Advertising Spending: Online and Ofﬂine Spending Forecasts in the US and Globally,Along with the Latest Data on Cross-Media Integration

July 2003

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Table of Contents 3 Methodology 7

The eMarketer Difference 8

The Beneﬁts of eMarketer’s Aggregation Approach 9

“Benchmarking” and Projections 9 I Measuring the Money: Last Year’s Perspective 11 II US Online Ad Spending 17

A. Comparing Online with Ofﬂine 18

B. Online Spending Yesterday & Today: 2000 to 2003 20

Quarterly Reports 25

Online Advertising: Industries & Companies 26

C. AOL: How It Skews Online Ad Spending Figures 37

D. Online Spending Trends: 2000 to 2006 44

E. Online Forecasts: Methodologies Analyzed 55

F.Online Ad Format Spending 58

Banner Ads 62

Online Sponsorship 63

Search Advertising 64

Online Classiﬁed Ads 66

Rich Media 67

Interstitials & Pop-Up Ads 68

E-Mail Advertising 69

G. Plans for Online Ad Spending 70

H. Pricing Models, Pricing Trends 78

Transaction Types 86

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III US Ofﬂine Ad Spending 89

A. Spending Plans for Total Media 90

B. Total Media Spending 92

C. The Ofﬂine Ad Market 98

By Media 99

By Industry & Advertiser 104

Promotion Spending 109

Hispanic Market Spending 110

D. Broadcast Spending 112

E. Print Spending 116

F.Other Ofﬂine Spending 121 IV Cross-Media Trends 125

A. Attitudes Toward Cross-Media Advertising 126

B. Media Measurement: Apples to Apples? 133

Cross-Media Metric Tools 143

C. Cross-Media Optimization 147

D. Four More Cross-Media Scenarios 157

American Airlines 158

Subaru 160

Oscar Mayer 162

Planters Peanuts 164

E. Cross-Media: Driving Trafﬁc Online 168

F.Consumer Media Consumption 172 V Global Advertising Spending 177

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A. Internet Ad Spending: Worldwide & Regional 180

B. Total Ad Spending: Worldwide & Regional 186

Regional Marketing 189

C. Canada 192

Total Media Spending: Canada 194

D. Europe 198

Total Media Spending: Europe 202

United Kingdom 205

Germany 210

France 213

Italy 216

Spain 219

Russia 221

E. Asia-Paciﬁc 224

Total Media Spending: Asia-Paciﬁc 226

Japan 228

Australia 232

F.Latin America 234

Total Media Spending: Latin America 236 Index of Charts 237

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July 2003

Welcome to eMarketer

Dear Reader:

David Hallerman The Advertising Spending report from eMarketer provides marketing, media, ad agency, and business Senior Analyst, eMarketer professionals with a wide-ranging analysis of possibly the most compelling topic for the advertising [email protected] industry: money. Whether online or offline, there’s an ongoing fascination with advertising spending eMarketer, inc. 821 Broadway patterns and predictions. In fact, even though projecting these various numbers merely creates moving New York, NY 10003 targets, they all point upward in 2003 and the three years ahead. T: 212.677.6300 F: 212.777.1172 With more than 40 of eMarketer’s unique, cross-researcher, comparative estimate charts for spending areas such as online, television, newspaper, and global advertising, the Advertising Spending report examines the causes behind spending downturns the past couple of years, and why increased spending is not just on the horizon but already here. In addition to an array of nearly 300 charts and accompanying analysis, Advertising Spending offers a full range of related topics, such as: scenarios for better budget allocation in cross-media campaigns, how traditional metrics make evaluating online advertising more effective, spending plans among advertising executives, pricing models for online ads, and an exclusive in-depth examination of which ad formats researchers include in their online spending projections and what are the varying methodologies behind those numbers. Note that Advertising Spending is part three of three interrelated eMarketer reports focusing on advertising and marketing. The other two reports are: Online Advertising Essentials: What Marketers Need to Know About Online Audiences, Dayparts, Branding, Direct Response, Context, Advertisers and Publishers Online Advertising Tactics: Trends, Stats and Best Practices for Using Banners, Rich Media, Search, Sponsorships, E-Mail, Classifieds and More In the pages ahead, you’ll find statistics, lists, and detailed information that can help you develop business and marketing plans, create presentations, answer questions from clients or management and make critical decisions about ventures that affect all aspects of your company’s marketing operations. Like all eMarketer reports, Advertising Spending presents statistical information aggregated from a broad range of authoritative research sources, totaling 50 in all in this report. The data and analysis provide anyone working in nearly any enterprise with the answers they need, in an easy-to-search format. If you have any questions or comments concerning eMarketer or any of the material in this report, please call, fax or e-mail us.

David Hallerman Senior Analyst

Written by David Hallerman

Also contributing to this report: Reuse of information in this document, without prior authorization, Yael Marmon, director of research is prohibited. If you would like to license this report for your Tracy Tang, researcher organization, please contact David Iankelevich at David Berkowitz, senior editor [email protected], or 212.763.6037. Allison Smith, senior editor Kwanza Osajyefo Johnson, data entry associate Dana Hill, production artist

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Methodology 7 The eMarketer Difference 8 The Beneﬁts of eMarketer’s Aggregation Approach 9 “Benchmarking” and Projections 9

I Measuring the Money: Last Year’s Perspective 11

II US Online Ad Spending 17

III US Ofﬂine Ad Spending 89

IV Cross-Media Trends 125

V Global Advertising Spending 177

Index of Charts 237

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Methodology eMarketer’s approach to market research is founded on a philosophy of Measuring the Money: Last Year’s Perspective aggregating data from as many different sources as possible. Why? Because US Online Ad Spending there is no such thing as a perfect research study and no single research US Ofﬂine Ad Spending source can have all the answers. Moreover, a careful evaluation and Cross-Media Trends weighting of multiple sources will inevitably yield a more accurate picture Global Advertising Spending

Index of Charts than any single source could possibly provide.

The eMarketer Difference eMarketer does not conduct primary research, it therefore has no testing technique to defend, no research bias and no client contracts to protect. eMarketer prepares each market report using a four-step process of aggregating, ﬁltering, organizing and analyzing data from leading research sources worldwide.

Aggregate

Analyze Filter

Organize

Using the Internet and accessing a library of electronically-filed research reports and studies, the eMarketer research team first aggregates publicly available e-business data from hundreds of global research and consultancy firms. This comparative source information is then filtered and organized into tables, charts and graphs. Finally, eMarketer analysts provide concise and insightful analysis of the facts and figures along with their own estimates and projections. As a result, each set of findings reflects the collected wisdom of numerous research firms and industry analysts.

“I think eMarketer reports are extremely useful and set the highest standards for high quality, objective compilation of often wildly disparate sources of data. I rely on eMarketer’s research reports as a solid and trusted source.” — Professor Donna L. Hoffman, Co-Director, eLab, Vanderbilt University

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Methodology The Beneﬁts of eMarketer’s Aggregation Measuring the Money: Last Year’s Perspective Approach US Online Ad Spending

US Offline Ad Spending Objective: information is more objective than that provided by any single Cross-Media Trends research source Global Advertising Spending Comprehensive: gathered from the world’s leading research firms, Index of Charts consultancies and news organizations Authoritative: quoted in leading news publications, academic studies and government reports All in one place: easy to locate, evaluate and compare Readily accessible: so you can make quick, better-informed business decisions Above the hype: accurate projections that business people can use with confidence Time saving: there’s no faster way to find Internet and e-business stats, online or off Money saving: more information, for less, than any other source in the world

“Benchmarking” and Projections Until recently, anyone trying to determine which researcher was most accurate in predicting the future of any particular aspect of the Internet did not have a definitive source with which to do this. For instance, over 10 firms predicted e-commerce revenues for the fourth quarter 1998 online holiday shopping season, and yet no single source could be identified after the fact as having the “correct” number. In the Spring of 1999, however, the US Commerce Department finally began measuring e-commerce B2C activity so business people and others could have a benchmark with which they could compare and evaluate projections. eMarketer has adapted its methodology to recognize that certain government and other respected, impartial sources are beginning to provide reliable numbers that can be consistently tracked over time. Most of these established sources, however, only measure past results; typically, they do not make predictions.

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Methodology Today, eMarketer formulates its essential e-business numbers by first Measuring the Money: Last Year’s Perspective identifying the most established, reputable source for a given sector being US Online Ad Spending measured and then adopting that organization’s figures as benchmarks for US Offline Ad Spending the historical/current period. For instance, eMarketer’s US Internet user Cross-Media Trends figures will be based on a combination of the most recent data from the US Global Advertising Spending

Index of Charts Census Bureau and the International Telecommunication Union. Using this data as the benchmark for 2000 and 2001, eMarketer will make projections for subsequent years based on the following factors: a comparative analysis of user growth rates compiled from other research ﬁrms additional benchmark data from Internet rating ﬁrms, e.g., Nielsen//NetRatings, comScore Media Metrix, which use panels to measure Internet user activity on a weekly and monthly basis an analysis of broader economic, cultural and technological trends in the US Similarly, US e-commerce revenues are being “benchmarked” using historical data from the US Department of Commerce, and broadband household and penetration rate forecasts are being built off baseline data from the Organization for Economic Cooperation and Development (OECD). Through this benchmarking process, eMarketer will be holding itself – and its projections – accountable.

“When I need the latest trends and stats on e-business, I turn to eMarketer. eMarketer cuts through the hype and turns an overabundance of data into concise information that is sound and dependable.” — Mark Selleck, Business Unit Executive, DISU e-business Solutions, IBM

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Methodology 7 I Measuring the Money: Last Year’s Perspective 11

II US Online Ad Spending 17

III US Ofﬂine Ad Spending 89

IV Cross-Media Trends 125 I V Global Advertising Spending 177 Index of Charts 237

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Methodology Like Cuba Gooding Jr.’s Oscar-winning character in the 1996 movie “Jerry Measuring the Money: Last Year’s Perspective Maguire,” most people in the advertising business are now crying, “Show US Online Ad Spending me the money!” In the case of advertising, the money shows itself in the US Ofﬂine Ad Spending industry’s ongoing fascination with spending patterns and predictions. But Cross-Media Trends those numbers are merely moving targets, and the various analysts who try Global Advertising Spending

Index of Charts to hit those targets seldom land dead center. Before examining the comparative estimates chart for US online advertising from July 2002’s perspective, let’s briefly summarize the spending statistics as of July 2003. According to the latest research from the Interactive Advertising Bureau and PricewaterhouseCoopers—which eMarketer uses as its benchmark—Internet ad revenues for 2002 hit $6.01 billion, representing a 15.8% drop from 2001’s spending figures. (You’ll find a great deal more current and future Internet ad spending data in the next chapter, “US Online Ad Spending.”) Just one year ago, however, much of the perspective on Internet ad spending saw 2001 as the aberration after the burst of the Internet bubble, with a bounce-back imminent. In last year’s estimates, of the 15 researchers with spending projections for 2002, only four came close to the final figure of $6.01 billion (when close is defined as within a half-billion dollars): Forrester Research, J.P. Morgan, Morgan Stanley, and Salomon Smith Barney.

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Methodology Several other researchers, including eMarketer, felt that 2001’s spending Measuring the Money: Last Year’s Perspective slump was only a temporary setback, reasoning that the ongoing US Online Ad Spending proliferation of Internet users and increased usage among them would lead US Ofﬂine Ad Spending to a resurgence in advertising spending. While that logic did, and still does, Cross-Media Trends hold, what wasn’t factored enough into the equation last year was illogic— Global Advertising Spending

Index of Charts the fears raised by the double whammy of the seemingly discredited Internet (as an advertising vehicle) and by an economy whiplashed by terrorism, deﬁcit spending, and a rapidly declining stock market.

Comparative Estimates from July 2002: US Online Advertising Spending, 2000-2005 (in billions) 2000 2001 2002 2003 2004 2005 Adams Media Research, May 2001 $7.0 $7.6 $9.0 $10.6 $12.4 $14.1 CMR**, August 2002 $2.8 $2.5 – – – – eMarketer*, July 2002 $8.2 $7.2 $7.9 $8.8 $10.6 $12.7 Forrester Research, October 2001 $7.4 $6.0 $6.3 – – $30.7 GartnerG2, December 2001 – $7.9 $11.4 $14.7 $17.2 $18.8 Goldman Sachs, December 2001 $8.2 $7.4 $7.7 – – – J.P. Morgan, September 2002 – $7.2 $6.4 $6.9 $7.7 $8.3 Kagan World Media, December $8.5 $6.4 $7.0 $7.9 $8.9 $10.1 2001 Merrill Lynch, September 2001 $6.9 $6.5 $7.3 – – – Morgan Stanley, November 2001 $7.4 $5.7 $5.7 – – – Myers Group, July 2002 $4.3 $4.3 $4.5 $5.1 $6.5 $7.5 Salomon Smith Barney, September $6.3 $5.9 $6.5 – – – 2001 Universal McCann, July 2002 $6.5 $5.8 $5.5 – – – Veronis Suhler, July 2002 $8.2 $7.3 $7.6 $7.9 $8.4 $8.9 Yankee Group, 2001 $6.6 $8.6 $8.9 – – – Zenith Media, December 2001 $6.0 $6.6 $7.5 $8.6 – – Note: *eMarketer benchmarks its online advertising spending figures against the Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC) data, for which the last full year measured was 2001; **not including sponsorships, e-mail, most classifieds and barter Source: eMarketer, July 2002; various, as noted, 2001 & 2002 043463 ©2002 eMarketer, Inc. www.eMarketer.com

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Methodology “The mistake we always make is we assume the Measuring the Money: Last Year’s Perspective success in the next 10 years will be the same as the US Online Ad Spending success in the last 10 years.” US Ofﬂine Ad Spending — Eric Schmidt, chairman and chief executive ofﬁcer, Google; Internet Cross-Media Trends Advertising Report, 22 October 2002 Global Advertising Spending

Index of Charts Then, when you view those spending dollars as growth rates, of the 17 researchers offering figures for 2002, not a single one came close to the final spending decrease of 15.8% (when close is defined as being within 2.5 points). Lehman Brothers, however, was nearly on target with its projection of a 13.0% fall. In fact, only three of the 17 predicted any degree of spending decline for 2002, while the 13 estimated increases ranged from the Yankee Group’s 3.5% all the way up to GartnerG2’s 44.3% expected gain (Morgan Stanley called for a flat market).

Comparative Estimates from July 2002: US Online Advertising Spending Growth, 2001-2005 (as % increase/decrease vs. prior year) 2001 2002 2003 2004 2005 Adams Media Research, May 2001 8.0% 18.4% 17.8% 17.0% 13.7% CMR, August 2002 -14.7% 5.3% – – – eMarketer*, July 2002 -12.3% 9.6% 11.4% 20.5% 19.8% Forrester Research, October 2001 -18.9% 5.0% – – – GartnerG2, December 2001 – 44.3% 28.9% 17.0% 9.3% Goldman Sachs, December 2001 -9.8% 4.1% – – – J.P. Morgan, September 2002 -12.2% -10.8% 7.2% 11.3% 8.3% Kagan World Media, December 2001 -24.9% 9.0% 13.4% 12.1% 14.6% Lehman Brothers, May 2002 – -13.0% – – – Merrill Lynch, September 2001 -5.8% 12.3% – – – Morgan Stanley, November 2001 -23.0% 0.0% – – – Myers Group, July 2002 0.0% 4.0% 15.0% 26.9% 15.0% Salomon Smith Barney, September -6.3% 10.2% – – – 2001 Universal McCann, July 2002 -11.6% -5.0% – – – Veronis Suhler, July 2002 -11.9 4.1% 4.0% 6.9% 5.6% Yankee Group, 2001 30.3% 3.5% – – – Zenith Media, December 2001 10.0% 13.0% 15.3% – – Note: *eMarketer benchmarks its online advertising spending figures against the Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC) data, for which the last full year measured was 2001 Source: eMarketer, July 2002; various, as noted, 2001 & 2002 043464 ©2002 eMarketer, Inc. www.eMarketer.com

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Methodology The fact that predictions from one year ago failed to match up well with the Measuring the Money: Last Year’s Perspective most current research is no reason to ignore this year’s predictions. In fact, US Online Ad Spending as you’ll see in the next chapter, the Internet is still very young as an US Ofﬂine Ad Spending advertising medium. And that youth makes those of us involved in this Cross-Media Trends space potentially more open to the lessons imparted by our mistakes, and Global Advertising Spending

Index of Charts more aware than ever of the rich and complex range of factors that go into ad spending trends.

“It’s either a competitive advantage or a conspiracy afoot that online marketing is a raging success and no one [advertiser] wants the others to know.” — Scot McLernon, executive vice president for sales and marketing, CBS.MarketWatch; Media, April 2003

That said, the positive spending developments projected for 2003 and beyond are based in recent news such as this: In early April, Zenith Optimedia predicted that US ad spending in 2003 will grow by 2.2% compared to 2002. That new ﬁgure compares with Zenith’s December 2002 forecast of a 1.9% increase, which it described as “bearish.” In mid May, Nielsen Media Research announced that total US advertising spending for Q1 2003 rose by 1.5% over the same time period last year. In late May, the Online Publishers Association said that Q1 2003 ad revenues at 24 of its Internet member companies grew by an average of 40.7% over Q1 2002. Also in late May, Merrill Lynch analyst Lauren Rich Fine forecast total US ad expenditure growth of 3.3% for 2003 (or 3.1% including direct marketing). In early June, PricewaterhouseCoopers and the Interactive Advertising Bureau indicated that US online ad revenues in Q4 2002 increased by 8.9% over the previous quarter. In mid June, TNS Media Intelligence/CMR said not only that total US ad spending climbed by 4.9% in Q1 2003, compared to the same quarter in 2002, but online ad spending soared by 12.2% in the same period. And later in June, Universal McCann forecaster Robert Coen revised his estimate of US advertising spending in 2003 from a 5.0% gain to 4.6%. While that full-year revision appeared negative, Coen also said that this year’s second half would see a major boost in ad spending, leading to a 6.5% jump in 2004.

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Methodology “I think we’re at the moment in time where Measuring the Money: Last Year’s Perspective television was in the mid 1950s. What lies ahead is US Online Ad Spending a generation of consumers that grew up with this US Ofﬂine Ad Spending as part of their media landscape.” Cross-Media Trends — Michael Zimbalist, executive director, Online Publishers Association; Global Advertising Spending

Index of Charts MediaPost, 23 April 2003

Why the optimistic take overall? “The restraints that have held advertising in check in previous recessions don’t apply in 2003. It’s all about ﬁghting for market share,” reported MediaPost in March. “Advertisers today want to keep their messages in front of viewers, lest a competitor gets there sooner and more often.”

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Methodology 7

I Measuring the Money: Last Year’s Perspective 11 II US Online Ad Spending 17 A. Comparing Online with Ofﬂine 18 B. Online Spending Yesterday & Today: 2000 to 2003 20 C. AOL: How It Skews Online Ad Spending Figures 37 II D. Online Spending Trends: 2000 to 2006 44 E. Online Forecasts: Methodologies Analyzed 55 F.Online Ad Format Spending 58 G. Plans for Online Ad Spending 70 H. Pricing Models, Pricing Trends 78

III US Ofﬂine Ad Spending 89

IV Cross-Media Trends 125

V Global Advertising Spending 177

Index of Charts 237

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Methodology Since the beginning of this century, the path of US online advertising Measuring the Money: Last Year’s Perspective spending has been much like an extreme roller coaster—quickly up, then US Online Ad Spending just as quickly down. But just as this century is still quite young, with its US Ofﬂine Ad Spending true deﬁning trends yet to be determined, so is online advertising. Even Cross-Media Trends though the Internet is still an emergent ad medium, much analysis of Global Advertising Spending

Index of Charts online ad spending is permeated by comparisons to older and far more traditional media such as TV or newspapers.

A. Comparing Online with Ofﬂine Such comparisons are often unfair to an advertising medium as new and different as the Internet, and a broader perspective may be required to see it better. In the long run, all media have slow growth years, which in the chart below are deﬁned as years either when advertising spending actually declined or when it grew by 1.0% or less. Looking back starting in 1940, total media spending in the US saw six slow growth years, or 9.5% of the 63-year span measured using Universal McCann data.

“It does not help the industry to call it online and traditional media.” — Mark N. Dorf, CEO, AMS Interactive Media; Media Magazine, November 2002

Those media that outperformed the entire ad market—based on lowest percentage of slow growth years—are TV, both broadcast and cable, and direct mail. On the other side, from 1940 to 2002 radio, newspapers, and magazines all had several more slow growth years than average. Now on a percentage basis, Internet advertising has seen the greatest share of hard times, at 33.3% of the years in which its ad spending has been tracked. But for the Internet, that’s a mere six years—not enough time to form a statistically valid sample. Contrast that brief span with 22 years for cable TV, 53 years for broadcast TV, and 63 years for the other media shown.

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Methodology The Internet made its commercial debut as an advertising medium only a Measuring the Money: Last Year’s Perspective few years prior to a sustained downturn in the economy. If nothing else, US Online Ad Spending then, this data should begin to give a perspective on Internet advertising US Ofﬂine Ad Spending that too often seems lacking. Cross-Media Trends Global Advertising Spending Slow Growth Years for Various US Advertising Media, Index of Charts by Number of Years Spending Declined or Grew by 1.0% or Less, 1940-2002 Number of Number of Total Percent of years years years advertising advertising measured declined grew by 1.0% or less Broadcast TV (53)* 3 1 4 7.5% Direct Mail (63) 3 2 5 7.9% Cable TV (22) 0 2 2 9.1% Total Media (63) 4 2 6 9.5% Radio (63) 6 2 8 12.7% Newspapers (63) 8 2 10 15.9% Magazines (63) 10 2 12 19.0% Internet (6) 2 0 2 33.3% Note: *numbers in parentheses denote number of years measured for each medium Source: Universal McCann, December 2002; calculated by eMarketer, April 2003 049059 ©2003 eMarketer, Inc. www.eMarketer.com

In fact, even with that broader point of view, determining both the upcoming trends of Internet advertising and its recent past is still colored by varied interpretations of the same phenomena. When such subjective perspectives are applied to Internet ad spending’s roller coaster, you get details such as: Revenue at WashingtonPost.com in Q4 2002 rising to $10.6 million from $7.3 million in the prior year’s Q4 period, a 45% gain The Interactive Advertising Bureau and PricewaterhouseCoopers reporting that online advertising revenues for 2002 fell by 15.8% compared to the previous year but rose by 8.9% in the same year’s ﬁnal quarter America Online losing more than 1 million dial-up customers since last year, further hurting the online service’s attraction to advertisers Internet advertising growing by 12.2% in Q1 2003, according to TNS Media Intelligence/CMR

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Methodology B. Online Spending Yesterday & Today: Measuring the Money: Last Year’s Perspective 2000 to 2003 US Online Ad Spending

US Ofﬂine Ad Spending After hitting a peak of $8.1 billion in 2000, spending on Internet

Cross-Media Trends advertising has fallen in each measured year, down to $7.1 billion in 2001 Global Advertising Spending and down further to $6.0 billion in 2002, according to IAB/PwC. Index of Charts But along with most other researchers, eMarketer sees a rebound this year, rising to $6.3 billion, or a 4.8% gain.

Comparative Estimates: US Online Advertising Spending, 2002 & 2003 (in billions) 2002 2003 CIBC World Markets, November 2002 $6.1 $6.1 CMR/TNS, March 2003 $5.7 – Corzen, January 2003 $8.6 – eMarketer*, June 2003 $6.0 $6.3 GartnerG2, October 2002 $8.7 $9.1 Goldman Sachs, June 2003 $6.0 $6.0 IAB/PwC, June 2003 $6.0 – Initiative Media, March 2003 $2.8 $2.8 J.P. Morgan, August 2002 $6.4 $6.9 Jupiter Research, October 2002 $5.6 $6.2 Lehman Brothers, May 2002 $4.8 $7.6 Myers Report, May 2003 $4.0 $4.1 PricewaterhouseCoopers, May 2002 $7.6 $8.0 Salomon Smith Barney, October 2002 $7.0 $7.6 Universal McCann, June 2003 $4.9 $5.1 Veronis Suhler Stevenson, July 2002 $7.6 $7.9 Note: *eMarketer benchmarks its online ad spending projections against the Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC) data, for which the last period measured was Q4 2002 Source: eMarketer, June 2003; various, as noted, 2002 & 2003 050435 ©2003 eMarketer, Inc. www.eMarketer.com

“Remember, ad numbers that are more than a couple of years old contain a lot of junk, including the tail-ends of some awful long-term deals and hundreds of millions of dollars in phony advertising that AOL has since written off.” — Barry Parr, Internet media and e-commerce consultant, and former vice president of news, CNET; MediaSavvy blog, 10 April 2003

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Methodology Companies expecting even higher gains in 2003 include Jupiter Research, Measuring the Money: Last Year’s Perspective at 10.7%, and J.P. Morgan, at 7.2%. Growth rates similar to eMarketer’s US Online Ad Spending 4.8% estimate are found from Universal McCann at 5.0%, GartnerG2 at US Ofﬂine Ad Spending 4.7%, PwC (its research separate from the IAB) at 5.3%, and Veronis Suhler Cross-Media Trends at 4.0%. Global Advertising Spending

Index of Charts Other research ﬁrms project smaller growth for online ad spending or ﬂat rates, such as 0.7% from Goldman Sachs or no growth from CIBC.

Comparative Estimates: US Online Advertising Spending Growth, 2002 & 2003 (as a % increase/decrease vs. prior year)

Jupiter Research, October 2002 1.0% 10.7%

CMR/TNS, March 2003 -11.9% 7.4%

J.P. Morgan, August 2002 -10.8% 7.2%

PricewaterhouseCoopers (PwC), May 2002 0.9% 5.3%

Universal McCann, June 2003 -15.1% 5.0%

eMarketer*, June 2003 -15.8% 4.8%

GartnerG2, October 2002 4.9% 4.7%

Veronis Suhler Stevenson, July 2002 4.1% 4.0%

Myers Report, May 2003 -8.0% 2.6%

Goldman Sachs, June 2003 -17.5% 0.7%

continued on page 22

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Methodology CIBC World Markets, November 2002 Measuring the Money: Last Year’s Perspective -15.0% US Online Ad Spending 0.0% US Ofﬂine Ad Spending

Cross-Media Trends 2002 2003 Global Advertising Spending Note: *eMarketer benchmarks its online ad spending projections against Index of Charts the Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC) data, for which the last period measured was Q4 2002 Source: eMarketer, June 2003; various, as noted, 2002 & 2003 050434 ©2003 eMarketer, Inc. www.eMarketer.com

In an uneven market, some Web publishers are doing much better than others. Recent research from Goldman Sachs analyzed the online advertising revenues from six major Web publishers, including AOL, Yahoo!, and MSN. These half-dozen large publishers make up more than half of the entire online ad market.

US Online Advertising Revenues, by Web Publisher, 2000-2003 (as a % of total revenues) 2000 2001 2002 2003 MSN 5.3% 7.2% 10.8% 14.9% AOL 25.9% 30.5% 20.5% 13.3% Yahoo! 9.9% 5.9% 7.5% 10.2% Overture 1.2% 3.8% 6.5% 8.3% Lycos 3.9% 4.5% 4.0% 2.8% CNET 4.1% 2.7% 2.5% 2.5% 6 listed companies 50.3% 54.6% 51.9% 52.1% Note: 2000 total=$8.24 billion; 2001 total=$7.21 billion; 2002 total=$5.95 billion; 2003 total=$5.99 billion Source: Goldman Sachs, June 2003 050451 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology The shift in the market shows up in several ways. Take 2002’s ﬁgures, for Measuring the Money: Last Year’s Perspective example, where at $1.22 billion, AOL had nearly twice the ad revenue of its US Online Ad Spending leading competitor, MSN at $645 million. But Goldman Sachs’s projection US Ofﬂine Ad Spending for 2003 shows MSN as the leading Web publisher, with online ad revenues Cross-Media Trends of $894 million. Global Advertising Spending

Index of Charts US Online Advertising Revenues, by Web Publisher, 2000-2003 (in millions) 2000 2001 2002 2003 MSN $437 $520 $645 $894 AOL $2,134 $2,198 $1,222 $800 Yahoo! $818 $428 $448 $613 Overture $99 $271 $384 $500 Lycos $322 $324 $239 $170 CNET $338 $198 $148 $148 Sub-total $4,148 $3,939 $3,086 $3,125 Note: 2000 total=$8.24 billion; 2001 total=$7.21 billion; 2002 total=$5.95 billion; 2003 total=$5.99 billion Source: Goldman Sachs, June 2003 050449 ©2003 eMarketer, Inc. www.eMarketer.com

When viewing the revenue figures by growth rates, it appears that in both 2002 and 2003, MSN, Yahoo!, and Overture surpassed the total spending figures of a 17.5% decrease and a 0.7% increase, respectively. In fact, this year Goldman Sachs sees those three companies increasing their online ad revenues by more than 30% each. Meanwhile, for the same two years, the investment banking firm reports decreased or flat revenues for CNET, Lycos, and AOL.

US Online Advertising Revenue Growth, by Web Publisher, 2000-2003 (as a % increase/decrease vs. prior year) 2000 2001 2002 2003 MSN 62.0% 19.0% 24.0% 38.6% AOL 70.0% -47.7% 4.7% 36.8% Yahoo! 268.0% 173.7% 41.7% 30.2% Total 78.0% -12.5% -17.5% 0.7% CNET 71.0% -41.4% -25.3% 0.0% Lycos 55.0% 0.6% -26.2% -28.9% AOL 99.0% 3.0% -44.4% -34.5% Note: 2000 total=$8.24 billion; 2001 total=$7.21 billion; 2002 total=$5.95 billion; 2003 total=$5.99 billion Source: Goldman Sachs, June 2003 050450 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology “If our industry was regulated like public Measuring the Money: Last Year’s Perspective companies, the industry and its analysts would US Online Ad Spending probably be required to restate their numbers for US Ofﬂine Ad Spending 1999 and 2000, and we would probably ﬁnd that the Cross-Media Trends

Global Advertising Spending reported online advertising numbers for 1999 and

Index of Charts 2000 were overstated by several billion dollars each year.” — John Durham, COO of Interep Interactive; Media Life, 3 February 2003

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Methodology Quarterly Reports Measuring the Money: Last Year’s Perspective When the measurement focus is narrowed from annual to quarterly, the ups US Online Ad Spending and downs in the online ad spending market appear even more US Ofﬂine Ad Spending pronounced—reﬂecting in some ways the overall economic trends. Cross-Media Trends

Global Advertising Spending Take the last eight quarters measured by the IAB and PwC, the two full

Index of Charts years of 2001 and 2002. Starting from a peak of $1.87 billion in Q1 2001, spending fell continually, quarter by quarter, to as low as $1.45 billion in Q3 2002, and then beginning a rise to $1.58 billion the next quarter.

US Online Advertising Spending, Q1 2000-Q4 2002 (in billions)

Q1 2000 $1.92

Q2 2000 $2.09

Q3 2000 $1.95

Q4 2000 $2.12

Q1 2001 $1.87

Q2 2001 $1.85

Q3 2001 $1.77

Q4 2001 $1.64

Q1 2002 $1.52

Q2 2002 $1.46

Q3 2002 $1.45

Q4 2002 $1.58

Note: 2000 and 2001 figures were adjusted to reflect revenue restatements reported in public filings by several individual companies Source: Interactive Advertising Bureau, PricewaterhouseCoopers, October 2002 045510 ©2002 eMarketer, Inc. www.eMarketer.com

In the three full years measured by the IAB/PwC researchers, the biggest spending fall came in Q1 2001, at 11.8%. And the greatest rise came most recently, in Q4 2002, at 8.9%, similar to ﬁgures in 2000’s Internet boom days.

“The glass is half full in that things have bottomed out.” — Peter Petrusky, director new media, PricewaterhouseCoopers; Forbes.com, 23 May 2003

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Methodology Nevertheless, when you compare the quarterly spending ﬁgures to the same Measuring the Money: Last Year’s Perspective quarters in prior years, you won’t ﬁnd a gain since Q4 2000’s 19.5% jump.

US Online Ad Spending

US Ofﬂine Ad Spending US Online Advertising Spending, Q1 2000-Q4 2002 (as a Cross-Media Trends % increase/decrease vs. prior quarter and vs. same Global Advertising Spending quarter of prior year) Index of Charts % growth vs. % growth vs. prior quarter same quarter of prior year Q1 2000 8.2% 177.3% Q2 2000 8.8% 123.9% Q3 2000 -6.7% 60.3% Q4 2000 8.8% 19.5% Q1 2001 -11.8% -2.6% Q2 2001 -1.3% -11.6% Q3 2001 -4.1% -9.1% Q4 2001 -7.4% -22.7% Q1 2002 -7.4% -18.8% Q2 2002 -4.1% -21.1% Q3 2002 -0.5% -18.2% Q4 2002 8.9% -3.7% Note: 2000 and 2001 figures were adjusted to reflect revenue restatements reported in public filings by several individual companies Source: Interactive Advertising Bureau, PricewaterhouseCoopers, June 2003 045511 ©2002 eMarketer, Inc. www.eMarketer.com

Online Advertising: Industries & Companies Which types of companies are contributing most to the spending bounceback? As companies look increasingly to the Internet, the average share of industry budgets going toward online advertising in the Q1 2001 to Q1 2002 period was 7.7%, according to DoubleClick. But ﬁelds more highly invested in Internet advertising include business property and employment recruiting at 46.7%, computers and ofﬁce equipment at 15.6%, and publishing and media at 15.5%.

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Methodology

Measuring the Money: Online's Share of Total US Advertising, by Category, Last Year’s Perspective Q1 2001-Q1 2002 US Online Ad Spending

US Ofﬂine Ad Spending Business prop. and employment recruiting Cross-Media Trends 46.7% Global Advertising Spending Computers, office equipment and stationery Index of Charts 15.6%

Publishing and media 15.5%

Retail 14.7%

Business and consumer services 13.3%

Travel, hotels and resorts 12.0%

Electronic entertainment equipment and supplies 10.4%

AVERAGE 7.7%

Insurance and real estate 6.4%

Entertainment and amusements 5.6%

Apparel, footwear and accessories 4.5%

Drugs and remedies 3.2%

Freight, industrial and agricultural development 3.0%

Sporting goods, toys and games 3.0%

Household equipment and supplies 1.8%

Toiletries and cosmetics 1.4%

Foods and food products 1.1%

Automobiles, auto accessories and equipment 1.0%

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Methodology And the consumer electronics companies increased their online budget Measuring the Money: Last Year’s Perspective share in Q1 2002 by 11.2%, far more than any other industry shown.

US Online Ad Spending

US Ofﬂine Ad Spending Online's Share of Total US Advertising, by Category,

Cross-Media Trends Q1 2001 vs. Q1 2002 (as a % increase/decrease)

Global Advertising Spending Electronic entertainment equipment Index of Charts and supplies 11.2% Travel, hotels and resorts 3.6% Insurance and real estate 0.6% Drugs and remedies 0.4% Foods and food products 0.3% Apparel, footwear and accessories 0.2% Toiletries and cosmetics 0.1% Household equipment and supplies -0.2% Automobiles, auto accessories and equipment -0.2% Business and consumer services -1.0% Sporting goods, toys and games -1.0% Entertainment and amusements -1.4% Freight, industrial and agricultural development -2.4%

Computers, office equipment and stationery -4.3% Publishing and media -4.4% Retail -7.8% Business prop. and employment recruiting -17.0%

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Methodology Note that the auto industry spent only 1.0% of its ad dollars online in that Measuring the Money: Last Year’s Perspective period (mainly in 2001). And yet, since auto manufacturers spend such US Online Ad Spending large sums on advertising in general, even that small percentage translated US Ofﬂine Ad Spending to $387.6 million in 2001, according to estimates from Jupiter Research, or Cross-Media Trends fourth among the eight industries listed in the chart below. Global Advertising Spending

Index of Charts And the past is not perfectly prologue, either, since as the auto industry increasingly discovered online advertising’s effectiveness for reaching its target audience, it turned into the top spender in 2002, with a 116% increase to $839.3 million.

US Online Ad Spending, by Industry, 2001 & 2002 (in millions and as a % increase/decrease vs. prior year) 2001 2002 Growth rate Automotive $387.6 $839.3 116.5% Financial services $941.3 $671.4 -28.7% Media $1,107.4 $615.5 -44.4% Health $276.9 $503.6 81.9% Computer hardware $664.4 $391.7 -41.0% Travel $276.9 $391.7 41.5% Consumer goods $276.9 $391.7 41.5% Telecommunications $166.1 $279.8 68.5% Total (for 8 industries) $4,097.4 $4,084.4 -0.3% Note: based on Jupiter's US online ad spending figures of $5,537 million (2001) and $5,595 million (2002) Source: Jupiter Research, October 2002; calculated by eMarketer, May 2003 049729 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology The IAB/PwC study categorizes online ad spending in broader industry Measuring the Money: Last Year’s Perspective groupings than the granular DoubleClick data above. The general consumer US Online Ad Spending category contributes more to online ad spending revenues than the other US Ofﬂine Ad Spending industries shown below, staying in the 30% range from 2000 through 2002. Cross-Media Trends Global Advertising Spending US Online Advertising Spending, by Industry Index of Charts Category, 2000-2002 (as a % of total spending)

Consumer 31% 30% 32%

Computing 18% 18% 18%

Financial services 14% 12% 13%

Media 8% 12% 12%

Business services 9% 9% 7%

Other 20% 19% 18%

Looking at the same industry spending-share figures as absolute dollars, and it appears that the IAB/PwC figures sharply disagree with Jupiter’s estimates above—at least in some categories, and as far as those categories are comparable. Take consumer goods, which Jupiter says spent $391.7 million for online advertising in 2002; the figure for the consumer industry from the IAB/PwC study is far higher at $1.92 billion.

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Methodology But when the industry category is simply media, more convergence is Measuring the Money: Last Year’s Perspective found. Jupiter’s ﬁgure for 2002 above is $615.5 million, while the US Online Ad Spending IAB/PwC’s below is $720 million. US Ofﬂine Ad Spending Cross-Media Trends US Online Advertising Spending, by Industry Global Advertising Spending Category, 2000-2002 (in billions) Index of Charts Consumer $2.51 $2.14 $1.92

Computing $1.46 $1.28 $1.08

Financial services $1.13 $0.86 $0.72

Media $0.65 $0.86 $0.72

Business services $0.73 $0.64 $0.42

Other $1.62 $1.36 $1.08

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Methodology With the 15.8% decrease for total online ad spending in 2002, none of the Measuring the Money: Last Year’s Perspective major industry categories listed by the IAB/PwC showed any growth. And US Online Ad Spending both the computing and media industries followed the total online trend, US Ofﬂine Ad Spending matching that 15.8% downturn. Cross-Media Trends Global Advertising Spending US Online Advertising Spending Growth, by Product/ Index of Charts Service Category, 2001 & 2002 (as a % increase/ decrease vs. prior year)

Consumer-related -14.6% -10.1%

Computing products -11.8% -15.8%

Media 32.3% -15.8%

Financial services -24.4% -8.7%

Business services -11.8% -34.5%

Other -16.2% -20.2%

2001 2002 Note: 2000 total=$8.09 billion; 2001 total=$7.13 billion; 2002 total=$6.01 billion Source: Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC), June 2003 050418 ©2003 eMarketer, Inc. www.eMarketer.com

When the IAB/PwC’s perspective changes from categorizing by industry to the focus on consumers, sellers of retail goods had the highest share of US online ad spending in 2002, at 42%. The auto industry, at 19%, increased its share of spending by eight points from 2001’s ﬁgures.

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Methodology Note that the IAB/PwC industry category (the three charts above) and the Measuring the Money: Last Year’s Perspective consumer category (the three charts below) overlap partially. The former US Online Ad Spending definitions look at what industry the advertiser is in; the latter definitions US Offline Ad Spending look at the ways consumers are targeted. Cross-Media Trends Global Advertising Spending US Online Advertising Spending, by Consumer Index of Charts Category, 2000-2002 (as a % of total spending)

Retail 42% 50% 42%

Auto 19% 11% 19%

Music 7% 12% 15%

Travel/hotels 9% 10% 14%

Amusement 4% 5% 4%

Other 19% 12% 6%

2000 2002 2002 Note: 2000 total=$8.09 billion; 2001 total=$7.13 billion; 2002 total=$6.01 billion Source: Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC), June 2003 050416 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Retailers spent over $2.5 billion for online advertising last year, followed Measuring the Money: Last Year’s Perspective by the auto industry at more than $1.1 billion.

US Online Ad Spending

US Ofﬂine Ad Spending US Online Advertising Spending, by Consumer Cross-Media Trends Category, 2000-2002 (in billions)

Global Advertising Spending Retail Index of Charts $3.40 $3.57 $2.52

Auto $1.54 $0.78 $1.14

Music $0.57 $0.86 $0.90

Travel/hotels $0.73 $0.71 $0.84

Amusement $0.32 $0.36 $0.24

Other $1.54 $0.86 $0.36

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Methodology Even though retail advertisers spent the most last year for interactive Measuring the Money: Last Year’s Perspective advertising, that was still a 29.2% fall from the industry’s 2001 spending US Online Ad Spending ﬁgures. Meanwhile, as also indicated in the Jupiter data above, the auto US Ofﬂine Ad Spending industry increased its online spend in 2002, rising by 45.5% by the Cross-Media Trends IAB/PwC estimates. Global Advertising Spending

Index of Charts US Online Advertising Spending Growth, by Consumer Category, 2001 & 2002 (as a % increase/decrease vs. prior year)

Auto -48.9% 45.5%

Travel/hotels -2.0% 17.9%

Music 51.2% 5.3%

Retail 5.0% 29.2%

Amusement 10.3% -32.6%

Other -44.3% -57.9%

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Methodology No matter how the industry is deﬁned, consolidation remains one name Measuring the Money: Last Year’s Perspective of the game. The top 10 Web publishers raked in 72% of the revenues in US Online Ad Spending Q4 2002, according to the IAB/PwC, while the top 25 had 89% of that US Ofﬂine Ad Spending quarter’s revenues. Cross-Media Trends Global Advertising Spending Share of US Internet Advertising Revenues among Top Index of Charts 10, 25, and 50 Ad-Selling Web Sites, Q4 2002

Top 10 72%

Top 25 89%

Top 50 97%

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Methodology C. AOL: How It Skews Online Ad Measuring the Money: Last Year’s Perspective Spending Figures US Online Ad Spending

US Ofﬂine Ad Spending Trying to describe the state of Internet advertising and not factoring in

Cross-Media Trends America Online’s impact on online ad revenues is a lot like the joke making Global Advertising Spending the rounds recently: A factory worker is sitting alone in a bar drinking, Index of Charts telling the bartender about how hard it is to make ends meet, when Bill Gates enters the bar. The bartender tells the worker, “Cheer up! Now on average everyone in this bar is a billionaire.” In much the same way, but in reverse, the red ink spurting from AOL’s ﬂagging online advertising revenue stream continues to drag down the average online revenue ﬁgures—which would be substantially more optimistic and positive if you factored AOL out of the equation. As the largest online service, AOL’s ad sales disproportionately color any analysis of the industry as a whole. For example, in early December 2002, AOL Time Warner—the service’s parent company—announced expectations that its online division’s advertising and e-commerce revenue in 2003, which consists mostly of ad sales, would slump 40% to 50%, following equally steep declines posted in 2002.

“I can’t speak for AOL, but throughout the industry, we’re seeing a turnaround in online advertising. We’ve seen signiﬁcant increases in spending by many of our major clients.” — Jim Warner, president, Avenue A/New York; BusinessWeek Online, 3 December 2002

Even when AOL Time Warner reported in late April 2003 that it earned $396 million in the ﬁrst quarter of 2003, and said that the turnaround was helped by a 6.3% jump in revenues, the company also said revenues at the company’s online division slipped by 4% to $2.20 billion, pulled down by declines in advertising. The company also claimed that its ban on pop-up ads contributed to the loss. Looked at over a nearly four-year span, and the roller coaster nature of AOL’s advertising revenues comes clear—going from a low of $205 million in Q1 1999 up to a high of $598 million in Q1 2001 and back down to $266 million in Q3 2002. These Morgan Stanley estimates are based on the assumption that 83% of AOL’s reported US advertising and commerce revenue has been advertising, per company disclosures in Q2 and Q3 2002.

