Outlook 2013: Data Driven Marketing, Today and Tomorrow

Outlook 2013:

Data Driven Marketing,

Today and Tomorrow

Bruce Biegel

Winterberry Group: Helping the Advertising and Marketing Industry Grow Shareholder Value

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Outlook 2013

What Happened in 2012:

By The Numbers & By The

Channels

A Focus on Data

Integration

Forecast & Themes for

2013

U.S. GDP growth slowed during 2012, hovering

around

~

2.0%

with a dip in Q4

The Good:

• U.S. financial markets showed impressive strength in 2012; S&P 500 grew ~15%

• Unemployment rate fell to 7.8% in Q4, dropping below 8% mark for first time since 2009

• Consumer deleveraging continued The Less Good:

• Slower than expected holiday season for retailers • Fiscal cliff, EU default risk and recession

• Slowdowns in emerging market growth

2012: International Economic Performance Remained Weak, With Growth in The U.S. Constrained by Challenging Global Conditions

3.5% 3.3% 4.3% 3.8% 5.0% 4.6% 4.0% 4.8% 5.3% 5.0% 6.0% 6.3% 2.0% 4.0% 6.0% Initial Revised

With Sluggish Global Growth, Advertising and Marketing Spend Faced Headwinds, Lowered Forecasts

Cuts in 2012 Global Ad Spend Growth Forecasts (Initial Year

Vs. Revised Forecasts)

Source: Company Websites

• Major global research firms revised global ad spend

forecasts down, responding to persisting softness in the EU • Agency holding companies

lowered 2012 organic revenue forecasts due to slowed

international growth—negative in the EU

• US ad spend grew 4.3% YOY despite the slow economy—~2x GDP growth

In U.S., Total Ad Spend Expanded $15BB+ in 2012, Primarily Driven by New & Shifted Investment Into Digital Channels

$122.7 $126.9 $127.9 $129.9 $86.4 $87.8 $89.0 $89.9 $25.8 $28.9 $34.6 $39.7 $0 $100 $200 $300 2009 2010 2011 2012

U.S. Advertising and Marketing Spending, By Share of Approach 2009-2012 (US $BB)

Traditional Direct Digital

Digital Direct Traditional 15.4% 1.3% 1.9%

Note: CAGR measured from 2009-2012

• Systemic shift in spend from traditional to digital channels continued in 2012

• Spend in traditional & direct marketing segments continued to see modest growth

• Summer Olympics and U.S. national elections in 2012 were primary drivers of

Though Print Media Faced Systemic Pressures, Major Quadrennial Events Helped TV to Drive an Increase in 2012 ATL Spending

2012 U.S. “Measured Media” Spending: $129.8 BB

Newspapers: $19.8BB 6.6% -5.9% Television: $64.5BB Magazines: $14.0BB -2.1% Outdoor: $6.8BB Radio: $15.9BB 2.0% Cinema: $0.6BB

Source: Winterberry Group analysis of multiple sources

Note: Arrows reflect percentage change in spend, by channel, from 2011 levels

2.0% 4.9% 1.5% Yellow Pages $8.2BB -8.9%

2012 U.S. “Direct & Digital” Spending: $129.6BB

Source: Winterberry Group analysis of multiple sources Note: Arrows reflect percentage change in spend, by channel, from 2011 levels; DR Broadcast and DR Print removed from category, as most direct ads include a call-to-action and DR broadcast/print spend is believed to be captured in traditional ATL channels; Insert Media includes statement inserts and

excludes FSIs, which are captured in ATL newspaper spend Teleservices: $40.7BB 0.1% Direct Mail: $45.2BB Search: $17.8BB 5.1% 10.7% Other: $3.1BB

4.9%

Below-the-Line Spending Grew Yet Again, Driven by Continued Expansion of Digital Channels

Mobile Posted Larger than Expected Gains As Marketers Implemented Multiplatform Campaigns in Earnest and Local Search Use Expanded

33.3%

Social Technology and Services¹:

$2.1BB

8.4%

Lead Gen & Affiliate Services: $0.2BB 5.1% Search: $17.8BB 2012 U.S. Digital Advertising Spending: $39.7BB

Mobile2_: $4.1BB 180.0% Email: $1.8BB 12.5% Display: $13.7BB 14.7% 14.9%

Source: Winterberry Group analysis of multiple sources

Note: Arrows reflect percentage change in spend, by channel, from 2011 levels ¹Excludes social display and social search spend

