Publicidad y Nuevos Medios Wally Swain SVP, América Latina 27 de febrero de 2008

Agenda Yankee Group Vision and Advertising On-line Advertising Mobile Advertising Conclusions Q&A

Agenda Yankee Group Vision and Advertising On-line Advertising Mobile Advertising Conclusions Q&A

A global communications revolution is underway Three network technologies are unleashing the next wave of the network effect: IP as a de facto standard broadband wireless Barriers protecting traditional networks are falling Business models, laws and social norms are all under attack as well We are accelerating towards ubiquitous connectivity, when all people and will be connected anywhere

Revolution will lead to the Anywhere Network The Anywhere Network is Yankee Group’s vision of a seamless and always-accessible intelligent infrastructure that provides a connection for everyone to everything from anywhere Where is the Anywhere Network developing? What are the sustainable business models? How will technology and regulation effect change? How will devices evolve in concert with the network?

Consumers Will Connect to Everything from Anywhere Regardless of their physical location, consumers' access to content and applications will affect all service sectors. Image source: Flickr

Content Delivery Value Chain Who pays for TV content and how? Disney Chanel CableCo This simple flow of money does not pay for television content production. And would not apply to Internet where Consumers will only pay subscriptions for very specialized content. Production Program Deliver Consume Subscription Rights Purchase

Content Delivery Value Chain Who pays for TV content and how? Disney Chanel CableCo Most of the value chain is paid for by Consumers buying the goods Advertisers need to sell. This is the New Media model content providers hope to exploit. Production Program Deliver Consume Purchase Rights Subscription Product Placement TV Ads Ad Insertion Buy Goods Advertisers

Content Delivery Value Chain Implications for Intenet UGC YouTube Carrier The great benefit of User-Generated Content is that Internet brands like YouTube get content for FREE. carriers have no equivalent of ad-insertion. Production Program Deliver Consume Display Ads Buy Goods Advertisers

Digital Advertising & Marketing: Perspective Objective Type of Marketing Digital Tools Advertising is a tool that marketers use to: Build brand awareness Engage customers and prospects And ultimately increase sales. The marketing funnel describes these different types of marketing objectives There are different types of media choices: Print Radio Television Out of home Online Site sponsorships Awareness Brand Advertising Video advertising e-mail marketing Direct marketing Rich media Direct response Text/Search ads The goal of this slide is to level set the audiences. Marketers know these things implicitly. Technology people who are interested in marketing, especially some form of digital advertising, can always use a refresher. The primary difference between awareness and intent is that we know that we need to be marketing to people to make them aware of a brand well before they buy. In digital media, intent is best described as “I’m interested in learning more about…” which is when most people do internet searches. Key notes: Intent advertising is worth less on a cost per thousand (CPM) basis than brand/awareness advertising. Prime time television shows earn CPMs of ~$35-40, whereas the average online CPM is closer to $2. To understand the role of awareness. Just remember that the day that someone decides to buy a $50,000 car is the wrong time to start advertising Mercedes to that person. It’s way too late. In the digital tools: Site sponsorships = main page (e.g. portal) takeovers Video advertising = TV ads delivered as pre-, mid- or post-roll in online video clip Rich media = popup windows, other forms of video windows, casual games, etc. E-mail marketing = this should need no explanation SEO = Search Engine Optimization for websites SEM = Search Engine Marketing Text/search = the types of ads that Google sells… Intent

Digital Advertising Landscape Buy Side Sell Side Ad Network Brands and Advertisers Consumers Agencies Direct Audience Targeting Publishers Websites Portals Online publications Video content Gaming Mobile operators Social Networks Web 2.0 apps Telecommunications Digital television Distribution (CATV, DBS, IPTV, etc.) Syndication & other secondary dist Ad exchange Ad Server Targeting Platform Enabling Tech Brands use advertising to reach a group of customers described by a demographic or psychographic profile There are many types of enablers, including networks, exchanges and technologies Publishers create and own content. Historically, individual types of content have had clearly defined audiences relevant to advertisers. Interactive targeting is a way to re-define online audiences for advertisers The target. The goal. Advertisers need to get in front of consumers a minimum of three times with a message in order for consumers to retain it. Large advertisers work with ad agencies, though smaller advertisers may purchase directly. Interactive makes this easy. Source: The Yankee Group

Advertisers spend significant dollars on traditional media TV Gets 41% of Spend Spending shifts from Newspapers to Internet Internet gets 9% -- More than Magazines or Billboards Source: TVB, NAA, RAB, IAB, Yankee Group

Colombian Advertising Spend Internet not even tracked by IBOPE

Agenda Yankee Group Vision and Advertising On-line Advertising Mobile Advertising Conclusions Q&A

In the US, Consumers spend less time focused on television.

