Key Category Trends

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Key Category Trends
Jon Swallen TNS Media Intelligence Sept. 6, 2007
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TNS Media IntelligenceWhat We Do

• Leading provider of strategic advertising and
  marketing information toU.S. advertisers,
  agencies and media properties
• Competitive intelligence across 20 media
• Monitoring the industry
• 2.8 million brands
• 150 billion in ad expenditures
• 190 million ad occurrences(400,000 occurrences
  collected every day)

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Todays Agenda

• An economic focus centered on ad expenditures
• Spending levels
• Media allocation where the money is going
• Select, high-value categories
• Key segments and advertisers

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Methodology

• All of the ad expenditure figures were pulled
  from the TNS MI database
• Internet spending reflects display advertising
  only search not included
• For 2007, actual figures from January-May were
  used
• The notation 2007 (e)
• An estimate developed by applying Jan-May 2007
  growth rates to year-end 2006 actuals

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Automotive
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Automotive CategoryDefinition

• INCLUDED
• Passenger cars and light trucks
• Manufacturers, dealer associations, local dealers
• EXCLUDED
• Motorcycles, mobile homes and RVs
• Commercial vehicles
• Aftermarket accessories, equipment, services

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Background

• Stagnant sales
• Domestic manufacturers losing market share
• Attempting to reduce cost structure
• 7 consecutive quarters of declining advertising
  spend
• Falling ratio of ad spend to unit sales
• Still the 1 ad category 11 of total measured
  ad spend

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Auto AdvertisingA 3 Year Slump
1.72
Source TNS Media Intelligence
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All Segments Are In Decline
Source TNS Media Intelligence
10
Total Nameplate Spending Change Jan-May 2007
vs. Year Ago
Source TNS Media Intelligence
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Where Is The Money Going?

• Big Losers
• Newspaper spending off 35 from 2005 levels
• Smaller Losers (comparatively)
• National TV losses are widening
• Spot TV falling back in 07
• Magazine spending has stabilized after the
  2005-06 cutbacks
• Radio - a steadily leaking bucket
• Winners
• Internet display spending up 177 from 2005 levels

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Share of Spend ScorecardPoint Change 2007 (e)
vs. 2005
Source TNS Media Intelligence
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The Media Mix Has Shifted
10.8
25.9
10.1
32.2
21.8
25.6
25.7
24.8
19.16 Billion
16.51 Billion (est)
Source TNS Media Intelligence
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Spot TV Gaining Dealer Share
11.3
11.8
16.4
20.0
62.1
68.6
5.62 Billion
4.72 Billion (est)
Source TNS Media Intelligence
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Recap

• A bloody mess
• A 3 billion hit
• Newspapers and TV had the most to lose..and did
• It cant get any worse..can it?

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Financial
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Financial Advertising - 11.93 billion in 2006Up
43 From 2003
Source TNS Media Intelligence
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Auto InsuranceBackground

• Fragmentation
• Concentration
• State Farm Allstate Progressive GEICO
  43 share of market
• Short purchase cycle
• 15-25 billion in churn annually
• A price-driven marketplace
• Advertisings role build/maintain awareness and
  recognition

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Auto Insurance AdvertisingNearly Trebled Since
2003
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Category Spending Is Concentrated
Source TNS Media Intelligence
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Spending Concentrated Among Top 4 Companies
Source TNS Media Intelligence
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Growth Continuing Into 2007January-May YTD
7.3
Source TNS Media Intelligence
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Where Is The Money Going?

