ZenithOptimedia’s Global Adspend Expectations and the Outlook For Russia

Fragile and debt laden western economies

Eurozone crisis

Little agreement on where the global economy is headed

How to predict Advertising Expenditure in future years?

• Forecasts for 79 markets over 31 years

• Dedicated central team

• 15 leading forecasts and guides published every year

• Tracked crashes and resurgences

• Underlying trends to share today

ZENITHOPTIMEDIA’S GLOBAL ADSPEND EXPECTATIONS AND THE OUTLOOK FOR RUSSIA

1. Stock market fluctuations and adspend

2. Economic growth and the ad market

3. Global ad market rankings

4. Potential growth categories in Russia

ZENITHOPTIMEDIA’S GLOBAL ADSPEND EXPECTATIONS AND THE OUTLOOK FOR RUSSIA

1. Stock market fluctuations and adspend

2. Economic growth and the ad market

3. Global ad market rankings

4. Growth potential of key categories

Dow Jones Hang Seng Nikkei 225 MICEX-18.0

-16.0

-14.0

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

Decline in stock market value (%)

Decline in stock market value (%)

STOCK MARKET CRASHES THIS SUMMER

Source: ZenithOptimedia

DOES A STOCK MARKET CRASH MEAN A DROP IN ADSPEND?

Thailand 1997

Malaysia 1997

Singapore 1997

S. Korea 1997

USA 2000 UK 2000-100.0

-90.0

-80.0

-70.0

-60.0

-50.0

-40.0

-30.0

-20.0

-10.0

0.0

Decline in stock market value (%) Next year adspend growth (%)

Dotcom bubble bursts

STOCK MARKET CRASHES SOMETIMES PRECEDE ADVERTISING DOWNTURNS

Asian financial crisis

Source: ZenithOptimedia

BUT THEY ARE NOT BY THEMSELVES A RELIABLE INDICATOR

UK 1987 USA 1987 Canada 1987 Hong Kong 1997

USA 1997 USA 2001-50.0

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

Decline in stock market value (%) Next year adspend growth (%)

Black Monday Asian financial crisis 9/11

Source: ZenithOptimedia

DOES A STOCK MARKET CRASH MEAN A DROP IN ADSPEND?

A crash in stock market values does not by itself mean ad expenditure is about to decline

Causal Connections:

...when an overvalued stock market is supporting excessive advertising

...if the market correctly anticipates a sharp downturn in global economic activity

ZENITHOPTIMEDIA’S GLOBAL MARKET EXPECTATIONS AND THE OUTLOOK FOR RUSSIA

1. Stock market fluctuations and adspend

2. Economic growth and the ad market

3. Global ad market rankings

4. Growth potential of key categories

LATEST GDP FORECASTS

2010 2011 2012 20130

1

2

3

4

5

6

7

8

World Developing markets RussiaDeveloped markets Eurozone

Source: Adjusted IMF % growth in GDP

ADSPEND GROWTH vs GDP GROWTH: GLOBAL

-2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

GDP growth (%)

Adsp

end

grow

th (%

)

Source: ZenithOptimedia

Strong correlation between GDP and Adspend

Other factors: new technology, intensity of competition

ADSPEND GROWTH vs GDP GROWTH: RUSSIA

-20.0 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

GDP growth (%)

Adsp

end

grow

th (%

)

Source: ZenithOptimedia

Russia more volatile, with larger swings..

..but the same correlation applies

GLOBAL ADVERTISING SHRINKING AS % OF GDP

Source: ZenithOptimedia

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

0.2

0.4

0.6

0.8

1

1.2

Advertising as % of GDPDot com bubble

AD EXPENDITURE AS % OF GDP BY REGION (2011)

MENARussi

a

Asia Paci

fic (ex. J

apan

)

C & E Europe

Latin Americ

a

Western Europe

WORLD AVERAGE

Japan

North Americ

a0.00

0.20

0.40

0.60

0.80

1.00

1.20

Source: ZenithOptimedia

RUSSIA: ADVERTISING TRENDING BACK UP AS % GDP

Source: ZenithOptimedia

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

Advertising as % of GDP

03 04 05 06 07 08 09 10 11 12 13-15.0

-10.0

-5.0

-

+5.0

+10.0

GDP Adspend

GLOBAL ADSPEND AND GDP GROWTH YEAR-ON-YEAR % CHANGE, CURRENT PRICES

Source: ZenithOptimedia, IMF

Assumes European and US growth remains weak, but not in recession

Adspend growth lags GDP on global basis

03 04 05 06 07 08 09 10 11 12 13-30.0

-20.0

-10.0

-

+10.0

+20.0

+30.0

+40.0

GDP Adspend

RUSSIAN ADSPEND AND GDP GROWTH YEAR-ON-YEAR % CHANGE, CURRENT PRICES

Source: ZenithOptimedia, IMF

Assumes Russia GDP growth well ahead of Developed markets

Adspend growth ahead of GDP

ZENITHOPTIMEDIA’S GLOBAL ADSPEND EXPECTATIONS AND THE OUTLOOK FOR RUSSIA

1. Stock market fluctuations and adspend

2. Economic growth and the ad market

3. Global ad market rankings

4. Growth potential of key categories

ADSPEND GROWTH BY REGION (2013 v 2010)YEAR-ON-YEAR % CHANGE, CURRENT PRICES

North America

Western Europe

Japan Asia Pa-cific (ex. Japan)

