How a Once in a Century Financial Event will Impact Digital Advertising The Internet Strategy Forum October 23, 2008

Overview Review of spending trends and growth rates How organizations are reacting to trends –Driving consistent metrics of success –Leveraging SEO more effectively –Integrating search more effectively into other forms of advertising Major challenges –Universal search making things more complex –Keyword price inflation Q&A

Study Overview Covario high tech customers (B2B and B2C) Represents estimated $ M in 2008 spending US/Canada-based firms Conducting global advertising programs

Major Highlights Year on Year growth rates for Q3 were up –Q2’07 to Q2’08 = 43.3% –Q3’07 to Q3’08 = 51.2% –This growth was driven by EMEA/APAC – US growth increase was only 32% –Covario estimates ~5% resulting from one-time Olympics related spending Google continues to dominate spending with 83% market share in US and 95% in EMEA Continued erosion of Yahoo CPCs, while CPC rates on other engines went up

Year On Year Growth Rates for Q3 Overall growth was 51% EMEA growth was 204% over same time in 2007 US growth rate has decreased steadily throughout the year Growth driven by Olympics advertising (~5%)

Regional Spend Analysis Spending in US accounted for 82% of total Allocation to EMEA trimmed to 20% — consistent with 2007 APAC spending at 10%

Regional Spend Analysis — North America Google commands 82% of the spending allocation — up slightly Yahoo’s gains in Q2 are consistent in Q3 83% of customers in the study are conducting spending on Ask — small amounts

Regional Spend Analysis — EMEA Google dominance continues to grow — 95% market share! Yahoo market share is 4% Investments in Russia running largely through Yandex and Rambler (80%)

Regional Spend Analysis — APAC Baidu did not see any appreciable growth given Olympics Google surge is largely Olympics related

Trends in CPCs CPCs are down 8% Y-o-Y on average Google CPCs are at $1.14 with Yahoo at $1.03 (for consistent keyword sets) Search EngineQ1Q2Q3Q4YEQ1Q2Q3 Baidu$0.14$0.11$0.14$0.13 $0.11$0.12$0.18 Google$1.06$1.03$1.23$1.28$1.22$1.13$1.09$1.14 MSN$1.02$1.21$1.13$1.42$1.28$1.67$1.51$1.60 Yahoo!$1.38$1.41$1.50$1.72$1.59$1.55$0.16$1.03 Yandex$0.75$1.37$1.26$1.15$1.16$0.98$1.23$1.17 Total$0.98$0.92$1.18$1.30$0.19$1.14$1.07$1.09

Going Forward Growth rates are going to revise down –Display will be hit worst, this is already being seen in Yahoo results –Search will slow from 40% Y-o-Y growth to ~20% Currency EMEA/APAC Google will gain more share CPCs will go up as inventory contracts –Would plan on paying 5–10% more over next 18 months for same number of clicks

What To Do? Prime Real Estate Is Going to Be More Valuable 52.6% in Organic Pos 1–4 11.9% in Paid Pos 1–3 Total =52.6%64.5% PAGE 1 TOTAL 93.1% Source: Enquiro

Better Leveraging Organic #1 Organic #1 Paid

What does our PvO analysis do? PaidOrganic Conversions ROI paid = 20 ROI incremental = 5

Impact of Paid Listing on Organic Traffic (Branded Query) Paid campaign paused Organic traffic jumps

Maximize Traffic Optimize Bookings Optimize Ad Revenue Building an Integrated View of Marketing

Purpose is to Integrate and Optimize Media Mix Consumers Maximize Traffic Optimize Orders and Bookings Optimize Ad Revenue Optimize Customer Engagement Display Mobile Advertisements Visitors Search Site #1 Site #3 Site #4 Site #5 Site #6 Site #7 Site #2 Video

Universal Search Results Making SEO More Complex News Books Video Shopping Web

…And Changing the Value of the Real Estate Heat map regular results Heat map blended results Source:

Trends in CTRs — Expect Inflation CTRs were down on Google from same period last year Yahoo has the lowest CTR rates of the major platforms MSN has consistently had the highest CTRs for the past 6 months Search EngineQ1Q2Q3Q4YEQ1Q2Q3 Google2.20%1.80%2.40%2.60%2.40%2.20%2.10%1.90% MSN1.70%1.30%3.00%2.60% 1.70%2.80%2.20% Yahoo!1.10%1.80%0.90%1.00% 0.90% 1.00% Yandex0.60%1.00%1.10%1.60%1.20%2.40%2.70%3.00% Google2.20%1.80%2.40%2.60%2.40%2.20%2.10%1.90%

Overview Review of spending trends and growth rates How organizations are reacting to trends –Driving consistent metrics of success –Leveraging SEO more effectively –Integrating search more effectively into other forms of advertising Major challenges –Universal search making things more complex –Keyword price inflation Q&A

Thank you! Craig Macdonald Vice President, Products and Marketing