Digital Generation's CEO Hosts Investor Day Conference (Transcript)

| About: Digital Generation, (DGIT)

DG FastChannel, Inc. (NASDAQ:DGIT)

Investor Day Conference

May 16, 2013 9:00 am ET

Executives

Craig E. Holmes - Chief Financial Officer and Principal Accounting Officer

Neil H. Nguyen - Chief Executive Officer, President, Director and Member of Executive Committee

Ricky Liversidge - Chief Marketing Officer

Gregory Michael Smith - Former Chief Technology Officer

Andrew Ellenthal - Executive Vice President of Sales and Ad Operations

Trace Rutland

Andrew Bloom - Senior Vice President of Strategic Business Development

Darren Herman - Chief Digital Media Officer

Craig E. Holmes

Good day. Welcome. Without [indiscernible], we can get started. [indiscernible] last year. So I've just completed my first full quarter as CFO. I'd like to start out by saying welcome to all of you. We appreciate you guys making time for this program today, and welcome to those of you listening in over the Internet. You've heard us talk a lot over the last year about our strategy. Today, we're not only going to talk about our strategy, but we're going to talk about how we're implementing the strategy across our businesses. We have a very significant, probably the largest Internet delivery network in North America. And we also have the a significant independent global online campaign management company. And today, we're going to talk about how we're combining those 2 companies to create a multiscreen campaign solution for our customers.

Let me start out by going through the agenda. So in a minute, I'll hand it off to Neil and he'll cover his opening comments and the industry overview. Neil will be followed by Ricky, he'll talk about product strategy. Andy will follow Ricky, and we'll talk about our sales strategy, go-to market strategy. After that, we'll have a break. And during the break, what we'll do is we'll split up into 3 groups. I guess each of you have a letter on your -- where's Jamie? If you have a letter on your name tags, what we'll do is we'll split up into 3 groups and then we'll complete a tour of our production facilities.

Following the break, we have a customer panel roundtable discussion, and I think that promises to be a great program. That will be facilitated by Ricky, and I think you'll enjoy that. After the industry panel, we'll have a financial overview and then we'll round up with some Q&A. We do believe that most of your questions will be answered over the course of the presentations. So please, if you have questions, write them down, save them until the end. We'll bring the management team back up and we'll have a question-and-answer period.

Now before I get -- before I go any further, what I'd like to do is introduce a couple of people. We have Scott Ginsburg, our Chairman of the Board, Executive Chairman of the Board; and we have Melissa Fisher. She's just recently joined our Board. So we appreciate having both of them here today.

We also have a couple of people that have been actively involved in our Investor Relations activities. So JoAnn Horne, many of you know her from Market Street Partners, and Elaine Locke. You -- many of you have talked to Elaine Locke. She's the VP in our finance organization, responsible for Investor Relations and Treasury Services. And we certainly appreciate the efforts of those and others that have been involved in putting on this program today.

So I have one more administrative item to cover. Where did the Safe Harbor disclosure go? So hopefully that would be in the web deck that's included on the website. Interim the course of these presentations, we will make some forward-looking statements. And for purposes of evaluating those statements, we do recommend that you look at our Risks and Uncertainties section of our SEC documents that are filed with the SEC and available on our website. Also, we may make reference to some non-GAAP financial measures. For purposes of evaluating those, we recommend that you look at the reconciliations that will be included and attached to the presentation included on our website at the last page.

So without further ado, let me introduce Neil.

Neil H. Nguyen

Thanks, Craig. Good morning, everyone. Thank you for joining us today. Let me -- I want to start out by articulating our vision to all of you. As one company, DG is uniquely positioned to help our costumers win through powerful technology, stellar service and the delivery of innovative and multiscreen advertising. I've been at the company for over the past 8 years, and through this period of time, we bought a number of innovations to the marketplace, and we firmly believe today that we have a portfolio of products and services that will help our clients navigate the challenging advertising landscape.

So I was searching for a couple of imagery to articulate and convey how pervasive and digital technology has become a part of our lives. So this is a picture of the Vatican square in 2005. An anxious group awaiting the announcement and the election of the new Pope. Here's a similar audience picture in 2013. So as you can see, 2005, 2013. It's amazing what -- how much technology has become a part of our daily lives, and with this comes a significant amount of challenges for advertisers and agencies to deliver the right message to their audience. So there will be beans of fragmentation, beans of personalized message are great opportunities in how DG will be positioned to help our clients to execute these campaigns.

See, there are a couple of key trends that I've selected to highlight as part of the marketplace that's important to DG today. The first is programmatic buying. And for those of you who aren't familiar with programmatic media buying, it is the use of technology to help connect buyers and sellers over an exchange in the marketplace. And some data points here, in 2010, roughly $350 million was transacted in the marketplace. In 2012, over $3 billion of media is bought and sold over electronic marketplace. So this represents a rapidly growing segment within the advertising ecosystem. So how does DG fit in here? We have 2 product lines that have grown over 100% in the past year-over-year. So both from our trading services and our data and analytics products help power some of these marketplaces. It also represents a great growth opportunity for some of our core products, which dynamic creative, standard banner ads, as well as rich media.

The next growth trend that is near and dear and absolutely critical to DG is the rapid expansion of online video in the digital media marketplace. So In 2011, roughly $3 billion to $4 billion was the amount of media allocated to video as a format within the digital media marketplace. We expect it to grow to over $9 billion by 2017. So that's media spend inside of the online advertising marketplace.

As you all know, we invented the delivery of video in the traditional media space, so we sit on a vast amount of video assets and we see a great opportunity for us to help free these assets across multiple screens.

A couple of data points I want to share with you based on some industry reports. In March alone, U.S. consumers or Americans, watched over 13 billion online video ads, which equated to almost 5 billion minutes. Those are data extracted from comScore. That's a single month. So video is one of the most dynamic, pervasive way to deliver a branding message on behalf of the advertiser, and we're pretty excited about the trend as a whole.

So one other data point that is -- that I've been tracking is the connect-to-TV marketplace. So by 2011 -- or by 2017, there'll be over 600 million TV sets on a global basis that will be connected to -- that will be considered a connected device. The U.S. will represent 25% of that. So going back to my earlier slides, technology, IP-enabled devices, creates a massive opportunity for our clients to really deliver a personalized advertising message to their target audience. But this also creates a significant amount of challenges for agencies who have to execute on these campaigns.

So I debated heavily whether or not to throw up this slide of just logos, but it was the only infographic I could find that expressed the fragmentation in the marketplace, and this is just the display ecosystem alone.

So on the left-hand side, let me share level set. On the left-hand side, you have your advertisers, and then the agencies who are our clients. You have content aggregators, like publishers, who are also clients of our company, and ultimately, the audience, which is the consumer. So in between those 2 ends, you have close to 270 companies that are vying to sell services to agencies and advertisers. No agency can execute a campaign when you're dealing with, at scale, with 5 or 6 technology vendors. So where do we come in?

So over the past 5 years, as part of the acquisition at MediaMind, they were down the path of building a global ad serving campaign management platform. So with that, today, we help media agencies, creative shops, help reach their audience through a common platform. One of the big differentiators for us as a company is that we are an open platform. It's very important. Andy will dive a little bit deeper in this when we discuss the comparative differentiation between us and some of our competitors. So our clients can access some of the best technologies on this slide through our platform.

So one additional point on this slide. My view is that we believe that we can pull in the television marketplace as part of a channel across this campaign management platform. We know that their secular shifts in traditional advertising. It's true, really driven by consumer behaviors across-the-board as they consume content over IP-enabled devices, and that number continues to grow.

So where do we play? So these are the pockets or these are the technology sets that DG participates today. So our platform is modular. So we have client clients that will buy verification services from us. They'll buy just the display, ad service solutions from us, or they'll buy the entire solution and therefore, we call them, really, a platform customer as a whole.

So in summary for me today, I want to introduce DG for those of you who are new to our story. So today, we operate in 46 offices, 1,800 employees, and I spend a lot of time talking about the U.S. trends and U.S. marketplaces, but we're winning globally. So in Q1, we, our APAC business grew over 30%. Our Latin American markets grew over 80%. In North America, we returned to growth and grew over 20%. You take out some of the macro headwinds that we're faced in EMEA alone, our digital business grew over 20% organically. We've also demonstrated, for the past 3 to 4 quarters, our ability to protect our margins on the TV side, which is growing through a transitional process, but it's a critical part of our technology strategy, partly because we have the plumbing system and the linear side of the house, as well as all the video assets. And Ricky's going to walk you through some of our product strategy. Greg will highlight some of our technology strategy.

So before I wrap up, my goals for our investors and our analysts today is to take away 3 key things at the end of the session. One, gain deeper insights to our product and technology strategy; two, see how we compete and why we win in the marketplace; and then lastly, to highlight the team that I've built over the last 12 months. That's the most tenured person, is roughly 12 months here.

And with that, I'm going to turn the mic over to our Chief Marketing Officer, Ricky Liversidge, and he'll take you through our product and marketing strategy.

Ricky Liversidge

Thank you, Neil. Good morning, everyone. You seem a pretty lively bunch. Let's get going here. So let me first welcome you, all, to our facility here at -- in New York. This houses many of our operations across all our businesses, so it's great to have you here and it's great to be able to show you some of the things that we do here at DG. Clearly, for those people on the phone, they don't get quite the same experience, but we look forward to housing you here some time in the future.

Let me first introduce myself. Neil -- I've known Neil for a little while now. I actually joined DG about 9 months ago, and it's certainly been a very interesting 9 months. And I've been getting my feet wet, really, with the products and the technologies and the opportunity. Neil and I have spent a lot of time sort of talking about where we need to go, the things we need to focus on. And one of the things I wanted to do in starting at the company was to build a 3-year strategy that we can get on board with and start to drive forward. Because there is no doubt in my mind that here at DG, there's plenty of opportunity.

And I'm a pretty animated guy. So if I get a little bit animated and get a little ahead of myself from a talking point of view, just slow me down because I do get passionate about the technologies and the things that we talk about. I'm actually going to host this session with Greg Smith, our CTO. And what we'll do is I'll take you through a little bit of the product. We'll talk about some of our -- the way we're going to develop it from a technology point of view, and then I'll come back and talk a little bit about the positioning. But I've spent a lot of years, some would say far too many years, at Adobe. I spent 17 years at Adobe, working my way through many of the different business groups, flipping from marketing into product, never really could decide which one I like to do the most. And so here at DG, I'd get to do both. So whilst I'm CMO, I also actually get to head up product and some of our product strategy, which I team up with some of the other people.

But what I really wanted to do before we get really sort of deep into the strategy and the future is I just wanted to do a little bit of level setting and build off the back of what Neil has been talking about. Because I think when you think about DG and you look at it on paper at first sight, it all looks fairly obvious, it all looks fairly straightforward. It's obvious were your competitors are. It's obvious the markets that you play in. But I think there are some really hidden gems in there that really do need to be drawn out from an online perspective and a TV perspective. So what I do is I use this particular chart, and as Neil said, and he showed you using the chart, is basically, our job is to connect advertisers to our broadcasters and publishers, and we do that through technology and we do that through services. And that gives us an incredible, incredible relationship with many of the customers that we actually deal with. So on the TV side, this is specifically around our TV business, quite often, when I started at DG, people would say to me, "Oh, you're the ad distribution company, aren't you?" And I'd say, "Yes, but we do a little bit more than that." Let me be really clear. From an advertiser, I'm a marketing guy. There is no more valuable asset that you build than your TV ad. Quite often from a campaign perspective, it kicks off all the big campaigns and we saw that at the Super Bowl this year. DG actually delivered 123 of 150 actual TV ads. But that was just a tip of the iceberg. Those ads, every one of those 123 ads would cost something like $4 million from a placement point of view. There is no one dealing with that amount of value from an asset perspective. But the tip of the iceberg is the TV campaign or the TV ad kicks off a whole wrath of online and multiscreen experience. And so what you see is you see advertising, certainly from a TV perspective, capturing people's attention and then really driving the sales home from an online perspective. And that's really where our opportunity sits. So when people say to me, "Oh, you're the ad distribution company." I say, "No, it's a little bit more than that." Because in dealing with this process, what we do is we do post-production services and we also do asset management. So we have to take every TV commercial and ingest it to our own system. If we ingest that ad into our own system, we can do so many things with that ad from a multiscreen perspective. And that is where the would opportunity lies for us moving forward.

But I just wanted to also mention some of the post-production services that we also do. We get master files delivered to us and we have to finish those off by tweaking the sound, tweaking the colors, adding clause captioning, maybe doing a voiceover, direct response business doing a lot more than that. So we work on that final file and we literally have a limited amount of time to actually get that add into market. And so the relationship that we built over the years at DG with the advertisers and with the agency is second to none. And that is another opportunity that we get to leverage in this business.

So again, when people say, it's all about distribution, no, there's much more than that. We sit on 80% of the ads here in North America and are starting to build a footprint elsewhere in the world. So let me move on to online.

