KEY AD CATEGORY TRENDS Jon Swallen TNS Media Intelligence Outline An economic focus centered on ad expenditures Spending levels and growth rates Where the money is going (media mix) Outlook Automotive Telecommunications Retail Department Stores Home Improvement Local Services Methodology All ad expenditure figures come from the TNS MI database 18 media types and 3.2 million products Spot TV based on 101 DMAs Local cable not included For 2009, actual figures from January-June (H1) were used The notation 2009 (e) An estimate: applying H growth rates to year-end 2008 actuals Pacing Benchmarks Source: TNS Media Intelligence Telecommunications Background Continuing consolidation Convergence and competition Battle for market share Cost-conscious consumers Ad Spend Is Rebounding +11.7% -6.1% -5.5% Source: TNS Media Intelligence +9.2% Segment Ad Spend Total Ad SpendSpot TV Ad Spend Segment 2008 ($MM) H1 09 % Growth 2008 ($MM) H1 09 % Growth Wireless Svc5, % % TV Services1, % % Bundles % % All Other1, % % TOTAL8, %1, % Source: TNS Media Intelligence Where The Money Is Going Total Category Source: TNS Media Intelligence National TV 2006: 38% share 2008: 42% share Spot TV 2006: 14% share 2008: 17% share Newspapers 2006: 22% share 2008: 17% share Internet 2006: 8% share 2008: 6% share (-) Wireless Products The Big Four 93% of total segment ad spend Annual spend per wireless subscriber is tracking at $18-$22 National TV and Newspapers still have 75% share of total spend But a 10 point shift towards TV since 2007 Over 50% of segment Spot TV spend comes from Verizon & AT&T A presence in all of the Top 101 DMAs Prepaid wireless providers a growing niche TV Service Providers Satellite Telco Cable TV Services Source: TNS Media Intelligence Total Ad SpendSpot TV Ad Spend 2008 ($MM) H1 09 % Growth 2008 ($MM) H1 09 % Growth DirecTV % % Echostar % % Comcast % TW Cable % Verizon % % AT&T % % Primary territories Boston to Norfolk corridor Texas, Southern California H1 goal HH Passed10.3 mm18.0 mm HH Subs2.2 mm (23%) mm (20-25%) # DMAs w/ Spot TV ads 23 GRPs per DMA (median) 12,000 Primary territories Midwest and Southeast California, Texas H1 goal HH Passed18 mm30 mm HH Subs1.6 mm (9%) 6-7 mm (20-25%) # DMAs w/ Spot TV ads 49 GRPs per DMA (median) 7,000 Competition Spurs Ad Spend Sources: TNS Media Intelligence; Nielsen Media Research Outlook TV Services Expanded competition driven by telco TV rollout Marketing emphasis on price, bundles, programming and features DBS vulnerability remains its narrower product offering Advertising: battleground markets Retail Background Retail sales and consumer spending are weak Rising unemployment Diminished wealth Consumer psychology Low-price sellers leading the way Retailers Have Cut Back On Ad Spending +2.0% -4.2% -6.1% Source: TNS Media Intelligence -16.0% Major Segments Total Ad SpendSpot TV Ad Spend Segment 2008 ($MM) H1 09 % Growth 2008 ($MM) H1 09 % Growth Dept. Stores4, % % Food/Beverage1, % % Home Improve4, %1, % Apparel2, % % CATEGORY AVG-16.0%-25.6% Source: TNS Media Intelligence Department Stores Sales in decline since 2000 Mergers and consolidation 7 major national chains Over 85% of total Dept. Store ad spend Reallocating budgets towards national media National TV and Newspapers are 70+% share of total spend But moving in opposite directions Spot TV: < 5% share of ad spend Major Segments Total Ad SpendSpot TV Ad Spend Segment 2008 ($MM) H1 09 % Growth 2008 ($MM) H1 09 % Growth Dept. Stores4, % % Food/Beverage1, % % Home Improve4, %1, % Apparel2, % % CATEGORY AVG-16.0%-25.6% Source: TNS Media Intelligence Home Improvement Retailers Defining the segment Correlation with housing market 2009 retail sales pacing at 2003 levels Down 20% from 2006 peak Less