$43.8 $44.9 $45.2 $45.2

$0.0 $20.0 $40.0

2009 2010 2011 2012

Direct Mail: Flat, No Catalyst for Growth, But Holding Its Own

U.S. Direct Mail Marketing Spend ($BB)

Source: Winterberry Group, Jan. 2013 • Online substitution for First Class

advertising, statement and

informational mailings continues to inhibit growth

• Personalized, targeted (and lower-volume) direct mail is growing,

fueled by digital print technology • Direct mail industry moves towards

mobile multichannel integration, email and QR codes

• “Do-not-mail” and green issues have lost traction, while fate of

USPS remains top-of-mind Direct Mail

102.7 _96.0 80.0 84.4 84.7 84.7 35.3 _32.3 29.6 27.7 26.9 25.9 0 20 40 60 80 100 120 140 160 2007 2008 2009 2010 2011 2012 Annua l P ie ce V olum e (B B)

Standard Class First Class DM

Direct Mail Volume Declines Slow; First Class Challenged By Systemic Switch to Digital Alternatives

Source: Winterberry Group analysis of U.S. Postal Service data

U.S. Direct Mail Volume, 2007-2012 (BB)

First Class DM CAGR: -6.0%

$14.6 $15.6 $16.9 $17.8 $0.0 $5.0 $10.0 $15.0 $20.0 2009 2010 2011 2012

U.S. Search Marketing Spend, 2009-2012 ($BB)

Search: Still Accounts for Almost 50% of Digital Spend; Feeds on Local Demand

* Local search defined as searches that incorporate some geographic parameters Source: Covario, Google

Search

CAGR 5.1%

CAGR measured from 2009-2012 Source: Winterberry Group, Jan. 2013 • Search can capture new intenders

and drive traffic better than other digital channels

• Search retargeting enables

marketers to apply the power of search to display and email with added benefits of real-time

optimization and attribution • Local search* is now 20% of all

Web search queries and 40% of mobile search queries—

fueled by

increasing smartphone

penetration

Display: Spending Rose to $13.7BB in 2012, Driven by Audience Targeting, Demand for Social and Video Formats

Sources: IDC, eMarketer, ComScore

CAGR measured from 2009-2012 Source: Winterberry Group, Jan. 2013

* Includes social display, video, rich media and banner ad formats, as well as ad sponsorships

$8.4 $9.9 $11.9 $13.7 $0.0 $5.0 $10.0 $15.0 2009 2010 2011 2012

U.S. Display Marketing Spend*, 2009-2012 ($BB)

Display

CAGR 13.0%

• Marketers shift to audience targeting, primarily through RTB solutions that leverage analytics, retargeting and 3rd _{party digital data} (RTB now ~10% of spend, up from 6% in 2011)

• As engagement increases, online video and mobile spend drive the majority of display growth

• Facebook Exchange (FBX)

enables data-rich, targeted ad buys across a platform that accounts for nearly one in three impressions

Social: U.S. Social Tech & Services Spend Rose in 2012 to $2.1BB as Marketers Demanded Analytics and Engagement Platforms

What happened to social gaming? What’s the future of social image sharing?

Source: IBM CMO Survey; BIA/Kelsey; eMarketer; Nielsen Wire; Bizo, Pew Research

27% 31% 37% 38% 54% Brand building/viral marketing Conversion rate optimization Content optimization Mobile Optimization Social media engagement

Source: Adobe, eConsultancy

• 68% of CMOs say they are

underprepared to deal with the impact of

social media—yet 82% plan to increase

investment in social media technology

• Increasing investment in social media

analytics to address concerns over ROI

and measurability

• As spend accelerates, providers

consolidate, building integrated social

services stacks for brand-to-consumer engagement

Marketer Survey: What Are The Most Promising Digital-Related

Mobile: 2012 Spending at $4.1BB, Up 173% YOY—Test Volumes and Marketer Experience Increased Across Mobile Solutions

• Tablet/smartphone adoption drives native

mobile content development by publishers to capture mobile ad spend; many companies still lack mobile-optimized sites, however

• Bricks and Clicks—Marketers focus on

consumer engagement at point-of-sale to combat “showrooming”

• Location-based targeting still in early

stage of development

• M-Commerce: 83% CAGR 2011-2015;

major players pivot to provide solutions (e.g. eBay, Groupon)

Source: Credit Suisse, eMarketer

Mobile Search:

$2.0 BB

Mobile Display1_:

$1.9 BB

1_{Includes banner, rich media and video}

Source: Winterberry Group, Jan. 2013

Mobile Messaging:

$0.2 BB

2012 Total Mobile Spending:

E-mail: Continued Steady Growth As a Cost-Effective, Easily Targeted Marketing Channel, Reaching $1.8BB in 2012

1_{: “Q2 2012 N.A. Email Trends and Benchmarks Results,” Epsilon}

Source: Epsilon, Return Path

CAGR measured from 2009-2012E Source: Winterberry Group, Jan. 2013

$1.2 $1.4 $1.6 $1.8 $0.0 $1.0 $2.0 2009 2010 2011 2012

U.S. Email Marketing Spend, 2009-2012 ($BB)

Email CAGR 14.5%

• Marketers focus on delivery, relevance,

social media integration and database expansion and segmentation

• Challenges in consumer engagement

with email persist: both open rate and

CTR fell in Q2 to (4.4%)—at lowest level since 20091

• Rise and fall of “Daily Deals”

(Groupon, LivingSocial): email-based providers facing revenue, SMB

2012 Was Another Transitional Year, Presenting New Digital Opportunities Across Channels and Market Segments

Rising marketer digital spend & testing drove new learnings, social/mobile spend lagged “conversation” and staff /talent

continued to play catch up

Suppliers expanded digital cores, added omnichannel delivery platform support, acquired more agency services to

capture share in emerging markets

Investments in ad tech platforms continued, propelling innovation in digital solutions and services

M&A deal activity in marketing, media & technology was flat from 2011 and deal value declined 8.5% YOY*

Outlook 2013

What Happened in 2012:

By The Numbers & By The

Channels

A Focus on Data

Integration

Forecast & Themes for

2013

Can You Say “Big Data”? Everyone Else Does…..Too Often 0 5 10 15 20 25 30 35 2010 2020E

Browser/Web Analytics Data

• Registrations • Cookies (Flash) / • Click / Visit activities • Attribution /response data • In-market purchase intent • Ad Tags

Mobile

• Carrier / Location data • App data

• Device fingerprints • Ad Data, Search Data

Geo-Demographic

compiled from publishers, databases and other third parties

Artwork Source: David Harbaugh, Harvard Business Review

Psychographic and behavioral compiled

from surveys, analytical models

Social compiled from social

platforms, blogs, sharing sites, Tweets, retail apps

Traditional Media Companies Offline Compilers

Transactional added from purchase

records, cooperative databases, eCommerce, mCommerce Social Sites / Online Providers Portals / Online Compilers Offline Providers Web Sites

What Matters is Big “Marketing” Data

TV interaction and

viewing data compiled from

set-top boxes, DVRs, game consoles

So Far, Six Primary Digital Data Use Cases Have Emerged to Leverage the Potential of Cross-Channel Marketing Data

Targeted Media Buying / Campaign

Execution

Creative & Content Optimization Attribution Audience Optimization & Customer Insight Channel Optimization Advertising Yield Optimization

And The Tools Required to Enable Integrated Data Solutions Span a Range of Marketing Technologies

Data Sourcing

and Storage Integrated Data Management Decisioning Engines Execution Marketing

Web Site Data Intent Data Geographic Demographic Channel Preference Social Transactional Dat a Man ag em en t P lat fo rm DSP Content Mgmt. Site Interaction Engine Channel Interaction Engine Lead Scoring _Mgmt. Yield M ar ke ting E xe cut ion Pla tfor m s

At the Core of the Data Ecosystem is the Data Management Platform (DMP), An Evolving Tool Whose Role is Still Subject to Interpretation

“A ‘big data’

And to Activate “Big Data,” The DMP Should Include … 85% _79% 77% _73% 68% 60% _57% 52% Integration of first and third party data

Segmentation Online data

collection Audience analytics warehousing Online data transfer/export Data to marketing

channels

Modeling Integration of offline and online data Survey: Which of the following represent core

competencies of DMPs today?

DMPs Are Evolving to Cover a Variety of Data Use Cases 59% 69% 73% 76% 83% 84% 84% 86% 90% 93%

Supply-side advertising yield optimization Site content optimization Creative and content optimization CRM program optimization Channel optimization Multichannel campaign integration and optimization Deployment of emerging marketing channels Campaign / Channel attribution Targeted Media Buying Development of customer insights

Important / Extremely Important DMPs support

Source: WG White Paper, October 2012

SURVEY: “Thinking ahead, to what extent would you like to see DMPs support each of the following marketing use cases in the future?

