Transformation of the Measurement Transformation of the Measurement Industry: How Much Can be Industry: How Much Can be

Attributed to M&A?Attributed to M&A?

November 7, 2011

2

Introduction

• Industry leaders today are facing a quickly changing landscape

- Rate of change in industry among the highest in all of digital technology

- Emergence of real time data collection and dissemination driving technology deeper into today’s solutions

• Increasingly tough to compete with new, innovative entrants

- Growing channels and use cases bringing new players to the market

Unprecedented opportunity for new leaders to emerge

3

Snapshot of the Web 10 Years Ago

Social networks limited to forums, blogs, and chatrooms

41% of Americans using mobile phones (voice only)

Users spent seven hours per week online (email, news, chat)

143 million Americans (54%) using the Internet

Source: NTIA Source: Harris Interactive

Source: CTIA

4

Despite its Size, Online Advertising was Quite Underdeveloped

U.S. Online Advertising Revenue

($ in billions)($ in billions)

Source: IAB Internet Advertising Report, BusinessWeek

$7.1

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

2001

• Highly manual processes

• Little to no accurate measurement methodology

“…big advertisers still don't see the value of the Internet yet,"

Morgan Stanley analyst Michael Russell - July ’01

“…big advertisers still don't see the value of the Internet yet,"

Morgan Stanley analyst Michael Russell - July ’01

“… experts in the field now say that advertisers ought to forget about click-throughs… Online ads aren't meant only to spawn direct sales.. They're also for establishing or burnishing a brand…”

BusinessWeek – July ‘01

“… experts in the field now say that advertisers ought to forget about click-throughs… Online ads aren't meant only to spawn direct sales.. They're also for establishing or burnishing a brand…”

BusinessWeek – July ‘01

5

Tried and True Methodologies Were Manual, Expensive and Hard to Scale

Random Digit Dialing Random Digit Dialing

Mall Intercepts / InterviewsMall Intercepts / Interviews Focus GroupsFocus Groups Mailed SurveysMailed Surveys

Set MetersSet Meters

6

The Web Quickly Developed Scale and Use

43%

79%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2000 2010

Doubling of U.S. Online PenetrationDoubling of U.S. Online Penetration

Radio15%

Other7%

Magazines3%

TV | Video39%

Newspaper5%

Mobile8%

Internet 23%

Time Spent on Internet + Mobile Approaching TV

Time Spent on Internet + Mobile Approaching TV

Source: eMarketerSource: eMarketer

Avg. hrs spent per week

Avg. hrs spent per week ~7hrs~7hrs ~13hrs~13hrs

Source: ITU, Harris Interactive, comScoreSource: ITU, Harris Interactive, comScore

7

Fundamental Shifts in Usage Are Driving Need for New Measurement Methodologies

~8x growth in U.S. eCommerce~8x growth in

U.S. eCommerce($ in billions)($ in billions)

$25.8

$164.6

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

$180.0

2000 2010

Source: U.S. Census BureauSource: U.S. Census Bureau

0%

23%

0%

5%

10%

15%

20%

25%

2001 2010

8%

61%

0%

10%

20%

30%

40%

50%

60%

70%

2005 2010

Introduction of the SmartphoneIntroduction of the Smartphone

Social Networking Creating Information at ScaleSocial Networking Creating Information at Scale

Source: comScoreSource: comScore Source: Pew ResearchSource: Pew Research

8

The Rapid Growth in Online Advertising Has Created Various Measurement Complexities

How effective are my ads?

How effective are my ads?

BrandBrand Transaction Transaction

How are users behaving?

How are users behaving?

How do I measure safety and effectiveness in blind environments?

How do I measure safety and effectiveness in blind environments?

