Important advertising trends of 2011 — how you can fully capitalize on today's marketplace opportunities

Areas covered

• The current state of our economy – and what that means to us as Advertisers.

• An in depth look at the common problems that advertisers are facing – and what the smartest ones are doing about them.

• An assessment of today’s key advertising vehicles, what’s working, and what’s not

• Initial reactions to Digital – how is this performing?

• Exploring proven mediums for reaching your ideal clients.

Consumers are watching their spending

Source: Gallup Daily, http://www.gallup.com/poll/112723/gallup-daily-us-consumer-spending.aspx

Nov-0

8

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep-

09

Nov-0

9

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep-

10

Nov-1

0

Jan-

11

Mar

-11

40

50

60

70

80

90

U.S. Consumer Spending 14-day rolling average

Unemployment is up

1999 2001 2003 2005 2007 2009 20114,000

6,000

8,000

10,000

12,000

14,000

16,000

Unemployment

Thou

sand

s

Source: http://econ.economicshelp.org/2009_12_01_archive.html

Consumer confidence is low

• Consumers’ assessments of their own financial situation have remained quite dismal despite the expectation of improvement in the overall economy.

• Just 20% of all households reported their finances had improved in early March 2011, barely above the sixty year low of 16% recorded in November 2009.

Source: University of Michigan’s Survey of Consumers Report, March, 25 2011

Index of consumer confidence

Source: University of Michigan’s Survey of Consumers Report, March,25 2011

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 201140

50

60

70

80

90

100

110

120

U.S. consumer confidenceaverage since 1978

Inde

x va

lue

(106

6=10

0)

It is tempting for companies to cut back on marketing when sales go down…

• Multiple studies show that companies who increase their recession marketing efforts experience higher sales during and for years after as compared to those who don’t.

• Let’s look at some data…

Source: "How Advertising in Recession Periods Affects Sales," American Business Press, Inc., 1979 , Facts on the value of marketing during an economic downturn/recession; http://www.coin-op.org/pdfs/Facts%20on%20the%20Value%20of%20Marketing%20During%20an%20Economic%20Downturn Recession_Press%20Release.pdf,:4. Kijewski, Dr. Valerie.

Maintained marketing spendthrough 1974-1975 recession

• Companies during the 1974-75 recession who did not cut marketing budgets experienced higher sales and net income during those two years and the two years following than companies that made cuts during the same time period.

Source: ABP/Meldrum & Fewsmith study, 1979

Maintained or increased marketing budget through the 1981 – 1982 recession

• 600 U.S. companies were analyzed during the 1981-82 recession and the three years following.

• Companies that maintained or increased their advertising expenditures enjoyed a 256% growth by 1985.

Source: CARR Report, Aug 13 2001

Snap, crackle, profits

• During the Great Depression, Kellogg doubled its advertising budget, and heavily pushed its new cereal, Rice Krispies.

• By 1933, even as the economy cratered, Kellogg’s profits rose 30%.

• And became and what it also remains today: the industry’s dominant player.

$

$ $$

$$$

$

Source: The New Yorker http://www.newyorker.com/talk/financial/2009/04/20/090420ta_talk_surowiecki

Consumers feel advertising is a sign of stability

Executive poll

• 48% of adults believe lack of advertising during a recession indicates the business must be struggling.

• 86% of executives agree advertising in a down economy keeps a company at the front of the audience’s mind.

86%

Advertising in down economy keeps company top of mind

Source: http://www.marketinginsightstoday.com/archives/1223;http://www.jjhill.org/resources/press_releases/WomenVenture_03_24_09.pdf;http://mystrategicplan.com/resources/does-your-marketing-budget-makeyou-look-fat/l;Yankelovich/Harris Study 2008

Long term advertising creates a lasting impression

• In 2007, 100 year old Avon Co. increased its advertising by 21%. The result?

• A 2008 record-breaking revenue of $9.9 billion and 20% increase in sales.

• Sales have continued to increase approaching $11 billion in 2010

• “We won’t manage this company for the short-term. We all know how that movie ends.”

Source: http://www.mediapost.com/publications/index.cfm?fa=Articles.showArticle&art_aid=75872

Andrea Jung CEO, Avon

Even luxury brands flourish in difficult financial years

• New York based Tiffany & Co. did not cut its marketing spend at all during the 2001 recession.

