Ad Spend Study 2011

IAB report on online ad-spend2011

March 2012

interactiveadvertisingbureau

IAB report on online ad-spend 2011 2

Introduction and summary


This years edition relies on data supplied by a record 43 companies, which has allowed us to obtain a more accurate view of the market. We also conducted validation discussions on the preliminary results with a number of parties in the market.

Based on the additional input received, we have had to restate the 2010 figures slightly downwards, due to better reporting from affiliate marketing players. Further, based on input from survey participants we have made some changes in the categories and set up of the study.

This is the second year IAB and Deloitte are publishing the online advertising spend report for The Netherlands. The 2010 FY and 2011 H1 reports received positive response from the community and the current edition – which covers 2011 FY – has yet greater participation from key industry partners.

Introduction

“Once more, thanks to even more participants than last time, Deloitte managed to pull together a complete and comprehensive report overviewing the ad spends in our industry.”

“It is quite clear that Digital media is becoming a grown up industry. Nevertheless we keep showing double digit growth. This, next to the fact that the Tablet Ecosystem seems very promising, both for publishers and advertisers, provides a strong foundation for further expansion of Digital within the total Media-ecosystem in the coming years.”

Emile van den BergIAB | Research & Standards

Joris van HeukelomIAB | Chairman

“2011 has been a great year for online advertising, despite turbulent economic conditions and declining consumer confidence in the last six months. These conditions did have an effect on the expectations of the respondents for 2012; they do not see the double digit growth rates of last year repeated in 2012. To maintain current growth rates in 2012, Dutch online publishers and networks will have to make the most out of the possibilities of automated trading platforms, be able to compete with TV for brand advertising budgets and effectively promote in-app advertising on tablets with advertisers.“

Roel van RijsewijkDeloitte Online Business Innovation


Our methodology

Publication

Estimation

Conversation

Validation

Collection

Missing participants’ data estimated based on previous figures, desk research, expert opinions, industry databases and regression modeling

Deloitte collected data covering 79% of the market*

Final findings cross-referenced and validated with respondents

All findings presented to the IAB and industry participants

* Note: Based on STIR market estimate

Initial findings verified with industry experts, media buyers, and selected publishers


Executive summary

“The growth of the online advertising market in 2010 has continued for a large part throughout 2011”

“We are pleased with this IAB reportas it confirms a growth thatis in line with our annual globalmedia forecast. A growth that stilloutperforms other media, however notgrowing as fast as before.To accelerate growth we think theindustry should now make suremarketing driven thinking is fullymerged with technology solutions tofurther drive, enhance and developdigital advertising.”

Gagandeep SethiDeloitte Consulting | Strategy

Eric SnellemanGroupM | Head of Digital Trading

Despite slow economic growth and declining consumer confidence, the Dutch online advertising market was over €1 b in 2011, a year on year uplift of 12%

However, the lagging economy has an effect on the outlook for 2012; participants expect growth to slow to 7.7% growth for 2012

Ad revenues received by Dutch publishers through their mobile websites and in-app advertising on smartphones and tablets is still very small

Search is still dominant in the online advertising market earning half of total ad spend. Display is where the Dutch publishers and networks need to get their fair share

Automated trading technologies are on the rise with 36% of total display revenue generated through some kind of non-guaranteed pricing mechanism


Background


Comments

• Theeconomyseemstokeepaneasypace as the Dutch GDP is expected to grow at a steady 1.4% for the coming two years

• Followingthesharprecoveryin2010 in the advertising market, future growth is expected to be more in line with GDP

550

625

650

525

500

475

450

425

400

600

575

GDP

Total advertising growth rate YoY GDP Growth rate YoY

2013F2012F201120102009

542 551 560567

576

6%

3%

0%

-3%

-6%

-9%

-12%

-15%

Note: Real GDP based on constant prices

Source: IMF, Zenith optimedia December 2011,

SPOT TV Jaarrapport 2011, PwC Entertainment

& Media Outlook 2011-2015, Radio Advies

Bureau, Deloitte analysis

Dutch GDP projections (€b)

The Dutch economy is expected to experience slow growth over the next two years.