And while what I'll do on the online, I just want to take you through it from an online perspective. Because this looks a little bit different. The trader process and the media planning process is somewhat similar. We certainly do see similarities to our TV business there. But one of the things you'll notice here is we play an -- we play a bigger role from a trader perspective. Quite often, we talk to our clients, and let's be clear, from a marketing point of view, not everybody wants to look the same as each other, yes? Everyone is striving to be different. Everyone is striving to gain attention. And so, yes, you can do that with good creative, but more so, what people have learned from an advertising perspective, is you can do that with technology, you can do that with reach, you can do that with combining streams, you can do that in a number of different ways. So quite often, the relationship that we have on the online side is not only with the media planning side, it's also with the creative side. Because what we really want to do is we want to connect them to the best opportunity for their ad campaign or their marketing campaign that we possibly can. So that may mean that we need to design a new format for them from an online perspective. That may mean that we have to work with the publisher to receive that format. So it's not just about taking in an ad and actually add something.

So the same comment is true here on the online side as is on the TV side. So you're just an ad serving company? No, we're not an ad serving company, and you'll hear me say it many, many times, but we are a campaign management company. And more so, that campaign management will be across all channels, TV, online, social, and more driving to that multiscreen experience.

But the reason why I say it's more than ad serving, because you'll see things in here like targeting and optimization. Targeting and optimization are ways that you can get the right creative in front of the right person. But you can also get the right creative on the right website at the right time. So we can do that through a number of different opportunities. And I think, if you take that opportunity around targeting and optimization and you start to apply that to a multiscreen world, where TV or video, as we would like to call it -- because video is really a combination between TV and video online, now becomes the center of the universe. So we believe that this opportunity, when we start to play this across a multiscreen world, starts to become incredibly valuable to advertisers and the agencies that work within the industry. The one thing that you see on this particular chart that you didn't see on the TV chart is this bottom piece, analytics and data.

How many times have you heard Big Data? Probably a couple of times in the last 5 minutes. No, sorry. Probably a few times in the last week, no. I go to quite a view conferences and I get to speak on DG's behalf at a number of the conferences. Look, 60% of the content in these presentations is all around data, how we use data. And it's not -- many company can produce a report, many of our competitors produce report. It's not about producing reports. Our customers will tell you, they've got enough reports. What they want is insights, and they want actionable data. Okay? An actionable data is how you serve it up and what you get it to do. And so when you take data and you allow it to help you from a planning point of view, targeting, optimize, guard your brand value, search out the right website. On the surface, your website may look good. Your target audience are going to that website. But do you want your brand to show up in that particular website alongside 7 other things that you don't really care about? So the way you place your ads is really, really important. So this is where things start to take off, and I'm really sorry about this, but it just gets a little bit harder.

So the next chart is actually a little bit of an eye chart. But I think when you take the online opportunity and you take the TV opportunity and you start to put those 2 things together, you can start to play a really big role. So it's not about distribution. It's not about ad serving. It's about campaign management across multiscreen using data. So workflow is not -- what I would say now in some of our -- the some of approaches that our competitors and certainly, some of the things that we've done in the past, is we think workflow and we add data.

Going forward, when you combine this from a multiscreen perspective, it's a data-driven world where workflow sits on top, and that is slightly different, and that is the opportunity that we're building. And you'll see here, Neil talked about programmatic buying. Quite often, people say to me, do you have a DSP? We don't have a DSP. It doesn't stop us from programmatic buying. We serve into that world. We make money in that world. We integrate into app Nexus. We integrate into other people's DSPs. So we're not trying to be an individual in a particular niche. What we're trying to do, as Neil said, is connect that fragmentation so that our marketers and our advertisers can make the most of the opportunity. And that's why we think we're different to many other people that we compete with.

So that's just a little bit of a level set. How am I doing on time? I'm doing okay? Okay. I have a tendency to go on a little bit. So if you see JoAnn waving frantically at me, that means I have to get off. So this is -- what I really wanted to do was just give you an idea on what I've been working on since I started at DG. When I first came in, there was 5 things that really stood out obvious for me that we needed to excel in, certainly within the span of control and the responsibilities that I had. The first was product strategy, and I'm going to talk a little bit about that. The second is this idea of one company. And really, the one company thing, when I joined, DG had some incredible assets. We had the MediaMind asset. We had the EyeWonder asset. We had the Unicast asset. We had the Treehouse asset, the MIJO asset. But what we did is we took all those assets to market separately. And so what I really wanted to do, from a company point of view, was to rally around it as one company. Because if you put all these assets together and you go to market in a much more cohesive fashion, then the power of DG becomes so much more obvious and so much more powerful. And so you probably noticed the magenta DG logo. I promised I wouldn't mention that magenta DG logo, but I'm going to take it anyway. The magenta DG logo, we actually went through a redesign of our identity. But it wasn't about the identity, it's about this being one company. Because when we align and execute as one company, we are a powerhouse in the industry. And so for me, that's what it was all about. So when you see things like DG MediaMind, DG Video Fusion, DG MIJO, that's how we start to bring all these services and all these products together in one cohesive positioning and product strategy. So for me, certainly, one company was unleashing the power that actually sits within this organization.

The second is go-to-market strategy, which I share with my colleague, Andy Ellenthal. And Andy is going to spend some time talking about go-to-market strategy. But when you get on first, you will get the opportunity to steal someone else's content, which clearly, I would do, Andy. But on the go-to-market strategy perspective, I think there's opportunities, when I look at the product line, we sort of sometimes, we talk ourselves into commoditization as opposed to where the real value is. And I see a huge amount of opportunity to sell value across the product offering that we produce, whether that be online or TV, whether that be with small customers or large customers. But that is a really big opportunity for us. I look at our revenue and I look at ways that we can optimize the price. And certainly, from an optimizing-the-price perspective, yes, we can increase certain aspects of it, but there is no doubt that we need to find and we need to deliver a number of new revenue streams, which is why the strategy. I'll take you through the product strategy.

I think building demand is something I care about greatly. I'm an ex officer at Adobe. I worked a lot on our enterprise products. I think you have to sell and market like an enterprise. A lot of our customers behave like enterprises now in certain ways. Some of the holding companies, they like to buy as the holding company. But then you get down below the service phase, they behave very independently. So what we'll do is we'll do a deal at the very highest level, but the work doesn't stop there. You have to continue to sell-in down through the organization.

So for me, building demand is finding new customers and building our footprint within the existing customers and taking share of wallet, which is something that we drive really, really aggressively. We've been, in the last 3 months, I think we've done something like 3 or 4 different call-out days, targeting specific customers with specific solutions. That is actually driving a real number of opportunities for us. So this is important, and clearly, I'm a marketing guy, so marketing execution, the branding, how we roll out, how we look, how we feel, how we position our products is important to me. So that's just a little bit about some of the things that I've been focused on, and we made really good headway in the first 9 months in driving that. So let me just move on a little bit.

So I'm going to talk a little bit about our strategy. This looks overly simple, and it is as simple, okay? We have 3 vectors of innovation that Greg and I are working on together. One is this idea of video convergence. So basically, when I use the word video from this point on, it means TV and video online, okay? It means everything that we do from a video perspective. I didn't call out TV differently. But I think, when you look at something like video convergence, the opportunity I talked about from a TV point of view, if you could automate the workflow from a TV perspective in a much more modern fashion and you could connect that to our MediaMind online platform in a modern method, then that increases the amount of opportunities. I can't tell you how many TV advertisers will say to me, how do I take my TV commercial, break that out and deliver that online? And if we can automate that particular fashion, we can release that asset. We can drive that. We can drive that through our TV. We can drive that through all the channels that we need to drive it, to mobile, we can do that through social, we can do that through all sorts of things. So we get asked to do that on a daily basis. We can do that in a very manual weighted day, but you start to automate that and bring those together.

So one of the things that's holding TV advertisers from actually jumping into this is, is really, really data, from a data perspective. The TV advertisers, they're used to their GRPs. They're used to the way that they look. They're used to the way that they plan. They don't really trust this online stuff. They don't really trust the measurement factors. What the hell is an impression? Why should I care about an impression? So one of the things that we've been working with through our partnership with Nielsen is a product that I'm sure Greg will touch on, which is called Cross Platform analytics. And basically, what that does is that takes the data that we've got from an online perspective, takes the data that we have access to -- from Nielsen, which no one has the depth of that level of data from Nielsen. So our competitors may make some false claims, they may be misleading in certain areas, but I can tell you stood here, no one has the depths of data that we have from a Cross Platform analytics perspective. And so when you start to put those together and you can surface those at an advertiser level, then the decision making that they can make, not TV separate, online from mobile separate, display separate, they can start to make decisions across that. They can do attribution across that. From a time-syncing perspective, I can say, I did this in TV and this is what happened over here in online. So when you start to surface that type of data, when you make it actionable for advertisers, that's an incredibly powerful tool. And I'll let Greg -- I wouldn't steal Greg's content, but I'll let Greg talk a little bit about that.

It's pretty clear, the MediaMind is at the heart of our online campaign platform, so the second vector online campaign management platform. We will keep that as a separate vector because I want to continue to make that a first-class marketing tool from an online perspective. And we will continue to build that out from a smart versioning and optimization perspective. We will continue to build that out from a verifications perspective. And we have some other things that we'll do around that. But effectively, those 2, really, are driving our bread and butter today, but unleash a number of opportunities for us moving forward. And then, as Neil said from a programmatic buying point of view, we're already in the game there. We're integrating with DSPs. We're taking a view around not how this programmatic buying specifically play to video or how this programmatic buying specifically play to online or how this programmatic buying specifically play to TV, if they ever get there. What we're saying is how this programmatic buying applies to all of those elements. And so we have a little bit of a broader view of most of our competitors around programmatic buying. So this is the one that we're building on, and I think this is a huge opportunity for DG.

So what I want to do is -- I just want to pause there and hold for a little while. I'm going to invite Greg up to talk a little bit about the technology and how we get there. And then unfortunately, for all of you, I get to come back. I get to come back and then just sort of wrap up from a product perspective.

And then, just to give you a fair trade [ph], I'm actually going to run the industry panel. So I'm -- certainly, if you not have had enough of me by the end of this session, you'll certainly get it by then. Greg, it's all yours.

Gregory Michael Smith

Thank you, Ricky. Industry of advertising services has not surprisingly been about service. That means you tailor your organization to meet the very specific and unique goals of your clients, your agencies, your advertisers who are out there. There's a new plank coming in to the competitive platform. And that plank is technology, and the reason it's coming in is because of Big Data. So Big Data, Big Data, Big Data. That's where we're at today. And I would direct you all to take a look, when you get a chance, the March edition of the Harvard Business Review. There's an article in here specifically about Big Data, analytics, 2.0 advertising, analytics 2.0. This is a good start. This is being able to process massive amounts of data and present it across media types. It is still what we call batch processing, meaning that it's not realtime. You can't do campaign optimization while your campaign is running in the very second, in the very instant that your campaign is running. So this new the competitive differentiation that is technology-focused is primarily about what happens after Big Data. How do we get to a point where that data not only becomes presentable across media types, but actually becomes actionable?

My name is Greg Smith. I'm the newest member of the team in some ways, and in some ways I'm the oldest member of the team. I've been working with DG, both inside and outside of the company since 2009. In the past few weeks, we, as a company, made the decision that it was time to embrace innovation first, meaning that when we talk about technologies, we're not just talking about that best-of-breed type of selection process, where you build and organize a platform with the most aggressive technology vendors on the market. We're talking about growing some new concepts at home that actually give us a unique, competitive differentiation going forward.

Today I'm going to talk about 2 kind of buzz words that have been in and around the industry in the past 6 months, in the past 2 years; cloud services and data-centric architectures, Big Data. But before I get into Big Data, I want to give you a sense of the size and the scale of what we're dealing with. We do about 60 billion transactions a day. Those transactions come from a lot of different sources. Yes, we have television data. We distribute television commercials out. We can figure out whether or not those television commercials were actually aired. We can tell you what the GRP data was at the time the television advertisement was aired. We also have, obviously, all of our online campaign data that's coming in. So you're distributing an impression, you're bringing back information on -- was a click through, what did that unique user do when they clicked through, what were they doing on other campaigns associated with that advertiser.

Real-time bidding data. This is where we really get into some heavy load. We have our Peer39 division. They actually go out and process 50 billion transactions a day. That is because they are scraping different websites in order to come up with characterizations of what exactly is on that website, what is the contextual relationships that are available on that website. Is this a website about dogs, or airplanes? And also, what's the overall quality? Is that a good website or a bad website for our advertisers to put their message out on?

Finally, we have some unique relationships for third-party data, which means we're bringing in the information from other companies that gather metrics. Obviously, everybody knows who Nielsen is. They're the 800-pound gorilla in the room on TV Data, and we have some unique capabilities there.

So what does it mean to have a data-centric architecture? Well, you have to get really, really fast. If you're going to process 1.5 terabytes or 2 terabytes of data every day, you have to get really, really fast if you're going to start to do that in realtime. You have to be really fast just to do that in batch mode doing closes multiple times a day.

So the way you do that is you first go through and you identify what is strategic data versus what is tactical data. Strategic data means that, that's data that you can process in order to make decisions about campaign optimization from that data. And that might mean you're processing some television data or it might mean you're processing some online data. It might mean you're processing second-screen interactions that go along with that television ad impression. But you're bringing all of those things together in order to look at a campaign across all media types, see how it's performing, see where it's performing, think about what is the context of the environments in which it is performing well versus the context of the environments in which it is performing maybe not as well, and then allow that to drive your next choice about what you're going to buy tomorrow, what you're going to buy later that day, what you're going to buy in the next hour. So we bring that strategic data together into the core and then we hang the services that everybody knows us for. So those interfaces that our customers and clients use today, they're code modules, they hang off of the edge of that data-centric architecture. I'm not going to go down that rabbit hole any further, but feel free to find me later and ask questions if you're interested.

