1 TARGETING BEHAVIORAL THE STATE OF ONLINE MARKETING: AND OTHER KEY TRENDS

2 Advertisers are spending more and more online as a result of increased Internet penetration and media usage. Online Penetration in Western Europe, 2004 to 2010 Source: Jupiter Research, June 2005 THE STATE OF ONLINE MARKETING 0% 10% 20% 30% 40% 50% 60% 70% Total Online Advertising Revenues in Western Europe, 2003 to 2009 Source: Jupiter Research, August 2004 € 0.0 € 0.5 € 1.0 € 1.5 € 2.0 € 2.5 € 3.0 € 3.5 € 4.0 € 4.5 €

3 Online spending will continue to increase, due to new opportunities provided by such emerging marketing tactics as behavioral targeting. Top-Performing Online Tactics as a % of Respondents Source: MarketingSherpa, house list Paid search Behavioral targeting Affiliates Rich media ads US Behavioral Targeting Ad Spending $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1, In Millions Source: eMarketer, 2004 THE STATE OF ONLINE MARKETING

4 WHAT IS BEHAVIORAL TARGETING? Behavioral targeting reaches users whose previous actions indicate that they are interested in a given product or service. Adware Solutions Site-Side Solutions Network Solutions Targets ads via software that users download onto their computers. Enables publishers to target audiences within their site based on surfing behavior. Targets specific audience behaviors across a network of websites. NEWS

5 Adware solutions are highly targeted and have significant reach, but are prone to privacy issues and a high churn rate. ADWARE SOLUTIONS Behavioral Targeting via Downloadable Software Consumers agree to receive advertising in order to download free software. Adware programs track user activities and deliver pop-up ads based on behavior. Advertising Professionals’ Opinion Regarding the Use of Adware 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Strongly Opposed Somewhat Opposed Somewhat Supportive Strongly Supportive Source: AAF, November 2004

6 Site-side solutions are highly targeted and increase the value of publishers’ run-of-site inventory, but provide limited reach for advertisers. SITE-SIDE SOLUTIONS Lift in Brand Metrics – Behavioral vs. Content Targeting on iVillage 0% 10% 20% 30% 40% 50% 60% 70% 80% Brand Awareness Behavioral Targeting Content Targeting Purchase Intent Brand Favorability Source: Dynamic Logic Behavioral Targeting within a Single Website Inventory within the travel section of a news website can often book quickly. Behavioral targeting reaches this “travel” audience across the publisher’s site.

7 Capitalizing on Behavior on Third-Party Websites Pixels on publisher sites are used to create behavioral segments based on site activity. Advertiser campaigns are served across websites to their desired segment. Capitalizing on Behavior on the Advertiser’s Website Pixels on advertiser’s site anonymously identify activity, e.g., researched flights. Ads sent to those users after they exit the site and visit sites within the network. Network solutions overcome the challenges of alternative providers in their ability to deliver a highly targeted audience with sizeable reach. NETWORK SOLUTIONS Network Behavioral Targeting vs. Single Site Content Sponsorship Source: 24/7 Real Media Single Site Content Sponsorship CPMCTR Network Behavioral Targeting Lift in CVRLift in CTR 3,130%225%Advertiser C 2,232%94%Advertiser B 167%192%Advertiser A Percent Lift – Behavioral vs. Run of Network Source: Advertising.com

8 Behavioral targeting delivers unprecedented relevancy, response and ROI for online advertisers and publishers. WHY THE RISE IN BEHAVIORAL TARGETING? Source: eMarketer, September 2004 Why Behavioral Targeting is Hot Increased spending by traditional advertisers who rely heavily on targeting Increase in online spending leads to sold-out inventory on some sites Success of contextual and search has marketers demanding more relevant advertising

9 Increased spending results in valuable “content” selling out. Behavioral targeting reaches users across content based on observed interests. WHY THE RISE IN BEHAVIORAL TARGETING? Percent Sold Inventory, 2003 – 2005 Source: AdRelevance, house ads versus non-house ads 0% 10% 20% 30% 40% 50% 60% 70% 80% Q2’2003Q1’2004Q1’2005 US Online Advertising Spending, 2003 – 2008 (in billions) $0 $5 $10 $15 $20 $ Source: eMarketer, May 2005