Dutch economy


Note: TV excludes Online TV Advertising

Source: Zenith optimedia December 2011, SPOT TV Jaarrapport 2011, PwC

Entertainment & Media Outlook 2011-2015, Radio Advies Bureau, Company

annual reports, Deloitte analysis

Comments

• ExpectedgrowthforthetotaladvertisingmarketinThe Netherlands in 2012 is 2.1%

• Theonlineadvertisingmarketisexpectedtobecomethe largest market in 2012

• Newspapersandmagazinesareexpectedtocontinuetheir steady decline

• Radioisexpectedtoremainstablethrough2012

• Outdoorisexpectedtogrowsteadily

Estimated advertising market (€m)

Magazines

RadioCinema

Outdoor

TV

Newspapers

Internet+2.1%

3,000

2,000

1,000

0 2012F

4,183

1,189

1,045

1,091

452

235

165 6

2011

4,095

1,068

1,088

1,059

484

233

5,000

4,000 158 5

2010

4,028

954

1,177

965

547

230

150 5

TV and online are expected to grow the most in both absolute and relative terms.

Dutch advertising market


NL Advertising Trends

Newspapers/MagazinesPrint still has a dominant position in the advertising market, with a relatively large share compared to the total time spent on this media. Forecasts show a steady declineofadvertisingincomefornewspapersandmagazines.

RadioTraditional radio is expected to decline in its share of total timespend, but will be compensated by online music services such as Spotify and Pandora. Upside potential in SoA is limited due to the nature of the medium and is expected to stabilize.

TVLinear TV in the Netherlands is likely to have a strong year due to major media events such as the Olympics and European Championships; major advertisers may increase spend on TV advertising as cost per reach is still relatively cheap.

InternetTime spent online will increase over the next few years with video and social being the big drivers. It is expected that advertising budgets will shift in line with this increase in time spend.

Note: Share of Advertising based on collected 2011 data; Time spend based on most recent available

findings from SPOT

Source: Trends tijdsbesteding 2010 SPOT, Zenith optimedia December 2011, SPOT TV Jaarrapport

2011, Radio Advies Bureau, Deloitte analysis

Time spend vs Share of Advertising spend (2011)*

5 10 15 20 25 30 35

Time spend (%)

25

20

15

30

40 45 50

40

45

50

Shar

e of

Adv

ertis

ing

spen

d (%

)

0

35

10

5

0

Newspapers

Indicative direction and speed

Magazines

InternetTV

Radio

As consumers spend more time online, advertisers are expected to respond similarly to rebalance the value of the different media types.

Time spend

* Definitions: Share of Advertising spend is the ratio of advertising revenue of a particular media type to the sum of revenue of all selected media types.

Time spend is the ratio of time spend on a particular media type to the sum of time spend on all selected media types.


Source: CBS, Deloitte analysis

Display advertising revenue vs. consumer confidence

-10

-30

40

-20

-40

€m

30

Oct Sept Aug July Jan Febr

20

10

0

2011

Dec Nov May Apr Mar June

Consumer confidence Advertising income

2010

-20

-30

€m

40

30

20

10

0 Dec

35

Nov

29

Oct

26

Sept

25

Aug

20

July

21

June

28

May

25

Apr

23

Mar

26

Febr

22

Jan

22

-40

0

-10

0 31 28

24 23 25 28 24

40

31 29 27 26

The decline in consumer confidence has had little direct impact on online advertising spend sofar.

Consumer confidence


2011 Results


Revenue by advertising category (€m)

“Adwords costs have increased tremendously due to high bidding; display stands to benefit in the short term from higher prices on search keywords”

“Advertisers are buying more but spending relatively less on display advertising leading to limited growth in the segment”

Search

Display

Classifieds, directories and listings

+12%

2011

€1,068 530

336

202

2010

€954m 460

302

192

Frank GoebbelsOmnicom | Strategy & Development Director

Hein AsserMagna Global | Contracting Director

* Search revenues is our estimation of all revenue of Google and its competitors in The Netherlands

Note: Display revenue includes some double counting from search related revenues; Classifieds,

directories & listings estimated based on a limited number of data points; Display and Classifieds,

directories & listings data for 2010 restated based on revised revenues figures from respondents and

additional data from new respondents

Source: Survey respondents, Annual reports; Deloitte analysis

The Dutch online advertising market was almost €1.1b in 2011, a year on year uplift of 12%.