The second area I want to talk about is cloud computing. It's probably, over the last 2 years, one of the best misnomers that the technology world has given to the rest of the world. It's sometimes viewed as a magic pill, hey, we're going to move to the cloud, everything's going to be great. Well, it's a little bit more challenging than that. There are areas where cloud-based operations and cloud services are incredibly effective, and there's areas where they make absolutely no sense whatsoever.

For most companies, mid-sized, large-sized, this is kind of a layout of how they would be thinking about cloud technology. There are positives, there's one concept which is, there's lower scale -- I'm sorry, lower cost and higher scale. There is a concept that, hey, you don't have control over your own operations when you're running in the cloud, so you may have lower reliability. But they're going through these pluses and minuses that are up here on this slide. For us, these are the areas that we care about when it comes to analyzing and selecting cloud technology. Notice I've highlighted reliability, next-generation architectures and choice and agility. Why? Because when you're a company that's operating at scale and you have 24/7 operations and you don't have 10 to 1 spiky traffic, cost really is not all that great of an upside for cloud technology. You can probably buy your own equipment, keep it on your own facility, less expensive than you can pay somebody else to buy it for you because your utilization rates on that infrastructure are going to be 80%, 90% anyway.

But what it does do for us, as we embrace innovation as our #1 goal for our technology group, is it allows us to bring new technologies, new architectures, new services to market incredibly quickly. So I don't -- I only have now 1 goal, which is, write the new software, develop the new mathematical science and put it out on to the cloud. It's not write that new software, develop that new science and then go stand up a data center in order to put it out on the cloud. So it gives us much, much faster time to market and when you're rolling something out, you don't necessarily have massive traffic on it. So paying by the drink for processing services tends to make a lot of sense. At some point, that may get to some scale and some high percentage utilization that it might make sense to bring it back in-house or it might make sense just to negotiate better rates with your cloud provider. It doesn't matter, we can take that decision in the future as long as we architect the services correctly to begin with.

So that's what I view as the opportunity that cloud services present to us, is it really clears out a lot of the work that we have to do in order to allow us to focus more on just innovation, on just developing that high-speed, realtime data analytics engine. You can also push your vendors to commoditize things. So some of our vendors today, some of the vendors particularly on the television side, they have products and services today that don't run on virtual machines. That pretty much means you're never going to deploy their software on Amazon. But there are other choices out there. There are things that we call bare metal clouds. A bare metal cloud is -- it's a concept of, hey, I actually have a machine here, it has no operating system on it, it has absolutely nothing on it and I'm going to need 40 more of these. I'm going to need 40 more of these machines and I'm going to need them up right now. So you go ahead and you image those machines with a very specific operating system and piece of software that you need, maybe it's a transcoder, maybe it's a trafficking engine, doesn't really matter. You can bring those things online fairly quickly to meet demand and then you can switch them over to something else later. That's one of the key decision points for us as we analyze different cloud providers. Is, can they support the software that we need or that the television industry has selected as a standard? And also, will our vendors be going down their own path of upgrades and software developments, so that they will start to work inside of the environments that we're selecting. So insightful cross-platform data analytics, that means, what I said at the beginning, which is we're pulling in information from television, we're pulling information from online, from mobile, from social. We're able to present that as one view. Those are the things that we're working on today. Ricky, as the marketing guy, gets to use the simple slide. As the tech guy, I get the more complicated slide. But this is sort of a 6-month, 2-year time horizon type view. VideoFusion 1.0 coming out this year. Again, that means television doesn't -- I'm sorry, video doesn't just mean television anymore, video means everywhere that video is going. I don't care if it's mobile, I don't care if it's online, I don't care if it's television, it's one platform for preparing that video. Cross-platform analytics starts off this year at that presentation layer, it starts off with batch processing and showing what -- how the campaigns are performing across media types, where does it go in the future. Realtime transactional information for realtime bidding, for campaign optimization, this hour, this second.

Peer39 development, I think, is really one of the most intriguing and just plain fun technologies that we have, whereby we can start to blend the characterization of the site, contextual and quality, with the campaign performance. So this solves this really interesting problem of scale in advertising. The ability to figure out what sites work or what television shows work for you as an advertiser, that has been around for a little while. It hasn't been all that fast, but you could figure it out. What you haven't been able to do is figure out why it works. Which means -- let's say you go out and you say hey, I've got -- I've got 20 sites that I'm advertising on right now. Two of them did better than the other 18, far better. Well, if your next decision is, okay I'm just going to only buy on those 2, well that's great, but maybe you can only land 500,000 impressions across those 2. It's not enough. You need to get your message more broadly distributed and you want to have that message to be as effective when you distribute it more broadly. So the opportunity here is to use that contextual information to determine exactly why those 2 sites were more effective. Now, what you can do is you can say, hey, I'm not going to limit myself to these 20. I'm going to open it up to 200, to 500, to 10,000 to choose from and I'm going to be able to select the right ones because I know what the contextual correlations were for the ones that were successful versus the ones that were less successful. So I'm going to pause there -- did it on time? And turn it back over to Ricky.

Ricky Liversidge

Thank you, Greg. Okay, I just wanted to make sure everyone's really clear around this particular thing. So one of the things I showed you was the 3 vectors of innovation. We have a number of products in market today like VideoFusion and MediaMind, the 2.0 campaign platform. Those are in market today, they are on a schedule updates and feature enhancements on a regular basis and we have a pretty robust roadmap for those particular products for the year. While Greg talked from a technology point of view, it's not so much what we build, it's how we build it. And how we do we build that in the future that gives our customers the scale and the integration and the actionable parts of the business that they really, really need? So when we talk about how we're using cloud and how we're using data-centric architecture, a lot of that starts to apply to things like VideoFusion 2.0, which is already well down the route of being actually built. The same with MediaMind 3.0. It's some -- it's actually, it's about scale. The more data you deal with, the harder these things get to do. And occasionally, you have to go back and you have to rearchitect that thing. But in rearchitecting, you can get integration points between these products and add so much more value to our customers. So certainly, lots of these products are in market today, on a regular roadmap. But I think what Greg and I was trying to do here in this specific section was to give you a little bit of an eye on the future of what we're focused on and how we're going to get there. Because it's the how that's really important and as Gregg says, technology gets us a competitive advantage here. And certainly, the assets that we own give us a competitive advantage here.

So I just have one final slide. It's my favorite slide. It's called the Wheel of Fortune, its the hub. And it really is -- this is how we really go to market from a brand and a positioning perspective. At the end of the day, it is all about data and it's all about assets and it's about what we can do with those assets. We take a huge amount of pride in how we deal with our advertisers' assets, whether that be on the TV side or whether that be on the online side. As I say, when we deliver 123 out of 150 Super Bowl ads, we don't leave anything to chance around that. We put people in at the broadcast that are ready to receive those ads. If you want to catch me off, I would -- I'll tell you, I feel that behind-the-scenes stories there, because, as they say, when an advertiser is spending $4 million for replacement and it's probably cost them well over $1 million for the actual ad, they're a little bit nervous on the day of the Super Bowl. I can tell you, they're nervous about the color, they're nervous about the sound, they're nervous about just about anything you can think about. So holding their hand through the process, so that their ad shows up in the way that they expect it to show up with such a huge investment, is an incredibly important role that we play.

When we worked with AT&T on the Olympics, it was a particular case study that we did. AT&T, one of the Olympics sponsors, I'm spending a lot of money on the Olympics, they wanted to take a TV commercial, they wanted it delivered in prime time, but they wanted to be able take content that happened literally a few hours before and build it into that TV commercial and then spin it out from an online perspective. They came to DG and said, look, we are only going to have literally a couple of hours to deliver this ad. So what we did is we set up a team, we worked with the post-production company and what we did is we built a couple of bylines. So we didn't know the American or the U.S. gymnastic team are actually going to win. So of course, you can't actually build an ad on that basis. You have to build an ad on that basis, and you also have to put an ad on the basis in case they don't win. Still has to have a positive outcome and a positive spin and all those sorts of things. So we had to shoot a number of different pieces of creative, working with a proxy. And then once we got the live content, unfortunately for everyone in the room and that, the U.S. did win, which is great. Then what we did is we built the ad. We went through all the processes of making sure that the ad -- and we got it into prime time showing on the same day, literally hours after the event that actually happened. That's why people turn to DG, okay? Because we don't leave anything to chance when we're dealing with someone's assets.

Now, I can easily tell you stories about that from a high-value perspective, but it's also true on the online side. Another story, Samsung. Samsung in Spain, everybody knows Samsung is doing great. Giving Apple a bit of a headache with their phones and things like that. I probably shouldn't share my view on that. But it's good to have competition in the market. It's really, really healthy. And Samsung came to us and they said, look, we've got this incredible piece of technology called the Samsung Smart TV. And what they wanted to do is they wanted to advertise it, but they wanted to advertise it in a way that is slightly different to everybody else. So what they came up with a suggestion was, well, look, is it possible for someone to take a phone or a tablet, connect that to their PC remotely and use their phone or a tablet as a remote control to get the full Samsung TV experience, is that possible? And we said, well, technically, it's possible, but we're going to have to work with a lot of people to make that happen. So we buckled down and we worked with Samsung and a number of other people on it. And it's actually live today, we launched it in Spain 1 month or so ago. And basically, what you can do and you've got to see it. Brian actually will have it for you in the break. And this is what I talk about as a dual screen experience. So what you can do is if you're on the web and you see the Smart TV, the Samsung Smart TV commercial in Spain and you happen to speak Spanish, which is a good thing, what you can do is you can quickly sync your phone to it, take the screen over and you get the full TV experience, okay? And what they're trying to do is they're not trying to drive a dual screen experience. What they're doing is they're driving a demonstration of what the technology can do. Well that's a slightly different advertising experience, but when you do that, you can start -- once you can sync devices together, you can create all sorts of second-screen experience. So the reason I used that story because it's an incredibly powerful one, which is not only resonating with Samsung in Spain, it's resonating with Samsung worldwide, because that's an opportunity for them to take that thing. So when I say we're creative and we push the boundaries of technology, we sit down with our customers. We listen to what they're trying to do and we try and drive that from a technology point of view. Sometimes we can do that with our technology alone and sometimes we have to do it with partnership with other people. But that's what they come to rely on us for, is we are a company that takes care of all their advertising assets. So data and assets, you heard it from Greg, you heard it from me, incredibly important to us. The way we go to market is we go to market the 2 product lines -- 2 product lines. One, which is the MediaMind project -- product line called DG MediaMind and one which is the VideoFusion product line, which is DG VideoFusion. The reason those are separate product lines is because today, they address separate buyers, they address separate customers. In the future, those customers will not be separate. And a whole vision around converged video and when we do the industry panel, I think you'll all hear from some costumers around, they're trying to take on these challenges actually today. But anything you want to do on video, and remember, video is TV and online, you can connect those 2 things together. Our dual screen experiences sit within our VideoFusion product line. We don't just do it for advertising, we do synchronize content as well. We have Treehouse, who actually do our direct response advertising. So there's a whole wealth of what we do to VideoFusion. So once again, it's not distribution, it's more than distribution, okay? So those are the 2 product lines that our teams go to market with. We sell those really hard and I'm going to let Andy talk about how we do that. Round the outside, you can see our very, very specific products and solutions and certainly, in those categories, some of those are market-leading in their own right. But when you start to put them together, that's how we win against some of our competition. So I always get the question around well, how do you win against people like Google? And I'm going to let Andy talk about that from a got-to-market point of view. But VideoFusion and what we do with video is our biggest differentiator from Google, okay? That's what wins us the big accounts. Some of that is what we do today and some of that is what we do in the future and I'm going to let Andy Ellenthal actually talk to that. Okay, thank you very much. I'm going to hand over to Andy now.

Andrew Ellenthal

Hey, everybody. I'm Andy Ellenthal, I run the company's sales and online operations and Ricky's wife was kind enough to send me this picture of him in 1982. I'll talk a little bit more about that in a second -- not really, it's not him. So I'm going to cover cell-structure data, I'm going to cover our go-to market and I'm going to cover why we win, and I think you guys are interested to know specifically why we win against Google. I've been asked just to spend just a moment briefly on my background. I've been in the digital space since -- I guess it's gone on 13 years. I did a little media and some software sales before that. I started out at DoubleClick. I managed what was the -- I was the Vice President of Advertisers' Solutions, which meant I help to build their third-party ad serving business, so therefore, a number of years. I work at a competitive rich media company. At the time, they were doing $4 million or $5 million, we grew to about $70 million. Along the way, we sold it to Gannett, and that company is called PointRoll, we compete against them today. At the time, I competed against MediaMind and I was always very jealous of their platform. I ran a media business for the newspaper industry and most recently, I was the CEO of Peer39. So I'm just celebrating my 1-year anniversary as part of DG. Thank you. And when we sold the company, we actually had a number of different options of companies that we could become a part of. I was very intrigued by the assets, this was a group I wanted to be part of and it's a company that was exciting to me 1 year ago, it's more exciting to me today. And the real takeaway here is not a picture of Ricky from 20-some-odd years ago, is, we are forcing the industry and we are a recognized force in the industry and we are going to continue to be a strong force in the industry.