On SiteOn Site On Social PlatformsOn Social Platforms

9

M&A Has Been Critical in Shaping Online Measurement

• Key themes from 2000 – 2008:

• Offline players buying online capabilities

• Proprietary data sets became highest sought after

• Realization of mobile potential, key players acquired mobile capabilities

• Real time emerging as important factor in measurement

January2005

April – June2007

/

/

/(Online Audience Measurement Assets)

/

/

March2008

/February

2007

April 2008

May 2008

October 2007

/

/

January 2006

/June2002

/July 2006 /

/

10

January2011

2010

Online advertising overtakes

newspapers in U.S. (source: eMarketer)

September 2009

/

June2010

/

July 2008

Nielsen releases its first quarterly “Three

Screen Report”, covering TV,

Internet, and mobile

October2009

February 2010

September2010

February2011

April2011

March 2011

August2011

September

2011

/

/

/

/

/

/

/

/

/

• Key themes from 2009 – today:

• New entrants to the market with use cases beyond research – Adobe, IBM, Salesforce

• Measurement in real time environments – Social, RTB

• Measurement -> Data Analytics

M&A Has Been Critical in Shaping Online Measurement (cont’d)

/

11

Online Measurement Landscape Today

/

Social

Online Ad Safety /

VerificationAttribution /

AnalyticsAd

Effectiveness

/

/

/

/

/

/

Ratings

/

/

/

Mobile

/

12

Highly Attractive Valuations in Online Measurement

Survey / OtherWeb / Data Analytics

Mobile

Acquirer / TargetAcquirer / TargetDateDate

$100.0$100.0

$300.0$300.004/18/1104/18/11

$340.7$340.703/30/1103/30/11

Acquirer / TargetAcquirer / TargetDateDate

$75.0$75.003/03/0803/03/08

$240.0$240.004/19/0704/19/07

$381.8$381.810/25/0710/25/07

Acquirer / TargetAcquirer / TargetDateDateImplied Ent. Value ($MM)Implied Ent. Value ($MM)

12/22/0912/22/09 NANA

Acquirer / TargetAcquirer / TargetDateDate

$421.5$421.508/06/0808/06/08

$43.7$43.705/28/0805/28/08

$328.3$328.302/06/0702/06/07

Implied Ent. Value ($MM)Implied Ent. Value ($MM)

LTM Rev.Mult.

LTM Rev.Mult.

LTM Rev.Mult.

LTM Rev.Mult.

LTM Rev.Mult.

LTM Rev.Mult.

Implied Ent. Value ($MM)Implied Ent. Value ($MM)

LTM Rev.Mult.

LTM Rev.Mult.

5.03x5.03x

6.00x6.00x

5.10x5.10x

NANA

4.41x4.41x 1.54x1.54x

NANA

NANA

3.06x3.06x

7.50x7.50x

NANA06/27/0706/27/07 NANA

NMNM06/26/0906/26/09 NMNM

$1,675.7$1,675.709/15/0909/15/09

NANA

4.60x4.60x

NANA

$237.7$237.702/14/1102/14/11 2.02x2.02x

02/07/1102/07/11

06/15/1006/15/10

Social

02/26/0702/26/07

Implied Ent. Value ($MM)Implied Ent. Value ($MM)

02/23/1002/23/10 NANA NANA

10/06/0910/06/09 NANANANA

NANA NANA

01/10/1101/10/11 $50.0$50.0 7.14x7.14x

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AcquirerAcquirer

Implied Enterprise

Value

Implied Enterprise

Value Target Target LTM Rev Multiple

LTM Rev MultipleDateDate

05/28/0805/28/08

03/03/0803/03/08

04/19/0704/19/07

$43.7$43.7 4.41x4.41x

$75.0$75.0

$240.0$240.0 6.00x6.00x

5.03x5.03x

Developing mobile capabilities for cross-media planning

Added competitive internet ratings

Able to provide internet intelligence to its client base

CommentsComments

M&A Case Studies: Obtaining Premium Valuation

Strengthened display media buying opportunities with retail clients

01/10/1101/10/11 $50.0$50.0 7.14x7.14x

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Who are the Big Acquirers?AcquirerAcquirer TargetsTargets ThemesThemes

• Leveraging strong publisher assets to solve publisher ROI challenges through data

• Approaching from the biggest data challenges – marketing/advertising business intelligence

• Coming at online measurement through strong consumer level data sets (CRM and Jigsaw)

New PlayersNew Players

Existing PlayersExisting Players

• Using M&A to as part of product and channel extension strategy

15

Measurement Technologies Will be Important to the Development of Real-Time Bidding

• Measurement of

quality and

effectiveness will

grow in importance

• Stigma of low quality

will further increase

importance of real

time measurement

technologies

• Measurement of

quality and

effectiveness will

grow in importance

• Stigma of low quality

will further increase

importance of real

time measurement

technologies

BlindBlind“Cookied”“Cookied”