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Methodology In contrast, note how total US online ad revenues without AOL’s ﬁgures has Measuring the Money: Last Year’s Perspective remained relatively steady in the $1.1 billion to $1.3 range since Q1 2001.

US Online Ad Spending

US Ofﬂine Ad Spending Comparison of US Internet Advertising with and Cross-Media Trends without AOL's Contribution, Q2 1999-Q3 2002 (in Global Advertising Spending millions) Index of Charts US total AOL's US total Total without AOL Q1 1999 $693 $205 $488 Q2 1999 $934 $225 $709 Q3 1999 $1,217 $266 $951 Q4 1999 $1,777 $334 $1,443 Q1 2000 $1,953 $438 $1,515 Q2 2000 $2,124 $466 $1,658 Q3 2000 $1,986 $493 $1,493 Q4 2000 $2,162 $569 $1,593 Q1 2001 $1,893 $598 $1,295 Q2 2001 $1,868 $586 $1,282 Q3 2001 $1,792 $518 $1,274 Q4 2001 $1,658 $529 $1,129 Q1 2002 $1,520 $409 $1,111 Q2 2002 $1,458 $334 $1,124 Q3 2002 $1,470 $266 $1,204 Note: US total from IAB/PwC; assumed that historically 83% of AOL's reported US advertising and commerce revenue has been advertising, per company disclosures Q2 2002 & Q3 2002 Source: Morgan Stanley Equity Research, Interactive Advertising Bureau/PricewaterhouseCoopers, AOL Time Warner reports, April 2003 047486 ©2003 eMarketer, Inc. www.eMarketer.com

Viewed on an annual basis, and you can see how AOL’s Internet advertising revenue peaked in 2001 and has fallen rapidly since.

Comparison of US Internet Advertising Spending with and without AOL's Contribution, 1999-2002 (in billions) US total AOL's US Total without total AOL 1999 $4.62 $1.03 $3.59 2000 $8.23 $1.97 $6.26 2001 $7.21 $2.23 $4.98 2002* $5.56 $1.26 $4.30 Note: US total from IAB/PwC; assumed that historically 83% of AOL's reported US advertising and commerce revenue has been advertising, per company disclosures Q2 2002 & Q3 2002; *supplied figures from Q1-Q3 2002 multiplied by 125% to get full year's estimate Source: Morgan Stanley Equity Research, Interactive Advertising Bureau/PricewaterhouseCoopers, AOL Time Warner reports, April 2003 050452 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology A similar analysis from Goldman Sachs, but just by year rather than by Measuring the Money: Last Year’s Perspective quarter, paints a similar picture. Estimates for AOL’s online ad revenue in US Online Ad Spending the US are about the same as from Morgan Stanley, and projections for US Ofﬂine Ad Spending 2003 show an even more severe drop-off to substantially under $1 billion. Cross-Media Trends Global Advertising Spending US Online Advertising Revenues with and without Index of Charts AOL's Contribution, 2000-2003 (in billions) US total AOL's US Total without total AOL 2000 $8.24 $2.13 $6.11 2001 $7.21 $2.20 $5.01 2002 $5.95 $1.22 $4.73 2003 $5.99 $0.80 $5.19 Source: Goldman Sachs, June 2003 050447 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology If you had any doubt that AOL is the proverbial 800-pound gorilla in the Measuring the Money: Last Year’s Perspective online ad world, the Morgan Stanley research shows that even as AOL’s US Online Ad Spending total ad revenue ﬁgures have tumbled, its weight continues to dictate the US Ofﬂine Ad Spending online ad market’s overall health. While AOL’s share of total US Internet Cross-Media Trends advertising fell from its plus-30% high in 2001 to 18% in Q3 2002, it Global Advertising Spending

Index of Charts remains the largest single player in the industry.

AOL's Share of Total US Internet Advertising, Q1 1999-Q3 2002

Q1 1999 29.6%

Q2 1999 24.1%

Q3 1999 21.9%

Q4 1999 18.8%

Q1 2000 22.4%

Q2 2000 21.9%

Q3 2000 24.8%

Q4 2000 26.3%

Q1 2001 31.6%

Q2 2001 31.4%

Q3 2001 28.9%

Q4 2001 31.9%

Q1 2002 26.9%

Q2 2002 22.9%

Q3 2002 18.1%

Note: US total from IAB/PwC; assumed that historically 83% of AOL's reported US advertising and commerce revenue has been advertising, per company disclosures Q2 2002 & Q3 2002 Source: Morgan Stanley Equity Research, Interactive Advertising Bureau/PricewaterhouseCoopers, AOL Time Warner reports; November 2002; eMarketer calculations, April 2003 047485 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Again, the research from Goldman Sachs backs up the Morgan Stanley Measuring the Money: Last Year’s Perspective calculations when it comes to AOL’s advertising share. With projections for US Online Ad Spending this year at a 13.3% share, however, less than half of only two years ago, US Offline Ad Spending AOL’s influence on US online ad spending figures is more like a gorilla on a Cross-Media Trends starvation diet. Global Advertising Spending

Index of Charts AOL's Share of Total US Internet Advertising Spending, 2000-2003

2000 25.9%

2001 30.5%

2002 20.5%

2003 13.3%

The distorted views produced by AOL’s woes skew the traditional ad industry’s perceptions of the value of online advertising. The chief cause of the online giant’s ad revenue declines dates back to dot-com days, when it signed long-term sponsorship deals and a backlog of other contracts, some of which won’t expire until the end of 2003. What created proﬁts then are a drag on the bottom line now. “Barter deals were apparently made to look like ad deals,” reported MediaPost in January 2003. “Long-term ad deals are alleged to have been booked as revenue earlier than appropriate. AOL [is] in hot water for just such alleged deception.… In fact, much of the ad ‘decline’ in the past year has been not so much a real reduction of advertiser spending, but a reﬂection of new accounting methods used.”

“At the time of the deal, January 2000, AOL had revenues of $4 billion a year, and Time Warner had revenues of $26 billion. Yet AOL got 55% of the combined company.” — Michael Kinsley, former editor-in-chief, Slate.com; 6 February 2003

And while not barter deals, per se, AOL books in-house ads—such as ones for Warner Brothers movies or Time Inc. magazines—as revenue, reports CNET News. This is unlike a site such as MSN, which does not count ads from other Microsoft divisions in its revenue stream.

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Methodology By relegating AOL’s contribution to the sidelines, a more accurate accounting Measuring the Money: Last Year’s Perspective of online advertising’s growth emerges. When you compare AOL’s growth US Online Ad Spending rates quarter-by-quarter with the total US numbers from the Interactive US Ofﬂine Ad Spending Advertising Bureau and PricewaterhouseCoopers, the contrast is striking. Take Cross-Media Trends Q3 2002 alone. Because AOL’s ad revenues declined by more than 20%, the Global Advertising Spending

Index of Charts total growth ﬁgure from IAB/PwC appeared ﬂat at less than 1%. And yet, the online ad industry sans AOL showed a healthy 7% growth rate.

Comparison of US Internet Advertising with and without AOL's Contribution, Q2 1999-Q3 2002 (as a % increase/decrease vs. prior quarter) Total growth AOL growth Growth without AOL Q2 1999 34.8% 9.8% 45.3% Q3 1999 30.3% 18.2% 34.1% Q4 1999 46.0% 25.6% 51.7% Q1 2000 9.9% 31.1% 5.0% Q2 2000 8.8% 6.4% 9.4% Q3 2000 -6.5% 5.8% -10.0% Q4 2000 8.9% 15.4% 6.7% Q1 2001 -12.4% 5.1% -18.7% Q2 2001 -1.3% -2.0% -1.0% Q3 2001 -4.1% -11.6% -0.6% Q4 2001 -7.5% 2.1% -11.4% Q1 2002 -8.3% -22.7% -1.6% Q2 2002 -4.1% -18.3% 1.2% Q3 2002 0.8% -20.2% 7.1% Note: US total from IAB/PwC; assumed that historically 83% of AOL's reported US advertising and commerce revenue has been advertising, per company disclosures Q2 2002 & Q3 2002 Source: Morgan Stanley Equity Research, Interactive Advertising Bureau/PricewaterhouseCoopers, AOL Time Warner reports; November 2002; eMarketer calculations, April 2003 047484 ©2003 eMarketer, Inc. www.eMarketer.com

Viewed annually through the Goldman Sachs research, it’s easy to see how in 2001, AOL’s positive ad sales growth of 3.0% supported a weakening market. But last year’s more severe total downturn of 17.5% turns into a far less dramatic 5.7% decrease when AOL’s 44.4% fall is not counted. Note how that total 17.5% drop from Goldman Sachs is about the same as the IAB/PwC 15.8% decrease for 2002. Perhaps more important is how Goldman Sachs predicts that while total Internet advertising growth will be a mild 0.7% in 2003, it will be a healthy 9.8% gain without AOL’s ﬁgures.

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Methodology Another way of looking at that would be company by company. If you took Measuring the Money: Last Year’s Perspective the top 25 Web publishers, which as noted above get 89% of the ad US Online Ad Spending revenue, how many of them—other than AOL—would be increasing revenue US Ofﬂine Ad Spending this year in order to offset the giant’s 34.5% fall? Cross-Media Trends Global Advertising Spending US Internet Advertising Revenue Growth with and Index of Charts without AOL's Contribution, 2001-2003 (as a % increase/decrease vs. prior year)

2001 -12.5% 3.0% -17.9%

2002 -17.5% -44.4% -5.7%

2003 0.7% -34.5% 9.8%

AOL growth Growth without AOL Total growth Source: Goldman Sachs, June 2003 050445 ©2003 eMarketer, Inc. www.eMarketer.com The problems at AOL not only disguise what’s essentially a vigorous market but may in fact be a blessing in disguise. That is, as ad dollars move away from AOL, it may “provide more opportunities for the rest of the players who have already gone through the correction and restructuring period of their own,” according to The Silk Road Weekly, the e-newsletter from US Bancorp Piper Jaffray.

“AOL is deﬁnitely an extreme case because they’re still winding down the tail end of the big multimillion-dollar boom-time deals.” — Jim Nail, analyst, Forrester Research; ZDNet News, 4 December 2002

Furthermore, non-AOL Web publishers such as MSN, Yahoo!, and large content sites like New York Times Digital went through a tough period in 2001 and rebounded by late last year. For example, the online division of The Times reported 2002 revenues of $71.8 million for its ad-supported Web site, as compared to 2001’s ﬁgure of $60.3 million, an increase of 19%. By the end of 2003 and into 2004, eMarketer expects a similar rebound for AOL. By next year, then, the midsize to large online publisher will sport even higher revenues on average—and it won’t be just because of the gorilla bellying up to the bar.

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Methodology D. Online Spending Trends: 2000 to 2006 Measuring the Money: Last Year’s Perspective From this year forward, the trend in US online advertising spending is up, US Online Ad Spending

US Ofﬂine Ad Spending according to eMarketer research, rising to $6.3 billion in 2003 from last

Cross-Media Trends year’s $6.0 billion ﬁgure, and reaching $8.1 billion by 2006.

Global Advertising Spending Index of Charts US Online Advertising Spending, 2000-2006 (in billions)

2000 $8.1

2001 $7.1

2002 $6.0

2003 $6.3

2004 $6.8

2005 $7.2

2006 $8.1

Note: eMarketer benchmarks its online ad spending projections against the Interactive Advertising Bureau/PricewaterhouseCoopers data, for which the last period measured was Q4 2002 Source: eMarketer, June 2003 050432 ©2003 eMarketer, Inc. www.eMarketer.com

“We saw some signs last year, but this past quarter was the afﬁrmation that this is a reasonably healthy environment for online advertising now. We’re not seeing a huge upside to expectations, but we are seeing structural changes that suggest this is a little more of a long-term recovery.” — Safa Rashtchy, analyst, US Bancorp Piper Jaffray; The New York Times, 5 May 2003

The progress this year and the three years following centers on several factors: The 4.8% growth rate in 2003 will supported by a mix of more companies including the Internet as part of their cross-media advertising campaigns and a general advance for ad dollars across the board. Even now, eMarketer believes this 4.8% increase is on the conservative side, but is waiting for Q2 and Q3 ﬁgures before adjusting its projections. The 7.9% growth rate in 2004 will be supported not only by the same factors in play in 2003 but also how next year will have both national elections and the Olympics, which will drive further online ad spending. The 5.9% growth rate in 2005 will be less than 2004’s gain because the overall economic problems caused by deﬁcit spending will not be solved, holding back what could be even stronger growth for online ad spending as the Internet becomes more mainstream than ever.

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Methodology The 12.5% growth rate in 2006 will be a positive reaction to a more Measuring the Money: Last Year’s Perspective stabilized economy, along with nearly all large advertisers including US Online Ad Spending the Internet among their media buys. That nearly 50% of all US online US Ofﬂine Ad Spending users will access the Internet via broadband is another key to double- Cross-Media Trends digit ad growth. Global Advertising Spending

Index of Charts

US Online Advertising Spending Growth, 2001-2006 (as a % increase/decrease vs. prior year)

-11.8% 2001

-15.8% 2002

2003 4.8%

2004 7.9%

2005 5.9%

2006 12.5%

“The Internet has become an important part of the media mix and therefore an important ad medium. Call it convergent media or fused media or Internet advertising or whatever you may: Internet advertising is growing bigger by the day.” — Rishad Tobaccowala, president, Starcom IP; Slate.com, January 2003

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Methodology The comparative estimates for US online advertising spending show Measuring the Money: Last Year’s Perspective eMarketer’s estimates about in the middle for 2003. In the years ahead, US Online Ad Spending some researchers see revenues hitting double ﬁgures, such as GartnerG2’s US Ofﬂine Ad Spending $10.0 billion projection in 2005, Jupiter Research’s $11.6 billion in 2006, Cross-Media Trends and PricewaterhouseCoopers’s $10.1 billion that same year. Global Advertising Spending

Index of Charts Comparative Estimates: US Online Advertising Spending, 2000-2006 (in billions) 2000 2001 2002 2003 2004 2005 2006 CIBC World Markets, November $8.2 $7.2 $6.1 $6.1 – – – 2002 CMR/TNS, March 2003 $2.8 $6.5 $5.7 $6.2 – – – Corzen*, January 2003 – $5.9 $8.6 – – – – eMarketer**, June 2003 $8.1 $7.1 $6.0 $6.3 $6.8 $7.2 $8.1 GartnerG2, October 2002 – $8.3 $8.7 $9.1 $9.5 $10.0 – Goldman Sachs, June 2003 $8.2 $7.2 $6.0 $6.0 – – – IAB/PwC, June 2003 $8.1 $7.1 $6.0 – – – – Initiative Media, March 2003 – – $2.8 $2.8 – – – J.P. Morgan, August 2002 $8.2 $7.2 $6.4 $6.9 $7.7 $8.3 $8.8 Jupiter Research, October 2002 $5.4 $5.5 $5.6 $6.2 $7.5 $9.5 $11.6 Lehman Brothers, May 2002 $6.5 $5.5 $4.8 $7.6 $9.5 – – Myers Report, May 2003 $4.3 $4.3 $4.0 $4.1 $4.9 – – PricewaterhouseCoopers, May $8.2 $7.5 $7.6 $8.0 $8.6 $9.3 $10.1 2002 Salomon Smith Barney, October – – $7.0 $7.6 – – – 2002 Universal McCann, June 2003 $6.5 $5.8 $4.9 $5.1 – – – Veronis Suhler Stevenson, July $8.2 $7.3 $7.6 $7.9 $8.4 $8.9 $9.3 2002 Note: *includes revenue that local newspapers generate by upselling print advertising into the newspaper's Web site and spending by e-mail marketers on all aspects of their marketing operations; **eMarketer benchmarks its online ad spending projections against the Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC) data, for which the last period measured was Q4 2002 Source: eMarketer, June 2003; various, as noted, 2002 & 2003

The difference in absolute dollars is largely due to starting from varying baselines, using different definitions and methodologies. For example, eMarketer benchmarks its online ad spending projections against the Interactive Advertising Bureau/PricewaterhouseCoopers data, for which the last full year measured was 2002. That puts the baseline at $6.0 billion. In contrast, GartnerG2’s 2002 figure is substantially higher, at $8.7 billion, as is Veronis Suhler’s at $7.6 billion. But when viewed by growth rates, the 2003 figures are more in line: eMarketer at 4.8%, GartnerG2 at 4.7%, and Veronis at 4.0%.

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Methodology During the next several years, double-digit growth rates are expected by a Measuring the Money: Last Year’s Perspective few researchers, such as J.P. Morgan in 2004, Jupiter Research from 2003 US Online Ad Spending onwards, and the Myers Group in 2004. US Ofﬂine Ad Spending Cross-Media Trends Comparative Estimates: US Online Advertising Global Advertising Spending Spending Growth, 2001-2006 (as a % increase/ Index of Charts decrease vs. prior year) 2001 2002 2003 2004 2005 2006 CIBC World Markets, November -12.3% -15.0% 0.0% – – – 2002 CMR/TNS, March 2003 130.3% -11.9% 7.4% – – – Corzen*, January 2003 – 46.7% – – – – eMarketer**, June 2003 -11.8% -15.8% 4.8% 7.9% 5.9% 12.5% GartnerG2, October 2002 – 4.9% 4.7% 4.6% 4.5% – Goldman Sachs, June 2003 -12.5% -17.5% 0.7% – – – IAB/PwC, June 2003 -11.8% -15.8% – – – – Initiative Media, March 2003 – – 0.0% – – – J.P. Morgan, August 2002 -12.2% -10.8% 7.2% 11.3% 8.3% 5.5% Jupiter Research, October 2002 2.5% 1.0% 10.7% 21.8% 25.9% 21.9% Lehman Brothers, May 2002 -15.4% -13.1% 59.0% 25.0% – – Myers Report, May 2003 0.0% -8.0% 2.6% 20.0% – – PricewaterhouseCoopers, May -8.4% 0.9% 5.3% 7.5% 8.1% 8.6% 2002 Salomon Smith Barney, October – – 8.0% – – – 2002 Universal McCann, June 2003 -11.6% -15.1% 5.0% – – – Veronis Suhler Stevenson, July -11.9% 4.1% 4.0% 6.9% 5.6% 5.0% 2002 Note: *includes revenue that local newspapers generate by upselling print advertising into the newspaper's Web site and spending by e-mail marketers on all aspects of their marketing operations; **eMarketer benchmarks its online ad spending projections against the Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC) data, for which the last period measured was Q4 2002 Source: eMarketer, June 2003; various, as noted, 2002 & 2003 050437 ©2003 eMarketer, Inc. www.eMarketer.com

“Today only 2% of ad dollars are spent online, but the industry is overcoming legacy problems like overemphasizing the click-through metric and lacking reach and frequency data and cross-media planning metrics.” — Gian M. Fulgoni, chairman, comScore Networks; Advertising Research Foundation, 3 December 2002

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Methodology Even with steady growth for online advertising spending, eMarketer sees Measuring the Money: Last Year’s Perspective that growth in parallel with ad spending growth in most media. That’s why US Online Ad Spending the Internet’s share of total media spending will only inch up from 2.5% US Ofﬂine Ad Spending last year and this year to 2.8% by 2006. Cross-Media Trends Global Advertising Spending US Online Advertising Spending, 2000-2006 (as a % of Index of Charts total media spending)

2000 3.3%

2001 3.1%

2002 2.5%

2003 2.5%

2004 2.6%

2005 2.6%

2006 2.8%

Note: eMarketer benchmarks its US online ad spending projections against the Interactive Advertising Bureau/PricewaterhouseCoopers data, for which the last period measured was Q4 2002; eMarketer benchmarks its total US ad spending projections against Universal McCann, for which the last period measured was 2002 Source: eMarketer, June 2003 050430 ©2003 eMarketer, Inc. www.eMarketer.com

Putting together eMarketer’s Internet user and online ad spending ﬁgures, and it appears that spending has gone down relative to user growth. That is, spending per user in 2001 was $50, but IT is now only $39. However, as online advertising increases and the growth rate among Internet users ﬂattens, the per-user spending will increase to $46 by 2006.

US Online Advertising Spending per Online User, 2000-2006

2000 $65

2001 $50

2002 $39

2003 $39

2004 $40

2005 $42

2006 $46

Note: eMarketer's year 2000 and 2001 baselines for Internet users are from the International Telecommunication Union (ITU); eMarketer benchmarks its online ad spending projections against the Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC) data, for which the last full year measured was 2002 Source: eMarketer, June 2003 050398 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Jupiter sees online ad spending per user at a similar dollar level of $36 for Measuring the Money: Last Year’s Perspective 2002 and 2003, but expects a much sharper increase in the years ahead, up US Online Ad Spending to $64 by 2007. US Ofﬂine Ad Spending Cross-Media Trends US Online Advertising Spending per Online Household Global Advertising Spending and User, 2001-2007 Index of Charts Online Online household user 2001 $89 $39 2002 $84 $36 2003 $87 $36 2004 $99 $41 2005 $117 $48 2006 $135 $55 2007 $157 $64 Source: Jupiter Research, October 2002 044607 ©2002 eMarketer, Inc. www.eMarketer.com

Most discussion of online ad spending is focused on the B2C market. And while that makes sense in one way, since the consumer audience is the still the largest one, the B2B online ad market will become more robust over the next few years. Research from GartnerG2 on spending in the US shows the amount devoted to B2B online advertising jumping from $1.9 billion this year to $3.42 billion by 2005.

US Online B2C and B2B Advertising Spending, 2001-2005 (in billions)

2001 $7.02 $0.89

2002 $8.33 $1.33

2003 $9.66 $1.90

2004 $10.92 $2.60

2005 $12.06 $3.42

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Methodology Viewed by share of US online ad spending, B2B is projected to increase Measuring the Money: Last Year’s Perspective from 13.7% last year to 22.1% by 2005.

US Online Ad Spending

US Ofﬂine Ad Spending US Online B2C and B2B Advertising Spending,

Cross-Media Trends 2001-2005 (as a % of total spending)

Global Advertising Spending 2001 Index of Charts 88.7% 11.3%

2002 86.3% 13.7%

2003 83.6% 16.4%

2004 80.8% 19.2%

2005 77.9% 22.1%

In fact, the growth rate for B2B online ad spending far surpasses the total rate, according to GartnerG2.

US Online B2C and B2B Advertising Spending Growth, 2002-2005 (as a % increase vs. prior year) B2C B2B Total 2002 18.8% 48.7% 22.1% 2003 15.9% 43.1% 19.6% 2004 13.1% 37.2% 17.1% 2005 10.4% 31.5% 14.5% Source: GartnerG2, April 2002 050396 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology When the interactive spending focus is turned to direct marketing alone, Measuring the Money: Last Year’s Perspective research from the Direct Marketing Association indicates that B2B US Online Ad Spending companies spend more than B2C ﬁrms. In each of the four years shown, US Ofﬂine Ad Spending B2B companies spend about 60% of the annual Internet-based direct Cross-Media Trends response total. The projections from the DMA say that B2B spending will Global Advertising Spending

Index of Charts reach $5.0 billion by 2006.

Advertising Spending for Direct Marketing Interactive Media among US B2C and B2B Companies, 2000-2002 & 2006 (in billions)

2000 $1.2 $2.0 $3.2

2001 $1.4 $2.2 $3.5

2002 $1.6 $2.5 $4.0

2006 $3.3 $5.0 $8.4

One last Internet ad spending trend for this section is a cross-media one: the revenues and sales and marketing spending—plus sales and marketing spending per dollar of revenue—for publicly traded Internet-centric companies. It’s cross-media, because many of these companies market their enterprises at least partially ofﬂine as well as online. Even for some of the larger Web sites, sales and marketing spending consumes a relatively large portion of their revenues. Take Yahoo! as one example; with $953 million in revenues in 2002, the portal spent 45 cents per revenue dollar in sales and marketing. That’s a similar level of spending to CBS MarketWatch.com, at 46 cents of each revenue dollar spent on marketing endeavors.

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Methodology Other major sites spent less than the average 33 cents per revenue dollar, Measuring the Money: Last Year’s Perspective such as eBay at 29 cents, Priceline.com at 8 cents, and Amazon.com at a US Online Ad Spending mere 3 cents. US Ofﬂine Ad Spending Cross-Media Trends Publicly Traded US Internet-Centric Companies Global Advertising Spending Revenues and Sales & Marketing Spending, 2002 (in Index of Charts millions) Revenues Sales & Sales & marketing marketing spending* spending per dollar of revenue** Audible $12.4 $12.5 $1.01 SportsLine.com $62.1 $48.4 $0.78 InsWeb $25.6 $18.4 $0.72 Homestore $264.5 $187.8 $0.71 Autobytel $80.9 $49.3 $0.61 IGN Entertainment $11.4 $5.8 $0.51 MarketWatch.com $44.5 $20.5 $0.46 Yahoo! $953.1 $428.9 $0.45 LendingTree $111.4 $50.1 $0.45 iVillage $59.4 $24.4 $0.41 Knot $29.5 $11.2 $0.38 US Search.com $30.3 $11.2 $0.37 Alloy $299.3 $107.7 $0.36 Switchboard $11.7 $4.0 $0.34 TheStreet.com $20.8 $7.1 $0.34 CNet Networks $237.0 $75.8 $0.32 EarthLink $1,357.4 $407.2 $0.30 Bluefly $30.6 $8.9 $0.29 eBay $1,214.1 $352.1 $0.29 Bankrate $26.6 $7.4 $0.28 Quotesmith.com $10.8 $2.9 $0.27 Multex.com $92.4 $22.2 $0.24 United Online $167.5 $40.2 $0.24 LookSmart $96.0 $21.1 $0.22 WorldGate Communications $13.9 $2.6 $0.19 Stamps.com $16.3 $2.4 $0.15 Edgar Online $16.2 $2.3 $0.14 Ameritrade $430.8 $60.3 $0.14 Drugstore.com $193.9 $25.2 $0.13 Barnes & Noble.com $422.8 $33.8 $0.08 Overture Services $667.7 $53.4 $0.08 Priceline.com $1,003.6 $80.3 $0.08

continued on page 53

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Methodology SoundView Technology Group $108.6 $7.6 $0.07 Measuring the Money: Last Year’s Perspective Charles Schwab Corp. $4,135.0 $206.8 $0.05 US Online Ad Spending Amazon.com $3,932.9 $118.0 $0.03 US Ofﬂine Ad Spending

Cross-Media Trends Average $462.6 $71.9 $0.33 Global Advertising Spending Note: *sales and marketing "expenses typically include money for Index of Charts advertising, marketing staff salaries and other costs related to marketing and selling"; **in dollars Source: Pegasus Research International, Advertising Age, Taylor Nelson Sofres' CMR, US Securities and Exchange Commission, Bloomberg, eMarketer calculations, April 2003 049057 ©2003 eMarketer, Inc. www.eMarketer.com All these figures for online ad spending overlook one important aspect of the Internet—the billions of dollars companies pay out for various indirect forms of advertising, promotion, and marketing. For example, an article from MediaPost referred to “content integration,” or implicit advertising. “Pharmaceutical firms including Pfizer have been pushing product subtly through educational ‘advocacy’ sites that inform consumers about topics like lowering cholesterol. The FAQ-type sites stay away from heavy branding, but surely are considered part of overall online marketing strategies. This is just the sort of online ad spend that doesn’t necessarily show up in ad-seller revenue reports.”

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Methodology Viewed as a promotional vehicle, the Internet continues to get an increased Measuring the Money: Last Year’s Perspective share of spending. Research from Promo Magazine found that 15.4% of US Online Ad Spending US marketers concentrated most of their promotional budget in various US Ofﬂine Ad Spending online endeavors. Cross-Media Trends Global Advertising Spending Promotion Vehicles toward Which US Marketers Index of Charts Concentrated Most of Their Budget, 2002 (as a % of respondents)

Direct mail 36.0%

Event marketing 29.7%

P-O-P displays 23.4%

Games, contests, sweeps 20.6%

Ad specialties 19.4%

Coupons 17.1%

Premium incentives 17.1%

Sponsorship 17.1%

Co-op marketing 15.4%

Online 15.4%

Research 13.1%

In-store services 10.3%

Tie-ins/alliances 10.3%

Trade shows 9.7%

Sampling 9.1%

Entertainment tie-ins 5.7%

Licensing 4.6%

Other 4.6%

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Methodology E. Online Forecasts: Methodologies Measuring the Money: Last Year’s Perspective Analyzed US Online Ad Spending

US Ofﬂine Ad Spending Diverse estimates for online advertising spending can be confusing,

Cross-Media Trends misleading, and frustrating. However, even as spending projections come Global Advertising Spending from a mixture of knowledge and guesswork, and even as various projections Index of Charts tell different stories, there’s often simple logic behind the numbers. In trying to understand where spending figures come from, two basic questions need to be answered: What is being measured? And, how is it being measured? Once those questions are answered, as several researchers did for eMarketer, the difference between the numbers becomes a lot clearer. For example, the figures from several researchers take in the same ad formats as measured by the Interactive Advertising Bureau and PricewaterhouseCoopers, the benchmark source for eMarketer’s online ad spending estimates. The other companies that include the IAB/PwC formats are CIBC World Markets, GartnerG2, Universal McCann, and Veronis Suhler Stevenson. The same is true for the Myers Group, except it doesn’t count two minor ad vehicles: slotting fees and referrals. Take CMR/TNS as another example. While it measures all types of banners and some interstitials, it does not include formats such as rich media, paid search, or sponsorships—and therefore its Internet ad spending figures are typically less than other researchers. There’s nothing wrong with that, per se, as long as you know what elements go into the final figures. While the what-is-measured side is somewhat standardized, as is expected, the how-it-is-measured side offers great variety. CIBC, for one, tracks and extrapolates, but says it’s “not a formal survey.” CMR/TNS uses its Evaliant unit to research rate cards for online ad pricing, and then works off that base. GartnerG2 uses SEC filings and conducts personal interviews with the top 20 sites that sell advertising. Universal McCann’s methodology is grounded in the US Census Bureau’s annual survey of online information suppliers. And the Myers Group estimates future spending through a panel of advertising executives. When researchers describe their methodologies, it creates greater understanding for companies trying to use the spending data. That’s true even if the methodology is somewhat obfuscated, as in PwC’s separate survey with Wilkofsky Gruen where they “generate advertising forecasts through mathematical models.”

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Methodology Why some companies—especially investment banks such as Goldman Measuring the Money: Last Year’s Perspective Sachs, J.P. Morgan, Lehman Brothers, and Salomon Smith Barney—refuse US Online Ad Spending to disclose their methodology for measuring online advertising spending is US Ofﬂine Ad Spending essentially understandable. With big money clients at stake, they believe Cross-Media Trends the “secret-sauce” approach wins the game among the banks more often Global Advertising Spending

Index of Charts than does transparency. However, it is somewhat surprising that these ﬁnancial services ﬁrms—and others—will not disclose simply which online ad formats they include in their published measurements.

Online Ad Spending: What Is Measured? How Is It Measured?, 2003 What is measured How it is measured (ad formats) (methodology) CIBC World Same as IAB/PwC Tracks all companies on Markets the services side and media side, then extrapolates the whole sector. Based on historical IAB/PwC numbers and the outlook for companies; not a formal survey, but uses interviews to indicate trends. CMR/TNS Includes: Evaliant collects rate cards • banners (all types) from most of the sites tracked; • some interstitial where a site does not supply Does not include: its rate card, substitutes a • slotting fees streaming category average derived from media other sites within that site's • sponsorship category profile. Then applies • paid search rich media factors to the rate card values • e-mail driven by industry study of • classifieds public domain revenue data • referrals (e.g. SEC filings). These factors are further guided by agency and advertiser input and industry trends. Corzen – Proprietary modeling based on government sources-including US Census, Bureau of Labor Statistics, and SEC-Dun & Bradstreet, and market level media usage. eMarketer Same as IAB/PwC Aggregates and analyzes information from all sources. Normalizes and weighs data. Develops projections based on the best fit with all the available data. Identifies IAB/PwC as the benchmark for historical periods. GartnerG2 Same as IAB/PwC Uses SEC filings and conducts personal interviews with the top 20 sites that sell advertising (top 20 are determined by volume of ads served).

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Methodology Goldman – n/a Measuring the Money: Last Year’s Perspective Sachs US Online Ad Spending IAB/PwC • online display & Confidential survey to US Ofﬂine Ad Spending proprietary systems interactive media companies;

Cross-Media Trends (including banners, validated via public records and skyscrapers, etc.) PwC audit records. Compile Global Advertising Spending • interstitials data from over 100 companies, Index of Charts • slotting fees including non-public firms (data • rich media shown only in aggregate). • e-mail • classifieds • streaming • sponsorship • keyword (paid search) • referral J.P. Morgan – n/a Jupiter – n/a Research Lehman – n/a Brothers Myers Group Same as IAB/PwC, Primary surveys fielded regularly except does not include: by panel of advertising • slotting fees executives; asks marketers, ad • referrals agency executives, media buyers, and planners to estimate their future spending. Pricewaterh- – Use third-party sources; ouseCoopers & generate advertising forecasts Wilkofsky Gruen through mathematical models. Associates Salomon – Partnered with Avenue A to Smith Barney come up with latest research forecast. Universal Same as IAB/PwC Based on US Census Bureau's McCann annual survey of online information suppliers; skewed so the biggest suppliers are in it (10,000 establishments). Formulates projections by looking at industry trend data, including other media. Veronis Suhler Same as Uses IAB/PwC for historical Stevenson IAB/PwC data; uses CMR (top 10 advertisers and top 10 advertising categories) for projections. Does not use any independent survey research in the consumer space. Note: when information is cited as not available (n/a), that is because the company refuses to disclose the specific online ad formats it tracks or how it calculates past, current or projected online ad spending dollars Source: eMarketer, June 2003; various, as noted, 2002 & 2003 050460 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology F.Online Ad Format Spending Measuring the Money: Last Year’s Perspective While the diverse vehicles that make up the online advertising universe US Online Ad Spending

US Ofﬂine Ad Spending have not yet reached some Biblical the-ﬁrst-shall-be-last stage, they have

Cross-Media Trends been going through diverse sea changes during the past three years. Global Advertising Spending For illustration’s sake, two examples: The share of US online advertising Index of Charts spending devoted to banners shrank from 46.8% in 2000 to 29.4% in 2002, a 17.4-point fall. Meanwhile, spending on keyword search (also called paid search) rose from a 1.3% share to 15.4%, or a 14.1-point gain. In addition, the use of online sponsorships has dropped by 10.2 points during the three-year period, while classiﬁeds have increased their market share by 7.6 points.

US Online Advertising Spending, by Vehicle, 2000-2002 (as a % of total spending)

Banners 46.8% 35.4% 29.4%

Sponsorships 28.4% 26.5% 18.2%

Keyword search 1.3% 4.2% 15.4%

Classifieds 7.4% 15.7% 15.0%

Slotting fees 7.8% 8.0%

Interstitials 3.7% 3.0% 5.0%

Rich media 2.0% 2.5% 5.0%

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Methodology E-Mail Measuring the Money: Last Year’s Perspective 2.7% US Online Ad Spending 2.7% US Ofﬂine Ad Spending 4.0% Cross-Media Trends

Global Advertising Spending Referrals Index of Charts 4.3% 2.0% 1.0%

2000 2001 2002 Note: 2000 total=$8.09 billion; 2001 total=$7.13 billion; 2002 total=$6.01 billion Source: Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC), June 2003 050109 ©2003 eMarketer, Inc. www.eMarketer.com As the ad formats continue to change places, total online spending has decreased by about $2 billion. What that means for speciﬁc online vehicles is a spending shift during the three-year span shown below, where increased gains are found for only four formats: keyword search, classiﬁeds, rich media, and (barely) e-mail.

US Online Advertising Spending, by Vehicle, 2000-2002 (in millions)

Banners $3,783.2 $2,526.4 $1,764.4

Sponsorships $2,293.6 $1,889.7 $1,092.8

Keyword search $108.5 $298.7 $927.4

Classifieds $601.3 $1,118.4 $901.5

Slotting fees $553.0 $480.8

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Methodology Interstitials Measuring the Money: Last Year’s Perspective $301.5 US Online Ad Spending $214.0 US Ofﬂine Ad Spending $300.5 Cross-Media Trends

Global Advertising Spending Rich media Index of Charts $160.6 $176.8 $300.5

E-Mail $219.6 $195.6 $240.4

Referrals $347.2 $142.7 $60.1

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Methodology When you view that spending by growth rates, the astounding increases for Measuring the Money: Last Year’s Perspective paid search become clear, with triple-digit increases in both 2001 and 2002. US Online Ad Spending And, as is obvious to most people who spend time on the Web, rich media US Ofﬂine Ad Spending and interstitial (including pop-up) ads are also rising, with growth rates of Cross-Media Trends approximately 70% and 40%, respectively, last year—albeit from small bases. Global Advertising Spending Index of Charts US Online Advertising Spending, by Vehicle, 2001 & 2002 (as a % increase/decrease vs. prior year)

Keyword search 175.3% 210.5%

Rich media 10.1% 69.9%

Interstitials -29.0% 40.4%

E-Mail -11.0% 22.9%

Slotting fees -13.1%

Classifieds 86.0% -19.4%

Banners -33.2% -30.2%

Sponsorships -17.6% -42.2%

Referrals -58.9% -57.9%

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Methodology Banner Ads Measuring the Money: Last Year’s Perspective From a 46.8% share of all US online advertising spending in 2000, banners US Online Ad Spending in 2002 fell to 29.4% of the spending pie. US Ofﬂine Ad Spending Cross-Media Trends Banner Ad Spending in the US, 2000-2002 (as a % of Global Advertising Spending total spending) Index of Charts 2000 46.8%

2001 35.4%

2002 29.4%

Note: 2000 total=$8.09 billion; 2001 total=$7.13 billion; 2002 total=$6.01 billion Source: Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC), June 2003 050106 ©2003 eMarketer, Inc. www.eMarketer.com

The spending on banners last year was more than $2 billion less than only two years earlier, dropping to $1.76 billion. This drop was due both to shrinkage in total ad spending—from $8.09 billion in 2000 to $6.01 billion in 2002—and banners’ reduced portion of the online pie.

Banner Ad Spending in the US, 2000-2002 (in millions)

2000 $3,783.2

2001 $2,526.4

2002 $1,764.4

With all this, it’s worth remembering that even as spending on banners decreases, more money goes into the format than any other online vehicle. The banner is not dead; it’s just ﬁnding its place as the basic and essential display ad.

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Methodology Online Sponsorship Measuring the Money: Last Year’s Perspective Compared to the growth of formats such as paid search and rich media, US Online Ad Spending sponsorships are more like banner ads—both have retained their status as US Ofﬂine Ad Spending one of the two most used online ad vehicles and both have lost market Cross-Media Trends

Global Advertising Spending share over the past three years.

Index of Charts In 2002, 18.2% of the US online spending went into sponsorships, a greater than 10-point drop from 2000’s ﬁgure.

Online Sponsorship Ad Spending in the US, 2000-2002 (as a % of total spending)

2000 28.4%

2001 26.5%

2002 18.2%

Actual 2002 spending reached $1.09 billion, a signiﬁcant decrease from $1.89 billion the year before.

Online Sponsorship Ad Spending in the US, 2000-2002 (in millions)

2000 $2,293.6

2001 $1,889.7

2002 $1,092.8

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Methodology Search Advertising Measuring the Money: Last Year’s Perspective The most recent online search spending ﬁgures from the Interactive US Online Ad Spending Advertising Bureau and PricewaterhouseCoopers clearly show its US Ofﬂine Ad Spending tremendous growth, going from a single-digit share of the interactive ad Cross-Media Trends

Global Advertising Spending vehicle market in 2000 and 2001 to a 15.4% slice in 2002.

Index of Charts Online Search Ad Spending in the US, 2000-2002 (as a % of total spending)

2000 1.3%

2001 4.2%

2002 15.4%

“Paid search is the new gold.” — Gary Stein, analyst, Jupiter Research; San Jose Mercury-News, 7 April 2003

Translated to absolute dollars, advertisers last year spent nearly $1 billion on various forms of paid search.

Online Search Ad Spending in the US, 2000-2002 (in millions)

2000 $108.5

2001 $298.7

2002 $927.4

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Methodology The ﬁgures below unmistakably show search advertising’s spectacular Measuring the Money: Last Year’s Perspective growth, going from a strong 175.3% gain in 2001 to an even stronger US Online Ad Spending 210.5% gain in 2002. US Ofﬂine Ad Spending Cross-Media Trends Online Search Ad Spending in the US, 2001 & 2002 (as Global Advertising Spending a % increase vs. prior year) Index of Charts 2001 175.3%

2002 210.5%

“In reality, pay-per-click search is not search at all—it’s text advertisements disguised as actual search results.” — Fredrick Marckini, CEO, iProspect; avant|marketer

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Methodology Online Classified Ads Measuring the Money: Last Year’s Perspective The hurting economy is also hurting online classified spending. With the US Online Ad Spending tight job market in the US, there were fewer help-wanted ads last year than US Offline Ad Spending in 2001, both offline and online. Even so, estimates from the IAB/PwC Cross-Media Trends

Global Advertising Spending study show that online classiﬁed spending made up 15.0% of last year’s

Index of Charts $6.01 billion total, down from 2001’s ﬁgure of 15.7% and just a bit less than paid search’s 15.4% share. Even with fewer recruitment ads, the success of auction sites, most notably eBay, keeps the classiﬁed format healthy.

Online Classified Ad Spending in the US, 2000-2002 (as a % of total spending)

2000 7.4%

2001 15.7%

2002 15.0%

Total spending for online classiﬁeds dropped below $1 million last year to $901.5 million.

Online Classified Ad Spending in the US, 2000-2002 (in millions)

2000 $601.3

2001 $1,118.4

2002 $901.5

“The growth of classified advertising really is a story about cannibalization. What we saw is that offline classifieds declined about 15% last year, while online classified spending increased 38%. We’ve seen a shift in consumer behavior because online is essentially cheaper, more efficient, faster.” — Marissa Gluck, senior analyst, Jupiter Research; CNNfn, 2 May 2002

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Methodology Rich Media Measuring the Money: Last Year’s Perspective According to research from the IAB and PwC, for all the attention rich US Online Ad Spending media gets from both users and the online advertising industry alike, US Ofﬂine Ad Spending spending on the format made up only 5.0% of the total for 2002. However, Cross-Media Trends

Global Advertising Spending that share doubled the 2001 ﬁgure of 2.5%.

Index of Charts Rich Media Ad Spending in the US, 2000-2002 (as a % of total spending)

2000 2.0%

2001 2.5%

2002 5.0%

“It’s time for us to use online as a way to deliver television commercials for our clients. Real broadband opportunities are starting to present themselves.” — Jack Klues, chief executive ofﬁcer, Starcom Mediavest; Forbes.com, 23 May 2003

And even though rich media ads are more expensive to run than most banner ads, the actual dollars reached only $300.5 million in 2002.

Rich Media Ad Spending in the US, 2000-2002 (in millions)

2000 $160.6

2001 $176.8

2002 $300.5

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Methodology Interstitials & Pop-Up Ads Measuring the Money: Last Year’s Perspective In 2002, interstitials’ share of US online ad spending was 5.0%, the same as US Online Ad Spending for rich media. Also like rich media, the 2002 share rose slightly over the US Ofﬂine Ad Spending 2001 ﬁgure. The increased portion of spending going to interstitials is Cross-Media Trends

Global Advertising Spending partially due to a greater use of pop-ups.

Index of Charts Interstitial Ad Spending in the US, 2000-2002 (as a % of total spending)

2000 3.7%

2001 3.0%

2002 5.0%

“Isn’t that what advertising is supposed to be? Intrusive?” — Jim Meskauskas, chief strategic ofﬁcer, Underscore Marketing; MediaPost, 7 February 2002

Interstitial spending in 2002 totaled $300.5 million, up from $214.0 million in 2001.