10 Marketers have benefited from the relevancy of contextual and search. Behavioral targeting is an extension of this “in the moment” marketing. WHY THE RISE IN BEHAVIORAL TARGETING? Users' Willingness to Click on Ads that are More Relevant to Their Interests Source: Ponemon Institute, Revenue Science, Chapell & Associates, September % 5% 10% 15% 20% 25% 30% 35% 40% 45% Absolutely yes Most likely yes UnsureMost likely no Absolutely no % of Respondents US Search Marketing Spending, by Segment, (in millions) $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5, Contextual listings Paid placement Source: Forrester Research, October 2003

11 Goal: Drive consumers to configure a new Volkswagen A4 and request information from a local dealer. CASE EXAMPLE: VOLKSWAGEN Demographic Targeting Targeted to consumers who researched cars online in the past six months Targeted to users who visited the VW website but did not configure a vehicle Behavioral Targeting Source: Advertising.com Impressions9.7M Configurations10,449 Information Requests7,970 Conversion Rate for Configurations42% Conversion Rate for Info Requests32% Impressions100M Configurations8,495 Information Requests3,609 Conversion Rate for Configurations10% Conversion Rate for Info Requests4% 1,077 configurations and 822 requests per million impressions 85 configurations and 36 requests per million impressions

12 Goal: Leverage behavioral targeting to convert consumers who visited the Lane Bryant website but did not complete a sale. CASE EXAMPLE: Source: Advertising.com Cost per Sale Target CPSActual CPS Cost per sale Source: Advertising.com Revenue GoalDelivered Revenue Online sales revenue Beat cost-per- sale goal by 85% Beat revenue goal by 408% Delivered Revenue

13 Goal: Convert consumers who researched VoIP services, but did not immediately purchase. CASE EXAMPLE: Source: Advertising.com ,000 1, Conversions Week Conversion Rates – With and Without Behavioral Targeting Without BehavioralWith Behavioral Conversion Rate Conversion rate more than doubled Weekly Conversions – Before and After Behavioral Targeting Behavioral targeting implemented

14 WHY THE RISE IN BEHAVIORAL TARGETING? Behavioral targeting enables marketers to reach in-market consumers and increases the value of publisher inventory. Increased spending by traditional advertisers Increase spending = sold-out inventory Success of contextual and search advertising Experience/comfort with audience segmentation offline will lead to increased behavioral dollars online Ability to create behavioral segments across content increases the value of run-of- site inventory Behavioral targeting provides the level of relevancy – and response – delivered by the ever-popular search marketing

15 Source: eMarketer, September 2004 For continued growth, providers must address the underlying challenges and issues associated with behavioral targeting. BEHAVIORAL TARGETING CHALLENGES Challenges of Behavioral Targeting Consumer privacy concerns The debate over data ownership Lack of industry standardization

16 With the rise of network solutions, the issue of data ownership has become a challenge for website publishers and their behavioral partners. BEHAVIORAL TARGETING CHALLENGES Overcoming Data Ownership Issues Networks and publishers must establish a clear policy with regards to: What data will be shared How the data will be used Ultimate ownership of the data The Consumer Data Trail NETWORK WEBSITE

17 Publishers, technology providers and advertisers define each behavioral segment/audience differently and lack universal success metrics. BEHAVIORAL TARGETING CHALLENGES Overcoming Standardization Issues While awaiting industry standardization, advertisers must define on their own: The audience they want to reach and how behavioral targets are defined The definition of success, e.g., conversions, audience composition, brand lift, against which all providers are measured Standardization There are currently no industry standards with regards to how behavioral targeting is defined and measured. Publishers ? Technology Providers ? Advertisers ?

18 THE FUTURE OF BEHAVIORAL TARGETING As targeting, tracking and reporting technologies advance, behavioral solutions will expand across objectives and channels. The rise of network solutions Multi-channel behavioral targeting Increased accountability With advertisers demanding increased reach, network solutions will continue to grow Advertisers are looking past basic reach metrics to determine campaign impact on actual revenue Behavioral solutions are expanding beyond the Web to include search- and -driven platforms

19 THE FUTURE OF ONLINE MARKETING Wireless advertising will also grow, as a result of increased use of mobile devices by European consumers. European Mobile Marketing Spending, 2004 to 2010 (in millions) Source: Jupiter Research, April 2005 European Wireless Penetration, 2004 to 2010 Source: Jupiter Research, April % 72% 73% 74% 75% 76% 77% 78% 79% 80% € 0 € 100 € 200 € 300 € 400 € 500 € 600 € 700 €

20 Advertisers will continue to shift media dollars to the Internet as consumers increase their online usage and marketing technologies advance. THE STATE OF ONLINE MARKETING Questions? For additional information, please contact Advertising.com’s Danish office: Århusgade 88, Copenhagen Phone: