magna global may 2008 advertising economy

8/14/2019 MAGNA Global May 2008 Advertising Economy

1/40

May 2008

The Advertising Ec onomy


2/40

2

Onc e Upon a Time, Marketing = Media + Creative

Trad itiona l med ia was p rimary (sole?)

venue for c ommunic a tions ob jec tives


3/40

3

But Fragmenta tion Frac tured That Proposition


4/40

4

New Platforms Would Make Change Possible

Source: MAG NA Globa l

Multichannel Homes

DVR Homes

VOD Homes

Broadband Homes

Satellite RadioSubscriptionsHD Subscriptions

Mobile Phone

Subscriptions

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

%ofUS

Households


5/40

5

Music Was The Canary In The Coal Mine

Sourc e: MAGNA Glob al, RIAA

Digitization c hanged produc tion, distribution and c onsumption

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)


6/406

The Venture World Would Shake Everything Else Up

Traditiona l Med ium Equivalent / Ad -Supported Revenue Driver

Rad io/ Music

InformationSeeking

Commerc e /Shopping

IndividualorCorporate

BehaviorDriver

TV Online/ Print Out-of-Home MarketingServic es

OtherMarketing

UGCProduction

Content-on-

Demand

Soc ia l ContentConsumption

Nic he ContentConsumption

New Plac eConsumption

AssetManagement

Ga me Playing

Source: MAGNA Global

Thousands of new models would surely c hange everything


7/407

And DVRs Were To Be The Last Nail In The Coffin


8/408

With A Digital Revolution Blooming In The Aftermath


9/409

But Traditional Media Never Died

Television is the

worst form ofadvertising, exceptall the others thathave been tried


10/4010


New advertisers rely on it for mass branding effec ts

1 McDonald's 1 AT&T Wireless

2 KFC 2 Verizon

3 Burger King 3 Sprint

4 Miller Lite 4 McDonald's5 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 Global analysis of TNS-CMR data


11/4011


Large brand-based advertisers: foc us 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


12/4012 Source: MAGNA Global, US Census, Veronis Suhler, OPA


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

MillionsofPerson-HoursPerYear


13/4013 Source: MAGNA Global, WARC, InternetWorldStats. Weekly reach figures for France and UK, daily for other countries. Reach definition for magazines = issue reach in France, Italy andSpain. Internet reach typically = % of population online monthly per Nielsen NetRatin s, ITU and other sources as of June 30 2007 except for US = March 31, 2007


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


14/4014


And emerging ones

Source: MAGNA Global, 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 NetRatin s, 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


15/4015


It also holds for young audiences

Young Audiences' TV Viewing Trends

15.0

17.0

19.0

21.0

23.0

25.0

27.0

29.0

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07H

oursofView

ingPerWeek P2-5

P6-11

P12-17

P18-34

Source: MAGNA Global analysis of Nielsen Media Research data


16/4016


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


17/4017


General Print TV

Suffic ient Rangeof Content

Suffic ientTec hnic a l Qua lity

Equipment

SubstitutionSuffic ientCustomer Service

Effic ientNavigation

Cheaper toSubstitute

IncreasedConvenience

SUMMARY

Limited TV co ntentava ilab le tod ay

Internet can t d eliverhigh res video we ll

IPTV: no STB integration

Qo S is c ritica l for video

Hard to navigate to findaudio/video

Online ba ndwidth canbe expensive to p rovide

Print is typ ica lly portab le

Print is ta c tile

Prospec ts for onlineme d ia substitution limitedby drawbacks relative to

trad itiona l media

Source: MAG NA Globa l

Is New Media a lways a better substitute? Consider c riteria

Yes! NotReally


18/4018


Reflec ted in ac tual usage Conventiona l TV popularity: 100x vs. Online in 2011?

Source: M AGNA Glob al, Ac custream

145.8x

119.8x

99.2x82.7x

69.4x 58.6x

0.0x

20.0x

40.0x

60.0x80.0x

100.0x

120.0x

140.0x

160.0x180.0x

200.0x

25% 30% 35% 40% 45% 50%Different Scenarios:

Assumed 4-Year Compounded Annual Growth Rate of Online Video

PopularityFac

torofConventional

TV

in2011

2007 Growth Rate Was 34.4%

Above Trend

Below Trend


19/4019

Communic ations Extends Beyond Media

The company is(putting) retail

marketing strategyunder the same

marketing directors who

oversee brand teams


20/4020


Large advertisers real shift: non-media marketing

Hershey Promotion and Advertising Expense 6-Year CAGR

Advertising Growth

Promotion Growth

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2001 2002 2003 2004 2005 2006 2007

8.8%

-6.2%

Source: MAGNA Global, Company Reports


21/4021



Coca-Cola Selling and Advertising 6-Year CAGR

Selling ExpenseGrowth

Advertising ExpenseGrowth

-15.0%

-10.0%-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2001 2002 2003 2004 2005 2006 2007

