OPENING REMARKS AND PRESENTATION OF THE OPENING REMARKS AND PRESENTATION OF THE RUSSIAN ADVERTISING MARKETRUSSIAN ADVERTISING MARKET

SERGEY VASILIEV,SERGEY VASILIEV,CEO – VIDEO INTERNATIONAL GROUPCEO – VIDEO INTERNATIONAL GROUP

EGTA’S ANNUAL EGTA’S ANNUAL MARKETING & SALES MARKETING & SALES

MOSCOW, 5 OCTOBER 2006MOSCOW, 5 OCTOBER 2006

VIDEO INTERNATIONAL GROUPVIDEO INTERNATIONAL GROUP

VIDEO INTERNATIONAL INCLUDES MEDIA-SELLING COMPANIESMEDIA-SELLING COMPANIES

THAT OCCUPY LEADING POSITIONS IN THE MAJOR ADVERTISING MEDIA MARKET SEGMENTS

WE ARE DOING BUSINESS IN RUSSIA AND THE CIS COUNTRIESRUSSIA AND THE CIS COUNTRIES

FOUNDED IN 19871987

VIDEO INTERNATIONAL IS A PRIVATELY OWNEDPRIVATELY OWNED COMPANY

ABOUT 3,000 STAFF IN 47 CITIES COVERING FIVE COUNTRIES 47 CITIES COVERING FIVE COUNTRIES

ANNUAL TRADE TURNOVER – MORE THAN $2 BILLION $2 BILLION

MEDIA ADVERTISING MARKET IN RUSSIA MEDIA ADVERTISING MARKET IN RUSSIA

RUSSIAN ADVERTISING MARKET AT A GLANCERUSSIAN ADVERTISING MARKET AT A GLANCE

ADVERTISING MARKET WAS EMERGED IN 1992

FOR RELATIVELY SHORT PERIOD THE AD MARKET EXPERIENCED SEVERAL STAGES, BEGINNING EMBRYONIC TO WELL DEVELOPING IN TERMS OF VOLUME, PLAYERS, SERVICES ETC.

ALMOST ALL MAJOR INTERNATIONAL ADVERTISERS AND LEADING AD MEDIA NETWORKS ARE OPERATED IN RUSSIA CURRENTLY

FOR THE MOMENT RUSSIAN ADVERTISING MARKET IS ONE OF THE FAST GROWING AD MARKETS IN THE WORLD

FOR THE LAST DECADE ADVERTISING HAS BECOME FOR THE LAST DECADE ADVERTISING HAS BECOME TRANSFORMED INTO A SUBSTANTIAL SECTOR OF RUSSIAN TRANSFORMED INTO A SUBSTANTIAL SECTOR OF RUSSIAN

AND GLOBAL ECONOMYAND GLOBAL ECONOMY

0

1000

2000

3000

4000

5000

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

DYNAMICS OF THE RUSSIAN MEDIA ADVERTISING MARKET,1992-DYNAMICS OF THE RUSSIAN MEDIA ADVERTISING MARKET,1992-2005, $ MLN.2005, $ MLN.

ADVERTISING MARKET AND ECONOMIC CRISESADVERTISING MARKET AND ECONOMIC CRISES

1390

660

1997 1999

RUSSIAN ADVERTISING MARKET CRISIS, $ MLN

TITANIC DROP - AD MARKETTITANIC DROP - AD MARKETDECREASED MORE DECREASED MORE

THAN TWICETHAN TWICE

THE CURRENT MEDIA ADVERTISING THE CURRENT MEDIA ADVERTISING MARKET IN RUSSIAMARKET IN RUSSIA

DYNAMICS OF THE RUSSIAN MEDIA ADVERTISING MARKET, DYNAMICS OF THE RUSSIAN MEDIA ADVERTISING MARKET, 2000-2006, $ MLN.2000-2006, $ MLN.

