ANNUAL REPORT 2009 Content Report on Financial information 1 Operations This is TradeDoubler 2 The year in brief 3 Word from the CEO 4 Market overview 6 Strategy 10 Business model 12 Offering 13 Operations 16 Customer cases 18 Risks and uncertainties 22 Corporate TradeDoubler’s Corporate Governance 24 Governance Corporate Governance 2009 28 Report Remuneration to the board and other senior executives 30 The board’s report on internal control and risk managment 32 Board of Directors 34 Group Management 35 Board of Board of Director’s report 38 Directors’ report Consolidated financial statements42 and financial statement Parent company financial statements46 Notes 50 Board’s signatures 70 Audit report 71 Five-year summary 72 TradeDoubler share 74 Definitions and glossary76 Annual General Meeting 77 Report on Operations 1 TRADEDOUBLER ANNUAL REPORT 2009 Financial information TradeDoubler AB (publ) (556575-7423) is a Swedish company with its registered office in Stockholm. The company is subject to Swedish laws and as a listed company is obliged to comply with Nasdaq OMX Stockholm’s rules and regulations which govern information dis- closure to the market. All values are stated in Swedish kronor. Kronor expressed in millions is abbreviated to SEK M and kronor expressed in thousands is abbreviated to SEK ’000. Nu- merical data in brackets refers to 2008 unless otherwise stated. Information about markets and the competitive situation is TradeDoubler’s own assessment, unless a specific source is provided. Stakeholders have the possibility to subscribe to press releases via TradeDoubler’s website and to read the company’s financial information. Financial calendar 2010 • Interim report for the period January 1 – March 31, 2010 May 6 • Annual General Meeting May 6 • Interim report for the period January 1 – June 30, 2010 July 27 • Interim report for the period January 1 – September 30, 2010 November 3 • Year-end report February 8, 2011 Swedish and English The annual report, year-end report and interim reports are published in Swedish and English. In the event of any differences in the versions, the Swedish text should be referred to. The annual report may be Give us your views! ordered from: Can we make the annual report TradeDoubler AB better? We would be glad to Sveavägen 20 receive your suggestions and S-111 57 Stockholm views, e-mail: [email protected] Phone +46 8 40 50 800 E-mail: [email protected] The printed version of the annual report is sent to all upon request and may be downloaded from www.tradedoubler.com Report on Operations 2 TRADEDOUBLER ANNUAL REPORT 2009 This is TradeDoubler Advertisers What is & publishers performance- based digital marketing? Trade- The company Doubler provides a is present complete in 18 offering which countries is un rivalled by any competitor Advertisers and publishers What is performance-based digital marketing? TradeDoubler operates as an independent third party and Performance-based marketing is a form of marketing on the inter- arranges adverts among advertisers and websites/publishers net where the remuneration is related to the customer response which display adverts on their homepages. TradeDoubler generated by the marketing. Remuneration is only payable when functions as a marketplace for adverts where advertisers and the visitor performs a predetermined activity such as entering a publishers/websites meet. The advertising rate is fixed by the website, clicking on an advert or executing a purchase. market, however, TradeDoubler always receives a predetermined share of the value of the activity arranged in commission. Customer benefit TradeDoubler offers its customers an attractive complete TradeDoubler’s presence offering. The company creates considerable value with its solid TradeDoubler currently conducts operations in 18 European coun- knowledge of internet marketing, advanced administrative tries and reaches about 75 percent of Europe’s internet users. No support and tracking technology as well as its continuously other competitor can offer as extensive geographical coverage as updated network of attractive advertisers and publishers. TradeDoubler. It is a clear competitive advantage for TradeDoubler to be represented in principle on all relevant European markets. Report on Operations 3 TRADEDOUBLER ANNUAL REPORT 2009 The year in brief • The severe economic downturn during 2009 impacted the future development. In addition, a provision of SEK -30 M was European advertising market and consumer buying intentions, made for unutilized office space in London. even on the internet. • Operating profit, adjusted for non-recurring items, amounted to • The Company’s assessment is that TradeDoubler retained its SEK 75 M (150). The decrease compared with 2008 was mainly leading position within performance-based digital marketing in attributable to lower gross profit, primarily due to lower sales in 2009 