The Latest in Ad Tech, Programmatic Mediaand Marketing SaaS

Digiday Exchange SummitAustin, Texas

Refer to pages 17-20 for Important Disclosures, including Analyst’s Certification. For Important Disclosures on the stocks discussed in this report, please go to http://research-us.bmocm.com/Company_Disclosure_Public.asp

September 18, 2013Dan Salmon

Equity Research Analyst

BMO Capital Markets

(212) 885-4029

dan.salmon@bmo.com

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Background: Childhood

Grew up with broadcast tower in the backyard

Key takeaway: safety first!

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Background: Equity Research

1. Associate (2000-2003): Hotels & Casinos• Starwood, Marriott, Hilton, Fairmont, Four Seasons, Wyndham• MGM Grand, Harrah’s, Caesars, Mandalay Bay

2. Associate (2004-2008): Broadcasting & Internet Media• Clear Channel, Tribune, Univision, Cumulus• Google, Yahoo!, Digitas, aQuantive, TiVo, Real Networks

3. Analyst (2008-Present) : Media & Internet Marketing1. Agencies: WPP, Omnicom, Publicis, Interpublic, Sapient, MDC Partners2. Internet Advertising: Google, Facebook, Yahoo!, LinkedIn, ValueClick3. Data/Direct Marketing: Nielsen, Alliance Data Systems, Acxiom, Harte Hanks4. Entertainment: Disney, 21st Century Fox, Time Warner, Viacom, CBS

• Omniture, April 2008: From Web Analytics to Digital Marketing Hub

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CMO Desk of the Future: The Digital Marketing Hub

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Marketing Spending = ~$1 Trillion Globally

• Paid media = ~87% of marketing spend• Media Advertising (53%)• Direct Marketing (34%)

• Agency Fees (8%)• Data & Intelligence (4%)• Software & Technology (1%)

• IP marketing = ~25% of marketing spend• Not just “Internet” like Search, Display

• Mobile• In-store/Point-of-Sale• IPTV• Digital-out-of-Home• Streaming Audio

Source: GroupM, DMA/Winterberry Group/Acxiom/Teradata, IDC, Advertising Age

Global Marketing Forecasts SummaryAbsolute 2010 2011 2012E 2013E 2020E

Advertising 462.2 485.6 507.6 530.6 696.3

Direct Marketing 304.2 322.9 341.0 358.2 486.0Total paid media 766.3 808.6 848.6 888.7 1,182.3

Agency Fees and Marketing BPO 62.3 67.9 71.6 75.3 108.73rd Party Data & Mkt. Research 47.9 49.0 49.9 50.9 56.9Ad Tech & Marketing Automation 9.7 10.6 11.4 12.2 19.9TOTAL Marketing 886.1 936.1 981.5 1,027.1 1,367.8

'12-'20Growth 2010 2011 2012E 2013E CAGR

Advertising 6.3% 5.1% 4.5% 4.5% 4.0%

Direct Marketing 7.6% 6.2% 5.6% 5.0% 4.5%Total paid media 6.8% 5.5% 5.0% 4.7% 4.2%

Agency Fees and Marketing BPO 6.4% 9.1% 5.4% 5.2% 5.4%

3rd Party Data & Mkt. Research 3.2% 2.5% 1.8% 2.0% 1.6%

Ad Tech & Marketing Automation 11.4% 9.7% 7.2% 7.3% 7.3%TOTAL Marketing 6.6% 5.6% 4.8% 4.6% 4.2%

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The Digital Marketing Hub: Plug-and-Play Modules

• Database Marketing/CRM• Enterprise Marketing Management (EMM) Software

Software Era: Pre 1995

Web 1.0 Era: 1995-2005

• Email Service Providers (ESP)• Ad Serving• Ad Operations• Ad Networks (Affiliate Marketing, Lead Generation)• Search Engine Optimization (SEO)• Search Engine Marketing (SEM)• Analytics (Web, Social, Third Party)