So I spent most of 2012 working on the sales structure and how we align sales with operations. And I feel really good about the progress we have made. We have about 150 salespeople or folks that are involved, carrying some type of quote on their heads across the company. About 105 of those people are in our online group. The actual structure of the sales team, it varies regionally, so in Latin America, we have EMEA, we have APAC, we have North America, we have multiple product lines. We currently are TV sales team separate from our online team. I'll talk a little bit about that. But we've created a much more efficient sales team and a much more capable sales team, and also -- and it's very much aligned around customer needs. So looking at just North America as an example, what we've done is we've taken salespeople, we've connected them with our client service team and I mean connected them, I mean, at the hip, so they sit next to each other, they start each day off with daily meetings, there is shared accountability, shared responsibility and a keen focus on our customers. And when we've made this change in North America, just by as an example, we saw a positive revenue impact within 6 to 8 weeks just by getting these groups together. And we've taken multiple different companies, multiple different sales organizations, we put them together and it took this type of structure to really get these guys cranking.

And then going forward, we'll bifurcate these again towards pure new business, pure growth of existing business. We'll add more subject matters experts around the sales structure, to be able to deliver on a full suite of technology solutions. So what I'm going to share with you now is the actual goals that I laid out for the sales team at the beginning of the year. This wasn't created just for you, so it's very easy, I pulled it out of a deck that I delivered in January. So the #1 objective is to use our platform business as the base for everything else. And when I talk about platform business, I'm primarily talking about online today and it's typically standard ad serving. So years ago, when I got started, all the adds were served by the publisher and that was very inefficient for the agencies and it developed into the rise of a third-party ad server. And that really is the base for a -- we said campaign management platform. It's the base campaign management platform for the agency. So everything else comes on top of that, so the platform is absolutely critical. We need to balance and inject a broader product mix and we've talked a lot about video, we'll talk a little bit more. So the same dynamic in video ads online, it's mirroring what happened with display in 1999 and 2000 where DG assets had been served by the publisher, they're inefficient, now they're being delivered on behalf of the agency through companies like DG and DG MediaMind. So video is absolutely critical. Our agency business grew 100%-plus year-over-year, dynamic, creative, so that's creative assets that changed based on some data. Maybe it's geography, maybe it's something you know about the user, but the assets get assembled on-the-fly and delivered to the most appropriate audience.

Trading, we talked about programmatic, critical, also 100%-plus growth, data in the form of our Peer39 business, as well as some of our other initiatives, also growing at triple-digit rates but we want to do more with them and there's -- this is a big part of adding these capabilities and others on top of the platform. And we got to beat our competitors, I got 150 salespeople out there, we got to be able to go out and take business from our competitors, we're doing it, I'll give you some examples in a moment. This -- my favorite kind of salespeople are the salespeople that actually have a little bit of business rationale, and those are ones who focus on revenue but they also focus on the drivers of that revenue. They're thinking about price, they're thinking about volume, they're thinking about mix. And we have a -- I have the, sales management, very focused on these 3 levers across both businesses. So these are levers we have to play with and where I think we're the smarter, more intelligent approach to how we leverage those 3 drivers. And then, we want to bring these teams together, so we brought some of the digital teams together last year, now we're working on bringing our entire sales team together and I'll address that in a moment. And I have a very clear mandate this year as we're going to deliver double-digit growth on our online segment and that's what's been communicated and harped on with the sales team.

So Neil showed a slide earlier, which is a whole bunch of logos and talked about the fragmentation, let me tell you what it means to me from a competition standpoint. So we have 2 types of competitors, there's ones that have a unified ad stack, and I'll explain a little bit more of that in a moment, as well as point solutions. So individual technologies that are really good at generally one thing. So obviously, the biggest piece out there from a unified ad stack is DoubleClick owned by Google. And what that means is they've taken a number of different products and services, put them on the same technology platform and what they're saying is, hey, use all of our stuff. And that's a good message, they have good technology but there's some real downsides that come with that, sort of years of experience, but makes it a very close system, it's very much -- you're going to do it my way or it's the highway, so there's not a lot of flexibility there.

We talked earlier about our open system and that means, yes, there are certain things that we obviously want our clients to use our products and services, but at the same time, there might be another solution that the agency standardized on or the client has standardized on, or they just might be more appealing to them. And in that case, that's all right, we want to enable that because we want them to use, if not 6 of our products, I'll take 5 out of 6. So DoubleClick tends to be very rigid. One of the biggest challenges is they're a big media company, DoubleClick is owned by Google, and Google is one of the biggest media sellers out there. And if you think about how these online platforms are used, they're used to measure campaign effectiveness. The effectiveness of an ad. In order to do that in a meaningful way, you need to apply media cost against it. So if you just put yourself in the shoes of a big agency or a big advertiser and you're spending a lot of money on Yahoo!, and you're also spending a lot of money on Google, do you really want to put all your Yahoo! media cost information into a platform owned by a competitor of Yahoo!? Some will, many won't. And many are asking for a strong alternative and we are that alternative.

Then there's a whole bunch of point solutions, they're typically regional in nature. So Weborama is really -- they're big in France. There's another one that has a footprint in Poland. Videco [ph] is a video ad server, not a rich media ad server, not a standard ad server. There's Atlas, there's flash talking, that's my former -- one of my former employers, PointRoll, that focuses just on rich media. But what this means and in the references before, it's a very important point, if you want to use these types of capabilities on a campaign, and you're an agency, it's really inefficient, it's really challenging to blend 5, 6, 7, 8 different technologies together and to get the campaign launched without any problems. So -- or it's really difficult for global advertiser to use multiple solutions in each market, they lose that global view. So we tend to do very well against DoubleClick and we tend to do very well against the point solutions.

So why do we win? And we've touched on a number of these things, I'm going to touch on them again. Global reach, local presence, that means actual people in all these markets to be able to work with the individual advertisers or teams within those markets. Video, video, video. You've heard it before, it's absolutely critical to our story, Google can't do everything that Ricky just described. And we're out in the market, my folks are out in the market, we're talking about this, it absolutely is resonating and it's making a meaningful difference in our business.

So we talked about point solutions being regional and inefficient but we do actually have our own point solution. Our rich media business, our rich media capability can be used as a standalone point solution. Often, that's an entrée into a bigger account. And they're very competitive. I think I touched on platform and data consolidation being able to pull all that stuff together, being innovative, being able to deliver new products and features multiple times a year, being flexible and open is really important. Not being a media company is absolutely a differentiator and the service and the execution is also important. So if you look at a couple of the logos on the slide, Havas, we just made an announcement about Havas, big holding company, I believe they're privately held, but you may be a little bit less familiar with them. What do they care about? They cared about global. They cared about converged video and they cared about our ability to service them in multiple markets.

Wrigley, Wrigley's a good one. So they're of Mars, we have won the Mars business, we started with them out in Germany, then we rolled them out across the rest of Europe, then we rolled them into North America. And then, in the beginning of this year, we added their Wrigley brands, which are high -- good amount of money associated with it. So global reach, local presence was important. We have gotten in there. And actually, we had -- our first entree into the business was we were doing rich media with them from the EyeWonder acquisition. We're able to build on that and be able to roll them off of the DoubleClick platform and onto our platform. So those are key. General Electric was another recent win, GE. So we had some experience with them from a point solution perspective, they were using the Google platform, they wanted to consolidate around a more flexible and innovative platform. And for them, that execution and service was absolutely critical. So I got a lot of examples like this, I'll be happy to talk to you more afterwards.

So that was pretty online-focused, let's take a moment and talk about changing the way we're going to market with our TV business. There's brand advertisers that we sell to. There's advertising agencies. One of the real benefits to the combined business is the TV business has relationships with a lot of these advertisers directly. Historically, MediaMind have been focused mostly on the agencies, so we now have some really interesting conversations going on with brands, specifically.

Obviously, there's some competitive pressure in the business. We're really focused on renewing our key clients and that's going on right now. With that, we've had a lot of conversations and made a good amount of progress on HD penetration. I guess, I felt competitive pressure was important so I put it up here twice. But -- so we have a lot of control over those first 3 bullets. I mean, we can address competitive pressure, we can focus on the renewals, we can look for opportunities to increase spend with HD penetration. What the sales reps or the sales team can't control are changes in spot buying activity. So if an advertiser that used to buy 20 markets now only buys 5 markets, that's not something that this team is going to be able to affect. What we can do is focus on other growth areas and other value propositions and that's the international markets, which is a big opportunity for us. You heard a little bit about our new platform, we're really focused on driving additional efficiency, not just for us but for our customer base. I'm saying it again, it's just important, both teams need to be talking about converged video. In order to be able to get that cross-screen analytics, you need online video and you need TV video. So we're leveraging online and TV together in a lot of different ways. And then we're working on a number, we're trying to be creative. We're looking at new ways to package both our online and our TV services to this customer base. And we're still in that testing phase of some of these ideas but the initial feedback looks positive.

So as it relates to bringing these teams together, a couple of things that we're doing now. So our GM video, video is obviously a big focus. If I haven't gotten that, we haven't communicated that, then -- well, I think we have. So our head of video actually runs our TV business. So there's some really good synergies there. We are moving our TV sales force under -- in EMEA, under our online, what has been our online EMEA sales leadership. Hopefully, that's clear. Was that clear? Okay.

We do a number of joint sales calls, they're both in North America and in other regions and that's been productive and there's a really good story and that story is not a -- it's a reality today. The Samsung example was a -- is a good one. As I mentioned, our new products that we're bringing to market, it's dependent on both teams executing. So with that, we're training the TV team to understand more about online and we're training the online team to be able to speak intelligently, not for me, speak intelligently about the metrics that are used to measure TV like GRPs and really understand the TV landscape. But just to be very clear, going forward, we are going to have one unified team that's capable of selling our entire suite of solutions. So that's really what I wanted to cover with you. Hopefully, you have more color on what our sales structure is like, how we're bringing teams together and a little bit more on our go-to market and competitive value proposition.

So I appreciate the opportunity to chat with you today. And with that, I'm going to turn it over to, it looks like Craig.

Craig E. Holmes

Thank you, Andy. Thank you, Ricky and Greg. I know that you guys have met me and Neil and talked to us in the past, to be exposed to our broader management team, we appreciate it and we appreciate you guys staying on time. So I do have an update on kind of administrative -- administrativean [ph] logistics. What we're going to do is we're going to have 3 groups and we don't have -- we don't actually have numbers or letters on our name tags. We're just going to separate it up into 3 groups and we're going to take a tour of our production facilities. In the meantime, what we'll do is we'll come back here, we'll set up for our customer panel and roundtable discussions, we'll follow up, follow it up with my financial discussion. We will have boxed lunches brought in. So any of you that can join us for lunch, we welcome you to do so and we'll also have product demos set up in another conference room so you can enjoy those as you eat your lunch. We do need to wrap up by 12:45 or 1:00 because we need to get back to work and create shareholder value. But we do appreciate everybody being here, we'll take a break, it's 10:20, come back at 11:00. We'll come back at 11:00 and have the customer panel, which I know you're going to enjoy. Thank you, very much.

[Break]

Craig E. Holmes

Hi, I hope everybody enjoyed the tour. We are making a little change in the program. We're going to be flexible, we're going to do these sorts of things, we're going to go ahead and have the financial overview now and we'll have the panel and roundtable discussion following my financial overview.

So let me start out by saying DG is a company in transition. Last year, we made a couple of acquisitions, we bought Peer39 to enhance our data and analytics capability. We also bought North Country to enhance our direct response TV business. Now in 2011, we made several acquisitions. We bought MIJO to increase our presence in the Canadian TV market. And we also bought Treehouse, another acquisition related to our direct response and -- our direct response business.

Finally, in 2011, we made 2 significant acquisitions. We bought MediaMind and EyeWonder. We bought these companies that immediately became one of the largest online advertising campaign management companies on the planet. DG recognized, prior to those acquisitions, that eyeballs and video were moving to the Internet. Also recognized that audience targeting and multiscreen video is becoming increasingly more important. So DG made these strategic acquisitions in 2011.

You can see on the chart that prior to the acquisitions in 2010, only about 10%, less than 10% of our revenues were associated with our online business. Following those acquisitions, in 2012, over 1/3 of our revenues are associated with our online businesses.

The transition that I referred to is in full swing today. Our TV industry has matured. Our online revenues are growing, and particularly, our data, analytics and online video revenues are growing rapidly. We're also seeing, as Ricky discussed and Andy discussed, we're seeing the conversation increase in the marketplace and among our customers about the convergence of online and TV. We also recognize that our TV, video legacy, our rich legacy working with TV, video ads, puts us in a great position relative to this evolving marketplace.

Over a longer term, we do expect our online revenue growth to overtake our TV revenues. We also expect that we'll be able to converge our operations in engineering organizations to support a single platform and single operational infrastructure over time. You've heard Ricky, you've heard Greg, you've heard Andy all talk about how our products support convergence. Our technology supports convergence. Our customers are supporting convergence, and Andy's sales strategies and sales and operations initiatives are supporting convergence. Over time, we ultimately believe that the lines between online and TV will disappear.

Let's take a look at our longer-term revenue and EBITDA trend. As you can see from this chart, year over year over year, revenues have grown nicely. What you'll also notice though, in the last couple of years, substantially, all of our revenue growth has been driven by our online businesses. On the right-hand side, you can see that the company has enjoyed nice EBITDA growth over several years, what we also notice is that EBITDA growth has leveled out this past year as the online revenues, our lower-margin online revenues, became the larger piece of our revenue pie.

I'm going to drill down on the segments here. First, I'm going to start with the TV segment. Our TV revenues and bottom line has actually decreased year-over-year. We made some adjustments to the revenues to take out the incremental impact of political revenues and some of the M&A revenues that we benefit from in 2012. But year-over-year and quarter-over-quarter, Q1 compared to Q1 of last year, our revenues actually declined by 5% to 7%.

In Q1, you can see that, that revenue decline actually fell all the way through to the bottom line. As we go forward, we expect a couple of things to continue. You heard Andy mention, I think twice, on one slide, that we're seeing some competitive pricing pressure out there. Also in 2012, what we saw is actually a secular shift in the way which some of our largest studio customers were buying their advertising. They're literally just decreasing the amount of spending they were doing on a per movie basis substantially. Now as we go forward, we do expect that competitive pressure to continue, but as I mentioned, we also expect our cost to come down as we benefit from the convergence of online and TV businesses.

When I think about our TV business, we've seen a couple of things evolving. First of all, we recognize that the cost will go down, we recognize that we're going to continue -- that we have competitive pressure, we recognize at this point in time, that we really need to attack, go on the attack and go on the offensive, we need to attack the competition. Really, what we're seeing out there is we're seeing smaller -- we're seeing companies with smaller market shares, much smaller market shares, going after and trying to buy our customers with low-cost solutions. When it comes to our TV business, we've been at this a long time, we have the best customer relations in the industry, we have the best customer delivery network, ad delivery network in the industry. We have some of the -- we have valuable, searchable video databases. We have great customer service. We're expanding internationally. If you heard me talk about the convergence of TV and online, we're already bringing to market some converged platform analytics capabilities and differentiated products to help support our TV business going forward.

DG has been on the leading edge of the TV advertising industry for years, we've seen changes take place. We've seen DG lead the transition from a hub and ship business to a digital workflow and digital distribution over the Internet and satellites. We're seeing DG today push HD everywhere since -- as the industry continues to evolve from SD to HD. And what you heard from the management team today is we do believe that DG continue -- can continue to lead as the TV industry evolves from a linear platform distribution model today to more of a 360-degree interactive model like online is today. In the meantime, but it is very important that we maintain and protect this valuable revenue base.

Let me talk about the online segment. So on this slide, I have our prior-year and current quarter revenues and EBITDA. The Q1 year-over-year results are fairly comparable, all the large acquisitions, all the large acquisitions that I talked about earlier, took place prior to the periods presented on the Q1 side.

On the next slide, I'll actually make adjustments to the 2011 revenues to adjust for the pro forma impacts of the mergers that I discussed earlier. But before I go to the next slide, I do want to point out that we had, in Q1, we had very nice revenue growth, as we talked about, but also nice EBITDA growth as our EBITDA increased from 4% to 13% during the quarter.

So on this slide, I made the adjustment for the pro forma, full year pro forma revenues associated with the acquisitions. And what you see is that our revenues in 2012 actually declined on an apples to apples basis. We experienced a couple of things in 2012. First, when we went to integrate and migrate the EyeWonder customers to the MediaMind platform, we had some customer fallout. It's a normal course of action in technology transactions that you migrate your customers to a common technology platform because you don't want to have the engineering resources supporting 2 different technologies, happens all the time and it's normal for that migration to take place. It's also not unusual for doing a migration like that for customers to stick their head up, look around, see what's going on in the competitive landscape because they're all having to make the change anyway. And during the migration, we did lose some customers, we did have difficulties during 2012 on that front.

Also in 2012, what we noticed is the macroeconomic headwinds affecting one of our largest geographic segments, our European business in our online segment. The good news is that the migration is significantly behind us, it's substantially complete. We are hopeful that things are stabilizing in Europe. We have made some additional management, we've added some new management to our online European business and actually to other key online positions to bolster our online business.

So what we're able to demonstrate here as a result of those actions is we actually reversed the trend that we saw last year, we had a turnaround in Q1 of this year where we actually saw double-digit growth. As one other point that I would make, and you've heard this over and over, it also is important that we do expect to benefit, going forward, as video, online video continues to grow. The online video market, as we pointed out earlier, is the largest, one of the largest and fastest-growing segments of the online video marketplace and so we're glad to be able to participate in that going forward as well.

I have a slide here, just touching on our revenue mix and this is just touching about how the revenues have evolved over time. You saw a year ago, 33% of our revenues were associated with our online business. Today, 37% of our revenues. And Q1, 37% of our revenues were associated with our online business. This slide is actually more indicative, it talks about our concentration of revenue across our geographies. We had -- we're glad to see that our concentration in EMEA is reducing over the years. So a year ago, we had 42% of our online revenues coming out of Europe. Today, it's only 34%. As you can see on the right-hand side of the slide, all of our geographies grew nicely during this past quarter year-over-year, except for Europe, which is down 12%. And if you take Europe out of the map, we actually saw a 20-plus-percent growth in our online segments, excluding Europe.

Now I'm going to take a look at the balance sheet. At the top line, you noticed that we did use cash, over $50 million of cash to pay down our debt during the quarter. So here at the end of the first quarter, we had over $47 million of cash, we have $50 million availability under our undrawn revolver. As you go on down the schedule, you'll notice that we have maintained good, solid working capital, we also had very positive cash flow from operations during the quarter at over $20 million. And then at the bottom line, we spent about $6.9 million in capital expenditure, a little bit less of what we spent during the same period of last year.

I wanted to look at a few recent trends on our P&L. Just had a couple of highlights here. At the top line, you'll notice that our revenues peak out in Q4 during the peak advertising season. If you look at the gross margins, our gross margins have actually stayed fairly consistent quarter-over-quarter, except in Q4, where those incremental revenues basically fell all the way down to the bottom line. Our OpEx has also stayed relatively consistent quarter-over-quarter, even though more of our revenues are shifting to our lower-margin online businesses. What you also see is we have shifted our revenues as we're investing more -- shifting our comps as were investing more and more in the sales and marketing activities that support our online businesses, so you can see growth in the sales and marketing line item, while total OpEx may stay consistent quarter-over-quarter, except in Q4.

So I wanted to wrap out just by saying a couple of things. As we look forward, it's our intention to grow our video revenues by leveraging our legacy businesses in the online TV marketplace. As we are working on developing these solutions to provide a converged video offering, a converged multiscreen offering for our online advertising customers and agencies, we are going to continue to develop technology that enhances our online video, our video capabilities and our analytics capabilities and we are going to continue to develop solutions, which allow us to converge our operations and our infrastructure into a single business unit, so we can avoid some of the redundancies and extra costs and maintain the efficiencies and synergies associated with operating in a single platform in a single business unit. And of course, we're also going to work hard to maintain cash flows necessary to pay back our debt.

I'd say, just to wrap things up, what I'll say is that here at DG, we recognize that sight, sound and motion is the most provocative and powerful form of advertising. We also recognize that it's most powerful and provocative, we also recognize that it's important to get that ad to the exact right person, at the right time, and on the right device. So at DG, we always aim to be spot on when it comes to our ad delivery. Thank you, very much. So I trust this is our panel.

Ricky Liversidge

Yes.

Craig E. Holmes

All right. Good.

Ricky Liversidge

I just need to get my cup. [indiscernible] We'll pull the chairs over and I'll introduce the panel.

Andrew, if you can help me just pull some seats out here. This is a little bit noisy, a few chairs to the front. Maybe you can go in the middle, Andrew. Yes, Darren [ph], come sit next to me.

It's been a long run. So we're just getting to the end of it now, so we're going to take 30 minutes for the panel. I can say lots and lots of things and talk about the industry for a long time, as people know. But what is really good to do is to hear from people who are at the coal face, really, sort of having this day to day. Certainly, we invited 2 of our customers. So Darren Herman is actually from an agency, I'm going to let Darren introduce himself but we have agency represented. We have Trace Rutland [ph] who's actually from Mars, so from an advertiser perspective. And then we have Andrew Blum [ph], who talks a little bit funny, because he's got a British accent, I don't know what that's all about, but yes, Andrew is actually a Senior Vice President of Business Development here and in Corporate Development at DG. So effectively, what you've got is you've got an advertiser, you've got an agency and you've got a tech company. So what we're going to do is we're going to make this a conversation, we're going to talk a little bit about video convergence and things. But before we get to that, Darren, maybe you'd like to just quickly introduce yourself.

Unknown Executive

Sure. All right. Welcome. Darren Herman, I run digital for the advertising holding company on DC Partners [ph], which is a publicly traded company. We've got about 53 agencies within our purview, ranging from Christian Porter to KBS to the owner. And from a media perspective, we buy about $3 billion worth of media in the marketplace. So I focus on that, I also run our investments practice, so focusing on marketing and advertising technology, so working with DG is close to what we do on a daily basis.

Ricky Liversidge

Trace, maybe you can introduce yourself.

Trace Rutland

Sure. I'm Trace Rutland. I work for Mars and importantly, Mars Incorporated, so I oversee all of our Mars business units, in terms of all above the line media. So TV, digital, radio, print, out of home and cinema, and I do that across all of our segments, chocolate, Wrigley, pet care, food, and I do that for the U.S. and for Canada. So some days that's all a little overwhelming.

Ricky Liversidge

I'm sure. Andrew?

Andrew Bloom

Hi everyone, I'm Andrew Bloom, I've been with the company, 3.5 years, I think one of the questions was, why do I work with DG? Well, I think because the company I was working at, got bought by DG, which was MediaMind, so -- but it's been a really, really exciting time for us and I headed up business development there and now, with all the TV assets that we have, combined with the online assets, it's a fantastic opportunity, and for me personally, prior to this, I was at a company called Spot Runner that many of you may have been familiar with, that was for about 2.5 years, 3 years, trying to build an advertising exchange in the same way that we now have online advertising exchanges with the TV business. So it's sort of, back to the future for me a little bit, and having fun here, sort of building toward that future.

Ricky Liversidge

Okay. So let's -- so thanks for that, everybody. So let's get into the questions. So I'm going to start off one nice and easy, we'll save the hard ones for last. So the first question, I guess, this industry is going through a lot of change. I guess it's always going through a lot of change. So it just feels a little bit different with multiscreen and other things going on at the moment. But I -- Darren, for you, and your company, what's the biggest challenge facing advertisers today, simply from the agency point of view and the advertiser?

Darren Herman

Our biggest challenge, which, which most of Madison Avenue has, is talent, and finding the talent that could be either multimodal or digital specialists. And our agency is, we tend to be multimodal, so we have folks that are doing digital, print, TV, at home, everything altogether. And the reason for that is because we feel as digital is a channel today, digital is just a delivery vehicle of tomorrow. And so we don't -- won't isolate digital as its own thing. Digital will penetrate -- video will penetrate print, at home, et cetera. And so, the key thing is talent. And if you want to move away from an easy answer such as talent, the second side of that is attribution and measurement. And so, what digital has given us is a way to measure fairly quickly, not that other channels can't be measured, but it takes a lag to get actually the measurement off television and print and all the other mediums. So digital has spoiled us, and actually getting metrics back in near realtime, within 24 hours, sometimes within seconds, if it's in a realtime world, you get metrics back. So the biggest question there is how do we attribute across channels and within channels for our marketing, and that's everything from cookie stack analysis to fractional contribution, even to channel mix optimizations, and that's a big hurdle that the advertising industry is taking on right now.

Ricky Liversidge

Good, I like that. Trace, maybe we can ask you the same question, so challenges facing Mars, I know, you know, it's a good part of what you do, so yes.

Trace Rutland

I'm very lucky Mars is pretty progressive in terms of looking at all types of media, and really not just test and learning, but really diving into all forms of consumer engagement. I guess our biggest challenge is the same, in that it's measurement and data. I mean, we almost have too much data sometimes, and then people don't -- don't use it in the right way, or maybe in the right direction, they don't -- they aren't able to find the story in a way that's really helpful to their business, which I try to do as often as possible. And so we have a lot of data, we don't have consistent measurements, and so trying to convince the nonbelievers, because we have them, like every organization, to really think about things in bigger terms. A few people still want to think about television as the only reach vehicle, there's definitely been a lot of movement, in terms of looking at online video and social. We're getting them there, social's probably, I would say our biggest challenge, because there's no real good measurement, no agreement on when it's important and when it's not. And is a like in Facebook important to us? We have some businesses -- well, it's a very diverse company in terms of their opinions and outlook, so some people want likes and likes on Facebook, some people don't even want to be on Facebook, internally. So even, really kind of convincing people where the value of social is, without a measurement that they can really relate to, I've spent a lot of time doing.

Ricky Liversidge

So Andrew, maybe a question for you, in the same vein, I know you spend a lot of time out in the market, so you speak with a lot of customers, both in the agency and the advertising world. And you spend a lot of time looking at emerging technology and looking at emerging areas. So challenges, what does that mean for you? What are you hearing?