Interstitial Ad Spending in the US, 2000-2002 (in millions)

2000 $301.5

2001 $214.0

2002 $300.5

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Methodology E-Mail Advertising Measuring the Money: Last Year’s Perspective When it comes to e-mail, the measured ad spending ﬁgures below do not US Online Ad Spending constitute the entire e-mail spending pie. That’s because the vast majority US Ofﬂine Ad Spending of e-mail dollars fall into some form of marketing, not necessarily ads Cross-Media Trends

Global Advertising Spending embedded in commercial e-mails.

Index of Charts That said, like rich media and interstitials, e-mail advertising increased its market share by a small amount last year, rising by 1.3 points to 4.0% of total spending.

E-Mail Ad Spending in the US, 2000-2002 (as a % of total spending)

2000 2.7%

2001 2.7%

2002 4.0%

In absolute dollars, that means e-mail advertisers spent $240 million in 2002.

E-Mail Ad Spending in the US, 2000-2002 (in millions)

2000 $219.6

2001 $195.6

2002 $240.4

“The number of e-mails people receive will only continue to increase. Our job is to break through, and that starts by targeting your e-mail and only sending information to those you know have asked for it.” — Adam Deringer, director, WebFingerprint; MediaPost, 12 August 2002

For hundreds more charts and analysis about the various online advertising vehicles, including further spending ﬁgures, see eMarketer’s companion report “Online Advertising Tactics” at: http://www.emarketer.com/products/report.php?advert_on_tact_jul03

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Methodology G. Plans for Online Ad Spending Measuring the Money: Last Year’s Perspective Measured by intent, online advertising is generally looking up. For US Online Ad Spending

US Ofﬂine Ad Spending example, in a recent survey from GartnerG2—as reported by Forbes.com in

Cross-Media Trends May 2003, “Ad agencies said they plan to bump up clients’ online spending Global Advertising Spending from 5.5% of their budgets to 6.8% by year’s end, and up to 9% by the Index of Charts close of 2004.” And in a survey from last August, 71.2% of the 176 US media and advertising polled by the Myers group said they planned to increase their online ad spending during the upcoming 12 months.

Online Advertising Spending Plans for the Next 12 Months among US Advertising Executives, August 2002 (as a % of respondents)

Decrease 7.6%

Remain the same 21.2%

Increase 71.2%

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Methodology The drill-down version of the same Myers survey found plans for relatively Measuring the Money: Last Year’s Perspective strong spending increases, with nearly one-third of those who plan to US Online Ad Spending spend more saying the increase would be in the 20% to 50% range. US Ofﬂine Ad Spending Cross-Media Trends Online Advertising Spending Plans among US Global Advertising Spending Advertising Executives for the Next 12 Months, Index of Charts August 2002 (as a % of respondents)

Increase less than 20% 19.1%

Increase 20% to 50% 32.4%

Increase 51% to 75% 8.7%

Increase 76% to 100% 2.9%

Increase 101% to 150% 4.0%

Increase 151% to 200% 2.3%

Increase 201% to 300% 0.6%

Increase 300% or more 1.2%

Total Increase 71.2%

Remain the same 21.2%

Decrease less than 20% 4.6%

Decrease 20% to 30% 0.6%

Decrease 31% to 40% 0.6%

Decrease 41% to 50% 1.2%

Decrease 50% or more 0.6%

Total Decrease 7.6%

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Methodology Spending for interactive marketing, in general, will see a 0.6% increase in Measuring the Money: Last Year’s Perspective 2003, according to a study from Havas, the Paris-based advertising agency, US Online Ad Spending and the London Business School. That ﬁgure may be small, but it’s greater US Ofﬂine Ad Spending than for other categories such as media advertising, sales promotion, and Cross-Media Trends direct mail. Global Advertising Spending

Index of Charts “Online tracks as traditional media does. When budgets are ﬂush, people are spending, and when budgets are tight, it gets tight across the board.” — George Shabab, senior vice president, CMR; Interactive Advertising & Branding News, 1 April 2002

The increases for spending allocation are based in more effective use of the Internet. The Wall Street Journal reported, “The study’s authors explain that marketers now are using the Web for more than Internet ads, and they like what they see. E-mail marketing and Web sites, for instance, have proved to be useful tactics not only to drive sales but also to gather information about customers.”

Marketing Spending Allocation in the US, by Category, 2002 & 2003 (as a % increase/decrease vs. prior year)

Media advertising -1.0% 0.4%

Sales promotion 0.1% -1.0%

Direct mail 0.4% 0.1%

PR/sponsorship -0.3% -0.3%

Interactive marketing 0.7% 0.6%

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Methodology Good news like that from GartnerG2, Myers, and Havas is certainly welcome Measuring the Money: Last Year’s Perspective by the lately beleaguered online ad industry. The economy’s rundown state US Online Ad Spending has put many ad budgets on a diet, as spending remains under ﬁre. When US Ofﬂine Ad Spending Insight Express asked over 1,000 US media planners earlier this year, in a Cross-Media Trends survey sponsored by MediaPost, if they agreed with the statement that the Global Advertising Spending

Index of Charts current economy signiﬁcantly impacts this year’s media budgets, 52% came out in the afﬁrmative. In contrast, only 19% of the ad-industry people believe that the economy does not affect their media budgets.

US Media Planners’ Opinions Regarding Whether the Economy Significantly Impacts Media Budgets, 2003 (as a % of respondents)

Agree 52%

Neutral 29%

Disagree 19%

That take on the connection between a ﬂatlined economy and US advertising is why 64% of those same planners believe their jobs will be tougher in 2003 than in 2002.

US Media Planners’ Opinions Regarding Whether their Jobs Will Be Tougher, 2003 vs. 2002 (as a % of respondents)

Agree 64%

Neutral 23%

Disagree 13%

“Many people hunkered down to survive through the sluggish economy in 2002. The outlook for 2003 appears to be completely different, almost diametrically opposed. Three times as many people anticipate spending increases as those who expect further cutbacks.” — Craig Shields, partner, Patrick Marketing Group; MediaPost, 7 October 2002

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Methodology But budgets, like plans, are made to be changed. That plans concerning Measuring the Money: Last Year’s Perspective spending are particularly flexible might be an understatement. The US Online Ad Spending MediaPost survey also found that one-third of US media professionals plan US Offline Ad Spending their budgets quarter by quarter, while about the same amount plan annually. Cross-Media Trends But note that nearly one in five plan spending only one month in Global Advertising Spending

Index of Charts advance, ready to shift in response to client, market, or economic changes.

How Far in Advance Do US Media Professionals Plan Spending, 2003 (as a % of respondents)

One month 18%

One quarter 33%

Bi-annually 12%

Yearly 31%

Other 6%

The same MediaPost survey found that of the 487 respondents who plan to spend more this year, 36% will increase budgets for online advertising— more so than for cable TV, radio, or any other media.

Ad Media that US Media Planners Will Be Spending More on in 2003 (as a % of respondents)

Online 36%

Cable TV 31%

Radio 23%

Network TV 19%

Magazines 18%

Outdoor 13%

Newspaper 11%

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Methodology Note, however, that just because more of these media planners intend to Measuring the Money: Last Year’s Perspective increase spending for online ads, it doesn’t mean more will be spent for US Online Ad Spending online than for other media. In fact, 23% of the 1,092 respondents said they US Ofﬂine Ad Spending expect to focus most of their media spending on network TV. However, 19% Cross-Media Trends cited the Internet as their prime focus for media ad spending—which if true Global Advertising Spending

Index of Charts would indicate a substantial increase for US online ad spending this year.

Where US Media Planners Expect to Focus Most of Their Media Spending in 2003 (as a % of respondents)

Outdoor 1% Other 14% Network TV Cable TV 23% 8% Radio 9% Online 19% Newspaper 10% Magazines 16%

And of the 191 respondents to the MediaPost survey who said they’d be spending less this year for advertising, most cited radio, outdoor ads, and newspapers as the media targeted for decreased spending. Only 13% mentioned the Internet, the same ﬁgure as for cable TV.

Ad Media that US Media Planners Will Be Spending Less on in 2003 (as a % of respondents)

Radio 20%

Outdoor 20%

Newspaper 20%

Magazines 18%

Network TV 16%

Online 13%

Cable TV 13%

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Methodology “It’s been pretty easy for big advertisers to try a lot Measuring the Money: Last Year’s Perspective of different things on the Web, because the US Online Ad Spending medium is so inexpensive right now. They can US Ofﬂine Ad Spending afford to stick with 3% of the budget, and try to Cross-Media Trends

Global Advertising Spending ﬁgure out what works.”

Index of Charts — Charles Buchwalter, vice president of client analytics, Nielsen//NetRatings; The New York Times, 24 June 2002

What are the most important elements that will sway advertising executives to increase their online ad spending? According to a Myers Group survey from last year, the three most inﬂuential issues are improved conversion rates, the increasingly effective creative opportunities, and improved research capabilities.

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Methodology

Measuring the Money: Issues US Advertising Executives Rate as “Very” or Last Year’s Perspective “Extremely Influential” for Increasing Online Ad US Online Ad Spending Spending in the Next 12 Months, August 2002 (as a % US Ofﬂine Ad Spending of respondents) Cross-Media Trends

Global Advertising Spending Improved online conversion rates Index of Charts 69.9%

Increasingly effective creative opportunities 64.9%

Improved research capabilities 61.0%

Lower CPMs 54.3%

Overall media budget increases 53.5%

Improved click-through rates 53.2%

Increased emphasis on branding 51.7%

Lower production costs 41.2%

Improved sales competence 40.4%

Lower administrative costs 38.4%

Increased market consolidation 25.1%

Improved stewardship of schedules 24.6%

Independently audited post-buy data 24.4%

Standard production requirements 22.8%

Greater Web site compliance with creative standards 22.2%

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Methodology H. Pricing Models, Pricing Trends Measuring the Money: Last Year’s Perspective As the previous chart from the Myers Group indicates, lower CPMs (cost per US Online Ad Spending

US Ofﬂine Ad Spending thousand) is an issue that can inﬂuence over 54% of advertisers to increase

Cross-Media Trends their online ad spending. Pricing by CPMs is typically applied to ad formats Global Advertising Spending such as banners, rich media, or interstitials, where the measured Index of Charts “thousand” is the ad impression. Here’s how an impression’s CPM might be calculated: A Web publisher that charges $1,200 per ad and reports 75,000 visits has a CPM of $16 ($1,200 divided by 75). This pricing model is also called cost-per-view (CPV). Another common pricing method for online ads is performance based. The main performance measurements include: Cost-per-click (CPC), where advertisers pay on the basis of how many users click on their ads. Many online publishers resist this pricing model, since click-throughs have dropped greatly. Cost-per-action (CPA) is an expanded version of CPC, since with this measurement the cost of an ad is based on the user taking some speciﬁcally deﬁned action in response to an ad, such as registering on the advertiser’s Web site. Cost-per-lead (CPL), where advertisers with an offer or promotion specify the number of leads they want to generate, and pay only for those that are delivered. Cost-per-acquisition (CPA) is similar to CPL, but in this case, advertisers pay only when users make an actual purchase or acquisition. (Also called “cost-per-buy” or “cost-per-sale.”)

“It’s also much less costly doing marketing online versus TV and/or print. Not only for our brands, but for the smaller brands that have to be frugal.” — Jean Pundiak, senior e-marketing manager, AstraZeneca; iMedia Connection; 16 January 2003

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Methodology Within this alphabet soup of CPMs and CPCs, which pricing model works Measuring the Money: Last Year’s Perspective best depends on the advertiser’s objectives and the publisher’s needs, as US Online Ad Spending well as both sides’ tolerance levels for absorbing ﬁnancial risk. The weak US Ofﬂine Ad Spending economy has also caused a shift in pricing models, according to the Cross-Media Trends IAB/PwC research. While 45% of US online ad revenues in 2002 came from Global Advertising Spending

Index of Charts CPM pricing, about the same as the previous two years, a shift to paying only for what you get means that performance deals garnered 21% of revenues, up from 12% in 2001.

US Online Advertising Revenues, by Pricing Model, 2000-2002 (as a % of total revenues)

CPM or impression 43% 48% 45%

Hybrid 47% 40% 34%

Performance deals 10% 12% 21%

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Methodology That shift meant revenues based on performance deals grew by 47.4% in Measuring the Money: Last Year’s Perspective 2002, the only pricing model with revenue growth.

US Online Ad Spending

US Ofﬂine Ad Spending US Online Advertising Revenue Growth, by Pricing Cross-Media Trends Model, 2001 & 2002 (as a % increase/decrease vs.

Global Advertising Spending prior year)

Index of Charts CPM or impression -1.5% -21.0%

Hybrid -24.9% -28.4%

Performance deals 5.9% 47.4%

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Methodology Advertisers spent $1.26 billion on ads bought through performance deals Measuring the Money: Last Year’s Perspective last year, $2.70 billion using CPM deals, and a bit over $2 billion using US Online Ad Spending hybrid pricing that mixes elements of CPM’s guaranteed price and US Ofﬂine Ad Spending performance’s accountability. Cross-Media Trends Global Advertising Spending US Online Advertising Revenues, by Pricing Model, Index of Charts 2000-2002 (in billions)

CPM or impression $3.48 $3.42 $2.70

Hybrid $3.80 $2.85 $2.04

Performance deals $0.81 $0.86 $1.26

“The Internet will transform advertising because of its trackability, not its beauty.” — Eric Schmidt, chairman and CEO, Google; Jupiter/IAB Ad Forum, October 2002

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Methodology Jupiter Research offers a somewhat different way of deﬁning pricing Measuring the Money: Last Year’s Perspective models, adding sponsorship to the list along with impression’s CPM and US Online Ad Spending pay-for-performance. In 2002, 42.5% of deals were priced by impression, US Ofﬂine Ad Spending similar to the IAB/PwC’s 45%. But Jupiter sees performance deals as a Cross-Media Trends stronger component, at 26.2% last year—compared to 21% from the Global Advertising Spending

Index of Charts IAB/PwC—and growing to one-third of all pricing by 2007.

US Online Advertising Spending, by Pricing Model, 2001-2007 (as a % of total media buys) Impression Sponsorship Performance 2001 42.7% 32.6% 24.8% 2002 42.5% 31.3% 26.2% 2003 42.4% 30.0% 27.7% 2004 42.2% 28.6% 29.1% 2005 42.1% 27.3% 30.6% 2006 41.9% 26.0% 32.0% 2007 41.8% 24.7% 33.5% Note: excludes online classified advertising Source: Jupiter Research, October 2002 044957 ©2002 eMarketer, Inc. www.eMarketer.com

Translated to dollars, Jupiter expects $1.3 billion to be spent on performance deals in 2003, while $2.0 billion will be spent on an impression basis.

US Online Advertising Spending, by Pricing Model, 2001-2007 (in millions) Impression Sponsorship Performance 2001 $1,909 $1,459 $1,108 2002 $1,850 $1,361 $1,141 2003 $2,017 $1,426 $1,317 2004 $2,492 $1,690 $1,719 2005 $3,206 $2,082 $2,330 2006 $3,971 $2,463 $3,034 2007 $4,870 $2,878 $3,903 Note: does not include online classified advertising Source: Jupiter Research, October 2002 050403 ©2003 eMarketer, Inc. www.eMarketer.com

Even as a greater percentage of online ad deals are made pay-for- performance, CPM payments still prevail among pricing models. Not only do publishers prefer them, but as CPM prices fall, they become more attractive to advertisers too. According to Jupiter, the average effective CPM in 2002 dropped by 21.4% to $2.04. (Effective means after discounting and other negotiations.)

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Methodology “Online marketing is cheap, and it works.” Measuring the Money: Last Year’s Perspective — Denise Garcia, director of research, GartnerG2; MediaPost, 30 May 2002 US Online Ad Spending US Ofﬂine Ad Spending After another average CPM decrease this year, down by 5.9% to $1.93, Cross-Media Trends Jupiter expects a turnaround from the current buyer’s market in 2004. In Global Advertising Spending

Index of Charts that year and the three following, the ﬁrm predicts a steady double-digit rise in CPM pricing for online advertising, reaching $3.26 by 2007. The two main factors behind CPM growth are better targeting for ads, which make them more valuable, and increased use of rich media ads, which simply cost more to implement.

Effective CPM for US Online Advertising, 2001-2007

2001 $2.60

2002 $2.04

2003 $1.93

2004 $2.12

2005 $2.45

2006 $2.79

2007 $3.26

Effective CPM for US Online Advertising, 2002-2007 (as a % increase/decrease vs. prior year)

-21.4% 2002

-5.9% 2003

2004 10.1%

2005 15.7%

2006 13.6%

2007 17.0%

Those increased CPMs will lead to a win-win situation. More effective targeting is one key to establishing the Internet as a tool for both direct response and branding. And rich media’s use for branding is something that’s drawing in the larger companies, plus some content sites are ﬁnding they can charge more. It’s one way that both the advertiser and the publisher see potential beneﬁts.

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Methodology For now, Nielsen//NetRatings sees a wide range in rate-card CPM (meaning Measuring the Money: Last Year’s Perspective the non-negotiated, non-discounted CPM). During the last two quarters of US Online Ad Spending 2002, the average CPM for full banner ads peaked at $52.50 on B2B Web US Ofﬂine Ad Spending sites; hovered in the teens on sites such as news, health, and travel; and Cross-Media Trends were less than $5 on movie, search engine, and gaming sites, for example. Global Advertising Spending

Index of Charts Average Full Banner Rate Card* in the US, by Web Site Genre, Q3 2002-Q4 2002 (in dollars per thousand impressions)

B2B $52.50

Automotive $37.86

Computing and technology $28.19

Home garden $25.00

Local and regional $25.00

Yellow and white pages $25.00

Sports and recreation $22.00

Business anad finance $20.00

General news $17.96

Fashion, romance and celebrity $16.71

Reference and education $15.52

Health and fitness $15.00

Community $13.00

Employment $11.00

Travel $11.00

continued on page 85

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Methodology Portal Measuring the Money: Last Year’s Perspective $10.70

US Online Ad Spending ISP and telecommunications US Ofﬂine Ad Spending $9.57 Cross-Media Trends Global Advertising Spending Kids and family Index of Charts $9.50

Shopping and auction $5.33

Incentive $4.00

Movies and television $3.50

Personal expression $2.00

Search engine $1.75

Games $0.75

Note: data limited to the advertising technologies and Web sites that Nielsen//NetRatings' AdRelevance service tracks; AdRelevance does not probe inside the AOL proprietary network; *rate card means non-negotiated value Source: Nielsen//NetRatings, January 2003 047445 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Transaction Types Measuring the Money: Last Year’s Perspective No matter the pricing model, and regardless of the speciﬁc price, cash deals US Online Ad Spending made up 90% of all online advertising transactions in 2002, according to US Ofﬂine Ad Spending the IAB/PwC researchers, accounting for $5.41 billion in revenues. Cross-Media Trends

Global Advertising Spending But with some advertisers and Web sites still hurting ﬁnancially, there’s

Index of Charts been a rise in barter deals, at 10% of total revenues in both 2001 and 2002.

US Online Advertising Revenues, by Transaction Type, 2000-2002 (as a % of total revenues)

Cash 93% 89% 90%

Barter/trade 6% 10% 10%

Packaged deals 1% 1% 0%

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Methodology

Measuring the Money: US Online Advertising Revenues, by Transaction Type, Last Year’s Perspective 2000-2002 (in billions) US Online Ad Spending

US Ofﬂine Ad Spending Cash Cross-Media Trends $7.52 Global Advertising Spending $6.35 Index of Charts $5.41

Barter/trade $0.49 $0.71 $0.60

Packaged deals $0.08 $0.07 $0.00

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Advertising Spending

Methodology 7

I Measuring the Money: Last Year’s Perspective 11

II US Online Ad Spending 17 III US Offline Ad Spending 89 A. Spending Plans for Total Media 90 B. Total Media Spending 92 C. The Offline Ad Market 98 III D. Broadcast Spending 112 E. Print Spending 116 F.Other Offline Spending 121

IV Cross-Media Trends 125

V Global Advertising Spending 177

Index of Charts 237

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Methodology While some marketers offer reasons for increasing or decreasing online ad Measuring the Money: Last Year’s Perspective spending based solely on their analysis of the Internet’s effectiveness, the US Online Ad Spending influences on ad spending allocation are increasingly part of cross-media US Offline Ad Spending objectives. That is, you can’t estimate where online ad spending is going Cross-Media Trends without looking also at offline spending. Global Advertising Spending

Index of Charts A. Spending Plans for Total Media Research by InsightExpress, sponsored by MediaPost, found that 45% of US media planners intend to increase their entire media budgets in 2003. Nearly as many, or 38%, expect no change in budgets; and only 17% said they’d be shrinking ad spending.

US Media Planners’ Opinions Regarding the Change in Size of Media Budgets in 2003 (as a % of respondents)

Remain the same 38% Increase 45%

Decrease 17%

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Methodology More optimistic media spending plans came out of DoubleClick’s research Measuring the Money: Last Year’s Perspective from December 2002. Among the 51% of companies expecting budget US Online Ad Spending increases, the average increase is 11%. And only 6% of marketers said they US Ofﬂine Ad Spending planned to decrease budgets. Cross-Media Trends Global Advertising Spending Change in Marketing Budget among US Marketers, Index of Charts 2003 vs. 2002 (as a % of respondents)

Budget decrease 6%

Stay the same 43% Budget increase 51%

However, like researcher estimates, advertiser spending plans are a moving target. While 67.5% of the US marketers surveyed by the Myers Group said they intend to increase advertising and marketing budgets in 2003, the largest portion (45%) pointed to mild budget increases in the 1% to 8% range.

US Marketers' Intent to Increase or Decrease Advertising and Marketing Budgets, 2003 (as a % of respondents)

Decrease budget Increase budget 12.5% by more than 8% Stay the 22.5% same 20.0%

Increase budget by 1% to 8% 45.0%

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Methodology B. Total Media Spending Measuring the Money: Last Year’s Perspective Total US advertising spending will reach $248.25 billion this year, US Online Ad Spending

US Ofﬂine Ad Spending according to eMarketer. That represents a 4.9% gain over last year’s

Cross-Media Trends $236.75 billion ﬁgure, benchmarked against spending research from Global Advertising Spending Universal McCann through 2002. As with Universal’s estimates, eMarketer Index of Charts includes the following media, both national and local, in its ad spending projections: television, radio, newspapers, magazines, Internet, direct mail, yellow pages, and outdoor.

US Advertising Spending, 2000-2006 (in billions)

2000 $247.50

2001 $231.30

2002 $236.75

2003 $248.25

2004 $263.50

2005 $277.50

2006 $293.00

Note: eMarketer benchmarks its US ad spending projections against Universal McCann, for which the last period measured was 2002 Source: eMarketer, June 2003 050442 ©2003 eMarketer, Inc. www.eMarketer.com

With help from the national elections and the Olympic games, ad spending in 2004 will rise by 6.1%. However, while eMarketer expects continued increases of 5.3% and 5.6% in both 2005 and 2006, respectively, the lift in spending will remain relatively ﬂat as the economy continues to ﬂounder.

US Advertising Spending Growth, 2000-2006 (as a % increase/decrease vs. prior year)

-6.5% 2001

2002 2.4%

2003 4.9%

2004 6.1%

2005 5.3%

2006 5.6%

Note: eMarketer benchmarks its US ad spending projections against Universal McCann, for which the last period measured was 2002 Source: eMarketer, June 2003 050441 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology “The truth is that traditional media are all as Measuring the Money: Last Year’s Perspective different from each other as the Net is from them.” US Online Ad Spending — Paul DeBraccio, CEO, Interevco; Media, April 2003 US Ofﬂine Ad Spending

Cross-Media Trends Looking just at 2003, comparative estimates for US ad spending growth Global Advertising Spending

Index of Charts range from Global Insight at the high end of 6.0% down to the Myers Group at 1.5%. Most important, however, is that all 14 researchers predict spending gains this year.

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Methodology

Measuring the Money: Comparative Estimates: US Advertising Spending Last Year’s Perspective Growth, 2003 (as a % increase/decrease vs. prior year) US Online Ad Spending

US Ofﬂine Ad Spending Global Insight, November 2002 Cross-Media Trends 6.0% Global Advertising Spending Jupiter Research, October 2002 Index of Charts 5.3%

Veronis Suhler Stevenson, July 2002 5.3%

Standard & Poor's, August 2002 5.1%

eMarketer*, June 2003 4.9%

Universal McCann, June 2003 4.6%

J.P. Morgan H&Q, August 2002 4.5%

Morgan Stanley, November 2002 4.4%

Initiative Media, March 2003 3.5%

CMR/TNS, March 2003 3.3%

CIBC World Markets, November 2002 3.1%

PricewaterhouseCoopers, May 2002 3.0%

Zenith Optimedia, April 2003 2.2%

Myers Report, May 2003 1.5%

Note: all firms' figures include TV, radio, magazines, newspapers, outdoor and Internet (except Global Insight and Jupiter, which do not include outdoor); in addition, CIBC, eMarketer, Global Insight, J.P. Morgan, Jupiter, and Universal McCann include direct mail; eMarketer, Jupiter, Morgan Stanley, Myers, Universal McCann, and Veronis include yellow pages; Initiative Media and Zenith include cinema; CIBC, eMarketer, Global Insight, J.P. Morgan, Jupiter, and Universal McCann include other or miscellaneous categories; *eMarketer benchmarks its US ad spending projections against Universal McCann, for which the last period measured was 2002 Source: eMarketer, June 2003; various, as noted, 2002 & 2003 050439 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology “Advertising accounts for 30% of all communications Measuring the Money: Last Year’s Perspective spending and has a cyclical relationship with the US Online Ad Spending economy. So as the economy improves, we expect US Ofﬂine Ad Spending advertising and therefore communications Cross-Media Trends

Global Advertising Spending spending to grow in a parallel path.”

Index of Charts — James P.Rutherfurd, executive vice president,Veronis Suhler Stevenson; The New York Times, 5 August 2002

Expanding the view from this year to the six-year span from 2001 to 2006 shows that all researchers with estimates for the next three years project increased ad spending. Seven of the eight growth rates listed for 2004, for example, fall into a relatively narrow two-point range from 5.3% to 7.3%.

Comparative Estimates: US Advertising Spending Growth, 2001-2006 (as a % increase/decrease vs. prior year) 2001 2002 2003 2004 2005 2006 CIBC World Markets, November 2002 -6.9% 0.5% 3.1% ––– CMR/TNS, March 2003 -1.4% 1.1% 3.3% ––– Corzen, January 2003 – 4.0% –––– eMarketer*, June 2003 -6.5% 2.4% 4.9% 6.1% 5.3% 5.6% Global Insight, November 2002 -6.8% 3.0% 6.0% 5.7% 5.6% 5.6% Initiative Media, March 2003 ––3.5% ––– J.P. Morgan H&Q, August 2002 -6.4% 1.9% 4.5% 5.3% 5.1% 4.9% Jupiter Research, October 2002 -3.7% 2.3% 5.3% 6.0% 4.6% 4.3% Morgan Stanley, November 2002 -10.9% 2.9% 4.4% ––– Myers Report, May 2003 -4.1% 2.5% 1.5% 5.3% – – PricewaterhouseCoopers, May 2002 -7.7% 1.1% 3.0% 7.3% 5.3% 6.5% Standard & Poor's, August 2002 -6.5% 2.7% 5.1% ––– Universal McCann, June 2003 -6.5% 2.4% 4.6% 6.5% – – Veronis Suhler Stevenson, July 2002 -6.2% 2.9% 5.3% 7.2% 5.9% 6.3% Zenith Optimedia, April 2003 -1.9% 1.4% 2.2% 4.5% 3.3% – Note: all firms' figures include TV, radio, magazines, newspapers, outdoor and Internet (except Global Insight and Jupiter, which do not include outdoor); in addition, CIBC, eMarketer, Global Insight, J.P. Morgan, Jupiter, and Universal McCann include direct mail; eMarketer, Jupiter, Morgan Stanley, Myers, Universal McCann, and Veronis include yellow pages; Initiative Media and Zenith include cinema; CIBC, eMarketer, Global Insight, J.P. Morgan, Jupiter, and Universal McCann include other or miscellaneous categories; Corzen includes directories, alternative newspapers, and telemarketing; *eMarketer benchmarks its US ad spending projections against Universal McCann, for which the last period measured was 2002 Source: eMarketer, June 2003; various, as noted, 2002 & 2003 050443 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Translated to dollars, however, and the ad spending numbers go all over the Measuring the Money: Last Year’s Perspective map. That’s largely because different researchers base their ﬁgures on

US Online Ad Spending different media components. While all 15 firms charted below include TV, US Offline Ad Spending radio, magazines, newspapers, the Internet, and outdoor (except for Global Cross-Media Trends Insight and Jupiter, which do not include outdoor), several do not include Global Advertising Spending direct mail, a $45 billion-plus business. That omission helps partially to Index of Charts explain the low figures from Taylor Nelson Sofres’s CMR division, Morgan Stanley, and PricewaterhouseCoopers, to name three.

Comparative Estimates: US Advertising Spending, 2001-2006 (in billions) 2001 2002 2003 2004 2005 2006 CIBC World Markets, $219.75 $220.87 $227.68 – – – November 2002 CMR/TNS, March $112.55 $113.75 $117.50 – – – 2003 Corzen, January $224.08 $232.97 – – – – 2003 eMarketer*, $231.30 $236.75 $248.25 $263.50 $277.50 $293.00 June 2003 Global Insight, $221.40 $228.00 $241.70 $255.40 $269.80 $285.00 November 2002 Initiative Media, – $99.15 $102.57 – – – March 2003 J.P. Morgan H&Q, $234.02 $238.46 $249.18 $262.41 $275.85 $289.31 August 2002 Jupiter Research, $231.04 $236.40 $248.90 $263.85 $276.00 $287.88 October 2002 Morgan Stanley, $151.20 $155.57 $162.44 – – – November 2002 Myers Report, May $156.90 $160.89 $163.31 $171.95 – – 2003 Pricewaterhouse- $148.80 $150.38 $154.96 $166.29 $175.13 $186.47 Coopers, May 2002 Standard & Poor's, $231.00 $237.20 $249.20 – – – August 2002 Universal McCann, $231.30 $236.75 $247.73 $263.80 – – June 2003 Veronis Suhler $172.11 $177.15 $186.51 $200.03 $211.93 $225.25 Stevenson, July 2002 Zenith Optimedia, $141.64 $143.55 $146.67 $153.34 $158.32 – April 2003 Note: all firms' figures include TV, radio, magazines, newspapers, outdoor and Internet (except Global Insight and Jupiter, which do not include outdoor); in addition, CIBC, eMarketer, Global Insight, J.P. Morgan, Jupiter, and Universal McCann include direct mail; eMarketer, Jupiter, Morgan Stanley, Myers, Universal McCann, and Veronis include yellow pages; Initiative Media and Zenith include cinema; CIBC, eMarketer, Global Insight, J.P. Morgan, Jupiter, and Universal McCann include other or miscellaneous categories; Corzen includes directories, alternative newspapers, and telemarketing; *eMarketer benchmarks its US ad spending projections against Universal McCann, for which the last period measured was 2002 Source: eMarketer, June 2003; various, as noted, 2002 & 2003 050444 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology On a quarter-by-quarter basis, the 2003 full year growth rate of 3.3% from Measuring the Money: Last Year’s Perspective CMR/TNS breaks down to higher increases in the ﬁrst half of 4.2% and 4.7%, US Online Ad Spending with slackening growth rates of 2.7% and 1.6% during 2003’s second half. US Ofﬂine Ad Spending Cross-Media Trends Advertising Spending in the US, 2003 (as a % growth Global Advertising Spending vs. prior year) Index of Charts First half 2003 4.5%

Q1 2003 4.2%

Q2 2003 4.7%

Second half 2003 2.1%

Q3 2003 2.7%

Q4 2003 1.6%

Full year 2003 3.3%

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Methodology C. The Ofﬂine Ad Market Measuring the Money: Last Year’s Perspective Another way to segment the ad market is national and local. In recent data US Online Ad Spending

US Ofﬂine Ad Spending from Universal McCann, the 2003 outlook for national advertising is

Cross-Media Trends $153.06 billion, or 62% of the market, while it’s $94.66 billion for local, or Global Advertising Spending a 38% share. Index of Charts And according to CMR/TNS—which does not include direct mail, for example—while more money was spent for national advertising in 2002 ($75.3 billion), local advertising grew more quickly (by 11.1%) over the prior year.

US Local and National Advertising Spending, 2001 & 2002 (in billions) January - January - % change December December 2001 2002 National advertising $74.7 $75.3 0.7% Local advertising $37.8 $42.0 11.1% Source: CMR/TNS Media Intelligence, March 2003 047888 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology By Media Measuring the Money: Last Year’s Perspective Which media get the most ad dollars? The “Outlook for Advertising and US Online Ad Spending Media” report from Global Insight points to nearly no shifts in media share US Ofﬂine Ad Spending from 2001 to 2006. For instance, ad spending in newspapers will drop from Cross-Media Trends

Global Advertising Spending a 23% share to 22%; direct mail will remain stable at 19%; and the Internet,

Index of Charts like cable TV, will increase by one share point.

US Advertising Spending Share, by Media, 2001 & 2006

Newspapers 23% 22%

Broadcast TV 21% 20%

Direct mail 19% 19%

Radio 8% 8%

Cable TV 6% 7%

Magazines 5% 5%

Internet 2% 3%

Other 16% 16%

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Methodology Turning from media share to spending growth rates, CMR/TNS expects Measuring the Money: Last Year’s Perspective Spanish language TV, the Internet, and cable network TV to gain the largest US Online Ad Spending increases in 2003—all surpassing the company’s average 3.3% growth rate. US Ofﬂine Ad Spending Cross-Media Trends Advertising Spending in the US, by Media, 2003 (as a Global Advertising Spending % growth vs. prior year) Index of Charts Spanish language TV (1) 9.2%

Internet (2) 7.4%

Cable network TV 4.8%

Radio (Local, network and national spot) (3) 3.8%

B2B magazine (4) 3.6%

Outdoor 3.4%

Consumer/Sunday magazines 2.7%

Network TV 2.7%

Newspapers (national and local) 2.6%

Syndication 2.5%

Spot TV 1.9%

Note: (1) includes expenditures from Univision and Telemundo; (2) figures provided by Evaliant, a CMR/TNS Company; (3) Local radio includes expenditures for 30 markets in the US; (4) figures based on Business Information Network (BIN) data as reported by CMR/TNS Media Intelligence to the American Business Media (ABM) Source: CMR/TNS Media Intelligence, January 2003 046635 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology The most recent figures from CMR/TNS, for Q1 2003, show a total growth Measuring the Money: Last Year’s Perspective rate of 4.9%. Several media are doing substantially better than that US Online Ad Spending average, however. Ad spending on cable TV jumped by 18.0%, reaching US Offline Ad Spending more than $2.5 billion in the first quarter. Consumer magazines are also Cross-Media Trends participating in an ad recovery, increasing by 12.0% to more than $3.7 Global Advertising Spending

Index of Charts billion. And Internet advertising posted a 12.2% gain, with spending at more than $1.5 billion.

US Advertising Spending, by Media, Q1 2002 vs. Q1 2003 (in millions and as a % increase/decrease vs. prior year) Q1 2002 Q1 2003 % change Network TV $5,369.0 $5,050.0 5.9% Spot TV $3,716.1 $3,736.8 0.6% Cable TV (1) $2,123.9 $2,506.3 18.0% Syndication-national $709.2 $812.1 14.5% Spanish language network TV (2) $426.5 $509.7 19.5% Local radio (3) $1,334.7 $1,397.7 4.7% National spot radio $474.2 $526.9 11.1% Network radio $208.1 $227.0 9.1% Total broadcast $14,361.6 $14,766.6 2.8% Consumer magazines $3,307.6 $3,705.8 12.0% B2B magazines $1,898.9 $2,003.6 5.5% Sunday magazines $303.3 $328.9 8.4% Local magazines $69.8 $77.1 10.4% Local newspapers $4,639.1 $4,843.4 4.4% National newspapers $680.5 $675.9 -0.7% Total print $10,899.2 $11,634.7 6.7% Internet $1,355.0 $1,520.2 12.2% Outdoor $550.6 $562.4 2.2% Grand total $27,166.3 $28,483.9 4.9% Note: (1) based on 37 networks; (2) includes Univision, Telemundo and Telefutura; (3) based on spending in 32 markets Source: TNS Media Intelligence/CMR, June 2003 050400 ©2003 eMarketer, Inc. www.eMarketer.com

CMR/TNS competitor Nielsen Media Research is another company measuring the whole ad space. In Nielsen’s analysis of Q1 2003 ad spending, it too sees Hispanic TV and national magazines with large increases of 15.1% and 14.4%, respectively. However, Nielsen did not report ﬁgures for online ad spending.

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Methodology Furthermore, the New York-based research firm put total ad spending Measuring the Money: Last Year’s Perspective growth at only 1.5% for the first quarter, compared to the CMR/TNS figure US Online Ad Spending of 4.9%. One possible reason for the difference is that Nielsen is measuring US Offline Ad Spending a smaller set of media than CMR/TNS. Cross-Media Trends Global Advertising Spending US Advertising Spending Growth, by Media, Q1 2003 Index of Charts (as a % increase/decrease vs. Q1 2002)

Hispanic TV 15.1%

National magazines 14.4%

Local newspapers 8.9%

Spot radio 3.9%

Total 1.5%

Spot TV 1.4%

Network radio 0.3%

-4.8% Syndicated TV

-5.0% National newspapers

-5.1% Cable TV

-5.2% Network TV

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Methodology Looking back to last year, CMR/TNS said that Spanish language TV was the Measuring the Money: Last Year’s Perspective growth leader for ad spending, increasing by 20.4% to $1.95 billion. And US Online Ad Spending by dollars alone, advertisers spent $20.09 billion on local newspapers, just US Ofﬂine Ad Spending slightly more than they spent on network TV, at $20.02 billion. Cross-Media Trends Global Advertising Spending US Advertising Spending, by Media, 2001 & 2002 (in Index of Charts billions and as a % increase/decrease vs. prior year) 2001 2002 % change Network TV $18.64 $20.02 7.4% Spot TV $14.35 $16.36 14.0% Cable $10.30 $10.59 2.9% Syndication-national $3.19 $2.95 -7.7% Spanish language network TV $1.62 $1.95 20.4% Local radio $5.06 $5.60 10.5% National spot radio $2.17 $2.45 13.2% Network radio $0.83 $.97 15.7% Total broadcast $56.15 $60.87 8.4% Consumer magazines $16.50 $16.79 1.8% B2B magazines $8.40 $7.22 -13.9% Sunday magazines $1.14 $1.26 10.6% Local newspapers $18.43 $20.09 9.0% National newspapers $2.95 $2.81 -4.6% Total for print $47.42 $48.19 1.6% Internet $6.52 $5.74 -11.9% Outdoor $2.46 $2.48 0.8% Grand total $112.55 $117.27 4.2% Source: TNS Media Intelligence/CMR, March 2003 047887 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology By Industry & Advertiser Measuring the Money: Last Year’s Perspective Viewed by product category, automobile manufacturers spent the most on US Online Ad Spending advertising during the ﬁrst two months of 2003, at $1.31 billion, according US Ofﬂine Ad Spending to Nielsen. However, that was a 1.21% decrease from the same period in Cross-Media Trends

Global Advertising Spending 2002. Interestingly, the two product categories showing the largest growth

Index of Charts rates are part of the same industry: auto dealers associations, with a 71.66% gain, and local auto dealers, with a 13.45% spending increase.

Top 10 Computers & Consumer Electronics Web Sites among At-Home Internet Users in the US, Week Ending 4 May 2003 (unique audience in thousands and % active reach) Unique Active Time per audience reach person (hrs:min:sec) Windows Media Player 11,783 14.55% 0:19:02 WhenU 8,107 10.01% 0:04:25 Real 7,775 9.60% 0:13:00 KaZaA 6,725 8.31% 0:50:36 Microsoft Windows Update 5,702 7.04% 0:04:13 Gator Network 3,934 4.86% 0:01:32 Apple 3,704 4.57% 0:03:18 McAfee 3,430 4.24% 0:06:19 AOL Computer & Electronics 2,468 3.05% 0:02:14 CNET 2,417 2.99% 0:03:07 Note: NetView traffic figures now incorporate AOL Proprietary Channels and Internet Applications Tracking with regular Web traffic data. This data cannot be trended against data from previous weeks Source: Nielsen//NetRatings, March 2003 049639 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Those early 2003 results appear to be simply a continuation of 2002’s Measuring the Money: Last Year’s Perspective spending patterns. According to CMR/TNS, both domestic and import car US Online Ad Spending and truck manufacturers and dealers increased ad spending by 15.4% and US Ofﬂine Ad Spending 17.0%, respectively. Cross-Media Trends Global Advertising Spending Top 10 US Industries by Advertising Spending, 2001 & Index of Charts 2002 (in billions and as a % change year-over-year) January- January- % Change December December 2001 2002 Domestic car and truck factory $6.28 $7.25 15.4% dealer Non-domestic car and truck factory $6.13 $7.17 17.0% and dealer Telecommunications services $3.79 $4.48 18.2% Transportation and tourism $4.12 $4.23 2.7% Media and marketing services $3.92 $4.19 7.0% Banking and investment $4.21 $4.07 -3.3% Restaurants $3.46 $3.84 11.1% Food $3.40 $3.57 5.2% Motion pictures $2.99 $3.41 14.2% Health aids $2.38 $2.89 21.7% Total $40.66 $45.11 10.9% Source: CMR/TNS Media Intelligence, December 2002 047899 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology In January and February 2003, the top three advertisers in the US, by Measuring the Money: Last Year’s Perspective dollars spent, were Procter & Gamble, General Motors, and Walt Disney, US Online Ad Spending according to Nielsen. US Ofﬂine Ad Spending By spending increases relative to the same period last year, the top three Cross-Media Trends were Ford (at 55.34%), Sony (at 47.15%), and Disney (at 24.24%). The Global Advertising Spending

Index of Charts average growth rate for the month was 6.84%, another indicator of a possible spending jump this year.

Top 10 Advertisers in the US, January-February 2003 (in millions and as a % increase/decrease vs. January-February 2002)

Procter & Gamble Company $373.9 (18.70%)

General Motors Corporation $334.4 (-24.63%)

Walt Disney Company $269.1 (24.24%)

AOL Time Warner $249.0 (4.71%)

Ford Motor Company $205.2 (55.34%)

Johnson & Johnson $197.8 (12.71%)

DaimlerChrysler AG $188.5 (-6.45%)

Altria Group Inc. $165.6 (2.67%)

Toyota Motor Corporation $156.8 (1.32%)

Sony Corporation $152.3 (47.15%)

Total $2,292.6 (6.84%)

Note: includes network TV, spot TV, syndicate TV, Hispanic TV, national/local magazine, network/spot radio (19 markets), outdoor, FSI (CPGs only), national/local newspapers (display ads only), national/local sunday supplements Source: Nielsen Media Research, May 2003 049692 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Like Nielsen, the research from CMR/TNS also ranks P&G, General Motors, Measuring the Money: Last Year’s Perspective AOL Time Warner, and Disney as the top four ad spenders in the Q1 US Online Ad Spending 2003 period. US Ofﬂine Ad Spending However, CMR/TNS says AOL Time Warner decreased spending by 4.0%, Cross-Media Trends while Nielsen points to a 4.71% increase. Possibly March 2003 spending, not Global Advertising Spending

Index of Charts accounted for in the Nielsen data, is the primary reason for the difference. Two more acute growth rate disparities are found in DaimlerChrysler’s and Johnson & Johnson’s spending. The car manufacturer’s ﬁgures were down by 6.45% according to Nielsen, and up by 19.0% according to CMR/TNS. The health-care company’s ﬁgures were up by 12.71% or 34.8%, depending on whether the data is from Nielsen or CMR/TNS.