73% _71% 63% 56% 55% 44% 38% 32% 15% Internal process, implementation and marketing operations hurdles No clear internal owner for DMP solution within the marketer organization Lack of clarity into the role and potential contribution of DMPs at the executive level/C-suite Lack of established performance metrics/insight into value Lack of clear business case / ROI expectations Concerns about consumer privacy, security and general data governance Concerns over

cost addressable Lack of data to fuel DMP utilization

Preference for waiting for next

generation technology

SURVEY: “To what extent do you think the factors below are inhibiting more rapid adoption of DMP solutions?

(Summary of those saying each is a “major contributing factor” or a “critical or primary factor”) Yet Organizational Silos, Internal Gaps and Operational Hurdles Will Limit Rapid Implementation of DMPs Within Marketer Organizations

And Defining and Implementing Appropriate Marketing Data Governance Policies Will Be a Critical Success Factor

Security

PII vs. Non-PII External & Internal/Self-Regulation Data Stewardship

Privacy

As Data-Driven Marketing Expands, WG Forecasts Continued Digital Data Spending Growth (Along With the Tools That Support It)

2008

2010

2012

(1) Online display-related data spending includes retargeting services, intent data / inferred data, offline data used for online marketing

(2) E-mail-related data spending includes e-mail lists, database management / hygiene and analytics services

(3) Direct mail-related data spending includes mailing lists, database management / hygiene and analytics services

U.S. Spending, Marketing Data & Related Services (2008-2012)

Showing Digital’s Increasing Share

$10.8BB $10.0BB

Online Display-Related Data Spending1

E-mail-Related Data Spending2

Direct Mail-Related Data Spending3

$12.0BB

Source: Winterberry Group analysis of various sources

Total Spending on Digital Data: $300MM Digital’s Share of Total: 2.8% $870MM 7.2% $520MM 5.2%

Outlook 2013

What Happened in 2012:

By The Numbers & By The

Channels

A Focus on Data

Integration

Forecast & Themes for

2013

Government tax agreement removes a degree of

uncertainty, enabling consumers and businesses

to begin longer-term planning

• Financial markets forecast UP

• Unemployment rate forecast DOWN

• Housing market improves - driving increased spending, likely end of deleveraging

• Emerging markets grow, while EU continues

slow progress towards recovery And….

• Drama in the Capital to continue - debt ceilings, spending cuts, more tax reform, health

insurance, privacy

2013: Global Economic Performance Improves, 3% GDP Growth in The U.S., EU Constraints Continue

Traditional Media Slows – “Odd Year” Without Elections, Olympics or World Cup, Plus Continued Shift Towards Less Expensive Digital Media

2013E U.S. “Measured Media” Spending: $130.4BB

Newspapers: $18.8BB 2.8% -4.8% Television: $66.4BB Magazines: $13.7BB -1.9% Outdoor: $7.1BB Radio: $16.1BB 2.0% Cinema: $0.6BB

Source: Winterberry Group analysis of multiple sources

Note: Arrows reflect expected percentage change in spend, by channel, from 2012 levels

1.5% 4.3%

0.4%

2013E U.S. “Direct & Digital” Spending: $137.2BB

Source: Winterberry Group analysis of multiple sources Note: Arrows reflect percentage change in spend, by channel, from 2012 levels; Insert Media includes FSIs and statement inserts Teleservices: $41.1BB -0.9% Direct Mail: $44.8BB Search: $18.8BB 5.7% 3.2% Other: $3.2BB

5.9%

Digital Will Captures New Ad Budgets and Shift from Print; Traditional Direct Flat to Slightly Down

1.0% Insert Media: $0.8BB Display: $16.2BB 18.4% Other Digital: $12.3BB 49.0% -5.0%

All “Green” in Digital Segments: Mobile Continues Aggressive Growth and Video/Rich Media Drives Display Increases

32.1%

Social Technology and Services¹:

$2.8BB

7.0%

Lead Gen & Affiliate Services: $0.3BB 5.7% Search: $18.8BB 2013E U.S. Digital Advertising Spending: $47.3BB

Mobile2 _: $7.2BB 77.1% Email: $2.0BB 11.1% Online Display: $16.2BB 18.4%

19.0%

Source: Winterberry Group analysis of multiple sources

Note: Arrows reflect expected percentage change in spend, by channel, from 2012 levels ¹Excludes social display and social search spend

1

Keeping up with the pace of

change:

•

Shifts in consumer media consumption

outpace shift in spend

•

Continuous innovation in digital media

platforms and formats

•

Organizational silos continue to fall

amidst limited increases in staff; more

cross-channel programs; new media

shifts from test to roll-out

•

Improving CTO-CMO collaboration as

marketing and technology become

increasingly integrated

10 for ‘13: Marketers More Challenged Than Ever Before to Keep Up, Tap Into New Innovations

