blackstone 2013 digital marketing review

January 2013

Digital Marketing Industry Review

Ken Allen Managing Director [email protected]

Rumena Manolova Associate [email protected]

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Table of Contents

I. Executive Summary 2

II. Industry Themes 7

III. M&A Perspectives 39

Appendix 51

I. Executive Summary

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Summary Observations I. Executive Summary

The Digital Marketing sector continues to evolve, and is becoming increasingly strategic to a large number of ecosystem players.

The Digital Marketing Ecosystem Continues to Undergo a Significant Transformation

Multi-decade transition from analog to digital

Audience-centric, cross-channel, data-driven, real-time

Growth in the Digital Marketing Industry is Being Driven by a Number of Important Trends

Mobile, Social, Video, Audience Targeting / RTB, and Data / Analytics are critical capabilities that have gained strategic importance in recent years

The Above Trends Have Catalyzed a Significant Wave of Consolidation in the Industry

Leading strategic acquirers seeking growth have gained access to these capabilities through inorganic expansion

Stack convergence is resulting in unified, multi-channel offerings fueled by data and analytics

Consolidation / M&A Will Continue to Define the New Digital Marketing Ecosystem

Larger players will continue to leverage M&A as a means to unify the product suite, ‘purchase R&D’, acquire talent, and, as a defensive measure, prevent strategic assets from falling into the wrong hands

Strategic M&A has become a core capability and a source of competitive advantage for many firms

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A Significant Shift Is Occurring in Online Marketing and Commerce Platforms

Marketing and eCommerce platforms are becoming increasingly integrated, supported by data and analytics, and processed in real time.

Purchase History

Intent Social Graph

Demo / Geo

Preferences / ‘Likes’

1 0 1 1 0 0 1 1 0 1 1 0 0 1 0 1 0 1 1 0 0 0 1 . . . Data . . . 1 0 1 1 0 0 1 1 0 1 1 0 0 1 0 1 0 1 1 0 0 0 1

How We Decide How We Buy

Multi-Channel Engagement

Multi-Channel Commerce

Ecommerce

Auctions

Comparison Shopping

Mobile Social

Flash Sales / Daily Deals

TV

Direct Mail Call Center

Point of Sale

Barcode

Digital Goods

Search

Display

Mobile Social

Email

Local

Community

Branding

Print

Radio

TV


Behavioral

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The Online Channel Represents the Sole Growth Vector in the Global Advertising Market

While currently smallest in size, the Online advertising market is vastly outpacing other channels in terms of long-term growth.

________________________________________________

Source: Wall Street research, Bloomberg, eMarketer.

2011 Global Market Size ($bn) 2006 – 2011 CAGR Key Drivers and Themes

Online media becoming central pillar of advertisers’ marketing efforts Growth driven by increased Internet penetration, advanced technologies

(e.g., data analytics), and new forms of engagement (e.g., video) Advertisers demanding engagement across multiple screens

Persistent decline caused by secular disadvantages

Integration with digital channels (mobile, QR) and enhanced data analytics capabilities becoming critical

Renewed interest in Direct Mail led by financial services, retail, and automotive sectors

Rapid decline caused by secular disadvantages

Shift towards brochures, flyers, booklets, press kits; away from news

Increased integration with digital (QR, augmented reality, ambient)

Strength in local / national cable offset by decline in broadcast TV, radio, and outdoor broadcast

Rapid growth of online video and radio creating competitive pressure

+14%

2%

(5%)

(6%)

($5)

($169)

($125)

($116)

($87)

Global Market Size

Online, 18%

Direct, 34%

Print, 23%

$497bn

Broadcast, 25%


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Key Industry Growth Drivers

A number of important themes are driving growth in the Digital Marketing ecosystem.

Mobile

Social

Video

Audience Targeting / RTB

Data / Analytics

Consolidation / M&A

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

________________________________________________

Note: Digital Advertising Revenue refers to U.S. spending; $ in billions. Source: Business Insider, IAB, eMarketer, Blackstone.

II. Industry Themes

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II. Industry Themes

Digital Marketing Industry Themes: Mobile

Mobile

Social

Video

Data / Analytics


Consolidation / M&A

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

________________________________________________


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Mobile Endpoints Are Expected to Drive Significant Data Consumption and Advertising Growth II. Industry Themes

Mobile Video

Audience Targeting /

RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Callout The proliferation of mobile devices, combined with the potential inherent in mobile targeting, presents a significant market opportunity.

________________________________________________

Source: Wall Street research.

Evolution of Hardware Device Penetration (Millions in log scale)

Ad Conversion by Device Type

(Based on a scale of 100% for Desktop)

U.S. Net Mobile Ad Revenues

($ in millions)

There are currently 953mm smartphone subscriptions vs. 6.1bn mobile subscriptions, representing a massive growth opportunity.

110%100%

107%100% 100% 100%

45%50%

90%

25% 27%

93%

17%22%

68%

0%

20%

40%

60%

80%

100%

120%

Rev. Per Click Conv. Rate Avg. Order Value

iPad Desktop Android Tablet iPhone Android Phone

$0

$1,000

$2,000

$3,000

$4,000

2011 2012E 2013E 2014E

Google Facebook Twitter Apple (iAd) Other

68%

40%194%

85%57%

'11 - '14E CAGRMainframe

Mini Computer

PC

Desktop Internet

Mobile Internet

0

1

10

100

1,000

10,000

100,000

1,000,000

1950 1970 1990 2010 2030

1MM+Units

10MM+Units

100MM+Units

1B+Units / Users

10B+Units?

