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Slide 1: Interactive Advertising Outlook 2009 A Report to the JP Morgan Chase Virtual Advertising Summit Cyberspace, New York January 26, 2009
Slide 2: IAB’s Mission Remains… GROWTH The Interactive Advertising  Bureau is dedicated to the  growth of the interactive  advertising marketplace, of  interactive’s share of total  marketing spend, and of  our members’ share of  total marketing spend. 2
Slide 3: Our ~400 Members Represent 86% of Measured U.S. Interactive Advertising Revenues Membership Sample
Slide 4: 2009 Themes • Interactive continues to grow despite strong economic headwinds • Medium girded by its breadth of options, from above-theline to below-the-line • Consumers increasingly embracing digital media in all forms • Share shift by marketers from offline to online to tap into the variety, reach, targetability, and effectiveness of interactive media • Emerging platforms provide new opportunities for marketers to engage and learn from their customers
Slide 5: 2008 First Nine-Month Revenues Totaled Over $17 Billion First Nine‐Month Revenues — 2007 vs. 2008 $ millions Source: IAB Internet Advertising Revenue Report, 2008 Second-Quarter and First Six-Month Results October 2008, and Q3 November 2008 combined
Slide 6: Historical Quarterly Revenue Trends Since the third quarter of 2002, revenues have increased 21 of the past 24 consecutive quarters. Quarterly Revenue growth remains strong on a cumulative year-over-year percentage and dollar basis. Quarterly $ Revenue Growth Comparisons — 2000‐2008 YTD $ millions 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: IAB Internet Advertising Revenue Report, 2008 Second-Quarter and First Six-Month Results, October 2008
Slide 7: Seasonal Trends Relatively Strong Through First 9 months $21.2B 28% $16.9B 28% $12.5B $ millions 29% $9.6B $8.1B $7.1B 26% 23% 28% $7.3B $6.0B 30% 72% 26% 71% 72% 72% $4.6B 38% 74% 62% 77% 74% 70% Source: IAB Internet Advertising Revenue Report, 2008 Second-Quarter and First Six-Month Results, October 2008
Slide 8: YOY % Search & Display Spend Grow Lead Gen 7% Classifieds 14% Email 2% Search 44% Display* 33% (32% in ’07) 2008 First Six-Month Revenues: $11.5 Billion (41% in ’07) Source: IAB Internet Advertising Revenue Report, 2008 Second-Quarter and First Six-Month Results, October 2007, 2008 * Display-related advertising includes Display Banner Ads, Rich Media, Digital Video and Sponsorship
Slide 9: Interactive is the fastest-growing display medium Percentage Change in Measured Ad Spending: Jan‐Sept 2008 vs. Jan‐Sept. 2007. Media Sector Television Media Magazine Media Newspaper Media Internet (Display Ads Only) Radio Media Outdoor FSIs Total Percentage Change 2.1% -3.9% -10.0% 7.0% -8.8% -0.5% 0.9% -1.7% Source:  “TNS Media Intelligence Reports U.S. Advertising Expenditures Declined 1.7 Percent in First Nine Months of 2008 ,” TNS Media Intelligence  Press Release, Dec. 11, 2008.  Note TNS does not track search advertising revenue.  URL:  http://www.tns‐mi.com/news/12112008.htm
Slide 10: US Online Social Network Ad Spending Projected to Grow $ millions Source: eMarketer, December 2008
Slide 11: Key Growth Drivers
Slide 12: Drivers of Interactive Ad Growth Include Rising Broadband Penetration… US Broadband Households (in millions) Source:  JupiterResearch Internet Access Model, 3/07 (US Only)
Slide 13: Consumers Time Spent Online Keeps Increasing 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Average Weekly Hours Online 9.4 9.8 11.1 12.5 13.5 14 15.3 2001 2002 2003 2004 2005 2006 2007 Source:  USC Annenberg School Center for the Digital Future, The 2008 Digital Future Report, and previous Digital Future Report releases. 