Web 2.0 Era: 2005-Present

• Ad Exchanges• Demand-Side Platforms (DSP) and Agency Trading Desks (ATD)• Sell-Side Platforms (SSP) and Private Exchanges• Data Management Platforms (DMP)• Retargeting• Creative Optimization

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The Digital Marketing Hub: Three Basic Elements• CMO and in-house • Agency employees: planners, creatives, buyers• Technology implementation and managed services• Engineers and coders• Data Scientists

People

Technology

• Code and Algorithms• Point Solutions and End-to-End Solutions or Platforms• Software-as-a-Service (SaaS)• Exchanges & bidding and yield management tools• Devices and networks

Data

• 1st Party (Brand), “2nd Party” (Publisher) and 3rd Party• Big Data (Unstructured)• Online vs. Offline• Ratings• Market Research

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Ad Tech vs. Marketing SaaS

"Cable" SaaS100% subscription/license

SAC and ChurnNo volume bonus

"Cell Phone" SaaSCombination of:

1) Subscriptions, licenses, mimums 2) Some level of volume bonus

% of Spend/Commission0% guaranteed, all volume-based

TAC and ArbitrageBudget shifts

The Spectrum of Revenue Models

Cut to the chase: what % of revenue is booked on Day 1 of the fiscal year?Reality: everyone is some form of Cell Phone SaaS

Investor Perception?

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Public Company Programmatic and Marketing SaaS

• LinkedIn• Sapient, Accenture, Cognizant• SAP, Oracle

Coming Soon?

Small Caps• AOL, ValueClick, Millennial Media, Tremor, YuMe• MDC Partners• Responsys, Marketo, Marin, Constant Contact• Acxiom, comScore, Harte Hanks, Rentrak

$10 Billion+• Google, Facebook, Yahoo!• WPP, Omnicom, Publicis, Interpublic• Salesforce.com, Adobe• Nielsen, Experian, Alliance Data Systems

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Other Topics

• It’s not about technology change, it’s about data change• Mostly business as usual at the agencies• Trading desks in focus

Omnicom + Publicis

Programmatic Upfronts

• AOL and Yahoo! leading the way• Speak to brand advertisers• Programmatic video: Xaxis and Magna TV programmatic• Why this is really important

• It could finally separate “RTB” from “programmatic”

The Ad Tech Shakeout

• Funding is slowing, but…• It’s still happening and the full Hub• These are really lightweight businesses• Consolidation is ongoing: Google bought Doubleclick in 2006

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Examining Ad Spending by Human Behavior or Format

Source: GroupM

How do we normally segment ad spending?

• Something like this…

2006 2007 2008 2009 2010 2011 2012E 2013EMedia advertisingTV 176,290 183,456 189,593 182,039 197,360 208,015 217,620 226,030Newspapers 101,546 102,870 97,967 85,034 85,394 83,641 81,112 80,068Magazines 63,793 65,871 62,752 51,318 50,381 49,897 48,854 48,297Out-of home 28,463 29,120 30,039 27,028 28,465 30,856 32,286 33,273Cinema 1,230 1,303 1,258 1,161 1,261 1,347 1,488 1,592Radio 26,380 27,061 26,459 25,105 25,855 26,654 27,271 27,834 Search 11,723 16,336 19,349 22,045 24,888 28,431 32,244 36,154 Display/ Video 16,405 19,711 21,781 22,617 25,516 28,576 31,830 35,526 Other Internet 8,404 12,208 16,432 18,468 23,044 28,229 34,943 41,779Total Internet 36,532 48,255 57,563 63,130 73,448 85,236 99,017 113,459Total media advertising 434,233 457,936 465,632 434,815 462,165 485,647 507,649 530,553

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Advertising Has Always Been Segmented by Distribution Method

• Print: ink, paper, printing presses, transportation/shipping

• Radio: broadcast towers, antennae and tuners

• Outdoor: billboards, bus shelters, posters and glue

• Television: broadcast towers, cable head-ends, satellites and set-top boxes

So what do we do as more and more advertising is delivered via the same distribution method?