discretionary spending on big- ticket projects Advertising:sales ratios contracting Home Improvement Retailers +6.0% -3.0% -11.7% Source: TNS Media Intelligence -23.8% Segment Ad Spend Total Ad SpendSpot TV Ad Spend Segment 2008 ($MM) H1 09 % Growth 2008 ($MM) H1 09 % Growth Home Centers & Hardware Stores 1, % % Furniture Stores1, % % All Other (Bed, Floor, Carpet, Appliances) 1, % % GRAND TOTAL4, %1, % Source: TNS Media Intelligence Where The Money Is Going Allocation of Media Spend: 2008 Home Centers Furniture All Other Total Spend100% National TV39%4%1% Spot TV10%43%33% Newspaper23%39%42% Radio15%6%8% All Other Media13%8%16% Source: TNS Media Intelligence Does the housing market affect ad spending by home improvement retailers? Fewer Home Improvement Stores Are Advertising By Region Northeast: -9% Midwest: -11% South: -16% West: -25% Select Markets Hartford: -12% Milwaukee: +7% Atlanta: -51% Phoenix: -35% # of Active Advertisers: H1 09 vs H1 07 Retailer Ad Spend Lagged The Housing Downturn Sources: TNS Media Intelligence; National Association of Realtors % Change vs. Prior Year REGION H1 09 SOUTH Homes Sold-4.5%-14.6%-19.3%-8.2% Spot TV Ad $+9.8%-5.5%-5.9%-27.5% WEST Homes Sold-20.4%-24.6%+0.2%+6.9% Spot TV Ad $+10.4%+3.3%-26.2%-30.4% Ad Spend Contracting Faster Than Retail Sales Sources: TNS Media Intelligence; US Bureau of the Census Retail sales +20% Retail sales -25% A/S ratio -20% PLUS. Home & Building Services Home & Building Services Contractors Fuel, Plumbing, HVAC Cleaning Services Moving & Storage Services Security Systems et al Private Businesses and Franchise Operations 2008 Ad $ (millions) TotalSpot TV Home Improvement Retailers4,2991,230 Home & Building Services1, GRAND TOTAL5,5771,568 Another $1.3 Billion of Ad Spend 25% share The Service Sector Has Recently Faltered $1.72 Source: TNS Media Intelligence 2006 vs vs vs 2007 H1 09 vs H1 08 Total Ad Spend Home Retailers+6.0%-3.0%-11.7%-23.8% Home Services %-4.7%-26.5% Spot TV Ad Spend Home Retailers+9.1%-2.5%-8.6%-28.8% Home Services+16.0%+6.7%-5.9%-31.2% Whats Happening? The # of advertisers has been growing modestly Nearly 18,000 in % of the spend goes to newspapers; 25% to Spot TV Top 5% of advertisers = 75% of total ad spend Over one-half of these larger advertisers use Spot TV Of these larger Spot TV advertisers, 1/3 rd were active in 5+ markets The long tail Outlook: Home Improvement Category Key Factors: When spending revives, how will consumers prioritize their deferred discretionary, big-ticket purchases? Consumer priority: maintenance or improvements? Housing market variables Sales of single-family homes Declining rates of home ownership Turning green into greenbacks Local Services Local Services Major Segments Total Ad SpendSpot TV Ad Spend Segment 2008 ($MM) H1 09 % Growth 2008 ($MM) H1 09 % Growth Medical Services1, % % Housing1, % % Events & Amusements 2, % % All Other2, % % CATEGORY AVG8, %1, % Source: TNS Media Intelligence Medical Services Nearly $2 billion in total annual ad spend Physicians; Hospitals & Clinics; Optical Services; Medical Study Recruitment Spending flat in 2007 & 2008; down 14% in H1 09 Spot TV and newspapers each have 25% of total spend Skewed towards DMAs 26+ Over 25,000 different advertisers in 2008 6,500 used Spot TV.and about 850 of these spent >$100k per year And 650 of the 850 were active in just 1-2 TV markets A broad mix hospitals, specialty clinics, research studies Outlook America is not getting healthier Continuation of an insurance-based medical system that is incentivized to provide revenue-generating treatments An increasingly crowded and competitive market of medical service providers A need for providers to establish competitive differentiation KEY AD CATEGORY TRENDS