Internet delivered video represents both a threat and an opportunity Q. What types of video do you watch online? n = 517 Source: Yankee Group Anywhere Consumer: 2007 U.S. Entertainment Survey

Online Advertising as a percent of total will triple

Advertisers will pay equivalent amounts for Internet “viewers”

Internet video transforms the viewing landscape Source: Yankee Group, 2007 mike

Where do advertisers spend their online dollars? Source: Internet Advertising Bureau, 2007

Search provides context and permits targeting ? Google or Yahoo show me FREE how to get the information I want. Ski resorts and ski manufactures pay them to get access to someone who is interested in skiing.

Targeting The carrier opportunity is to support targeting Dayparting Geographical Demographic Context Dayparting is the well-established practice of selling advertising based upon time of day when different products have greater appeal, such as coffee in the morning and pizza at night. Geographical targeting is the practice of correlating an IP address to a particular postal code or demographic market area (DMA). Demographic targeting combines IP network information with addresses and credit reports to determine the age, gender and income of online households and users. Contextual targeting relates to content on specific web pages. Large publishers and advertising networks use software to scan web site text and apply classification schema to individual pages, links, e-mails and other content. Ads are then served according to network or publisher taxonomies. In the future, developments in software are expected to enable publishers to apply similar taxonomies to video and audio content, including telephone calls and interactive video. Behavioral targeting (BT) is a well-understood targeting product that relies on user behavior, advertising networks and third-party browser cookies to serve ads based upon advertiser-defined preferences. The behavior in question can be clicking on specific parts of a web site or browsing to other types of sites. Psychographic profiling places social networking users into groups based upon contextual analysis of their published user profiles, including overlays of behavioral, demographic, dayparts and geographic information. Fox Interactive Media recently launched a psychographic program on MySpace, classifying users by one of a dozen enthusiast areas. Behavioral Psychographic

How does the carrier support targeting? Dayparting Time of day context for user Geographic Cross-reference IP address and physical location Demographic Cross-reference IP address, carrier CRM and recent activity Context Consolidate recent activities across multiple sites Behavioral Click sequence capture across multiple websites Psychographic Portals and multiple website profiling The challenge is that many users would view this as intrusive or – worse – as a violation of privacy

Where is online advertising going? Narrowband Broadband Novelty Essential Text Video, audio, multimedia PC Centric Multiple devices Productivity and publishing Entertainment Anonymous Aware Work and home Anywhere Advertising separated from content Contextual Integrated Response advertising Response and branding Push / publish advertising Participatory A place to go Everywhere you go

Recommendations for Advertising Networks, Operators and Enabling Technology Vendors Help publishers develop their business. Publishers will be challenged to cobble together various technologies and services into a cohesive technology plan and product road map. Think “sell through” and not “sell to.” Innovate with marketer segments. Clarify marketing expectations and how they relate to new interactive products and technologies. Solve workflow and automation challenges for advertisers. What technologies can ad networks and technology vendors build into services so that agencies can benefit? And this means more than a web interface. The last thing anyone needs is another username and password. Plan on video standards from the beginning. Digital media is disruptive, and we’ve already seen the fragmentation that comes with different forms of distribution for video. Although the ad formats may vary from the internet to broadcast television, there will be standards. So plan for them.

Agenda Yankee Group Vision and Advertising On-line Advertising Mobile Advertising Conclusions Q&A

POWER SHIFTS IN VALUE CHAIN Carriers are the most powerful stakeholders in the mobile advertising industry ADVERTISERS AGENCIES ENABLERS PUBLISHERS CARRIERS Reebok Adidas Anheuser Bush P&G Ford Daimler-Chrysler Budweiser Carat Interactive WPP Omnicom Mindshare Ogilvy ipsh Admob Enpocket/Nokia Third Screen Media Millennial MSFT JumpTap Medio Systems MediaFLO MobiTV USA Today TWC Turner Disney (ESPN, ABC) CBS NBC Viacom (MTV, Comedy Central) 100s of sites… Telefonica America Movil AT&T Verizon Wireless Sprint Nextel T-Mobile Orange Vodafone 3 EXAMPLE COMPANIES CONSUMERS INFLUENCE ON CHAIN High Medium Low Medium High POWER SHIFTS IN VALUE CHAIN Carriers have eyeballs, and are just starting to sell inventory and exert influence down chain Off deck publishers are acting independently, but are developing two prong strategy (on deck and off deck). Their power stems from the appeal of their content and internet relationships Enablers have bifurcated strategy – appealing directly to publishers and working with carriers Agencies and advertisers hold the purse strings. Mobile comprises tiny portion of ad buy. Source: The Yankee Group