Andrew Bloom

Well I think one of the biggest challenges that, I mean, obviously, what these guys is much more important than what I say. But one of the things that, really, I think it all comes down to, is we're dealing in a world of -- the consumer is just newly empowered in a way that we've never experienced that before. I mean I was counting up the obvious thing, like the number of devices we have at home, and realizing somehow, we've got 7 different Apple devices, and there's like 3 people using them. The reality is that it is just -- and it's incredibly hard to deliver a relevant experience and create that moment of truth in today's world. How do you do that in a relevant way? How do you do that in a respectful way? How do you do that in a way today where there are consumers who actually believe that it's their data, it shouldn't be borrowed or misused by other people? How do you do it in a way where people have a heightened sense of what's creepy? The fact that you could target someone or reach them, I mean, we know we can do that, but how do you that in the right way? So I think one of the single biggest issues that we as a company that has the capability to help these guys find their audiences, to deliver the message, like how do you do that in a way that is safe, relevant, respectful? And that is an emerging and hugely important issue. And I think, what excites us at DG is having the assets, having the capabilities to work with the these great advertising agencies to do that.

Ricky Liversidge

So let's move on to video convergence, and sort of go specifically down that maybe. You hear outlandish statements like death of TV and all those sorts of things, and maybe that's true, death of TV as we know it. But if you view it as just another screen, it's another screen. So I guess the first question is, what impact is the rise of video specifically having on the market? I guess for your customers and you as an agency?

Darren Herman

Well, it's good timing for that question, I literally flew in last night from Mountain View and spent those past 3 days with all the big strategic media companies there, the technology companies. And it reinforced our thoughts. And our thoughts is, it's not about TV anymore, it's video. And so, once you start to get out of the mindset of television and move to video, video opens up many more doors. And the hurdle around that is that we have a lot of choices now. We have almost too many choices. We don't just have 7 networks and maybe 30 cable channels that you can buy, you now have millions of programs across every different major media company out there, and so many new clips are updated to -- are uploaded to YouTube on a daily basis. So when you think about video now, the world is almost endless from what we can potentially buy. And so for us is, thinking about it from video, how do we then deploy the assets to all these fragmented areas, and how do we track that back to measurement metrics. And the measurement metrics for us, everyone likes to talk in the video ecosystem at GRPs, and GRPs are basically a translation to the amount of reach and frequency you're getting as a buyer. So the amount of people you're touching and the amount of times that you're touching those folks with your advertising message. The problem that we see with the GRP is, you're taking a metric from an old medium, a medium that was never built for engagement, and you're taking these GRPs and putting them onto this new medium of video, and so we see that as fundamentally flawed. Now we still deliver plans that show our GRPs, but we want to take engagement metrics and apply that to video. Why not use the technology vehicles such as laptops or tablets or even new screens or mobile devices and, video affords the opportunity to engage with on those devices. And so one of the big hurdles we see in the video landscape is getting our clients, we're not clients hopefully yet, but hopefully, in the future, we're coming to it, we could help solve your social problems. Is, we -- the way we see it, it's getting our clients that have grown up within the TV world to understand, to move away from GRP-based buying and move them into sort of engagement-based buying. If we can relate what engagement means to moving to the bottom line. Why clients keep GRP models is because they've done so many years of measurement and understanding that if you buy a bunch of GRPs or GRPs in the market, they'll move product off shelves. But we believe that just using GRPs in a video-based world, it devalues the opportunity that video affords, especially when it's digitally delivered because of engagement.

Ricky Liversidge

So Trace, you're in -- currently a progressive advertiser. So video, is it bigger cost to all your brands at this point in time? Are you -- is it something you're testing, working with, how is it forming your campaign?

Trace Rutland

So in the U.S. and globally, because we are a global company, and operate in all the major media markets, so we have a policy or a philosophy towards video neutrals, as a screen is a screen is a screen, and we don't really care, or we care, oh wait, they always give me a hard time about saying that, but we're not biased against a particular screen size or message, but I have had to disagree a little bit on TV. When you look at the U.S., sure, that's a great point. But when you're looking globally, TV is still it, in terms of reaching people, and when you're thinking, from strategically from a global standpoint, you have to recognize how important TV is. I don't think TV in a few years, is going to look like what it looks like right now. This week is the upfront week for all the TV networks, 2 weeks ago, I went to the digital new front, which is their answer to the TV model. I don't think that I would get to stop talking about it, in TV terms for a while. I started out working in digital in 1997, so we've been talking about TV being dead for a long time. It hasn't died yet. Actually, print hasn't died yet, so -- and I thought they'd go away a lot sooner than they have. So I'm not sure if I could really agree, that we need to talk about engagement, because we don't have really good measurements for engagement, or a really good definition, I think, for engagement. And I think engagement can be very specific to the product in the brand. In terms of -- some brands have high engagement levels, others don't, I think we try to falsely create engagement level for things that are not high-engagement brands. I don't see that as [indiscernible] Mars -- with our portfolio, but I see that in a lot of other packaged goods. In terms of where it's going to converge, I think the consumer is going to lead that. Obviously, millenials are going to lead that, and they're not TV-biased. If you look at the numbers of who's watching TV in the U.S., it's much older, but guess what, the whole population of the U.S. is much older. So true, it's an older population but it's still the majority, if you look at the overall demographic of the U.S. So I'm a little cautionary and in terms of talking about GRPs, I don't like that either, I don't like it for different reasons, I've never been impressed, even back in the day, that GRPs were a great way to talk about viewership, so I certainly don't think it's a good way to talk about online video, viewership or even any kind of digital engagement. But in order to sell things through, in order to get people to really -- advertisers and marketers to really engage themselves, you've got to use the terms they're comfortable with. So until we can come up with something that we can really verify measure in a way that's meaningful to everybody, I think we're kind of stuck there.

Ricky Liversidge

Yes. So let me -- can we come back to you, 1 sec, I just want to ask Andrew one -- well let me take it, I'll try it, yes.

Unknown Analyst

No, I was just going to ask you -- going to ask a question [indiscernible]

Ricky Liversidge

No, I'm going to ask the questions, and then if we have time at the end, I'll see if I can open up. So if you can just hold it for the moment, and I'll try and take just maybe 1 or 2 at the end, yes? Just to give you some sort of access. But one of the things that I just wanted to ask Andrew. Andrew, you know, so what are people looking to do with video that's sort of different and challenging in that? Because this converged picture where you did things one way on TV, and online affords you a number of different opportunities. We talked about IP connected TVs, we talked about all sorts of things. What are people -- what are advertisers trying to do?

Andrew Bloom

Well, I think the -- what we see the opportunity is, is to take all of the incredible value that the traditional TV experiences have sights on motion and bring them into much more targeted online experiences. So a lot of the new formats that we're working with our clients on, provide the initial engagement through the beauty of video, but then allow people to quickly go and find out more. So whether that's sort of putting kind of carousel-type ads in a way you can get to see different products or narrow cost into certain different products that folks want to show. So I think, what we're seeing is, the client say, give me the sort of the wow of -- on the experience of a TV-like video experience, but give me the power and the targeting and the data that I can gather from the traditional, or the way we normally expect to working online. So I think we're sort of seeing that hybrid and then, what's starting to get very interesting to us is the advertisers, they're trying to make the connection through the different video experiences that are delivered in 2 different screens. So that's where you guys are probably beginning to hear about things like second screen, experiences where you're actually syncing the delivery of a second experience on a tablet or on a mobile phone, directly to the video experience that somebody's having on the large screen. And you're going to see more and more of that happening, and in fact, you're going to see not just second-screen experiences being synced to first screen, but you're actually going to see some of those experiences on the second screen being pushed back to the first screen as well, unless I suppose, we'll get a chance to talk about some of that, maybe [indiscernible]

Ricky Liversidge

Yes, we'll certainly talk about it. This is one of my favorite questions, Darren, because I wrote this one, so it's a favorite of mine. But I think I've learned at DG that the online audience, we see a lot of young people in the online business, people coming straight out, it does -- it's a very mathematical, analytical type of business, and we see a lots of young people in the TV world. It's pretty well established, and there's certainly some differences there. But I guess the question is, why aren't TV and online more closely integrated? I sort of believe from a technology point of view, we're much further ahead. But is it people, business models, what's really holding this integration back? I think both for you and Trace, you're more progressive in this area but, I think for a lot of companies, that's still a barrier.

Darren Herman

Again, I'll answer it from the agency point of view, but it's exactly how you asked the question is, why aren't TV and online people more integrated? It's because you call them TV and online people, I mean, they have different departments for that. And so it's up to the company to isolate or to bring together those 2 silos. Historically, in media agencies, you have your TV buying group, and then you have your online group. We don't operate that way at our agencies. We have sort of brand teams, that are a mixture of everyone that's -- sort of talked in the beginning, how everyone is multimodal. But to your point, a lot of agencies call it the television buying group, and they tend to be an older group, one, because TV's just been around longer, but also, the TV is also built and bought on a lot of relationships. And folks that have grown up through the networks and through the channels over time. Digital is so new, it's just attracted sort of folks that haven't been part of the TV crowd, historically, not everybody. But it's -- yes, it attracts young talent, but I'd also argue, all departments within agencies attract a lot of young talent as they're coming right out of college, and that's a big area where agencies hire out of. So the biggest thing you hear is cut the silos between the groups and you'll start to bring everything together, and I think, by calling TV video, that -- then video could work across any screen, it doesn't necessarily have to be delivered on a big what is "television screen".

Ricky Liversidge

Right. Yes, of course, sure.

Andrew Bloom

Just one thing on that, one of my experiences, that, when I was at this startup, trying to change the world of TV, I think there's a certain sort of arrogance, historically, of the online guys going to the TV guys and saying, that thing's broken, we do it better. When I spent 3 years trying to do that in a former company, and then I'd went -- I was there saying, TV screwed up, it's really inefficient, the workflow is horrible, you guys don't get it, let's build an exchange, let's have an option model that'll price better, package better, we'll do lots of programmatic and the world will be better. And then, that company fell for other reasons, but then they come in online, and then let's get online, and I'm like, wow, what a mess. I mean, talk about -- to Darren's point, inventory ran amuck, people not packaging stuff very well, so I think, sort of fundamentally, everything that's sort of good about TV, in the way it's bad about online, I think the way this will ultimately come together is by taking the best of both. And I think what we've had is sort of attempt, sort of pretty arrogant attempts to impose different business models to, as Darren said, just different measurement models on the other side. And I think that's not going to be the answer. It's going to be more of a hybrid, more of a thoughtful process, and it's not going to happen overnight.

Ricky Liversidge

So Trace, you deal with all of it, and so you must face some of this from time to time. So what's it like in your position?

Unknown Executive

Yes. So there are so many answers to that and both great points on why it is the way it is. What I really see, it's not an age thing, it's not a generational issue. I mean, we are -- everybody in this room grow up with TV, and my 4-year-old niece watches TV. So TV is for everybody and it is the most sophisticated mature market comparatively but that doesn't antiquate it or the people who work in it, there's certainly older people who work in it because retirement age is 65, so generally, people like to stick around and learn new things and people do. And actually, I see, in my agency, a lot of passion for it. We have our -- for different reasons, we have our TV agency and our digital agency as 2 different groups within 1 holding company, but they're still separate companies, and I work very hard to get them to work together, we called them agency of 1, and we try to get them to play nice in the sandbox. And it isn't about the technology at all. I mean, as a matter of fact, one of the complaints I get from the TV side is we want to do your digital and not just because they want more of our business but because they want to learn and grow and they want to keep -- they want to be marketable. They're not looking to retire anytime soon either. So -- but in terms of why it's not converging, it's not really about the people, I think it's more about the P&L and the way the sales divisions have been split up. I mean, even to the point of the new front that were 2 weeks ago for digital, and the traditional ones, they were separate. A lot of the networks did separate meetings. And honestly, I have a lot of people asking me why are they doing that and they just don't know how to merge it. I think that's the biggest thing. I think a lot of advertisers want to merge it, a lot of advertisers think that way but if the infrastructure hasn't been there, it's slowly getting there. We do deals that includes someone's online and offline properties, but it's been because we've really pushed it and we've been doing it for a while. So it's tough. I mean, it's tough anytime you change a paradigm and -- or shift it or whatever the right way to phrase it is. But it takes a lot of work, it takes a lot -- and it takes a lot of work from everybody. I mean, we can't -- the networks can't change overnight if the advertisers aren't pushing it. The advertisers can't push it if they don't believe in it. The agencies can't put the advertisers until the knowledge is there. So -- and to your point, there is a lot of arrogance there and I think that's very off-putting. And then if you think about it on the level of at any company or brand manager who've got to deliver their numbers, if you can't sell them on, if you can't convince them this is what's going to drive their sales, it makes their goals and get them promoted to the next level, if you can't convince them that whatever you're proposing is going to work, they're going to take the safe route. I mean -- so I think, it's a bigger problem but we're -- and it's taking longer to get there than I thought. I mean, I thought by now, we'd have it down pat. Even if you went to the digital new front, they were so disorganized, there was like overflowed sections, I mean, it was awful, you go to the TV upfront, very orderly, you sit there, it's a very polished presentation. So there's just not -- everybody, I guess, needs to hold hands and move forward, but I mean, there's a lot of money involved.

Ricky Liversidge

Yes, a lot of money.

Unknown Executive

A lot of money. And so you have to -- that's probably the real answer.