Online advertising market


Other

Interruptive formats

Textlinks (incl. AdSense)

Embedded formats

Video

19%

31%

50%2011 Display formats

61%

10%

9%

8%

12%

Display Classifieds, directories and listings

SearchNote: Embedded formats are for example

traditional banners and skyscrapers

Source: Survey respondents, Deloitte analysis

More than half of display advertising revenues come from traditional embedded formats.

Details display advertising

Display advertising breakdown by format


Display advertising revenue per medium Number of devices

Note: In-app only includes revenues from

survey respondents and excludes revenues from

players such as Google and Apple

Source: Survey respondents, Emerce.nl,

Deloitte analysis

3%

9%

88%

In-app / Mobile website Tablet

Smartphone

E-mail

Website/browser

64%

36%

In-appMediums Dev

ices

(x1

m)

7

6

5

4

3

2

1

0

1.0

Smartphones

6.4

Tablets

Mobile websites and in-app advertising is small; within apps, tablets have a 36% revenue share while there are 6.4 times more smart phone devices then tablets.

Display revenue per medium

“On the one hand we can conclude that publishing for tablets which is dominated by Apple is still in the beginning of its lifetime-cycle. But the promise is huge. If you focus on the advertising-value of publishing on tablet you only can conclude that it is remarkably high. I assume that next years’ adspend study will show remarkable growth in this category.”

Joris van HeukelomIAB | Chairman


Comments

• ShareofAdvertisingspendistheratio of respondent revenue to the sum of revenue of included respondents

• ShareofVisitorsistheratioofrespondent unique visitors to the sum of unique visitors of included respondents

• Thepowerratioiscalculatedbydividing Share of Advertising spend by Share of Visitors

• Publisherswithaspecifictargetaudience received a high advertising share relative to their visitors’ share

• 4publishershaveanextraordinaryshare of advertising compared to their reach

• 6publishershavebelowaverageadvertising performance compared to their reach

Note: Unique visitors are according to STIR

definitions of visitors over 13 years of age

Source: STIR 2011, Survey respondents,

Deloitte analysis

Low

Average

High

0

2

4

6

8

10

12

Number of publishers

SoA

/ S

oV

11111122111121

0.3 0.5 0.6 0.7 0.8 1.0 1.1 1.21.8 1.9

2.9 3.0

6.0

12.4

1.0

Publishers vary in reach and performance in capturing advertising spend with market leaders capturing the most relative value through niche focus.

Power ratio display advertising

Power ratio display advertising


Top five industries by revenue share

Note: Excluding classifieds, directories &

listings, search and industry category other;

2011 included 3 new categories – ICT Services,

Fashion and Personal care; 2010 shares updated

to include additional respondents


Energy 1%

Free time 2%

Retail 2%

Fashion 2%

ICT Services 2%

Personal care 3%

Public sector 3%

Hardware & electronics 4%

Travel 7%

Automotive 7%

Online retail 9%

Telecom 10%

Financial services 14%

Consumer goods 17%

2010 2011

7%

5%

1%

6%

-4%

Change

3%

-1%

0%

0%

-2%

-1%

10%

11%

4%

5%

3%

2%

2%

4%

9%

9%

3%

Energy

Free time

Retail

Public sector

Hardware & electronics

Travel

Automotive

Online retail

Telecom

Financial services

Consumer goods

Consumer goods takes position as top spender amongst publishers while Financial services spending moves to a second position.

Industries


Display advertising revenue per payment model

“As we move towards more automated trading, CPM is becoming the default currency.”



51%CPM

19%CPS

12%Fixed Fee

9%CPC

2%Other

7%CPL

The CPM payment model maintains a leading position as the preferred revenue model for display advertising.

Revenue per payment model


A significant portion of sales is not realized through traditional ratecards but through using an automated trading mechanism.

Display advertising revenue by price mechanism

Note: Guaranteed revenues defined as sales

from upfront agreed upon price, for example

based on a ratecard. Non-guaranteed revenues

resulting from sales without an upfront agreed

upon price, for example exchange traded

inventory.


Non-guaranteed

Guaranteed

64%

36%

2011

Ad network / ad exchange

Agency trading desks

Ad network / saleshouse

Automated trading agencies

11%

45%

44%

2%12%

19%

67%

2011 Third parties

Media agencies

Direct sales

Third parties

Sales mechanism and channels

“2012 is going to be the year where automated trading really becomes part of a total integrated marketing solution. Automated trading has developed far from remnant inventory and moves to premium partnership solutions ranging from awareness to performance and ultimately delivering true ROI for our clients. The publishers that really gets the ultimate mix between branded content, premium formats & inventory and performance driven solutions is up for a great year.”

Mark Stockx Telegraaf Media Nederland Sales Director Digitaal

Revenue per channel


Of the total reported online advertising spend in 2011, €117m was generated through affiliate networks.

Spend on affiliate marketing (€m) Affiliate revenue by publisher model

Note: Division of revenue by publisher model

based on data from an estimated 50% of the

total market

Source: Survey respondents; Jochem Vroom

Affiliateblog/Imbull BV; Deloitte analysis

117m

Search (SEO/SEA)

Social Media

Comparison sites

Coupon codes

Cashback and loyalty

Topic publishers

Advertising networks

7%4%

48%

3%

12%

6%

20%

Publisher model

Affiliate marketing

“The historical participation of all relevant market players to the IAB – Deloitte ad-spend study will have a positive impact on the further development and transparency of this highly innovative and dynamic sector within the online marketing landscape.”

Bas RogaarAffilinetTaskforce Affiliate marketing


Outlook


Respondents predict a 7.7% market growth in 2012 weighted by respondent revenues.

Survey respondents growth expectations

* Growth expectation calculated by weighting

responses with company revenue

Source: Survey respondents; Deloitte analysis

“Companies expect a weighted growth rate of 7,7% in 2012; a clear downward revision of expectations voiced in H1 2011 of 20%.”

Gagandeep SethiDeloitte Consulting | Strategy

45% 50%20%18%15%12%10%

1 1 3

8%

1 2 13 2 3 1 1 13

5%4%2%

number of respondents(total of 32)

Weighted average growth expectation*

Low

Average

High

7,7%

2012 expectations

Revenue growth expectations


Online retail and Consumer goods were the sectors that have grown most in online ad spend in 2011, as expected by the participants in the last survey.

Online retail RetailConsumer goods

Financial services

Travel

0%3%

8%

6%4%

RetailTravelConsumer goods

Online retail Financial services

3% 3% 2% 2% 2%

Sector growth expectations vs actual results


Expectation of growth in 2011 by industry

Actual change in share of total market by industry in 2011


For 2012, CPM remains the main payment model and is expected to grow the most. Retail is expected to grow the most in spend. Expectations of growth of in-app advertising are limited.

Growth expectations for 2012


In-app

E-mail

Mobile website

WebsiteCPM

Fixed Fee

CPS

CPC

CPL

14%

4%

6%

3%

3% Telecom

Fashion

Consumer Goods

Payment model Industry Medium

9%

3%

4%

2%

13%

3%

9%

2%

2%

Online retail

Retail

Growth expectations 2012


Display

Classifieds

192

302

2010

€4942011

€538

202

336

2012F

€580

210

370

Display and classifieds, directories and listings revenues are expected to grow from €538m to €580m in 2012.

Display and classifieds forecast 2012 (€m)

Source: Survents respondents, Deloitte analysis

“The growth rate in 2012 for display advertising could be more than expected, driven by a slight shift away from keyword advertising.”


Revenue forecast


Appendix


Methodology

Online advertising market

• Over40companiesreportedtheirdatabasedonthequestionnaire.

