate amount of time managing indirect sales closely. Fast forward to today,

where the majority of ad inventory for a premium publisher is most likely to be sold via the indirect sales channel. And

the indirect sales channel may be responsible for up to 40% of revenue. Naturally, the VP of Sales’ interest in this

channel has increased dramatically.

But managing indirect sales on its own is not enough. Publishers must learn to manage effectively across these two

sales channels in a unified way, for a variety of reasons.

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More Marketers are Purchasing Inventory via Real-Time Bidding As real time bidding continues to gain momentum, a stark dichotomy is emerging between the once-a-year rate card

setting process that most publishers go through and the by-the-millisecond pricing changes that media buyers are

making. As agency trading desks garner a larger share of agency budgets and conduct fine-grained impression and

audience level analysis to change their pricing in real time, the once-a-year rate card looks more and more obsolete.

Publishers need to incorporate pricing data across both sales channels on a frequent basis to guide their rate cards

and price floors in each channel.

Greater Revenue Potential with Direct Audience Selling Just as real time bidding is gaining momentum, so is audience based selling. Most publishers sell placements and ad

units via their direct sales force today. However, they are increasingly being asked to sell a combination of placement

and audience segment going forward. This changes the very nature of calculating inventory, availability, and delivery

of ad impressions which requires effective cross channel sales management.

The Need To Understand Sales Profitability, Not Just Revenue While most publishers track sales revenue as a key metric, and indeed bonuses are often paid based on top-line

revenue, ultimately profitability is the most important metric for managing a long term business. Given the specifics of

the media business, such as fancy dinners, golf outings, and spa trips, revenue doesn’t necessarily equal profitability.

A direct sold Insertion Order at $10 CPM might be far less profitable than an indirectly sold segment of inventory at

$4 CPM when the cost of sales is calculated.

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Brand Advertiser Requirements are Shifting Lastly, as we emerge from the deep recession of the past few years, the requirements of brand advertisers have

changed in substantial ways. As Chief Marketing Officers have been compelled to justify their every marketing

dollar, even brand advertising requires some measure of metrics-based justification. This often means that brand

advertisers are just as concerned about click-through rates, lead counts, and conversions as traditional performance

advertisers. As a result, high performing inventory that is being sold via the indirect sales channel may need to be re-

classified as direct inventory, and vice-versa.

Cross channel sales management requires effective sales analytics, inventory forecasting, and pricing capabilities,

which requires going beyond today’s solutions that provide data and instead working off of actionable insights. These

three components, taken holistically across both direct and indirect sales, can provide publishers with greater insights

into their business and the ability to increase both revenue and profitability.

Sales Analytics Traditional ad serving systems provide reporting, but often don’t provide true insight into what is driving the business

forward. For example, which sales executives are responsible for the most profitability across direct and indirect

sales, or guaranteed and non-guaranteed media buys? Which audience segments are the most in demand and

growing the fastest? Which direct sold insertion orders are priced below real-time bidded price points and therefore

present an opportunity for far higher profitability? Which ad units should be sold up front versus on a spot basis?

A robust cross channel sales analytics platform provides a holistic view of the business across these important

dimensions.

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Inventory Forecasting While inventory forecasting systems have improved incrementally over the last few years, there are still significant

limitations that render them of limited effectiveness for cross channel sales management. The vast majority of

inventory forecasting systems don’t support audience based forecasting of inventory. As a result, they cannot answer

simple questions such as the number of impressions available for male viewers with incomes over $50,000 per year.

Even more difficult is targeting a combination of audience and placement, such as the requirement to target female

viewers on the home page only. Second, no inventory forecasting system available in the market today can take into

account the demand for inventory via the indirect sales channel to project inventory availability.sales, or guaranteed

and non-guaranteed media buys? Which audience segments are the most in demand and growing the fastest?