2

Retailers offer more ways to

shop/buy in response to shifts in

consumer behavior:

•

E-commerce continues to gain traction,

but still accounts for only 7% of total

retail spend

•

M-commerce still in infancy, but grew

100% in 2012

•

Local marketing for both national brands

and SMBs gets increasingly digitized

•

Investment growth focuses on joining

“bricks to clicks”: Digital - POS

integrations

10 for ‘13: Retail Marketing Transformation Accelerates, Targeting Connected, Convenience-Driven Shoppers

3

Automated collection,

integration and utilization of

digital data:

•

Digital “sensors” grow in prominence

(site tags, listening platforms, ad

tracking solutions)

•

Data platform implementations

accelerate as companies move from

planning to execution

•

Digital data management improves

as experience is gained in utilization,

cost of collection vs. value of data

10 for ‘13: The Next Chapter of Big Data: Integration, Implementation and the Rise of the Machines

 Data integration  Data management

4

Omnichannel integrated

marketing grows, making

attribution and measurement

more critical:

•

Most marketers still using inaccurate first-

or last-click attribution models

•

Integrated campaign delivery platforms

will make response data easier to

capture, assess and model

•

Gaps in aligning digital and offline media

measurement slowly close

•

Amplified demand for analytics talent

leads to more outsourcing

10 for ‘13: Attribution Requirements Turn Omnichannel, Remain a Pain Point

•54% of marketers and

agencies use a last-click attribution model

•However, only 14% say the

last-click method is “very effective”

•With more accurate

attribution models 72% said they could better allocate marketing budgets

Source: eConsultancy and Google Analytics report: Marketing Attribution: Valuing the Customer Journey

5

Demand for internal marketing

data governance (privacy,

security, best practices) to grow

along with legislative focus:

•

Resolution of fiscal cliff frees legislative

attention

•

Marketing data governance seeks

consistency across geographies; safe

harbor as default without global alignment

•

DMA & DAA lead more active response to

maintain a predominantly self-regulatory

environment

10 for ‘13: Data Privacy, Governance Become Top-of-Mind for Marketers and Legislators Alike

6

Focus on customer recognition,

location-based services and targeting

grows, driven by integration of

devices with geography, intent and

time of day:

•

Marketers focus on native local app ecosystems

and improving mobile ad formats

•

Intersection of m-commerce and shopper

marketing

•

Lack of access to device UIDs, cookies,

standards, staff training and regulatory

uncertainty inhibit growth

10 for ‘13: The Mobile/Social/Local Convergence Dominates New Investment and Priorities

7

Listening is easy, consumers keep

shifting preferences, marketing

activation platforms improve, agencies

and marketers gain experience:

•

More than 50% of companies plan to increase

social’s share of the marketing budget

•

Social display, driven by programmatic buying and

rich streams of social intent data (both declared

and inferred), gains largest share of spend

•

Social data models begin to provide a complex

portrait of consumers’ social behavior, matched to

traditional data attributes for insight/targeting

•

ROI still a challenge

10 for ‘13: The Maturation and Immaturity of Social Media

8

With device proliferation, consumers

utilize secondary screens while

watching TV, creating opportunities

for deeper marketing engagement:

•

What: Incentivized advertising, real-time

social interactions during live events, delivery

of rich, related content across screens

•

How: Set-top box data, made non-PII and

integrated with third-party digital delivery

platforms; integration apps proliferate

•

When: More tests in ’13; Roll-out requires

deeper tablet/smartphone penetration, TV

provider coverage and measurement

9

The ability to use automated,

business rules-driven,

integrated campaign execution

platforms becomes more

accessible to marketers:

•

Simplified user interfaces and faster

data integration enable more “triggered”

execution across channels

•

Improved delivery of optimized creative

and content, with greater variety and

cost-effectiveness in versioning

10 for ‘13: Data and Technology Combine to Enable Omnichannel Programmatic Marketing

10

VC investment and M&A outlook

moderate-to-strong, buoyed by a

low-interest, steady-growth,

globalizing, highly fragmented

market:

•

Ad tech shakeout coming as large stacks

fill in missing pieces, causing to prices fall

for attribution, optimization

•

Digital agencies of all flavors - buying

talent, clients

•

Social media platforms, services - scale

Bruce Biegel Senior Managing Director

bbiegel@winterberrygroup.com

60 Broad Street, 38th _Floor

New York, NY 10004

www.winterberrygroup.com