9401510

22402920

3910

5010

6400

2000 2001 2002 2003 2004 2005 2006

DYNAMICS OF THE RUSSIAN TV ADVERTISING, DYNAMICS OF THE RUSSIAN TV ADVERTISING, 2000-2006, $ MLN.2000-2006, $ MLN.

510920

1 2401 700

2 330

3150

270

2000 2001 2002 2003 2004 2005 2006

MEDIA ADVERTISING SPENDING BY SEGMENTS MEDIA ADVERTISING SPENDING BY SEGMENTS IN 2000-2006, %IN 2000-2006, %

20002000

TV 29%

RADIO 6%PRINT

48%

OUTDOOR ADS 18%

20020066

TV 49%

RADIO 6%

PRINT 25%

OUTDOOR ADS 18%

INTERNET 2%

PRICE GAP ON WELL DEVELOPED WESTERN EUROPEAN MARKETS IS PRICE GAP ON WELL DEVELOPED WESTERN EUROPEAN MARKETS IS ABOUT 1.5 (50%).ABOUT 1.5 (50%). RUSSIA HAS MOVING STEADILY IN THAT DIRECTION. RUSSIA HAS MOVING STEADILY IN THAT DIRECTION.

PRICE GAP ON WELL DEVELOPED WESTERN EUROPEAN MARKETS IS PRICE GAP ON WELL DEVELOPED WESTERN EUROPEAN MARKETS IS ABOUT 1.5 (50%).ABOUT 1.5 (50%). RUSSIA HAS MOVING STEADILY IN THAT DIRECTION. RUSSIA HAS MOVING STEADILY IN THAT DIRECTION.

х5х5

х5х5

х2.5

х2.5

х2.5

х2.5

VARIATION IN TV PRICES FOR LARGE VARIATION IN TV PRICES FOR LARGE AND MODEST ADVERISERS LESSENINGAND MODEST ADVERISERS LESSENING

2000 2001 2002 2003 2004 2005

LARGEST ADVERTISERS BUYING PREVIOUSLY HIGHEST POSSIBLE AIRTIME LARGEST ADVERTISERS BUYING PREVIOUSLY HIGHEST POSSIBLE AIRTIME VOLUMESVOLUMES

ON LOW PRICES DO NOT WANT TO LOSE DOMINANT MARKET POSITIONON LOW PRICES DO NOT WANT TO LOSE DOMINANT MARKET POSITION

TOP 10 ADVERTISERS

AVERAGE MARKET PRICE

50 ADVERTISERS BUYING AIRTIME ON MAXIMUM PRICE

RUSSIAN AD MARKET DYNAMIC GROWTHRUSSIAN AD MARKET DYNAMIC GROWTH

POST-CRISIS REVIVAL WAS INFLUENCED BY LOW STARTING LEVEL OF THE AD MARKET. IN 1999 AD EXPENDITURES PER PERSON WAS ABOUT $5

FURTHER DYNAMIC GROWTH WAS DEPENDENT ALSO ON HIGH POTENTIAL OF CONSUMER MARKET AS WELL AS POSITIVE PERSPECTIVES OF ECONOMY IN GENERAL

MAJOR GLOBAL ADVERTISERS READILY REINFORCED ACTIVITIES USING AGGRESSIVE MARKETING STRATEGIES

LEADING RUSSIAN COMPANIES WERE ABLE TO CONDUCT LARGE-SCALE AD CAMPAIGNS, ESPECIALLY ON TV

RUSSIAN AD MARKET HAS BEEN WELL DEVELOPED IN TERMS OF PERSONNEL, ADVANCED CLIENT SERVICES, INTERNATIONALLY ADOPTED RESEARCH MEASUREMENT

