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The Advertising Economy

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New Realities

2

I Found A Flaw

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Once Upon a Time, Marketing = Media + Creative

Traditional media was primary (sole?)

venue for communications objectives

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But Fragmentation Fractured That Proposition

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Music Was The Canary In The Coal Mine

Source: Magna, RIAA

Digitization changed production, distribution and consumption

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Revenues($000s)

TotalDigitalSales

RetailSales

Manufacturers' Shipments of Recorded Music

Napster Launched

(June 1999)

BitTorrent, Kazaa,

Grokster, etc. activeiTunes Launch

(March 2003)

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And DVRs Were To Be The Last Nail In The Coffin

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With A Digital Revolution Blooming In The Aftermath

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But Traditional Media Never Died

Television is the

worst form ofadvertising, exceptall the others thathave been tried

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But Traditional Media Never Died

New advertisers rely on it for mass branding effects

1 McDonald's 1 AT&T Wireless

2 KFC 2 Verizon

3 Burger King 3 Sprint

4 Miller Lite 4 McDonald's

5 Budweiser 5 Home Depot

6 AT&T 6 T-Mobile

7 Wendy's 7 Subway

8 American Express 8 Toyota Tundra

9 Miller High Life 9 Lowes

10 Advil 10 Wendy's

20071987

Top 10 Network TV Advertisers

Source: Magna analysis of TNS-CMR data

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But Traditional Media Never Died

Large brand-based advertisers: focus on reach

Network TV Prime Time Reach - Live Only Adults 18-49

96.17% 96.72%

0.0%10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2002 2007

Source: Initiative Analysis of Nielsen Data

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But Traditional Media Never Died

And frequency

0

100,000

200,000

300,000

400,000

500,000

600,000

2005 2006 2007 2008 2009 2010

TV

Radio

Total Internet

Newspapers

Consumer

MagazinesSearch

1.8bn

37.0bn

51.3bn

56.9bn

241.3bn

539.0bn

Total US Population: Hours Spent With Media

Millionso

fPerson-Ho

urs

Per

Year

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12/32www.MagnaInsights.com12 Source: Magna, WARC, InternetWorldStats. Weekly reach figures for France and UK, daily for other countries. Reach definition for magazines = issue reach in France, Italy and Spain.Internet reach typically = % of population online monthly per Nielsen NetRatings, ITU and other sources as of June 30 2007 (except for US = March 31, 2007)

But Traditional Media Never Died

This is true in established markets

Media Reach By Country

0.0%10.0%20.0%30.0%40.0%50.0%60.0%

70.0%80.0%90.0%

100.0%

TV

Rad

io

Newspape

rs

Magazin

es

Intern

et

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But Traditional Media Never Died

And emerging ones

Source: Magna, WARC, InternetWorldStats. Weekly figures for Brazil and Russia. Russia, China and India magazines are issue reach figures. Indian TV and radio = daily, newspapers= issue. Chinese TV = weekly and radio = daily. Internet typically = % of population online monthly per Nielsen NetRatings, ITU and other sources as of June 30 2007

Media Reach By Country

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%

100.0%

TV

Radio

Newspapers

Magazin

es

Internet

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But Traditional Media Never Died

It also holds for young audiences

Source: Magna analysis of Nielsen Media Research data

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But Traditional Media Never Died

In the US and around the world

Source: WARC

TV Reach: Adults and Teens

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%

80.0%90.0%

100.0%

UK

Germany

France

Italy

Spain

US

Brazil

Russia

India

China

Adults

Teens

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But Traditional Media Never Died

Reflected in actual usageConventional TV popularity: 100x vs. Online in 2011?

Source: Magna, Accustream

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Consequences of Reach and Frequency Paradigm

20 YEARS AGO

Models that were well-designed

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Consequences of Reach and Frequency Paradigm

20 YEARS AGO

For an era of homogenous media platform access

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Consequences of Reach and Frequency Paradigm

TODAY

May not be as well-suited for a world of Web 2.0%

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Consequences of Reach and Frequency Paradigm

TODAY

Which will reach some audiences and miss others

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Drivers of Online Spend: Endemics, New Businesses

Largest advertisers drive TV, smaller advertisers drive online

Source: Magna analysis of TNS-CMR data

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Drivers of Online Spend: Endemics, New Businesses

Who benefit from a Democratization of Advertising

Source: Magna analylsis of IRS data

Ad Expenditures By Small Businesses

4.0

4.2

4.4

4.6

4.8

5.0

5.2

5.4

5.6

5.8

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

MillionsofUSCorporations

With