Building Brands Online:

An Interactive Advertising Action Plan

November 12, 2009

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
Project sponsors

SFR 091112 Building Brands Discussion2 2

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
Why care about Building Brands Online?

• Direct response and driving “transactions” is the

“killer app” for online advertising …

• …but online advertising is not delivering on

brand marketer requirements and
expectations

• Growth in supply of online inventory creating

price pressure and commoditization

• Trend toward ROI-based and “response”

advertising, (versus longer-term brand equity
investments) exacerbated by cyclical downturn

SFR 091112 Building Brands Discussion2 3

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
 Marketers see high “value” in online, but
consider it a call-to-action medium
NATIONAL ADVERTISERS
Media "Value" "Reach" vs.
(5 = Excellent, 1 = Poor) "Call-to-Action" Ratio

4.0 30%
3.7 3.7
+21
20
3.5
10
3.0
3.0 3.0 +2
3.0 Average 0
2.8
2.8 -4
2.7
-10 -7
2.6 -10
2.5
-20 -17
-19-20
-23
-24
2.0 -30
Se a y

N aga h

ra V
V

Na ot V

M dio

io
bl ne

is le
N ble V
sp T V

TV
Sp dio

l r er
N ea ay
or e

Ra e

Lo sp ch
M er
c

il
w in

t'l T
ag T

Sp e T
Ca k T

ad
D obi
l

ca ap
ap
M ar

ob

Ca azi

ew r
pl
sp

et z

ot

M rk
Di

S
w
ew

et
N

Reach/
Call-to-
brand
action
building
Source: Bain ad buyer survey (02/2009); Bain analysis SFR 091112 Building Brands Discussion2 4
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
 Marketers believe online can be more
effective at all stages of the purchase funnel
Which marketing objectives are the following
media vehicles best suited for?
Promoting
Loyalty
100%

Driving
Traffic/
75 Purchase
Intent

Promoting
50 Consideration

Generating Brand
Familiarity objectives
25
Creating
Awareness
0
TV Magazine Newspapers Internet

Total Ad
$64.4B $13.3B $34.4B $23.1B
Spend (2008)
Source: Bain/IAB 2009 Marketer survey; Bain Media 3.0 Study SFR 091112 Building Brands Discussion2 5
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
 Brand marketers expect only modest
growth in online spend
Brand marketers rely heavily on TV, while Future mix shift to Online much more
response marketers advertise more online pronounced among Response Marketers
Weighted above-the-line
marketing budget (2008) % of above-the-line ad spend
Mobile
Yellow Pgs
100% 80%
Other

Outdoor
+3
80
Radio 60

Newspapers
60

Magazine +8 -4
40

2011
2008
40
Internet
+5

2011

2008
20

2011
2008
20

2011
2008
TV

0 0
Brand Response Internet TV & Internet TV &
Marketers Marketers Magazines Magazines
(>75% of spend) (>75% of spend)
Brand Response
Marketers Marketers
Source: Bain/IAB 2009 Marketer survey SFR 091112 Building Brands Discussion2 6
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
We need to address five key obstacles to
bring more brand advertising online
1• Ad formats and creative are not innovating with
the medium

2• We are awash in undifferentiated, low-cost

inventory

3• Metrics, metrics everywhere … but not the ones

that brand marketers really need

4• Media companies lack ideas, strategic expertise

and engage too late in the planning process

5• Marketers want cross-platform campaigns; instead

they get a model rooted in platform-specific silos

SFR 091112 Building Brands Discussion2 7

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
 1
Problem: Ad formats and creative
are not innovating with the medium

SFR 091112 Building Brands Discussion2 8

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
1 Bulk of online advertising volume is
ineffective for brand building

Effectiveness for online brand-building

50%

40
Effective

30

20
Extremely
effective

10

0
Sponsor- Digital Email Social Non-prem.
ships video networking display
Search Premium Rich Lead Classifieds
display media gen.

Source: Bain/IAB 2009 Marketer survey SFR 091112 Building Brands Discussion2 9
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
1 Solution: more custom execution
showcasing emotional potential of online

Fake
response
ad clutter

What’s •Non-standard formats

different? •Interactive and engaging
•Creative/technical support from media
•Cross-platform integration SFR 10
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
1 Solution: more custom execution
showcasing emotional potential of online

What’s •Non-standard formats

different? •Interactive and engaging
•Creative/technical support from media
•Cross-platform integration SFR 11
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
1 Solution: more custom execution
showcasing emotional potential of online

What’s •Non-standard formats

different? •Interactive and engaging
•Creative/technical support from media
•Cross-platform integration SFR 12
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
 2
Problem: We are awash in
undifferentiated, low-cost inventory

SFR 091112 Building Brands Discussion2 13

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
2 As inventory continues to expand,
marketers have more options at lower cost
Banner Ad Impressions & CPM, Rich Media Impressions & CPM,
2005-2008 2005-2008
Impressions (MM) CPM Impressions (MM) CPM