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Mobile Is Taking Share From all Other Media Channels II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Consumers are incorporating mobile in all aspects of their daily lives – from social activities to commerce and TV viewing.

Share of Consumer Time Spent with Major Media(1)

70% of users from mobile in 2011

________________________________________________

(1) Source: eMarketer, BII Research. (2) Source: BII Research, Facebook, Enders Analysis.

45%

25%

17%

4%

9%

7%

44%

26%

16%

6%

8% 8%

43%

26%

15%

9%

7% 7%

42%

26%

14%

12%

6%5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

TV Online Radio Mobile Print Other

2009 2010 2011 2012

55% of users from mobile in 2011

85% of smartphone users access phones

while watching TV

~20% of shoppers scan a product barcode

and/or send product pictures to friends and family

~56% of users from mobile in 2012

~1,000% YoY growth in users in Q3 2012

~1,100% YoY growth in users in Q4 2012

Metric(2)

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On a Global Basis, the Mobile Growth Opportunity Is Massive II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Untapped Online Opportunity(3)

(In billions)

Despite its rapid growth to-date, mobile continues to represent a major untapped opportunity.

G-20 Internet Access(1)

(Consumer broadband connections in millions) Untapped Smartphone Opportunity(2)

(Global users in billions)

________________________________________________

(1) Source: Strategy Analytics, International Telecommunications Union, BII Research. (2) Source: Boston Consulting Group, Mary Meeker, Kleiner Perkins, Morgan Stanley Research, Berg Insight, BII Research. (3) Source: International Communication Union, Google, BII Research.

1BUsers

6BUsers

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Smartphone Mobile Phone

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Global Population

Internet Population

350573

475

2,134

167

825

2,707

0

500

1,000

1,500

2,000

2,500

3,000

2005 2010 2015

Fixed Mobile

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153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Smartphone Penetration in the U.S. Is Showing Signs of Saturation II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

As more than half of U.S. mobile subscribers now own smartphones, the pace of net new adds has slowed down.

U.S. Smartphone Market: Year-Over-Year Net New Adds

(Users in millions)

30% 38% 41% 44% 48% 50% 55%

% Smartphone Penetration(1)

________________________________________________

Source: comScore, Nielsen, BII Research. (1) Note: U.S. mobile subscribers 18+.

1210

13 1314 15

119 8

10

1821

2729 29

35 3432 32

(40%)

(20%)

0%

20%

40%

60%

80%

100%

0

5

10

15

20

25

30

35

40

1Q2008

2Q2008

3Q2008

4Q2008

1Q2009

2Q2009

3Q2009

4Q2009

1Q2010

2Q2010

3Q2010

4Q2010

1Q2011

2Q2011

3Q2011

4Q2011

1Q2012

2Q2012

3Q2013

Users Added % YoY Growth

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153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Mobile Ad Revenues Have Exhibited Slower Growth Thus Far Relative to Other Media II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Mobile advertising has grown more slowly than other media, as advertisers struggle to adopt the ‘right’ advertising model.

Comparative U.S. Advertising Media Annual $ Revenue Growth (First 5 years) ($ in millions)

________________________________________________

Note: Adjusted for inflation. Source: IAB, McCann-Erickson, BIA-Kelsey, Bll Research.

$358

$1,012

$2,162 $2,162

$3,698

$80 $160$392

$806

$1,171

$55$267

$907

$1,920

$4,621

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

Year 1 Year 2 Year 3 Year 4 Year 5

Broadcast TV Mobile Internet

Blackstone 14

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Mobile Ads Are Primarily Web Search and Display II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

2011 Global Mobile Ad Spend(1)

Search dominates mobile ad revenues; however, eCPMs are lower than Desktop. The two leading smartphone platforms, Android and iPhone, garner the highest eCPMs.

Effective CPM, Desktop vs. Mobile(3)

$3.50

$0.75

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

Desktop Internet Mobile Internet

________________________________________________

(1) Source: IAB, BII Research. (2) Source: Opera Software, Q2 2012. (3) Source: comScore, Vivaki, Mobclix Exchange, BII Research.

CPM Rates by Mobile Devices(2)

$0.20$0.59 $0.64

$1.01

$2.10

$2.85

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

WindowsPhone

Symbian RIM J2ME /others

Android iPhone

62%

28%

10%

Search

Display

Messaging

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153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Native, Location-based, and Video Ads Represent the Next Big Opportunity in Mobile II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Native, social, location-based, and video ads integrate more seamlessly in consumer mobile experiences and have higher CPMs.

CPM Rate for Selected Mobile Ad Platforms(3)

Location-Based Ads(2)

(Monthly Ad Requests Per Mobile User by Location)

Ads in Timelines (Twitter / Facebook)(1)

________________________________________________

(1) Source: Twitter, Facebook. (2) Source: JiWire, 3Q 2012. (3) Source: Ad platforms, BII Research, Greg Sterling, Opus Research.

$10.00

$5.00

$5.00

$3.50

$0.0 $2.5 $5.0 $7.5 $10.0

Flurry Video Ads

Adsmobi Video Ads

LSN Mobile Local Ads

xAd Local

70 67 67

47 37 39 35

27 24 23 16 0

15

30

45

60

75

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Smartphone Users Spend More Time on Apps than on the Web II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

________________________________________________

(1) Source: Nielsen Smartphone Analytics, BII Research, Blackstone. (2) Source: iSuppli, Forrester Research, company press releases, BII Research.

0

20

40

60

80

100

120

140

Mar-11 Jun-11 Sep-11 Dec-11 Mar-12

Mobile Web Apps

Total Time Spent Using Mobile Web vs. Apps(1)

(Minutes Spent per Month in billions)

Apple dominates the mobile app revenue market.

2011 Mobile App Revenue Share(2)

83%

7%

10%

Apple iOS

Android

Other

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Google Is the Overall Leader in Mobile Ad Revenues II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

Google practically owns the mobile search market, and has steadily increased its revenue share over time.

________________________________________________

(1) Source: BII Research, Blackstone. (2) Source: Global StatCounter, BII Research.

Google Global Mobile Search Market Share(2)

Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 96% 96% 96% 97% 98% 98% 98% 98% 97% 97% 97% 97% 97% 97% 97% 97%

Other

Mobile Ad Revenue(1)

(% of total)

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153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Digital Marketing Industry Themes: Social

Mobile

Social

Video


Data / Analytics

Consolidation / M&A

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

________________________________________________


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153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Social Networks Are Profoundly Changing How Consumers Discover and Interact with Brands

Traditional Marketing Funnel Social Media Marketing Loop

Interest

Decision

Action

Recomm-endation

Awareness

Action

Decision

Interest

Awareness

________________________________________________

Source: eMarketer, Blackstone.

Social networks are becoming a primary source for consumers to discover new products, view peer recommendations, and seek reviews. Innovations such as mobile check-ins and Facebook integration with retailer sites have allowed consumers to take “word-of-mouth” marketing to a mass scale.

II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Blackstone 20

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

2011 2012E 2013E 2014E

70.9% 68.8% 65.6% 63.5%

5.5% 8.3% 11.1% 12.7%

Social Games 5.5% 6.7% 7.0% 7.4%

4.3% 5.3% 5.8% 6.1%

1.8% - - -

Total Top Five - % of Total Social 88.0% 89.1% 89.5% 89.7%

2011 2012E 2013E 2014E

14.0% 16.8% 17.7% 17.1%

13.8% 16.5% 19.8% 21.7%

10.8% 9.1% 8.1% 7.5%

4.5% 4.4% 4.3% 4.4%

4.3% 4.0% 3.8% 3.7%

Total Top Five - % of Total Display 47.4% 50.8% 53.7% 54.4%

The Shifting Display Ecosystem Has Resulted in Dramatic Share Shifts in Advertising

Underlying industry dynamics have resulted in significant display advertising share shifts from static, non-targeted premium channels to RTB and Social formats.

________________________________________________

Source: eMarketer.

Net U.S. Online Display Ad Revenues (% of Total Display Ad Revenues, 2011 – 2014)

II. Industry Themes

Net U.S. Social Network Ad Spending (% of Total Social Ad Revenues, 2011 – 2014)

Social Games

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Blackstone 21

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Facebook Represents an Exciting, Although As Yet Unproven, Advertising Platform II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Facebook’s data and potential targeting mechanisms hold significant promise for advertisers. Marketer response, however, has been mixed thus far.

Targeting Channels

Targeting Mechanisms

Facebook Online

Facebook Mobile Apps

Zynga.com Smartphone Apps

YOU

________________________________________________

Source: Blackstone, Wall Street Journal, Citigroup.

Facebook Targeting Framework

Demographic data

Personal information

Interest graph

Retargeting

Facebook Newsfeed

Facebook Exchange

Third-Party Sites

Facebook Advertising Feedback from C-Level Executives (Based on Citigroup Facebook Advertiser Survey)

17.1%

44.5%

38.3%

Superior

About the Same

Inferior

Facebook Advertising ROI vs. Competitors (% Surveyed)

Primary customer data Facebook Advertising Partner View Facebook Advertising Partner View

CEO of Major eCommerce Platform Mixed CEO of Online Ad Agency Mixed

CEO of Leading Online Luxury

Goods RetailerNegative

CEO of Large Online Ad Agency

GroupNegative

CEO of Digital Ad Agency Mixed CMO of Online Ad Agency Positive

Exec at Large Online Auction /

Commerce SiteMixed

CMO of Large Global Beverage

CompanyPositive

Exec at Large Online Community Site Negative CMO of Global Bank Mixed

Exec at Consumer / Business Printing

SiteMixed CMO of Leading CPG Company Mixed

Veteran Online Advertising Executive Negative CEO of Online Travel Company Negative

Exec at Online Ad Platform Positive CMO of Online Automotive Retailer Mixed

CEO of Large Ad Agency Firm NegativeExec at Leading Hot Beverage

CompanyPositive

Exec at Large Ad Agency Firm Positive

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Digital Marketing Industry Themes: Video

Mobile

Social

Video


Data / Analytics

Consolidation / M&A

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

________________________________________________


Blackstone 23

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

0

10

20

30

40

50

60

70

Midnight 2 AM 4 AM 6 AM 8 AM 10 AM 12 PM 2 PM 4 PM 6 PM 8 PM 10 PM

Online Becoming ‘The New Primetime’

A Huge Opportunity, One that Online Video Is Ideally-Suited to Target, Exists in Display & Brand Advertising

A significant gap exists between the relative share of online and offline branding, implying a $13.0bn untapped market opportunity in the U.S. alone.

U.S. Market Opportunity (2011) ($ in billions)

Branding (2)

[__]

Branding (2)

($125.0bn, 82%)

Implied

Gap

($13.0bn, 43%)

Direct

Response (1)

($27.0bn, 18%)

Direct

Response (1)

($19.0bn, 61%)

0%

25%

50%

75%

100%

U.S. Offline

Media Spend

U.S. Online

Media Spend

Branding (2)

($12.0bn, 39%)

$31.0bn $152.0bn

________________________________________________

Source: IAB, Wall Street research, comScore, Blackstone. (1) Offline DR includes direct mail and directories. Online DR includes classifieds, e-mail, lead generation, and search. (2) Offline Branding includes outdoor, print, radio, and TV. Online Branding includes banner ads, rich media, sponsorships, and video.

% P

eo

ple

15

+ U

sin

g M

ed

ium

Internet

TV

Prime Time

Harder to Reach Audiences in the New Media Model

TARGET AUDIENCE MEDIA

Trad

itio

nal

M

edia

Fewer ads… Reached more people… With undivided attention.

ADS

New

Med

ia Reaching fewer people… More ads… Paying less attention.

II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Blackstone 24

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

“Over-the-Top” Video Is Reaching Mass Adoption

As consumers begin to view more content online, “over-the-top” video revenues are on the rise.

U.S. Primetime TV Viewing(1)

(% of 18-49 TV set users during 8-9 PM hour, multiple responses permitted) Global Digital Video Revenue(2) ($ in billions)

________________________________________________

(1) Source: GfK, BII Research. (2) Source: Company filings, Wall Street research, BII Research, Blackstone.

II. Industry Themes

82% 83%

64%

17% 16%

26%

6% 6%

8%

7%

0%

20%

40%

60%

80%

100%

120%

2004 2008 2012

Live TV Recorded TV

Video game Streaming video

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

2006 2007 2008 2009 2010 2011

Netflix Youtube Hulu

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Blackstone 25

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

48% 47%

24%

21%

6%

15%

8% 5% 5% 5% 5% 3% 3% 4%

0% 0% 0%

10%

20%

30%

40%

50%

2011 2012E 2013E 2014E 2015E 2016E

Search Display

Video Classifieds and Directories

Lead Generation Rich Media

Sponsorships Email

40%

47%

38%

18%

17% 14%

5%

21%

0%

10%

20%

30%

40%

50%

Broadcast Print Direct Online

Online Advertising Has Shown Robust Growth Over the Past Decade

Online advertising growth, which has averaged 18% per year over the past decade, has come mainly at the expense of Print. In the future, Video is expected to be a major growth driver online.

________________________________________________

Source: Wall Street research, eMarketer. (1) Broadcast includes outdoor, radio, and television. (2) Print includes magazines and newspapers. (3) Direct includes direct mail and directories. (4) Online includes search, display, video, classifieds, lead generation, rich media, sponsorships, and e-mail. (5) Includes mobile advertising.

Historical U.S. Market Share by Channel

Projected U.S. Online Advertising Market Share

(1) (2) (3) (4)

(5)

II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Blackstone 26

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Similar to Print a Decade Ago, TV is Ripe for Disruption

Google already generates almost as much U.S. ad revenue as all magazines and newspapers. The Company is well positioned to take share from TV networks as more video content is consumed online and becomes better monetized.

U.S. Ad Revenue(1)

($ in billions) Ad Loads, TV vs. Digital(2)

(% share of programming)

________________________________________________

(1) Source: Google, NAA, PIB, BII Research. (2) Source: comScore, June 2012, BII Research.

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

$40.0

$45.0

$50.0

2004 2005 2006 2007 2008 2009 2010 2011 1H2012

Google Magazines Newspapers

II. Industry Themes

92.1%

98.5%

75.2%

7.9%

1.5%

24.8%

0% 20% 40% 60% 80% 100%

Streaming TV Online

Online Video

TV

Content Ads

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Blackstone 27

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Digital Marketing Industry Themes: Audience Targeting / Real-time Bidding (“RTB”)

Mobile

Social

Video


Data / Analytics

Consolidation / M&A

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

________________________________________________


Blackstone 28

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

The Display Markets Have Seen a Flood of Non-Premium Inventory That Is Less Attractive to Brands II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

The Display market has been driven by a rise in non-premium inventory, which has typically been less attractive to brands and has resulted in pricing pressure for premium publishers.

U.S. Average CPM by Media Type

Denotes Average CPM

Broadcast TV

Cable TV

Syndication TV

Radio

Magazine

Newspaper

Out-of-Home

Internet (Display)

CPM <$2 $6 $10 $14 $18 $22 $26 $30 $34 >$40

Online Video

Hulu

________________________________________________ Source: Wall Street research, Blackstone. Note: Display inventory comprised of page views and ad coverage; pricing reflective of RPM’s. Pricing reflective of the combination of CTRs and CPC.

Global Display Advertising has Seen a Flood of Inventory ($ in billions)

42% 46% 48% 45%39%

41% 41% 47% 51%57%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2004 2005 2006 2007 2008

Supply-Driven Demand-Driven

$17.1 $7.4 ($1.3)

$23.1 $7.8

$1.2 $32.2

$0.0

$20.0

$40.0

$60.0

$80.0

2007 Inventory(Supply)

Pricing(Demand)

2010 Inventory(Supply)

Pricing(Demand)

2013E

Huge opportunity to increase ad effectiveness through social marketing / audience targeting / RTB

% Increase'07-'10E '10E-'13E

Supply 122% 87%

Demand (22%) 13%

________________________________________________ Source: Media Dynamics, comScore, Wall Street research. Note: All media measured per adult, based on 2009 / 2010 rates; low estimates for traditional media include ads aimed at mass market (no demo targeting); average estimates for TV include 1) early am, 2) daytime, 3) early news, 4) primetime, and 5) late evening and are based on upfront pricing.