Top 10 US Advertisers Ranked by Ad Spending, Q1 2002 vs. Q1 2003 (in millions and as a % increase/decrease vs. prior year) Q1 2002 Q1 2003 % change Procter & Gamble $495.7 $608.1 22.7% General Motors $618.3 $575.3 -7.0% AOL Time Warner $479.5 $460.4 -4.0% Walt Disney Co. $320.4 $396.4 23.7% DaimlerChrysler $296.6 $352.9 19.0% Ford Motor Co. $255.2 $323.6 26.8% Johnson & Johnson $222.4 $299.8 34.8% Sony $185.3 $261.9 41.3% Verizon $255.8 $260.8 2.0% Altria Group $259.4 $242.4 -6.5% Source: TNS Media Intelligence/CMR, June 2003 050399 ©2003 eMarketer, Inc. www.eMarketer.com

Spending in ofﬂine media by Internet-centric companies is part of the trend towards cross-media advertising, according to data published in an Advertising Age article. Companies such as Charles Schwab, Ameritrade, and eBay all increased their ofﬂine media spending in 2002. For, just as traditional companies realize increasingly that online advertising needs to be part of their media plans, the same appears to be true in reverse for those companies with mainly online presences.

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Methodology

Measuring the Money: Publicly Traded US Internet-Centric Companies Ad Last Year’s Perspective Spending in Traditional Media, 1999-2002 (in millions) US Online Ad Spending 1999 2000 2001 2002 US Ofﬂine Ad Spending

Cross-Media Trends Charles Schwab Corp. $190.8 $238.3 $138.3 $160.5 Global Advertising Spending Ameritrade $105.9 $164.5 $57.7 $64.7 Index of Charts eBay $4.9 $19.4 $15.0 $52.6 EarthLink $21.9 $48.8 $54.0 $52.0 Yahoo! $36.4 $69.8 $52.9 $41.0 United Online $13.2 $76.1 $23.9 $34.3 LendingTree $9.4 $35.4 $26.3 $32.5 Priceline.com $29.3 $92.7 $39.1 $22.4 Amazon.com $36.9 $19.4 $10.3 $19.2 MarketWatch.com $3.7 $7.1 $6.6 $8.5 iVillage $33.8 $13.1 $6.6 $4.6 Quotesmith.com $17.2 $28.6 $10.6 $4.1 CNet Networks $40.2 $15.2 $6.7 $2.8 Barnes & Noble.com $11.2 $6.3 $0.4 $1.6 Audible $2.2 $2.1 $3.5 $1.5 Overture Services $5.1 $4.3 $0.0 $0.4 WorldGate Communications $1.0 $1.2 $0.7 $0.3 Knot $0.1 $0.2 $0.1 $0.1 Stamps.com $11.6 $5.3 $0.3 $0.0 Autobytel $11.3 $19.9 $6.4 $0.0 Drugstore.com $8.4 $11.6 $0.0 $0.0 InsWeb $6.5 $3.4 $0.0 $0.0 Bluefly $5.7 $8.4 $2.8 $0.0 Bankrate $5.2 $0.3 $0.0 $0.0 LookSmart $4.8 $0.0 $0.0 $0.0 US Search.com $4.3 $2.3 $0.0 $0.0 TheStreet.com $4.1 $4.2 $0.0 $0.0 Multex.com $3.5 $0.4 $0.0 $0.0 IGN Entertainment $1.8 $4.0 $0.0 $0.0 SportsLine.com $1.6 $26.8 $2.2 $0.0 Switchboard $1.6 $6.3 $15.2 $0.0 Alloy $1.4 $0.0 $0.0 $0.0 Homestore $0.3 $25.7 $1.3 $0.0 Edgar Online $0.0 $0.5 $0.0 $0.0 SoundView Technology Group $0.0 $1.5 $0.0 $0.0 Total $635.3 $963.1 $480.9 $503.1 Average $18.2 $27.5 $13.7 $14.4 Note: ranked by 2002 spending Source: Pegasus Research International, Advertising Age, Taylor Nelson Sofres' CMR, US Securities and Exchange Commission, Bloomberg, April 2003 049056 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Promotion Spending Measuring the Money: Last Year’s Perspective Looking at promotion spending by companies, the largest share of US Online Ad Spending spending goes into premiums, according to the Promotion Marketing US Ofﬂine Ad Spending Association (PMA). At $44.1 billion in 2002, spending on premiums far Cross-Media Trends

Global Advertising Spending outweighs the $15.5 billion spent on point-of-purchase displays.

Index of Charts The promotion industry segments with the highest growth rates in 2002 were agency net revenues (at 14.8%), fulﬁllment (at 13.5%), and interactive marketing (at 13.1%).

Promotion Spending in the US, by Industry Segment, 2001 & 2002 (in millions and as a % change) 2001 2002 % change Premiums/promotions $42,265 $44,100 4.3% P-O-P displays $15,500 $15,500 0.0% Sponsorships $9,300 $9,393 1.0% Coupons $6,500 $6,800 4.5% Specialty printing $5,900 $5,770 -2.2% Licensing $5,800 $6,000 3.0% Fulfillment $3,230 $3,666 13.5% Agency net revenues $2,845 $3,266 14.8% Interactive marketing (Internet) $1,500 $1,700 13.1% Games, contests, sweeps $1,650 $1,800 9.0% Research $1,475 $1,497 1.5% Product sampling $1,230 $1,340 9.0% In-store services $850 $867 2.0% Subtotal Year-to-year $98,045 $101,699 3.7% Event marketing $115,000 $132,000 3.7% Revised total $213,045 $233,699 9.7% Source: Promo Magazine/Promotion Marketing Association, April 2003 048782 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Hispanic Market Spending Measuring the Money: Last Year’s Perspective As shown in the Nielsen and CMR/TNS data above, Spanish language TV is US Online Ad Spending a clear growth leader among advertising media. US Ofﬂine Ad Spending Research from the Myers Group shows that about 70% of the ad money Cross-Media Trends

Global Advertising Spending used to target Hispanics goes into broadcast network TV and spot TV nearly

Index of Charts equally. Radio is the third-most used medium to target this growing audience.

Hispanic Market Advertising Spending in the US, by Media, 2001-2004 (as a % of market share) 2001 2002 2003 2004 Broadcast networks 32.3% 34.0% 34.9% 36.1% Local and national spot TV 31.3% 32.8% 33.7% 33.9% Radio 21.6% 19.3% 18.0% 17.1% Newspapers 8.0% 7.4% 7.1% 6.9% Outdoor 2.5% 2.2% 2.0% 1.9% Magazines 2.2% 2.0% 1.9% 1.8% Network cable television 1.6% 1.5% 1.6% 1.8% Online 0.6% 0.8% 0.9% 0.6% Source: Myers Group, March 2003 048097 ©2003 eMarketer, Inc. www.eMarketer.com

Myers says that by 2004, over $3.7 billion will be spent on Hispanic market advertising, up from $3.4 billion this year.

Hispanic Market Advertising Spending in the US, by Media, 2001-2004 (in millions) 2001 2002 2003 2004 Broadcast networks $856 $1,038 $1,185 $1,339 Local and national spot TV $830 $1,002 $1,142 $1,260 Radio $573 $589 $612 $636 Newspapers $212 $226 $241 $255 Outdoor $65 $66 $67 $69 Magazines $58 $61 $63 $65 Network cable television $42 $46 $53 $65 Online $16 $25 $30 $24 Total $2,652 $3,053 $3,393 $3,713 Source: Myers Group, March 2003 048096 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology While research from Hispanic Business offers different proportions, it Measuring the Money: Last Year’s Perspective agrees with Myers that network and local TV are the ways that most US Online Ad Spending advertisers are targeting the Spanish-speaking audience. US Ofﬂine Ad Spending Cross-Media Trends Advertising Spending in the US Hispanic Market, by Global Advertising Spending Media, 2002 (in millions) Index of Charts Network/national TV $1,014.0

Local TV $507.4

Local radio $419.0

National radio $170.1

Local newspapers $135.7

National newspapers $90.5

Out-of-home $65.6

Magazines $61.3

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Methodology D. Broadcast Spending Measuring the Money: Last Year’s Perspective Together, broadcast and cable TV, both national and local, get the lion’s US Online Ad Spending

US Ofﬂine Ad Spending share of US advertising spending. In 2003, that spending will be anywhere

Cross-Media Trends from Initiative Media’s $52.86 billion to Veronis Suhler’s $61.07 billion, Global Advertising Spending with ﬁve estimates in between. Index of Charts Comparative Estimates: US Television Advertising Spending, 2000-2006 (in billions) 2000 2001 2002 2003 2004 2005 2006 CMR/TNS, March – $48.09 $51.86 – – – – 2003 Corzen, January – $52.63 $55.49 – – – – 2003 Initiative Media, – – $50.89 $52.86 – – – March 2003 J.P. Morgan H&Q, $61.06 $55.13 $57.86 $60.10 – – – August 2002 Jupiter Research, – $54.42 $56.25 $60.00 $64.58 $66.66 $68.75 October 2002 Myers Report, $56.64 $52.16 $55.69 $58.87 $64.15 – – October & December 2002, May 2003 Pricewaterhouse- $56.65 $53.58 $56.37 $57.96 $63.86 $66.06 $71.03 Coopers, May 2002 Universal McCann, $60.26 $54.40 $53.72 $56.40 – – – June 2003 Veronis Suhler, July $56.08 $53.88 $57.68 $61.07 $66.67 $70.05 $75.72 2002 Note: includes both broadcast and cable Source: various, as noted, 2002 & 2003 049488 ©2003 eMarketer, Inc. www.eMarketer.com

All seven researchers with projections for 2003 expect TV ad spending to increase. Comparative growth rates in 2003 start at 2.8% (PricewaterhouseCoopers), hover in the 3.9% to 5.0% range (Initiative Media, J.P. Morgan, and Universal McCann), and top out at 6.7% (Jupiter Research).

“Ad spending has declined from 42% to 12% of marketing spending in the last 20 years, and the marketing pie continues to fragment. It takes more to do less. In 1965 it took three commercials to reach 97% of women; today it takes 97.” — Norman Lehoullier, managing director, Grey Interactive Worldwide; from the Advertising Research Foundation, 3 December 2002

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Methodology The four firms with estimates for 2004 expect significant growth in the 7.6% Measuring the Money: Last Year’s Perspective to 10.2% range. Interestingly, while for 2003 PwC and Jupiter offered growth US Online Ad Spending rates at the low and high end, respectively, for 2004 they switch places. US Offline Ad Spending Cross-Media Trends Comparative Estimates: US Television Advertising Global Advertising Spending Spending Growth, 2001-2006 (as a % increase/ Index of Charts decrease vs. prior year) 2001 2002 2003 2004 2005 2006 CMR/TNS, March 2003 – 7.8% – – – – Corzen, January 2003 – 5.4% – – – – Initiative Media, March 2003 – – 3.9% – – – J.P. Morgan H&Q, August 2002 -9.7% 4.9% 3.9% – – – Jupiter Research, October 2002 – 3.4% 6.7% 7.6% 3.2% 3.1% Myers Report, October & -7.9% 6.8% 5.7% 9.0% – – December 2002, May 2003 PricewaterhouseCoopers, May -5.4% 5.2% 2.8% 10.2% 3.4% 7.5% 2002 Universal McCann, June 2003 -9.7% -1.2% 5.0% – – – Veronis Suhler, July 2002 -3.9% 7.1% 5.9% 9.2% 5.1% 8.1% Note: includes both broadcast and cable Source: various, as noted, 2002 & 2003 049489 ©2003 eMarketer, Inc. www.eMarketer.com

“The days of spending hundreds of millions of dollars on TV advertising are over. Reaching consumers is no longer TV driven.” — Bill Lamar Jr., senior vice president US marketing, McDonald’s; MediaPost, 11 April 2003

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Methodology Among those media planners looking to spend more on TV advertising this Measuring the Money: Last Year’s Perspective year, the key inﬂuence is reach, according to 42% of the respondents to a US Online Ad Spending survey sponsored by MediaPost. Covering their target audience is another US Ofﬂine Ad Spending important factor, cited by 29% of the respondents. Cross-Media Trends Global Advertising Spending Factors that Influence US Media Planners Who Are Index of Charts Planning to Spend More on TV in 2003 (as a % of respondents)

Reach 42%

Coverage of target 29%

Client preference 23%

Brand image 22%

Demographics 21%

Composition of target 14%

CPM 14%

Agency preference 8%

Buzz 6%

The six comparative estimates for radio ad spending in 2003, both national and local, lie in a fairly narrow span, with about $1 billion separating PwC’s low projection of $19.27 billion from J.P. Morgan’s high projection of $20.29 billion.

“In hard times, often ad budgets become discretionary, but you can only do that for so long. In order to maintain your market share, you have to advertise.” — Diane Warren, spokesperson, Clear Channel; Reuters, 30 October 2002

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Methodology In next year’s spending market, healthy increases will bring the dollar Measuring the Money: Last Year’s Perspective ﬁgure up to as high as $21.17 billion, which is Jupiter’s estimate.

US Online Ad Spending US Ofﬂine Ad Spending Comparative Estimates: US Radio Advertising Cross-Media Trends Spending, 2000-2006 (in billions) Global Advertising Spending 2000 2001 2002 2003 2004 2005 2006 Index of Charts CMR/TNS, March – $8.06 $9.01 – – – – 2003 Corzen, January – $9.01 $18.48 – – – – 2003 J.P. Morgan H&Q, $19.82 $18.36 $19.19 $20.29 – – – August 2002 Jupiter Research, – $17.86 $18.58 $19.75 $21.17 $22.44 $23.56 October 2002 Myers Report, $19.09 $18.40 $19.23 $19.61 $20.40 – – October & December 2002, May 2003 Pricewaterhouse- $19.30 $18.05 $18.44 $19.27 $20.39 $21.49 $22.61 Coopers, May 2002 Universal McCann, $19.30 $17.90 $18.94 $19.64 – – – June 2003 Veronis Suhler, $19.07 $17.89 $18.46 $19.41 $20.88 $22.34 $24.14 July 2002 Note: includes both national and local Source: various, as noted, 2002 & 2003 049490 ©2003 eMarketer, Inc. www.eMarketer.com

Starting in 2002, every researcher for every year shown calculates increases in radio ad spending. This oldest of broadcast media offers a steady market, with projected annual increases over the next three years no lower than 4.0% (Myers in 2004) and as high as 8.1% (Veronis in 2006).

Comparative Estimates: US Radio Advertising Spending Growth, 2001-2006 (as a % increase/ decrease vs. prior year) 2001 2002 2003 2004 2005 2006 CMR/TNS, March 2003 – 11.7% – – – – Corzen, January 2003 – 8.2% – – – – J.P. Morgan H&Q, August 2002 -7.4% 4.5% 5.7% – – – Jupiter Research, October 2002 – 4.0% 6.3% 7.2% 6.0% 5.0% Myers Report, October & -3.6% 4.5% 2.0% 4.0% – – December 2002, May 2003 PricewaterhouseCoopers, May -6.5% 2.1% 4.5% 5.8% 5.4% 5.2% 2002 Universal McCann, June 2003 -7.2% 5.8% 3.7% – – – Veronis Suhler, July 2002 -6.2% 3.2% 5.2% 7.5% 7.0% 8.1% Note: includes both national and local Source: various, as noted, 2002 & 2003 049491 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology E. Print Spending Measuring the Money: Last Year’s Perspective Newspapers, both local and national, are the largest ad medium this side of US Online Ad Spending

US Ofﬂine Ad Spending television. After some downturns in 2002, the six research ﬁrms with

Cross-Media Trends estimates for 2003 cite spending ﬁgures in a fairly narrow range. Five out Global Advertising Spending of six estimates are between $44 billion and $47 billion. Index of Charts The outlier is Veronis Suhler. Starting at a larger base, Veronis sees newspaper advertising increasing to nearly $67 billion by 2006. In contrast, Jupiter and PwC project $52.16 billion and $53.25 billion, respectively, for the same year.

Comparative Estimates: US Newspaper Advertising Spending, 2000-2006 (in billions) 2000 2001 2002 2003 2004 2005 2006 CMR/TNS, March 2003 – $21.38 $22.90 – – – – Corzen, January 2003 – $50.31 $50.02 – – – – J.P. Morgan H&Q, $48.67 $44.32 $44.59 $46.55 – – – August 2002 Jupiter Research, – $44.26 $44.76 $46.55 $48.51 $50.35 $52.16 October 2002 Myers Report, October $48.40 $44.30 $43.86 $44.30 $45.18 – – & December 2002 May 2003 Pricewaterhouse- $48.67 $44.32 $43.85 $45.20 $47.95 $50.90 $53.25 Coopers, May 2002 Universal McCann, $49.05 $44.30 $44.45 $45.71 – – – June 2003 Veronis Suhler, July $54.96 $50.73 $52.35 $55.70 $59.48 $63.81 $66.89 2002 Note: includes both national and local Source: various, as noted, 2002 & 2003 049512 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Several researchers—such as J.P. Morgan, Jupiter, and PwC—believe that Measuring the Money: Last Year’s Perspective after spending decreases or ﬂat growth last year, newspaper ad spending US Online Ad Spending will rise by about 4% this year. And all the projections for 2004 and beyond US Ofﬂine Ad Spending see increased spending on either a moderate (2% to 4%) or healthy (6% or Cross-Media Trends higher) scale. Global Advertising Spending

Index of Charts Comparative Estimates: US Newspaper Advertising Spending Growth, 2001-2006 (as a % increase/decrease vs. prior year) 2001 2002 2003 2004 2005 2006 CMR/TNS, March 2003 – 7.1% – – – – Corzen, January 2003 – -0.6% – – – – J.P. Morgan H&Q, August 2002 -8.9% 0.6% 4.4% – – – Jupiter Research, October 2002 – 1.1% 4.0% 4.2% 3.8% 3.6% Myers Report, October & December -8.5% -1.0% 1.0% 2.0% – – 2002, May 2003 PricewaterhouseCoopers, May 2002 -8.9% -1.1% 3.1% 6.1% 6.2% 4.6% Universal McCann, June 2003 -9.7% 0.3% 2.8% – – – Veronis Suhler, July 2002 -7.7% 3.2% 6.4% 6.8% 7.3% 4.8% Note: includes both national and local Source: various, as noted, 2002 & 2003 049514 ©2003 eMarketer, Inc. www.eMarketer.com

Comparative estimates for the magazine category are mixed. One reason for wide divergence of spending ﬁgures is that some companies include both consumer and business magazines, while others look at just the consumer segment. Or take Universal McCann’s ﬁgure of $11.77 billion— substantially lower than most others because it includes only national magazine ad spending, but not local.

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Methodology In 2003, for example, PwC and Veronis, which include all magazine types, Measuring the Money: Last Year’s Perspective estimate ad spending at $18.84 billion and $21.93 billion, respectively. On US Online Ad Spending the other hand, Jupiter’s estimate of $11.64 billion covers consumer US Ofﬂine Ad Spending magazines only. Cross-Media Trends Global Advertising Spending Comparative Estimates: US Magazine Advertising Index of Charts Spending, 2000-2006 (in billions) 2000 2001 2002 2003 2004 2005 2006 CMR/TNS, March 2003* – $26.04 $25.29 – – – – Corzen, January 2003* – $23.00 $22.06 – – – – J.P. Morgan H&Q, $17.29 $15.56 $15.43 $16.14 – – – August 2002 Jupiter Research, – $11.10 $10.98 $11.64 $12.34 $12.96 $13.48 October 2002 Myers Report, October $17.05 $16.21 $16.46 $17.11 $17.89 – – & December 2002, May 2003 Pricewaterhouse- $23.26 $19.41 $18.77 $18.84 $19.39 $20.79 $22.33 Coopers, May 2002* Universal McCann, $17.29 $15.60 $10.99 $11.77 – – – June 2003 Veronis Suhler, $26.18 $22.73 $21.11 $21.93 $23.38 $24.82 $26.24 July 2002* Note: *includes both consumer and B2B magazines Source: various, as noted, 2002 & 2003 049515 ©2003 eMarketer, Inc. www.eMarketer.com

Projected growth rates, however, follow a closer path. In 2003, other than PwC’s outlier, the other five researchers estimate spending increases from 3.9% (Veronis) to 6.0% (Jupiter). These are welcome predictions, after 2002’s spending falls, as indicated by seven of the eight firms with figures for that year.

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Methodology Beyond 2003, the four companies making predictions all see steady growth, Measuring the Money: Last Year’s Perspective with PwC’s 7%-plus in 2005 and 2006 the most optimistic.

US Online Ad Spending US Ofﬂine Ad Spending Comparative Estimates: US Magazine Advertising Cross-Media Trends Spending Growth, 2001-2006 (as a % increase/ Global Advertising Spending decrease vs. prior year) Index of Charts 2001 2002 2003 2004 2005 2006 CMR/TNS, March 2003* – -2.9% – – – – Corzen, January 2003* – -4.1% – – – – J.P. Morgan H&Q, August 2002 -10.0% -0.9% 4.6% – – – Jupiter Research, October 2002 – -1.0% 6.0% 6.0% 5.0% 4.0% Myers Report, October & -4.9% 1.5% 4.0% 4.5% – – December 2002, May 2003 PricewaterhouseCoopers, -16.6% -3.3% 0.3% 2.9% 7.2% 7.4% May 2002* Universal McCann, June 2003 -9.7% -29.6% 7.1% – – – Veronis Suhler, July 2002* -13.2% -7.1% 3.9% 6.6% 6.2% 5.7% Note: *includes both consumer and B2B magazines Source: various, as noted, 2002 & 2003 049516 ©2003 eMarketer, Inc. www.eMarketer.com

According to the Publishers Information Bureau, a New York-based trade group, the two industry categories with the largest ad spends are also the ones with the greatest growth. That is, in February 2003, drugs and remedy companies spent $137.7 million on magazine advertising, a 32.8% increase from the previous year. And companies in the auto industry spent $137.3 million, a 49.4% increase.

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Methodology Other industries ramping up their magazine ad spending include retailers Measuring the Money: Last Year’s Perspective (at 23.6% growth); transportation, hotels, and resorts (at 18.3%); home US Online Ad Spending furnishing and supplies (at 14.9%); and toiletries and cosmetics (at 14.8%). US Ofﬂine Ad Spending On the other side, the hurting technology sphere decreased spending Cross-Media Trends by 16.4%. Global Advertising Spending Index of Charts US Magazine Advertising Spending, by Industry Category, February 2002 & February 2003 February February % 2002 2003 change Drugs and remedies $104,096,267 $137,704,204 32.8% Automotive $91,888,450 $137,253,289 49.4% Food and food products $124,687,098 $122,955,592 -1.4% Direct response companies $103,417,526 $109,466,705 5.8% Toiletries and cosmetics $94,157,423 $108,060,128 14.8% Home furnishing and supplies $76,715,939 $88,145,386 14.9% Media and advertising $71,242,320 $78,360,190 10.0% Apparel and accessories $76,718,361 $69,332,913 -9.6% Technology $79,083,148 $66,090,301 -16.4% Financial, insurance and real estate $57,668,337 $54,151,476 -6.1% Retail $42,870,038 $53,007,751 23.6% Public transportation, hotels and $37,846,671 $44,782,807 18.3% resorts Source: Publishers Information Bureau, March 2003 048460 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology F.Other Ofﬂine Spending Measuring the Money: Last Year’s Perspective Unsung in some ad industry quarters, and derided as “junk mail” by many US Online Ad Spending

US Ofﬂine Ad Spending consumers, the direct mail advertising segment regularly shows steady and

Cross-Media Trends strong spending growth. The 2002 and 2003 comparative estimates all top Global Advertising Spending $45 billion, about the same as newspaper ad spending. And the only firm Index of Charts willing to project beyond this year, Jupiter Research, expects direct mail spending to pass $50 billion in 2005. Not only has direct mail not gone away with the advent of e-mail marketing, the two often complement each other. More direct marketers find that paper works best for less frequent, larger contacts with customers, while e-mail fits in for the keep-in-touch retention tactics prized by such companies.

Comparative Estimates: US Direct Mail Advertising Spending, 2000-2006 (in billions) 2000 2001 2002 2003 2004 2005 2006 Corzen, January 2003 – $43.42 $45.77 – – – – Direct Marketing $44.52 $46.51 $49.09 – – – – Association, July 2002 J.P. Morgan H&Q, $44.52 $44.65 $45.10 $46.90 – – – August 2002 Jupiter Research, – $44.73 $45.87 $47.80 $49.61 $51.40 $53.15 October 2002 Universal McCann, $44.59 $44.70 $45.86 $49.06 – – – June 2003 Source: various, as noted, 2002 & 2003 049521 ©2003 eMarketer, Inc. www.eMarketer.com

The all-positive growth rates from each ﬁrm and for all six years in the chart below point to direct mail’s fundamental place in the ad world—a staple in any marketing plan.

Comparative Estimates: US Direct Mail Advertising Spending Growth, 2001-2006 (as a % increase vs. prior year) 2001 2002 2003 2004 2005 2006 Corzen, January 2003 – 5.4% – – – – Direct Marketing Association, 4.5% 5.5% – – – – July 2002 J.P. Morgan H&Q, August 2002 0.3% 1.0% 4.0% – – – Jupiter Research, October 2002 – 2.6% 4.2% 3.8% 3.6% 3.4% Universal McCann, June 2003 0.2% 2.6% 7.0% – – – Source: various, as noted, 2002 & 2003 049522 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Yellow page advertising is another steady staple among media, with mid- Measuring the Money: Last Year’s Perspective teen spending ﬁgures that rival magazines and hit levels near radio US Online Ad Spending spending. In what’s still a very mobile nation, with people moving from US Ofﬂine Ad Spending place to place and needing to know the local supplier of various products Cross-Media Trends and services, it’s no surprise that this type of advertising continues to thrive. Global Advertising Spending

Index of Charts According to both Jupiter and Veronis, spending on yellow pages advertising will near or top $16 billion by 2005.

Comparative Estimates: US Yellow Pages Advertising Spending, 2000-2006 (in billions) 2000 2001 2002 2003 2004 2005 2006 Jupiter Research, – $13.59 $13.86 $14.56 $15.26 $15.96 $16.66 October 2002 Myers Report, $13.20 $13.57 $13.98 $14.12 $14.12 – – October & December 2002, May 2003 Universal McCann, $13.23 $13.60 $13.72 $13.98 – – – June 2003 Veronis Suhler, July $13.70 $14.43 $14.67 $15.11 $15.64 $16.27 $16.95 2002 Yellow Pages $13.20 $13.60 $14.10 – – – – Publishers Associ- ation, February 2002 Source: various, as noted, 2002 & 2003 049517 ©2003 eMarketer, Inc. www.eMarketer.com

Again like direct mail, each ﬁrm estimates positive growth rates for all six years charted. Jupiter appears the most optimistic of the group, projecting increases of 5.0% this year and over 4% in the years to follow.

Comparative Estimates: US Yellow Pages Advertising Spending Growth, 2001-2006 (as a % increase vs. prior year) 2001 2002 2003 2004 2005 2006 Jupiter Research, October 2002 – 2.0% 5.0% 4.8% 4.6% 4.4% Myers Report, October & 2.8% 3.0% 1.0% 0.0% – – December 2002, May 2003 Universal McCann, June 2003 2.8% 0.9% 1.9% – – – Veronis Suhler, July 2002 5.3% 1.7% 3.0% 3.5% 4.1% 4.2% Yellow Pages Publishers 3.0% 3.7% – – – – Association, February 2002 Source: various, as noted, 2002 & 2003 049518 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology As an encompassing media category, outdoor advertising includes both the Measuring the Money: Last Year’s Perspective large (billboards mainly) and the small (ads in restaurant bathrooms, for US Online Ad Spending instance, or on matchbook covers). Other than the low outlier from US Offline Ad Spending Initiative Media for 2003 spending, which typically offers lower estimates Cross-Media Trends than other firms, the other four firms converge with projections from $5.24 Global Advertising Spending

Index of Charts billion (Myers) to $5.70 billion (PwC). While PwC’s estimate is in close range this year, its projections for the next three years bring outdoor ad spending at over $7 billion by 2006.

Comparative Estimates: US Outdoor Advertising Spending, 2000-2006 (in billions) 2000 2001 2002 2003 2004 2005 2006 CMR/TNS, March 2003 – $2.46 $2.48 – – – – Corzen, January 2003 – $4.28 $4.44 – – – – Initiative Media, March 2003 – – $2.18 $2.23 – – – J.P. Morgan H&Q, August 2002 $5.24 $5.20 $5.25 $5.46 – – – Myers Report, October & $5.10 $5.14 $5.19 $5.24 $5.34 – – December 2002, May 2003 PricewaterhouseCoopers, $5.18 $5.11 $5.35 $5.70 $6.10 $6.60 $7.15 May 2002* Universal McCann, December $5.18 $5.10 – – – – – 2002* Veronis Suhler, July 2002 $5.24 $5.19 $5.32 $5.44 $5.59 $5.77 $5.99 Note: *out-of-home advertising Source: various, as noted, 2002 & 2003 049519 ©2003 eMarketer, Inc. www.eMarketer.com

Matching that high dollar prediction, PwC also sees high growth rates of 6.5% (in 2003) up to 8.3% (in 2006). Other forecasts, such as from Myers and Veronis, are in the moderate 2% to 3% range.

Comparative Estimates: US Outdoor Advertising Spending Growth, 2001-2006 (as a % increase/ decrease vs. prior year) 2001 2002 2003 2004 2005 2006 CMR/TNS, March 2003 – 0.8% – – – – Corzen, January 2003 – 3.6% – – – – Initiative Media, March 2003 – – 2.2% – – – J.P. Morgan H&Q, August 2002 -0.7% 1.0% 4.0% – – – Myers Report, October & December 0.8% 1.0% 1.0% 2.0% – – 2002, May 2003 PricewaterhouseCoopers, May 2002* -1.2% 4.6% 6.5% 7.0% 8.2% 8.3% Universal McCann, June 2003* -1.5% – – – – – Veronis Suhler, July 2002 -0.8% 2.5% 2.2% 2.7% 3.2% 3.7% Note: *out-of-home advertising Source: various, as noted, 2001-2003 049520 ©2003 eMarketer, Inc. www.eMarketer.com

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Advertising Spending

Methodology 7

I Measuring the Money: Last Year’s Perspective 11

II US Online Ad Spending 17

III US Ofﬂine Ad Spending 89 IV Cross-Media Trends 125 A. Attitudes Toward Cross-Media Advertising 126 B. Media Measurement: Apples to Apples? 133 C. Cross-Media Optimization 147 IV D. Four More Cross-Media Scenarios 157 E. Cross-Media: Driving Trafﬁc Online 168 F.Consumer Media Consumption 172

V Global Advertising Spending 177

Index of Charts 237

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Methodology In certain lights, viewing online advertising as an endeavor separate from Measuring the Money: Last Year’s Perspective other forms of advertising is simply shortsighted. As more companies join US Online Ad Spending the trend to cross-media campaigns, the questions about where to advertise US Ofﬂine Ad Spending switch from either/or to which/when. Cross-Media Trends

Global Advertising Spending

Index of Charts A. Attitudes Toward Cross-Media Advertising In order to attain cross-media nirvana, then—at least from the online industry’s point of view—media planners need ﬁrst to be convinced about the Internet’s basic advertising value. Results from research done by InsightExpress for MediaPost earlier this year have 70% of respondents saying that online is a valuable advertising medium. That compares favorably to segments of media planners who feel the same about TV, magazines, and radio.

US Media Planners’ Opinions Regarding the Advertising Value of Various Media, 2003 (as a % of respondents) Valuable Neutral Not valuable Cable TV 83% 12% 5% Network TV 77% 15% 8% Magazines 74% 17% 9% Radio 73% 19% 8% Online 70% 21% 9% Newspapers 63% 24% 13% Outdoor 55% 32% 13% Newsletters 41% 34% 25% Source: MediaPost, InsightExpress, February 2003 047471 ©2003 eMarketer, Inc. www.eMarketer.com

Note, though, that as an online research service, InsightExpress draws respondents from the Internet only, which could skew the results. Even so, the Internet’s value among US media planners is clearly growing. That’s partially due to two key factors: one, the use of measurement tools standard in the ofﬂine world; and two, the combined use of branding and direct response objectives in online campaigns.

“There really isn’t a way to ﬁgure out return on investment. The measurement services that are out there just tell you the nature of the audience and the reach of your campaign—things that help you with media planning.” — Jim Spaeth, president, Advertising Research Foundation; Crain Communications, 15 July 2002

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Methodology Several following sections will examine such standard advertising metrics Measuring the Money: Last Year’s Perspective as reach, frequency, and gross rating points (GRPs). For now, we will focus US Online Ad Spending on the most basic question for marketers: “What are your online US Ofﬂine Ad Spending advertising objectives?” Cross-Media Trends In a study conducted by DoubleClick in the fall of last year, 82% of the 200 Global Advertising Spending

Index of Charts ad managers, brand managers, chief marketing ofﬁcers, and vice presidents of marketing from B2B and B2C companies cited building brand awareness as their objective. That’s a 7-point jump from the spring 2002 results. And yet direct response goals are nearly just as important, with 69% of respondents saying they advertise online to acquire new leads, registrants, customers, or clients. Again, that ﬁgure represents an uptick from earlier results.

Online Advertising Objectives among US Marketers, 2002 (as a % of respondents)

Building brand awareness 75% 82%

Acquiring new leads/registrants/customers/clients 59% 69%

Driving immediate sales 43% 52%

Driving retention 40% 51%

Upselling to existing customers/clients 28% 44%

Providing company or product information 38% 58%

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Methodology And according to several studies, the affluent, business executives, and the Measuring the Money: Last Year’s Perspective at-work audience—all prime marketing targets—see the need to reach them US Online Ad Spending via cross-media advertising. US Offline Ad Spending For example, the WashingtonPost.com and Nielsen//NetRatings asked Cross-Media Trends nearly 1,000 affluent US adults which media they believe are best to reach Global Advertising Spending

Index of Charts people like themselves—that is, those with household incomes of $100,000 or more. While 63% said they would definitely or probably include newspapers in an ad campaign to reach people like themselves, and 62% cited television, the Internet followed closely at 58%. That figure is substantially higher than the 45% the affluent respondents attached to magazines or radio.

Advertising Media that Affluent US Adults Would Definitely or Probably Include in a Campaign to Reach People Like Themselves, January 2003 (as a % of respondents)

Newspapers 63%

Television 62%

Internet 58%

Magazines 45%

Radio 45%

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Methodology In an earlier survey from the WashingtonPost.com and Measuring the Money: Last Year’s Perspective Nielsen//NetRatings, this along with MORI Research, they asked a group of US Online Ad Spending “business decision makers” a similar question: Which media would they use US Offline Ad Spending in an advertising campaign targeted at them? In this case, the definitely- Cross-Media Trends and probably-include figures for the Internet reached 61%. That’s higher Global Advertising Spending

Index of Charts than the 33% and 47% ﬁgures, respectively, for TV and newspapers.

Media Suggested by US “Business Decision Makers” for Use in an Advertising Campaign Targeted at Them, 2002 (as a % of respondents) Internet TV Radio News- Magazines papers Definitely include 36% 20% 12% 21% 25% Probably include 25% 13% 19% 26% 30% Might or might not include 14% 15% 18% 19% 14% Probably not include 6% 12% 13% 7% 6% Definitely not include 5% 16% 14% 8% 6% Don’t know/ refused 7% 8% 8% 7% 8% Note: Respondents included in this study are “business decision makers” who answered “yes” to one or more categories for the following question: “Do you, personally and directly, participate in or influence the decision to purchase any of the following for your company?” Answers included: ASPs/Internet Access Services/Website Hosting Services, Legal Services; Business Consulting Services; IT Technology Consulting Services, etc.; multiple responses allowed Source: Nielsen//NetRatings @Plan, MORI Research and washingtonpost.com, September 2002 043748 ©2002 eMarketer, Inc. www.eMarketer.com

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Methodology The Internet is also the place where 47% of those business decision makers Measuring the Money: Last Year’s Perspective say the advertising is rich in information. Only magazines, among other US Online Ad Spending media, approach that ﬁgure, at 42%. US Ofﬂine Ad Spending Cross-Media Trends Opinions of “Business Decision Makers” Regarding Global Advertising Spending the Advertising They Encounter, by Media Type, 2002 Index of Charts (as a % of respondents) Inter- TV Radio News- Maga- None Don’t net papers zines of know/ these refused Where to receive infor- 77% 7% 6% 23% 32% 4% 4% mation about products Where modern and up- 72% 53% 28% 31% 58% 2% 5% to-date companies advertise Has advertising that is 47% 8% 5% 29% 42% 15% 5% rich in information Has innovative adver- 43% 50% 13% 8% 23% 11% 8% tising Has interesting adver- 30% 54% 21% 16% 38% 13% 6% tising Where traditional com- 20% 78% 49% 68% 58% 1% 5% panies advertise Note: Respondents included in this study are “business decision makers” who answered “yes” to one or more categories for the following question: “Do you, personally and directly, participate in or influence the decision to purchase any of the following for your company?” Answers included: ASPs/Internet Access Services/Website Hosting Services, Legal Services; Business Consulting Services; IT Technology Consulting Services, etc.; multiple responses allowed Source: Nielsen//NetRatings @Plan, MORI Research and washingtonpost.com , September 2002 043444 ©2002 eMarketer, Inc. www.eMarketer.com

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Methodology In addition, recent research sponsored by the Online Publishers Association Measuring the Money: Last Year’s Perspective finds that the at-work audience prefers the Internet over TV, radio, US Online Ad Spending magazines, and newspapers for finding out about new products and getting US Offline Ad Spending information about goods and companies. Cross-Media Trends Global Advertising Spending Attitudes toward Advertising among At-Work Internet Index of Charts Users in the US, by Medium, 2003 (as a % of respondents) Internet TV Radio Maga- News- zines papers Where I prefer to find out about new 53% 37% 8% 29% 13% products Where I prefer to receive information 52% 20% 5% 23% 20% about companies Has advertising that is rich in 42% 22% 10% 35% 23% information Has advertising that helps me 41% 38% 14% 31% 24% decide what to buy Note: n=1,053 Source: Millward Brown IntelliQuest, Online Publishers Association (OPA), May 2003 049662 ©2003 eMarketer, Inc. www.eMarketer.com

“Web marketing is effective—especially when used in tandem with other media and in ways that respect the user—and is likely to grow larger and more important with the passage of time. Yes, it has more evolving to do, but it is evolving fast.” — Rishad Tobaccowala, president, Starcom IP; Slate.com, January 2003

Implementing campaigns across media to reach groups such as the affluent or at-work users is harder than it may seem. Just because an advertiser knows where the audience is and what the audience is looking for fails to account for existing obstacles within the marketer’s organization. In a Reveries.com survey last year sponsored by Arc Marketing—a Greenwich, CT-based firm—200 ad agency and corporate marketing executives were asked to what degree their companies were organized to deliver what the researchers called “integrated marketing.” Whether at an agency or corporation, 25% replied not at all, while only 8% and 5%, respectively, responded by saying significantly. The main causes for the disconnect between the desire for cross-media marketing and its implementation are “organizational silos within companies, a lack of clear agency leadership, and the need for better and broader cross training of staff members,” according to Arc.

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Methodology As reported by MediaPost, the respondents also mentioned “the need for Measuring the Money: Last Year’s Perspective improved information resources, better measurement capabilities, and even US Online Ad Spending changes in compensation structures that would gauge total performance, US Ofﬂine Ad Spending not just discipline-speciﬁc work.” Cross-Media Trends Global Advertising Spending Degree to Which US Ad Agencies and Corporate Index of Charts Marketing Departments Have Organized to Deliver Integrated Marketing, 2002 (as a % of respondents)

Signifi- Signifi- cantly cantly 8% 5% Not at all Not at all 25% 25%

Somewhat Somewhat 67% 70%

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Methodology B. Media Measurement: Apples to Apples? Measuring the Money: Last Year’s Perspective Among online advertising professionals, two schools of thought compete US Online Ad Spending

US Offline Ad Spending when it comes to metrics for planning and measuring ads on the Internet. Cross-Media Trends One school insists that the main way, if not the only way, the ad industry Global Advertising Spending will accept the Internet among the mainstream media is by comparing Index of Charts apples to apples. That means after years of pitching metrics such as unique visitors, page views, and click-through rates (CTRs), interactive ad agencies and publishers would deploy only traditional metrics—measuring tools used for decades by media such as TV and print. Or as MediaPost wrote, “As integration of offline and online advertising becomes the industry standard, the ability to compare all media placements using a common denominator has become imperative.” The four traditional metrics most commonly advanced are: Reach—the percentage of the total market population, or identifiable audience, that will see a given advertisement or campaign over a specified period of time Frequency—the number of times people are exposed to that given advertisement or campaign over a specified period of time Gross ratings points (GRPs)—a measure of advertising coverage; or, the percentage of an audience reached multiplied by the number of times they see the message over some period of time (reach x frequency) Targeted ratings points (TRPs)—the form of GRPs targeted to the advertiser’s desired audience by specific demographics and psychographics

An alternative method for calculating GRP coverage has you multiply reach (in absolute numbers) by frequency, and dividing that ﬁgure by the audience size times 100. For example, if an ad reaches 20 million people at a frequency of 2.5 times each within a potential audience of 90 million, the GRP ﬁgure is 55.56. In addition, Internet ad professionals who encourage the use of these time-tested metrics also tend to support surveys and sophisticated testing to measure the brand impact of a campaign. These traditional branding metrics include awareness, recall, interest, and purchase intent. The competing perspective dates back to 20th century days when people went around saying, “The Internet changes everything.” That school believes that as the most measurable medium ever, online advertising should be sold using metrics as unique as the Internet itself. They say that GRPs and the reach/frequency curve are based on projections and statistical modeling—but given its inherent trackability, the Internet should be able to move beyond projections and models to measure what’s actually going on.

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Methodology “There have been two major barriers to the growth Measuring the Money: Last Year’s Perspective of online advertising: it is highly complex and there US Online Ad Spending is a lack of standardized metrics that compare US Ofﬂine Ad Spending online media and ofﬂine media.” Cross-Media Trends — Tom Sperry, president, Atlas DMT Global Advertising Spending

Index of Charts They say that reducing the Web to old-fashioned (and limited) metrics will sell it short. They say that such traditional metrics as GRPs or TRPs are inadequate even for traditional media. And they say that while impressions and traffic and CTRs may be somewhat worn-out, trying to compare the Internet to television is setting up the Net for failure. If describing this Internet-is-unique-therefore-its-ad-metrics-should- also-be-unique school of thought sounds as if we’re setting up a straw man only to knock it down, first consider this: All too often, interactive agencies and Web sites still talk about traffic, click-through rates, page views, and other metrics that are irrelevant to most advertisers’ objectives. As a medium started by tech nerds rather than media folks, online advertising built up barriers by creating new words for every normal media word out there—not audience but users; not circulation but traffic; not frequency but impression. And this different language continues to spread a fog among advertisers accustomed to traditional terminology. And those barriers aren’t simply ones created by distinct terminology. The lack of ad metric standards makes it “difficult to work in a team environment and try to share information when we don’t have the common tools and metrics,” said Jean Pundiak, the senior e-marketing manager at AstraZeneca, to iMedia Connection in January 2003.

“Our industry needs to speak the same language as that of traditional advertising.” — Cory Trefﬁletti, media director, Freestyle Interactive; MediaPost, 27 September 2002

Then consider the following: As an Internet-only ad metric, impressions count page requests from a user’s browser. Even though the term implies that some pair of eyes viewed a particular ad at least once, impressions gauge only undifferentiated page requests—ﬁltered, at least, from robotic views. While the untargeted nature of raw impressions makes them an unsuitable metric for many traditional advertisers, many Web publishers still base the cost of ads on an impression count and some companies choose which sites to advertise on based on how many impressions those publishers promise.

