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Online is the New Primetime Gian Fulgoni Chairman

MEASURING THE DIGITAL WORLD. Online is the New Primetime Gian Fulgoni Chairman. Web Content 2008 June 18, 2008. Why is Online the New Primetime?. It’s where the audience is. There are powerful new tools for online media planning and analysis We have proof of the power of online advertising:

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Online is the New Primetime Gian Fulgoni Chairman

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  1. MEASURING THE DIGITAL WORLD Online is the New PrimetimeGian FulgoniChairman Web Content 2008 June 18, 2008

  2. Why is Online the New Primetime? • It’s where the audience is. • There are powerful new tools for online media planning and analysis • We have proof of the power of online advertising: • Correct metrics • Can measure latent impact • Can show impact on offline (e.g. in-store) sales • Can demonstrate long term branding benefit • Budgets rapidly shifting online as effectiveness and efficiency of online marketing is demonstrated, but Internet marketing still underutilized by many industries

  3. comScore Customer Knowledge Platform: A 360° View of 2 Million Global Internet Users Passively Observed Behavior and Survey Measurement • Designed to be representative of the online population • Projectable to the total U.S. population • Ernst & Young certified for information privacy & security • DEMOGRAPHICS • Self-reported and validated • Appended Segments (e.g. Claritas, Acxiom) • Individual & Household Level • WEB VISITING & VIEWING • All Web Site/Page Click Stream • Content Viewed • Search Engine Queries • Keyword Used • SURVEYS • E-mail or Contextual “Pops” • Behavior-activated Surveys • Observation of All Surveys Taken Across All Suppliers • ONLINE TRANSACTIONS • All Secure Session Activity • Purchases and Subscriptions • Price Paid, Shipping & Handling, Promotions • • Applications/Configurations • OFFLINE PURCHASING • Linked using Name and Address • Client CRM Databases • Retailer Loyalty Card Data • IRI Scanner Panel Data • MARKETING STIMULI • Online Ads • Referral Links

  4. The Internet is a already a massive medium, but still growing rapidly in a variety of ways 191 million U.S. people age 2+ online in a month, spending an average of 30 hours online per person* But 77% of 841 million global Internet users now outside of U.S. 99% of online population search in a month, conducting 80 searches per searcher** 73% of online population stream a video, viewing an average of 83 videos per viewer per month*** Up 50% vs YA 67% of online population visit a social networking site, spending 4 hours per month per visitor* Online consumer spending totaled $200B in 2007, up 20% vs. YA Non-travel represents 8% of consumer spend (excl. food, gas, and autos)

  5. User Generated Content Sites Growing Rapidly Monthly Unique Visitors (000) People (000)

  6. The Internet is the 3rd most used medium and about to become 2nd only to TV * Excludes work usage. Source: Forrester Research, March 2007

  7. Internet’s reach exceeds TV’s from 7 am to 8 pm Source: National People Meter, comScore Media Metrix 2007

  8. Internet Ad Revenues Continue to Surge Quarterly Internet Advertising Revenues ($ Billions) $21.1B in 2007, Up 26% Over 2006 1998 2002 2003 2004 2005 2006 1999 2007 2000 2001 Source: Interactive Advertising Bureau (IAB), PricewaterhouseCoopers (PwC) estimates.

  9. Ad Dollars are Flowing Online Advertising Dollars Spent in 2007* Media Percent Change from 2006 Internet Outdoor Cable TV Magazines Direct Mail Miscellaneous Overall Trade Journals Yellow Pages Broadcast TV Radio Newspapers $21 Billion $ 7 $26 $14 $61 $39 $295 $ 4 $14 $46 $19 $44 60% of all ad spending in traditional media goes to branding campaigns Source: Global Insights as published in BusinessWeek* Other sources may define categories differently, leading to different results

  10. Yet, online is only 7% of total ad spending! 2007 Estimate ($ in Millions) Source: Advertising Age by Robert J. Coen, McCann-Erickson Inc; Newspaper Association of America; Radio Advertising Bureau; Simba Information; Outdoor Advertising Association of America; Interactive Advertising Bureau (IAB); Lehman Brothers

  11. U.S. Online Advertising:One third branding; two thirds direct response • Search is the biggest piece of online advertising • Branding spending still under-developed Total Online Advertising 2007: $21.2 Billion Source: Interactive Advertising Bureau (IAB), PricewaterhouseCoopers (PwC) estimates. 11

  12. The Web Already Delivers More Advertising Than TV! Monthly GRP’s Monthly Impressions Per Person 2.2 x The CPM’s are just much, much lower for Internet. Source: Display Impressions: comScore Ad Metrix, Jan -08, Television GRP’s: comScore Estimates 12