Ricky Liversidge

So there's no doubt it's going to move forward. There's certainly some obstacles in the way and I think, along the way, there's certain tipping points that move that on. And I think, certainly, the consumer from a multiscreen perspective, at the end of day, roll off to the consumer and that's going to drive it that way. So we talked a little bit about video convergence, but keep the microphone, we'll come back to you, we'll break the order. And what we'll do is we'll go to a question around data, big data. How many conferences have you appeared to that talk about big data. What's key around this whole conversation around data for you, we talked a lot about GRP, we talked a little bit about impressions and convergence and all that sort of thing. But to you at Mars, what's the most important issue?

Unknown Executive

It has to be actionable. It has to mean something to people. It has to -- the story has to pop out because -- and we do, we go to conferences, we have people present to us all the time and it's like, well, that's nice to know but how does that change our business, how does that drive my business, and can I really act on it? Because if it's not actionable, it's pretty meaningless to us. So I think that's the biggest thing. I love the data, I love seeing it, we have a direct response business actually within our portfolio, and we do see realtime sales that we optimize against which sounds great until it keeps you up at night because you're checking to see how things are moving. But I would just say, overall, there's too much of it, it doesn't mean anything and it distracts from the people, from the situations that really can shed some light on your business.

Ricky Liversidge

Hey Darren, same question for you, I think you do talk a little bit about, so I don't know if you can just open that subject up a bit more.

Darren Herman

Totally agree. I mean, data for the sense of data is meaningless. Data with a sense of purpose is insight. And sort of what we're seeing in the industry now is marketing budgets are coming close to the CIO budgets and enterprise solutions for adopting software packages, Software-as-a-Service licensing, big databasing, it's coming to the agencies because we've always lacked it at scale. And agencies are sort of building their "big data departments", not because they want to manage their databases but because they want all the data to find the insight and insight is what drives our clients forward. And we need to be able to take that insight, not just from a media purpose but bring that into creativity, bring that into strategy analytics, bring that into media planning, bring that into media buying, sort of bring it throughout the entire organization. Some of our best relationships with our clients allow me to present some insights back that have nothing to do with marketing but have to do with product development or human resources or in other areas of the business that we are not scoped to touch but are areas that we found insight from that we bring to our clients. They don't know what to do with it but they bring in the right people into the room to have those conversations. The last 4 or 5 years have been around the databases and the data warehousing and the big companies sort of within this space and I expect the next 4 or 5 years to be about sort of the data application lair, taking -- stop talking about the big databases but talk about the visualization solutions, start talking about the data to insight solutions that will allow us to take that data and make it actionable for our clients.

Andrew Bloom

I think one of the -- everyone falls into the traffic data and just sort of talking about how big that is and mine's bigger than yours and mine's faster than yours, but I think that one of the real issues that not a lot of people want to talk about is trust. When I think of data, I think the fundamental question here is, do you trust the company that's holding it, using it, managing it to have access to it? I mean, at the end of the day, in fact, what I was saying a few minutes ago, we're in a new world where the consumer realizes it's their data at the end of the day. And there are companies like disconnect.me, if you haven't seen that company, which has a model to disconnect people off the grid and then reconnect them and charge people for using their cookies or whatever it is for people to advertise to them. So that's one kind of bizarre example. But shows you that consumers feel empowered. And then on the other side, you're moving from a world where agencies in particular, I think it's obviously somebody down, how to think about is now they're building the databases, they're building this huge kind of insight where it's off of their costumer's data and who owns that data. And I think advertisers are questioning whose data is it. Well, it's obviously, they're not questioning it at all, they're saying it's ours. So they're really sort of loaning it back to these intermediaries to use it and so I'm just when I look the slide like Neil showed, like us but all these logos, and I do gasp at the idea that advertisers are entrusting their data to the tiny little startups that have no idea of the regulations, have no idea about how data moves across border. How can you do that? Like it takes you to get to the size of, I don't know, $50 million or $100 million in revenue before you're even beginning to think about that. So these are sort of issues that are out there that, in a way, no one wants to talk about and I think, at our company, we have people focused on that.

Ricky Liversidge

I really want to talk about them but we don't have time to talk about them. But I've got a couple of other questions that I want to get and I promise our panel I'd get them out of here on time because they've got appointments to go to. So I want to be very respectful of their time. But I guess, this question is one, Andrew, that comes up a lot, I know I'm going to let Darren answer it first, but how important is it to you to work with an independent ad server? Obviously, this is a pretty loaded question. And again, it's not a question of who owns the data, yes, how do you your customers feel about that?

Darren Herman

I've been fairly public about this in sort of our position to the marketplace and I've written this for The Times to Ad Age. I want our client's data to be in an independent place, independent of media. I'd like our data -- so when I came to the agency, we historically had relationships with Microsoft's Atlas at the time and DoubleClick start. And understanding Google's prominence within the media marketplace and Microsoft not knowing what to do with an ad-serving system, I had to find something that was out there, that was independent. We buy a lot of Google but doesn't necessarily mean we trust a lot of Google. And they come to us and say, hey, there's Chinese walls between DoubleClick and Google but people aren't realizing that their entire platform now is all on one stack. And so I like to go into a casino where no one has an advantage, or at least, I think I have my own advantage as someone sitting at the table. If the house has an advantage, it's not a game I want to play in. So for here, with DG, more specifically with MediaMind, because it was unattached when we signed up, MediaMind wasn't playing in the media business, so they couldn't care less which media property that we were buying from. They just wanted to serve the media and track it back and then we can take the data, either keep it in the database or manipulate it in our own dashboards, depending upon our agency any which way we wanted to do. So it was really, really important for us and remains important for us to be independent of the media opportunities that exist. So the media vendors, whoever they may be, can't use our data in a way that will affect our advertisers, either from a pricing perspective or a performance perspective or anything along those lines.

Ricky Liversidge

So I'm going to ask Trace a slightly different question, one that's come from the floor. It's gone a little bit because it's -- so tell me if it's unfair, but what makes you -- you have a relationship with DG, why is that? What are the important facts behind that, for you? And if you don't mind talking about that, if that's okay?

Unknown Executive

To a point, yes. And to Darren's point, the opportunity to own the data, I don't think we really -- we knew, but we look at -- I don't think it really deeply resonated with us that we didn't own our own data. I mean, I think we all assumed it. And basically, on our agency contract, we certainly have visibility to it, could get it to a certain point, but even from a historical standpoint, there was kind of a point where it would be hard to get an opportunity to own the data. So we do own -- we now own our data, which -- and it's not just about lack of trust in any of our partners, so we have great partners, we love working with, but just Mars is not only a privately owned company but a very private company. And it was very -- that was a huge advantage for us to be able to have that and we joke about like how -- invest to challenge in itself to own something that you don't really completely understand in terms of from a technical standpoint, but it was certainly worth it to us. Because it's -- to your point, and our consumers, we look to them. I mean, they don't want -- they want to buy a candy bar from us, they don't want us to hold information about them and then share it with a lot of other people, so we're very careful about them. We look at everything from a privacy standpoint. So I just -- it's just very interesting, when you think about, to his point, about the fact that you don't -- people tell you they're not repurposing it but how do you know.

Ricky Liversidge

Okay. So one question for you, Darren. So you've had a relationship with DG for a while. From the outside, we stood up and told that the people, what our strengths and weaknesses, what we believe are, from your perspective, strength and weaknesses of DG?

Darren Herman

Good question. So strength, I mean, we love -- I think the largest strength is independence, is unattached to the media properties out there. And independence at scale. There's plenty of choices out there in the marketplace but there's very little scale that they can serve to deliver the needs of marketers. I think, on a weakness?

Ricky Liversidge

Yes, you don't have to do weaknesses, I don't mind.

Darren Herman

I'd have to really think about that but maybe if someone else answers, then we can come back on weakness perspective.

Ricky Liversidge

Okay. Well, look, I'm -- we are up against time, it's actually 1 minute to 12:00, and I said I'd get you out of here at 12:00. So I want to thank our 3 panelists for being so open and honest in showing their thoughts about what's going on. What I'm going to do now is I'm going to hand back over to Craig for -- to sort of close you out, and take us to the next stage. But Trace -- no, actually, I had them written down [indiscernible] but I couldn't do all the questions, I'm afraid. So I took questions from the floor, I did my piece. So yes, let me -- I'll take that off you. Thanks.

Craig E. Holmes

All right, lots of good questions today. We thank you very much for joining us, we appreciate it. Sorry about the traffic. Okay. Thanks, again, to the panel. So we're going to have, we're going to bring the management team back up, we'll have a little Q&A. I've been told by JoAnn to make sure that everybody understands that this USB is -- does have the presentations on it, so be sure and take that with you. Notepads, take those with you, any other takeaways? All right. So with the management team right here.

Ricky Liversidge

Hey, Craig. We've got Neil, we've got Andy, we'll take Andrew Bloom, so.

Craig E. Holmes

All right. So we'll do kind of an open forum questions, JoAnn will take the questions from the floor, if there are any. And we're going to have to pass the mic around.

Unknown Attendee

I have a question of pricing. So you -- early this morning, you showed a statistic about online media spend rising from $3.5 billion, I guess, that was last year or this year, to $9 billion by 2017. What percent of that number will be kind of the ad-serving analytics piece of the industry take?

Andrew Ellenthal

Well, I think the data points might have been related to programmatic being programmatic growing. But if you look specifically at the online ad technologies that are enabling video, that are enabling verification, realtime blocking, ad serving, and the list goes on and on. Generally, a good number to use as a percentage of media is between 5% and 10% -- 5% and 8%, excuse me. We tend to use in our -- I believe, in our internal evaluation, roughly about 6% to 6.5%.

Unknown Attendee

So that's a lot higher than it is on the TV side, is it not?

Andrew Ellenthal

It is substantially higher.

Unknown Attendee

So why do you think that will kind of be maintained?

Andrew Ellenthal

Oh, is the question is what's it going to look like going forward or what is it today?

Unknown Attendee

I was -- the question was what will it look like when we get to this $9 billion number in 4 years or whatever it is?

Andrew Ellenthal

I see. Look, there's -- one of the things that I've seen in the 15 years I've done this is when I started out, third-party ad serving was $0.55 to $0.75 to deliver a standard ad unit. The media cost relative to that ad was substantially higher than it is today. But there wasn't -- 10 different aspects of the technology we're delivering in ad online. Today, we're providing a lot more comprehensive services and capabilities that justify that 6.5%. My expectation is that we'll continue to justify that 6%, 6.5%. And I haven't seen that move over a 10, 15-year period. It could, but my crystal ball says, 6%, 6.5% going forward.

Unknown Attendee

Andy, I think it was you who said that competitive pressure is one of the things that you can address directly. Of the forces that are affecting you, how exactly do you address competitive pressure?

Andrew Ellenthal

Sure. And like in any business, there's always going to be competitors, and you need to expect that. I mean a lot of that's the -- a lot of that's based on -- the best thing you can do to ward off competitors is to be very, very close to your customers, and I think we do that exceedingly well. It's to continue to innovate and bring new products, new ideas, new ways for them to be more efficient. These are all things that while you have the customer, you got to treat them like you want to keep them. And I think we've done that exceedingly well in a challenging business with -- like TV.

Unknown Attendee

What are the ways [ph] to not pick up price in matching that with competition.

Andrew Ellenthal

And in some cases, yes, pricing is absolutely part of that conversation. I'd like to -- it to be a smaller part of that conversation, it to be much more about the value that we're delivering on a daily basis. But I'd be lying if I sit here saying prices isn't part of that conversation.

Unknown Attendee

If you could -- sort of a final point on competition, why are you -- is it [indiscernible] Extreme or whoever else. And at some point, if we're going to see 6%, 6.5% to the [indiscernible] price, it should get uneconomically [ph]?

Andrew Ellenthal

Okay. I'll hold my comments about the 6%, 6.5% or clear -- or maybe I wasn't clear. So what we were talking about there was for the effective cost for advertising technologies within the digital landscape, so -- as a percentage of media.

Neil H. Nguyen

In the addressable market, right? So within any given -- so as digital is roughly $40 billion in the U.S., half of that, plus or minus in search, the other half is display. And within the display market, you got different formats, video, banners, et cetera. And what we're saying is that on a percentage of that media, it creates technology services, what agencies and advertisers pay. So the addressable market for DG's online segment today is roughly between 6.5% to 8% or so. Industry numbers, we'll actually say it's closer to 8% to 10% overall. So take online video, for an example. So $4 billion, right? So call it 8%, 10% of that is fees that we or publishers can get for delivering ads, providing verification, providing ad format, unit deliveries. Of that, specific to online video, most of that today is being done by the publishers. If you look at every single format through the history, whether it be rich media, banners, it all starts with the publisher serving the ads. And then it transitions out to a third-party company like ours when the campaign grows in scale.

Unknown Attendee

I just, I guess following on that topic a little bit. On the television side, is the competition in the pricing within television rational right now? And I guess, I'm asking you explicitly to address Extreme Reach?

Andrew Ellenthal

I'm sorry, I could barely hear you.

Unknown Attendee

Is the pricing rational and the competition rational in the television space right now? And I guess I'm explicitly asking you to address Extreme Reach and kind of their growth and market share.