Rapidly growing market >Rapidly growing market > Majority of impressions still relatively anonymousMajority of impressions still relatively anonymous

$353

$823

$380

$592

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2001 2010

U.S. Exchange Traded Media Spending in $MMU.S. Exchange Traded Media Spending in $MM

Source: ForresterSource: Forrester

RTBRTB

Non-RTBNon-RTB

16

Ad Effectiveness Solutions will Follow the $$ Up the Funnel

65%65%

35%35%

71%71%

29%29%

PerformancePerformanceBrandBrand

Traditional MediaTraditional Media Digital MediaDigital Media

Share shift to digital

Share shift to digital

Demand fulfillmentMost innovation and technology M&A at this part of funnel

Demand fulfillmentMost innovation and technology M&A at this part of funnel

Demand generation Increased interest and innovation as new digital $$ focus earlier in the purchase cycle

Demand generation Increased interest and innovation as new digital $$ focus earlier in the purchase cycle

Source: Credit Agricole, GridleySource: Credit Agricole, Gridley

17

Social will Challenge the Status Quo in Both Advertising and User Measurement

Coca-Cola

Example of Coke using Facebook to

elicit feedback on bottle design

Example of Coke using Facebook to

elicit feedback on bottle design

Massive audienceMassive audience

Facebook controls a large part of the adtech supply

Facebook controls a large part of the adtech supply

Facebook

(~30%)

Facebook

(~30%)

Rest of the Web

Rest of the Web

Brands are going directly to its consumers through FacebookBrands are going directly to its consumers through Facebook

Source: Comscore Q1 estimates for U.S. Web, FacebookSource: Comscore Q1 estimates for U.S. Web, Facebook

Q1’11: 1.1 trillion impressionsQ1’11: 1.1 trillion impressions

18

Source: eMarketerSource: eMarketer

Tremendous Promise with Mobile Given Unique Characteristics

Computer

Newspapers, Magazines, Books

Snail Mail

Video Camera

Range Finder

Game ConsoleAlarm

ClockMusic Player

Credit Cards,

Identity

Telephone

PDA

GPS, Maps,

Compass

Camera

Watch

Don’t knowDon’t know

Performed worse than expectedPerformed worse than expected

Performed as expectedPerformed as expected

Exceeded expectationsExceeded expectations

Haven’t measuredHaven’t measured

Far below expectationsFar below expectations

ROI of Existing Mobile Marketing CampaignsROI of Existing Mobile Marketing Campaigns

Measurement will be critical to achieve scale by marketersMeasurement will be critical to achieve scale by marketers

Over 50% of campaigns lack any sort of measurement

19

Everything is Becoming Internet-Enabled

PC: 1990 - PC: 1990 - VoIP: 1999 -VoIP: 1999 - Mobile: 2008 -Mobile: 2008 - Tablet: 2010 -Tablet: 2010 - TV: 2012 ?TV: 2012 ? Car: 2013?Car: 2013?

OfflineOffline OnlineOnline

• Growing interest from brand marketers to define ROI across channels

• Data integration becoming increasingly possible/seamless as world become internet-enabled

20

Convergence of Capabilities

• Becoming hard to determine who is competitive as separate disciplines converge

• Has major M&A implications

MobileMobile SocialSocial

Ad Effectiveness

Ad Effectiveness

Ad Safety / VerificationAd Safety / Verification

Users

21

Advice to the Audience – Private Companies

• Unprecedented opportunity for new leadership

• Clear, differentiated capabilities are key

• Buyers will pay premiums for market leaders and experienced teams

• Scale and successful client case studies are key

• Watch for new buyers to emerge

22

Advice to the Audience – Public Companies

• Traditional leaders – You are more vulnerable than you think

• Think strategically about innovation and M&A

• Tremendous value being created, competitive dynamics are changing

• Watch out for disruptive business models

23

Advice to the Audience – VC / PE Investors

• "Jump In – The Water's Fine"

• Be careful about amount of $ invested

• $250MM+ exits aren't easy!

• Look for new strategic buyers to emerge

• Different companies require different exit strategies

24

Questions?

Linda GridleyGridley & Company LLC

10 East 53rd Street, 24th FloorNew York, NY 10022

212.400.9720 tel212.400.9717 fax

Twitter: @gridleycowww.gridleyco.com