1,000,000 $3.5 35,000 $40

3.0 30,000
800,000
30
2.5 25,000

600,000
2.0 20,000
20
1.5 Banner Ads 15,000
400,000 Impressions
Banner Ads CPM
1.0 10,000
10
200,000
0.5 5,000

0 0.0 0 0

12/05

12/06
6/05

12/05

6/06

12/06

6/07

12/07

6/08

6/05

6/06

6/07

12/07

6/08
Endless supply + “Response dependency” =
Relentless path to commoditization
Source: Morgan Stanley; ComScore Building
SFR Brands discussion document 100109 14
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
2 Solution: develop and deliver three
distinct “triple play” service models
Response Brand reach Brand engagement

Marketer • Drive customers to site • Supplement buys in other • Build brand awareness
objectives • Generate transactions and media and purchase intent
immediate ROI • Generate wide exposure • Deliver custom, high-
at low cost impact campaigns

Product • Banners, rich media • Banners, rich media • Digital video, rich media
offerings • Mix of premium and non- • Mix of premium and non- • Premium position banners
premium positions premium positions • Social/UGC applications
• Content/placement • Cross-platform integration
control

Key • Buying agency • Brand marketing team • Brand marketing team

decision (downstream) • Creative agency • Creative agency
maker • Creative agency (large (upstream) (upstream)
clients only) • Buying agency • Buying agency

Larger-scale, Larger-scale, High touch,

more automated, reduced service, high cost,
efficiency model efficiency model premium model
SFR 091112 Building Brands Discussion2 15
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
2 Super-charge offerings: segment service
levels and match to customer needs and value
ILLUSTRATIVE
Custom Multi-platform Enhanced Marketing
solutions integration targeting options support
Full creative/
Full cross-platform Custom/ behavioral
customization Category expertise
menu targeting
support
Enhanced

High-touch category
offering

Large number of Ability to selectively

Individual ad space experts provide
cross-platform options target individuals
creation or extensive marketing
throughout all based on past
customization and support to key
properties of media behavior and
creative support for accounts
company preferences
key accounts

Proprietary Assigned marketing

“Flexible” non- Single-property
audience insights lead
standard options cross-platform
Proprietary data on Designated account
Non-standardized ad Cross-platform
audience behaviors lead providing
options that allow for “bundles” within
and characteristics moderate marketing
“efficient single property of
(e.g. consumption support to key
customization” media company
trends, etc.) accounts

General
Portfolio of Platform-driven Basic sales
demographic
standard products sales approach support
statistics
Range of Platform-specific Marketer interacts
offering

Basic information on
sales forces (even with general sales
Basic

standardized ad
demographics of
options to allow “plug within same media team on as needed
audience (i.e. age,
and play” for creative property) basis
gender, etc.)

SFR 091112 Building Brands Discussion2 16

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
2 Embrace non-premium for reach/response;
build scale through networks or partnerships
Partner with smaller sites to offer
Network own properties
greater reach and scale

Description: • Demo-focused • Ad network by content • Suite of advertising

vertical ad networks area on proprietary sites,
(People, Sports
• Partners with audiences • Premium ad units, Illustrated, Time)
similar to MTVN campaign reporting and
optimization • Ads only shown on
branded sites

Impact: • Large publishers get higher ad rates and • Publisher can deepen
revenue from small publisher sales advertiser
• Small publishers access scale - reach relationships across
marketers upstream in buying process properties

Source: Advertising Age, MediaPost, ClickZ, Marketing Pilgrim SFR 091112 Building Brands Discussion2 17
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
 3
Problem: metrics, metrics
everywhere… but not the ones that
brand marketers really need

SFR 091112 Building Brands Discussion2 18

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
3 Brand marketers maintain preference for
traditional brand impact metrics
Which metrics are most valuable for brand-building campaigns?

Percent of respondents What brand

60%
marketers want

#3
What brand
40 marketers get
#2

20
#1

0 Brand Likelihood to Conversion Click Message Time spent View

awareness recommend rates through association Ad on page through
Purchase Favorability Recall Unique impressions/ Interaction Engagement
intent visitors views rate time

SFR 091112 Building Brands Discussion2 19

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
3 Solution: New metrics can help marketers better
compare and fully value brand campaigns

Key measurement needs

• Combined target audience reach and frequency

Reach/ • Unified metrics across multiple sites (de-duplicated)
frequency
• Share of voice

• Brand recall and awareness within target audience

Brand • Link to sales impact
Impact

• True number of “unique” impressions

Reliability/
• Consistent standards enabling comparison across media
consistency
platforms

• Engagement/interactivity measures
“Currency” • Brand equity measures
standards

SFR 091112 Building Brands Discussion2 20

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
 4
Problem: Media companies lack
ideas, strategic expertise and
engage too late in the process

SFR 091112 Building Brands Discussion2 21

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
4 Brand marketers desire high-impact
partnerships with their media companies
Which capabilities are most important in supporting
your online advertising?
% of respondents

40%
Brand marketers want
category expertise,
customization and a
30
#2 relationship mindset