• Thedatagatheredcomprises79%oftotalreach(basedonSTIR)

• Thefiguresaredrawnuponthebasisofsitedeclarationandhavenotbeenaudited

• Whereverneededwehaveusedtoolssuchasregressionanalysistomakeestimations regarding total market

• Basedontheinformationprovidedbysurveyparticipants,figureshavebeenadjusted for double counting when possible

Search and classifieds estimates

• Duetolimitedavailabilityofcompanydatawehadtoestimatethemarketsizefor search and classifieds based on market data

• TogetherwiththetaskforcesearchfromtheIABwedefinedthesearchmarketandestimatedthemarketsize

• Googleregulationsforbidcommentingonoursearchmarketestimates

• Theclassifiedmarketisbasedonpublicavailablemarketestimates.Duetolimiteddatapoints,currentclassifiedmarketsizecouldnotbeverified


Definitions

Categories

• Display -Embeddedformats(banners,buttons,skyscrapersetc) -Interruptiveformats(richmedia,overthepage,pagetake-overetc) -Tekstlinks(incl.AdSense) -Video(pre-/mid-/postroll) -Otheruncategorizeddisplayadvertising

• Onlineclassifieds,directories&listings - B2B - B2C - C2C

Payment models

• FixedFee:Paymentmodelbasedonafixedfee

• CPM:CostperMille=Paymentmodelwheretheadvertiserpaysperthousandviewers

• CPC:CostperClick=Paymentmodelbasedonthenumberofclicksonanadvertisement

• CPL:CostperLead=Paymentmodelthatisbasedonthenumberofleadsgenerated. A lead is an online conversion where the consumer shares its contact details and indicates to be interested

• CPS:CostperSale=Paymentmodelbasedonthenumberofsalesgenerated


Name of company

1 Adfab

2 Adfactor

3 Adlantic

4 Admitter Nederland

5 Affiliate4You

6 Affilinet Nederland

7 Bannerconnect

8 Beslist.nl

9 Cleafs

10 ClickDistrict

11 Daisycon

12 De Persgroep Advertising

13 Digimo Media

14 FD Mediagroep

15 Funda Real Estate

16 HDC Media

17 Hi-media Nederland

18 IDG

19 Kluwer Media

20 Lumata

21 Marktplaats Media

22 Microsoft

Name of company

23 NDC Mediagroep

24 NRC Media

25 OMG/Netdirect

26 RTL Nederland

27 Sanoma Media

28 SBS

29 Ster

30 Sulake

31 TAPPS

32 Telegraaf Media Groep

33 Tibaco

34 TradeDoubler

35 Viacom International Media Networks Northern Europe

36 Videostrip

37 VNU Media

38 WebAds Interactive Advertising

39 Koninklijke Wegener

40 YD

41 Young Advertising

42 Zanox M4N

43 Zoom.in

List of survey participants


Data sources

Company / Organization Website

1 Affiliate blog www.affiliateblog.nl

2 CBS www.cbs.nl

3 Comscore www.comscore.com

4 Emerce www.emerce.nl

5 Forrester www.forrester.com

6 Google www.google.com

7 Imbull www.imbull.nl

8 IMF www.imf.org

9 PwC www.pwc.nl

10 Radio Advies Bureau www.rab.fm

11 SPOT www.spot.nl

12 STIR www.stir.nl

13 Zenith Optimedia www.zenithoptimedia.com


Lauren van der HeijdenIAB NederlandTel: +31(0)854010802Email: [email protected]

Dutch IAB research includes the IAB / Deloitte Ad Spend Study, all IAB commissioned research and assisting IAB members with their research projects. Also responsible for shaping the IAB knowledge base so that it meets members’ needs moving forward.

Roel van RijsewijkDeloitte Online Business InnovationTel: +31(0)652615087Email: [email protected]

Roel is a Director with the Risk Services practice from Deloitte with more than 10 years of experience in risk consulting for companies in the Technology, Media &Telecommunications(TMT)industry.RoelleadsoneofDeloitte’smaininnovationprojects on ethics and trust in a digital world and is co-founder of Deloitte’s Online Business Innovation group.

Gagandeep Sethi Deloitte Consulting | StrategyTel: +31(0)613127167Email: [email protected]

Gagandeep Sethi is a Manager in the Corporate Strategy practice of Deloitte Consulting Netherlands with more than 10 years of experience within the Technology,Media&Telecommunications(TMT)industry.

For questions concerning this research feel free to contact:

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