  13. Frequent news about moves online • “The country’s third-largest advertiser (General Motors) is getting ready to shift fully half of its $3 billion budget into digital and one-to-one marketing within the next 3 years.” Advertising Age March 17, 2008 • Even ad-spending giant P&G is considering cutting its overall ad budget by as much as 10% this year and aggressively moving ad dollars to the Web. • WSJ May 12, 2008 “Online is getting to the point where it may be more important than the 30-second TV spot.” Joel Ewanick VP Marketing Hyundai Motor America 13

  14. New Tools Put Online Media Planning and Analysis on a Par with other Media • Panel-based measures correct problems with site server data • Using the correct metrics allows improved media planning and analysis • Also, look beyond clicks • Intelligence is now available showing advertisers and publishers detailed data on all online ad campaigns • Detailed segmentation of users is helping build more powerful media plans

  15. The Cookie Deletion Problem: Overstated Reach and Understated Frequency A comScore Study of Yahoo and DoubleClick Cookies • 30% of Internet users delete their cookies in a month • These deleters do so an average of 4 times a month • 5 different cookies for same site in a month on one computer • True for 1st party site cookies and 3rd party ad serving cookies • Cookie deletion creates large errors: • 2.5 times overstatement of unique visitors in server logs • 2.5 times overstatement of reach and a similar understatement of frequency in ad server logs • Need to adjust basic site server statistics using panels

  16. Looking Beyond your Site Server DataWhat’s the Size of my Lost Opportunity? Analysis of Marriott Visitor Non-Buyers (VNBs) Dollar Share of Lost Sales Among VNBs A:Lost Opportunity Analysis 8% Bought at Marriott Other 13% Had No Other Travel Activity Hilton 12.9 Million Unique Visitors 19% 25% Priceline 7% 92% Became Visitor Non-Buyers (VNBs) 7% 88%Did Not Convert 14% Hotels.com IC Hotels 8% 87%That Visit Another Travel Site 10% 10% Choice Hotels Starwood Expedia 12% Bought Elsewhere $462M Sales Opportunity Gap 16 16 16

  17. Decline in Online Ad Click-Through Rates Sources: Doubleclick, eMarketer, Eyeblaster, ABI Research estimates

  18. “Natural Born Clickers”comScore Study with Tacoda and Starcom Clickers on Display Ads Source: comScore, Total US Online Population, July 2007 Clickers Non-Clickers

  19. Clickers Follow the 80/20 Rule Source: comScore, Total US Online Population, July 2007 Clickers are predominantly younger (25 - 44) with lower income (under $40K)

  20. Those Who Viewed the Ad But Did Not Click Drove Majority of Site Engagement and Sales % of Exposed People Include View-Through Effects When Measuring the Campaign – Clicks Are NOT Enough

  21. Majority of Sales Impact of Display Ads Occurs Offline

  22. Clicks on Display Ads Are a Misleading Metric and They Don’t Reflect Brand-Building Effects Only use for direct response ad campaigns (or search) Clicks don’t measure all of a campaign’s sales impact, including the cumulative (latent) and offline impact of ads Clicks don’t tell you anything about brand building effects

  23. New competitive advertising intelligence • comScore Ad Metrix • Number of ad view impressions…per advertiser…per site • Precise reach and frequency, full demographics and behavioral stats • Transcription of actual ads • Post-buy analysis

  24. Auto Industry Ad Leaders Source: comScore Ad Metrix, Jan 08

  25. Automakers using Portals and Auto Resource Sites Source: comScore Ad Metrix, Jan 08

  26. Top Sites Deliver Far Less Than Their Nominal Reach and Need Ad Networks to Expand Effective Reach At Least Half of Top Sites Audiences Are Hard to Reach by a Typical Campaign Reach of U.S. Internet Audience 74.4% 72.4% 58.7% 56.5% Bottom 50% of Viewers for Each Site Yahoo! Sites Google Sites AOL Media Network MSN-Windows Live % of Page Views Viewed by Bottom 50% of Site Users % of Total Page Views AOL Media Network Yahoo! Sites Google Sites AOL Media Network MSN-Windows Live Average PVs per Light User (bottom 50%) 10.3 7.4 14.7 7.3 Source: comScore Custom Analysis, December 2007

  27. Why have so many advertisers been slow to adopt online? • Are the wrong metrics being used, i.e. clicks instead of ROI? • Is it lack of proof that online advertising works? • Is there a bias that online is only for direct response? • Do some advertisers not realize what paid search can do for them? • comScore’s clients have been busy proving the results • Search • Display advertising • Offline impact (in-store sales) • Latent effects