That is, IP communications networks

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How about Ad Spend by Human Device Use?1. Non-portable Out-of-Home/Office Device (outdoor, DOOH, radio)

2. Non-portable Home/Office Device (television, desktop PC, some radio)

3. Portable Device (newspaper, magazine, smartphone, tablet, laptop)

Source: GroupM and BMO estimates

42% 41% 40% 39% 38% 37% 37% 38% 38% 39% 40% 41% 42% 43% 44% 45%

45% 46% 47% 48% 50% 51% 50% 50% 50% 49% 48% 48% 47% 46% 45% 44%

13% 13% 13% 12% 12% 12% 12% 12% 12% 12% 12% 12% 11% 11% 11% 11%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E

Portable Device Non-portable Home/ Office Device Non-portable Out-of-Home/ Office Device

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Or How about Ad Spend by Format?1. Video (TV, online video, some DOOH, etc.)

2. Static image (magazines, newspapers, outdoor, most display, etc.)

3. Audio (radio, online streaming, etc.)

4. Text (classifieds, “traditional” search, etc.)

17% 16% 16% 16% 16% 16% 16% 16% 16% 16% 15% 15% 14% 14% 14% 13% 13% 12% 12% 12% 11%

6% 6% 7% 7% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6%

38% 38% 36% 36% 36% 37% 37% 37% 37% 35% 35% 34% 34% 34% 33% 33% 33% 32% 32% 32% 32%

39% 40% 41% 41% 42% 41% 41% 41% 42% 43% 45% 45% 46% 46% 47% 48% 49% 50% 50% 51% 51%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E

Text Audio Static image Video

Source: GroupM and BMO estimates

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Coverage Universe

13-Sep EPS P/E Mkt CapMedia & Internet Marketing Rating Price Target 2012E 2013E 2014E 2012E 2013E 2014E Div Yld Book ($mm)21st Century Fox (FOXA) Market Perform $32.63 $33 $1.20 $1.36 $1.63 27.2 24.0 20.0 $0.17 0.5% $12.96 49,468Acxiom (ACXM) Market Perform $26.16 $22 $0.74 $0.77 $0.75 35.4 34.0 34.9 $0.00 0.0% $8.43 1,975Alliance Data Systems (ADS) Market Perform $206.09 $195 $8.70 $9.90 $11.85 23.7 20.8 17.4 $0.00 0.0% $12.19 14,055CBS (CBS) Outperform $55.46 $61 $2.56 $3.13 $3.60 21.7 17.7 15.4 $0.48 0.9% $16.21 34,607Constant Contact (CTCT) Market Perform $21.41 $18 $0.57 $0.69 $0.85 37.6 31.0 25.2 $0.00 0.0% $6.73 666Facebook (FB) Outperform $44.33 $50 $0.54 $0.70 $1.00 82.1 63.3 44.3 $0.00 0.0% $5.08 110,914Google (GOOG) Market Perform $888.24 $890 $39.88 $44.50 $52.00 22.3 20.0 17.1 $0.00 0.0% $228.01 300,225Harte-Hanks (HHS) Market Perform $8.39 $9 $0.62 $0.59 $0.60 13.5 14.2 14.0 $0.34 4.1% $5.35 527Interpublic Group (IPG) Outperform $16.86 $18 $0.74 $0.87 $1.16 22.8 19.4 14.5 $0.30 1.8% $5.10 7,223Linkedln (LNKD) Market Perform $249.59 $235 $0.89 $1.50 $2.40 nm nm nm $0.00 0.0% $9.00 29,102Marchex (MCHX) Outperform $6.91 $8 $0.22 $0.18 $0.28 31.4 38.4 24.7 $0.14 2.0% $3.31 245MDC Partners (MDCA) Outperform $24.73 $30 -$2.60 $0.71 $0.99 nm 34.8 25.0 $0.68 2.7% -$6.15 843Nielsen (NLSN) Outperform $35.56 $41 $1.69 $1.97 $2.25 21.0 18.1 15.8 $0.64 1.8% $13.87 13,363Omincom Group (OMC) Market Perform $65.01 $63 $3.57 $3.87 $4.32 18.2 16.8 15.0 $1.60 2.5% $11.88 16,720Publicis Groupe (PUB) Market Perform $60.77 $55 $3.23 $3.53 $3.83 18.8 17.2 15.9 $0.90 1.5% $23.16 13,491Sapient (SAPE) Outperform $15.74 $17 $0.49 $0.55 $0.67 32.1 28.6 23.5 $0.00 0.0% $3.71 2,249Time Warner (TWX) Market Perform $62.56 $65 $3.24 $3.73 $4.35 19.3 16.8 14.4 $1.15 1.8% $32.14 59,495Valassis (VCI) Outperform $28.73 $32 $2.98 $3.21 $3.63 9.6 9.0 7.9 $1.24 4.3% $12.36 1,120ValueClick (VCLK) Market Perform $22.75 $22 $1.65 $1.82 $1.95 13.8 12.5 11.7 $0.00 0.0% $8.23 1,761Viacom (VIAB) Market Perform $82.26 $79 $4.21 $4.56 $5.44 19.5 18.0 15.1 $1.20 1.5% $14.15 40,472Walt Disney (DIS) Outperform $66.69 $76 $3.07 $3.44 $3.98 21.7 19.4 16.8 $0.75 1.1% $23.38 121,442WPP (WPP) Market Perform $12.88 $12 $0.73 $0.84 $0.92 17.6 15.3 14.0 $0.30 2.3% $537.95 17,465Yahoo! (YHOO) Market Perform $29.26 $27 $1.27 $1.41 $1.56 23.0 20.8 18.8 $0.00 0.0% $13.04 32,040

