The Evolution of Digital Advertising: From Direct Response to Branding Gian Fulgoni Executive Chairman and Co-Founder comscore, Inc

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1 The Evolution of Digital Advertising: From Direct Response to Branding Gian Fulgoni Executive Chairman and Co-Founder comscore, Inc comscore, Inc. Proprietary.

2 Topics for Today The Click Search vs. Display Advertising Offline Sales Lift The Cookie Display advertising Today Retailers as Ad Platforms Viewability and Audience Guarantees comscore, Inc. Proprietary. 2

Data sourced from comscore s global panel of 2

View of Person Behavior Online & Offline Buying

Exposure PANEL CENSUS Transactions Advertising

Mobile Internet Usage & Behavior Demographics,

Measurement (UDM) Patent-Pending Methodology 1

Top 100 US Media Properties Plus 5 Million TV Set

3 Data sourced from comscore s global panel of 2 million Internet users 2 Million Person Panel 360 View of Person Behavior Online & Offline Buying Web Visiting & Search Behavior Online Advertising Exposure PANEL CENSUS Transactions Advertising Effectiveness Media & Video Consumption PANEL Mobile Internet Usage & Behavior Demographics, Lifestyles & Attitudes Unified Digital Measurement (UDM) Patent-Pending Methodology 1 Million Domains Participating Adopted by 90% of Top 100 US Media Properties Plus 5 Million TV Set Top Boxes for 3-Screen Measurement comscore, Inc. Proprietary. V0411 3

4 The Click: A Misleading Measure of Display Ad Effectiveness comscore, Inc. Proprietary.

5 Global Click Rates on Individual Campaigns are Pitifully Low Worldwide Click-Through Rates* Austria 0.05% France 0.11% Finland 0.05% Italy 0.11% UK 0.07% Germany 0.11% Canada 0.08% Belgium 0.11% Australia 0.08% Denmark 0.11% U.S. 0.09% New Zealand 0.13% Spain 0.09% Netherlands 0.15% Switzerland 0.09% Greece 0.17% Singapore 0.09% India 0.19% Ireland 0.10% Hong Kong 0.22% Luxemburg 0.10% China 0.64% *Click-through rates across static image, flash and rich media formats Source: DoubleClick Benchmarks data representing a cross-section of countries, Jan to Dec, 2010 comscore, Inc. Proprietary. 5

6 Forget the Click on Display Ads: Clickers Represent a Small and Declining Segment of Internet Users There were 50% fewer clickers in 2009 (16%) than in July 2007 (32%) Only 8% of all Internet users account for 85% of all clicks Clickers have undesirable demographics Optimizing against clicks means ignoring 84 percent of Internet users July 2007 March 2009 Clickers 32% Clickers 16% Non- Clickers 68% Non- Clickers 84% comscore, Inc. Proprietary. Source: comscore, Inc. custom analysis 6

7 7 Journal Of Advertising Research: comscore s Whither the Click? Journal of Advertising Research, June 2009 comscore s Whither the Click? Study 200+ comscore studies conducted in the U.S. to assess behavioral impact of paid search and online display ads. Even with Click Rates of Only 0.1%, Display Advertising can Lift: Site visitation Trademark search queries Online and offline sales comscore, Inc. Proprietary. 7

8 Sales Lift/HH in $ Sales Lift/HH in $ Analysis indicated no significant relationship between click-through rates and offline sales lift A negative pattern emerged between Sales Lift per Household and Click Through Rate (i.e., as CTR increases, sales decrease) R 2 = $0.600 $0.500 $0.400 The regression analysis indicates this relationship is not statistically significant, therefore there is no significant relationship between CTR and Sales $0.300 $0.200 $0.100 $- 0.00% 0.20% 0.40% 0.60% 0.80% CTR Click-through Rate comscore, Inc. Proprietary. 8

9 9 The impact of display ads on site visitation: There is a significant impact within the 1 st week, with a substantial lift being observed over the four weeks following initial ad exposure Results from 139 comscore Campaign Effectiveness Studies Advertiser Site Reach 5.8% 6.6% 3.5% 3.1% 4.8% 3.9% 4.5% 2.1% % Lift: 65.0% % Lift: 53.8% % Lift: 49.1% % Lift: 45.7% Week of first exposure Weeks 1-2 after first exposure Weeks 1-3 after first exposure Weeks 1-4 after first exposure Control Test comscore, Inc. Proprietary. 9

10 Display Ads Lift Site Visitation Across All Verticals Advertiser Site Reach Weeks 1-4 after first exposure Average, N= % 6.6% % Lift: 46% Δ Lift: 2.1% Automotive, N=38 Finance, N=16 CPG & Restaurant, N=10 0.9% 1.9% 1.3% 2.3% 0.6% 1.1% % Lift: 114% Δ Lift: 1.0% % Lift: 86% Δ Lift: 1.1% % Lift: 77% Δ Lift: 0.5% Retail & Apparel, N=21 9.1% 13.8% % Lift: 52% Δ Lift: 4.7% Media & Entertainment, N=24 7.0% 10.0% % Lift: 42% Δ Lift: 2.9% Electronics & Sof tware, N=14 Travel, N=9 5.8% 7.2% 4.8% 5.8% % Lift: 25% Δ Lift: 1.5% % Lift: 21% Δ Lift: 1.0% Control Test comscore, Inc. Proprietary. 10