  28. “The Role of Search in Consumer Buying”2006 comScore Study with Google The Three Components of how Search Drives Buying 16% Direct Online Effects 21% Latent Online Effects 63% Latent Offline Effects Source: Google/comScore “The Role of Search in Consumer Buying” Press Release, March 21, 2006; based on holiday-related purchases completed online and offline across 11 product categories for 60 days post-search

  29. “The Digital Shelf”: comScore Study with P&G, Yahoo and SEMPO USING SEARCH THE SEARCH MARKETING OPPORTUNITYAll CPG Categories % INTERNET REACH UNIQUE VISITORS UVs USING SEARCH Nearly half of Internet Users search on CPG related terms or visit CPG related sites. Source: comScore Marketing Solutions; 3 Months Ending April 2007 – Total U.S.

  30. Searchers are more affluent, youngerand more likely to be female Demographic Profile Demographic & Life Stage Questions: Base: Searcher (n = 2,011); Non – Searcher (n= 803) = Significant difference at 95% confidence

  31. Searchers can be influenced to switch brands based on factors other than price Thinking about your last purchase, did you switch brands? Why did you switch? • Price • (Main Reason for Switching) • Searchers 27% • Non-Searchers 38% QA14/11a: Did you switch to another brand? Base: Searchers (n = 1,893); Non-Searchers (n = 751) QA15/12a: Why did you switch? Base: Searchers (n = 625); Non-Searchers (n = 208) = Significant difference at 90% confidence.

  32. The Brand Lift of Search

  33. Top Sponsored Only Control, brand not mentioned 4 3 2 5 1 Side Sponsored Top Organic Top Organic Only Top Organic AND Top Sponsored Methodology: Testing the Brand’s Placement Subjects entered an unbranded query and saw one of the following search engine results pages (SERP): Query: Unbranded (i.e., “fuel efficient car”) • Control (No branding – “Brand X” does not appear on the SERP) • Brand appears in Top Sponsored result only • Brand appears in Top Organic result only • Brand appears in both Top Sponsored and Top Organic results • Brand appears in Side Sponsored result only Top Sponsored Note: All subjects (N=2722) are 25+ and considering purchasing a new car within the next year (test brand: major import auto maker). Source: Enquiro Search Solutions, Inc., July 2007.

  34. A 16% Point Increase in Brand Association When Brand Is in Top Sponsored and Top Organic Results When you think of fuel-efficient cars, which come to mind? Query: Unbranded (i.e., “fuel efficient cars”) 16% 70% 60% 50% 42% point gap between test brand and another brand 40% 30% 20% Test Brand Other None 10% 0% Side Sponsored Top Organic Listing Top Sponsored Listing Top Sponsored & Top Organic Control Source: Enquiro Search Solutions, Inc., July 2007; Note: There is a significant (7% point) increase from Control to Side Sponsored, as well.

  35. 2.2x 1.5x x A 2.2x Lift in Aided Brand Recall When Brand Is in Top Sponsored and Top Organic Results Which of the following brands do you remember seeing in the search results page you just viewed? Query: Unbranded (i.e., “fuel efficient cars”) Test Brand 70% 60% 50% 40% 30% 20% Test Brand Other 10% 0% Side Sponsored Top Organic Listing TopSponsored Top Sponsored & Top Organic Source: Enquiro Search Solutions, Inc., July 2007.

  36. What about the impact of Internet ad campaigns on in-store sales?

  37. Close the Loop Studies (Done with Yahoo!) • Dozens of studies to assess the impact of paid search and banner ads on online and offline sales • Real world analysis: comScore panelists divided into two matched groups (exposed and non-exposed to advertising) • Search only • Display ads only • Search and display ads together • Neither • Passively measured behavior, no surveys involved • Linked to in-store sale through CRM databases, retailer loyalty cards (e.g. Kroger), IRI scanner panel

  38. Search + Display Ad Effectiveness Results:comScore Norms for Offline Sales Lift Search ads generate a greater lift in offline sales, but have a far lower reach and cost substantially more than Display ads Incremental Impact On Offline $’s Offline $$ Per (000) Exposed % of All Exposed Users 8% 80% 11% 39

  39. Some Summary Thoughts for the Future • The move to online advertising is in full gear • It will spread rapidly as traditional advertisers understand its impact • Panel data needed for accurate consumer metrics • Reach and cumulative frequency are mandatory metrics if traditional branding ad dollars are to be moved online • Measure latency and offline impact of online campaigns to show true (higher) ROI • Search can be a branding tool

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