20

10 #1

0
Deep Strong Customized Digital Cross- Streamlined
knowledge relationship options advt platform purchasing
of marketer with marketer success campaign options
and industry metrics options
Best Full ad
Effective High impact Digital advt
contextual placement
targeting online creative knowledge
fit for ads transparency

Source: Bain/IAB 2009 Marketer survey SFR 091112 Building Brands Discussion2 22
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
4 Solution: Adapt capabilities and learnings
from offline and portal sales teams
Current capabilities

• Marketer knowledge and relationships

Television
• Product integration, creative support
Networks
• Consumer insights

• Deep category expertise, customer

Online understanding Online capability needs
portals/ • Consumer insights
search • Relationships with
• Customization, creative support
marketers, creative agencies
• Demographic expertise (e.g., women)
• Category-specific
Magazines • Ability to deliver cross-title packages offerings and insights
through corporate sales
• Creative services and
customization support
• Transactional sales model, focused on
Online buying agencies
publishers • More comprehensive
• Limited marketing/creative support targeting options

SFR 091112 Building Brands Discussion2 23

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
4 Solution: Leverage new capabilities and
scale to move upstream in the value chain
Marketing Planning Process

Overall Brand Creative Media Media

marketing campaign process planning buying
objectives design Online Online Online

Media Co Strategic Creative Planning

Selling
Support support services support

• Campaign • Customization • Proactive • Response to

ideas to marketer media RFPs
campaign planning
• Support in • Pro-active
objectives involvement
campaign development of
design • Full creative • Cross- ad packages
execution platform
• Consumer • Ad allocation
integration
insights and placement

Move upstream

SFR 091112 Building Brands Discussion2 24

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
 5
Problem: marketers want cross-
platform campaigns; instead get
platform-specific silos

SFR 091112 Building Brands Discussion2 25

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
5 After many fits and starts, integrated
marketing is becoming a necessity
Q: What percent of your total above-the-line
budget is spent on each type of
marketing campaign?

Percent of brand marketer

above-the-line spend
100%
Single
• Leading brand marketers are
media
80 reorganizing teams around
vehicle
campaigns campaigns, not platforms

60 Separate but • Agencies are being forced to follow

simultaneous suit, often through new team
on- and offline structures
campaigns
40
• Most media companies retain
Cross- separate organizations across
20 platform platforms
campaigns

0
2008 In 3 years

Source: Bain/IAB 2009 Marketer survey SFR 091112 Building Brands Discussion2 26
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
5 Marketers who use the same creative
agency for “the whole egg” are more satisfied
Most marketers use the
same agency for online …and tend to be much more satisfied with online
and offline creative… capabilities than when using separate agencies

Online agency ratings

Agency usage (% respondents choosing 4 or 5)
100% 80

Separate
agencies
80
for online 60

Same online/offline agency

and offline

60

Separate online/offline agencies

40
40 Same
agency for
online and 20
20 offline

0 0
2008 Effective High impact Digital
targeting online creative advertising
Deep Strong Customized knowledge
knowledge relationship options
of marketer with marketer
Source: Bain/IAB 2009 Marketer survey
and industry
SFR 091112 Building Brands Discussion2 27
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
5
Solution: Revamp the sales force structure
ILLUSTRATIVE

Typical legacy Example future

sales force approach sales force approach

Media company Media company

Multi-platform Transactional
Online Offline “engagement” online
sales force sales force sales force sales force
CPG Auto Etc.

Reach/
Engagement Engagement
Most needs response
needs needs
needs

• Separate online and offline sales • Vertical-specific sales forces with high-
forces, impractical for cross-platform touch and innovation focus
campaigns • Separate reach/response sales force
• “One-size-fits-all” approach • Ability to meet reach requirements as
• Limited category expertise necessary for brand customers

SFR 091112 Building Brands Discussion2 28

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
Summary: online media companies need to
change both their offerings and sales approach

• Create distinct value propositions for each leg of the

“Triple Play”

• Sell cross-platform “solutions,” not “units” – with deeper

relationships and more differentiated ad offerings

• Deepen audience insights and strategic marketing skills

to help increase branding impact

• Build category sales forces for brand advertisers, with

separate sales force for reach/response selling

• Establish scale to enhance selling/delivery of brand solutions

• Collaborate on common standards and metrics

SFR 091112 Building Brands Discussion2 29

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
For the IAB: focus on five key areas to
improve online branding value
1
• Work with other associations to establish clear standards for
Measurement measurement of brand impact and reach/frequency

2
• Address current scale and data limitations for targeting
Targeting
• Identify ways to adjust for overlapping audience in reach buys

3
• Help develop low-cost and/or automated processes for
Automated brand reach and response buys
processes
• Establish common technical standards for the industry

4
Online • Identify and communicate success factors for marketers,
creative agencies, and publishers in executing cross-platform creative

5
• Create ongoing forums with marketers for discussion of
Engaging branding approach, limitations, and key developments
marketers

SFR 091112 Building Brands Discussion2 30

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
 SFR 091112 Building Brands Discussion2 31
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.