DIGITAL MARKETING HUB v2.0 - AdExchanger

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Digital Marketing Hub <strong>v2.0</strong> BMO Capital Markets data assets are primed for leverage as the marketing world shifts to an IP worldview. Social TV is also helping support the medium as the television screen remains the center-point of a critical marketing environment, the living room, and marketers are finding ways to help viewers interact via social platforms (e.g., dancing and singing contest shows have introduced realtime voting to TV), which helps buttress TV advertising budgets. …And Who Has Challenges? Yahoo! Although there is more clarity on board/management turmoil and Asian asset monetization, Yahoo! still faces considerable challenges in its core IP advertising franchises. The search agreement with Microsoft has not yet yielded the expected return. Worse yet, prior management’s focus on this part of the business in the 2007-2009 time period likely played a role in Yahoo! losing its edge in display advertising. Unlike Google, which acquired YouTube in 2007, Yahoo! missed the opportunity to create or buy into a large social media play. And after decisively leading the display advertising business toward exchanges and RTB with the acquisition of Right Media in 2007, the asset has languished as key employees left and innovation slowed. The company’s recent focus on leveraging Yahoo!’s still massive audience data sets was a clear positive, in our view. The launch of Yahoo! Genome – a new audiencebuying solution, integrating much of the technology acquired from interclick – is a strong first step in this direction, but until management is settled, it’s difficult to judge if the product will flourish or languish. Exhibit 4. Estimated US Display Revenue Share 100% Facebook Yahoo! Google Microsoft Aol Other 80% 52.6% 49.3% 46.3% 45.6% 60% 40% 4.3% 4.5% 13.8% 4.0% 4.4% 16.5% 3.8% 3.7% 4.3% 4.4% 19.8% 21.7% 20% 10.9% 9.1% 8.1% 7.5% 0% 14.0% 16.8% 17.7% 17.1% 2011 2012 2013 2014 Source: eMarketer A member of BMO Financial Group 12 June 7, 2012
Digital Marketing Hub <strong>v2.0</strong> BMO Capital Markets Non-Television, Non-IP Advertising Newspaper subscription rates continue to fall in most developed markets; permanent pressure on a medium’s addressable market means permanent pressure on advertising revenue. Magazines have generally fared better, but face similar challenges as audiences shift to IP platforms like tablets. Moreover, print has not been able support prices as television has. For example, while social TV is a flourishing concept, there is no such thing as social print. Certainly many entities have been able to survive on the backs of strong brands, professional editorial content, their own adoption of IP platforms to reach consumers, and the socialization of these experiences. However, as long-tail content proliferates via IP technologies, barriers to distribution (the bedrock of analog advertising business models) continue to fall, once dominant franchises are losing market share. Elsewhere, broadcast radio and traditional outdoor/billboards cede more of the growth in audio ads and out-of-home to streaming radio and DOOH (digitalout-of-home), respectively. Where broadcast radio and billboards are very different from newspapers is in their more stable addressable markets (e.g., AM/FM tuners in cars). Direct Marketers With Larger Exposure to Print Direct mail has much better prospects than newspapers because its addressable market – households with mailboxes -- is stable in developed markets. Put simply, until one begins reading stories about consumers chopping down their mailboxes, stocks with exposure to direct mail should see relatively stable cash flows. However as younger consumers become more accustomed to receiving phone bills via email, coupons via social networks, and compare recent fashions on flash deal sites instead of catalogues, engagement – and thus marketing return -- will fall over time, in our opinion. Harte Hanks’ direct marketing division has seen success lately with its data-centric products like the Trillium business intelligence software and earned media work for its clients on social networks. However, its Shoppers division remains largely maildriven and puts pressure on the stock’s multiple. Valassis’ national, co-op/shared direct mail model offers a low-cost model and the company stands as the leading contender to continue to consolidate direct mail and newspaper insert budgets. However, its investment in digital/IP products has only ramped up in the past few years and remain unproven. Op-Ed Marketing Cozies Up Closer to Commerce In a virtual IP world, commerce services mesh much more closely with marketing services. Under the traditional paradigm, consumers were generally marketed to in their living rooms (television) and elsewhere in the home (reading the newspaper over breakfast), as well as during the daily commute (radio in the car); likewise, commerce was generally reserved for after-work and weekend visits to bricks-and-mortar retail stores. In the digital world, however, marketing and commerce are only a click-away from each other, and often blur the distinction completely. For example, the basic affiliate marketing model allows publishers to place offers from e-commerce sellers on their websites (e.g., a “10% off the latest digital camera” offer is placed on a photography bloggers’ website); when clicked, the user is often dropped right into a shopping cart that hopefully ends in a sale for the e-commerce entity. So is that affiliate offer an advertisement, or simply the first step in an online shopping cart process? A member of BMO Financial Group 13 June 7, 2012
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