LIBERAL MARKET POLICY AND GRADUAL IMPROVEMENT OF MACRO-ECONOMIC

INDICATORS INCREASE THE COUNTRY INVESTMENTS ATTRACTION

IT BRINGS ANNUAL 30-50% INCREASE OF ADVERTISING IT BRINGS ANNUAL 30-50% INCREASE OF ADVERTISING EFFECTIVE EFFECTIVE

DEMAND AND DYNAMIC GROWTH RATE OF THE MARKETDEMAND AND DYNAMIC GROWTH RATE OF THE MARKET

RUSSIAN ADVERTISING MEDIA MARKET IN INTERNATIONAL RUSSIAN ADVERTISING MEDIA MARKET IN INTERNATIONAL CONTEXT CONTEXT

RUSSIA AND THE EUROPEAN ADVERTISING MARKETRUSSIA AND THE EUROPEAN ADVERTISING MARKET

RANK COUNTRYADVERTISING EXPENDITURE (BILLION US$ AT CURRENT PRICES)

1991 1996 2001 2002 2003 2004 2005

1 GERMANY 14,3 18,2 20,8 19,0 18,0 18,5 19,0

2 UNITED KINGDOM 8,9 12,3 16,6 16,6 17,0 17,9 18,7

3 FRANCE 8,0 8,4 10,9 10,8 10,8 11,2 11,5

4 ITALY 5,0 5,8 8,8 8,5 8,8 9,4 10,0

5 SPAIN 5,3 4,1 6,2 6,1 6,3 6,6 6,9

6 RUSSIA* … 1,0 1,5 2,2 2,9 3,9 5,07 NETHERLANDS 2,3 3,2 4,3 4,2 3,9 3,8 3,9

8 POLAND 2,0 0,6 2,5 2,7 2,9 3,1 3,3

9 BELGIUM 1,0 1,3 2,0 2,2 2,4 2,8 3,1

10 GREECE 0,33 1,0 2,1 2,3 2,5 2,8 2,9

11 SWITZERLAND 2,4 2,5 3,1 2,8 2,7 2,7 2,8

12 AUSTRIA 1,0 1,4 2,1 2,1 2,2 2,2 2,3

13 NORWAY 0,46 1,3 1,8 1,9 1,9 2,0 2,1

SOURCE: ZENITHOPTIMEDIA - ADVERTISING EXPENDITURE FORECAST, * - THE RUSSIAN ASSOCIATION OF COMMUNICATION AGENCIES

RUSSIA AND THE WORLD ADVERTISING MARKETRUSSIA AND THE WORLD ADVERTISING MARKET

SOURCE: ZENITHOPTIMEDIA - ADVERTISING EXPENDITURE FORECAST, * - THE RUSSIAN ASSOCIATION OF COMMUNICATION AGENCIES

RANK COUNTRYADVERTISING EXPENDITURE (BILLION US$ AT CURRENT PRICES)

1991 1996 2001 2002 2003 2004 20051 USA 82,2 104,9 147,2 149,8 152,3 161,5 168,0

2 JAPAN 37,2 37,7 38,9 36,3 36,2 37,9 38,7

3 GERMANY 14,3 18,2 20,8 19,0 18,0 18,5 19,0

4 UNITED KINGDOM 8,9 12,3 16,6 16,6 17,0 17,9 18,7

5 FRANCE 8,0 8,4 10,9 10,8 10,8 11,2 11,5

6 ITALY 5,0 5,8 8,8 8,5 8,8 9,4 10,0

7 CHINA 0,3 2,5 5,1 6,3 7,7 8,7 9,7

8 SOUTH KOREA 2,0 4,5 5,3 6,3 6,6 7,1 7,6

9 SPAIN 5,3 4,1 6,2 6,1 6,3 6,6 6,9

10 CANADA 3,7 4,2 5,6 5,8 6,0 6,3 6,5

11 AUSTRALIA 3,0 3,9 4,9 5,0 5,4 5,8 6,1

12 RUSSIA* … 1,0 1,5 2,2 2,9 3,9 5,013 BRAZIL 2,5 6,0 4,0 3,3 3,7 3,9 4,2

14 NETHERLANDS 2,3 3,2 4,3 4,2 3,9 3,8 3,9

15 MEXICO … 1,8 3,6 3,6 3,4 3,5 3,6

ADVERTISING EXPENDITURE PER CAPITA 2005, ADVERTISING EXPENDITURE PER CAPITA 2005, (US $, EXCL VAT)(US $, EXCL VAT)