Blackstone 29

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

A New Display Advertising Ecosystem Is Emerging

________________________________________________

Source: Blackstone.

The Display ecosystem is increasingly integrated, data-driven, and real-time in nature.

Exchange Ecosystem

Demand-Side

Platforms

Supply-Side

Platforms

Data Integration / Aggregation / DMPs

Data Warehouse

Client / Primary Data

Third Party Data

Cloud / Edge Network / CDN

Publisher

Tools

Advertiser

Tools

Publishers

O&O Premium

Niche / Vertical

Social Networks

Video

Mobile

Proprietary Networks

Format

Display

Search

AdSense

Rich Media

Online Video

Mobile

Social

TV

Radio (?)

Print (?)

Other (?)

Advertisers

Brand

Inventory Format

Display

Search

AdSense

Rich Media

Online Video

Mobile

Infr

astr

uct

ure

Self-Service Ad Platforms

SSPs

Optimization/ Analytics

DSPs / Targeting

Ad Campaign Management

Marketing Automation

Long-tail Networks

Data Management

Platforms

Ad Exchanges

Infrastru

cture

Direct

Social

Direct

Optimization / Analytics

Media Buying Platforms

II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Blackstone 30

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Q2 2012QoQ Δ in

# of Advertisers

Major National 57% 30%

Internet Brand 29% 23%

Major Regional 11% 25%

Local Business 3% 49%

$1.0

$7.1

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

2011 2016

RTB Spending Is Growing Across All Major Ad Formats

While it has been used historically to auction remnant inventory, RTB has extended to premium publishers, premium advertisers, and premium ad formats.

________________________________________________

Note: Includes all display formats served to all devices. Source: eMarketer.

U.S. Real-Time Bidding Digital Display Ad Spending ($ in billions)

Types of Advertisers that Use RTB in North America

Key Drivers of RTB Spending

Maturation of Facebook Ad Exchange

Influx of Mobile and Video Inventory

Greater Availability of Premium Inventory

Demand for Increased Transparency

% of Total Display Ad Spending

8% 22%

II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Blackstone 31

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Ecommerce Players Are Also Disrupting the Display Ecosystem by Leveraging Data

Major eCommerce players have developed significant advertising businesses by harnessing their unique data assets to target advertising to specific audiences.

U.S. Retailers: Total Ad Display Impressions(1)

(In billions)

________________________________________________

(1) comScore, BII Research. (2) Amazon.com, BII Research.

Product Ads From External Websites(2)

II. Industry Themes

0.0

5.0

10.0

15.0

20.0

25.0

Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012

Other

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Blackstone 32

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Digital Marketing Industry Themes: Data / Analytics

Mobile

Social

Video


Data / Analytics

Consolidation / M&A

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

________________________________________________


Blackstone 33

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

II. Industry Themes

The Internet Has Generated an Explosion of Unstructured Digital Content

________________________________________________

Source: Go-Globe.com

13,000+ hours MUSIC

STREAMING on

12,000+ NEW ADS POSTED on

370,000+ minutes VOICE CALLS on

320+ NEW accounts

100+ NEW accounts

The world’s LARGEST

community created content

1 NEW article is published

associatedcontent

6,600+ NEW pictures are uploaded on

125+ PLUGIN

downloads

510,040 COMMENTS

79,364 WALL POSTS

695,000+ STATUS UPDATES

1,700+

DOWNLOADS

50+ DOWNLOADS

694,445 SEARCH QUERIES

168 million EMAILS

ARE SENT

60+ NEW BLOGS

1,500+ BLOG POSTS

70+ DOMAINS

REGISTERED

600+ NEW VIDEOS

25+ hours TOTAL DURATION

QUESTIONS asked on the internet…

100+ 40+

Answers.com

13,000+ APPLICATIONS DOWNLOADED

20,000+ NEW POSTS on

1 NEW DEFINITION is added on

1,600+ READS ON

98,000+ TWEETS

Blackstone 34

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Data Usage Is Projected to Continue to Grow Exponentially II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

In addition to massively increasing data volumes, the variety and complexity of data are experiencing similar exponential growth. The explosion of data represents a tremendous opportunity, and challenge, for marketers.

CAGR (2010 – 2014E)

48.0%

22.0%

58.0%

Multiple Sources Contributing to Growth in Data

Megabytes

Big Data

Web

Segmentation

Offer Details

Customer Touches

Support Contacts

CRM

ERP

Purchase Detail Purchase Record Payment Record

A/B Testing

Dynamic Pricing

Web logs

Offer History

Affiliate Networks

Search Marketing

Behavioral Targeting

Dynamic Funnels

Sensors / RFID / Devices

Mobile Web

User Click Stream Sentiment

User Generated

Content

Social Interaction &

Fees

Spatial & GPS Coordinates

External Demographics

HD Video, Audio, Images

Speech to Text

Product / Service Logs

SMS / MMS

Gigabytes

Terabytes

Petabytes

Increasing Data Variety and Complexity

________________________________________________

Source: Cisco, Wall Street research, YouTube.

2.5 3.86.3

8.7 10.5

16.4

24.2

35.7

53.2

79.2

0

15

30

45

60

75

90

2005 2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E

Unstructured Structured

Historical and Projected Data Growth (Exabytes)

Blackstone 35

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Data Analytics, Mobile, and Social Are the Top Priorities of Today’s CMO II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

________________________________________________

Source: IBM, eMarketer.

Analytics, social, and performance-based advertising are at the forefront of the CMO agenda.

Technology that CMOs Worldwide Plan to Increase Use of in the Next 3 – 5 Years (% Respondents)

Data-Driven Marketing

Transition to Performance-Based Advertising (% Channel Market Share)

Performance-Based CPM Hybrid

41% 41%47% 51%

57% 59% 62% 65%

42% 46%

48%45%

39% 37% 33% 31%

17% 13%5% 4% 4% 4% 5% 4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2004 2005 2006 2007 2008 2009 2010 201146%

56%

61%

62%

63%

66%

68%

70%

72%

73%

80%

81%

81%

82%

0% 15% 30% 45% 60% 75% 90%

Email Marketing

Score Cards / Dashboards

Campaign Management

Search Engine Optimization

Reputation Management

Predictive Analytics

Collaboration Tools

Single View of Customer

Tablet Applications

Content Management

Mobile Applications

CRM

Customer Analytics

Social Media

Blackstone 36

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Data Is Gaining Increased Importance in the Current Digital Marketing Landscape

Agencies

`

Enterprise CRM Marketing Software

3rd Party Data / Data Exchanges

(WPP)

Analytics, Optimization and Media Plan Execution

® (WPP)

(Omnicom)

Analytics

(IBM)

Networks / Exchanges

(Google)

Database Marketing

Brands / Primary Data

________________________________________________

Source: Blackstone, Gartner.

II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

http://www.admob.com/s/home/

Blackstone 37

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Digital Marketing Industry Themes: Consolidation / M&A

Mobile

Social

Video


Data / Analytics

Consolidation / M&A

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

________________________________________________


Blackstone 38

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Services

/

/ / /

Strategic M&A Activity Is Occurring on All Levels of the Digital Marketing Stack

Email Local Mobile Search Social Video

Optimization

Analytics

Data

/ /

/ /

/

/

/

/ +

/ /

/

/ /

/

/

/

/

/ /

/

/

/

________________________________________________

Source: Capital IQ, Blackstone.

(Search partnership)

(Daily deal sites consolidation)

/ /

/ / /

/

Display Email / MA Local Mobile Search Social Video

/

/

Platforms /

/ / / /

/

/

II. Industry Themes

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

/ /

III. M&A Perspectives

Blackstone 40

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Summary Observations in Digital Marketing M&A

________________________________________________

Source: Blackstone.


Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Strategic M&A is impacting every layer of the Digital Marketing stack.

The Digital Marketing Ecosystem Continues to Consolidate through Strategic M&A

Marketers realize inherent value from the consolidation of multiple point products into an integrated offering

Market solutions evolving toward integrated CMO dashboards for executing cross-channel campaigns

Data, analytics, and automation are increasingly important components

Digital Marketing Strategic Activity is Concentrated Among a Relatively Small Number of ‘Serial Acquirers’

21 major market participants across 4 key sectors: Agencies, Software, Platforms, and Publishers

Others acquirers exist, but tend to make tuck-in buys in a sporadic fashion

Interest in Inorganic Expansion in the Digital Marketing Sector Has Broadened Beyond the Traditional Internet Platform Players

Google, Yahoo!, Microsoft, AOL, WPP, and Publicis formerly viewed as the end-game

Strategic buyer ecosystem has broadened materially in recent years, most notably into the traditional horizontal software players

Strategic Activity Has Concentrated in a Handful of ‘Hot’ Sectors of Late

Buyers continue to orient their M&A strategies around key growth sectors

Data / Analytics, Social, Mobile, Content, eCommerce, and Digital Agencies have attracted significant investment

No Market Participant Has Assembled a Complete Stack Solution, as Yet

Google has made the most aggressive moves to-date

Adobe, IBM, Oracle, and Salesforce.com beginning to make interesting moves as they target the ‘Marketing Cloud’

Blackstone 41

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

295

179214

321

519

570614

674

758

960

845

(60.0%)

(30.0%)

0.0%

30.0%

60.0%

90.0%

0

200

400

600

800

1,000

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Number of Deals YoY % Change in # of Deals

$7$5

$13

$28

$36

$64

$27

$16$15

$20

$32

$0

$25

$50

$75

$100

$125

$0

$15

$30

$45

$60

$75

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Deal Value ($ in Billions) Avg. Deal Size ($ in Millions)

Digital Marketing Strategic Activity: Historical Perspective III. M&A Perspectives

________________________________________________

Note: Includes disclosed deal values only. Source: The 451 Group, Thomson Financial.

Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Digital Marketing M&A activity has grown steadily post-2008 levels, from both a volume and size perspective.

Transaction Volume # of Deals YoY % Change

Transaction Value Deal Value, $bn Average Deal Size, $mm

Blackstone 42

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

The Digital Marketing Stack Continues to Consolidate

A number of key players continue to consolidate the Digital Marketing stack through strategic M&A.

Digital Marketing Stack Key Industry Consolidations

Channels

Data / Analytics

Networks

Ad Servers and Exchanges

Search

Display

Video

Mobile

Social

Agencies

Software

Platforms

________________________________________________

Source: Blackstone.