LNKD is co-covered by Daniel Salmon and Jeffrey M. Silber.Source: BMO Capital Markets estimates and company reports.

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DisclosuresImportant Disclosures

Analyst's CertificationI, Dan Salmon, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.

Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account.

Company Specific DisclosureFor Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx .

Distribution of Ratings (June 30, 2013)Rating BMOCM US BMOCM US BMOCM US BMOCM

BMOCM StarmineCategory BMO Rating Universe* IB Clients** IB Clients*** Universe****

IB Clients***** UniverseBuy Outperform 37.9% 17.6% 52.7% 39.6%

51.0% 53.2%Hold Market Perform 56.8% 10.2% 45.9% 53.9%

45.5% 41.1%Sell Underperform 5.3% 3.2% 1.4% 6.5%

3.5% 5.6%

* Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category.*** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients.**** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients.

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DisclosuresRating and Sector Key (as of April 5, 2013)We use the following ratings system definitions: OP = Outperform - Forecast to outperform the analyst’s coverage universe on a total return basis;Mkt = Market Perform - Forecast to perform roughly in line with the analyst’s coverage universe on a total return basis;Und = Underperform - Forecast to underperform the analyst’s coverage universe on a total return basis;(S) = Speculative investment; NR = No rating at this time; andR = Restricted – Dissemination of research is currently restricted.

BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US Large Cap, US Small Cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating).

Prior BMO Capital Markets Rating System (January 4, 2010 – April 4, 2013):http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf

Other Important Disclosures For Other Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3.

Dissemination of ResearchOur research publications are available via our web site http://www.bmocm.com/research/. Institutional clients may also receive our research via FIRST CALL, Thomson Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information.

Conflict StatementA general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with investment research, which is available at http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx.

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DisclosuresGeneral Disclaimer“BMO Capital Markets” is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (“BMO Financial Group”) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein.

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To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as “relevant persons”). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients

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Disclosures

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