11 Search vs. Display Advertising Effectiveness comscore, Inc. Proprietary.

12 For multi-channel retailers, higher offline sales lifts are seen from search vs. display advertising, but combined the synergy provides an even greater lift Incremental Lift in Retailers Offline Sales per (000) Exposed Source: comscore Ad Effectiveness Solutions 120% +119% 100% 80% +82% 60% 40% 20% +16% 0% Search and Display Search Only Display Only comscore, Inc. Proprietary. 12

Display ads get a far higher reach than search.

people reached by display ads is typically much higher than search As a result, even though the sales lift

than search due to the smaller lift acting on a larger base % of Households Reached Incremental Impact on

13 Display ads get a far higher reach than search. But, synergy gains can be obtained by using display overlaid on a search campaign The overall number of people reached by display ads is typically much higher than search As a result, even though the sales lift among those exposed to a search ad is higher, the total dollar sales gained from display ads is often larger than search due to the smaller lift acting on a larger base % of Households Reached Incremental Impact on Offline Sales per (000) Exposed Total Sales Volume Lift Index % Note: 0 equals par in above chart. comscore, Inc. Proprietary. Source: comscore Ad Effectiveness Solutions 13

14 Despite click rates of only 0.1%, comscore research has shown that display ads can successfully lift retailer sales both online and offline Dollar Sales Lift Among Households Exposed to Online Advertising % Lift: 27% % Lift: 17% $9,905 $11,550 Conclusions Exposure to display ads doesn t just impact online sales it lifts in-store sales as well The absolute dollar lift in offline sales is 5x higher than the lift in e-commerce sales $994 $1,263 Online Unexposed Offline Exposed The click is misleading as a measure of campaign effectiveness Source: Whither the Click? 139 comscore studies in the June 2009 Journal of Advertising Research comscore, Inc. Proprietary. 14

The Short-Term Offline Sales Lift from Digital Advertising Matches Longer-Term TV Impact Offline Sales Impact of Advertising for CPG Brands: TV Versus Digital +8% +8% BehaviorScan tests

15 The Short-Term Offline Sales Lift from Digital Advertising Matches Longer-Term TV Impact Offline Sales Impact of Advertising for CPG Brands: TV Versus Digital +8% +8% BehaviorScan tests conducted over a one-year period. comscore tests conducted over a three-month period; assumes 40% HH Internet reach TV (BehaviorScan) Internet (comscore/dunnhumby) comscore, Inc. Proprietary. 15

16 The Cookie: Not Perfect but Better than Traditional Media comscore, Inc. Proprietary.

17 The Cookie Crumbles Branding advertisers on TV are accustomed to audience guarantees and expect the same in digital Accuracy of cookie-based digital plan delivery is problematic: Cookie Deletion Cookie Proliferation Cookies Are Not People comscore, Inc. Proprietary. Source: comscore

18 Cookie Deletion is a Global Reality and a Global Challenge Counting reach with cookies is not possible, yet until recently was the method used in most ad servers and analytics systems! Ad Server Cookies Web Site Cookies Country Percent of computers deleting Average # of cookies per computer for same campaign Percent of computers deleting Average # of cookies per computer for same web site Australia 37% % 2.7 Brazil 40% % 2.5 U.K. 35% % 2.7 U.S. 35% % 3.5 comscore, Inc. Proprietary. 18

19 Because of Multiple Users on a Computer, Cookies Can t Accurately Identify Who is Using a Computer at any Given Point in Time Over 64% of U.S. home users share a computer with other users, 0 3+ users, 32% 1 user, 36% Percent of People per Computer 2 users, 32% comscore, Inc. Proprietary. 19

20 % Composition of Exposed Audience Cookie-based demo targeting limits a campaign s ability to selectively reach a targeted audience Target for this health & well being product was females age Male 40% 40% of exposed consumers outside of planned gender target 20.6% % Female 60% 25.3% 17.3% Only 43% of females exposed to the campaign met the targeted age group 14.4% 55+ Only 25% of all exposed consumers met planned targeting criteria comscore, Inc. Proprietary. 20

21 Cookie Deletion Causes Skewed Ad Server Delivery & Results in GRP s Wasted on Overly Saturated Consumers 65% of exposures comscore, Inc. Proprietary. 21

22 Digital Advertising Today: comscore, Inc. Proprietary.

Q1 2013 digital ad revenues hit landmark numbers, up nearly 16% Y/Y to $9.