C & E Europe

Latin America

MENA Rest of world

-15

-10

-5

0

5

10

15

20

25

30

35

Source: ZenithOptimedia

Russia growing from 1.5% - 2.3% of total global Adspend

2010 Adspend 2013 Adspend

1. USA 151,665 1. USA 165,9772. Japan 46,153 2. Japan 47,6303. China 26,122 3. China 38,8544. Germany 23,791 4. Germany 25,4295. UK 18,086 5. UK 19,6566. Brazil 14,716 6. Brazil 17,5877. France 12,564 7. France 13,4658. Australia 11,246 8. Australia 12,3139. Italy 10,296 9. Canada 12,09810. Canada 10,041 10. Russia 11,413

TOP 10 ADVERTISING MARKETSUS$ million, current prices

Source: ZenithOptimedia

GLOBAL ADSPEND SHARE BY MEDIUM

Newspapers21.5%

Magazines9.8%

Television39.8%

Radio7.2%

Cinema0.5%

Outdoor6.7%

Internet14.4%

Newspapers17.9%

Magazines8.4%

Television40.5%

Radio6.9%

Cinema0.5%

Outdoor6.9%

Internet18.9%

2010 2013

Source: ZenithOptimedia

ADSPEND SHARE BY MEDIUM - RUSSIA

Newspapers4.1%

Magazines9.0%

Television54.6%Radio

5.1%

Cinema1.5%

Outdoor14.6%

Internet11.1%

Newspapers3.1% Magazines

7.6%

Television52.9%

Radio4.1%

Cinema1.5%

Outdoor13.9%

Internet16.9%

2010 2013

Source: ZenithOptimedia

ZENITHOPTIMEDIA’S GLOBAL MARKET EXPECTATIONS AND THE OUTLOOK FOR RUSSIA

1. Stock market fluctuations and adspend

2. Economic growth and the ad market

3. Global ad market rankings

4. Growth potential of key categories

FMCG OVERTAKEN BY OTHER CATEGORIES AS MARKETS DEVELOP

Retail24.4

%

FMCG19.7

%Services19.5%

Auto18.1

%

Media9.4%

Pharma

5.3%

Alcohol3.6%

1990

Auto30.0

%

Tele-coms20.2

%

Fi-nance14.8

%

Me-dia

14.4%

Fast food12.9

%

FMCG7.8%

2010

Source: ZenithOptimedia

AD EXPENDITURE BY TOP TEN CATEGORIES - USA

FMCG OVERTAKEN BY OTHER CATEGORIES AS MARKETS DEVELOP

Retail24.4

%

FMCG19.7

%Services19.5%

Auto18.1

%

Media9.4%

Pharma

5.3%

Alcohol3.6%

1990

Auto30.0

%

Tele-coms20.2

%

Fi-nance14.8

%

Me-dia

14.4%

Fast food12.9

%

FMCG7.8%

2010

Source: ZenithOptimedia

AD EXPENDITURE BY TOP TEN CATEGORIES - USA

RUSSIA STILL DOMINATED BY FMCG, THOUGH OTHER CATEGORIES ARE GROWING

FMCG

86.7%

Tele-com

s7.7%

Auto5.6%

2000

FMCG

56.8%

Ser-vices16.3

%

Auto8.3%

Tele-coms7.3%

Poli-tics

5.8%

Finance5.5%

2010

Source: ZenithOptimedia

AD EXPENDITURE BY TOP TEN CATEGORIES - RUSSIA

HUGE GROWTH POTENTIAL OF NON-FMCG CATEGORIES

FMCG

56.8%

Ser-vices16.3

%

Auto8.3%

Tele-coms7.3%

Poli-tics

5.8%

Finance5.5%

Russia

Auto30.0

%

Telecom

s20.2

%

Fi-nanc

e14.8

%

Me-dia

14.4%

Fast food12.9

%

FMCG7.8%

USA

Finance, auto and telecoms: 21.1% Finance, auto and telecoms: 65.0%Source: ZenithOptimedia

AD EXPENDITURE BY TOP TEN CATEGORIES - 2010

ZENITHOPTIMEDIA’S GLOBAL MARKET EXPECTATIONS AND THE OUTLOOK FOR RUSSIA

1. Stock market crashes don’t always mean

Adspend decline

2. Economic growth is closely tied to the ad market

3. Russia Adspend will grow faster than Developed

markets and join the Top Ten

4. Growth potential of major new categories is

likely to grow Adspend even faster