but the market shares within search engine optimization in the UK. There were signs at the end of 2009 of an improvement the UK have decreased. The Company’s search engine marketing in market conditions in the UK. business is growing on other markets. • Profit after tax amounted to SEK -178 M (94) and earnings per • A large-scale action program was completed during the first share before/after dilution was SEK -5.31 (2.80). half-year 2009, including personnel reductions, aimed at lower- • The cash flow from operating activities amounted to SEK 65 M ing the Company’s costs. The number of employees amounted (218). to 565 at the end of the year, which was 72 fewer compared with December 31, 2008. • A rights issue of SEK 356 M was carried out in December with preferential rights for existing shareholders, which was fully • The operations within TradeDoubler and IMW Group in the UK subscribed. The rights issue made it possible to repay all of the and France were integrated during 2009. The development of Company’s loans at the start of 2010 and strengthened the a solution-orientated sales model was another prioritized area. Company’s financial position. This gives TradeDoubler financial TradeDoubler has successfully focused on integrating the sales freedom which strengthens competitiveness, enables invest- activities and on offering the complete product portfolio to the ments such as geographical expansion and increases customer customers. and supplier confidence. • Net sales amounted to SEK 3,014 M (3,457) and operating profit • The Board of Directors proposes a dividend of SEK 0.0 (0.0) per (EBIT) was SEK -105 M (150). share to the Annual General Meeting. • Impairment of goodwill of SEK -150 M was carried out, in respect of IMW Group in the UK which was acquired in 2007, due to a weak result and a more conservative assessment of the Five years in summary Number of employees 2005–2009 at year end 700 MSEK 2009 2008 2007 2006 2005 600 Net sales 3,014 3,457 2,664 1,744 1,085 637 500 565 Gross profit 690 747 636 480 314 550 400 Gross margin % 22.9% 21.6% 23.9% 27.5% 29.0% 300 351 Costs -795 -597 -441 -290 -271 200 256 Operating profit -105 150 195 190 44 100 Operating margin % -3.5% 4.3% 7.3% 10.9% 4.1% 0 2005 2006 2007 2008 2009 The costs for 2009 include non-recurring items of SEK -180 M, of which SEK -150 M related to impairments of goodwill in respect of IMW Group in the UK, which was acquired in 2007. Report on Operations 4 TRADEDOUBLER ANNUAL REPORT 2009 Focus on profitable growth The most important item on my agenda is undoubtedly that TradeDoubler should achieve satisfactory profitability as soon as possible! We must increase sales in order to succeed. Together, we have all that is required to succeed; The Company is well-positioned on a growth market, has a strong team, competitive technology and sufficient finan- cial resources to act on a long-term basis. The foundations have been laid sity to change and desire to succeed that prioritized. On the contrary! It is important For TradeDoubler, 2009 was a year of characterizes TradeDoubler. These are critical for us to focus on “operational excellence” consolidation. Major focus was placed on in- success factors, especially in a changeable and continually develop and improve our tegrating IMW group, which was acquired in sector like ours. My spontaneous opinion af- processes to become even more efficient. 2007, with TradeDoubler’s other operations ter having met our employees is that we are Partly to reduce costs, partly to improve the in the UK and France, and at the same time a strong, highly motivated team, possessing customer experience. At the same time, I on introducing search engine optimization great skills and a strong commitment to would like to emphasize that the “opera- on other markets. the job! It is gratifying to see that the staff tional excellence” work may not stifle the turnover fell during 2009 – a trend that we entrepreneurial spirit in the Company. In addition to this, the Company’s financ- shall endeavour to maintain. ing was secured thanks to a fully subscribed Increased geographical coverage rights issue and the Company’s cost base Focus areas 2010 The objective is to maintain our advantage was lowered through personnel reductions. It is important to do right things in the right in relation to geographical coverage. In or- An important project was also initiated way in order to be successful. In order to der to offer our customers wide coverage, during the fall of 2009, aimed at strengthen- succeed we must take the right strategic it is a distinct competitive advantage to be ing the internal governance and control of decisions and continue to be sharper in our represented on many markets. Profitability TradeDoubler’s operations and processes, sales performance. And above all, we must is simultaneously improved since costs for including the financial reporting.