Carriers’ bread and butter is about core (voice) transactional revenues and data’s future promise US Revenue Forecast 2006 Voice $121.8B Data $16.2B (12%) $53 $52 Blended ARPU $51 2011 Voice $136.3B Data $39.4B (22%) Source: Yankee Group, 1Q07

FURTHER REQUIREMENTS FOR GROWTH Mobile advertising: drivers, inhibitors, and further requirements for growth DRIVERS INHIBITORS Huge TAM. Volume of Handsets, time spent on mobile platform, growth trajectory of mobile for Internet, Video and other entertainment Untapped medium Advertisers, publishers and carriers need to replace declining revenues traditional channels Appeal and promise of targeting and proximity to commerce Network and device advancements Mobile carriers need for control Unproven business models Lack of standards Inherent display and form factor limitations Fractured ad buying/selling ecosystem Lack of real metrics Privacy and personalization concerns Uncertain consumer tolerance FURTHER REQUIREMENTS FOR GROWTH More success stories with measurability of effectiveness More cohesive carrier participation Consumer value creation – through better content, easier access, and (for some segments and experiences) subsidies Scale. Advertisers require breadth as well as targeting

Motivations differ but agree on priorities – Grow mobile advertising! MOTIVATIONS WITHIN THE VALUE CHAIN Advertisers and Agencies Enablers Publishers Service providers Losing eyeballs in traditional forms of media (Television, print) Need reach and breadth of audience Want early mover advantage Need metrics of efficiency – ROI Appeal of localized personalized targeting Another touch point for integrated experience Stake early claim in market Take risk for early position and hope for outrageous reward Pure play vendors want to create market for their technology Integrators looking to position in growth category Another revenue stream Take control of business models Position for growth as extension of Internet business models Grow advertising revenues across platforms Balance between going alone and cooperating with behemoth carriers that possess and control customers Grow data revenues and data service appeal Buttress declining ARPU from basic connectivity Take bounty on any traffic on network Differentiate service plans from competitors Leverage “three screen appeal” to advertisers Protecting consumer privacy while leveraging consumer context Source: The Yankee Group

Carrier and non-carrier channels (participation) Mobile is confusing for advertisers – with multiple, fragmented platforms/technologies and channels to market Mobile platforms Messaging (SMS, MMS, A2P, P2P) – largely used for marketing/promotional campaigns Mobile Internet/Web – like the web, largely used for banner/display or text ads, with various click through mechanics options E.g., Click-to-Call, Click-to-Coupon, Click-to-Locate, Click-to-URL, Click-to-Data Capture (SMS or email address), Click-to-Survey, Click-to-Contest, etc.) Mobile Search – sponsored, click-to-call Mobile Video/TV – pre- and post-roll, within broadcast channels Downloadable applications (games, etc.) On-device portals Idle Screen Other (Bluetooth, RFID, NFC, etc.) Carrier and non-carrier channels (participation) On-deck/portal – within the walled garden Off-deck/portal – outside the walled garden (D2C)

Where are mobile operators’ opportunities in advertising?

Mobile advertising by platform/channels – who’s got the power in the value-chain

Messaging and mobile web: where today’s reach is in mobile Active Usage of Mobile Features/Capabilities (Use Once a Month or More) Messaging Personalization In 2007, nearly 13% of consumers were active mobile web browsers, and 19% of consumers had attempted to use the Mobile web (up from 6% and 18% respectively from 2006). Entertainment Web Source: Yankee Group 2005-2006 US Mobile User Surveys, Anywhere Consumer: 2007 US Web/Data Survey.

Disintermediation/Google-ization is happening already When you browse the mobile web, what types of sites do you access? About 40% of 18-34 rank web browsing among the top five mobile apps they are interested in. About 20% of 18-34 regularly browse the mobile web. Despite carriers’ tries to close the door on Google, its PC web dominance has easily transferred to the mobile web. Source: Yankee Group Anywhere Consumer: 2007 US Web/Data Survey, 2007 Teens and Technology Survey

Consumers still uncertain about ad-supported mobile experiences How Would You Like to Pay for these Mobile phone services (select one answer for each service shown)? Variable bases, and represents includes those respondents who listed the above services/applications among the top five for future use. Source: Yankee Group Anywhere Consumer: 2007 US Web/Data Survey

Preferred Payment Model Mobile Application Included Consumers most open to ad-supported models within mobile entertainment experiences Preferred Payment Model Mobile Application Included Pay Fee View Ads Don’t Know Communication Tools Text Messaging Photo Messaging Video Messaging Mobile IM Email Push-To-Talk 52.40% 19.70% 27.87% Entertainment Services Game Downloads Adult Content Listen to Music or Radio Watch TV or Video 39.60% 27.30% 33.11% Web Access & Productivity Information/Directions Post/upload photos Access Social Networks / Online communities Internet Browsing Receive Text Alert 46.70% 20.90% 32.45% Personalization Graphics/wallpapers Ringtones Ringback tones 46.40% 23.70% 29.90% Consumers express mixed feelings towards mobile service payment models, but are clearly willing to pay directly for core Communication Tools like SMS, IM and email Consumers are open to advertising supported Entertainment Services, like gaming or multimedia downloads This may prove to be a viable model, given higher reported click-through rates for mobile advertising Of the 30% of respondents interested in using the mobile internet, 6% reportedly clicked through (3X traditional rates) n = varies, % are aggregate – weighted average Source: Yankee Group Anywhere Consumer: 2007 US Web/Data Survey (online survey of 1,500 adult US mobile consumers)

Gap between what adults say they will pay for multimedia services and what it currently costs Percent of Respondents Interested in Spending Monthly and Amount Willing to Spend per Month n=variable bases among top 5 applications interested in using and willing to pay monthly fee Source: Yankee Group Anywhere Consumer: 2007 US Web/Data Survey

US carrier approach to ad enablement Attitudes on Advertising Current Activity and Early Initiatives Assessment Verizon Outpacing all competitors in churn management – with primary focus on retention and share grab Taking tempered, controlled approach Most vocal about consumer privacy concerns relating to mobile advertising Quietly launched on deck mobile web advertising on secondary pages using TSM Using Medio Systems for search Advertising served in Media FLO mobile TV services; targeted/mobile-specific advertising will be served in the future Most expressed concern about use of personal data to target Verizon Wireless not integrated strategically with wireline, which may affect cross-channel opportunities Sprint Nextel First mover in mobile data Highest data ARPU Losing share and more in need of supplemental revenue Launched on deck mobile web advertising initiative using Enpocket / Nokia Working with Microsoft for on deck search and MobiTV for video/TV View local search as critical component of advertising strategy Risk of under-funding behind strategy WiMAX play could provide some level of differentiation AT&T Largest nationwide carrier, with number 2 carriers (VZW) nipping its heels Mass market push around 3-screen vision Most open to new business models Expressed concern over not affecting transactional data revenue and consumer experience in advertising Trials of WAP banner and text ads launched in June to gauge consumer acceptance Yahoo! Go enabled on some handsets Using Infospace for on-deck search Advertising will be served in Media FLO mobile TV services; targeted/mobile-specific advertising will be served in future 3 screen vision way ahead of 3 screen capabilities, but most likely to look for cross channel opportunities T - Mobile Value play Customer base most attractive to deploy advertising against Limited data offers 3G spectrum now available Using Medio for on-deck search Potential to be most disruptive with advertising play (e.g., 100% ad-supported business models)

What carriers need to do to move the market forward Prove the appeal of mobile to advertisers by building the inventory Test user acceptance Ensure standardization and reporting Look to monetize across on- and off-deck environments Build more sophisticated targeting, including location-based elements Partner where you lack skills Take a tempered approach

Agenda Yankee Group Vision and Advertising On-line Advertising Mobile Advertising Conclusions Q&A

Conclusions In the US, Internet advertising is 10% of total. Growth has come at the expense of Newspapers. LA advertisers speed less on Newspapers today so direct analogies may not apply Consumers live with ad-supported models in TV and Internet Search but don’t know what it means in Mobile Carrier opportunity is supporting Targetting Speed is of the essence Good Luck! New costumer demands will require carriers to re-think their strategy to focus more on an open application layer of their network and partner with third parties to innovate new services IMS allows carriers to promptly meet the demands of a new communications scenario by consolidating services across a single platform, transforming dumb into intelligent network.

! Muchas Gracias! Wally Swain wswain@yankeegroup.com + 57 1 759-8748