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Methodology That’s one reason why researchers continue to track impressions. Measuring the Money: Last Year’s Perspective According to Jupiter Research, the number of impressions per Internet user US Online Ad Spending per day will soar from 658 this year to 836 by 2007. That represents a 27% US Ofﬂine Ad Spending increase over the ﬁve-year span. Cross-Media Trends Global Advertising Spending US Online Marketing Impressions per Internet User Index of Charts per Day, 2001-2007

2001 554

2002 610

2003 658

2004 718

2005 779

2006 808

2007 836

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Methodology Next, consider the following research from the Myers Group. When the New Measuring the Money: Last Year’s Perspective York-based firm asked US ad execs which methods they expect to use to US Online Ad Spending plan or measure online advertising, over 94% mentioned click-through rates US Offline Ad Spending (CTRs). And yet, as people click less and less on ads—and yet continue to be Cross-Media Trends influenced by them—CTRs have become nearly outmoded as a useful metric Global Advertising Spending

Index of Charts for assessing the true effect of online ads. But they sure are easy to measure.

Methods to Plan or Measure Online Advertising that US Advertising Executives Expect to Use in the Next 12 Months, August 2002 (as a % of respondents)

Click-through rates 94.2%

Web site traffic 90.1%

E-Mail responses 88.2%

Online conversion rates 83.1%

Third-party ad server reporting 80.5%

Web sites ad server reporting 75.3%

Impressions by demographics 60.0%

Pre/post brand tracking 58.0%

Online reach/frequency models 57.7%

Technology aided; cookies (Dynamic Logic) 55.9%

Media industry association research (IAB) 48.5%

Cross-media reach/frequency tools 46.7%

Media-mix modeling (sales impact) 34.7%

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Methodology And last year when Jupiter asked US marketers how they measure online ad Measuring the Money: Last Year’s Perspective campaigns, click-throughs also came out on top, with 67% of the US Online Ad Spending responses. The research ﬁrm concluded from this data that “stakeholders US Ofﬂine Ad Spending have failed to sell the true value proposition of online advertising” since Cross-Media Trends only 34% of “marketing departments regularly track any long-term Global Advertising Spending

Index of Charts metrics” such as predictive behavior (at 16%) and branding (at 9%).

“The problem is that the click-through is not really a good measure. People won’t click unless they have a real need at that moment. But even if you do not click, you still see the message. So we’ve found that branding is really the essence of advertising.” — Hairong Li, editor, Journal of Interactive Advertising; The New York Times, 15 January 2002

Since branding objectives need time to develop, and the CTR is a short- term metric, it appears that there’s a disconnect between online ad metrics and overall advertising goals. (Remember: 82% of US marketers told DoubleClick that branding awareness is their prime objective.)

Metrics US Marketers Use to Measure Online Advertising Campaigns, 2002 (as a % of respondents)

Click-throughs 67%

Registrations 65%

Purchases 51%

Referrals 30%

Predictive behavior for the future 16%

Long-term behavior 9%

Branding (awareness, interest, intent) 9%

Other 3%

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Methodology And as an indicator of the continuing click-through metric, DoubleClick Measuring the Money: Last Year’s Perspective research shows a steady state for average CTRs worldwide, at about 0.7% US Online Ad Spending during the four quarters of 2002. US Ofﬂine Ad Spending Cross-Media Trends Average Click-Through Rates for Online Ads Global Advertising Spending Worldwide, Q1 2002-Q4 2002 Index of Charts Q1 2002 0.72%

Q2 2002 0.69%

Q3 2002 0.69%

Q4 2002 0.72%

Now contrast those primarily Internet-only advertising metrics with a traditional, cross-media metric—the aforementioned GRP. In one of its periodic cross-media studies, DoubleClick pulled together the GRPs of the top 25 US Web sites, TV shows, and magazines from three different sources—looked at by targeted demographics. Take the core group of adults, ages 25 to 54. At 271, the GRP for the top 25 Web sites is a bit higher than for magazines, at 259, and substantially higher than for TV, at 186.

“Let’s settle quickly on the standards to measure online GRPs—without petty industry bickering.” — Mike Warsinske, CEO, Hula Media; AdBumb, 5 June 2002

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Methodology Part of what this means is that even though the Web has more sites than TV Measuring the Money: Last Year’s Perspective has shows (even with cable included), the top sites are more concentrated US Online Ad Spending than the top shows. This GRP comparison promises at least two things: a US Ofﬂine Ad Spending better chance of targeting with fewer buys on the Internet, and a better Cross-Media Trends chance of wooing traditional advertisers (often aka, brand advertisers) Global Advertising Spending

Index of Charts through metrics that speak their language.

GRPs* of Top 25 US Web Sites, TV Shows and Magazines, by Demographic Group, 2001 & 2002 Web TV Maga- Sites (1) shows (2) zines (3) Adults 18+ 217 184 244 Adults 18-34 248 161 273 Adults 18-49 254 172 257 Adults 25-54 271 186 259 Men 18-49 274 153 258 Women 18-49 244 192 348 Blacks 18-49 180 174 416 Teens 12-17 213 114 298 Adults 18-49, household income $75,000+ 268 187 282 Adults 25-54, household income $75,000+ 284 211 287 Men 18-49, household income $75,000+ 303 166 291 Women 18-49, household income $75,000+ 228 214 378 Note: *GRPs=gross rating points; total GRPs arrived at by adding the rating of each of the top 25 vehicles of each medium Source: (1) Nielsen//NetRatings, May 2002; (2) Nielsen/NTI, October 2001-February 2002; (3) MRI, Fall 2001 048177 ©2003 eMarketer, Inc. www.eMarketer.com

Then DoubleClick took those GRP ﬁgures above and averaged them among the top-25 sites, shows, and publications. The more focused nature of the most-popular Web sites and magazines gives them higher ratings than the general audience for broadcast television.

“My oft-used phrase when discussing the matter of metrics used in ofﬂine media applied to online media: if you want to convert the natives it is best to use their language.” — Jim Meskauskas, chief strategic ofﬁcer, Underscore Marketing, MediaPost, 5 December 2002

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Methodology Here’s how this data might come into play: Say if a company’s marketing Measuring the Money: Last Year’s Perspective department wants to reach men, ages 18 to 49, with household incomes of US Online Ad Spending $75,000 or higher. With an average GRP of 12.1, the Web appears a far US Ofﬂine Ad Spending better buy than TV, at 6.6 average GRP. For women the same age, same Cross-Media Trends income, magazines boast a higher GRP than the Web. Global Advertising Spending

Index of Charts In fact, in every demographic slice shown below, the Web or magazines garner higher average GRPs than does TV.

Average GRP* among Top 25 US Web Sites, TV Shows, and Magazines, by Demographic Group, 2001 & 2002 Web TV Maga- Sites (1) shows (2) zines (3) Adults 18+ 8.7 7.4 9.8 Adults 18-34 9.9 6.4 10.9 Adults 18-49 10.2 6.9 10.3 Adults 25-54 10.8 7.4 10.4 Men 18-49 11.0 6.1 10.3 Women 18-49 9.8 7.7 13.9 Blacks 18-49 7.2 7.0 16.6 Teens 12-17 8.5 4.6 11.9 Adults 18-49, household income $75,000+ 10.7 7.5 11.3 Adults 25-54, household income $75,000+ 11.4 8.4 11.5 Men 18-49, household income $75,000+ 12.1 6.6 11.6 Women 18-49, household income 9.1 8.6 15.1 $75,000+ Note: *GRP=gross rating points; average GRPs arrived at by adding the rating of each of the top 25 vehicles of each medium and then dividing that figure by 25 Source: (1) Nielsen//NetRatings, May 2002; (2) Nielsen/NTI, October 2001-February 2002; (3) MRI, Fall 2001 048773 ©2003 eMarketer, Inc. www.eMarketer.com

Continuing to reduce the language barriers—in this case by looking at comparative audiences, not users—let’s examine how many people view or read the top dozen Web sites, TV shows, and magazines. In gross numbers (that is, undifferentiated by demographic data), more people read “People” magazine, at 26.6 million, than visit any single site or watch any top TV program. (Of course, even this chart reﬂects an inconsistent use of jargon, since magazines often also talk of “circulation,” not “audience.”)

“It used to be that online ads were deﬁned by click- through rates. Now, they’re being evaluated on mind share and audience reach.” — Nick Nyhan, president, Dynamic Logic; Philadelphia Inquirer, 13 December 2001

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Methodology However, the top Web sites in general match up well to the top magazines. Measuring the Money: Last Year’s Perspective For example, the audience of 22.7 million at MSN Hotmail is nearly the US Online Ad Spending same as the 22.8 million who read “Reader’s Digest” and more than the 22.5 US Ofﬂine Ad Spending million audience for “Better Homes & Gardens.” Cross-Media Trends Furthermore, the top TV audience in the October 2001 to February 2002 Global Advertising Spending

Index of Charts timeframe was the 14.7 million people watching “Friends.” Even the seventh-ranked Web site, that for Yahoo! Geocities, had a larger audience.

Audience Size of US Adults Ages 18-49 among Top 12 Web Sites, TV Shows, and Magazines, 2001 & 2002 (in millions) Web Sites (1) TV shows (2) Magazines (3) Yahoo! Search 22.8 Friends 14.7 People 26.6 MSN Hotmail 22.7 ER 13.3 Reader's Digest 22.8 MSN Search 22.6 Will & Grace 10.9 Better Homes & 22.5 Gardens Google 20.8 Survivor 10.7 TV Guide 20.1 Yahoo! Shopping 18.4 CSI 10.6 National 19.6 Geographic eBay 17.6 Everyone 10.1 Sports Illustrated 16.2 Loves Raymond Yahoo! Geocities 17.2 Law & Order 8.8 Cosmopolitan 14.6 AOL Search 13.1 West Wing 8.4 Good 14.2 Housekeeping MSNBC 10.4 Frasier 8.1 Newsweek 12.6 Weather Channel 10.3 Simpsons 8.0 Family Circle 12.2 Monster.com 10.1 Fear Factor 7.2 Martha Stewart 9.4 Average 16.6 Average 10.0 Average 17.1 Source: (1) Nielsen//NetRatings, May 2002; (2) Nielsen/NTI, October 2001-February 2002; (3) MRI, Fall 2001 048772 ©2003 eMarketer, Inc. www.eMarketer.com

While imperfect and still evolving, this kind of apples-to-apples measurement puts the Internet medium in a light just as bright as that of traditional media. Perhaps more importantly, it shows marketers the Internet in a frame that’s easily comparable by the tools they’re accustomed to using.

“The survival of online advertising depends on its comparability between and among other forms of media. It will only be with apples-to-apples comparisons that marketing and media directors will be able to shift marketing dollars from other media and other channels to online.” — Dave Morgan, CEO, Tacoda Systems; iMedia Connection, 22 January 2003

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Methodology For another example, the basic cross-media element of reach is the prime Measuring the Money: Last Year’s Perspective factor that influences US media planners when selecting media, according US Online Ad Spending to 61% of the respondents to MediaPost research. Basic, because all US Offline Ad Spending advertisers need to know the percentage of the target audience that will Cross-Media Trends see/hear/read any specific ad or campaign. Global Advertising Spending

Index of Charts Factors that Influence US Media Planners When Selecting Media, 2003 (as a % of respondents)

Reach 61%

CPM 53%

Quality of ad environment 40%

Coverage 37%

Editorial content 30%

Composition 29%

Integrated offerings 14%

Online and offline presence 10%

Buzz 7%

Sister publication discount rates 5%

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Methodology Cross-Media Metric Tools Measuring the Money: Last Year’s Perspective Using various tech tools, several companies support the growing use of US Online Ad Spending reach, frequency, and GRP metrics. For instance, in March of this year, US Ofﬂine Ad Spending comScore Media Metrix introduced for its clients a reach/frequency Cross-Media Trends

Global Advertising Spending analysis system, combined with another traditional metric targeting tool, a

Index of Charts daypart analysis module. And Nielsen//NetRatings and Interactive Marketing Systems (IMS)—two companies under the VNU umbrella—sell a media-planning-and-analysis software suite called WebRF.

“We’re just talking about applying ofﬂine metrics to online advertising. That in and of itself isn’t valuable to me.” — Christian Kugel, associate director, Starcom IP; AdAge, 5 August 2002

In December 2002, Atlas DMT—a division of Seattle-based Avenue A— introduced version 3.0 of its GRP and Reach Forecaster. This new version turned what had been a client-only tool into a standalone product. More important, the forecasting tool combines data from both ad servers and user panels, the methodology recommended by the Advertising Research Foundation (ARF). Atlas DMT’s own serving software harvests the ad- serving data, while comScore Media Metrix supplies the panel-based data. The GRP and reach tool “determines who a given media plan will reach and how many times each person in the target audience will be exposed to the campaign,” writes Internet Advertising Report. “In this newest version, the tool also lets planners see what percentage of the total target audience would be reached by a campaign, as well as what percentage of the online target audience would be reached.” These tools help the online ad industry demonstrate how the Internet is a mass-reach medium.

“It’s crucial for the online industry to have the same level of sophisticated research tools as traditional media.” — Susan Nathan, senior vice president, Universal McCann; MediaPost, 7 October 2002

For instance, Young-Bean Soon, the director of analytics at Atlas DMT, supplied a sample spending forecast to eMarketer—a scenario for reaching 51% of US adults ages 18 to 54 with an online ad budget of $1 million. This hypothetical example spreads 333 million impressions (276 million of which were targeted) over 25 large sites, and achieves an unduplicated target reach of over 51%. The cost assumption behind the $1 million spend is an average effective CPM of $3.

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Methodology Note how the big three of AOL, MSN, and Yahoo! represent 24.5% of Measuring the Money: Last Year’s Perspective impressions and nearly 50% (48.7%, to be exact) of the unduplicated reach. US Online Ad Spending Note, too, how the target reach among the sites ranges from 9.95% at US Ofﬂine Ad Spending Yahoo! down to 0.61% at CBS MarketWatch. The average target reach Cross-Media Trends comes midway at 3.63%. Global Advertising Spending

Index of Charts Sample Media Plan to Reach Half of US Households via Online Advertising, 2003 Site Total Target Target Aver- Tar- size (1) spend impres- reach (3) age get sions (2) fre- reach quen- % (5) cy (4) About.com 19,788,000 $50,000 13,939,668 8,152,166 1.71 5.06% Advertising. 122,026,000 $65,000 17,923,022 12,656,800 1.42 7.86% com America 69,011,000 $80,000 22,170,526 13,742,923 1.61 8.54% Online Ask Jeeves 14,624,000 $30,000 8,425,864 4,187,365 2.01 2.60% CBS 5,165,000 $10,000 2,531,604 974,438 2.60 0.61% Marketwatch Classmates 31,742,000 $50,000 13,596,132 6,730,635 2.02 4.18% CNET.com 12,989,000 $32,000 8,830,889 4,564,752 1.93 2.84% CNN.com 21,743,000 $55,000 14,996,220 8,635,814 1.74 5.36% ESPN 7,258,000 $23,000 6,565,642 2,270,699 2.89 1.41% InfoSpace 25,287,000 $45,000 12,743,394 5,523,951 2.31 3.43% Sales Looksmart 4,600,000 $12,000 3,097,525 1,270,665 2.44 0.79% Lycos 36,165,000 $55,000 15,227,587 7,665,088 1.99 4.76% Network Mapquest 18,435,000 $25,000 7,003,759 2,291,503 3.06 1.42% Monster 9,547,000 $25,000 7,211,978 3,401,175 2.12 2.11% MSN Network 87,600,000 $75,000 20,603,237 10,278,946 2.00 6.38% MSNBC 16,367,000 $35,000 9,242,660 4,565,887 2.02 2.84% MTV 6,957,000 $25,000 7,457,045 2,937,955 2.54 1.82% NASCAR.com 3,681,000 $10,000 2,796,487 1,289,834 2.17 0.80% New York 7,796,000 $24,000 6,351,918 2,347,026 2.71 1.46% Times Digital Orbitz 7,235,000 $24,000 6,275,287 2,516,645 2.49 1.56% Premium 40,171,000 $40,000 11,380,022 5,923,841 1.92 3.68% Network ValueClick 121,745,000 $60,000 16,564,388 10,406,004 1.59 6.46% Weather.com 13,044,000 $35,000 9,571,611 4,647,257 2.06 2.89% Yahoo! 93,768,000 $90,000 24,754,492 16,015,138 1.55 9.95% ZDNet 10,141,000 $25,000 6,856,554 3,050,770 2.25 1.89% Totals – $1,000,000 276,117,511 146,047,277 1.89 90.71%

continued on page 145

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Methodology Undupli- – – – 82,179,529 3.36 51.04% Measuring the Money: Last Year’s Perspective cated

US Online Ad Spending Totals US Ofﬂine Ad Spending Note: Total offline target population=161,013,000 heads of household ages Cross-Media Trends 18-54; (1) number of unique visitors in one month; (2) total number of advertising exposures on this site to users in the target demographic; (3) Global Advertising Spending number of people in the target who will have the opportunity to see an Index of Charts online advertisement at least once; (4) average number of advertising exposures to users on this site in the target; (5) target reach expressed as a percentage of the total offline target population Source: Atlas DMT, comScore Networks, January 2003 048817 ©2003 eMarketer, Inc. www.eMarketer.com Drilling down to the costs, targeting rating points, and cost per point, it appears that the $1 million buys 171.49 TRPs worth of coverage. The average TRP among the 25 sites is 12.20, while the average cost for buying each rating point is $5,831.

Costs and Targeted Rating Points for Sample Media Plan to Reach Half of US Households via Online Advertising, 2003 Total spend TRPs (1) CPP (2) About.com $50,000 8.66 $5,775 Advertising.com $65,000 11.13 $5,839 America Online $80,000 13.77 $5,810 Ask Jeeves $30,000 5.23 $5,733 CBS Marketwatch $10,000 1.57 $6,360 Classmates $50,000 8.44 $5,921 CNET.com $32,000 5.48 $5,835 CNN.com $55,000 9.31 $5,905 ESPN $23,000 4.08 $5,640 InfoSpace Sales $45,000 7.91 $5,686 Looksmart $12,000 1.92 $6,238 Lycos Network $55,000 9.46 $5,816 Mapquest $25,000 4.35 $5,747 Monster $25,000 4.48 $5,581 MSN Network $75,000 12.80 $5,861 MSNBC $35,000 5.74 $6,097 MTV $25,000 4.63 $5,398 NASCAR.com $10,000 1.74 $5,758 New York Times Digital $24,000 3.94 $6,084 Orbitz $24,000 3.90 $6,158 ValueClick $60,000 10.29 $5,832 Premium Network $40,000 7.07 $5,659 Weather.com $35,000 5.94 $5,888 Yahoo! $90,000 15.37 $5,854

continued on page 146

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Methodology ZDNet $25,000 4.26 $5,871 Measuring the Money: Last Year’s Perspective Totals $1,000,000 171.49 $5,831 US Online Ad Spending Unduplicated Totals – 171.49 – US Ofﬂine Ad Spending

Cross-Media Trends Note: Total offline target population=161,013,000 heads of household ages

Global Advertising Spending 18-54; (1) targeted rating points, usually defined as Reach * Frequency/(Target Audience Size); (2) cost per point, or total spend divided Index of Charts by total TRPs Source: Atlas DMT, comScore Networks, January 2003 048815 ©2003 eMarketer, Inc. www.eMarketer.com Perhaps more important than the speciﬁc numbers of this sample online campaign from Atlas is how relatively easy it has become to deploy traditional metrics in the service of interactive advertising.

“The Internet and the organizations associated with the Internet have made remarkable progress to move the whole area ahead. And I think they’ve ﬁnally now have reached a point where a lot of the requirements, in terms of being able to evaluate the Internet along with traditional media, are virtually there.” — Michael Drexler, chief executive ofﬁcer, Zenith Optimedia USA; MediaPost, 23 April 2003

We say “relatively easy,” since the move toward traditional metrics requires more Web publishers to ﬁnd out more about the people who visit their sites. That means investing in research to catalog audiences into basic demographic and psychographic groups—gender, age, household income, and education level, among other things, along with speciﬁc interests and ad-viewing and consumer tendencies. “This information, coupled with measures of unique users, could be used to give advertisers an idea of how many people they can reach with a given site,” writes ClickZ. “From there, it is easy to calculate GRPs and CPP.”

For more about Internet advertising measurements, see part one of this three-part series of reports, eMarketer’s “Online Advertising Essentials” at: http://www.emarketer.com/products/report.php?advert_on_ess_jun03

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Methodology C. Cross-Media Optimization Measuring the Money: Last Year’s Perspective Even if the questions are no longer black-or-white, Internet advertising US Online Ad Spending

US Ofﬂine Ad Spending advocates regularly look for ways to demonstrate how online complements Cross-Media Trends ads on TV and other ofﬂine media. Perhaps the most heralded way is the Global Advertising Spending Cross Media Optimization Study (XMOS). Spearheaded by the Interactive Index of Charts Advertising Bureau, this ongoing research is conducted by Rex Briggs of Marketing Evolution along with Dynamic Logic and Forrester Research. The various reports within the study attempt to answer the question: “What is the optimal media mix to achieve marketing goals?” The prime XMOS focus so far examines which advertising vehicles at what frequency best advance campaign objectives—such as purchase intent or greater reach—for several consumer brands, and recently for B2B.

“The Internet gets into trouble on its own, but it plays well with others.” — Josh Rose, senior vice president and director, iDeutsch Los Angeles; Media, April 2003

In the initial XMOS research for the Dove Nutrium soap bar, Unilever executives found that by increasing online ad spending from 2% to 15% of the same, unchanged budget, they’d get a general lift in branding metrics of 5 points, from 19% to 24%.

Measuring the Online Ad Impact for Unilever's Dove Personal Care Brand, 2002

Actual 2% 19%

Recommended 15% 24%

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Methodology Then, when measuring the effect of increased frequency on purchase Measuring the Money: Last Year’s Perspective intent, the researchers saw a jump from a pre-campaign ﬁgure of 8.7% of US Online Ad Spending respondents to an average of 14%. When the ad frequency was ratcheted US Ofﬂine Ad Spending up to 12.5 exposures, the purchase intent rose to 22.0%. Cross-Media Trends Global Advertising Spending Purchase Intent for Dove Nutrium Bar, by Number of Index of Charts Online Ad Exposures, 2001 (as a % of female consumers)

12.5 22.0%

8.9 14.1%

6.1 12.0%

3.1 14.2%

1.7 13.0%

Pre-campaign 8.7%

Even with that high-end frequency, the average online frequency among the female consumers targeted by the Dove brand remained at only 1.7— less than both print and television.

Average Exposure of Female Consumers to Dove Nutrium Bar Ads, by Medium, 2001 (in number of impressions)

Television 6.0

Print 2.6

Online 1.7

The IAB released that Dove research in early 2002. Toward the end of the year, the trade organization published the second XMOS study, this one for McDonald’s. In this case, the fast-food giant introduced its Grilled Chicken Flatbread Sandwich in a cross-media campaign across TV, radio, print, and online. Among the 21 online publishers participating in the research include AOL Time Warner, CNET Networks, Google, Disney Internet Group, Forbes.com, iVillage, MSN, New York Times Digital, Wall Street Journal Online, Washingpost.Newsweek Interactive, and Yahoo!.

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Methodology McDonald’s found that in the target group of adults ages 18 to 49, about Measuring the Money: Last Year’s Perspective 20% are not heavy television users but are reachable primarily online. In US Online Ad Spending addition, it found that online advertising, more than the other media, most US Ofﬂine Ad Spending inﬂuences product image perception among the “key youth segment” ages Cross-Media Trends 15 to 24. Global Advertising Spending

Index of Charts Target Audience* for McDonald's Cross-Media Ad Campaign**, by Internet and TV Use Levels, 2002

Lighter TV, Heavier TV, lighter Internet lighter Internet 6% 15%

Lighter TV, heavier Internet 20% Heavier TV, heavier Internet 59%

Note: n=10,024; *target audience adults ages 18-49; **campaign for Grilled Chicken Flatbread Sandwich Source: Interactive Advertising Bureau (IAB)/Marketing Evolution/Advertising Research Foundation (ARF)/Dynamic Logic, October 2002 048819 ©2003 eMarketer, Inc. www.eMarketer.com

According to Marketing Evolution’s Briggs, “TV does not reach (or only lightly covers) 27% of the 18-49 target market with online access.” Looked at another way, 76% of these target consumers use the Internet one or more hours daily—the 20% group in the chart above. “Using online advertising to reach these otherwise elusive consumers provides better coverage of the overall target audience,” says Briggs.

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Methodology The particular media mix for McDonald’s target audience of adults ages 18 Measuring the Money: Last Year’s Perspective to 49 shows the largest share of targeted rating points (TRPs) allocated to US Online Ad Spending TV ads, at 705.6, with online trailing at 5.9. Targeted rating points US Ofﬂine Ad Spending represent the percentage of your target audience reached (reach) multiplied Cross-Media Trends by the number of times they will see the message over some period of time Global Advertising Spending

Index of Charts (frequency). The TRP ﬁgures in the chart below don’t follow that formula exactly due to rounding.

Reach, Frequency, and Targeted Rating Points (TRPs) for McDonald's Cross-Media Ad Campaign*, by Medium, 2002 Reach Frequency TRPs Television 84% 8.4 705.6 Radio** 57% 3.7 421.8 Magazines 11% 1.1 12.5 Online 3% 1.8 5.9 Note: n=10,024; *campaign for Grilled Chicken Flatbread Sandwich; **radio is local, therefore reach and frequency are estimated, with TRPs for two-week period Source: Interactive Advertising Bureau (IAB)/Marketing Evolution/Advertising Research Foundation (ARF)/Dynamic Logic, October 2002 048822 ©2003 eMarketer, Inc. www.eMarketer.com

However, McDonald’s found that by increasing online’s reach to 60%, product awareness would increase by 8.3 points among the target group. That awareness is reﬂected partially in the product image that McDonald’s attempted to arouse among consumers: that the Grilled Chicken Flatbread sandwich has four attributes—new, exciting, different, and is a “combination of great ﬂavors.”

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Methodology For each of these product image descriptions, the number of respondents Measuring the Money: Last Year’s Perspective who said each described the new sandwich completely or somewhat when US Online Ad Spending online was added to the advertising equation. Take the “different” attribute, US Ofﬂine Ad Spending which rose by 2.6 points from ofﬂine only and by 7.7 points from pre- Cross-Media Trends campaign levels. Global Advertising Spending

Index of Charts Product Image Responses* to McDonald's Cross-Media Ad Campaign**, 2002 (as a % of respondents)

Online and offline 73.2% 66.9% 45.7% 59.2%

Offline only 71.8% 64.3% 41.2% 55.0%

Pre-campaign 64.8% 59.2% 37.0% 48.8%

New Different Exciting Combination of great flavors Note: n=10,024; *among respondents who said the ads described these four attributes completely or somewhat; **campaign for Grilled Chicken Flatbread Sandwich Source: Interactive Advertising Bureau (IAB)/Marketing Evolution/Advertising Research Foundation (ARF)/Dynamic Logic, October 2002 048821 ©2003 eMarketer, Inc. www.eMarketer.com

Then in June 2003, the IAB released further branding data from the McDonald’s campaign. The Dynamic Logic researchers found that rich media advertising (a 30-second interstitial) outperformed not only static online banners in boosting the sandwich’s image descriptions, but worked more effectively than TV for two of the four attributes.

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Methodology That is, the online transitional ad boosted consumer perception that the Measuring the Money: Last Year’s Perspective product is different by 6.1%, compared to TV’s 5.7%. And the lift for the US Online Ad Spending exciting attribute rose by 16.3% from the rich media ad relative to 5.0% lift US Ofﬂine Ad Spending from television. Cross-Media Trends Global Advertising Spending Comparative Branding Metrics for McDonald's Ad on Index of Charts Television and Online, 2003 (based on % incremental lift)

New 8.0% 3.9% 1.3%

Different 5.7% 6.1% 2.7%

Exciting 5.0% 16.3% 4.3%

Combination of great flavors 7.0% 9.2% 3.5%

Television* Transitional ad** Online all other formats*** Note: *30-second commercial; **a 550x480 pixel 30-second Superstitial (Unicast branded interstitial); ***includes banners (468x60), skyscrapers (160x60, 120x600 or 120x400), boxes (300x250, 510x425 or 550x480), and rectangles (210x275 or 260x140) Source: Interactive Advertising Bureau (IAB), June 2003 050038 ©2003 eMarketer, Inc. www.eMarketer.com

The IAB released data in February 2003 for the next two case studies in the XMOS series: one for Colgate Total toothpaste, the other for Kleenex Soft Pack tissue. For the Colgate product, the campaign’s focus was to increase purchase intent among the company’s target consumer group: occasional or non- users of the product, ages 18 to 49. Results showed a sharp uptake as the online budget share grew, ranging from a 3.4% intent-to-purchase increase with no online budget rising to a 4.3% intent to purchase when 11% of the ad budget was spent online. In addition to online’s contribution to increasing purchase intent, XMOS data showed that it cost 23% more to encourage consumer purchase using television alone compared to using television along with online.

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Methodology The less than one-point change from an all ofﬂine budget to an 11% online Measuring the Money: Last Year’s Perspective budget is small. However, even incremental increases might make a US Online Ad Spending difference for a major brand with a major ad budget—especially when it US Ofﬂine Ad Spending involves just a reallocation of spending and no increased costs. Cross-Media Trends Global Advertising Spending Purchase Intent for Colgate Total Toothpaste, by Index of Charts Share of Budget Allocated to Online, 2003 (as a % increase pre-campaign)

Budget all offline* 3.4%

7% of budget online 3.8%

11% of budget online 4.3%

Note: Target audience is occasional or non-users of Colgate Total, ages 18-49; *television and print Source: Interactive Advertising Bureau (IAB)/Marketing Evolution/Advertising Research Foundation (ARF)/Dynamic Logic, February 2003 048813 ©2003 eMarketer, Inc. www.eMarketer.com

For the Kleenex brand, the research question looked at the ability of online advertising to extend the campaign’s reach beyond television and print. In its original budget, 75% of the overall ad dollars went to television, 22% for print, and 3% for online. This media mix was not optimal for reaching the entire target market. More speciﬁcally, when targeting those not reached or only lightly covered by television, the combination of online and magazine advertising was the most effective for boosting aided brand awareness, brand image, purchase intent, and bundled trial intent. Therefore, the IAB advised Kleenex to boost its online spending from 3% to 10% of its overall mix for optimal results. In fact, that 7-point budget reallocation indicated that online advertising could potentially deliver 26% of the target audience.

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Methodology In each of the four cross-media studies so far, results are based on goals. Measuring the Money: Last Year’s Perspective For example, Colgate’s goal was to increase purchase intent, McDonald’s US Online Ad Spending wanted to boost positive product images, while Kleenex hoped to increase US Ofﬂine Ad Spending reach among the part of their target market who rarely watch television. In Cross-Media Trends each case, the brand found that by spending no more, but by shifting a Global Advertising Spending

Index of Charts share of the budget to online, it could boost its branding results.

Current and Recommended Online Advertising Budget Shares for Various Consumer Brands, 2003

Colgate Total toothpaste 7% 11%

Dove Nutrium soap bar 2% 15%

Kleenex Soft-Pack tissues 3% 10%

McDonald's Grilled Chicken Flatbread sandwich 1% 13%

Current Recommended Note: Target audience is occasional or non-users of Colgate Total, ages 18-49; *television and print Source: Interactive Advertising Bureau (IAB)/Marketing Evolution/Advertising Research Foundation (ARF)/Dynamic Logic, February 2003 048814 ©2003 eMarketer, Inc. www.eMarketer.com

Briggs claims the results are better when online plays a larger role in the marketing mix for two key reasons: 1) Ofﬂine media hit diminishing returns, and online can help boost the overall results by touching the same consumers in another complementary environment. 2) Ofﬂine media miss/under-delivers to a segment of consumers, which happen to be reachable through online advertising.

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Methodology That last point is supported by data such as the chart below from a Measuring the Money: Last Year’s Perspective Millward Brown IntelliQuest study done for the OPA, which shows a greater US Online Ad Spending preference for online advertising among at-work Internet users versus light US Ofﬂine Ad Spending TV viewers. Cross-Media Trends Global Advertising Spending Attitudes toward Advertising among At-Work Internet Index of Charts Users Who Are Light TV Viewers* in the US, by Medium, 2003 (as a % of respondents)

Where I prefer to find out about new products 53% 29%

Where I prefer to receive information about companies 51% 17%

Has advertising that is rich in information 38% 16%

Has advertising that helps me decide what to buy 39% 31%

Internet TV Note: n=327 (light TV viewers, 36% of the at-work audience); *light TV viewers defined as those who view less than 2 hours 15 minutes of television per day during the work week Source: Millward Brown IntelliQuest, Online Publishers Association (OPA), May 2003 049661 ©2003 eMarketer, Inc. www.eMarketer.com

With all the research so far and still to come with the XMOS studies, concerns remain over whether the results apply to other marketers. Questions that need to be asked include: What ad formats are being used, both online and ofﬂine? Which formats are best for which product? How was scheduled reach and frequency determined? What sites were the ads run on? What characteristics of the targeted audience call for a cross-media approach?

“There are so many variables ﬂoating around here: creative, the type of ad unit, the Web sites. At the end of the day, do you really know what was driving your results?” — Geoff Ramsey, CEO, eMarketer; DM News, 2 April 2003

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Methodology In contrast, as Rishad Tobaccowala— president of Starcom IP, a Chicago- Measuring the Money: Last Year’s Perspective based cross-media ad firm—wrote in a fascinating exchange on Slate.com, US Online Ad Spending “Increasingly, IP-based media is influencing and often taking over the guts US Offline Ad Spending of all electronic media and advertising. Clients are beginning to use online Cross-Media Trends advertising in tandem with offline, not only as a complement to their offline Global Advertising Spending

Index of Charts dollars but also to learn how to better measure and target the rest of their advertising. As many worry about the inevitable spread of personal video recorders, they are realizing that Internet advertising will allow them to learn about ways to better measure, better innovate, and better align with consumer passions when the 30-second commercial grows less important.”

For the full text of “Will the Internet Become a Signiﬁcant Advertising Medium?,” a three-part article that ran on Slate in January 2003, see: http://slate.msn.com/id/2076621/entry/2076656/

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Methodology D. Four More Cross-Media Scenarios Measuring the Money: Last Year’s Perspective The more the online ad industry promotes cross-media marketing, the more US Online Ad Spending

US Ofﬂine Ad Spending advertisers need to see measured results that support aspects of a particular Cross-Media Trends campaign—and that the results could extend to their category. This need is Global Advertising Spending particularly strong among brand advertisers, who don’t always have direct Index of Charts response results to rely on. Especially when it comes to anything new, advertisers resist because they don’t commit to anything until tested—and for many, even today, the Internet is still seen as new. Or as Jean Pundiak—the senior emarketing manager at AstraZeneca— recently told iMedia Connection when asked what are the obstacles preventing her company from allocating a larger percent of her marketing/advertising budget online, “Data—the research that shows this really works.” One effort to overcome such resistance is a recent series of tests by DoubleClick and Nielsen//NetRatings that gauged the Internet’s effect on traditional ad metrics over cross-media campaigns for four companies: American Airlines Subaru Oscar Mayer Planters Peanuts

Each of the four sets of three charts below demonstrates the effect of increasing the Internet’s share of a non-changing ad budget on reach, frequency, and GRP for each company. In several cases, but not all, more money spent online boosts those three metrics. The two major variables appear to be what category of product is being pitched and the exact nature of each company’s target.

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Methodology American Airlines Measuring the Money: Last Year’s Perspective For American Airlines, the campaign target was business and leisure US Online Ad Spending travelers, ages 25 to 54, with incomes of $60,000 or more. By redirecting a US Ofﬂine Ad Spending portion of the spend away from television and toward online media, the Cross-Media Trends

Global Advertising Spending developed planning scenario tripled the Internet’s share from 5%, as in the

Index of Charts original ad schedule, to 15%. That increased Internet allocation resulted in a useful 3.1-point gain for reach, what DoubleClick described as an “insigniﬁcant frequency decline,” and a mild 2.2% GRP skip from 416 to 425. These results are not exactly earth shattering.

Effect of Increased Internet Ad Budget on Reach, Frequency, and GRPs* for American Airlines' Campaign, 2002 Reach Frequency GRP 5% Internet (original schedule) 61.1% 6.8 416 7% Internet 63.0% 6.8 426 15% Internet 64.2% 6.6 425 Note: targeted to business and leisure travelers, ages 25-54, incomes of $60K+;*GRPs=gross rating points Source: DoubleClick, Nielsen//NetRatings, March 2003 048656 ©2003 eMarketer, Inc. www.eMarketer.com

“If we’re going to get in the game, we have to come up with a combined reach and frequency.” — John Keck, interactive media director, Foote Cone & Belding; ZDNet News, 13 May 2002

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Methodology However, when the researchers broke down the high-level demographic Measuring the Money: Last Year’s Perspective description of the target audience by level of TV use, the GRP changes US Online Ad Spending become magniﬁed. While the GRP among heavy TV users declined by 5.5% US Ofﬂine Ad Spending as more money was spent on Internet ads, it shot up by 26.4% among light- Cross-Media Trends to-medium TV users. Global Advertising Spending

Index of Charts Effect of Increased Internet Ad Budget on GRPs* among US TV Viewers for American Airlines' Campaign, by Frequency of TV Use, 2002

5% Internet (original schedule) 202.2 34.9

15% Internet 191.1 44.1

Heavy TV users Light-to-Medium TV users Note: targeted to business and leisure travelers, ages 25-54, incomes of $60K+;*GRPs=gross rating points Source: DoubleClick, Nielsen//NetRatings, March 2003 048655 ©2003 eMarketer, Inc. www.eMarketer.com

Similarly, boosting the budget for interactive media reduced frequency of exposure to the airline’s ads by 11.1% among heavy TV users and increased it by 19.9% among the light-to-medium TV users.

Effect of Increased Internet Ad Budget on Frequency of Exposure among US TV Viewers for American Airlines' Campaign, by Frequency of TV Use, 2002

5% Internet (original schedule) 16.57 2.86

15% Internet 14.73 3.43

Heavy TV users Light-to-Medium TV users Note: targeted to business and leisure travelers, ages 25-54, incomes of $60K+ Source: DoubleClick, Nielsen//NetRatings, March 2003 048654 ©2003 eMarketer, Inc. www.eMarketer.com

The signiﬁcance of those GRP and frequency changes become clearer when you look at the underlying nature of those two groups: heavy TV users tend to have lower income and professional status, while lighter TV users not only tend to have more money and status, they are also harder to reach by television advertising, while available to marketers online.

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Methodology Subaru Measuring the Money: Last Year’s Perspective More than the American Airlines campaign, Subaru’s ads targeted an even US Online Ad Spending broader swath: not just ages 25 to 54, with household incomes of $60,000 US Ofﬂine Ad Spending or more, but all adults. In the Japanese car manufacturer’s case, the Cross-Media Trends

Global Advertising Spending marketing department increased the Internet budget share from only one

Index of Charts online placement to a 7% spend. The overview effect of an increased Internet ad budget on the three metrics shows a mild growth in reach, a negligible decrease in frequency, and a static GRP.

Effect of Increased Internet Ad Budget on Reach, Frequency, and GRPs* for Subaru's Campaign, 2002 Reach Frequency GRPs Original schedule 94.7% 15.9 1,507 7% Internet 95.3% 15.8 1,507 Note: targeted to adults, ages 25-54, incomes of $60K+; *GRPs=gross rating points Source: DoubleClick, Nielsen//NetRatings, March 2003 048653 ©2003 eMarketer, Inc. www.eMarketer.com

Note that even with the original ad schedule, Subaru reached an extremely high level of its wide target audience. But it appears that a boost in online spending enhances results on the margins—among those people who, since they rarely watch TV, are better reached by the Internet and magazines. In this case, increasing the Internet’s share to 7% translates to a GRP decrease of 3.1% among TV junkies, but a corresponding 4.0% GRP uptick among the more desirable segment of the entire target.

Effect of Increased Internet Ad Budget on GRPs* among US TV Viewers for Subaru's Campaign, by Frequency of TV Use, 2002

Original schedule 675.2 75.4

7% Internet 654.0 78.4

Heavy TV users Light TV users Note: targeted to adults, ages 25-54, incomes of $60K+; *GRPs=gross rating points Source: DoubleClick, Nielsen//NetRatings, March 2003 048652 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Similarly, frequency of exposure to the Subaru campaign dropped by 3.8% Measuring the Money: Last Year’s Perspective among heavy TV users, but increased by 3.3% among light TV users.

US Online Ad Spending

US Ofﬂine Ad Spending Effect of Increased Internet Ad Budget on Frequency Cross-Media Trends of Exposure among US TV Viewers for Subaru's Global Advertising Spending Campaign, by Frequency of TV Use, 2002

Index of Charts Original schedule 35.66 3.98

7% Internet 34.30 4.11

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Methodology Oscar Mayer Measuring the Money: Last Year’s Perspective With the goal of convincing mothers to choose Oscar Mayer Lunchables for US Online Ad Spending their children’s midday meal, the original ad schedule divided as follows: US Ofﬂine Ad Spending 48% on national TV, broadcast and cable, including Lifetime and Martha Cross-Media Trends

Global Advertising Spending Stewart; and 52% devoted to women’s magazines and mass-reach

Index of Charts publications such as “People.” However, an analysis of the target group showed that 83% of the women ages 25 to 54 went online in the previous 30 days, and that this group skewed younger and more educated. In addition, this online portion watched less TV and read more magazines than the rest of the target. This analysis became the rationale for redirecting 15% of the ad budget onto the Internet. The overall results show a 4-point reach increase but two signiﬁcant decreases of 1-point for frequency and 60 gross rating points.

Effect of Increased Internet Ad Budget on Reach, Frequency, and GRPs* for Oscar Mayer's Campaign, 2002 Reach Frequency GRPs Original schedule 83% 6.9 571 15% Internet 87% 5.9 511 Note: targeted to women, ages 25-54; *GRPs=gross rating points Source: DoubleClick, Nielsen//NetRatings, March 2003 048650 ©2003 eMarketer, Inc. www.eMarketer.com

The effect of the increased Internet ad budget made GRPs fall by 12.2% among heavy TV users and rise by 6.3% among light TV users. However, the decrease showed a 36-point drop, while the increase was only 1 point.

Effect of Increased Internet Ad Budget on GRPs* among US TV Viewers for Oscar Mayer's Campaign, by Frequency of TV Use, 2002

Original schedule 296 16

15% Internet 260 17

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Methodology The degree of change for frequency of exposure also showed a sharp drop Measuring the Money: Last Year’s Perspective among heavy TV users and a small gain among light TV users.

US Online Ad Spending

US Ofﬂine Ad Spending Effect of Increased Internet Ad Budget on Frequency Cross-Media Trends of Exposure among US TV Viewers for Oscar Mayer's

Global Advertising Spending Campaign, by Frequency of TV Use, 2002

Index of Charts Original schedule 17.82 0.96

15% Internet 15.03 1.01

These slight effects for Oscar Mayer’s online budget increase point to questions of targeting. DoubleClick reported, “Online seems especially effective for campaigns with more specific demographic qualifiers, such as the presence of children in the household.” Two more demographic signifiers for online campaigns are higher income and greater education.

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Methodology Planters Peanuts Measuring the Money: Last Year’s Perspective The fourth cross-media advertising scenario found Planters Peanuts US Online Ad Spending targeting younger adults, ages 18 to 34. The original ad schedule devoted US Ofﬂine Ad Spending 72% of the budget to national TV, 25% to men’s interest magazines such as Cross-Media Trends

Global Advertising Spending Rolling Stone and Sports Illustrated, and tossed a 3% bone to high-reach

Index of Charts men’s sites like ESPN.com. (Why the DoubleClick research says the target was adults, but the ad spends focused on men, is not clear.) In this case, the online portion of the target group—deﬁned as those who accessed the Internet within the past 30 days—was a bit more than half, at 57%. This segment tended to be younger and more educated than the 43% ofﬂine, and was more likely to have children. Similar to the Oscar Mayer campaign, a budget-share increase to 15% Internet created increased reach, but decreased both frequency and GRP.

