CitiGroup Comments on AdRevenue Conference

From Analyst Mark Mahaney

• We Attended The AdRevenue 08 Conference - We attended the AdRevenue 08 Conference in San Francisco, held by PubMatic. We attended panels on 1) Differences between ad networks, ad exchanges and ad optimizers; 2) Publisher ad strategies; 3) Increasing value of ad inventory; and 4) How agencies & buyers are changing strategies. Companies we spoke with/attended included, Federated Media, Meebo, Six Apart, ContextWeb, AdECN, PubMatic, Razorfish, Havas Digital and Media Math.
• Display Pricing Under Pressure - Publishers, advertisers and agencies indicated to us that with significant increase in inventory, especially from social media sites, display CPMs have been and will continue to be under pressure. Furthermore, demand for premium display continues to soften as advertisers want to reach very specific and highly targeted audiences. We note that PubMatic's eCPM Ad Index showed a 21% decline in Q3 prices vs. Q2 prices.
• Recent Trends In Display Advertising - These include: 1) October spend appears to have dropped sharply vs. September; 2) Ad budgets continue to shift from offline to online, but away from premium display and towards performance based advertising; 3) '09 marketing budgets are still in flux as marketers are taking a wait & see approach; and 4) all three parties expect to expand the use of ad networks and ad exchanges in '09.
• Incrementally More Negative for Branded Display Companies - We believe the conference takeaways are incrementally more negative for premium display businesses.