Generating advertising revenues in digital media - Lessons Learned

1. Generating advertising revenues in digital media - Lessons Learned

2. WHO AM I? • SVP, Liberty Media Corporation Interactive Group • Fun Technologies, Game Show Network, QVC, Provide Commerce, GSI Commerce, OpenTV, etc. • Partner, McKinsey & Company; Co-founder and leader, Internet Practice • Founding Board member of Future of Advertising Stakeholder cross-industry committee involving AAAA, ANA, IAB (1997-2000) • Keynote, Procter & Gamble Interactive Advertising Summit August 1998; Harvard University Interactive Advertising Conference 1996 – frequent speaker at industry events and press source on digital advertising issues

3. TODAY’S AGENDA • Lessons • learned • The media buying process • Media: A business in transition

4. SELLERS SPEND BILLIONS TO INTERACT WITH BUYERS $ Billions, per year • Sellers • Buyers • Advertising/media • National branding • Local advertising • Direct • $100B • $100B • $150B • Channel management • 100 million households • Stores, dealerships, branches • Incentives, promotions, rebates • $? • $100B + • Customer servicing • Call centers • Maintenance, repairs • Loyalty programs • Billing costs • $? • $? • $? • $? • 200 million adults

5. TRADITIONAL MEDIA REACHING DIMINISHING RETURNS 78% Consumers who fast-forward through commercials when watching a TIVO/PVR recorded show 73% Households that channel surf to avoid advertising 48% Adults using internet while watching TV when TV and PC are in the same room 30% Less time spent watching television by consumers with internet access 23% Viewers who mute out TV commercials

6. ADVERTISING HAS BEEN AROUND FOR A LONG TIME • Internet • 1995 • Radio • 1922 • Television • 1941 • 1700 • 1850 • 1900 • 1950 • 2000 • 1860s Magazines • 1850 Outdoor moving (railways) • 1835 Outdoor • 1704 Newspaper

7. WHAT ADVERTISERS SAY THEY WANT Integrated communications Do more with less Thinking consumer-in,not brand-out Consumer becomes “part of the brand” From products to services

8. HOW ADVERTISERS FEEL ABOUT MEDIA TODAY

9. TODAY’S AGENDA • Lessons • learned • The TV media buying process • Media:A business in transition

10. THE TV MEDIA BUYING PROCESS Step 1: Advertiser communicates campaign objectives to agencies Ad Agency Advertiser Increase consumptionamong “stay-at-home” Moms • Account Executive • Creative Director • Media Director Increase brand awarenessamong college-age males • VP, Advertising • Brand Manager • VP, Marketing • Research Director • Media Director Media Agency Emphasize Tide’s new “Stain Preventor” feature • Account Executive • Media Director • Media Planner

11. THE TV MEDIA BUYING PROCESS Step 2: Initial Media Plan is created and reviewed/approved by Agency and Advertiser • Media Plan • Objectives • Target audience Reach/Frequency • Strategy • Allocation of dollars by media type • Local market allocation • Optimization of schedule • Tactics • Vehicle ranking & selection • Contingency plan • Planning Tools • Strata • NCC • eSM • In-House Tools

12. Buying Tools • Donovan • Adware • Ad2Media • In-House Tools THE TV MEDIA BUYING PROCESS Step 3a: Media Plan gets divided among the media buyers. TV buyers then request avails from networks and spot markets via RFP’s Network RFP Eastern Spot RFP Central Spot RFP Television Western Spot RFP Print Radio Outdoor

13. THE TV MEDIA BUYING PROCESS Step 3b: The Creative Team also goes to work on the “copy” a. Concept e. Post-Production & Distribution d. Production Ideas. Testing. Budgeting Editing. Duplication. Insertion b. Client Approval Sets. Props. Location. Shoot c. Pre-Production Creative direction. Budget. • Creative Partners • Agencies • Studios • Post-Production Casting. Scheduling. Storyboarding

14. THE TV MEDIA BUYING PROCESS Step 4: 50-80% of national inventory is purchased during the “Upfronts” in May as package blocks. Spot is sold as individual avails. Insertion Orders • Trafficking Tools • Advision • Eclipse • Novar

15. THE TV MEDIA BUYING PROCESS Step 5: Commercials are run and monitored. Shortfalls are corrected with make goods. Affidavits and invoices are generated. Invoice • Monitoring Services • Nielsen Media Research • CMR • Bowden • Billing Tools • Advision • Eclipse • Novar

16. TODAY’S AGENDA • Lessons learned • The media buying process • Media: A business in transition

17. LESSONS LEARNED ON PREVIOUS BATTLEFIELDS • Invent a different – not just better – mouse trap (ad-unit) • Uniquely leverage the media • Demonstrably superior to existing solutions • Priced to value • Make it easy to buy • Sell it the way they buy it • Standardize ad-units, buying process, metrics • Develop credible metering and research • Third-party validation • Create wins with reputable ad-buyers and promote the pioneers and their successes

18. CURRENTLY WINING AD-UNITS/FORMATS ARE MORE UNIQUE TO DIGITAL MEDIA Examples • Search • products Paid listings on Google Enormous • Online advertising • Integrated solutions Sponsored page on Myspace Respectable Banners and buttons on People.com • Standard media • products Waiting for broadband

19. Digital media unique in supporting multiple pricing models • Opportunity for marketers to shift the burden of risk to sites • Pricing has evolved to a hybrid of traditional and performance-based models PRICING INNOVATIONS HELPED GROW MARKET Impression Cost per exposure Unit of time spent Click-through Internet pricing models Cost per response Lead Download $ Revenues Cost per transaction Trans-actions

20. GO WHERE THE FISH ARE • Priority product categories • Example • Categories in which consumers make purchase online • Travel, electronics, music, software • Categories with hard to reach users (genY, working women) • Movies, video games, diet foods • Categories in which consumers use web to make purchasing decisions • Cars, mortgages, financial services • Categories in which privacy matters • Botox services, incontinence treatments • Categories in which Internet connectivity can broaden consumer experience • Dieting, Healthcare, Foods, personal care

21. Generating advertising revenues in digital media - Lessons Learned