Effect of Increased Internet Ad Budget on Reach, Frequency, and GRPs* for Planters Peanuts' Campaign, 2002 Reach Frequency GRPs 3% Internet (original schedule) 92.0% 10.4 957 15% Internet 94.2% 9.8 927 Note: targeted to adults, ages 18-34; *GRPs=gross rating points Source: DoubleClick, Nielsen//NetRatings, March 2003 048639 ©2003 eMarketer, Inc. www.eMarketer.com

However, GRPs showed signiﬁcant changes by television use analysis, with a 9.2% decrease among heavy TV users and a 26.3% increase among light users.

Effect of Increased Internet Ad Budget on GRPs* among US TV Viewers for Planters Peanuts' Campaign, by Frequency of TV Use, 2002

3% Internet (original schedule) 433 38

15% Internet 393 48

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Methodology Frequency of exposure to the Planters ads followed the same pattern: down Measuring the Money: Last Year’s Perspective by 11.1% among heavy TV users, up by 23.8% among the light users.

US Online Ad Spending

US Ofﬂine Ad Spending Effect of Increased Internet Ad Budget on Frequency Cross-Media Trends of Exposure among US TV Viewers for Planters Global Advertising Spending Peanuts' Campaign, by Frequency of TV Use, 2002

Index of Charts 3% Internet (original schedule) 23.5 2.1

15% Internet 20.9 2.6

While the Planters target group was nearly as broad as Oscar Mayer’s, “shifting spending to online was more effective due to the age of the target,” writes DoubleClick. In fact, increasing the Internet spending allocation by from a 3% to a 15% share helped them reach over 2 million previously untouched, younger consumers.

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Methodology Cross-Media Comparative Summary Measuring the Money: Last Year’s Perspective Finding the right blend in a cross-media advertising campaign is not only a US Online Ad Spending matter of exploring traditional metrics but balancing traditional concerns. US Ofﬂine Ad Spending That is, what are you trying to sell? And who are you selling to? (What’s Cross-Media Trends your product? Who’s your audience?) Global Advertising Spending

Index of Charts When you compare the effect of increased Internet ad budgets on GRPs and frequency of exposure across all four product campaigns, the pattern is clear: down for heavy TV users and up for light TV users.

Comparative Effect of Increased Internet Ad Budgets on GRPs* among US TV Viewers, by Frequency of TV Use, 2002 (as a % increase/decrease vs. original budget)

American Airlines* -5.5% 26.4% Subaru -3.1% 4.0% Oscar Mayer -12.2% 6.3% Planters Peanuts -9.2% 26.3%

Heavy TV users Light TV users Note: Increased Internet budget shares: from 5% to 15% (American Airlines), from near 0% to 7% (Subaru), from 0% to 15% (Oscar Mayer), from 3% to 15% (Planters Peanuts); *light-to-medium TV users Source: DoubleClick, Nielsen//NetRatings, March 2003 048764 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology

Measuring the Money: Comparative Effect of Increased Internet Ad Budgets Last Year’s Perspective on Frequency of Exposure among US TV Viewers, by US Online Ad Spending Frequency of TV Use, 2002 (as a % increase/decrease US Ofﬂine Ad Spending vs. original budget) Cross-Media Trends

Global Advertising Spending American Airlines* Index of Charts -11.1% 19.9% Subaru -3.8% 3.3% Oscar Mayer -15.7% 5.2% Planters Peanuts -11.1% 23.8%

What’s not as clear is the meaning behind the pattern. That is, should all advertisers increase the Internet’s share in their budgets to boost metrics such as GRP and frequency? If not, which advertisers? And even then, by how much should they shift spending allocations to optimize results? As the common online chat group acronym derived from commercials goes: YMMV…or, your mileage may vary.

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Methodology E. Cross-Media: Driving Trafﬁc Online Measuring the Money: Last Year’s Perspective Research indicates that reallocating budgets within cross-media campaigns US Online Ad Spending

US Offline Ad Spending is far from the only way to lift branding objectives, as gauged by metrics Cross-Media Trends such as GRPs. Sometimes the cross-media influence operates from offline Global Advertising Spending to online, boosting branding indirectly by using advertising in traditional Index of Charts media to drive traffic to product Web sites, as this series of three case studies from Hitwise demonstrates. By sponsoring the hit TV program “American Idol,” AT&T Wireless found increased visitor flow to its Web site. That show aired on Tuesday and Wednesday each week, and the figures below show how the share of telecommunications site visitors to the www.attws.com site peaked every week on Wednesday.

Daily US Visitors to the AT&T Wireless Web Site, 1 March 2003 - 4 April 2003 (as % of visitors in telecommunications category) Date Day of Week Share 1 March 2003 Saturday 10.41% 2 March 2003 Sunday 11.25% 3 March 2003 Monday 11.75% 4 March 2003 Tuesday 12.05% 5 March 2003 Wednesday 13.10% 6 March 2003 Thursday 12.50% 7 March 2003 Friday 12.35% 8 March 2003 Saturday 10.92% 9 March 2003 Sunday 11.24% 10 March 2003 Monday 10.78% 11 March 2003 Tuesday 10.32% 12 March 2003 Wednesday 10.73% 13 March 2003 Thursday 9.75% 14 March 2003 Friday 8.84% 15 March 2003 Saturday 8.51% 16 March 2003 Sunday 8.65% 17 March 2003 Monday 8.98% 18 March 2003 Tuesday 9.31% 19 March 2003 Wednesday 9.79% 20 March 2003 Thursday 8.89% 21 March 2003 Friday 9.36% 22 March 2003 Saturday 8.94% 23 March 2003 Sunday 8.85% 24 March 2003 Monday 9.96% 25 March 2003 Tuesday 9.74%

continued on page 169

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Methodology 26 March 2003 Wednesday 11.05% Measuring the Money: Last Year’s Perspective 27 March 2003 Thursday 9.52% US Online Ad Spending 28 March 2003 Friday 9.60% US Ofﬂine Ad Spending

Cross-Media Trends 29 March 2003 Saturday 8.55% Global Advertising Spending 30 March 2003 Sunday 8.55% Index of Charts 31 March 2003 Monday 8.89% 1 April 2003 Tuesday 8.67% 2 April 2003 Wednesday 9.79% 3 April 2003 Thursday 9.17% 4 April 2003 Friday 9.47% Note: AT&T Wireless sponsored the "American Idol" television show which aired on Tuesday and Wednesday Source: Hitwise, June 2003 050029 ©2003 eMarketer, Inc. www.eMarketer.com Rarely do two companies in the same industry compete as directly as did Ben & Jerry’s and Baskin & Robbins in late April of this year. Both firms engaged in the exact same marketing campaign only one day apart: a free cone day at their US stores. And both campaigns were done across media, online and offline. The US Web traffic figures from Hitwise show a run-up of visitors on 28 April, one day before the Ben & Jerry’s offer and two days before the Baskin & Robbins one. While the shares of all Web surfers on that day, 0.33% and 0.39%, respectively, may not seem like much, each figure represents an increase in absolute numbers of visitors of approximately 120% each from 27 April. On the 29th, the share of visitors increased once again, but more for Baskin & Robbins than for Ben & Jerry’s, whose free offer was that day. Then, while the visitor share to the Ben & Jerry’s Web site dropped off to normal levels the next day, it soared to a 1.10% share at the Baskin & Robbins site on the 30th, the day of its free cone offer. Hitwise claims that Baskin & Robbins “witnessed a larger increase in share of US visits…as users flocked to the Web site to locate the nearest store.” While that is undoubtedly true, the import is not easily determined. In one speculative example, the greater increase at one site over the other may have little to do with Baskin & Robbins’ marketing effectiveness over its rival. It might equally mean that more Internet users already knew where to find a local Ben & Jerry’s, but needed more help locating a Baskin & Robbins store.

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Methodology Nevertheless, the link between retail promotions and Web site visits is Measuring the Money: Last Year’s Perspective clearly demonstrated here.

US Online Ad Spending

US Ofﬂine Ad Spending Daily US Visitors to the Ben & Jerry's and Cross-Media Trends Baskin-Robbins Web Sites, 17 April 2003-7 May 2003

Global Advertising Spending (as a % of total US Web visitors) Index of Charts www.benjerry.com www.baskinrobbins.com 17 Apr 2003 0.09% 0.07% 18 Apr 2003 0.09% 0.06% 19 Apr 2003 0.08% 0.04% 20 Apr 2003 0.05% 0.04% 21 Apr 2003 0.08% 0.09% 22 Apr 2003 0.22% 0.18% 23 Apr 2003 0.18% 0.25% 24 Apr 2003 0.21% 0.23% 25 Apr 2003 0.17% 0.22% 26 Apr 2003 0.15% 0.18% 27 Apr 2003 0.15% 0.18% 28 Apr 2003 0.33% 0.39% 29 Apr 2003 0.56% 0.65% 30 Apr 2003 0.12% 1.10% 1 May 2003 0.05% 0.20% 2 May 2003 0.06% 0.09% 3 May 2003 0.04% 0.08% 4 May 2003 0.04% 0.06% 5 May 2003 0.03% 0.04% 6 May 2003 0.03% 0.04% 7 May 2003 0.01% 0.05% Note: Ben & Jerry's had a "free cone day" offer on 29 April 2003, and Baskin-Robbins had a "free cone day" offer on 30 April 2003 Source: Hitwise, June 2003 050318 ©2003 eMarketer, Inc. www.eMarketer.com

Old soft-drink rivals Coke and Pepsi have been wrestling for market share long before there were personal computers, let alone the Internet. But a recent campaign by Pepsi showed the potential effect of cross-media efforts in wooing Web site visitors. First note how on most of the 12 days charted below, market leader Coke had a greater share of visitors than did Pepsi. However, Pepsi ran a Beyonce Knowles commercial during the Oscars on 23 March 2003. Simply put, on that day, trafﬁc at the company’s Web site soared from a 0.11% visitor share to 0.45%. Again, while those numbers may appear small, they represent a 309% rise in site visitors—a deﬁnite effect caused by the Knowles commercial.

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Methodology And the boost in visitors continued the next day, when Pepsi’s 0.34% share Measuring the Money: Last Year’s Perspective was nearly twice as large as Coke’s 0.18% share.

US Online Ad Spending

US Ofﬂine Ad Spending Daily US Visitors to the Pepsi Cola and Coca-Cola Web Cross-Media Trends Sites, 15 March 2003-26 March 2003 (as a % of total

Global Advertising Spending US Web visitors) Index of Charts www.pepsi.com www.coca-cola.com 15 Mar 2003 0.12% 0.13% 16 Mar 2003 0.11% 0.20% 17 Mar 2003 0.11% 0.14% 18 Mar 2003 0.13% 0.17% 19 Mar 2003 0.10% 0.15% 20 Mar 2003 0.15% 0.14% 21 Mar 2003 0.10% 0.13% 22 Mar 2003 0.11% 0.16% 23 Mar 2003 0.45% 0.19% 24 Mar 2003 0.34% 0.18% 25 Mar 2003 0.12% 0.17% 26 Mar 2003 0.09% 0.18% Note: Pepsi ran a Beyonce Knowles commercial during the Oscars on 23 March 2003 Source: Hitwise, June 2003 050319 ©2003 eMarketer, Inc. www.eMarketer.com

What any of these companies accomplished with the increased Web trafﬁc is a whole other marketing matter. But by demonstrating a direct connection between ofﬂine advertising and boosts for online marketing, cross-media appears not just a wave of the future but an established trend.

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Methodology F.Consumer Media Consumption Measuring the Money: Last Year’s Perspective In concert with increased Internet use both at home and at work, consider US Online Ad Spending

US Ofﬂine Ad Spending how more and more people increasingly partake in various media as if they Cross-Media Trends had just come across a gourmet all-you-can-eat restaurant—how much Global Advertising Spending media can one person consume in one day? Index of Charts In its annual “Communications Industry Forecast” report, Veronis Suhler Stevenson tracks the annual media use among US consumers from 2000 to 2006. To start with in the chart below, note the bottom line, the average per day media use. Not only does it grow steadily from 9.93 hours in 2002 to 10.37 hours by 2006, consider these rough numbers: work = 8 hours; commute = 1 hour; sleep = 7 hours. That leaves 8 hours in a day, apparently not enough for that average media use. Unless, of course, you listen to the radio while driving, and watch TV while going online, and read periodicals while listening to music, and go online while at work, and so on. The challenge for 21st century advertisers is ﬁnding ways to surmount that split and make the most of it through cross-media marketing that touches the consumer from various sides. That said, the Veronis data also points to increased use of the consumer side of the Internet, from 157 hours annually in 2002, trailing the daily newspaper at 175 hours, to 213 hours by 2006, trailing only TV and radio.

Annual Use of Media among US Consumers, 2000-2006 (in hours) 2000 2001 2002 2003 2004 2005 2006 TV (broadcast and cable) 1,640 1,661 1,661 1,656 1,669 1,672 1,679 Radio 964 983 1,001 1,014 1,032 1,049 1,062 Internet, consumer 106 134 157 174 189 199 213 Recorded music 264 238 228 219 211 203 195 Newspapers, daily 179 177 175 173 172 170 169 Home video (pre- 46 56 77 96 109 120 126 recorded tapes) Magazines, consumer 121 119 117 116 115 113 112 Video games 75 78 84 90 95 101 106 Books, consumer 111 109 107 106 105 104 103 Box office (movies) 12 13 13 13 14 14 14 iTV (video-on-demand 2 2 2 3 3 5 6 only) Total 3,519 3,570 3,623 3,661 3,715 3,750 3,785 Average per day* 9.64 9.78 9.93 10.03 10.18 10.27 10.37 Note: ranked by 2006 figures; numbers may not add to total due to rounding; *average per day figures based on 365-day year Source: Veronis Suhler Stevenson , July 2002 044856 ©2002 eMarketer, Inc. www.eMarketer.com

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Methodology Veronis projects the growth rate for consumer Internet usage over the Measuring the Money: Last Year’s Perspective whole seven-year span at 100.9%, far above the 7.6% average, TV’s 2.4% US Online Ad Spending growth, or the declining use of traditional reading matter such as the daily US Ofﬂine Ad Spending newspaper, consumer magazines, and books. Cross-Media Trends Global Advertising Spending Growth Rate in Media Use among US Consumers, Index of Charts 2000-2006 (as a % increase/decrease)

iTV (video-on-demand only) 200.0%

Home video (prerecorded tapes) 173.9%

Internet, consumer 100.9%

Video games 41.3%

Box office (movies) 16.7%

Radio 10.2%

Total 7.6%

TV (broadcast and cable) 2.4%

Newspapers, daily -5.6%

Books, consumer -7.2%

Magazines, consumer -7.4%

Recorded music -26.1%

“Today’s consumers are hearing overlapping messages from advertisers. Simultaneous media usage changes all the rules.” — Tom Holliday, president, Retail Advertising & Marketing Association (RAMA)

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Methodology Similarly, Internet users spend anywhere from 115.7 minutes online Measuring the Money: Last Year’s Perspective daily according to RoperASW and AOL down to 43.0 minutes by Veronis US Online Ad Spending Suhler’s estimates. Estimates from eMarketer indicate the sweet spot is an US Ofﬂine Ad Spending average of 65.0 minutes per day. To make an easier comparison to the TV Cross-Media Trends use chart above, those three ﬁgures translate to 1:56, 0:43, and 1.05 hours Global Advertising Spending

Index of Charts per day, respectively.

Comparative Estimates: Average Time Spent Online by Internet Users in the US, 2002 (in minutes per day)

America Online/RoperASW, March 2003 (1) 115.7

Nielsen//NetRatings, February 2003 (1) (2) 100.4

UCLA Center for Communication Policy, February 2003 (3) 95.1

Arbitron/Edison Media Research, February 2003 (3) 80.0

Harris Interactive, April 2002 (3) 68.6

eMarketer, June 2003 (3) 65.0

comScore Media Metrix, February 2003 (3) 62.3

Veronis Suhler Stevenson, July 2002 (4) 43.0

Note: (1) home and work usage; (2) based on changed methodology that includes desktop applications connected to the Internet; (3) usage from any location; (4) calculated based on Veronis figure of time online per year for all consumers and Internet user penetration rate of 60%; (5) these numbers have been calculated by eMarketer based on the hourly, daily and/or weekly estimates of each research firm Source: various, as noted, 2002 & 2003; eMarketer calculations (5), June 2003 049905 ©2003 eMarketer, Inc. www.eMarketer.com

When you contrast the Veronis Suhler figure of 157 annual hours of Internet use among US consumers in 2002 to the UCLA Internet Report figures below, a sharp dichotomy appears. With a 2002 average of 11.1 hours per week spent online by US Internet users, that translates to 577.2 hours annually—far above the Veronis figure.

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Methodology The Internet usage ﬁgure from Veronis falls short of the UCLA research Measuring the Money: Last Year’s Perspective for two reasons: One, Veronis looks at consumer Internet use only, not US Online Ad Spending counting the hours spent at work or at school. Two, while the UCLA US Ofﬂine Ad Spending report looks at hours online among Internet users, the Veronis report Cross-Media Trends looks at all US consumers, not just those who go online. This reduces the Global Advertising Spending

Index of Charts average signiﬁcantly.

Average Number of Hours Spent Online per Week by Internet Users in the US, 2000-2002

2000 9.4

2001 9.8

2002 11.1

Even when you attempt to even out the Veronis estimates by factoring in the average Internet user penetration rate of 60%, the merchant bank’s Internet usage reaches only 260.9 hours per year. Projections from eMarketer put annual Internet use at about 400 hours, similar to estimates from comScore and Harris.

Comparative Estimates: Average Time Spent Online by Internet Users in the US, 2002 (in hours per week and per year) Week Year (5) America Online/RoperASW, March 2003 (1) 13.5 701.9 Nielsen//NetRatings, February 2003 (1) (2) 11.7 609.1 UCLA Center for Communication Policy, February 2003 (3) 11.1 577.2 Arbitron/Edison Media Research, February 2003 (3) 9.3 485.3 Harris Interactive, April 2002 (3) 8.0 416.2 eMarketer, June 2003 (3) 7.6 394.3 comScore Media Metrix, February 2003 (3) 7.3 378.0 Veronis Suhler Stevenson, July 2002 (4) 5.0 260.9 Note: (1) home and work usage; (2) based on changed methodology that includes desktop applications connected to the Internet; (3) usage from any location; (4) calculated based on Veronis figure of time online per year for all consumers and Internet user penetration rate of 60%; (5) these numbers have been calculated by eMarketer based on the hourly, daily and/or weekly estimates of each research firm Source: various, as noted, 2002 & 2003; eMarketer calculations, June 2003 049904 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology All those averages don’t get at one fact: The more experience people have Measuring the Money: Last Year’s Perspective with the Internet (in terms of tenure), the more time they spend online.

US Online Ad Spending

US Ofﬂine Ad Spending Average Number of Hours Spent Online per Week by Cross-Media Trends Internet Users in the US, by Experience Online, 2002

Global Advertising Spending

Index of Charts <1 year 5.5

1 to <2 years 6.7

2 to <4 years 9.2

4 to <6 years 10.9

6+ years 15.8

For more about the cross-media advertising audience, see part one of this three-part series of reports, eMarketer’s “Online Advertising Essentials” at: http://www.emarketer.com/products/report.php?advert_on_ess_jun03

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Methodology 7

I Measuring the Money: Last Year’s Perspective 11

II US Online Ad Spending 17

III US Ofﬂine Ad Spending 89

IV Cross-Media Trends 125 V Global Advertising Spending 177 A. Internet Ad Spending: Worldwide & Regional 180 B. Total Ad Spending: Worldwide & Regional 186 C. Canada 192 V D. Europe 198 E. Asia-Paciﬁc 224 F.Latin America 234

Index of Charts 237

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Methodology The adage that advertising follows eyeballs is true, but the corollary is that Measuring the Money: Last Year’s Perspective in an industry as traditional as advertising, it takes a while to follow where US Online Ad Spending the eyes are turning. And data from all over the world shows that whether US Ofﬂine Ad Spending at home or at work, more people are spending more time on the Internet. Cross-Media Trends In 2003, there will be 633.6 million Internet users worldwide, according Global Advertising Spending

Index of Charts to eMarketer. Comparative estimates indicate that by mid decade, nearly one billion people will be going online across the globe.

Comparative Estimates: At-Home and At-Work Internet Users Worldwide, 2000-2006 (in millions) 2000 2001 2002 2003 2004 2005 2006 Computer Economics, June – – 562.3 665.4 752.6 830.3 921.4 2002 (1) Computer Industry Almanac – 540.0 665.9 – – 1,000.0 – (CIA), December 2002 comScore Networks Inc., – – 323.1 – – – – May 2002 eMarketer, May 2002 384.8 498.6 565.7 633.6 724.9 – – IDATE, January 2003 – 474.3 590.0 – – – 948.7 International DataCorpo- – – – – – 941.0 – ration (IDC), November 2002 Morgan Stanley, May 2002 348.0 457.0 571.0 695.0 813.0 932.0 – Pioneer Consulting, 344.6 460.3 – – – – – January 2002 Note: (1) Internet users are defined as individuals who consistently use the Internet with access from either work, school, home or multiple locations Source: eMarketer, May 2002; various, as noted, 2002 050391 ©2003 eMarketer, Inc. www.eMarketer.com

“The message is clear: online advertising works, and its cheap. This is different from the message that online advertising has to increase because there are many millions of ‘eyeballs’ on the Web, and advertisers will follow the eyeballs. The latter statement was not inaccurate but it needed the former, as a proof and the incentive, to actually generate orders from traditional advertisers.” — Safa Rashtchy, senior research analyst, US Bancorp Piper Jaffray; The Silk Road Weekly, 14 April 2003

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Methodology And the average Internet user spends anywhere from 9.0 hours per week Measuring the Money: Last Year’s Perspective online, as in Germany, to 10.8 hours per week, as in Brazil, up to nearly 14 US Online Ad Spending hours per week, as in Canada. This recent data from AOL and RoperASW is US Ofﬂine Ad Spending just for select countries; the weekly usage will vary, of course, in nations Cross-Media Trends not listed. And the numbers might be a little high, given that eMarketer’s Global Advertising Spending

Index of Charts estimate of hours online per week is 7.6. But as a pointer to where the eyeballs spend time, it indicates where advertisers might ﬁnd a receptive audience.

Time Spent Online by Consumers at Home and Work in Select Countries Worldwide, 2002 (in average hours per week)

Canada 13.9

US 13.5

France 12.7

Brazil 10.8

UK 10.6

Germany 9.0

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Methodology A. Internet Ad Spending: Worldwide Measuring the Money: Last Year’s Perspective & Regional US Online Ad Spending

US Ofﬂine Ad Spending According to two researchers, GartnerG2 and PricewaterhouseCoopers,

Cross-Media Trends worldwide Internet ad spending in 2003 will surpass $10 billion. That the Global Advertising Spending ﬁgures from Initiative Media are about half as that from the other ﬁrms, Index of Charts even after adjusted for the fact that it counts only about 80% of the market, is a mystery, since the New York-based media services company doesn’t explain its methodology. Nevertheless, worldwide online ad spending by 2005 is expected to reach nearly $13 billion (PwC) or more than $15 billion (GartnerG2).

Comparative Estimates: Worldwide Online Advertising Spending, 2000-2006 (in billions) 2000 2001 2002 2003 2004 2005 2006 GartnerG2, October 2002 – $7.91 $9.66 $11.54 $13.52 $15.48 – Initiative Media*, March – – $5.16 $5.37 – – – 2003 PricewaterhouseCoopers, $10.08 $9.60 $9.65 $10.54 $11.49 $12.54 $13.66 May 2002 Note: *initial figures based on 40 markets, accounting for around 80% of total global online ad spending, therefore figures above extrapolated for 100% of market Source: various, as noted, 2002 & 2003 050394 ©2003 eMarketer, Inc. www.eMarketer.com

The comparative growth rates for global online ad spending diverge significantly, with GartnerG2 pegging it in the double figures for all the years shown while, from 2003 on, PwC puts the growth in the high single figures. In either case, both researchers describe healthy growth for this still emerging global ad medium.

Comparative Estimates: Worldwide Online Advertising Spending Growth, 2001-2006 (in billions) 2001 2002 2003 2004 2005 2006 GartnerG2, October 2002 – 22.1% 19.5% 17.2% 14.5% – Initiative Media*, March 2003 – – 4.1% – – – PricewaterhouseCoopers, May 2002 -4.7% 2.6% 7.0% 9.0% 9.1% 8.9% Source: various, as noted, June 2003 050395 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Estimates from Havas and the London Business School show interactive Measuring the Money: Last Year’s Perspective marketing spending in general growing by 11.7% this year. However, these US Online Ad Spending ﬁgures are not truly global, covering only the US, Germany, the UK, US Ofﬂine Ad Spending France, and Japan. Cross-Media Trends Global Advertising Spending Interactive Marketing Spending in Select Countries*, Index of Charts 2002 & 2003 (as a % increase vs. prior year)

2002 6.6%

2003 11.7%

Note: n=645 chief marketing officers; interactive marketing defined as Internet advertising, marketing Web sites and extranets, e-mail marketing and new media (e.g., digital TV, wireless); *US, Germany, UK, France and Japan Source: London Business School/Havas, December 2003 047387 ©2003 eMarketer, Inc. www.eMarketer.com

When worldwide online ad spending is viewed by region, the dominance of the US market becomes obvious. That more money is spent in the Asia- Paciﬁc region than in Europe, even though the latter has stronger national economies, is due to the sheer size of the Asia-Paciﬁc contingent and a greater number of Internet users.

Worldwide Online Advertising Spending, by Region, 2000-2006 (in millions) 2000 2001 2002 2003 2004 2005 2006 US $8,225 $7,530 $7,600 $8,000 $8,600 $9,300 $10,100 Asia-Pacific $681 $804 $924 $1,076 $1,279 $1,470 $1,631 Western Europe $904 $957 $984 $1,074 $1,158 $1,229 $1,299 Latin America $123 $150 $160 $175 $200 $250 $300 Canada $73 $94 $105 $120 $137 $155 $175 Eastern Europe $48 $48 $55 $63 $75 $86 $99 Middle East/Africa $26 $21 $26 $33 $40 $47 $53 Worldwide $10,080 $9,604 $9,854 $10,541 $11,489 $12,537 $13,657 Note: ranked by 2003 spending figures Source: PricewaterhouseCoopers, Wilkofsky Gruen Associates, May 2002 047302 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology

Measuring the Money: Worldwide Online Advertising Spending, by Region, Last Year’s Perspective 2000-2006 (as a share of worldwide spending) US Online Ad Spending 2000 2001 2002 2003 2004 2005 2006 US Ofﬂine Ad Spending

Cross-Media Trends Asia-Pacific 6.8% 8.4% 9.4% 10.2% 11.1% 11.7% 11.9% Global Advertising Spending Canada 0.7% 1.0% 1.1% 1.1% 1.2% 1.2% 1.3% Index of Charts Eastern Europe 0.5% 0.5% 0.6% 0.6% 0.7% 0.7% 0.7% Latin America 1.2% 1.6% 1.6% 1.7% 1.7% 2.0% 2.2% Middle East/Africa 0.3% 0.2% 0.3% 0.3% 0.3% 0.4% 0.4% US 81.6% 78.4% 77.1% 75.9% 74.9% 74.2% 74.0% Note: ranked by 2003 spending figures Source: PricewaterhouseCoopers, Wilkofsky Gruen Associates, May 2002 047353 ©2003 eMarketer, Inc. www.eMarketer.com

“It’s a distributed system. You put tools out there and see what happens. You accept that things are going to be messy and somewhat unpredictable.” — Tim Berners-Lee, creator of the World Wide Web; The New York Times, 11 May 2003

While PwC and Wilkofsky Gruen Associates see all regions increasing their online ad spending from 2002 onward, the sharpest run-ups—relative to the worldwide growth figures—will be found in the Asia-Pacific regions, Canada, Eastern Europe, and the Middle East/Africa region. The latter two have much room to grow, starting from such small spending figures.

Worldwide Online Advertising Spending, by Region, 2001-2006 (as a % increase/decrease vs. prior year) 2001 2002 2003 2004 2005 2006 Asia-Pacific 18.1% 14.9% 16.5% 18.9% 14.9% 11.0% Canada 26.8% 11.7% 14.3% 14.2% 13.1% 12.9% Eastern Europe 0.0% 14.6% 14.5% 19.0% 14.7% 15.1% Latin America 22.0% 6.7% 9.4% 14.3% 25.0% 20.0% Middle East/Africa -19.2% 23.8% 26.9% 21.2% 17.5% 12.8% US -8.4% 0.9% 5.3% 7.5% 8.1% 8.6% Worldwide -4.7% 2.6% 7.0% 9.0% 9.1% 8.9% Note: ranked by 2003 spending figures Source: PricewaterhouseCoopers, Wilkofsky Gruen Associates, May 2002 047352 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology While companies in the US spend the most ad dollars per Internet user, Measuring the Money: Last Year’s Perspective other nations with lively online ad markets include Switzerland, Australia, US Online Ad Spending Sweden, and Norway—all well-wired nations. US Ofﬂine Ad Spending Cross-Media Trends Online Advertising Spending per Internet User, by Global Advertising Spending Nation, 2000-2006 (ranked by 2003 spending) Index of Charts 2000 2001 2002 2003 2004 2005 2006 US $66.33 $50.49 $41.23 $41.36 $41.17 – – Switzerland $9.13 $21.85 $19.38 $19.14 $20.27 $20.26 $20.24 Australia $6.97 $10.47 $13.85 $17.42 $20.29 $22.22 $24.32 Sweden $23.14 $15.82 $15.00 $14.62 $14.93 $15.22 $15.71 Norway $13.08 $13.33 $11.88 $11.76 $12.00 $12.22 $11.89 Japan $11.63 $10.50 $10.61 $11.27 $12.84 $14.16 $15.00 Canada $6.13 $7.52 $7.95 $8.57 $9.13 $9.69 $10.29 United Kingdom $7.99 $9.32 $8.60 $8.21 $8.62 $9.15 $9.83 France $13.68 $10.05 $8.18 $7.92 $7.69 $7.78 $7.86 Germany $6.32 $5.39 $5.42 $6.15 $6.25 $6.21 $6.17 Finland $3.91 $5.17 $5.48 $5.76 $5.43 $5.83 $6.22 Portugal $11.43 $5.60 $5.33 $5.14 $5.13 $4.89 $4.80 Spain $7.90 $5.50 $5.00 $5.00 $4.73 $4.67 $4.62 Italy $5.34 $4.90 $4.84 $4.85 $4.86 $4.86 $4.87 Netherlands $4.33 $4.25 $4.00 $4.21 $4.40 $4.66 $4.76 Hong Kong $5.38 $4.24 $4.17 $4.00 $4.19 $4.44 $4.68 Taiwan $4.44 $3.38 $3.33 $3.30 $3.27 $3.33 $3.46 China $1.47 $1.47 $1.40 $1.29 $1.22 $1.18 $1.15 Russia $1.38 $1.07 $0.83 $0.68 $0.70 $0.71 $0.73 Note: US figures from eMarketer; Canada figures from Statistics Canada, PricewaterhouseCoopers, Wilkofsky Gruen Associates; Europe figures from Zenith Media, PricewaterhouseCoopers, Wilkofsky Gruen Associates; Asia-Pacific figures from NUA, IDC, PricewaterhouseCoopers, Wilkofsky Gruen Associates Source: eMarketer, February 2003; Zenith Media, NUA, IDC, PricewaterhouseCoopers, Wilkofsky Gruen Associates, May 2002 047303 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology According to Havas and the London Business School, 2003 will see Measuring the Money: Last Year’s Perspective signiﬁcantly increased interactive marketing expenditures in the UK, US Online Ad Spending France, and the US. US Ofﬂine Ad Spending Cross-Media Trends Interactive Marketing Spending in Select Countries, Global Advertising Spending 2002 & 2003 (as a % increase/decrease vs. prior year) Index of Charts US 11.3% 12.7%

Germany -2.2% 1.5%

UK 19.7% 23.3%

France -2.3% 14.2%

Japan -0.6% 7.4%

Total 6.6% 11.7%

2002 2003 Note: n=645 chief marketing officers; interactive marketing defined as Internet advertising, marketing Web sites and extranets, e-mail marketing and new media (e.g., digital TV, wireless) Source: London Business School/Havas, December 2002 047388 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Within the ﬁve major nations studied by the Paris-based ad agency and the Measuring the Money: Last Year’s Perspective London B-School, the industry sectors poised to increase their interactive US Online Ad Spending marketing most in 2003 are travel and transport, media entertainment, US Ofﬂine Ad Spending consumer durables, and luxury or fashion products. Cross-Media Trends Global Advertising Spending Interactive Marketing Spending in Select Countries*, Index of Charts by Industry Sectors, 2002 & 2003 (as a % increase/decrease vs. prior year) 2002 2003 Automotive 14.0% 14.8% Business/industrial services -0.7% -6.5% Consumer electronics -14.7% 5.0% Consumer packaged goods 7.4% 13.8% Retail financial services -0.5% 15.9% Hotels/tourism/leisure 6.2% 14.4% Luxury/fashion products 23.5% 16.4% Media entertainment/culture 6.1% 19.3% OTC pharmaceuticals -6.1% 0.8% Other consumer durables -1.0% 17.3% Other electronic products/systems 18.9% 13.6% Other industrial products/systems -1.0% 8.9% Retail/mail order 18.1% 3.9% Telecom products/services -10.6% 9.4% Travel/transport 4.4% 23.4% Other (including utilities) 16.6% 8.6% Note: n=645 chief marketing officers; interactive marketing defined as Internet advertising, marketing Web sites and extranets, e-mail marketing, and new media (e.g., digital TV, wireless); *US, Germany, UK, France, Japan Source: London Business School/Havas, December 2002 047377 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology B. Total Ad Spending: Worldwide & Regional Measuring the Money: Last Year’s Perspective While three of the four research ﬁrms put worldwide advertising spending US Online Ad Spending

US Ofﬂine Ad Spending in all media at about $330 billion in 2003, Universal McCann projects a

Cross-Media Trends much higher ﬁgure of $469.80 billion. Global Advertising Spending Index of Charts Comparative Estimates: Worldwide Advertising Spending, 2000-2006 (in billions) 2000 2001 2002 2003 2004 2005 2006 Initiative Media, – – $313.50 $327.50 – – – March 2003*

Pricewaterhouse- $336.64 $320.40 $324.20 $334.89 $356.36 $377.35 $403.77 Coopers, May 2002 Universal McCann, $474.30 $440.90 $450.50 $469.80 – – – June 2003

Zenith Optimedia, – $328.64 $325.99 $330.94 $343.43 $354.63 – December 2002** Note: *given 2003 figure of $262.0 billion represents "around 80% of total global spend"; **April 2003 estimates only for seven largest ad markets "which together account for 73% of the world's advertising expenditure," rest of figures shown extrapolate missing 27% Source: various, as noted, 2002 & 2003 049069 ©2003 eMarketer, Inc. www.eMarketer.com

However, global growth rates for 2003 fall more in line, ranging from Zenith’s 1.5% to Universal’s 4.3%. More important, after spending declines or ﬂat growth in 2001 and 2002, all four forecasts see strong growth globally ahead.

Comparative Estimates: Worldwide Advertising Spending Growth, 2001-2006 (as a % increase/decrease vs. prior year) 2001 2002 2003 2004 2005 206 Initiative Media, March 2003 -4.2% 0.9% 4.5% ––– PricewaterhouseCoopers, May 2002 -4.8% 1.2% 3.3% 6.4% 5.9% 7.0% Universal McCann, June 2003 -7.0% 2.2% 4.3% ––– Zenith Optimedia, December 2002 – -0.8% 1.5% 3.8% 3.3% – Source: various, as noted, 2002 & 2003 049068 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology The regional comparisons for total advertising spending from PwC show Measuring the Money: Last Year’s Perspective the order as expected. That is, the most spending in the US, followed by the US Online Ad Spending Europe/Middle East/Africa regions (not broken out separately), the Asia- US Ofﬂine Ad Spending Paciﬁc region, Latin America, and Canada. Cross-Media Trends Global Advertising Spending Advertising Spending Worldwide, by Region, Index of Charts 2001-2006 (in billions) 2001 2002 2003 2004 2005 2006 US $148.80 $150.38 $154.96 $166.29 $175.13 $186.47 Europe/Middle $81.66 $82.27 $85.38 $90.39 $96.15 $103.35 East/Africa Asia-Pacific $70.28 $70.79 $72.87 $76.61 $81.27 $87.00 Latin America $14.79 $14.94 $15.57 $16.50 $17.73 $19.34 Canada $5.68 $5.83 $6.12 $6.58 $7.08 $7.62 Total $320.40 $324.20 $334.89 $356.36 $377.35 $403.77 Note: numbers may not add up to total due to rounding Source: PricewaterhouseCoopers (PwC), Wilkofsky Gruen Associates, May 2002 050368 ©2003 eMarketer, Inc. www.eMarketer.com

The spending shares by region will show little change during the six years charted below.

Advertising Spending Worldwide, by Region, 2001-2006 (as a % of total spending and in billions) 2001 2002 2003 2004 2005 2006 US 46.4% 46.4% 46.3% 46.7% 46.4% 46.2% Europe/Middle 25.5% 25.4% 25.5% 25.4% 25.5% 25.6% East/Africa Asia-Pacific 21.9% 21.8% 21.8% 21.5% 21.5% 21.5% Latin America 4.6% 4.6% 4.6% 4.6% 4.7% 4.8% Canada 1.8% 1.8% 1.8% 1.8% 1.9% 1.9% Total spending $320.40 $324.20 $334.89 $356.36 $377.35 $403.77 (in billions) Source: PricewaterhouseCoopers (PwC), Wilkofsky Gruen Associates, May 2002 050359 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology The growth rates for ad spending paint a different picture, however. In Measuring the Money: Last Year’s Perspective 2003, spending in Europe/Middle East/Africa regions, Latin America, and US Online Ad Spending Canada will all grow more quickly than the global rate of 3.3%. US Ofﬂine Ad Spending And in the three years following, ad spending in all regions is Cross-Media Trends expected to grow at rates of 5.1% or more—healthy growth by nearly Global Advertising Spending

Index of Charts anyone’s standards.

Advertising Spending Growth Worldwide, by Region, 2001-2006 (as a % increase/decrease vs. prior year) 2001 2002 2003 2004 2005 2006 US -7.7% 1.1% 3.0% 7.3% 5.3% 6.5% Europe/Middle East/Africa -1.4% 0.7% 3.8% 5.9% 6.4% 7.5% Asia-Pacific -0.8% 0.7% 2.9% 5.1% 6.1% 7.0% Latin America -8.7% 1.1% 4.2% 6.0% 7.4% 9.1% Canada 2.9% 2.6% 5.0% 7.6% 7.5% 7.7% Total -4.8% 1.2% 3.3% 6.4% 5.9% 7.0% Source: PricewaterhouseCoopers (PwC), Wilkofsky Gruen Associates, May 2002 050361 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Regional Marketing Measuring the Money: Last Year’s Perspective A survey in December 2002 of 645 chief marketing ofﬁcers in the US, US Online Ad Spending Germany, the UK, France, and Japan found that they intend to increase US Ofﬂine Ad Spending marketing expenditures in 2003 by 3.3% overall. The categories set to Cross-Media Trends

Global Advertising Spending receive greater than average spending increases include media advertising

Index of Charts (at 3.6%), direct mail (at 3.5%), and interactive marketing (at 11.7%).

Total Marketing Spending in Select Countries*, by Category, 2002 & 2003 (as a % increase/decrease vs. prior year) 2002 2003 Media advertising -2.0% 3.6% Sales promotion 0.8% 0.6% Direct mail 3.8% 3.5% PR/sponsorship 1.8% 2.2% Interactive marketing 6.6% 11.7% Total (including other) 0.6% 3.3% Note: n=645 chief marketing officers; *US, Germany, UK, France, Japan Source: London Business School/Havas, December 2002 047396 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology When the Havas and the London Business School report entitled Measuring the Money: Last Year’s Perspective “Marketing Expenditure Trends 2002” looked at the allocation of marketing US Online Ad Spending expenditures by nation in 2001, it found the following: US Offline Ad Spending The UK and Japan allocate more to media advertising than the average Cross-Media Trends total of 45.4% of budget. Global Advertising Spending Index of Charts Sales promotion is greater than the 19.8% allocation average in Germany and France. The US and the UK are more invested in direct mail than the five- nation average of 12.8%. Spending on public relations and sponsorship is greater than the 12.7% allocation average in both the US and Germany. With an average budget share of 6.1% going into interactive marketing, that figure is surpassed in the US, Germany, and Japan.

Marketing Spending Allocation in Select Countries, by Category, 2001 US Germany UK France Japan Total Media advertising 42.9% 41.4% 51.3% 42.1% 50.8% 45.4% Sales promotion 19.4% 23.4% 13.0% 26.4% 18.3% 19.8% Direct mail 14.6% 10.8% 17.2% 12.0% 7.9% 12.8% PR/sponsorship 13.0% 16.2% 10.4% 11.6% 12.5% 12.7% Interactive marketing 7.5% 6.4% 4.4% 3.4% 7.2% 6.1% Other 2.6% 1.8% 3.7% 4.5% 3.3% 3.1% Note: n=645 chief marketing officers Source: London Business School/Havas, December 2002 047395 ©2003 eMarketer, Inc. www.eMarketer.com

The average spending allocations in the ﬁve nations will remain relatively stable during the 2001 to 2003 period. However, the share devoted to media advertising is expected to drop by one point, while interactive marketing’s share should increase by nearly one point.

Marketing Spending Allocation in Select Countries*, 2002 & 2003 (as a % increase/decrease vs. prior year) 2001 2002 2003 Media advertising 45.4% 44.2% 44.4% Sales promotion 19.8% 19.9% 19.4% Direct mail 12.8% 13.3% 13.3% PR/sponsorship 12.7% 12.9% 12.8% Interactive marketing 6.1% 6.5% 7.0% Other 3.1% 3.2% 3.2% Note: n=645 chief marketing officers; *US, Germany, UK, France, Japan Source: London Business School/Havas, December 2002 047394 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology The industry sectors that Havas and the London Business School project to Measuring the Money: Last Year’s Perspective get the greatest overall marketing spending increases in 2003 are other US Online Ad Spending electronic products/systems (at 11.2%), automotive (at 8.0%), retail US Ofﬂine Ad Spending ﬁnancial services (at 7.3%), and telecom products and services (at 6.9%). Cross-Media Trends Global Advertising Spending Total Marketing Spending in Select Countries*, by Index of Charts Industry Sectors, 2002 & 2003 (as a % increase/decrease vs. prior year) 2002 2003 Automotive -0.1% 8.0% Business/industrial services -5.0% -5.0% Consumer electronics -12.4% 3.9% Consumer packaged goods 3.0% 5.4% Retail financial services 3.0% 7.3% Hotels/tourism/leisure 3.7% 3.7% Luxury/fashion products 10.3% 1.7% Media entertainment/culture -0.3% 0.0% OTC pharmaceuticals -2.0% -0.6% Other consumer durables -3.3% 6.3% Other electronic products/systems 4.7% 11.2% Other industrial products/systems 2.7% 0.2% Retail/mail order 3.9% -2.0% Telecom products/services -16.8% 6.9% Travel/transport -2.8% 2.2% Other (including utilities) -0.7% 2.1% Note: n=645 chief marketing officers; *US, Germany, UK, France, Japan Source: London Business School/Havas 047487 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology C. Canada Measuring the Money: Last Year’s Perspective With 17.8 million Internet users in 2003, according to eMarketer, and a US Online Ad Spending

US Ofﬂine Ad Spending total population of 32.2 million, according to the US Census Bureau, the

Cross-Media Trends online penetration rate in Canada is a strong 55.3% (practically the same as Global Advertising Spending the 55.8% rate in the US). Index of Charts Comparative Estimates: At-Home and At-Work Internet Users in Canada, 2000-2006 (in millions) 2000 2001 2002 2003 2004 2005 2006 Computer Industry Almanac – – 17.8 – – – – (CIA), December 2002 comScore Networks Inc., – – 15.9 – – – – October 2002 eMarketer, September 2002 12.7 13.5 14.9 17.8 21.4 – – International Data Corporation – 18.8 – – – – 25.2 (IDC), April 2002 Morgan Stanley, May 2002 9.7 13.0 – – – – – PricewaterhouseCoopers – 12.5 13.2 14.0 15.0 16.0 17.0 (PwC)/Wilkofsky Gruen Associates, May 2002 Source: eMarketer, September 2002; various, as noted, 2002 050382 ©2003 eMarketer, Inc. www.eMarketer.com

Alongside that strong penetration rate for online usage in general is increasing adoption of broadband access, which eMarketer expects to be more than half of Canadian households by the end of this year.