Email

Marketing Automation

Ad

vert

ise

r-Si

de

eCommerce

Optimization

SSPs

Content

Pu

blis

he

r-Si

de

Publishers

Digital Agencies


Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Blackstone 43

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Agencies Software Platforms Publishers

•••••••••• •••••••••• •••••••••• •••••••••• •••••••••• • • • • ••• •••••

•••••••••• •••••••••• •••••••••• •••••••••• ••••••••••

•••••••••• ••••••••• •••••••• •••••••••• ••••••••••

•••••••••• •••••••••• ••••••••••

••••• •••••••••• ••••••••••

•••••••••• ••••••••••

•••••••• ••••••••••

••••••••••

••••••••••

•

Search • ••• •••

Display •••

Video • • •

Mobile • •• • •• •• • • •• ••••• •••

Social • • ••• ••• • •• •

Email • •

Marketing

Automation• • •• •

Data / Analytics • • •••• • •••• ••• • • •• •• • • •

Networks • • •••• • •• •••• •

Ad Servers /

Exchanges•• • •

••••• ••••• •••••eCommerce •• • • •• •• • ••••• ••••• ••• • • ••• •

•• ••••

Optimization • •• • •• ••

SSPs •

••••• ••••• ••••• ••••• •••••Content • • • • ••••• ••••• • •• ••••• • • ••••• •••••

• ••••• •

Ad

vert

iser

-Sid

e

Digital Agencies

Soft

war

e

Pu

blis

her

-Sid

e

Serv

ices

Digital Marketing Strategic M&A Chessboard: 2007 – 2012(1)

________________________________________________

Source: The 451 Group, Capital IQ, company websites and news releases. (1) Data represents strategic transactions in the Digital Marketing sector only.

• = 1 Transaction


Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Blackstone 44

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Strategic Buyer Observations

________________________________________________

Source: Blackstone.


Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

The Digital Marketing ecosystem has changed dramatically as various players have increasingly leveraged M&A as a strategic capability.

Buyers from Multiple Sectors are Converging on the Digital Marketing Opportunity

Agencies, Software, Platforms, and Publishers represent core segments of activity

Buyers, Historically, Have Tended to Stay Close to Home

Agencies have rarely bought technology

eCommerce and Publisher players have historically bought within their core sectors

A Small Number of True Stack Players Exist

Google, Adobe are the furthest along; each has accomplished stack convergence, in part, through M&A of strategic capabilities it did not own

Examples include Google buying into Display and Mobile, Adobe buying into Site Optimization and Video

Sector Cross-over is Beginning to Emerge

IT Services increasing Digital Marketing presence and vice-versa

Traditional horizontal software players moving aggressively into marketing vertical

Commerce players, such as Amazon, moving into Display Advertising (organically, thus far)

M&A is Becoming a Strategic Capability

Innovation is difficult for many large companies; M&A in the Digital Marketing sector has served as a method for strategics to acquire R&D, key personnel, and expertise

Those companies who have been consistent and successful acquirers have tended to perform well financially and in the equity markets

Blackstone 45

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

97

71

47

3129

16

9 8 86

2 1

37

20 2018 18

64

23

18

0

10

20

30

40

50

60

70

A Wide Range of Activity in the Digital Marketing Landscape Exists Across Market Participants

Number of Digital Marketing Transactions by Strategic Buyer (# of Deals, 2007-2012)

________________________________________________

Source: The 451 Group, Capital IQ, company websites and news releases.

Agencies Software Platforms Publishers

100

Strategic activity in Digital Marketing varies widely by participant. WPP, Microsoft, Google, and Gannett lead their respective sectors in terms of the number of transactions completed.


Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Blackstone 46

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Digital Marketing Strategic Activity Momentum by Buyer – Two-Year Perspective (2011 – 2012)

Deal ‘momentum’ in the Digital Marketing sector varies considerably by participant.

________________________________________________

Source: The 451 Group, Capital IQ, company websites and news releases. Note: Position on timeline based on total number of transactions from 1/1/2011 to 12/31/2012 relative to peers within given sector. Size of circle represents the aggregate total enterprise value of transactions by each company from

1/1/2011 to 12/31/2012, relative to peers within given sector. Transactions with undisclosed enterprise value are assumed to contribute a size of $25mm to the aggregate total enterprise value.

Age

nci

es

Soft

war

e

Pla

tfo

rms

Pu

blis

her

s

Low High


Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Blackstone 47

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Valuation Trends

________________________________________________

Source: Blackstone.


Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Valuations in Digital Marketing are driven by growth, scalability, scarcity, synergy potential / fit, and a competitive dynamic among the relevant buyer universe.

Divergence Exists in the Multiples Paid by Various M&A Participants

Platform and Software players have paid nearly 2x the multiple of Publishers and Agencies, on average

Valuations in Digital Marketing are a Function of Growth and Scalability

Interactive agencies and other services businesses tend to have low margins, lower growth and low scalability, and as such achieve lower multiples

Software and platform companies tend to trade at high multiples due to above average growth prospects and higher profitability

Strategic Assets Command Strategic Valuations

Assets in sectors viewed as being highly strategic, such as mobile and social, command premium valuations

‘Scarce’ assets that either have achieved scale in a sector, or have a differentiated and strategic technology also command a valuation premium

• YouTube, Admob, Buddy Media represent notable examples

Other key valuation drivers include: fostering a competitive dynamic among relevant buyers, synergies, and defensive reasons

Google has been the Most Prolific and Aggressive Acquirer

37 deals across nearly every segment of the stack

Highest aggregate value and multiple paid (for disclosed deals)

Blackstone 48

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

0x

2x

4x

6x

8x

10x

12x

14x

16x

18x

20x

0 10 20 30 40 50 60 70 80 90 100 110

Me

dia

n T

ran

sact

ion

TEV

/LTM

Re

ven

ue

Total # of Transactions

Valuation Trends: 2007 – 2012(1)

________________________________________________

Source: The 451 Group, Capital IQ, company websites and news releases. Note: Size of circle represents the aggregate total enterprise value of transactions by each company. Transactions with undisclosed enterprise value are assumed to contribute a size of $25mm to the aggregate total enterprise value. Facebook, IPG, and Omnicom excluded from graph due to unavailable transaction enterprise value data; total number of deals for Facebook, IPG, and Omnicom: 6, 29, and 31, respectively. (1) Data represents strategic transactions in the Digital Marketing sector only.

