Advertising and the Telephone: The Next Generation of Telemedia

1. Advertising and the Telephone:The Next Generation of Telemedia SpeechTEK West February 2007 Dan Miller, Sr. Analyst

2. Agenda • Introduction • Overall Concept – Assisted Search • Definition • Learning from legacy DA • Revenue models • Major Trends • Advertiser receptivity • Reaching the mobile masses • User scenarios and use cases • Future developments Advertising and the Phone

3. My Background • Founded Opus Research in 1985 focusing on ‘telemedia’ and ‘teleservices’ • Coined ‘Conversational Access Technologies’ (CAT) to capture elegant combinations of automated speech, enhanced routing and associated business logic • Focus on industry analysis and strategy consulting to infrastructure providers, service providers and their customers Advertising and the Phone

4. Strategic Direction: Assisted Search Voice Gateway Queries “intelligent transfer” Ads &Coupons Broadband IP Note: Callers ask questions. Automated system resolves query or transfers to agent if unable to. Agents have access to listings and Web Services. Promos Web Services SearchEngines DA Application Driving Directions Listings Advertising and the Phone

5. The Automated DA Legacy • Enhanced query response • Below 7% of calls • Leveraging Web 2.0, LBS, non-directory data • Impact of local search options • Desktop Web access • Wireless Web (WAP 2.0) • “Connected” speech processing • SMS response • Two-way SMS Advertising and the Phone

6. Existing Revenue Models • Greeting Advertisement • Branding • Parallels tile ads on Web • $0.35 is what market bears • Transfer/Connect Fee • “Signed Advertisers” pay a fee for direct connection • Rates range from $1.00 to $30 (or more online) • Conversion rates fall in a range of 7% to 12% (per Jingle) • Promotional Spots – “Switch Pitches” • Advertisers pay premium to pre-empt a query • Historically a bad idea • Electronic Coupon (text message) • Participating merchants can offer electronic promotions via SMS • Rates as little as $0.06 per message (involve minimums) • Pay-Per-Connect • Service provider charges variable rates (from $1 to $35 and above) for delivering a live, interested buyer to a service provider. Advertising and the Phone

7. Free 411 Competitors Advertising and the Phone

8. General Advertiser Receptivity • High interest in “mobile” buyers • Awareness of attractive demographics and growth • Anticipating new payment modalities • Inventory is growing • Several options emerging • Ad-supported DA • Speech-enabled search engines (520-FIND) • Web services adding phones Advertising and the Phone

9. What’s Working in Ad Sales • Very little direct sales for “free DA” • Telesales (e.g. Jingle) • Web-based bidding site • Syndication/aggregation (à la InsiderPages) • Search engine extension • Google, Yahoo!, MSN “mobile” • Enhanced IYP model Advertising and the Phone

10. Conversion and Call-Throughs • Reported CTRs (vary considerably by category): • Jingle: 4% - 6% “average conversion rates” (calls to advertisers), range from 3.4% to 21.9% • Ingenio: reports a high of more than 20% in free DA context and many in single digits. Generally, better rates in DA environment than online • VoiceStar: Online PPCall industry range is 7% to 12% at the high end Advertising and the Phone

11. Online Advertising Today: In Context Comparison of Media Spending ($ Billions) Local ad spending = up to $147 billion Source: Interactive Advertising Bureau/PricewaterhouseCoopers (2006) Advertising and the Phone

12. Current U.S. Online Spending: Where’s the Money? • Categories: • Paid search: $5.1 billion (41%) • Display advertising (incl. video): $4.3 billion (34%) • Classifieds revenue: $2.1 billion (17%) • Sector: • Consumer-related marketing (largest segment: $6.4b) • Retail – 47% • Automotive – 20% • Leisure (travel, hotel & hospitality) – 14% • Entertainment (music, film & TV entertainment) – 10% • CPG – 5% • After consumer-related: Financial Services ($1.5b), Computer-related ads ($1.6b), Telecom ($800m) and ‘Media’ ($700m) Source: Interactive Advertising Bureau/PricewaterhouseCoopers (2006) Advertising and the Phone

13. Local Search Revenues*: 2006 Estimated Distribution Source: Sterling Market Intelligence (4/06) *Does not include online local display or classified advertising Advertising and the Phone

14. Tactics to Attract More Advertisers • Detect, reinforce and grow use cases • Mash-ups • Social networks • Promotions and discounts • Leverage search engines • “Assisted Search” is the concept • Add Web 2.0 components • Objective: leverage broader base of online advertisers Advertising and the Phone

15. Some Quick Facts about Wireless • More mobile phones than fixed-lines or PCs: • More mobile phones globally than landlines (incl. U.S.): approx. 2.5b wireless subs globally • There are 207.9 million mobile phone users in the U.S. (69% of the U.S population) and almost 400 million in China • U.S. users want local content, not music/video: • 75% or more not interested in video on mobile phones • 69% or more not interested in music on mobile phones • Local content (e.g., traffic, weather, maps) top desired content on mobile phones • But mobile data user experience “not ready for prime time” Source: TNS Telecoms (2005), RBC Capital Markets (2006), Pew Internet & American Life (2006) Advertising and the Phone

16. Mobile Offers and Couponing • Coupons are “offers” or “discounts” • Motivate consumer action in mobile environments • Attract new participants into network • Well-understood offline precursor • 79% of the U.S. population uses coupons (per Promotion Marketing Assoc.) • 38% of U.S. purchasing decisions influenced by coupons (Mediamark Research) • Current offers: • Jingle (e.g. “switch pitch”) • Cellfire • Mobiqa • ValPak (via wireless Web access to site) • Others Advertising and the Phone

17. User Scenarios • Tellme Mobile • Promotes personalization, voice or text input • SMS texting of numbers • Local shopping modules • VSearch • VoiceSignal and InfoNXX • Embedded Speech front-end to enhanced DA • InfoSpace Local Search (WAP 2.0) • Category search merges products, services and directory • Single source for maps, directions, ticketing • Integrates “what’s nearby?” and “who’s nearby?” • Click-to-Connect “pay-per-connect” Advertising and the Phone

18. More User Scenarios • HelloYellow • Category Search • AT&T 1-800-YELLOWPAGES • “Free” DA • Advertising Management (Apptera) • Automated Speech (Nuance) Advertising and the Phone

19. What’s Working/What’s Not • Working • “Free” offers for now • SMS response • Rudimentary personalization (e.g. Tellme) • Customer service with service delivery • Bundled offering (Jingle’s sales tactic) • Not Working (yet) • Profitable “free DA” • “Switch Pitches” • Branding opportunities using speech Advertising and the Phone

20. Next up: Video • Video offers potential for subscriber revenues; 69% of U.S. adults have watched online video and 5% of those who watch online video have paid for content (on annualized basis): • $10 or less: 21% • $11-$20: 30% • $21-$30: 7% • $31-$50: 27% • Forecasts predict well over $1.5 billion in online video-related revenues by 2010 from premium content; advertising-model more likely to take hold Source: IDC (2006); Online Publishers Assn (2006) Advertising and the Phone

21. Thanks! • Contact info: • Opus Research330 Townsend Street, Suite 201San Francisco, CA 94107Dan Miller: dmiller@opusresearch.net 415 904-7666 Advertising and the Phone