Online Households in Canada: Dial-Up vs. Broadband, 2001 & 2002 (as a % of online households)

2001 58.0% 42.0%

2002 50.4% 49.6%

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Methodology According to PricewaterhouseCoopers and Wilkofsky Gruen Associates, Measuring the Money: Last Year’s Perspective companies will spend $120 million for online advertising this year, rising US Online Ad Spending to $175 million by 2006. US Ofﬂine Ad Spending Cross-Media Trends Online Advertising Spending in Canada, 2000-2006 (in Global Advertising Spending millions) Index of Charts 2000 $73

2001 $94

2002 $105

2003 $120

2004 $137

2005 $155

2006 $175

Starting from a relatively small base, but with such an active Internet population, means tremendous growth rates for online ad spending—in the double digits for all six years shown.

Online Advertising Spending Growth in Canada, 2001-2006 (as a % increase vs. prior year)

2001 28.8%

2002 11.7%

2003 14.3%

2004 14.2%

2005 13.1%

2006 12.9%

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Methodology Total Media Spending: Canada Measuring the Money: Last Year’s Perspective In the IAB Canada report entitled “Advertiser’s Executive Survey 2002,” US Online Ad Spending 141 marketers in that nation were asked about ad budget increases by US Ofﬂine Ad Spending media in 2002. While 23% mentioned the Internet (but note that 43% of the Cross-Media Trends

Global Advertising Spending respondents were online advertisers), TV and direct mail were also cited by

Index of Charts 20% and 17%, respectively.

Average Ad Budget Increase among Canadian Companies, by Media, 2002 (as a % of respondents)

Online 23%

TV 20%

Direct mail 17%

Magazine 13%

Other 11%

Newspaper 10%

Radio 8%

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Methodology When comparing ad budget increases among media in 2002, online, TV, Measuring the Money: Last Year’s Perspective and direct mail got the largest boosts, while the two main print media— US Online Ad Spending magazines and newspapers—had the most mentions of spending decreases. US Ofﬂine Ad Spending Cross-Media Trends Change in Ad Budgets among Canadian Companies, Global Advertising Spending by Media, 2002 (as a % of respondents) Index of Charts Online 32% 9%

TV 26% 6%

Direct mail 24% 7%

Magazine 23% 10%

Newspaper 20% 10%

Radio 17% 9%

Other 17% 6%

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Methodology The two comparative estimates for total media spending in 2003 lie in a Measuring the Money: Last Year’s Perspective close range: $6.12 billion from PwC and $5.52 billion from Zenith.

US Online Ad Spending

US Ofﬂine Ad Spending Comparative Estimates: Advertising Spending in

Cross-Media Trends Canada, 2000-2006 (in billions)

Global Advertising Spending 2000 Index of Charts $5.52

2001 $5.68 $5.10

2002 $5.83 $5.31

2003 $6.12 $5.52

2004 $6.58 $5.69

2005 $7.08 $5.82

2006 $7.62

Zenith Optimedia, PricewaterhouseCoopers (PwC)/ December 2002 Wilkofsky Gruen Associates May 2002 Source: PricewaterhouseCoopers (PwC)/Wilkofsky Gruen Associates, May 2002; Zenith Optimedia, December 2002 049061 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology However, PwC expects sharper growth rates this year and through mid Measuring the Money: Last Year’s Perspective decade than does Zenith.

US Online Ad Spending

US Ofﬂine Ad Spending Comparative Estimates: Advertising Spending in

Cross-Media Trends Canada, 2000-2006 (as a % increase vs. prior year) Global Advertising Spending 2001 Index of Charts 2.9%

2002 2.6% 4.1%

2003 5.0% 3.9%

2004 7.6% 3.0%

2005 7.5% 2.3%

2006 7.7%

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Methodology D. Europe Measuring the Money: Last Year’s Perspective All three ﬁrms with estimates of Internet users in Europe for 2003 see the US Online Ad Spending

US Ofﬂine Ad Spending size of the audience as being between 195.5 million and 199.0 million, with

Cross-Media Trends eMarketer’s ﬁgure of 196.2 million in the middle. Global Advertising Spending Index of Charts Comparative Estimates: At-Home and At-Work Internet Users in Europe, 2000-2006 (in millions) 2000 2001 2002 2003 2004 2005 2006 Computer Economics, June – – 163.5 195.5 224.8 240.6 257.4 2002 (1) Computer Industry – 115.0 – – 357.0 – – Almanac (CIA), March 2002 eMarketer, May 2002 108.3 144.4 175.7 196.2 221.1 – – Morgan Stanley, May 2002 87.0 121.0 158.0 199.0 234.0 269.0 – Note: (1) Internet users are defined as individuals who consistently use the Internet with access from either work, school, home or multiple locations Source: eMarketer, May 2002; various, as noted, 2002 050392 ©2003 eMarketer, Inc. www.eMarketer.com

With a market of Internet users that’s larger than the US and Canada combined, the upside for Internet ad spending is potentially even larger. What’s holding that back is a combination of tradition and generally weaker economies than in North America. Nevertheless, combined online spending ﬁgures from PricewaterhouseCoopers, Wilkofsky Gruen, and Zenith show 2003’s total European spending at $1.14 billion, with expectations of a reasonable but not spectacular rise to $1.40 billion by 2006.

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Methodology The largest spending in 2003 occurs in the largest nations: the UK at $230 Measuring the Money: Last Year’s Perspective million, France at $190 million, and Germany at $160. But size fails to US Online Ad Spending equate exactly with online ad spending, since Germany is larger than the US Ofﬂine Ad Spending other two nations. An active Internet population does equate, however; Cross-Media Trends which is why 2003’s online ad spending in Sweden, at $95 million, outstrips Global Advertising Spending

Index of Charts larger nations such as Italy (at $80 million) and Spain (at $50 million).

Online Advertising Spending in Europe, by Country, 2000-2006 (in millions) 200 2001 2002 2003 2004 2005 2006 Austria $17 $19 $20 $22 $25 $27 $29 Belgium $12 $17 $20 $23 $27 $31 $33 Denmark $16 $20 $20 $19 $21 $23 $24 Finland $9 $15 $17 $19 $19 $21 $23 France $197 $191 $180 $190 $200 $210 $220 Germany $141 $124 $130 $160 $175 $180 $185 Greece $17 $14 $16 $17 $18 $18 $19 Ireland $1 $3 $4 $4 $5 $5 $5 Italy $71 $71 $75 $80 $85 $90 $95 Netherlands $26 $34 $36 $40 $44 $48 $50 Norway $34 $40 $38 $40 $42 $44 $44 Portugal $16 $14 $16 $18 $20 $22 $24 Spain $49 $44 $45 $50 $52 $56 $60 Sweden $118 $87 $90 $95 $100 $105 $110 Switzerland $21 $59 $62 $67 $75 $79 $83 UK $159 $205 $215 $230 $250 $270 $295 Western Europe $904 $957 $984 $1,074 $1,158 $1,229 $1,299 Subtotal Czech Republic $3 $5 $7 $8 $8 $9 $10 Hungary $7 $6 $7 $8 $10 $11 $12 Poland $18 $17 $19 $21 $24 $26 $29 Romania $7 $5 $7 $9 $12 $15 $19 Russia $13 $15 $15 $17 $21 $25 $29 Eastern Europe $48 $48 $55 $63 $75 $86 $99 Subtotal Europe total $952 $1,005 $1,039 $1,137 $1,233 $1,315 $1,398 Source: Zenith Media, PricewaterhouseCoopers, Wilkofsky Gruen Associates, May 2002 047301 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology The larger nations that surpass 2003’s notable spending growth rate of Measuring the Money: Last Year’s Perspective 9.4% across Europe include Germany (at 23.1%), Spain (at 11.1%), and US Online Ad Spending Russia (at 13.3%). In general, building from a much smaller base, online ad US Ofﬂine Ad Spending spending will grow more quickly in Eastern Europe than in the west. Cross-Media Trends Global Advertising Spending Online Advertising Spending Growth in Europe, by Index of Charts Country, 2001-2006 2001 2002 2003 2004 2005 2006 Austria 11.8% 5.3% 10.0% 13.6% 8.0% 7.4% Belgium 41.7% 17.6% 15.0% 17.4% 14.8% 6.5% Denmark 25.0% 0.0% -5.0% 10.5% 9.5% 4.3% Finland 66.7% 13.3% 11.8% 0.0% 10.5% 9.5% France -3.0% -5.8% 5.6% 5.3% 5.0% 4.8% Germany -12.1% 4.8% 23.1% 9.4% 2.9% 2.8% Greece -17.6% 14.3% 6.3% 5.9% 0.0% 5.6% Ireland 200.0% 33.3% 0.0% 25.0% 0.0% 0.0% Italy 0.0% 5.6% 6.7% 6.3% 5.9% 5.6% Netherlands 30.8% 5.9% 11.1% 10.0% 9.1% 4.2% Norway 17.6% -5.0% 5.3% 5.0% 4.8% 0.0% Portugal -12.5% 14.3% 12.5% 11.1% 10.0% 9.1% Spain -10.2% 2.3% 11.1% 4.0% 7.7% 7.1% Sweden -26.3% 3.4% 5.6% 5.3% 5.0% 4.8% Switzerland 181.0% 5.1% 8.1% 11.9% 5.3% 5.1% UK 28.9% 4.9% 7.0% 8.7% 8.0% 9.3% Western Europe Subtotal 5.9% 2.8% 9.1% 7.8% 6.1% 5.7% Czech Republic 66.7% 40.0% 14.3% 0.0% 12.5% 11.1% Hungary -14.3% 16.7% 14.3% 25.0% 10.0% 9.1% Poland -5.6% 11.8% 10.5% 14.3% 8.3% 11.5% Romania -28.6% 40.0% 28.6% 33.3% 25.0% 26.7% Russia 15.4% 0.0% 13.3% 23.5% 19.0% 16.0% Eastern Europe Subtotal 0.0% 14.6% 14.5% 19.0% 14.7% 15.1% Europe total 5.6% 3.4% 9.4% 8.4% 6.7% 6.3% Source: Zenith Media, PricewaterhouseCoopers, Wilkofsky Gruen Associates, May 2002 047298 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Even with such robust growth rates, the Internet’s share of Europe’s total Measuring the Money: Last Year’s Perspective advertising spending will hover at 1.4% from 2003 through 2006.

US Online Ad Spending

US Ofﬂine Ad Spending Internet's Share of Total Advertising Spending in Cross-Media Trends Europe, 2000-2006 (in billions) Global Advertising Spending 2000 2001 2002 2003 2004 2005 2006 Index of Charts Internet $0.98 $1.03 $1.07 $1.17 $1.27 $1.36 $1.45 Total $82.79 $81.66 $82.27 $85.38 $90.39 $96.15 $103.35 Share 1.2% 1.3% 1.3% 1.4% 1.4% 1.4% 1.4% Source: PricewaterhouseCoopers (PwC), Wilkofsky Gruen Associates, May 2002 049041 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Total Media Spending: Europe Measuring the Money: Last Year’s Perspective In fact, total ad spending in Europe is far less than in the US, no matter US Online Ad Spending what the media. In 2003, for example, either comparative estimate below is US Ofﬂine Ad Spending far less than the $248 billion eMarketer estimate for the US. Again, it’s a Cross-Media Trends

Global Advertising Spending combination of tradition (less marketing focus than in the States) and

Index of Charts weaker economies that reduce spending.

Comparative Estimates: Advertising Spending in Europe, 2000-2006 (in billions)

2000 $82.79

2001 $81.66 $72.91

2002 $82.27 $72.11

2003 $85.38 $73.89

2004 $90.39 $77.28

2005 $96.15 $80.82

2006 $103.35

Zenith Optimedia, PricewaterhouseCoopers (PwC)/ December 2002 Wilkofsky Gruen Associates May 2002* Note: *region includes Europe, Middle East, Africa Source: PricewaterhouseCoopers (PwC)/Wilkofsky Gruen Associates, May 2002; Zenith Optimedia, December 2002 049067 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology That said, both PwC and Zenith project growth rates for total media Measuring the Money: Last Year’s Perspective spending both this year and through 2006.

US Online Ad Spending

US Ofﬂine Ad Spending Comparative Estimates: Advertising Spending in

Cross-Media Trends Europe, 2001-2006 (as a % increase/decrease vs. prior Global Advertising Spending year)

Index of Charts 2001 -1.4%

2002 0.7% -1.1%

2003 3.8% 2.5%

2004 5.9% 4.6%

2005 6.4% 4.6%

2006

Zenith Optimedia, PricewaterhouseCoopers (PwC)/ December 2002 Wilkofsky Gruen Associates May 2002 Note: *region includes Europe, Middle East and Africa Source: PricewaterhouseCoopers (PwC)/Wilkofsky Gruen Associates, May 2002; Zenith Optimedia, December 2002 049066 ©2003 eMarketer, Inc. www.eMarketer.com

According to Zenith, the most active advertising markets are in Germany and the UK, where spending in 2003 should hit $19.15 billion and $16.07 billion, respectively.

Advertising Spending in Select Countries in Europe, 2001-2005 (in millions) 2001 2002 2003 2004 2005 France $10,532 $10,281 $10,416 $10,707 $11,027 Germany $20,146 $19,323 $19,147 $19,819 $20,910 Italy $8,349 $8,053 $8,098 $8,337 $8,634 Spain $5,710 $5,787 $5,828 $6,062 $6,339 UK $15,888 $15,889 $16,067 $16,538 $17,074 5 country total $60,624 $59,333 $59,556 $61,463 $63,984 Note: includes newspapers, magazines, television, radio, cinema, outdoor and Internet spending Source: Zenith Optimedia, April 2003 048749 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Viewed by growth rates, however, and overall economic woes in Germany Measuring the Money: Last Year’s Perspective are expected to deliver an ad spending downturn of 0.9% this year—the US Online Ad Spending only negative growth in the ﬁve largest European nations. In a slow US Ofﬂine Ad Spending advertising market, the greatest increase is seen for France, at 1.3%. Cross-Media Trends Zenith expects a spending recovery next year, and by 2005 the 5.5% Global Advertising Spending

Index of Charts increase in Germany will be greater than in the other four nations.

Advertising Spending Growth in Select Countries in Europe, 2002-2005 (as a % increase/decrease vs. prior year) 2002 2003 2004 2005 France -2.4% 1.3% 2.8% 3.0% Germany -4.1% -0.9% 3.5% 5.5% Italy -3.5% 0.6% 3.0% 3.6% Spain 1.4% 0.7% 4.0% 4.6% UK 0.0% 1.1% 2.9% 3.2% 5 country total -2.1% 0.4% 3.2% 4.1% Note: includes newspapers, magazines, television, radio, cinema, outdoor and Internet spending Source: Zenith Optimedia, April 2003 048755 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology United Kingdom Measuring the Money: Last Year’s Perspective Internet ad spending ﬁgures from PwC and Wilkofsky Gruen suggest that US Online Ad Spending the years of two-digit gains were earlier in the decade—although the 7.0% US Ofﬂine Ad Spending growth prediction for this year still represents a considerable increase. Cross-Media Trends Global Advertising Spending Online Advertising Spending Growth in the UK, Index of Charts 2001-2006 (as a % increase vs. prior year)

2001 28.9%

2002 4.9%

2003 7.0%

2004 8.7%

2005 8.0%

2006 9.3%

Translated to absolute dollars, spending for online advertising in the UK appears a bit less considerable, with a 2003 estimate of $230 million, rising to $295 million by 2006.

Online Advertising Spending in the UK, 2000-2006 (in millions)

2000 $159

2001 $205

2002 $215

2003 $230

2004 $250

2005 $270

2006 $295

“With Internet penetration in the United Kingdom set to pass 50% soon, advertisers there will begin to adopt it as a viable advertising medium in 2003,” according to I-level, a London-based ad agency. The agency predicts that Internet ad spending this year will rise 46%,” as reported by the Internet Advertising Report earlier this year—far above the PwC ﬁgure of 7.0%.

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Methodology As a standalone prediction, that growth figure from I-level might seem Measuring the Money: Last Year’s Perspective outrageously large, if not for the even larger 2003 online ad spending US Online Ad Spending growth estimate of 47.9% from Initiative Media. The New York-based US Offline Ad Spending media firm also sees increased spending in the UK for other ad media, such Cross-Media Trends as 7.5% for the cinema and 3.8% for television. Global Advertising Spending Index of Charts Advertising Spending Growth in the UK, by Media, 2003 (as a % increase vs. prior year)

Internet 47.9%

Cinema 7.5%

Outdoor 5.4%

TV 3.8%

Press* 3.5%

Radio 2.9%

While not quite as optimistic, a study released in December 2002 by the London Business School and Paris-based communications ﬁrm Havas predicted UK online marketing spending would rise by more than 23% in 2003 after a nearly 20% gain the year before.

Interactive Marketing Spending in the UK, 2002 & 2003 (as a % increase vs. prior year)

2002 19.7%

2003 23.3%

Note: n=105 chief marketing officers; interactive marketing defined as Internet advertising, marketing Web sites and extranets, e-mail marketing and new media (e.g., digital TV, wireless) Source: London Business School/Havas, December 2002 047384 ©2003 eMarketer, Inc. www.eMarketer.com

That large growth for online ad spending contrasts with an overall marketing spending increase of 5.3% in 2003.

Total Marketing Spending in the UK, 2002 & 2003 (as a % increase vs. prior year)

2002 4.2%

2003 5.3%

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Methodology In line with the jump in spending is a shift in marketing budget allocations. Measuring the Money: Last Year’s Perspective In 2003, the share of spending for interactive marketing is expected to rise US Online Ad Spending by 0.9%, according to Havas and the London B-School, balanced by a 0.7% US Ofﬂine Ad Spending decrease in the spending allocation for sales promotions. Cross-Media Trends Global Advertising Spending Marketing Spending Allocation in the UK, by Index of Charts Category, 2002 & 2003 (as a % increase/decrease vs. prior year)

Media advertising -2.4% -0.2%

Sales promotion -0.8% -0.7%

Direct mail 1.5% 0.3%

PR/sponsorship -1.0% 0.2%

Interactive marketing 0.7% 0.9%

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Methodology The World Advertising Research Center (WARC)—a UK-based marketing Measuring the Money: Last Year’s Perspective research company—said that in 2002, total advertising spending in the UK US Online Ad Spending inched up by 0.8%. The media with the highest growth rates last year were US Ofﬂine Ad Spending direct mail (at 6.7%) and television (at 4.3%). Meanwhile, spending Cross-Media Trends downturns for business magazines (at –9.4%) and national newspapers (at Global Advertising Spending

Index of Charts –6.4%) helped keep the entire market ﬂat.

Advertising Spending in the UK, by Medium, 2001 & 2002 (in millions of £ and % change) 2001 % change 2002 % change National newspapers* £2,063 -8.4% £1,930 -6.4% Regional newspapers £2,834 2.6% £2,870 1.3% Consumer magazines** £779 3.9% £785 0.8% Business magazines £1,202 -5.4% £1,088 -9.4% Television £3,525 -10.7% £3,677 4.3% Radio £487 -9.1% £491 0.8% Outdoor £678 -2.8% £690 1.9% Direct mail £2,228 8.7% £2,378 6.7% Total £13,794 -3.3% £13,908 0.8% Note: *includes supplements; **excludes supplements Source: World Advertising Research Center (WARC), March 2003 048450 ©2003 eMarketer, Inc. www.eMarketer.com

Newspaper advertising, in particular, was hurt by the continuing soft economy. Because of a slumping job market, recruitment ad spending fell by 7.6% in 2002.

Advertising Spending in the UK, by Medium, Q2 2001-Q4 2002 (as a % increase/decrease vs. prior year) Q2 Q3 Q4 Q1 Q2 Q3 Q4 2001 2001 2001 2002 2002 2002 2002 National newspapers* -11.8% -11.0% -18.1% -17.4% -6.5% -1.6% 3.1% Regional newspapers 2.2% 1.3% 0.1% 0.7% -0.3% 2.0% 2.8% Consumer magazines** 5.3% 4.5% -1.2% -2.1% -0.5% 1.9% 3.6% Business magazines -5.9% -11.2% -11.1% -21.5% -5.6% -6.0% -5.0% Television -15.9% -12.3% -12.3% -6.8% 5.4% 9.3% 9.8% Radio -14.5% -7.8% -13.5% -0.7% 0.1% 0.7% 3.1% Outdoor -5.8% -2.8% -12.9% -10.8% -2.1% 5.1% 15.5% Direct mail 7.5% 6.0% 11.2% 5.8% 9.7% 8.6% 3.9% Total -6.3% -5.1% -6.8% -6.0% 1.1% 3.6% 4.9% Note: *includes supplements; **excludes supplements Source: World Advertising Research Center (WARC), March 2003 048447 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Newspaper advertising, in particular, was hurt by the continuing soft Measuring the Money: Last Year’s Perspective economy. Because of a slumping job market, recruitment ad spending fell US Online Ad Spending by 7.6% in 2002. US Ofﬂine Ad Spending Cross-Media Trends Newspaper Display and Classified Advertising Global Advertising Spending Spending in the UK, 2001 & 2002 (in millions of £ and Index of Charts % increase/decrease vs. prior year) 2001 2002 % change Total newspaper display* £2,487 £2,410 -3.1% Total newspaper classified £2,409 £2,390 -0.8% Recruitment £1,056 £976 -7.6% Property £386 £391 1.4% Motor £370 £380 2.6% Other £598 £644 7.7% Note: *includes supplements Source: World Advertising Research Center (WARC), March 2003 048451 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Germany Measuring the Money: Last Year’s Perspective According to Nielsen Media, online advertising spending in Germany grew US Online Ad Spending by 20.9% in 2002, increasing to €255.9 million. That put online ad US Ofﬂine Ad Spending expenditures at 1.5% of total advertising budgets. Cross-Media Trends

Global Advertising Spending The ﬁve major industry sectors advertising online last year were:

Index of Charts Service companies, €53 million, up 87.3% Training and media, €39 million, up 26.8% Trade and logistics, €33 million, up 48.2% Financial services, €29.5 million, up 75.7% Telecommunications, €22.5 million, up 7.2% A highly different take on Internet ad spending in Germany comes from Havas and the London Business School, which indicates that interactive marketing expenditures in 2002 fell by 2.2%. but will rise by 1.5% in 2003.

Interactive Marketing Spending in Germany, 2002 & 2003 (as a % increase vs. prior year)

-2.2% 2002

2003 1.5%

Note: n=93 chief marketing officers; interactive marketing defined as Internet advertising, marketing Web sites and extranets, e-mail marketing and new media (e.g., digital TV, wireless) Source: London Business School/Havas, December 2002 047385 ©2003 eMarketer, Inc. www.eMarketer.com

Another perspective comes from PwC and Wilkofsky Gruen: Online advertising did not soar by 20%-plus in 2002, as Nielsen reports, but will increase at that level in 2003 after a 4.8% gain last year.

Online Advertising Spending Growth in Germany, 2001-2006 (as a % increase/decrease vs. prior year)

-12.1% 2001

2002 4.8%

2003 23.1%

2004 9.4%

2005 2.9%

2006 2.8%

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Methodology PwC’s spending ﬁgure of $130 million in 2002 also diverges greatly from Measuring the Money: Last Year’s Perspective Nielsen’s €255.9 million estimate. (To compare them equally, that $130 US Online Ad Spending million equals €111 million as of late June 2003.) US Ofﬂine Ad Spending Cross-Media Trends Online Advertising Spending in Germany, 2000-2006 Global Advertising Spending (in millions) Index of Charts 2000 $141

2001 $124

2002 $130

2003 $160

2004 $175

2005 $180

2006 $185

Not including the Internet, Initiative Media expects a down market for ad sales in 2003, talking of negative growth rates for radio, TV, outdoor, and “press” ads (newspapers and magazines).

Advertising Spending Growth in Germany, by Media, 2003 (as a % decrease vs. prior year)

Radio 0.6%

TV 1.8%

-1.8% Outdoor

-3.1% Press*

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Methodology The perspective from Havas and the London Business School is only Measuring the Money: Last Year’s Perspective slightly better, calling for a 1.3% increase in across-the-board marketing US Online Ad Spending spending in Germany this year. US Ofﬂine Ad Spending Cross-Media Trends Total Marketing Spending in Germany, 2002 & 2003 (as Global Advertising Spending a % increase/decrease vs. prior year) Index of Charts -4.5% 2002

2003 1.3%

In a ﬂat market, the only category with even a hint of gain in spending allocation this year will be sales promotions, and that at only 0.6% up.

Marketing Spending Allocation in Germany, by Category, 2002 & 2003 (as a % increase/decrease vs. prior year)

Media advertising -2.5% -0.2%

Sales promotion 0.1% 0.6%

Direct mail 0.4% -0.2%

PR/sponsorship 1.8% -0.6%

Interactive marketing 0.2% 0.0%

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Methodology France Measuring the Money: Last Year’s Perspective Online spending estimates from PwC and Wilkofsky Gruen point to a US Online Ad Spending direct bounceback this year in France, with a 5.6% gain offsetting last US Ofﬂine Ad Spending year’s 5.8% loss. Cross-Media Trends

Global Advertising Spending Online Advertising Spending Growth in France, Index of Charts 2001-2006 (as a % increase/decrease vs. prior year)

-3.0% 2001

-5.8% 2002

2003 5.6%

2004 5.3%

2005 5.0%

2006 4.8%

If true, that would bring 2003’s spending to $190 million, about the same as in 2001. With steady gains, online ad spending in France should reach $220 million by 2006.

Online Advertising Spending in France, 2000-2006 (in millions)

2000 $197

2001 $191

2002 $180

2003 $190

2004 $200

2005 $210

2006 $220

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Methodology The French ad agency Havas, along with the London Business School, says Measuring the Money: Last Year’s Perspective that after a 2.3% fall in 2002, interactive marketing spending will make a US Online Ad Spending major turnaround this year, rising by 14.2%. US Ofﬂine Ad Spending Cross-Media Trends Interactive Marketing Spending in France, 2002 & Global Advertising Spending 2003 (as a % increase vs. prior year) Index of Charts -2.3% 2002

2003 14.2%

Note: n=103 chief marketing officers; interactive marketing defined as Internet advertising, marketing Web sites and extranets, e-mail marketing and new media (e.g., digital TV, wireless) Source: London Business School/Havas, December 2002 047383 ©2003 eMarketer, Inc. www.eMarketer.com

Initiative Media projects radio as France’s major spending growth medium in 2003, with gains of 10.0%. Unfortunately, the ad ﬁrm offered no estimates for the Internet.

Advertising Spending Growth in France, by Media, 2003 (as a % increase vs. prior year)

Radio 10.0%

TV 3.7%

Outdoor 2.0%

Cinema 1.0%

Press* 0.9%

After a year of ﬂat growth in 2002, total marketing spending in 2003 will gain by more than 5%, according to Havas.

Total Marketing Spending in France, 2002 & 2003 (as a % increase vs. prior year)

2002 0.3%

2003 5.1%

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Methodology Budget allocations, however, will remain relatively stable, with minuscule Measuring the Money: Last Year’s Perspective increases for media advertising and interactive marketing.

US Online Ad Spending

US Ofﬂine Ad Spending Marketing Spending Allocation in France, by

Cross-Media Trends Category, 2002 & 2003 (as a % increase/decrease vs. Global Advertising Spending prior year)

Index of Charts Media advertising 0.0% 0.6%

Sales promotion -0.7% -0.5%

Direct mail -0.1% 0.1%

PR/sponsorship 0.4% 0.0%

Interactive marketing -0.1% 0.3%

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Methodology Italy Measuring the Money: Last Year’s Perspective Online ad spending in Italy is less than half that of the levels reached in the US Online Ad Spending UK, Germany, and France. According to PwC and Wilkofsky Gruen, it US Ofﬂine Ad Spending should reach $80 million in 2003, and rise to $95 million by 2006. Cross-Media Trends

Global Advertising Spending Online Advertising Spending in Italy, 2000-2006 (in Index of Charts millions)

2000 $71

2001 $71

2002 $75

2003 $80

2004 $85

2005 $90

2006 $95

However, those relatively small ﬁgures belie the steady development of Internet advertising in Italy, as demonstrated by growth rates in the 5.6% to 6.7% range from 2002 on through 2006.

Online Advertising Spending Growth in Italy, 2001-2006 (as a % increase vs. prior year)

2001 0.0%

2002 5.6%

2003 6.7%

2004 6.3%

2005 5.9%

2006 5.6%

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Methodology The conservative estimates from Initiative Media say that Internet ad Measuring the Money: Last Year’s Perspective spending in 2003 will remain ﬂat, along with TV, newspaper, magazine, US Online Ad Spending and outdoor ads. The only medium with a strong projection is cinema US Ofﬂine Ad Spending advertising, at 10.3% growth. Cross-Media Trends Global Advertising Spending Advertising Spending Growth in Italy, by Media, 2003 Index of Charts (as a % increase/decrease vs. prior year)

Cinema 10.3%

Outdoor 1.3%

TV 0.3%

Internet 0.0%

-0.8% Press*

-3.2% Radio

Spending ﬁgures from February 2003, while limited in scope, appear to support the Initiative Media contentions. Nielsen Media Research found that ad spending for television dropped by 2.0% relative to January 2003, for radio fell by 1.4%, and for all print declined by 1.7%.

Advertising Spending in Italy, by Media, February 2003 (in millions of € and % change vs. same month of prior year)

Television €375 (-2.0%)

Total print €203 (-1.7%)

National daily newspapers €69 (-9.9%)

Radio €23 (-1.4%)

Billboard €14 (30.0%)

Total €621 (-1.3%)

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Methodology Telecommunications was the only Italian industry posting ad spending Measuring the Money: Last Year’s Perspective gains in February, with a 10% gain. At the far side, banks and insurers US Online Ad Spending spent 37% less on advertising that month. US Ofﬂine Ad Spending Cross-Media Trends Advertising Spending Growth in Italy, by Industry, Global Advertising Spending February 2003 (as a % change vs. same month of prior Index of Charts year) Telecommunications 10% Automotive -5% Travel and tourism -28% Banks and insurers -37%

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Methodology Spain Measuring the Money: Last Year’s Perspective After a severe online ad spending cutback of 10.2% in 2001, and near flat US Online Ad Spending growth of 2.3% last year, Spain is poised for a significant spending boost US Offline Ad Spending this year, according to PwC and Wilkofsky Gruen. Should the projected Cross-Media Trends

Global Advertising Spending 11.1% increase come to pass, that would be total online spending at $50

Index of Charts million, or higher than the past three years.

Online Advertising Spending Growth in Spain, 2001-2006 (as a % increase/decrease vs. prior year)

-10.2% 2001

2002 2.3%

2003 11.1%

2004 4.0%

2005 7.7%

2006 7.1%

Continuing spending growth would put the online ad market at $60 million by 2006.

Online Advertising Spending in Spain, 2000-2006 (in millions)

2000 $49

2001 $44

2002 $45

2003 $50

2004 $52

2005 $56

2006 $60

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Methodology Data from Initiative Media on spending growth in other media for 2003 Measuring the Money: Last Year’s Perspective appears somewhat suspicious, as the company is predicting the same 2.0% US Online Ad Spending increase for each medium shown in the chart below. US Ofﬂine Ad Spending Cross-Media Trends Advertising Spending Growth in Spain, by Media, 2003 Global Advertising Spending (as a % increase vs. prior year) Index of Charts TV 2.0%

Radio 2.0%

Press* 2.0%

Outdoor 2.0%

Cinema 2.0%

Internet 2.0%

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Methodology Russia Measuring the Money: Last Year’s Perspective With an economy that’s still in the process of establishing itself, at least in US Online Ad Spending Western terms, online advertising in Russia is both nascent and somewhat US Ofﬂine Ad Spending representative of other former Eastern Bloc nations such as Poland and the Cross-Media Trends

Global Advertising Spending Czech Republic. According to PwC and Wilkofsky Gruen, spending on

Index of Charts interactive advertising in 2002 was $15 million, and should nearly double to $29 million by 2006.

Online Advertising Spending in Russia, 2000-2006 (in millions)

2000 $13

2001 $15

2002 $15

2003 $17

2004 $21

2005 $25

2006 $29

Last year in Russia, the online ad market was ﬂat. However, the researchers see a 13.3% spending jump this year, with even greater growth in the three years following. Yes, double-digit increases come more easily when starting from such low ﬁgures, but it also indicates the establishment of online advertising in general.

Online Advertising Spending Growth in Russia, 2001-2006 (as a % increase vs. prior year)

2001 15.4%

2002 0.0%

2003 13.3%

2004 23.5%

2005 19.0%

2006 16.0%

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Methodology If the rise of Internet ad spending in Russia seems spectacular, then the Measuring the Money: Last Year’s Perspective 35.4% increase for TV ad spending seems like a three-ring circus. Lesser but US Online Ad Spending similar growth rates are seen this year for outdoor, cinema, newspaper, US Ofﬂine Ad Spending magazine, and radio ads, according to Initiative Media. Cross-Media Trends Global Advertising Spending Advertising Spending Growth in Russia, by Media, Index of Charts 2003 (as a % increase vs. prior year)

TV 35.4%

Outdoor 20.0%

Cinema 20.0%

Press* 15.5%

Radio 14.3%

Many of the top advertisers in Russia are names familiar in the West, such as Procter & Gamble, Nestle, and Unilever. These multinationals see promise in an emerging market.

Top Advertisers in Russia, Ranked by Advertising Spending, 2001 & 2002 (in millions*)

Procter & Gamble $80.2 $105.0

Nestle (including Rossiya) $44.7 $55.7

Unilever $35.1 $53.9

Wimm-Bill-Dann $26.0 $49.9

L’Oreal (including Garnier) $22.6 $46.7

Mars Rossiya $41.1 $45.0

continued on page 223

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Methodology Henkel (including Schwarzkopf) Measuring the Money: Last Year’s Perspective $24.5 US Online Ad Spending $31.5 US Ofﬂine Ad Spending Wrigley Cross-Media Trends

Global Advertising Spending $33.3

Index of Charts $30.9

Mobile TeleSystems $15.6 $30.2

LG Electronics $17.7 $27.3

Coca-Cola $18.6 $27.3

Beiersdorf AG $11.4 $26.3

Samsung Electronics $17.8 $24.2

PepsiCo $29.2 $22.9

Beeline $11.8 $22.3

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Methodology E. Asia-Paciﬁc Measuring the Money: Last Year’s Perspective Across the broad region of the Asia-Paciﬁc, more people go online both US Online Ad Spending

US Ofﬂine Ad Spending at work and at home than in any other area of the world. Estimates

Cross-Media Trends from eMarketer put that potential Internet advertising market at 205 Global Advertising Spending million in 2003. Index of Charts Comparative Estimates: At-Home and At-Work Internet Users in the Asia-Pacific Region, 2000-2006 (in millions) 2000 2001 2002 2003 2004 2005 2006 Computer Economics, June – – 151.3 203.6 238.0 273.0 313.4 2002 (1) Computer Industry Almanac – 115.0 – – 357.0 – – (CIA), March 2002 eMarketer, May 2002 115.9 165.0 181.5 205.0 235.8 – 47.0 IDATE, January 2003 – 123.0 180.0 – – – 375.0 International Data Corpora- – 94.0 – – – – – tion (IDC), July 2002 (2) Morgan Stanley, May 2002 63.0 88.0 117.0 153.0 191.0 228.0 – PricewaterhouseCoopers – 168.7 209.8 253.9 293.1 333.1 371.9 (PwC)/Wilkofsky Gruen Associates, May 2002 World Bank/ Pyramid 92.5* 133.1* 209.0 275.8 355.4 442.6 531.4 Research, March 2003 (3) Note: *actual; (1) Internet users are defined as individuals who consistently use the Internet with access from either work, school, home or multiple locations; (2) excludes Japan; (3) Number of active, unique individuals who have used the Internet in the past 30 days Source: eMarketer, May 2002; various, as noted, 2002 & 2003 050390 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Outside of the US, the nation with the greatest Internet ad market is Japan, Measuring the Money: Last Year’s Perspective where spending is expected to reach $800 million this year and break the US Online Ad Spending $1 billion barrier in 2005. The two other nations with near- or plus-$100 US Ofﬂine Ad Spending million online ad spending ﬁgures for 2003 are Australia and China. Cross-Media Trends Global Advertising Spending Online Advertising Spending in the Asia-Pacific Index of Charts Region, by Country, 2001-2006 (in millions) 2001 2002 2003 2004 2005 2006 Australia $67 $90 $115 $140 $160 $180 China $50 $70 $90 $110 $130 $150 Hong Kong $14 $15 $16 $18 $20 $22 India $7 $8 $9 $10 $12 $14 Indonesia –– – – $1 $1 Japan $630 $700 $800 $950 $1,090 $1,200 Taiwan $27 $30 $33 $36 $40 $45 Thailand $9 $11 $13 $15 $17 $19 Total $804 $924 $1,076 $1,279 $1,470 $1,631 Source: PricewaterhouseCoopers (PwC), Wilkofsky Gruen Associates, NUA, IDC, May 2002 046882 ©2003 eMarketer, Inc. www.eMarketer.com

Other than the blip in Taiwan in 2001, Internet ad spending in all seven nations charted here is poised for growth, most often at double-digit rates. Even in Japan’s established online market, expected spending will rise by 14.3% in 2003. All these positive ﬁgures offer classic conﬁrmation of spending following eyeballs.

Online Advertising Spending Growth in the Asia-Pacific Region, by Country, 2001-2006 2001 2002 2003 2004 2005 2006 CAGR (2002-2006) Australia 45.7% 34.3% 27.8% 21.7% 14.3% 12.5% 21.9% China 51.5% 40.0% 28.6% 22.2% 18.2% 15.4% 24.6% Hong 0.0% 7.1% 6.7% 12.5% 11.1% 10.0% 9.5% Kong India 16.7% 14.3% 12.5% 11.1% 20.0% 16.7% 14.9% Japan 15.0% 11.1% 14.3% 18.8% 14.7% 10.1% 13.8% Taiwan -3.6% 11.1% 10.0% 9.1% 11.1% 12.5% 10.8% Thailand 50.0% 22.2% 18.2% 15.4% 13.3% 11.8% 16.1% Total 18.1% 14.9% 16.5% 18.9% 14.9% 11.0% 15.2% Source: PricewaterhouseCoopers (PwC), Wilkofsky Gruen Associates, NUA, IDC, May 2002 046885 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology Total Media Spending: Asia-Pacific Measuring the Money: Last Year’s Perspective The growth curve for total media spending in the Asia-Pacific region, while US Online Ad Spending positive, is nowhere as spectacular as for Internet advertising. Both PwC and US Offline Ad Spending Zenith predict steady spending increases this year and in the three following. Cross-Media Trends

Global Advertising Spending Comparative Estimates: Advertising Spending in the Index of Charts Asia-Pacific Region, 2001-2006 (as a % increase/ decrease vs. prior year)

2001 -0.8%

2002 0.7% 1.2%

2003 2.9% 4.1%

2004 5.1% 4.3%

2005 6.1% 4.8%

2006 7.0%

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Methodology In absolute dollars, total ad spending in the Asia-Pacific region is a bit less Measuring the Money: Last Year’s Perspective than in Europe. According to PwC, $72.87 billion is the figure for 2003, US Online Ad Spending while Zenith weighs in at $66.94 billion. US Offline Ad Spending Cross-Media Trends Comparative Estimates: Advertising Spending in the Global Advertising Spending Asia-Pacific Region, 2000-2006 (in billions) Index of Charts 2000 $70.88

2001 $70.28 $63.54

2002 $70.79 $64.28

2003 $72.87 $66.94

2004 $76.61 $69.84

2005 $81.27 $73.16

2006 $87.00

However, analysts expect ad spending in at least one nation in the region to soar this decade: China. As reported by Reuters in mid June 2003, Nielsen Media Research says, “China’s advertising market—worth $10 billion in 2002—is set for double-digit growth annually in coming years and should overtake Japan to become the world’s second largest by 2010. The country of 340 million TV households is set for an advertising boom, helped by Beijing hosting the 2008 Olympic Games, as local and foreign ﬁrms vie for increasingly afﬂuent consumers.”

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Methodology Japan Measuring the Money: Last Year’s Perspective For now, however, Japan stands next to the US as the second largest US Online Ad Spending advertising market in the world—both online and ofﬂine. With an active US Ofﬂine Ad Spending Internet audience, online ad spending will increase at healthy rates through Cross-Media Trends

Global Advertising Spending mid decade, and should reach $1.2 billion by 2006, according to PwC.

Index of Charts Online Advertising Spending Growth in Japan, 2001-2006 (as a % increase vs. prior year)

2001 15.0%

2002 11.1%

2003 14.3%

2004 18.8%

2005 14.7%

2006 10.1%

Online Advertising Spending in Japan, 2000-2006 (in millions)

2000 $548

2001 $630

2002 $700

2003 $800

2004 $950

2005 $1,090

2006 $1,200

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Methodology Research from Havas and the London Business School shows that for all Measuring the Money: Last Year’s Perspective interactive marketing, spending in 2003 should bounce back from last US Online Ad Spending year’s minor decline. US Ofﬂine Ad Spending Cross-Media Trends Interactive Marketing Spending in Japan, 2002 & 2003 Global Advertising Spending (as a % increase vs. prior year) Index of Charts -0.6% 2002

2003 7.4%

Note: n=116 chief marketing officers; interactive marketing defined as Internet advertising, marketing Web sites and extranets, e-mail marketing and new media (e.g., digital TV, wireless) Source: London Business School/Havas, December 2002 047382 ©2003 eMarketer, Inc. www.eMarketer.com

Initiative Media sees lesser growth in Japan’s ad market, with Internet ad spending increasing by 5.0%, but every other category shown either ﬂat or falling.

Advertising Spending Growth in Japan, by Media, 2003 (as a % increase/decrease vs. prior year)

Internet 5.0%

TV 0.6%

Radio 0.0%

-1.2% Press*

-5.0% Outdoor

Zenith predicts total ad spending in 2003 at $35.36 billion, a mere 0.8% gain from last year’s ﬁgure.

Advertising Spending in Japan, 2001-2005 (in millions)

2001 $37,650

2002 $35,089

2003 $35,359

2004 $35,906

2005 $36,578

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Methodology However, at least that gain would counter the 6.8% spending loss in Measuring the Money: Last Year’s Perspective 2002’s market.

US Online Ad Spending

US Ofﬂine Ad Spending Advertising Spending Growth in Japan, 2002-2005 (as

Cross-Media Trends a % increase/decrease vs. prior year)

Global Advertising Spending

Index of Charts -6.8% 2002

2003 0.8%

2004 1.5%

2005 1.9%

Estimates from Havas for total marketing expenditures differ little from Zenith’s, showing small 1.4% and 1.5% decreases in 2002 and 2003, respectively.

Total Marketing Spending in Japan, 2002 & 2003 (as a % decrease vs. prior year)

-1.4% 2002

-1.5% 2003

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Methodology Interactive marketing is the only category Havas says will have increased Measuring the Money: Last Year’s Perspective spending allocation in 2003, and even that gain is only 0.7%.