Agencies Software Media Platforms Publishers

Digital Marketing Transactions by Valuation Multiple and Size = $500 million

$ in millions Summary Statistics

# of Deals Agg. Enterprise Value Avg. EV per Deal Median Multiple

Agencies 275 $18,923 $69 2.4x

Software 50 19,921 398 5.2x

Platforms 123 19,271 157 6.7x

Publishers 41 4,059 99 3.5x

Total 489 $62,174 $127 4.4x


Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Blackstone 49

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Sector Observations

________________________________________________

Source: Blackstone.


Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Digital Marketing strategic M&A is concentrated along a number of key sectors and themes.

The Global Roll-up of Digital Agencies Continues Acquisitions in the sector tend to be of relatively small agencies (<$100 million), by the major holding companies

WPP and Publicis represent ‘serial’ acquirers in the space

‘Hot’ Sectors Have Garnered Significant Attention from Strategic Buyers Mobile, Social, and Data / Analytics have become strategic priorities, given growth characteristics

Despite relative nascency, these sectors have quickly become highly-sought after capabilities

M&A Activity among Networks and Exchanges has Waned ‘Plain-vanilla’ Ad Networks, in particular, are no longer viewed as strategic

Interest among buyers has migrated to optimization around audiences, behavioral, predictive analytics • Ability to leverage data in real-time for precision targeting is viewed as critical

On the Publisher Side, Consolidation Continues Among Content and Commerce Assets Amazon, eBay, and Google have made strong and consistent moves in the eCommerce arena

AOL, Google, Gannet, and Hearst have been the predominant acquirers of Content assets

Future M&A Will Concentrate on a Number of Key Themes Social will migrate from Fan Page management to Cross-channel Social Marketing

Mobile networks less interesting to buyers; post-click optimization, mobile advertising ‘gamification’ gaining traction

Optimization of Digital Marketing messages to custom audience segments

Real-time Predictive Analytics, applied to marketing, will migrate from a nice-to-have to a must-have

Marketing Automation is increasingly viewed as a strategic capability • Oracle / Eloqua, IBM / Unica, Teradata / Aprimo recent examples; expect more to follow

Blackstone 50

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

272

20

12

75

3 3 2

23

14

4

66

49

8

1

0

10

20

30

40

50

60

70

Dig

ital

Age

nci

es

Mo

bile

Soci

al

Sear

ch

Mar

keti

ng

Au

tom

atio

n

Vid

eo

Dis

pla

y

Emai

l

Dat

a /

An

alyt

ics

Net

wo

rks

Ad

Ser

vers

/Ex

chan

ges

Co

nte

nt

eC

om

me

rce

Op

tim

izat

ion

SSP

s

Strategic Activity in Digital Marketing Varies Widely by Sector

Advertiser-Side Publisher-Side

280

Software Services

Number of Transactions by Target Sector (# of Deals, 2007-2012)

________________________________________________

Source: The 451 Group, Capital IQ, company websites and news releases.

The highest volume of Digital Marketing transactions exists in the Digital Agency, Mobile, Social, Data / Analytics, Content, and eCommerce sectors.


Mobile Video


RTB

Consolidation / M&A

Social

Data / Analytics

$0

$10

$20

$30

$40

1995 1999 2003 2007 2012

Appendix

153 191 194 0 115 99 126 211 117 0 152 195 99 206 202 81 162 21 60 113 120 0 44 95

Blackstone 52

Biography: Ken Allen

Ken Allen Managing Director

Ken Allen is a Managing Director in Blackstone Advisory Partners L.P., is a founding member of Blackstone’s Technology M&A practice, and leads the firm’s Digital Marketing and Cloud Computing Advisory efforts. Mr. Allen has advised hundreds of companies in his 15 years in the industry, and has successfully executed M&A transactions having an aggregate value of over $10 billion. Notable transactions Mr. Allen has advised on include Publicis’ $530 million acquisition of Razorfish from Microsoft, OrangeSoda’s sale to Deluxe Corporation, ClickSquared’s Series C Private Placement, Sapient's acquisitions of The Nitro Group and Derivatives Consulting Group, Compellent’s $960 million sale to Dell, Xerox's $8.3 billion acquisition of ACS, and the £190 million sale of Xafinity to Advent International. Prior to joining Blackstone in 2007, Mr. Allen worked in Deutsche Bank's Technology Group, where he focused on mergers and acquisitions, leveraged recapitalizations, leveraged buyouts, and equity financings for a range of companies including Infosys, Ciena, Intralinks, WNS, Stratus Technologies, Allot Communications, and Interwise. Mr. Allen received an MBA from the Tuck School of Business at Dartmouth, where he graduated as a Tuck Scholar. He also received his BE from Dartmouth in Electrical Engineering, where he graduated with summa cum laude and Phi Beta Kappa honors.

Appendix