Which direct sold insertion orders are priced below real-time bidded price points and therefore present an opportunity

for far higher profitability? Which ad units should be sold up front versus on a spot basis? A robust cross channel

sales analytics platform provides a holistic view of the business across these important dimensions.

Inventory Pricing As the percentage of inventory sold via the indirect sales channel has skyrocketed, and price points continue to

move up with the advent of real time bidding, it’s increasingly important for pricing systems to take as input the price

signals from both direct and indirect sales channels. Real time bidding signals can and should be incorporated into

the publisher’s rate card on a periodic basis. Similarly, pricing and sell through rate in the direct sales channel should

impact dynamic floor price setting in the indirect sales channel.

Solving the challenges of sales analytics, inventory forecasting, and inventory pricing via a cross channel sales

management approach won’t be easy. But the benefits to revenue, profitability, and overall operational excellence are

increasingly clear as the indirect sales channel gains in importance for most premium publishers.

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Next Steps

Coming out of what has been statistically shown to be the worst recession since World War II, there are finally hopeful

signs on the horizon for publishers to scale their revenue. PubMatic believes that best in class publishers are scaling

their revenue not through incremental change and innovation, but through wholesale change.

As previously discussed, RTB is growing at an unprecedented rate across the online advertising ecosystem.

Agencies through their agency trading desk units, DSPs, and SSPs are ushering in a new and far more efficient way

to monetize media and audience at scale. Every publisher must have a strategy in place to capture RTB dollars and

protect themselves against channel conflict.

Similarly, advertisers and agencies are increasingly interested in monetizing fine-grained audiences in the right

context, as opposed to context alone. Here again there are new actors, primarily data exchanges and social

networking companies that capture and process this data at scale, that are driving the buy-side community in this

direction. Publishers must arm themselves with the same audience data that the buy side sees in order to ensure that

the publisher can sell what the advertiser is looking for.

Mobile and video are the new frontiers of media consumption. As smartphone usage in developed economies

explodes and video consumption shifts from TV to Internet, publishers must have a multi-screen strategy in place to

support advertisers who want to reach an audience wherever they spend time.

And lastly, publishers must embrace and understand cross channel sales management. The old lines that created

distinct channels of guaranteed and non-guaranteed inventory at wildly different price points are fading as price

points come closer together and advertiser needs blur across both channels. Savvy publishers are looking holistically

at their placements, audience, and inventory across both channels and maximizing yield in a concerted fashion.

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Education Resources For Publishers at PubMatic.com

The only RTB white paper dedicated to publisher education rather than the advertiser education.

62

About PubMatic

Our Mission: To provide publishers with the greatest control of their ad revenue and brand.

Our Publisher Platform: We provide premium publishers one platform with the technology and

services needed to earn the most ad revenue possible while keeping unwanted ads of their site.

Copyright © 2010 PubMatic. All rights reserved. PubMatic, PubMatic logo, Ad Auction Engine, Ad Price Prediction, Data Firewall, Live Creative Dashboard, and TrustedPartner Program are trademarks of PubMatic or its affiliates in the U.S.

and other countries.

Impression-Level Ad Auction with Real-Time Bidding (RTB)

Global Demand Representation

Audience Analytics and Monetization

Brand Control and Data Safety

Guaranteed Inventory Yield Management

Enterprise Ad Operations Support

Some of the world’s most respected online publishers have chosen to work with PubMatic, including The

Huffington Post, eBay, United Online, TV Guide, Scribd, MSNBC, and the majority of the

ComScore Top 10. www.PubMatic.com

Contact UsOnline publishers interested in working with PubMatic should contact:

[email protected]

Ad networks interested in working with PubMatic should contact:

[email protected]

64

Contact Us:

Phone: (646) 706-7171

Publishers contact: [email protected]

Ad Networks contact: [email protected]

For General Information: [email protected]

www.PubMatic.com

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444 High St.Fourth FloorPalo Alto, CA 94301

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ad revenue report 2010

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