• Sales have increased 100% since that time.

• “Tiffany is about things that last. And that perspective is perhaps more important today than at any time in our history.” Michael J. Kowalski

CEO, Tiffany & Co.

Source: JCK-Jewelers Circular Keystone 11/1/08

So, its makes sense to continue to advertise

– but there still is a huge issue to deal with:

FRAGMENTATION

The commercial noise today is almost deafening

• In the 1970s, consumers were exposed to about 500 ads per day.

• Today, the average consumer receives up to 20,000 commercial messages each day.

• And since consumers have a lot more media options, your audience is much harder to reach.

• This is called fragmentation, and it’s affecting every business in the world.

Source: QRS: “Don’t Interrupt Your Consumer; Engage Them.” 2011. http://www.qsrmagazine.com/outside-insights/don-t-interrupt-your-consumer-engage-themThe Washington Post, "Skip Past the Ads, But You're Still Being Sold." 2009; http://www.washingtonpost.com/wp-dyn/content/article/2009/08/14/AR2009081401629.html

The number of media vehicles has increased dramatically

Consumer magazines are up 52% since 1998.

The number of web sites has skyrocketed by 6,381% since 1997.

75% more AM/FM radio stations exist than in

1990.New online radio

stations go live every minute.

There are 300% more television stations than

in 1999.

Source: Arbitron Infin http://www.fcc.gov/mb/audio/totals/bt050930.html; The Influential's ; Keller & Berry; /sizeofweb.html; http://www.boutell.com/newfaq/misc; http://news.bbc.co.uk/2/hi/science/nature/1738496.stm; Source: American Society of Magazine Editors. “Number of Magazine Titles: A Magazine for Everyone” (database accessed 5/24/2010) http://www.magazine.org/ASME/EDITORIAL_TRENDS/1093.aspx, ite Dial 2010: Digital Platforms and the Future of Radio, http://www.edisonresearch.com/infinite_dial_presentation_2010_revb.pdf

Cutting a path to your customer

• With all these advertising messages, it’s a challenge to reach your customers.

• Almost every form of media is experiencing challenges with consumer engagement.

Viewing habits and costs over 30 years: a cost per thousand home increase of 499%

Source: Nielsen Media Research, February Each Year, http://www.tvb.org/rcentral/adrevenuetrack/media/media.asp?c=1b

Households Viewing

Average Minutes

Cost per 30 Seconds

Cost per 1000 Homes

1980 15,240,000 $57,900 $3.79

1990 12,540,000 $122,200 $9.74

2000 6,134,000 $82,300 $13.42

2005 6,043,000 $129,300 $21.45

2009 4,562,000 $103,700 $22.70

2010 5,248,000 $103,600 $19.74

They’re not watching your ads even when they are watching programs

• Commercial skipping costs TV advertisers $4 billion dollars per year.

• 70% mute commercials.• Time-shifting machines

in 40% of U.S. homes.• 50% of DVR

subscribers skip commercials.

“TV Ads Hit $69B In '10, Digital Viewing Up.” April 21, 2011: http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=149150&nid=126025 Source: “The DVR Dilemma: Managing Consumer Behavior”; www.jupiterresearch.com, http://www.ehomeupgrade.com/2006/05/05/dvr-commercial-skipping-could-threaten-8-billion-in-tv-advertising/; http://blogs.zdnet.com/ITFacts/?p=10466

Television advertising costs are UPwhile viewership is DOWN

• The average TV audience in 2009 was 54% smaller than 1965, yet average cost of advertising increased 426%.

• 78% of advertisers say TV advertising has become less effective.

Source: http://tvbythenumbers.com/wp-content/uploads/2007/09/broadcastnetworksharebyseason0828.jpg; Television Bureau of Advertising, 2009, TV Costs and CPM Trends. http://www.tvb.org/rcentral/adrevenuetrack/media/media.asp?c=1b

But . . . More people are paying attention to events

• In 2011 there were 111 million people watching the Super Bowl which is a 30% increase from 2005.

• The first game of the NCAA Men’s Basketball Tournament posted 1.2 million viewers, 13% more than 2010.

• The Golden Globes had 21,000 more viewers in 2011, increasing to 17 million.

• Grammy Awards had almost 26 millions viewers, an increase of 800,000 from 2010.

Super B

owl

NCAA Tournam

ent

Golden Globes

Grammy A

wards

0500,000

1,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,0004,500,0005,000,000

Source: http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=144456&nid=123511, Nielsen http://blog.nielsen.com/nielsenwire/media_entertainment/academy-awards-who-will-win-how-many-will-watch,http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=146983&nid=124897

News Audience Trends

Source: State of the News Media 2011: http://stateofthemedia.org/2011/overview-2/key-findings/

Audience Percentage

Change from 2009-

2010

Social Media Scoops Every Major Story Worldwide: but there are challenges

• Details are scarce.• Credibility is

questionable.• Information is

contradictory.• It’s all happening

real-time.• Not seeing big wins

reported.

Average click rates on ads for most websites are dismal

• Time on the Internet is increasing, but people just aren’t clicking on the ads.

• “I think it’s interesting (that) in the digital age, a number of people are connecting, but not necessarily connected.” - Mary Beth West, CMO Kraft Foods

Percentage of people who click on Internet banners on average

Source: Source: ZSmart Business, Imedia Connection, 2010 

1997 2001 Today0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.00%

0.40%

Less than 0.02%

Paywalls are being added every day

• Paywalls are popping up at publishers worldwide.

• Actually showing a decrease in visitors.

• “NYT Pay Wall Cuts Online Traffic By 5%-15%.”

Source: MediaPostNews April 12, 2011: http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=148517&nid=125672

iPad Magazine Apps are all over the board

• Cost structures are being created and modified.

• Uncertainty still exists.• Same content and layout as

print version or modified for digital platform?

• Who’s advertising and what are the guarantees?

• “Many of these apps are evolving so quickly that today's flaws could be erased with tomorrow's update.” – Barb Palser

Source: American Journalism Review, March 3, 2011: http://www.ajr.org/Article.asp?id=5027

A lot of people talk about digital advertising

• Spending on digital surpassed newspapers for the first time in 2010.

• But … digital still does not have proven ROI and many think it never will.

Source: Internet Ad Revenues Rebound to Record High in 2010. http://www.marketingprofs.com/charts/2011/4847/internet-ad-revenues-rebound-to-record-high-in-2010?adref=nlt041511

Step back and take a look at one company’s case study

• 2009 – Company pulled all National TV Advertising to move to digital.

• Hoped to catch attention of home buyers.

• Didn’t see results and ended up changing overall ad spend.

• “We thought it was time to clarify what we are and what consumers feel about us. So it was time to go back into the consumer space with all media.“ – Beverly Thorne, Chief Marketing Officer, Century 21

Source: Advertising Age, March 28, 2011: http://adage.com/article/news/century-21-back-big-tv-buys-2012-super-bowl-spot/149615/

Internet advertising still unproven

• Time on the Internet is increasing, but people just aren’t clicking on the ads.

• In 2009, companies spent about $22.7 billion on Internet advertising, yet click-through rates are averaging only 0.2% of viewers.

• Internet ad CPMs have decreased over 50% since last year, acquisition costs are high, and most websites aren’t even achieving a 2% conversion rate.

Source: Source: ZSmart Business, Imedia Connection, 2010 http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=100504;; Grab Stats: http://www.grabstats.com/statcategorymain.asp?StatCatID=4; http://www.i-advertising.com/

Direct Mail is tougher than ever

Source: Proven Ways To Increase Sales And Boost Direct Mail Response Rates, August 2009, Articlesbase, by Andrea Ratajczak; and Direct Mail Statistics You Can Use, By Andrew Michaels | Article Abstract, http://www.articlesphere.com/Article/Direct-Mail-Statistics-You-Can-Use/150454, February 2010.

• The average American receives 560 pieces of direct mail each year.

• 44% goes in the garbage unopened.

• 97% to 99% of recipients never respond.

The radio audience is increasingly fragmented

Source: Arbitron, “The Infinite Dial 2010: Digital Platforms and the Future of Radio,”http://www.arbitron.com/downloads/infinite_dial_presentation_2010_reva.pdf; Bridge Ratings, “Satellite Radio Brand Appeal,” November 2009 http://www.bridgeratings.com/; Federal Communications Commission, Licensed Broadcast Station Totals (1990 to Present) http://www.fcc.gov/mb/audio/totals/index.html

As radio advertising becomesless effective, revenues slide

Source: Radio Advertising Bureau, “Radio Revenue Trends,” http://www.rab.com/public/pr/yearly.cfm

There’s one medium you can use to take full advantage of your media budget?

Newspapers

We all need media that reaches our audience

• Would you like to advertise in media that reaches more than 50% of U.S. adults every day?

34

Source: Clark, Martire & Bartolomeo, Inc. Survey October 2007, http://www.nynewspapers.com/Libraries/PDF_s/Newspaper_Drives_Online_12-7.sflb.ashx, MRI 2009, : “Scarborough: Most Americans Still Read Newspapers” Newspaperproject.org 11/18/2009)

Reach customers who can afford your products

• Would you like to advertise in media that reaches 57% of the population with incomes over $75,000?

35

Source: Newspaper Association of America, Daily Newspaper Section Readership Report, 2008.http://www.naa.org/docs/Research/Daily-Readership-Active.pdf

Pinpoint specific local audiences across the country

• Look for a media vehicle that reaches the majority of homes...

• A media that enables you to reach people both locally and across the country.

36

Source: Newspaper Advertising - Advantages & Disadvantages, by Mike Brassi, http://www.websitemarketingplan.com/small_business/newspaper.htm

Reach your audience when they are receptive

• Look for a media where your ad can be examined at leisure without limited exposure.

• Where your audience can take their time.

37

Source: Newspaper Advertising - Advantages & Disadvantages, by Mike Brassil http://www.websitemarketingplan.com/small_business/newspaper.htm

People take their time reading the paper

• Time spent reading Sunday print paper– Over 60 minutes: 45%– 30 to 60 minutes: 32%

• Time spent reading daily print paper– Over 30 minutes: 45%– 16 to 30 minutes: 34%

Source: Newspaper Association of America, http://www.naa.org/docs/Research/newspaper-reader-engagement-06.pdf

Survey respondents who read newspaper preprints account for 87% of all adults

Source: How America Uses Advertising 2009 Prepared by MORI Research and NAA

Regularly check Sunday inserts from store categoriesGrocery or food stores 80%

Department stores 69

Discount stores 63

Drug stores 53

Home electronics stores 49

Home building centers 43

Office supply stores 39

Computer stores 38

Home furnishings stores 33

Sporting goods stores 33

Appliance stores 25

Cell phone stores 11

Base = Adults who ever read or look at

newspapers advertising inserts (87% of

sample)

Question: Please tell me if

you regularly check Sunday

inserts from any stores from the

following general categories.

People read on-page advertising as they browse

• As a matter of routine, 8 in 10 newspaper readers scan on-page ads as they page through the newspaper.

• Two-thirds (63%) of newspaper readers say they usually read advertising as they page through the newspaper.

• Scanning becomes reading when they come across something that is relevant to them in a substantive way, or has interesting creative content, or both.

Source: How America Shops & Spends 2011 Prepared by Frank N. Magid Associates and NAA

Associated Context can be very effective

• You can tie your ad to the content on the page.

• Health, sports, travel, beauty are all possibilities.

• Positive associations trigger better response rates and recall ability among consumers.

While doing your planning, know that print and the Internet work well together

• Time after time, marketers have proven that even when Internet advertising is appropriate, print is the “push” that complements the web’s “pull.”

• A print piece not only drives additional traffic to the website, it increases the amount that people spend when they arrive.

Source: Deliver magazine, July 2010

Newspapers are driving online traffic

• Newspaper websites continue to grow rapidly, reaching 83.7 million unique visitors in April 2010, a 57% increase from 2004.

• “As the industry continues to expand its digital portfolio, readers are visiting newspaper websites in record numbers for in-depth news and information as well as hyper-local information.”

-John F. Sturm, CEO & President, Newspaper Association of America

Source: 2010 - “Newspaper web Traffic in Top Markets Leaps To An All-Time High.” http://www.nnnlp.com/news/news-05-24-10.php, Newspaper Association of America. Newspaper websites Custom Chart. http://www.naa.org/TrendsandNumbers/Newspaper-websites.aspx . BizReport.com “record visitor numbers,” July 24, 2007 http://www.bizreport.com/2007/07/online_newspapers_experience_record_visitor_numbers.html#, Newspaper National Network.

Newspapers drive online action

• 73% of readers visited Web sites, used online search, or made an online purchase in following up on advertising they saw in a newspaper in the previous month.

• In 2009 the number was 39% but in less than two years people have become much more engaged in the online research and taking action based on seeing advertisements in the paper.