RUSSIA EASTERN EUROPE

WESTERN EUROPE

JAPAN USA

OF THE COUNTRY POPULATION

OF THE URBAN POPULATION

90

250300

565

2943

RUSSIARUSSIA EASTERN EASTERN EUROPEEUROPE

WESTERN WESTERN EUROPEEUROPE

LATIN LATIN AMERICAAMERICA

CPT ON THE NATIONAL TELEVISION INCPT ON THE NATIONAL TELEVISION IN 2005, 2005, $$ ( (EXCL VATEXCL VAT))

1,31,3

7,0-9,07,0-9,0

2,5-3,02,5-3,02-2,52-2,5

RUSSIA AND LATIN AMERICA - THE URBAN POPULATION, RUSSIA AND LATIN AMERICA - THE URBAN POPULATION, WESTERN AND EASTERN EUROPE - THE COUNTRY POPULATIONWESTERN AND EASTERN EUROPE - THE COUNTRY POPULATION

RUSSIARUSSIA EASTERN EASTERN EUROPEEUROPE

USAUSALATIN LATIN AMERICAAMERICA

RATIO OF ADVERTISING BUDGETSRATIO OF ADVERTISING BUDGETSTO RETAIL SALES VOLUME IN TO RETAIL SALES VOLUME IN 20052005, %, %

22,,66

77.0.0

4-54-533--44

FORECAST OF THE RUSSIAN MEDIA ADVERTISING MARKET DEVELOPMENT FORECAST OF THE RUSSIAN MEDIA ADVERTISING MARKET DEVELOPMENT TOTO 2010 2010

THE FORECAST OF THE RETAIL SALES TURNOVER IN RUSSIA IN 2005-2010, $ BLN. THE FORECAST OF THE RETAIL SALES TURNOVER IN RUSSIA IN 2005-2010, $ BLN.

0

50

100

150

200

250

300

350

2005 2006 2007 2008 2009 2010

nonfood commodity sales food commodity sales

SOURCE: ‘RENAISSANCE CAPITAL’ IC

BY 2010, THE RETAIL SALES TURNOVER WILL INCREASE BY 126% 126%BY 2010, THE FOOD COMMODITY SALES VOLUME WILL DOUBLE DOUBLE

28,1

2

29,1

7

31,3

2

30,6

9

28,8

1

28,2

9

27,1

5

26,5

0

26,0

0

25,5

0

25,0

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

VARIATION OF ROUBLE / US DOLLAR EXCHANE RATEVARIATION OF ROUBLE / US DOLLAR EXCHANE RATE

FORECAST OF THE RUSSIAN MEDIA ADVERTISING MARKET DEVELOPMENT FORECAST OF THE RUSSIAN MEDIA ADVERTISING MARKET DEVELOPMENT TOTO 20 201100, , $$ MLN.MLN.

5 0006400

77009000

10300

11700

2005 FACT 2006 2007 2008 2009 2010

+28+28%%

+15+15%%

+28+28%%

+21%+21% +17+17%%

+13+13%%

ANNUAL GROWTHANNUAL GROWTH

FORECAST OF THE RUSSIAN MEDIA ADVERTISING MARKET BY SEGMENTS TOFORECAST OF THE RUSSIAN MEDIA ADVERTISING MARKET BY SEGMENTS TO 20 201100,, $$ MLN.MLN.

