Internet & Media Sector
Youssef H. Squali
Global Head of Internet & Media Equity Research
ysquali@cantor.com
July 15, 2013
1
CANTOR FITZGERALD
Who Wins/Who Loses from the Rise of Programmatic Buying?
Mission:
Identify investable trends early, and ride them hard
Internet has turned many a business model on its head by:
 Eliminating one or more intermediary layers
 Doing it faster and cheaper
 Bringing more convenience
2
CANTOR FITZGERALD
The View from Wall Street
The rapid adoption of RTB is …
 Transforming the way ads are bought and sold – NASDAQ as proxy
 Allowing/enhancing price discovery
 Bringing intelligence to every impression
 Enabling scale beyond what existed before
 In time, it will allow the sale of premium display, video and mobile
 But… several issues need to be resolved before RTB enters prime
time
3
CANTOR FITZGERALD
The Big Picture around RTB
CANTOR FITZGERALD
U.S. RTB Digital Display Ad Spending Forecast
RTB by the Numbers:
 Roughly $3.5 billion revenue in 2013
 Growing at 70+% Y/Y
 At a 5 year CAGR of ~34%
 ~20% of digital display advertising
 or, ~8% of total Internet advertising
4
In 5 years, RTB could account for 30-50% of total display ad
spending
5
CANTOR FITZGERALD
U.S. RTB Digital Display Ad Spending Forecast
Indexed Price Performance
135
• The Cantor Internet Index (equalweighted index of 60+ Internet
cos) vs. the S&P 500.
Price (Indexed to 100)
130
125
130.63
120
115
110
119.33
105
100
95
90
85
07/2012
09/2012
11/2012
01/2013
Internet
03/2013
S&P 500
05/2013
Source: FactSet Prices
Source: FactSet and Cantor Fitzgerald research
300
Indexed Price Performance
Price (Indexed to 100)
258.31
250
200
150
• Over the last 5 years, the CII has
dramatically outperformed the
S&P 500.
129.22
100
50
0
01/2009
01/2010
Internet
01/2011
S&P 500
01/2012
01/2013
Source: FactSet Prices
Source: FactSet and Cantor Fitzgerald research
6
CANTOR FITZGERALD
So Why Does Wall Street Care?
RTB is Growing Significantly Faster than Overall Internet Advertising
100.0%
90.0%
RTB CAGR: 34.3%
Internet CAGR:
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
2012
2013E
2014E
2015E
2016E
2017E
US Internet Ad Revenue Growth
US RTB Display Ad Spend Growth
Source: IAB, eMarketer, and Cantor Fitzgerald research
7
CANTOR FITZGERALD
So Why Does Wall Street Care?
$
$
ADVERTISER
ADVERTISING AGENCY
$
AGENCY TRADING DESK
$
DSP (BUYER PLATFORM)
SSP (SELLER PLATFORM)
PUBLISHER INVENTORY
$
$
PROGRAMMATIC GUARANTEED
DIRECT ORDER
AUTOMATION
$
$
AUCTION MARKET
$
Source: Rubicon and Cantor Fitzgerald research
You’ve got to simplify the story!
8
CANTOR FITZGERALD
The Digital Display & RTB Ecosystem
• Consolidation around publishers, large integrated ad exchanges and advertisers likely.
• As larger players build their tech stacks, point solutions to be acquired or wither away.
• Google is currently in the lead with a full service stack, but Facebook’s FBX is
likely another big beneficiary.
Select Ad Technology and Marketing Services M&A Activity - To Date
Announced
5/17/2013
12/12/2012
9/20/2012
7/31/2012
6/4/2012
11/30/2011
11/1/2011
8/2/2011
6/16/2011
6/13/2011
4/21/2011
9/17/2010
8/4/2010
1/4/2010
9/15/2009
8/9/2009
9/27/2007
9/4/2007
7/24/2007
5/18/2007
5/17/2007
5/16/2007
4/30/2007
4/13/2007
1/15/2007
Target Name
Acquity Group Ltd.
CyberAgent FX, Inc.
LBi International NV
Wildfire Interactive, Inc.
Buddy Media, Inc.
Efficient Frontier, Inc.
interCLICK, Inc.
Dotomi, Inc.
MediaMind Technologies, Inc.
Admeld, Inc.
GreyStripe
AKQA, Inc.
Slide, Inc.
Quattro Wireless, Inc.
Omniture
Razorfish, Inc.
Traffix, Inc.
BlueLithium, Inc.
TACODA, Inc.
aQuantive, Inc.
24/7 Real Media, Inc.
Acxiom Corp.
Right Media, Inc.
DoubleClick, Inc.
TradeDoubler AB
Target Description
Digital strategy, multi-channel digital marketing, brand e-commerce
Internet media and advertising
Digital communication services
Social media marketing software provider
Social marketing and content management
Online performance and social media marketing
Data driven advertising solutions
Personalized and pertinent marketing
Ad management and distribution platform
Supply Side Platform (SSP)
Selling and serving mobile ads
Interactive marketing agency
Widgets on social networks, blogs and desktops
Mobile advertising company - iAds
Web analytics and marketing services company
Interactive marketing/tech and digital ad buying
Internet, mobile technology, and traditional marketing
Advertising network - behavioral targeting
Online advertising services - behavioral targeting
Advertising network
Digital display marketing solutions
Enterprise data, analytics and SAAS company
Right Media ad exchange
Ad exchange and other digital marketing tech/services
Performance-based digital marketing and technology
Base Equity Value(USD)
305.71
254.89
558.92
250
689
374.7
226.88
287.38
429.63
400
70.6
600
179
275
1656.5
530
160.49
300
273.9
5,373.63
603.57
1,843.40
680
3,100
839.97
Acquirer Name
Accenture Plc
Yahoo Japan Corp.
Publicis Groupe SA
Google, Inc.
salesforce.com, inc.
Adobe Systems, Inc.
Yahoo!, Inc.
ValueClick, Inc.
DG FastChannel, Inc.
Google, Inc.
ValueClick, Inc.
Dentsu, Inc.
Google, Inc.
Apple, Inc.
Adobe
Publicis Groupe SA
New Motion, Inc.
Yahoo!, Inc.
Time Warner, Inc.
Microsoft Corp.
WPP Group Plc
Silver Lake Partners LP
Yahoo!, Inc.
Google, Inc.
Time Warner, Inc.
Source: MergerStat, FactSet, and Cantor Fitzgerald research
9
CANTOR FITZGERALD
Consolidation is Inevitable
1. The
trend toward automated direct buying is only in its infancy, but
the shift has begun.
2. Automation, data and effectiveness that RTB brought to the auction
market will be utilized for premium direct ad buys as well
3. Video and mobile are the next frontier
4. Consolidation will happen. Scale matters; point solutions will give
way to integrated offerings.
10
CANTOR FITZGERALD
In Summary:
Internet & Media Sector
Youssef H. Squali
Global Head of Internet & Media Equity Research
ysquali@cantor.com
July 15, 2013
11
CANTOR FITZGERALD
Who Wins/Who Loses from the Rise of Programmatic Buying?