• TV share of category spend holding steady at
  75-80
• Split between national and spot TV varies by
  company
• Radio has 8-10 share
• Internet display has 3-5 share
• Would be considerably higher if search were
  measured and included

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48.8
35.5
61.3
15.0
1.14 billion in spend
417 million in spend
Source TNS Media Intelligence
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Top Brands Pursue Different Media Mixes2006 vs.
2003
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Recap

• Auto insurance hot category but presently
  running a bit cooler
• 30 growth rates are not sustainable
• Fierce competition among 4 national brands
  which is sustainable
• Allstate, GEICO, Progressive, State Farm
• National TV still the preferred medium
• Allocations beginning to evolve as top brands
  seek to maintain consumer awareness and achieve
  competitive differentiation

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Telecommunications
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Background

• Shifting terrain
• Mergers and consolidation
• Convergence and competition
• Wireless penetration growth is subsiding

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A Downturn in 20072006 Levels Inflated by ATT
9.9
-5.6
1.5
12.3
1.72
Source TNS Media Intelligence
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Segment Definitions
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Wireless Still AdvancingOther Segments Lagging
32

Source TNS Media Intelligence
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Source TNS Media Intelligence
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Where Is The Money Going?

• Increased category spend has been
  disproportionately allocated towards national TV,
  leading to share gains
• Newspaper dollars have been flat, leading to
  share loss
• Internet display budgets holding steady at 8 of
  category spend
• Expanding faster among the Top 3 advertisers
• Spot TV spending has been comparatively more
  robust among the mid-size advertisers

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Source TNS Media Intelligence
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of Budget Allocated To Major MediaSelect
Telecom Segments Jan-May 2007
Source TNS Media Intelligence
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National Chain Restaurants
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Background

• A slow-growth, highly competitive industry
• Industry sales growing at low single-digit rates
• More than 350 advertised brands in 2006
• Fresh concepts and new product offerings
• Health and nutrition

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National RestaurantsModest Growth Rate
1.72
Source TNS Media Intelligence
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National Restaurants
100 4.75 Billion
Source TNS Media Intelligence
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Top 10 Advertisers2006 Rankings In Parentheses
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Increasing Budgets
Source TNS Media Intelligence
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Where Is The Money Going?

• TV the medium of choice for all the top chains
• National TV extending its share-of-market lead
  over Spot TV
• QSR and Casual Dining have different splits
  between National and Spot TV
• Radio share holding steady at around 9-10
• But slipping within some segments
• Other media are minor players in this category

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Spending AllocationCasual Dining vs. QSR
3.00 Billion (est)
1.07 Billion (est)
Source TNS Media Intelligence
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Share of Budget National vs. Spot TVSelect
Advertisers Jan-May 2007
Source TNS Media Intelligence
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Share of Budget National vs. Spot TVSelect
Advertisers Jan-May 2007
Source TNS Media Intelligence
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Recap

• A 4.8 billion category dominated by TV
  advertising
• Budgets at most of the large chains are currently
  flat or down
• Large budget QSRs devote smaller share of spend
  to national TV than the casual dining restaurants
  with their mid-size budgets

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Motion Pictures
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Background

• Welcome to the digital revolution
• Traditional revenue streams being challenged
• Can Hollywood adapt?
• Advertising tactics largely unchanged
• Reach early, frequency late
• Thursday night fever

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Ad Spend Lagging Box Office
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Wheres The Money Going?
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Department Stores
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Background

• Industry sales in decline since 2000
• Mergers and consolidation
• Ad budgets moving towards national media

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Source U.S. Census Bureau
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Department StoresAd Spending Also Stagnant
1.72
Source TNS Media Intelligence
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6 Holding Companies 80 Share of Spend
Source TNS Media Intelligence
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Expansion.
Sources TNS Media Intelligence Company annual
reports
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Contraction
Note Macys data are pro-forma and encompass the
continuing operations of the former Federated and
May companies.. Sears data are pro-forma and
include the Sears and K-Mart divisions.
Sources TNS Media Intelligence Company annual
reports
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Where Is The Money Going?

• Newspapers maintaining a plurality share of
  spend but its shrinking
• Money is shifting into national media both TV
  and magazines
• Macys Target Kohls
• Internet display still accounts for less than 5
  of budgets

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Sources TNS Media Intelligence
Kmart-Sears merger March 2005 Federated-May
merger Aug 2005
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Recap

• Anemic performance
• Mergers lead to consolidation of brands and ad
  budgets
• Pronounced shift from local media to national
  media

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Wrap Up
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Where The Money Is
Source TNS Media Intelligence