6.5%12.8%



22/4022



Liz Claiborne Marketing and Advertising 6-Year CAGR

Marketing Growth

Advertising Growth

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2001 2002 2003 2004 2005 2006 2007

4.4%

9.0%



23/40

23



Wrigley Merchandising, Selling and Advertising 6-Year CAGR

Merchandising andPromotions/Other

GrowthSelling and other

Marketing Growth

Advertising Growth0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2001 2002 2003 2004 2005 2006 2007

15.2%

16.2%

10.0%



24/40

24

Drivers of Online Spend = Endemics, New Businesses

Largest advertisers drive TV, smaller advertisers drive online



25/40

25


Online a llows for lower c ost, narrow reac hing campaigns

2006: Unique Advertisers By Medium

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Network TV Internet Display



26/40

26


Search primarily driven by small businesses + e-commerc e

Search Spending as % of E-Commerce Sales

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

1Q00A

2Q00A

3Q00A

4Q00A

1Q01A

2Q01A

3Q01A

4Q01A

1Q02A

2Q02A

3Q02A

4Q02A

1Q03A

2Q03A

3Q03A

4Q03A

1Q04A

2Q04A

3Q04A

4Q04A

1Q05A

2Q05A

3Q05A

4Q05A

1Q06A

2Q06A

3Q06A

4Q06A

1Q07A

2Q07A

3Q07A

4Q07A

Source: MAGNA Global, IAB, BEA


27/40

27 Source: MAGNA Global, US Census, Veronis Suhler


Reflec ting effec tiveness for SMEs

$0.00$1.00

$2.00

$3.00

$4.00$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

2005 2006 2007 2008 2009 2010

Search

Newspapers

Total Internet

ConsumerMagazines

TV

Radio

Advertising Dollars Spent Per Hour of Media Consumption

$9.39

$0.94

$0.08

$0.58

$0.10$0.33


28/40

28

Beyond search, emerging media = small business today

Emerging Media Advertising: Sourc es of Revenue

2007E Emerging Media Advertising

$0.0

$2,000.0

$4,000.0

$6,000.0

$8,000.0

$10,000.0

Search All OtherR

evenuesinM

illions

Source: MAGNA Global, IAB


29/40

29


Sub-scale media: more effec tive for sub-scale advertisers(?) Emerg ing med ia requires ad hoc p roc esses and workflows

Most or a ll p roc esses in sma ller advertisers a re ad hoc !

or


30/40

30


But gut dec isions on fee l frequently d rive a lloc ations Use of newer med ia c an be simila r to magazines: it fee ls right

=


31/40

31


What will c ause advertisers to use more emerging media? Trad itiona l med ia stops working


32/40

32


What will c ause advertisers to use more emerging media? Better infrastruc ture


33/40

33


What will c ause advertisers to use more emerging media? Bette r-a ligned organiza tions

OperatingDivision

RetailDistribution

ProductDevelopment

Branding

CEO

Other CorporateFunctions

COO

PR / CorporateCommunications

OperatingDivision

ProductDevelopment

Branding

OperatingDivision

ProductDevelopment

Branding

CMO / CentralMarketing

Creative OtherMedia

Marketing, PR,Retail, Sales



Source: MAGNA Global

Direct /Online Sales


34/40

34


What will c ause advertisers to use more emerging media? Foc us on peop le, not pages (or ra tings)


35/40

35


What will c ause advertisers to use more emerging media? Ab ility to assess va lue, not c ost

Top 10 DMAs National Network


36/40

36


What will c ause advertisers to use more emerging media? Ab ility to ac tua lly use da ta

= +


37/40

37


So when is emerging media used?

Nic he-foc used brands or marketing ob jec tives

Reac hing c onsumers ac ross multip le touc h-points

Experimenta tion / interna l lea rning / p repara tion for the future


38/40

38

What Have We Learned Today?

We thought we c ould makemoney on the internet

While the internet is new andexc itingit hasnt matured

as a d istribution mec hanism

It will be a few yearsbeforemed ia on theinternet can be monetized

- Kyle Broflofski, April 2008


39/40

39

Summary

OldMedia :

NotDeadYet,

BecomesDigital

BelowThe Line :Growth

Driver ForLargest

Advertisers

OnlineDisplay:Foc us on

Endemics,Commerce

OnlineSearch:Led bySmall

Businesses,

Commerce

NewMedia:

SystemicLimits fo r

Most La rge

Advertisers

EmergingMedia:Niches,MultipleTouc h

Points orTests


40/40

Contacts:

Brian Wieser, CFATel: 646-865-2260Email: [email protected] om

www.interpublic.com/news+ideas/research

magna global may 2008 advertising economy

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