23 Q digital ad revenues hit landmark numbers, up nearly 16% Y/Y to $9.6B SOURCE: IAB Internet Advertising Revenue Report, Q Press Release, June 2013, IAB & comscore, Inc. Proprietary. PricewaterhouseCoopers 23

24 The digital ad market: strong growth with many powerful formats and platforms +15% vs. year ago $37 Billion online ad dollars in X Faster Growth than All Media* Search $16.9B +17% Banners $7.7B +13% Video $2.3B +28% Mobile $3.4B +111% Source: IAB, comscore & *Kantar Media comscore, Inc. Proprietary. 24

25 Internet equivalent to half of TV ad spend, and larger than magazines, newspaper and radio individually 2012 Ad Revenue by Media ($ Billions) Television* $72.1 Internet $36.6 Magazines** Newspaper Radio $16.1 $19.4 $22.8 Out of Home $7.5 Video Games Cinema $0.8 $0.7 The total U.S. advertising market includes other segments not charted here. * Television includes Broadcast Television (Network, Syndicated and Spot television) and Cable Television (National Cable Networks and Local Cable television) advertising revenue. ** Magazine includes Consumer and Trade magazines SOURCE: IAB Internet Advertising Revenue Report, 2012 Full Year Report, April 2012, IAB & comscore, Inc. Proprietary. PricewaterhouseCoopers 25

26 Retailers as Advertising Platforms: comscore, Inc. Proprietary.

27 Dynamics are changing, with commerce increasingly fueling advertising in tight feedback loop Advertising Commerce has become marketing and marketing has become commerce. Rishad Tobaccowala Chief Strategy & Innovation Officer Vivaki Commerce comscore, Inc. Proprietary. 27

Purchase-based targeting drives higher sales lift in-store than campaigns that don t leverage this type of targeting Median Offline Sales Lift in 3-Months from Digital Advertising for CPG

28 Purchase-based targeting drives higher sales lift in-store than campaigns that don t leverage this type of targeting Median Offline Sales Lift in 3-Months from Digital Advertising for CPG Brands Among Consumers Receiving Ads Source: comscore AdEffx Offline Sales Lift, Norms for CPG, Mar % +21% No Targeting With Purchase-Based Targeting comscore, Inc. Proprietary. 28

29 Viewability and Audience Guarantees: comscore, Inc. Proprietary.

30 Viewability: In-view rates are low comscore vce Benchmarks (2013) Real-World Scenario 1000 s campaigns, 290B impressions Mix of advertisers Mix of publishers NOT IN-VIEW 54% 46% IN-VIEW comscore, Inc. Proprietary. vce Charter Study (2012) 30

31 Premium Publishers Boast Higher Average In-View Rates than Ad Networks/Exchanges comscore, Inc. Proprietary. 31

32 Using comscore vce, campaign delivery can be monitored and optimized in-flight. In the example below, Publisher 1 is delivering results superior to Publishers 2 & 3 and would receive a greater share of ad spend In-Flight Campaign Optimization by Publisher Based on Cost and Effectiveness Opportunity to optimize - budgets follow performance Multiple publishers, each with high reach potential Wide variance in performance observed Brand X - Q3/Q4 Publisher Avg Frequency Impressions in Target Impressions in View Lift in Awareness CPM % 83% 5.74 $ % 91% 0.55 $ % 71% 0 $8.62 comscore, Inc. Proprietary. 32

33 Real-Time: In-flight optimization of Reach, Frequency and Targeting using comscore CE data is driving rapid gains in marketing ROI for Kellogg s Increase in ROI from Improved In-Flight Targeting Brand 1 ROI Brand 2 ROI ROI 2X 5X ROI 3X 6X Year 1 Year 2 1H Year 3 Year 1 Year 2 1H Year 3 comscore, Inc. Proprietary. 33

Viewability: Using vce, higher in-view delivery of ad impressions results in dramatic increase in sales lift for Kellogg s Digital Sales Lift Index Indexed to 100 for Less Than 50%

34 Viewability: Using vce, higher in-view delivery of ad impressions results in dramatic increase in sales lift for Kellogg s Digital Sales Lift Index Indexed to 100 for Less Than 50% Viewability of Impressions Less Than 50% Viewability At Least 70% Viewability comscore, Inc. Proprietary. 40% improvement in viewability generating 75% increase in sales impact 34

35 Key Takeaways Digital advertising has been shown to be a powerful and cost effective direct response and branding medium that can lift both online and in-store sales The click is not an accurate predictor of display advertising effectiveness While offering advantages over traditional media, the cookie is far from perfect as a measurement and targeting tool In-flight optimization of digital campaigns dramatically improves financial ROI by improving viewability and targeting accuracy Leading to publishers now beginning to offer audience guarantees comscore, Inc. Proprietary. 35

36 Thank You! For more information on comscore, please comscore, Inc. Proprietary.

How to Build Brands Using Online Advertising: Lessons Learned

How to Build Brands Using Online Advertising: Lessons Learned IAB Chile Seminar on Interactive Marketing Gian Fulgoni, Chairman, comscore Inc. Discussion Online Advertising in Latin America The Correct