MEDIAMEDIA 20052005 factfact

20062006 20072007 20082008 20092009 20102010

TELEVISIOTELEVISIONN

2330 3 150 3 950 4 850 5 750 6 650

RADIORADIO 300 370 440 500 550 600

PRINTPRINT 1390 1 600 1 800 1 950 2 070 2 210

OUTDOOROUTDOOR 910 1 150 1 300 1 370 1 440 1 510

INTERNETINTERNET 60 100 160 250 370 550

OTHERSOTHERS 20 30 50 80 120 180

TOTALTOTAL 5 0105 010 6 4006 400 7 7007 700 9 0009 000 10 30010 300 11 70011 700

MEDIA ADVERTISING SPENDING BY SEGMENTS MEDIA ADVERTISING SPENDING BY SEGMENTS IN 2005-2010, %IN 2005-2010, %

202010 FORECAST10 FORECAST2002005 FACT5 FACT

TV 47%

RADIO 6%

PRINT 28%

OUTDOOR ADS 18%

INTERNET 1%

TV 57%

RADIO 5%

PRINT 19%

OUTDOOR ADS 14%

INTERNET 5%

FORECAST OF THE TELEVISION ADVERTISING FORECAST OF THE TELEVISION ADVERTISING EFFECTIVE DEMAND GROWTH TO 2010, EFFECTIVE DEMAND GROWTH TO 2010,

$ MLN. (INCL$ MLN. (INCL VAT), % VAT), %

6650

5750

48503950

31502 330

2005 FACT 2006 2007 2008 2009 2010

+37+37%%

+19+19%%

+35+35%%

+25%+25% +23+23%%

+16+16%%

ANNUAL GROWTHANNUAL GROWTH

RUSSIAN BROADCASTING STRUCTURERUSSIAN BROADCASTING STRUCTURE

STRUCTURE OF AD BLOCKS ON FEDERAL TV CHANNELSSTRUCTURE OF AD BLOCKS ON FEDERAL TV CHANNELS

BROADCASTING IS DISTRIBUTED BY TIME ZONES

BROADCASTING IN EACH CITY IS CARRIED OUT THROUGH A CITY’S TELEVISION RELAY

TV CHANNEL BROADCASTING IN DIFFERENT CITIES INCLUDES ‘REGIONAL WINDOWS’ TO BROADCAST LOCAL PROGRAMS AND ADS

MOSCOW

CITY NA BLOCK OF ADS

PROGRAM PROGRAMFILM, SHOW, ETC.NATIONALAD SPOTS

MOSCOWAD SPOTS

CO

MM

ER

CIA

L

CO

MM

ER

CIA

L

CO

MM

ER

CIA

L

CU

TO

FF

PROGRAM PROGRAMFILM, SHOW, ETC..NATIONALAD SPOTS

REGIONALAD SPOTS

CO

MM

ER

CIA

L

CO

MM

ER

CIA

L

CO

MM

ER

CIA

L

CU

TO

FF

MAJOR TRENDS INMAJOR TRENDS IN 2006-20 2006-201100

DRAMATIC INCREASE IN PRICES FOR TELEVISION ADVERTISING

ADVERTISERS WILL OPTIMIZE THEIR EXPENDITURE TO GET THE BEST RETURN OF INVESTMENT. ADS PURCHASE SCHEMES WILL BECOME MORE COMPLICATED

THROUGH THE USE OF MORE IMPACTFUL CREATIVE MESSAGES AND SELECTIVE

TARGETTING ADVERTISERS WILL ATTEMPT TO BE MORE COMPETITIVE

INTERNET ADVERTISING WILL SKYROCKET

TV AD MARKET BECOMES MORE COMPLICATED. ADVERTISERS STRIVE TO ENHANCE IMPACT THROUGH THE OPTIMISATION OF NATIONAL AND REGIONAL TV CAMPAIGN TARGETTING

THANK YOU THANK YOU FOR ATTENTION!FOR ATTENTION!

25, AKADEMIKA PAVLOVA ST., 121359 MOSCOW, RUSSIA TEL.: +7 (495) 234-4400, FAX: +7 (495) 737-5006, E-MAIL: PR@VI.RU