Slide 14: Search Is Now Habitual 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Percentage of US Online Adults Using Search Engines 85% 89% 84% 90% 91% 91% 88% 89% 29% 31% 30% 42% 41% 41% 38% 49% Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 May-02 May-03 May-04 May-05 May-06 May-07 Jan-08 Used Search Engine Ever Used Search Engine Yesterday Source:  “Almost Half of All Internet Users Now Use Search Engines on a Typical Day,” Pew Internet & American Life Project Data Memo,  August 6, 2008  Link:  http://www.pewinternet.org/PPF/r/258/report_display.asp May-08
Slide 15: During 2008, US Search Volumes Grew by 15-26% Each Month Percentage Growth Rate of US Core Searches, Year-on-Year 30% 25% 23% 20% 15% 10% 5% 0% US Core Search Growth Rates, Year‐On‐Year 26% 18% 19% 19% 19% 19% 17% 15% 20% 22% Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Source:  comScore qSearch, quoted in “ComScore:  YouTube Now 25 Percent of All Google Searches,” TechCrunch, Dec. 18, 2008,  http://www.techcrunch.com/2008/12/18/comscore‐youtube‐now‐25‐percent‐of‐all‐google‐searches/ 
Slide 16: Digital Video Is Now a Mainstream Medium US Monthly Video Streams Served (Billions) 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 9.50 6.20 December-07 November-08 Key November 2008 Data (Nielsen): Streams Served:  9.5 billion Unique Viewers:  124.3 million Streams/Viewer:  76.8 streams Time per Viewer:  177.9 minutes Source:  “Nielsen: 9.5B Video Streams in November,” NewTeeVee.com, Dec. 30, 2008; “Nielsen Online's VideoCensus: Networks Failing To Reach  Men Online,”  MediaPost Onlline Media Daily, Feb. 15, 2008.
Slide 17: Smartphones Are Unleashing Mobile’s Potential As of 2Q 2008, in the US: • More than 26 million mobile subscribers use a smartphone device • Smartphones represent 16% of recent mobile device acquisitions • 57% of smartphones are acquired by personal users • 30% of smartphone users are likely to upgrade their device in the coming year Source:  “Nielsen Proivdes iPhone 3G and Smartphone Statistics,” Nielsen Mobile Press Release, October 16, 2008.  URL:   http://www.nielsenmobile.com/html/press%20releases/iPhone3GandSmartphoneStats.html
Slide 18: Social Media Sites Already Exceed Television’s Reach Worldwide Audience for Top 10 Social Media Sites, November 2008 Monthly Global Unique Visitors (in Millions) 250 200 150 100 50 0 221.5 200.2 •Total Social Media Audience:  691M, or 69.4% reach •Facebook’s audience grew 116% from Nov 07‐Nov 08  126.2 113.7 86.8 69.2 63.9 58.1 46.4 45.6 HI 5 ut Or k Fa ce bo ok W or dp do re ws ss Li ve Sp ac Ya es ho o Ge oc it i es My Sp a Source:  comScore as reported in “Top Social Media Sites of 2008 (Facebook Still Rising),” TechCrunch, Dec. 31, 2008. W in Si xA pa rt gg er ce Bl o Fl ic kr
Slide 19: Consumers want the Internet to be ad-supported • For both mobile and PC video, 70% of consumers prefer ad-supported models over consumer-paid models. (IBM study across 6 major international markets) • 67% of US consumers ages 25-34 and 75% of consumers aged 13-24 would “be willing to be exposed to online ads in exchange for free content.” 66% of all Internet users would click on more online ads if they were better targeted to them. (Deloitte) Source:  “IBM Study Shows Consumers Will Accept New Forms of Advertising If Companies Follow Their Rules,” IBM Press Release, Nov. 17, 2008, URL:  http://www‐ 03.ibm.com/press/us/en/pressrelease/26077.wss; Deloitte Study quoted in “Survey:  More online ads, free content,” Forbes, December 26, 2007, link:   http://techland.blogs.fortune.cnn.com/2007/12/26/survey‐more‐online‐ads‐free‐content/
Slide 20: Challenges • • • • Measurement standardization/simplification Cross-media measurement Antiquated media-mix modeling Overuse/misapplication of DR standards and methodologies • Creative shabbiness