Source: How America Shops & Spends 2011 Prepared by Frank N. Magid Associates and NAA

2011 20090

10

20

30

40

50

60

70

80

90

Percent of consumers act-ing on print ads

Summary of Findings:

• The best companies of our time continue to advertise,

regardless of the economy.

• To break through fragmentation and manage your budget,

you need to use the vehicles that reach your ideal client.

• Unproven advertising vehicles need time to prove

themselves and when used right, prove to complement

traditional media

• The right advertising in the right medium is key to building

successful campaigns

• As digital continues to grow, smart companies are using

traditional vehicles to increase impact, create more traffic,

and strategically grow their business

Who is Mediaspace?

• Mediaspace Solutions is a privately-held company headquartered in Norwalk, CT. We also have offices located nationwide in Atlanta, Chicago, Los Angeles, Minneapolis and New England.

• With expert service and custom-built technology systems, we help national and regional advertisers maximize their print and interactive advertising budgets.

• We have an experienced and sophisticated management team focused on serving you and negotiating the best possible rates and placements.

46

We help companies keep their eye on the ball

• 75% of companies who outsource important functions to other companies “significantly outperform their peers on three key business metrics:”– Reduced administrative expenses– Increased growth in return on assets– Higher growth in earnings before interest

and taxes• No one knows your business better than you.

But by focusing on your core strengths and your customers, you have time and resources to stay on top of your customers’ needs.

47

Source: Business impact of outsourcing—a fact-based analysis, IBM Global Services, 2006 [ABA2 100]

Why wouldn’t you rely on experts?

• A good advertising solutions partner already knows the ropes, the organizations and the personalities.

• Is it really worth the training time, personnel and resources to do all this yourself?

American Express Success Study

• Newspaper programs used in past for AMEX

proved ineffective at producing desired results

and they needed a change – They called

Mediaspace.

• We implemented a new approach using

newspapers and delivered more highly visible,

guaranteed ad placements – where their clients

were reading.

• We also saved them $300,000/drop.

• A year later, they raised their newspaper spend

by 1,000%; within 18 months, over 1,500% - and

are now well into an 8 figure spend.

• Clearly, this change in strategy is working.

Jessica Birk says it best…

“As the leader in accountable media solutions, ID Media looks for partners like Mediaspace Solutions that can save our clients like American Express over 85% off on their media while finding ways to provide added value, exceptional positioning, and improved ROI.”

Jessica Birk

Vice President of ID Media

U.S. Census Success Study

• This critically important newspaper plan in 2010 required both deep analysis and deep discounts to achieve their required results.

• They needed to reach everybody – in large and small markets, with a tight budget.

• Plan recommendations involved both large and small market newspapers, often with comprehensive ZIP analysis.

• Newspapers contributed to their overall success – 72% response vs. 64% in previous campaign.

• Newspapers proved to STILL be their key vehicle for success!

Takeda Success Study

• Takeda’s largest competitor was about to receive an FDA warning announcement which was sure to make big news

• Actos wanted its brand’s safety message in key markets ASAP as consumers read headlines/looked to switch Rx

• Within 48 hours of getting go-ahead, a 150+ newspaper plan was fully executed with low CPMs/100% FDA compliance

Let our Total Solutions Team work for your success

• When clients work with us they are assigned an entire Total Solutions Team– Account development– Ad operations– Finance

• You will receive regular and clear reports on your advertising activity.

• You can call anyone on your team directly for any answers you need.

• We provide customized solutions for YOUR business.

Just a few of our other clients

Suggested next steps…

• For a limited time, Mediaspace Solutions is offering a complete audit of all of your newspaper and advertising activities.

• Our experts will reveal what we believe to be your opportunities, and advise you on areas that you could be doing even better.

• We will show you our detailed Case Studies, and explore where we can create similar success for you and your company.

Best PricingBest Placement

Best TargetsBest Service

GUARANTEED!

Share of total ad spend by medium in 2010

Television

Internet

Newspap

erRad

io

Mag

azine

Direct

Mail

Outdoor

0.00%5.00%

10.00%15.00%20.00%25.00%30.00%35.00%40.00%

Percent of Total Ad Spend

Source: Forecast: TV Regains Hefty Ad Levels; http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=147613&nid=125220, March 2011

Print is 23% ofall ad spend