Moving the Internet Advertising Market Forward

1
Moving the Internet Advertising Market Forward

• Shelby Bonnie
• Chairman, IAB

2
Size of the United StatesInternet Advertising
Market

• 1.7 billion Internet Advertising Revenues for 3
  months January to March 2003
• almost 200 billion
• almost 2 trillion won
• Forecasts for full year 2003 6.3 to 7 billion
• 740 billion to 825 billion
• 7.4 trillion won to 8.2 trillion won

11 compared to January March 2002
3
Historical Internet Ad RevenueBy Quarter
In US Billions
US Internet Ad Spending
1997
1998
1999
2000
2001
2002
2003
4
How the Internet Market Has Evolved
58 million users 907 million ad revenue
124 million users 8.1 billionad revenue
162 million users 6.3 billionad revenue
1997
2003
2000

• Banner ads
• Direct response
• Growing user base

• Interactive ad unitsintroduced
• Direct response
• Dot.com advertisers
• Online campaignsnot integrated

• Universal ad units
• Direct response Branding
• Traditional advertisers
• Integrated campaigns

5
What Marketers Are Buying Now
Keyword Search revenue is now 15 of the Internet
Advertising Market
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The Search Market

• In the United States...
• 4 billion searches are conducted each month
• By 110 million people
• For an average of 35 searches per searcher
• Search providers are consolidating
• Yahoo! to acquire Overture, Inktomi
• ValueClick acquires Search123
• Overture buys Altavista and FAST
• Google buys Applied Semantics
• LookSmart buys WiseNut
• Room for growth
• Traditional direct marketing industry 200
  billion
• Yellow pages advertising 14 billion

928million
299million
109million
Keyword Search Revenue
7
Role of Category/Content Sites Popular
Destinations for Learning Shopping
Percent of Total US Users in July 2003
Source Nielsen NetRatings Home/Work Panel, July
2003
8
Consumer Use of the Internet Outpaces Advertiser
Use of the Internet
Share of Market
Media Consumption Share of weekday media hours
among top four media (Source Online Publishers
Association, May 2003)Ad Spending Share of ad
dollars among the four largest measured media
(Source CMR January-March 2003)
9
The Internet Dominates the Workday
Media Use by Daypart Among Those With Internet
Access at Work
77
68
39
38
Source Online Publishers Association/MBIQ Media
Consumption Study, May 2003 Q. How much time did
you spend on the following ltmediagt yesterday
between ltdaypartgt? Base At Work Internet Users
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Role of the IAB

• Increase Interactive advertising and marketing
  dollars
• Simplify make Interactive Advertising easier to
  buy
• Help the industry set standards and guidelines
• Prove and promote the effectiveness of
  Interactive Advertising
• Increase direct value to members

11
Building the IAB

• Doubled the budget
• Grew membership by 300
• 35 members to 135 members
• Raised 6 million in acceleration capital
• pre-paid memberships
• simplification programs
• cross-media research
• events
• membership services (example Media Credit System)

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Major Accomplishments - Simplification

• Universal Ad Package
• Over 200 Downloads of UAP Adobe Photoshop Plug In
  to increase adoption
• Over 20 Compliant Publishers that represent more
  than 50 of internet inventory
• Ethical eMail Guidelines
• Over 20 Participating Publishers
• Ad Campaign Measurement Guidelines
• Rich Media Guidelines v2.0
• Terms Conditions Restarted expanded
• Base TCs v2.0, eMail TCs, Search TCs

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Research Proves That Online Advertising Works
1,000 Ads Tested
Average Lift
3.7
5.9
2.0
2.1

Source Dynamic Logic MarketNorms Database of
400 campaigns All measures statistically
significant at 99 ncampaigns between 375 and
416

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The New Marketing Question

• No longer talking about Why Online
• Question is How to integrate

• Specifically, how to integrate to maximize
• Brand Awareness
• Brand Image
• Purchase Intent Sales

XMOS RESEARCH
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Cross Media Study Optimization Study XMOS

• Largest cross media study ever conducted
• Assesses Cost Effectiveness of each medium
• Scientifically evaluates real world, in-market
  campaigns
• Carefully considered methodology

XMOS RESEARCH
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The Studys Methodology and Rigor Are Widely
Accepted and Respected

• Endorsed by the Advertising Research Foundation
  (ARF)
• Nominated for ESOMAR John Mary Goodyear Award
  (Best International Research)
• Reviewed and Analyzed by Forrester Research
• Endorsed by Major Agency Media Research Directors

XMOS RESEARCH
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The Key Finding of the Study

• Same Budget, Better Results

by Optimizing the Media Mix (most often,
increasing Online's role)
XMOS RESEARCH
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Increasing the Online Share of Budget Improve
Results
Online advertising is typically more cost
efficient at producing branding gains
Online advertising affects branding metrics
Online reaches those who would otherwise not get
the advertising message
XMOS RESEARCH
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XMOS Study Findings
XMOS RESEARCH
-- Metric not optimized
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XMOS ResultsMajor Marketers Rethinking Strategy
McDonalds Shifting Ads Away From TV to Digital
-- AdAge Magazine
"The days of spending hundreds of millions of
dollars on TV advertising is over. Reaching
consumers is no longer TV driven." "We must have
insight-driven ideas that connect us to
individual consumers at the right time and in a
place where that customer is most receptive to
our message. For McDonald's that means less TV
advertising is in our future." -- Bill Lamar
Jr., SVP US Marketing, McDonalds Speaking at
the American Association of Advertising Agencies
Management Conference as noted by Ad Age
McDonald's Shifting Ads Away From TV To
Digital, April 2003
2002 Cross Media Optimization Study for
McDonalds Grill Chicken Flatbread Increasing
Onlines share of campaign budget from 1 to 13
boosts awareness 8 adding 6 million potential
new customers
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Getting the Word OutSuperhero Advertising
Campaign
SUPERHERO 1 Cammie Dunaway, Frito-Lay, Inc.She
shifted money from Super Bowl TV to Interactive
promotions and increased Doritos sales by
5 SUPERHERO 2 Phil Bienert, Volvo Cars of
North AmericaHe used Interactive as the primary
launch vehicle for a new car, the Volvo S60, and
generated net profits over 100 million
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What is Next?

• An aggressive 2003 agenda
• XMOS Road Show in 7 cities
• 6 exclusive industry events
• Extensive press coverage
• Launch Media Credit Member Services (DB)
• Reach and Frequency development
• Expanded Best Practices
• Monthly member newsletter
• Additional efficacy research

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Thank You

• Shelby Bonnie
• Chairman, IAB

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Universal Ad Package
180 x 150

• Over 200 Downloads of Adobe Photoshop Plug-In
• Over 20 Compliant Publishers, representing more
  than 50 of inventory

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Effectiveness of Sponsored Search
Sponsored Links 18.3 click through, 1.4
conversion
Free and Paid Inclusions4.3 click through, 0.6
conversion
Source ComScore Networks, US Internet Users, 2
months ending May 2003