US Online Ad Spending

US Ofﬂine Ad Spending Marketing Spending Allocation in Japan, by Category, Cross-Media Trends 2002 & 2003 (as a % increase/decrease vs. prior year) Global Advertising Spending Media advertising Index of Charts -0.3% -0.3%

Sales promotion -0.1% -0.3%

Direct mail -0.1% -0.1%

PR/sponsorship 0.4% 0.1%

Interactive marketing 0.1% 0.7%

In fact, other than the PwC numbers for Internet ad spending, all the other ﬁgures shown above picture a ﬂat market for all types of advertising in Japan.

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Methodology Australia Measuring the Money: Last Year’s Perspective With an active online community connecting the wide-open spaces in US Online Ad Spending Australia, PwC’s considerable growth ﬁgures for Internet ad spending make US Ofﬂine Ad Spending much sense. In 2003 alone, the predicted increase is nearly 30%. Cross-Media Trends

Global Advertising Spending Online Advertising Spending Growth in Australia, Index of Charts 2001-2006 (as a % increase vs. prior year)

2001 45.7%

2002 34.3%

2003 27.8%

2004 21.7%

2005 14.3%

2006 12.5%

Spending should surpass the $100 million mark this year.

Online Advertising Spending in Australia, 2000-2006 (in millions)

2000 $46

2001 $67

2002 $90

2003 $115

2004 $140

2005 $160

2006 $180

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Methodology Just as in the US, one online ad format making huge gains in Australia is Measuring the Money: Last Year’s Perspective paid search. According to Jupiter Research, search advertising will take in US Online Ad Spending more than $24 million this year, rising to nearly $64 million by 2005. US Ofﬂine Ad Spending Cross-Media Trends Revenues from Paid Search Listings in Australia, Global Advertising Spending 2002-2005 (in millions) Index of Charts 2002 $10.0

2003 $24.3

2004 $40.7

2005 $63.8

Perhaps, as with Initiative Media’s data for Spain, the company’s estimates for Australia are too vague to put much weight on, with a standard 3.0% spending rise in all media shown.

Advertising Spending Growth in Australia, by Media, 2003 (as a % increase vs. prior year)

TV 3.0%

Radio 3.0%

Press* 3.0%

Outdoor 3.0%

Cinema 3.0%

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Methodology F.Latin America Measuring the Money: Last Year’s Perspective According to eMarketer, Internet users in Latin America will grow from US Online Ad Spending

US Ofﬂine Ad Spending 33.1 million last year to over 60 million by 2004.

Cross-Media Trends

Global Advertising Spending Comparative Estimates: At-Home and At-Work

Index of Charts Internet Users in Latin America, 2000-2006 (in millions) 2000 2001 2002 2003 2004 2005 2006 Computer Economics, June – – 25.6 32.7 43.8 59.5 80.8 2002 (1) eMarketer, May 2002 19.3 26.2 33.1 43.4 60.6 – – IDATE, January 2003 – 16.0 28.0 – – – 47.0 Morgan Stanley, May 2002 15.0 18.0 21.0 26.0 31.0 40.0 – PricewaterhouseCoopers(PwC)/ – 26.0 29.6 35.7 48.3 62.9 80.5 Wilkofsky Gruen Associates, May 2002 World Bank/ Pyramid Research, 18.3* 23.7* 28.7 35.5 42.2 48.2 53.3 March 2003 (2) Note: *actual; (1) Internet users are defined as individuals who consistently use the Internet with access from either work, school, home or multiple locations; (2) Number of active, unique individuals who have used the Internet in the past 30 days Source: eMarketer, May 2002; various, as noted, 2002 & 2003 050388 ©2003 eMarketer, Inc. www.eMarketer.com

Online ad spending in Latin America is moderate, owing to the still developing status of many nations in the region. According to PwC, spending should surpass $200 million by next year.

Online Advertising Spending in Latin America, 2000-2006 (in millions)

2000 $123

2001 $150

2002 $160

2003 $175

2004 $200

2005 $250

2006 $300

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Methodology Beginning from such a small base leaves great room for growth, as is Measuring the Money: Last Year’s Perspective shown for each year charted below.

US Online Ad Spending

US Ofﬂine Ad Spending Online Advertising Spending Growth in Latin America,

Cross-Media Trends 2001-2006 (as a % increase vs. prior year)

Global Advertising Spending

Index of Charts 2001 22.0%

2002 6.7%

2003 9.4%

2004 14.3%

2005 25.0%

2006 20.0%

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Methodology Total Media Spending: Latin America Measuring the Money: Last Year’s Perspective The total media ad market in Latin America appears ready to roll, after last US Online Ad Spending year’s ﬂat growth (PwC’s take) or sharp downturn (Zenith’s data). US Ofﬂine Ad Spending Cross-Media Trends Comparative Estimates: Advertising Spending in Latin Global Advertising Spending America, 2001-2006 (as a % increase/decrease vs. prior Index of Charts year) 2001 2002 2003 2004 2005 2006 Initiative Media, March 2003 -12.5% -36.4% 10.0% – – – PricewaterhouseCoopers (PwC)/ -8.7% 1.1% 4.2% 6.0% 7.4% 9.1% Wilkofsky Gruen Associates May 2002 Zenith Optimedia, December 2002 – -11.8% 4.5% 7.4% 6.9% – Source: Initiative Media, March 2003; PricewaterhouseCoopers (PwC)/Wilkofsky Gruen Associates, May 2002; Zenith Optimedia, December 2002 049062 ©2003 eMarketer, Inc. www.eMarketer.com

Translated to absolute dollars, the spending estimates for 2003 come in at either $15.57 billion (PwC) or $17.66 billion (Zenith). Again as an outlier, Initiative Media’s 2003 Latin America ad spending ﬁgure is only $9.4 billion, far less than the other two researchers.

Comparative Estimates: Advertising Spending in Latin America, 2000-2006 (in billions) 2000 2001 2002 2003 2004 2005 2006 Initiative Media, March – $13.4 $8.5 $9.4 – – – 2003 Pricewaterhouse- $16.9 $14.78 $14.94 $15.57 $16.50 $17.73 $19.34 Coopers (PwC), May 2002 Zenith Optimedia, – $19.17 $16.90 $17.66 $18.97 $20.29 – December 2002 Source: Initiative Media, March 2003; PricewaterhouseCoopers (PwC)/Wilkofsky Gruen Associates, May 2002; Zenith Optimedia, December 2002 049063 ©2003 eMarketer, Inc. www.eMarketer.com

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Methodology 7

I Measuring the Money: Last Year’s Perspective 11

II US Online Ad Spending 17

III US Ofﬂine Ad Spending 89

IV Cross-Media Trends 125

V Global Advertising Spending 177 Index of Charts 237

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Table of Contents 3

Methodology 7 The eMarketer Difference 8 The Beneﬁts of eMarketer’s Aggregation Approach 9 “Benchmarking” and Projections 9 I Measuring the Money: Last Year’s Perspective 11 Comparative Estimates from July 2002: US Online Advertising Spending, 2000- 2005 (in billions) 13 Comparative Estimates from July 2002: US Online Advertising Spending Growth, 2001-2005 (as % increase/decrease vs. prior year) 14 II US Online Ad Spending 17 A. Comparing Online with Ofﬂine 18 Slow Growth Years for Various US Advertising Media, by Number of Years Spending Declined or Grew by 1.0% or Less, 1940-2002 19 B. Online Spending Yesterday & Today: 2000 to 2003 20 Comparative Estimates: US Online Advertising Spending, 2002 & 2003 (in billions) 20 Comparative Estimates: US Online Advertising Spending Growth, 2002 & 2003 (as a % increase/decrease vs. prior year) 21 US Online Advertising Revenues, by Web Publisher, 2000-2003 (as a % of total revenues) 22 Comparative Estimates: US Online Advertising Spending Growth, 2002 & 2003 (as a % increase/decrease vs. prior year) 22 US Online Advertising Revenue Growth, by Web Publisher, 2000-2003 (as a % increase/decrease vs. prior year) 23 US Online Advertising Revenues, by Web Publisher, 2000-2003 (in millions) 23 Quarterly Reports 25 US Online Advertising Spending, Q1 2000-Q4 2002 (in billions) 25 Online Advertising: Industries & Companies 26 US Online Advertising Spending, Q1 2000-Q4 2002 (as a % increase/decrease vs. prior quarter and vs. same quarter of prior year) 26 Online’s Share of Total US Advertising, by Category, Q1 2001-Q1 2002 27 Online’s Share of Total US Advertising, by Category, Q1 2001 vs. Q1 2002 (as a % increase/decrease) 28 US Online Ad Spending, by Industry, 2001 & 2002 (in millions and as a % increase/decrease vs. prior year) 29 US Online Advertising Spending, by Industry Category, 2000-2002 (as a % of total spending) 30 US Online Advertising Spending, by Industry Category, 2000-2002 (in billions) 31 US Online Advertising Spending Growth, by Industry Category, 2001 & 2002 (as a % increase/decrease vs. prior year) 32 US Online Advertising Spending, by Consumer Category, 2000-2002 (as a % of total spending) 33

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US Online Advertising Spending, by Consumer Category, 2000-2002 (in billions) 34 US Online Advertising Spending Growth, by Consumer Category, 2001 & 2002 (as a % increase/decrease vs. prior year) 35 Share of US Internet Advertising Revenues among Top 10, 25, and 50 Ad-Selling Web Sites, Q4 2002 36 C. AOL: How It Skews Online Ad Spending Figures 37 Comparison of US Internet Advertising Spending with and without AOL’s Contribution, 1999-2002 (in billions) 38 Comparison of US Internet Advertising with and without AOL’s Contribution, Q2 1999-Q3 2002 (in millions) 38 US Online Advertising Revenues with and without AOL’s Contribution, 2000-2003 (in billions) 39 AOL’s Share of Total US Internet Advertising Spending, Q1 1999-Q3 2002 40 AOL’s Share of Total US Internet Advertising Spending, 2000-2003 41 Comparison of US Internet Advertising Spending with and without AOL’s Contribution, Q2 1999-Q3 2002 (as a % increase/decrease vs. prior quarter) 42 US Internet Advertising Revenue Growth with and without AOL’s Contribution, 2001-2003 (as a % increase/decrease vs. prior year) 43 D. Online Spending Trends: 2000 to 2006 44 US Online Advertising Spending, 2000-2006 (in billions) 44 US Online Advertising Spending Growth, 2001-2006 (as a % increase/decrease vs. prior year) 45 Comparative Estimates: US Online Advertising Spending, 2000-2006 (in billions) 46 Comparative Estimates: US Online Advertising Spending Growth, 2001-2006 (as a % increase/decrease vs. prior year) 47 US Online Advertising Spending per Online User, 2000-2006 48 US Online Advertising Spending, 2000-2006 (as a % of total media spending) 48 US Online B2C and B2B Advertising Spending, 2001-2005 (in billions) 49 US Online Advertising Spending per Online Household and User, 2001-2007 49 US Online B2C and B2B Advertising Spending Growth, 2002-2005 (as a % increase vs. prior year) 50 US Online B2C and B2B Advertising Spending, 2001-2005 (as a % of total spending) 50 Advertising Spending for Direct Marketing Interactive Media among US B2C and B2B Companies, 2000-2002 & 2006 (in billions) 51 Publicly Traded US Internet-Centric Companies Revenues and Sales & Marketing Spending, 2002 (in millions) 52 Publicly Traded US Internet-Centric Companies Revenues and Sales & Marketing Spending, 2002 (in millions) 53 Promotion Vehicles toward Which US Marketers Concentrated Most of Their Budget, 2002 (as a % of respondents) 54 E. Online Forecasts: Methodologies Analyzed 55

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Online Ad Spending: What Is Measured? How Is It Measured?, 2003 56 Online Ad Spending: What Is Measured? How Is It Measured?, 2003 57 F.Online Ad Format Spending 58 US Online Advertising Spending, by Vehicle, 2000-2002 (as a % of total spending) 58 US Online Advertising Spending, by Vehicle, 2000-2002 (as a % of total spending) 59 US Online Advertising Spending, by Vehicle, 2000-2002 (in millions) 59 US Online Advertising Spending, by Vehicle, 2000-2002 (in millions) 60 US Online Advertising Spending, by Vehicle, 2001 & 2002 (as a % increase/decrease vs. prior year) 61 Banner Ads 62 Banner Ad Spending in the US, 2000-2002 (in millions) 62 Banner Ad Spending in the US, 2000-2002 (as a % of total spending) 62 Online Sponsorship 63 Online Sponsorship Ad Spending in the US, 2000-2002 (in millions) 63 Online Sponsorship Ad Spending in the US, 2000-2002 (as a % of total spending) 63 Search Advertising 64 Online Search Ad Spending in the US, 2000-2002 (in millions) 64 Online Search Ad Spending in the US, 2000-2002 (as a % of total spending) 64 Online Search Ad Spending in the US, 2001 & 2002 (as a % increase vs. prior year) 65 Online Classified Ads 66 Online Classified Ad Spending in the US, 2000-2002 (as a % of total spending) 66 Online Classified Ad Spending in the US, 2000-2002 (in millions) 66 Rich Media 67 Rich Media Ad Spending in the US, 2000-2002 (in millions) 67 Rich Media Ad Spending in the US, 2000-2002 (as a % of total spending) 67 Interstitials & Pop-Up Ads 68 Interstitial Ad Spending in the US, 2000-2002 (in millions) 68 Interstitial Ad Spending in the US, 2000-2002 (as a % of total spending) 68 E-Mail Advertising 69 E-Mail Ad Spending in the US, 2000-2002 (in millions) 69 E-Mail Ad Spending in the US, 2000-2002 (as a % of total spending) 69 G. Plans for Online Ad Spending 70 Online Advertising Spending Plans for the Next 12 Months among US Advertising Executives, August 2002 (as a % of respondents) 70 Online Advertising Spending Plans among US Advertising Executives for the Next 12 Months, August 2002 (as a % of respondents) 71 Marketing Spending Allocation in the US, by Category, 2002 & 2003 (as a % increase/decrease vs. prior year) 72

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US Media Planners’ Opinions Regarding Whether their Jobs Will Be Tougher, 2003 vs. 2002 (as a % of respondents) 73 US Media Planners’ Opinions Regarding Whether the Economy Significantly Impacts Media Budgets, 2003 (as a % of respondents) 73 Ad Media that US Media Planners Will Be Spending More on in 2003, (as a % of respondents) 74 How Far in Advance Do US Media Professionals Plan Spending, 2003 (as a % of respondents) 74 Ad Media that US Media Planners Will Be Spending Less on in 2003, (as a % of respondents) 75 Where US Media Planners Expect to Focus Most of Their Media Spending in 2003, (as a % of respondents) 75 Issues US Advertising Executives Rate as “Very” or “Extremely Influential” for Increasing Online Ad Spending in the Next 12 Months, August 2002 (as a % of respondents) 77 H. Pricing Models, Pricing Trends 78 US Online Advertising Revenues, by Pricing Model, 2000-2002 (as a % of total revenues) 79 US Online Advertising Revenue Growth, by Pricing Model, 2001 & 2002 (as a % increase/decrease vs. prior year) 80 US Online Advertising Revenues, by Pricing Model, 2000-2002 (in billions) 81 US Online Advertising Spending, by Pricing Model, 2001-2007 (in millions) 82 US Online Advertising Spending, by Pricing Model, 2001-2007 (as a % of total media buys) 82 Effective CPM for US Online Advertising, 2002-2007 (as a % increase/decrease vs. prior year) 83 Effective CPM for US Online Advertising, 2001-2007 83 Average Full Banner Rate Card* in the US, by Web Site Genre, Q3 2002-Q4 2002 (in dollars per thousand impressions) 84 Average Full Banner Rate Card* in the US, by Web Site Genre, Q3 2002-Q4 2002 (in dollars per thousand impressions) 85 Transaction Types 86 US Online Advertising Revenues, by Transaction Type, 2000-2002 (as a % of total revenues) 86 US Online Advertising Revenues, by Transaction Type, 2000-2002 (in billions) 87 III US Offline Ad Spending 89 A. Spending Plans for Total Media 90 US Media Planners’ Opinions Regarding the Change in Size of Media Budgets in 2003, (as a % of respondents) 90 US Marketers’ Intent to Increase or Decrease Advertising and Marketing Budgets, 2003 (as a % of respondents) 91 Change in Marketing Budget among US Marketers, 2003 vs. 2002 (as a % of respondents) 91 B. Total Media Spending 92

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US Advertising Spending Growth, 2000-2006 (as a % increase/decrease vs. prior year) 92 US Advertising Spending, 2000-2006 (in billions) 92 Comparative Estimates: US Advertising Spending Growth, 2003 (as a % increase/decrease vs. prior year) 94 Comparative Estimates: US Advertising Spending Growth, 2001-2006 (as a % increase/decrease vs. prior year) 95 Comparative Estimates: US Advertising Spending, 2001-2006 (in billions) 96 Advertising Spending in the US, 2003 (as a % growth vs. prior year) 97 C. The Ofﬂine Ad Market 98 US Local and National Advertising Spending, 2001 & 2002 (in billions) 98 By Media 99 US Advertising Spending Share, by Media, 2001 & 2006 99 Advertising Spending in the US, by Media, 2003 (as a % growth vs. prior year) 100 US Advertising Spending, by Media, Q1 2002 vs. Q1 2003 (in millions and as a % increase/decrease vs. prior year) 101 US Advertising Spending Growth, by Media, Q1 2003 (as a % increase/decrease vs. Q1 2002) 102 US Advertising Spending, by Media, 2001 & 2002 (in billions and as a % increase/decrease vs. prior year) 103 By Industry & Advertiser 104 Top 10 Computers & Consumer Electronics Web Sites among At-Home Internet Users in the US, Week Ending 4 May 2003 (unique audience in thousands and % active reach) 104 Top 10 US Industries by Advertising Spending, 2001 & 2002 (in billions and as a % change year-over-year) 105 Top 10 Advertisers in the US, January-February 2003 (in millions and as a % increase/decrease vs. January-February 2002) 106 Top 10 US Advertisers Ranked by Ad Spending, Q1 2002 vs. Q1 2003 (in millions and as a % increase/decrease vs. prior year) 107 Publicly Traded US Internet-Centric Companies Ad Spending in Traditional Media, 1999-2002 (in millions) 108 Promotion Spending 109 Promotion Spending in the US, by Industry Segment, 2001 & 2002 (in millions and as a % change) 109 Hispanic Market Spending 110 Hispanic Market Advertising Spending in the US, by Media, 2001-2004 (in millions) 110 Hispanic Market Advertising Spending in the US, by Media, 2001-2004 (as a % of market share) 110 Advertising Spending in the US Hispanic Market, by Media, 2002 (in millions) 111 D. Broadcast Spending 112 Comparative Estimates: US Television Advertising Spending, 2000-2006 (in billions) 112

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Comparative Estimates: US Television Advertising Spending Growth, 2001-2006 (as a % increase/decrease vs. prior year) 113 Factors that Influence US Media Planners Who Are Planning to Spend More on TV in 2003, (as a % of respondents) 114 Comparative Estimates: US Radio Advertising Spending Growth, 2001-2006 (as a % increase/decrease vs. prior year) 115 Comparative Estimates: US Radio Advertising Spending, 2000-2006 (in billions) 115 E. Print Spending 116 Comparative Estimates: US Newspaper Advertising Spending, 2000-2006 (in billions) 116 Comparative Estimates: US Newspaper Advertising Spending Growth, 2001-2006 (as a % increase/decrease vs. prior year) 117 Comparative Estimates: US Magazine Advertising Spending, 2000-2006 (in billions) 118 Comparative Estimates: US Magazine Advertising Spending Growth, 2001-2006 (as a % increase/decrease vs. prior year) 119 US Magazine Advertising Spending, by Industry Category, February 2002 & February 2003 120 F.Other Offline Spending 121 Comparative Estimates: US Direct Mail Advertising Spending Growth, 2001-2006 (as a % increase vs. prior year) 121 Comparative Estimates: US Direct Mail Advertising Spending, 2000-2006 (in billions) 121 Comparative Estimates: US Yellow Pages Advertising Spending Growth, 2001- 2006 (as a % increase vs. prior year) 122 Comparative Estimates: US Yellow Pages Advertising Spending, 2000-2006 (in billions) 122 Comparative Estimates: US Outdoor Advertising Spending Growth, 2001-2006 (as a % increase/decrease vs. prior year) 123 Comparative Estimates: US Outdoor Advertising Spending, 2000-2006 (in billions) 123 IV Cross-Media Trends 125 A. Attitudes Toward Cross-Media Advertising 126 US Media Planners’ Opinions Regarding the Advertising Value of Various Media, 2003 (as a % of respondents) 126 Online Advertising Objectives among US Marketers, 2002 (as a % of respondents) 127 Advertising Media that Affluent US Adults Would Definitely or Probably Include in a Campaign to Reach People Like Themselves, January 2003 (as a % of respondents) 128 Media Suggested by US “Business Decision Makers” for Use in an Advertising Campaign Targeted at Them, 2002 (as a % of respondents) 129 Opinions of US “Business Decision Makers” Regarding the Advertising They Encounter, by Media Type, 2002 (as a % of respondents) 130

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Attitudes toward Advertising among At-Work Internet Users in the US, by Medium, 2003 (as a % of respondents) 131 Degree to Which US Ad Agencies and Corporate Marketing Departments Have Organized to Deliver Integrated Marketing, 2002 (as a % of respondents) 132 B. Media Measurement: Apples to Apples? 133 US Online Marketing Impressions per Internet User per Day, 2001-2007 135 Methods to Plan or Measure Online Advertising that US Advertising Executives Expect to Use in the Next 12 Months, August 2002 (as a % of respondents) 136 Metrics US Marketers Use to Measure Online Advertising Campaigns, 2002 (as a % of respondents) 137 Average Click-Through Rates for Online Ads Worldwide, Q1 2002-Q4 2002 138 GRPs* of Top 25 US Web Sites, TV Shows and Magazines, by Demographic Group, 2001 & 2002 139 Average GRP* among Top 25 US Web Sites, TV Shows, and Magazines, by Demographic Group, 2001 & 2002 140 Audience Size of US Adults Ages 18-49 among Top 12 Web Sites, TV Shows, and Magazines, 2001 & 2002 (in millions) 141 Factors that Inﬂuence US Media Planners When Selecting Media, 2003 (as a % of respondents) 142 Cross-Media Metric Tools 143 Sample Media Plan to Reach Half of US Households via Online Advertising, 2003 144 Costs and Targeted Rating Points for Sample Media Plan to Reach Half of US Households via Online Advertising, 2003 145 Sample Media Plan to Reach Half of US Households via Online Advertising, 2003 145 Costs and Targeted Rating Points for Sample Media Plan to Reach Half of US Households via Online Advertising, 2003 146 C. Cross-Media Optimization 147 Measuring the Online Ad Impact for Unilever’s Dove Personal Care Brand, 2002 147 Average Exposure of Female Consumers to Dove Nutrium Bar Ads, by Medium, 2001 (in number of impressions) 148 Purchase Intent for Dove Nutrium Bar, by Number of Online Ad Exposures, 2001 (as a % of female consumers) 148 Target Audience* for McDonald’s Cross-Media Ad Campaign**, by Internet and TV Use Levels, 2002 149 Reach, Frequency, and Targeted Rating Points (TRPs) for McDonald’s Cross- Media Ad Campaign*, by Medium, 2002 150 Product Image Responses* to McDonald’s Cross-Media Ad Campaign**, 2002 (as a % of respondents) 151 Comparative Branding Metrics for McDonald’s Ad on Television and Online, 2003 (based on % incremental lift) 152 Purchase Intent for Colgate Total Toothpaste, by Share of Budget Allocated to Online, 2003 (as a % increase pre-campaign) 153

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Current and Recommended Online Advertising Budget Shares for Various Consumer Brands, 2003 154 Attitudes toward Advertising among At-Work Internet Users Who Are Light TV Viewers* in the US, by Medium, 2003 (as a % of respondents) 155 D. Four More Cross-Media Scenarios 157 American Airlines 158 Effect of Increased Internet Ad Budget on Reach, Frequency, and GRPs* for American Airlines’ Campaign, 2002 158 Effect of Increased Internet Ad Budget on Frequency of Exposure among US TV Viewers for American Airlines’ Campaign, by Frequency of TV Use, 2002 159 Effect of Increased Internet Ad Budget on GRPs* among US TV Viewers for American Airlines’ Campaign, by Frequency of TV Use, 2002 159 Subaru 160 Effect of Increased Internet Ad Budget on GRPs* among US TV Viewers for Subaru’s Campaign, by Frequency of TV Use, 2002 160 Effect of Increased Internet Ad Budget on Reach, Frequency, and GRPs* for Subaru’s Campaign, 2002 160 Effect of Increased Internet Ad Budget on Frequency of Exposure among US TV Viewers for Subaru’s Campaign, by Frequency of TV Use, 2002 161 Oscar Mayer 162 Effect of Increased Internet Ad Budget on GRPs* among US TV Viewers for Oscar Mayer’s Campaign, by Frequency of TV Use, 2002 162 Effect of Increased Internet Ad Budget on Reach, Frequency, and GRPs* for Oscar Mayer’s Campaign, 2002 162 Effect of Increased Internet Ad Budget on Frequency of Exposure among US TV Viewers for Oscar Mayer’s Campaign, by Frequency of TV Use, 2002 163 Planters Peanuts 164 Effect of Increased Internet Ad Budget on GRPs* among US TV Viewers for Planters Peanuts’ Campaign, by Frequency of TV Use, 2002 164 Effect of Increased Internet Ad Budget on Reach, Frequency, and GRPs* for Planters Peanuts’ Campaign, 2002 164 Effect of Increased Internet Ad Budget on Frequency of Exposure among US TV Viewers for Planters Peanuts’ Campaign, by Frequency of TV Use, 2002 165 Comparative Effect of Increased Internet Ad Budgets on GRPs* among US TV Viewers, by Frequency of TV Use, 2002 (as a % increase/decrease vs. original budget) 166 Comparative Effect of Increased Internet Ad Budgets on Frequency of Exposure among US TV Viewers, by Frequency of TV Use, 2002 (as a % increase/decrease vs. original budget) 167 E. Cross-Media: Driving Trafﬁc Online 168 Daily US Visitors to the AT&T Wireless Web Site, 1 March 2003 - 4 April 2003 (as % of visitors in telecommunications category) 168 Daily US Visitors to the AT&T Wireless Web Site, 1 March 2003 - 4 April 2003 (as % of visitors in telecommunications category) 169 Daily US Visitors to the Ben & Jerry’s and Baskin-Robbins Web Sites, 17 April 2003-7 May 2003 (as a % of total US Web visitors) 170

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Daily US Visitors to the Pepsi Cola and Coca-Cola Web Sites, 15 March 2003-26 March 2003 (as a % of total US Web visitors) 171 F.Consumer Media Consumption 172 Annual Use of Media among US Consumers, 2000-2006 (in hours) 172 Growth Rate in Media Use among US Consumers, 2000-2006 (as a % increase/decrease) 173 Comparative Estimates: Average Time Spent Online by Internet Users in the US, 2002 (in minutes per day) 174 Comparative Estimates: Average Time Spent Online by Internet Users in the US, 2002 (and per year) 175 Average Number of Hours Spent Online per Week by Internet Users in the US, 2000-2002 175 Average Number of Hours Spent Online per Week by Internet Users in the US, by Experience Online, 2002 176 V Global Advertising Spending 177 Comparative Estimates: At-Home and At-Work Internet Users Worldwide, 2000- 2006 (in millions) 178 Time Spent Online by Consumers at Home and Work in Select Countries Worldwide, 2002 (in average hours per week) 179 A. Internet Ad Spending: Worldwide & Regional 180 Comparative Estimates: Worldwide Online Advertising Spending Growth, 2001- 2006 (in billions) 180 Comparative Estimates: Worldwide Online Advertising Spending, 2000-2006 (in billions) 180 Worldwide Online Advertising Spending, by Region, 2000-2006 (in millions) 181 Interactive Marketing Spending in Select Countries*, 2002 & 2003 (as a % increase vs. prior year) 181 Worldwide Online Advertising Spending, by Region, 2001-2006 (as a % increase/decrease vs. prior year) 182 Worldwide Online Advertising Spending, by Region, 2000-2006 (as a share of worldwide spending) 182 Online Advertising Spending per Internet User, by Nation, 2000-2006 (ranked by 2003 spending) 183 Interactive Marketing Spending in Select Countries, 2002 & 2003 (as a % increase/decrease vs. prior year) 184 Interactive Marketing Spending in Select Countries*, by Industry Sectors, 2002 & 2003 (as a % increase/decrease vs. prior year) 185 B. Total Ad Spending: Worldwide & Regional 186 Comparative Estimates: Worldwide Advertising Spending Growth, 2001-2006 (as a % increase/decrease vs. prior year) 186 Comparative Estimates: Worldwide Advertising Spending, 2000-2006 (in billions) 186 Advertising Spending Worldwide, by Region, 2001-2006 (as a % of total spending and in billions) 187 Advertising Spending Worldwide, by Region, 2001-2006 (in billions) 187

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Advertising Spending Growth Worldwide, by Region, 2001-2006 (as a % increase/decrease vs. prior year) 188 Regional Marketing 189 Total Marketing Spending in Select Countries*, by Category, 2002 & 2003 (as a % increase/decrease vs. prior year) 189 Marketing Spending Allocation in Select Countries*, 2002 & 2003 (as a % increase/decrease vs. prior year) 190 Marketing Spending Allocation in Select Countries, by Category, 2001 190 Total Marketing Spending in Select Countries*, by Industry Sectors, 2002 & 2003 (as a % increase/decrease vs. prior year) 191 C. Canada 192 Online Households in Canada: Dial-Up vs. Broadband, 2001 & 2002 (as a % of online households) 192 Comparative Estimates: At-Home and At-Work Internet Users in Canada, 2000- 2006 (in millions) 192 Online Advertising Spending Growth in Canada, 2001-2006 (as a % increase vs. prior year) 193 Online Advertising Spending in Canada, 2000-2006 (in millions) 193 Total Media Spending: Canada 194 Average Ad Budget Increase among Canadian Companies, by Media, 2002 (as a % of respondents) 194 Change in Ad Budgets among Canadian Companies, by Media, 2002 (as a % of respondents) 195 Comparative Estimates: Advertising Spending in Canada, 2000-2006 (in billions) 196 Comparative Estimates: Advertising Spending in Canada, 2000-2006 (as a % increase vs. prior year) 197 D. Europe 198 Comparative Estimates: At-Home and At-Work Internet Users in Europe, 2000- 2006 (in millions) 198 Online Advertising Spending in Europe, by Country, 2000-2006 (in millions) 199 Online Advertising Spending Growth in Europe, by Country, 2001-2006 200 Internet’s Share of Total Advertising Spending in Europe, 2000-2006 (in billions) 201 Total Media Spending: Europe 202 Comparative Estimates: Advertising Spending in Europe, 2000-2006 (in billions) 202 Advertising Spending in Select Countries in Europe, 2001-2005 (in millions) 203 Comparative Estimates: Advertising Spending in Europe, 2001-2006 (as a % increase/decrease vs. prior year) 203 Advertising Spending Growth in Select Countries in Europe, 2002-2005 (as a % increase/decrease vs. prior year) 204 United Kingdom 205 Online Advertising Spending in the UK, 2000-2006 (in millions) 205

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Online Advertising Spending Growth in the UK, 2001-2006 (as a % increase vs. prior year) 205 Total Marketing Spending in the UK, 2002 & 2003 (as a % increase vs. prior year) 206 Interactive Marketing Spending in the UK, 2002 & 2003 (as a % increase vs. prior year) 206 Advertising Spending Growth in the UK, by Media, 2003 (as a % increase vs. prior year) 206 Marketing Spending Allocation in the UK, by Category, 2002 & 2003 (as a % increase/decrease vs. prior year) 207 Advertising Spending in the UK, by Medium, Q2 2001-Q4 2002 (as a % increase/decrease vs. prior year) 208 Advertising Spending in the UK, by Medium, 2001 & 2002 (in millions of £ and % change) 208 Newspaper Display and Classiﬁed Advertising Spending in the UK, 2001 & 2002 (in millions of £ and % increase/decrease vs. prior year) 209 Germany 210 Online Advertising Spending Growth in Germany, 2001-2006 (as a % increase/decrease vs. prior year) 210 Interactive Marketing Spending in Germany, 2002 & 2003 (as a % increase vs. prior year) 210 Advertising Spending Growth in Germany, by Media, 2003 (as a % decrease vs. prior year) 211 Online Advertising Spending in Germany, 2000-2006 (in millions) 211 Marketing Spending Allocation in Germany, by Category, 2002 & 2003 (as a % increase/decrease vs. prior year) 212 Total Marketing Spending in Germany, 2002 & 2003 (as a % increase/decrease vs. prior year) 212 France 213 Online Advertising Spending in France, 2000-2006 (in millions) 213 Online Advertising Spending Growth in France, 2001-2006 (as a % increase/decrease vs. prior year) 213 Total Marketing Spending in France, 2002 & 2003 (as a % increase vs. prior year) 214 Advertising Spending Growth in France, by Media, 2003 (as a % increase vs. prior year) 214 Interactive Marketing Spending in France, 2002 & 2003 (as a % increase vs. prior year) 214 Marketing Spending Allocation in France, by Category, 2002 & 2003 (as a % increase/decrease vs. prior year) 215 Italy 216 Online Advertising Spending Growth in Italy, 2001-2006 (as a % increase vs. prior year) 216 Online Advertising Spending in Italy, 2000-2006 (in millions) 216 Advertising Spending in Italy, by Media, February 2003 (in millions of € and % change vs. same month of prior year) 217

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Advertising Spending Growth in Italy, by Media, 2003 (as a % increase/decrease vs. prior year) 217 Advertising Spending Growth in Italy, by Industry, February 2003 (as a % change vs. same month of prior year) 218 Spain 219 Online Advertising Spending in Spain, 2000-2006 (in millions) 219 Online Advertising Spending Growth in Spain, 2001-2006 (as a % increase/decrease vs. prior year) 219 Advertising Spending Growth in Spain, by Media, 2003 (as a % increase vs. prior year) 220 Russia 221 Online Advertising Spending Growth in Russia, 2001-2006 (as a % increase vs. prior year) 221 Online Advertising Spending in Russia, 2000-2006 (in millions) 221 Top Advertisers in Russia, Ranked by Advertising Spending, 2001 & 2002 (in millions*) 222 Advertising Spending Growth in Russia, by Media, 2003 (as a % increase vs. prior year) 222 Top Advertisers in Russia, Ranked by Advertising Spending, 2001 & 2002 (in millions*) 223 E. Asia-Pacific 224 Comparative Estimates: At-Home and At-Work Internet Users in the Asia-Pacific Region, 2000-2006 (in millions) 224 Online Advertising Spending Growth in the Asia-Pacific Region, by Country, 2001- 2006 225 Online Advertising Spending in the Asia-Pacific Region, by Country, 2001-2006 (in millions) 225 Total Media Spending: Asia-Pacific 226 Comparative Estimates: Advertising Spending in the Asia-Pacific Region, 2001- 2006 (as a % increase/decrease vs. prior year) 226 Comparative Estimates: Advertising Spending in the Asia-Pacific Region, 2000- 2006 (in billions) 227 Japan 228 Online Advertising Spending in Japan, 2000-2006 (in millions) 228 Online Advertising Spending Growth in Japan, 2001-2006 (as a % increase vs. prior year) 228 Advertising Spending in Japan, 2001-2005 (in millions) 229 Advertising Spending Growth in Japan, by Media, 2003 (as a % increase/decrease vs. prior year) 229 Interactive Marketing Spending in Japan, 2002 & 2003 (as a % increase vs. prior year) 229 Total Marketing Spending in Japan, 2002 & 2003 (as a % decrease vs. prior year) 230 Advertising Spending Growth in Japan, 2002-2005 (as a % increase/decrease vs. prior year) 230

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Marketing Spending Allocation in Japan, by Category, 2002 & 2003 (as a % increase/decrease vs. prior year) 231 Australia 232 Online Advertising Spending in Australia, 2000-2006 (in millions) 232 Online Advertising Spending Growth in Australia, 2001-2006 (as a % increase vs. prior year) 232 Advertising Spending Growth in Australia, by Media, 2003 (as a % increase vs. prior year) 233 Revenues from Paid Search Listings in Australia, 2002-2005 (in millions) 233 F.Latin America 234 Online Advertising Spending in Latin America, 2000-2006 (in millions) 234 Comparative Estimates: At-Home and At-Work Internet Users in Latin America, 2000-2006 (in millions) 234 Online Advertising Spending Growth in Latin America, 2001-2006 (as a % increase vs. prior year) 235 Total Media Spending: Latin America 236 Comparative Estimates: Advertising Spending in Latin America, 2000-2006 (in billions) 236 Comparative Estimates: Advertising Spending in Latin America, 2001-2006 (as a % increase/decrease vs. prior year) 236 Index of Charts 237

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Also Available from eMarketer Security Online: Corporate & Consumer Protection A comprehensive overview of Internet security. Topics include security breaches, the business costs of cyberattacks, tech solutions, Internet fraud and security risks faced by individual users. (117 Pages, 96 Charts) Automotive Industry Online The automobile industry is reshaping itself - putting manufacturing, marketing and sales online creating a value chain connecting suppliers, dealers and consumers. Henry Ford would be proud. (172 Pages, 149 Charts) Privacy in the Information Age Privacy is a growing consumer concern. Many companies use it as a competitive edge - others are skewered for misusing it. Find out why it pays to protect your customers’ privacy. (228 Pages, 191 Charts) IT Spending: Comparative Forecasts and Trends in Technology Spending Provides in-depth analysis and statistics, reinforced by comparative survey data, on IT spending in 2002 and 2003, by region and key technology market segments. (131 Pages, 138 Charts) The Online Content report Examines the emerging trends in online paid content and services in the US consumer sector. Topics include market size and forecasts, leading subscription sites, the broadband factor, music, games, sports, pornography and much more. (184 Pages, 164 Charts) Interactive Marketing: Stats, Strategies and Trends A thorough analysis of the strategies that are reshaping today’s online marketing universe—along with guidelines on how to take advantage of them. (311 Pages, 328 Charts) Consumer Electronics Online Examines how CE manufacturers and retailers are using the Internet to change how they do business. Covers electronics industry IT spending, b2b e-commerce trade, US online shopping grid and electronics industry online ad spending. (83 Pages, 77 Charts) The European Wireless report Analysis of the wireless market throughout Europe, covering retail and business applications, technology infrastructure, subscriber populations, and mobile apps. (121 Pages, 120 Charts)

251 ©2003 eMarketer, Inc. Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information. Advertising Spending

The US Online Holiday Shopping report A comprehensive update of the leading trends in e-business and online retailing in the world's largest Internet market, the United States, and also looks at the growing world market. (108 Pages, 107 Charts) Essential E-Business Numbers for Marketers, Q3 2002 A quick-reference, "stats-only" report. Data gathered from hundreds of sources is combined with eMarketer ’s own forecasts, and presented in side-by-side tables, graphs and source comparison charts. (74 Pages, 60 Charts) Latin America Online: Demographics, Usage & E-Commerce A comprehensive update of the leading trends in e-business and online retailing, with a focus on six countries that form the "core" of the region’s online market. (197 Pages, 211 Charts) Interactive Banking: Integrating Online into Traditional Channels A comprehensive overview of the interactive banking market. "Interactive," not just "online," because banking is being transformed into a cross-channel business. (386 Pages, 427 Charts) Retail Industry Online Covers the three major areas of retailers’ business operations that have been impacted by the Internet: 1) IT and e-business spending, 2) online advertising and 3) selling to consumers online. (122 Pages, 126 Charts) North American Wireless Market: On the Road to 3G As mobile voice penetration approaches 50%, a heated marketing battle is shaping up between North American wireless operators. Find out why--and what it means for your business. (160 Pages, 170 Charts) Asia-Pacific Online: Access, Demographics and Usage A comprehensive update of the leading trends in Internet usage and user demographics in the Asia-Pacific region, with a focus on eight "core" countries. (158 Pages, 179 Charts) Asia-Pacific E-Commerce: B2B & B2C Provides a thorough analysis of the demographic characteristics, usage patterns and category preferences of online shoppers in the Asia-Pacific region. (156 Pages, 156 Charts) Online Selling & eCRM A compilation of the latest survey and forecast data examining the current trends facing companies operating commercial Web sites. (125 Pages, 137 Charts)

252 ©2003 eMarketer, Inc. Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information. Advertising Spending

Broadband & Dial-Up Access Examines the residential broadband and dial-up Internet access markets in 27 countries across four regions. The report covers technologies, major players and trends in broadband access costs. (338 Pages, 433 Charts) E-Mail Marketing: Strategies, Stats, Techniques & Tools Gathering the latest findings from leading researchers, the report tracks the steady growth of e-mail marketing and shows why it is rapidly becoming one of a marketer's sharpest tools. (188 Pages, 209 Charts) The Pharmaceutical Industry Online An essential reference tool covering all aspects of the pharmaceutical industry online from companies using the Internet for trading, to the consumer using the Internet to research and buy pharmaceuticals. (88 Pages, 111 Charts) Online Investing: Brokers, Investors, Statistics, and Market Trends Provides a wide-ranging analysis of the trends and strategies that shape today's interactive investing market - along with guidelines on how to take advantage of them. (214 Pages, 203 Charts) Europe E-Commerce: B2B & B2C Provides a comprehensive review of data from leading research firms and government organizations regarding revenue forecasts for B2B and B2C e-commerce. (208 Pages, 209 Charts) CPG Online A comprehensive review of how CPG companies are working with each other and with the consumer online. It is the ideal resource for retailers, wholesale/ distributors, consultancies and marketers. (76 Pages, 80 Charts) Europe Online: Access, Demographics and Usage An overview of Internet users and usage in the 12 "core" countries that best represent the region's market, including Internet penetration rates in each country, how users are accessing the Internet, and why. (188 Pages, 195 Charts) The Benefits of Broadband A review of all available research quantifying the economic benefits of broadband. The report covers supply and demand for broadband in the US, and analyzes direct and indirect benefits of widespread adoption. (138 Pages, 124 Charts)

253 ©2003 eMarketer, Inc. Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information. Advertising Spending

North America E-Commerce: B2C & B2B A comprehensive overview of e-commerce in the US and Canada, including analysis of online shoppers versus buyers, the factors that influence people to buy online and the demographics of online buyers. (212 Pages, 250 Charts) PDA Market report Reviews the status of the worldwide PDA/handheld computer market from the perspective of data-centric devices, and analyzes the trends that are shaping its future growth. (124 Pages, 128 Charts) Interactive TV: Reality & Opportunity An overview of worldwide iTV usage and revenue prospects, television commerce, iTV advertising, video-on-demand, personal video recorders and iTV services. (194 Pages, 200 Charts) E-Commerce Trade and B2B Exchanges A comprehensive update of the leading trends shaping e-business decisions in 2002, focusing on the multiple channels businesses are using to migrate their business-to-business (B2B) trade onto the Internet. (127 Pages, 134 Charts) Online Advertising A definitive, objective look at the online ad market, including the pros and cons of emerging ad formats and the role of online advertising within a traditional media campaign. (272 Pages, 318 Charts) North America Online A comprehensive overview of the North American Internet user and market, focusing on US and Canadian user demographics, access and usage. (252 Pages, 333 Charts) Travel Market Worldwide Provides a clear picture of the current situation in the travel industry, with information and statistics regarding travel purchased both online and offline. (186 Pages, 205 Charts) For more information, or to order a copy, contact eMarketer at: Phone: 212.677.6300 Fax: 212.777.1172 eMail: [email protected] Web: www.emarketer.com For Sales Inquiries: For Media Inquiries: Nick Lovett David Berkowitz [email protected] Director of Media Relations 212.763.6031 [email protected] 212.763.6038

254 ©2003 eMarketer, Inc. Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information.