Neil H. Nguyen

So we normally don't comment on overall. We made broad statements about our pricing for ourselves. And what we've seen in the last quarter is pricing has somewhat stabilized. Year-over-year, it is down 20-plus percent. So at some point, we do believe that there should be some rationalization for the delivery of content to broadcast mediums.

Unknown Attendee

But you have seen some stabilization at that bid...

Neil H. Nguyen

That's the recent set of data we have over the last 2, 3 quarters is the decline is in the single digits. But year-over-year, it is, double digit. What it will be going forward? It's another crystal ball question.

Unknown Attendee

And then just, Craig, you had talked about the revenue from online, I guess, getting bigger than television segment. Over what time frame do you think that's going to happen? And what are the margins for the online piece of business at that time frame?

Craig E. Holmes

Yes. So it's literally just a math question. It's hard to predict the future. If we look at the current trends, we've seen declines in the TV revenues. We've seen growth in the online revenues. You extrapolate 7%, 8%, 7% -- 6%, 7% declines in TV, you extrapolate 15% plus or minus growth in online revenues, you can do the math, and you can see those lines cross at some point in 2014, probably late 2014. So that's the time frame that you can think about, depending on what assumptions you include into that algebraic equation. With respect to margins, we've been working hard to maintain margins. We are going to continue to invest in online growth. Yes, we don't believe that the 50-plus percent TV margins we've been enjoying are sustainable. We've made that point before. We're going to continue to make that point. Where the online margins settle out over the long term? Yes, we haven't given that guidance as we sit here today. We've given guidance for this year. We've told you what we think is going to happen this year. And as we get towards the end of this year and to next year, we'll give longer-term guidance for the following year.

Unknown Attendee

[indiscernible] pricing decline, reducing cost of goods, just try to keep these gross margins as high as possible?

Andrew Ellenthal

So the question was, what are we doing to reduce cost of goods sold on the TV side to maintain margins. And the answer to that question is following existing and new technology trends. So we have, in place right now, some systems which are relatively new, some systems which are a little bit older. And really, at the most simple level, you retire legacy systems, you combine customer operations on to fewer and fewer platforms, and your overall costs go down. We've seen that trend, and we expect it to continue.

Craig E. Holmes

Let me just add briefly to that, too, because what we're all doing -- so a big component of our cost of sales is our customer service infrastructure. So we talked about integrating our customer service infrastructure across a single platform. At some point in the future, that's obviously going to help. But also as we allow our customers to do more self-service, incorporate more self-service capabilities, improve the UI of our platforms, that also is going to reduce the need for direct customer service interactions and that will also help our cost structure going forward.

Unknown Attendee

So just a couple. First, EMEA was a source of weakness in the last quarter. I know it's kind of a macro headwind. But what portion of that is macro versus execution? I notice your head of EMEA is both for online and TV now. And then second question, for the VideoFusion product, what percentage are you sort of cross-sold on the MediaMind platform? And when do you sort of see an inflection point of kind of a converged pitch, if you will?

Andrew Ellenthal

EMEA [indiscernible]. Yes, so it's a difficult question to answer. The -- we've installed new leadership with -- in EMEA within the last 6 to 7 months. That's had a significant impact. There was -- some of it was -- some of it clearly was execution, some of it was unavoidable relative to the size of media budgets. We've actually done some really large deals out of EMEA. We have some both in 2012 and in Q1. So we're actually winning a fair bit of business. We're flipping business from competition both regional competition, which is a bit stronger in EMEA, as well as our competitor with -- our Google competitor. So we are winning there. We are making progress. Some of the economies in specific markets are particularly challenging. But difficult for me to assign an exact percentage for you or even a vague percentage for you. I don't know, do you have a different view or different color Neil?

Neil H. Nguyen

So I kind of look at it as I know that we're winning in certain markets like Spain, so our media numbers are back to 1997. But we're winning there because we're taking share. So when I look at it and I talked to Andy about it, it's 50% macro and 50% us not taking business away from our competitors. So that's kind of how I'd size it up in EMEA as a whole.

Neil H. Nguyen

Maybe you could repeat the question about VideoFusion?

Unknown Attendee

[indiscernible] percentage of your VideoFusion line [indiscernible] based on current trends inflection point [indiscernible]

Neil H. Nguyen

So I think we've talked about to all of our shareholders that we really wanted to integrate and stabilize our online operation. So no need to add more pressure to integrate our TV and our online clients in one single base. We started doing some of that in the back half of 2012. So I say, a relatively small percent. So when Andy was talking about testing, we're testing products. We're testing pricing strategies, so we do have traction on clients buying both product lines in a unified manner, and we're trying to provide the right mix within that.

Andrew Ellenthal

One additional comment, when you heard the customer panel, they talked about these bifurcated teams within the agency, sometimes within the clients. Where we're seeing the most initial traction there with VideoFusion, our clients, like MDC, where they've actually integrated the teams, the Richards Group out of Dallas, which is a very large independent agency. They have one team for media. It's not an online team. It's not a digital team, and those are really great starting points for us relative to VideoFusion.

Unknown Attendee

I'm curious on a top-down basis how you deal with a clear trend towards nonscheduled viewership of media, whether it be Netflix or watch a show whenever you like or it be [ph] it really makes the ad less effective. And so it's a headwind, I think, that anybody in the ad business has to deal with. And you might see that as a cause behind some of the TV pricing problems is that the advertiser is actually not getting as much bang for the buck because someone's got a DVR or whatever. I definitely only watch ads, if I'm forced to. I'm not sure how that even happens. So how do you deal with that as a -- I think as a major headwind? You're in the ad business, essentially, ad services business and post production business, how do you look at that and think about your business?

Neil H. Nguyen

So some of the data shows a little bit different. DVR, even though they thought the DVR -- they mentioned DVR would actually kill live viewership as a whole. I think from our perspective, the idea of us owning a campaign management platform that can serve ads into all IP environment, so you mentioned a couple of those environments. So VOD, it's just consumption of content on demand. And today, there is no dynamic way to deliver ads into the environments, so that's an area of innovation and opportunity for us. As we are able to help our advertisers deliver a more personalized advertising message, which is what the web is, right? It's that targeting, it is that optimization. So while some see the shift away from broad lean back experience on the TV to a more individual consumption of media, we see it as a great way for our ad serving engine, our campaign management platform to play a critical role in the delivery of videos across all of those channels.

Unknown Attendee

I guess, I'm more curious on a top-down basis. Do you have a certain level of concern about the general trend away from advertising effectiveness? Maybe even -- one of the advertisers in the speakers' bar, and I'm going to skip that out, if any way possible, I don't want to see it. And back in the old days when I was a watching show, I was forced to watch it but I left the room and turn off the television. Now it's pretty easy and getting easier with every technological moment to skip it. So is there anything technologically that DG can do with that issue? I was trying to understand -- definitely do you think about it all, or...

Neil H. Nguyen

We do, but it ultimately starts with great creative. That's what's going to trap somebody to watch an ad to begin with, right? And it has to be relevant. I watch an ad if its -- I'm not going to watch a Pampers ad if I don't have babies. I just don't need that. Or if a minimum market for a car, I'm going to be interested in looking for automotive ads. So the idea of using data for targeting and optimization is critical for effectiveness. And I think that's part of it. Ricky, you want to add, too?

Ricky Liversidge

Well, I just want to mention some things like second screen is quite a good opportunity in a sense that we know from the statistics that when ads come on the TV is first, someone has a mobile phone or an iPad, they will look down to it and they will start clicking. So we did a test in the U.K. with Channel 4 from a second screen around a particularly big show, the Million Pound Drop, where we delivered a second screen experience in the first ad break. And normal click-through rates would be anywhere between sort of like 5% and 6%. We actually saw around about a 17% click-through rate, where people saw the ad come up on the screen, a normal TV commercial, but what was being shown on the second screen was something a little bit different that encouraged the consumer to click and share and do all the things that you do when you have an iPad or an iPhone in front of you. And the stats just went through the seams. 17% on 270,000 people who were actually dual screening at that point in time. Because it's not about the ad necessarily, if you take a game show like that, people like to play along. They like to play at home. They like to engage with that in a slightly different way. So I think you see some experiences like that, that sort of break the mold in the way that we're thinking about everything has to be a decline. And so those people are the early adopters and early thinkers. They're thinking about how they can engage with those consumers with the challenges and the headwinds that you potentially speak about. So I just used that as an example, but it's not the only example that I've got from a product point of view. I don't know Andy, if you wanted to add to that.

Andrew Ellenthal

I think it's a great example, and these are the types of innovative strategies our advertisers like to hear about, and we certainly can be part of the solution. I think one of the mistakes we make when we live on a -- especially when we're on the East Coast or the West Coast, is that our personal behavior is indicative of what's going on elsewhere in the market. Mine happens to mirror yours. The spending data and the viewership data doesn't mirror our behavior. It doesn't mean we shouldn't be innovative and be thinking about it, but it hasn't come to pass yet.

Unknown Attendee

People knew what country or major [ph] [indiscernible]

Andrew Ellenthal

Well it's them or rather it's our parents in Florida or what have you, but their spending data hasn't changed as a result.

Unknown Attendee

So 2 questions. One is how should we think about your acquisition strategy going forward? You've been quite acquisitive, small, big sort of annually. How should we think about that going forward? What gaps are left? How much, what size, what sort of kit [ph] are you thinking about? And the second question is in terms of online pricing. So TV pricing is obviously at a stage where it's going down now, as expected, as you predicted a long time ago. The world is sort of moving very fast in online. When does online pricing start -- or online demand start going down the cliff as well? Is it 20 years away or 2 years away?

Neil H. Nguyen

I will take the first one and ask Andy to take the second one. So from an acquisition standpoint, we don't -- we clearly need to stay aware of what's going on in a very dynamic technology space, but we're not really thinking about acquisition of any size, right? I think right now we have the assets that we need to execute on the business plan that we've laid out. We have a fantastic technology organization that I expect them to drive innovation and we should be able to really go to market with a lot of firsts in the industry over the next period of time. Where our focus is really when we think of acquisition is actually just delevering our balance sheet. That's what our focus is as a management team and really driving profitable growth throughout all of our business and executing on protecting our margins, automation, technology, and go to market with innovation as a whole.

Andrew Ellenthal

So -- I'm sorry, the second question was specifically about online pricing over time?

Unknown Attendee

Yes, [indiscernible] if you can comment on it.

Andrew Ellenthal

I mean, I'll have no hair left for sure when that happens. So again, what I've constantly seen in my time in the digital landscape is one product at some point reaches a -- will flatten out. So standard ad serving is at a relatively flat range today where it started off at really high rates, with really low volume. Now it's really, really high volume, relatively low rates. Rich media went through the same cycle. We have video now, in-stream video, we have -- there's 2 types, there's interactive and noninteractive, starting off at a really high base. At some point, it will settle. But that -- those new products and services, as we gain scale, those are overall effective, what we call our effective CPM. And at the same time, if you think back, we talked earlier about a platform strategy and having a suite of services. We have additional capabilities. We're running a campaign and it's generally the same amount of work to do a $5,000 campaign versus a $500,000 campaign. What I want to make sure is we have as many of our products in that mix and as possible, so our yield on a per campaign basis is as high as possible. But in terms of when this becomes price like TV, I don't think it will be. I think that the vast majority of the products and services in the marketplace are on a transactional basis. That's how it's grown up. That's how it's been formed, and I don't see that changing.

Unknown Attendee

Perhaps on what's the challenge of getting someone spending $5,000, spend $500,000?

Andrew Ellenthal

A lot of times it's the function of their media budget, right? So if they're a small advertiser or they're operating in a small geographic footprint...

Unknown Attendee

I guess, let me reask the question. What's the challenge of the competition [indiscernible] of your [indiscernible] because that's what you all say in sort of -- bundling.

Andrew Ellenthal

Yes. No, well, it's -- bundling is absolutely critical. So one, it's getting that first product in and it's a positive experience with that product. It's establishing it across as wide of a geographic footprint as possible. It's really about execution and being able to demonstrate the inefficiencies they might be seeing by using other technologies that aren't plugged in. Advertisers and agencies, they appreciate easy, thoughtful and valuable approach. So by being able to demonstrate those things, you can demonstrate a value and a need for those additional products and services.

Unknown Attendee

Perhaps, you can [indiscernible] 3 years ago or 5 years ago versus today, how does [indiscernible] people to [indiscernible]

Andrew Ellenthal

Let me just give you a frame of reference. So MediaMind as a digital organization 4 years ago was entirely a rich media company. So all the products and services that we've discussed today and how they're tying together around video, with the exception of rich media, which is a more interactive-type ad unit, a heavier ad unit, something that a user can engage with, all those other products that's been discussed, didn't exist. The platform didn't exist. So it's a relatively new platform. The customers around that platform didn't exist. Verification, online verification, viewability, being able to measure whether the ad was in a viewable part of the screen didn't exist. Video, video ad delivery, didn't exist, interactive video ad delivery didn't exist. The list is quite long. Hopefully that helps.

Craig E. Holmes

I'll tell you it's all about sales and execution at this point. Bundling our products enough selling to our costumers.

We are going to have to cut it up. I think it was a great discussion. I appreciate all the quality questions. Appreciate once again, everybody making time. I know everybody's busy making time to participate in this program today and I do appreciate those of you on the Internet listing in. So at this point, we'll wrap it up, we do have some product demos and we do have box lunches available, and thanks again for your participation.

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