METHODOLOGY FOR BORRELL DATA

Borrell Methodology11/30/2011

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The Borrell Ad Spend Model

Under continuous development since 1984

NAA Lifetime Achievement Award to chief architect Kip Cassino, Executive Vice-President

In long-term use by major media companies

Advertiser-centric rather than media-centric

Bottom-up rather than top-down

Based on multiple sources

…measuring ad spending would be easy

If the world had only one market…

If the world only had one market…

…markets are all over the place.

Unfortunately…

If the world only had one market…

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Ad spending generated in a market…

…may go anywhere. Ad spending from any other market may end up in the market you’re trying to measure.

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How we do it…

Borrell separates ad spending that’s coming in from ad spending going out…

So, we can measure:• Ad spending generated in a market.• Ad spending directed to a market

from someplace else.• Ad spending generated and spent

locally.

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We start with two databases…

#1 - Estimates ad spending by more than 20 millionUS companies

#2 - Estimates receipts for all US Media Companies

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At the National Level…

1 = 2 !That is, total US ad spending

must equaltotal receipts for USmedia companies.

=

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Database 1 (Spending) Sources…

Dun & Bradstreet (updated quarterly) IRS The Postal Service Annual reports & 10K’s More than 40 additional secondary sources (magazines, association reports, surveys, articles), including – Editor & Publisher, Advertising Age, etc.

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We don’t stop here!

Every company’s spending estimate is modified to fit specific markets in

two ways.

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Two Modifications

First, every estimate is altered to fit the media demand pattern

of its specific market,using data from:

Nielsen, Scarborough, Demographics Now, Claritas and

other sources.

Second, the estimates are not expressed as percent of revenue…but as Per Employee ad expenditures.

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In general ad spending increases as businesses get

larger…

…the per employee percentage of ad spending actually drops.

Each SIC has its own distinct pattern. We measure and

account for that.

But…

Employees are key!

%$

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Database 2 (Receipts) Sources…

Dun & Bradstreet Annual reports & 10K’s More than 40 additional secondary sources (magazines, association reports, surveys, articles), including –

NAA RAB DMA TVB IAB YPPAMedia Week, OMMA, Advertising Age , Our own survey of media company revenues with 4,800+ companies represented.

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Comparisons Made

Each media estimate is compared to other sources (including McCann Erickson, Veronis Suhler, Jupiter, Forrester and others) to insure accuracy.

When discrepancies are found, that are not due to methodology or definitions, the estimates are re-computed.

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Once the two databases agree…

… the resulting estimates (by SIC and media choice) are

distributed to all US counties.

Distribution to counties is a three-step procedure:

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Once the two databases agree…

Step 1: Allocation

Media estimates are allocated to each county

using the weighted values of several variables,

including:• households• retail sales

• median income• gross regional product

• population• median age

Step 2: Replacement

Whenever possible, allocated estimates are

replaced by actual known information. Typically, about

25% of the estimates are

replaced.

Step 3: RecalculationAfter replacement,

the sum of the estimateswill no longer foot to the

originalnational totals.

So, all un-replaced estimates are

indexed and recalculated.

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To complete a market estimate, we must return to Database 1 – Ad spending estimates for every

US business.

Not yet!

All of our work so far has produced estimates of ad spending directed to each market. We still don’t know how much is local.

Is it Soup yet?

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Estimates fromDatabase 2

The first contains the ad spending generated in the measured market.

The second contains ad spendingdirected to the market.

3 21

Think of three Glasses…

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The contents of both must be “poured”…

…into the third glass – which represents ad spending in the measured market.

…poured into one

3

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For some media, the contents of thefirst two glasses will not fill the

third. More ad spending must be

“imported” to make up the difference.

Imports

3

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For some media, the contents of the first two glasses will more than fill the

third. The ad spending “overflow”

must be “exported” to other markets.

Exports

3

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The Formula is Simple

Ad Spending generated in a market(Database #1)

- “Exports”

+ “Imports”

MUST = Ad Spending directed to a market

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• Used by many of the nation’s largest Media Companies for years.

• Used by Advo, TV networks, ad agencies, telecommunications companies…

• Has shown to be accurate to within 3-5 percent In markets where

we can get “on the ground” evidence.

• According to Booz Allen: “Only methodology that could work.”

How good is the Result?

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What they’re saying….

“Accurate enough to be actionable”− Borrell client

“Solid guidance on scale and direction”− Another Borrell client

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Our Model in Action - Examples

Political Ad Spending Borrell Projected $20 million Competitors projected $75 million Actual was $19.5 million

Directories Projected decline of yellow pages of 37% Competitors had it at 7% Later projections pegged it closer to 35%

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Thanks!

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