1

MAGNA GLOBAL Advertising Revenue Forecasts US media suppliers’ advertising revenues to accelerate by +4.1%

to $168 billion in 2015

Top Stories • According to MAGNA GLOBAL, US Media Suppliers’ advertising revenues grew by

+3.0% in 2014 (to $164 billion), a modest performance in an even-numbered year. • The growth was just +1.6% when factoring out non-recurring “P&O” ad revenues. This

was the smallest growth in six years, since the great recession of 2009. • Television underperformed with media owners’ ad revenues growing by +3%, and even

declining by -0.4% when excluding P&O. • Digital media sales grew by +15% to reach $49 billion and a 30% market share. • 2015 will see an improved advertising market thanks to a stronger economic

environment: +2.7% (+4.1% excluding P&O) but television will continue to be subdued (-2.9%, or +0.3% excluding P&O).

2014: Ad Sales Slow Down to +1.6% 2014 ended as a disappointing year in terms of media suppliers’ advertising revenues. Excluding the incremental revenues generated by the non-recurring political and Olympic events of 2014 (P&O), advertising revenues grew by a modest +1.6%, to $161 billion. This is the smallest annual growth rate in the last six years, since the recovery that followed the 2008-2009 drop. Keeping in the P&O revenues, advertising revenues increased by +3.0%, also a modest performance in an even-numbered year.

Looking at individual media categories, the sustained growth in digital media revenues (+15% to $46 billion) was not enough to offset the slowdown suffered by traditional media categories: television -0.4% (excluding P&O), print -11.0%, radio -3.3%. Outdoor media sales were barely flat (+1.5%). Traditional media as whole was down -3.4% (excl. P&O).

Television in particular had a difficult year in 2014. The even-year P&O bonanza (approximately $2.4 billion) was smaller than expected; political advertising on local TV in particular was approximately 20% smaller than what it had been during the previous mid-term elections. Factoring out P&O, underlying revenues decreased by -0.4%, for first time since 2009. National TV was down -0.1% (up +1.0% with Olympics); Local TV was down -1.0% (up +6.9% with political revenues). In the fourth quarter, cable networks saw their first-ever year-over-year decline in advertising revenues following a slow-down that started in the second quarter and caused by soft pricing and lower unit volumes. To be fair, television companies had to face high comps in 2014, due a surprisingly – perhaps abnormally – good revenue performance in 2013.

Digital advertising continued to grow mid-teens (+15% to $49bn), $6bn more than in 2013, and reaching critical mass with a 30% market share. Within digital formats, social (+57%) and video (+39%) are growing rapidly. In terms of platforms, mobile advertising revenues generated by impressions on smartphones and tablets grew by +74% to reach nearly 25% of total digital advertising, while desktop/laptop impressions grew by a mere +4%.

2014 showed an unusual pattern in terms of quarterly dynamic. Advertising was up +2.5% in the first half despite the mini-recession that hit the US in 1Q; revenues were almost flat in the second half despite a very significant improvement in the economic environment (GDP growing

2

by nearly 4%). This goes against the traditional pattern of an advertising market accelerating when the economy improves and even amplifying economic growth rates. This disconnect between advertising spending and the economic cycle suggests that the market is affected by an intrinsic deflationary mechanism that is mostly uncoupled from the economic environment. The ‘digital deflation’ (term that we use to encapsulate that systemic phenomenon), is partly caused by the ever-increasing supply of digital media impressions and the advent of new buying mechanisms, but most significantly by the deflationary pressure that the digital shift creates on all other traditional media vendors and media categories too, leading to low cost-per-thousand increases across the board. When one dollar shifts from traditional media to digital media, it is no longer one dollar but somewhat less, due the efficiency gains provided by digital formats and data-based.

Until recently, television seemed to be mostly immune from that effect, but we analyze the dramatic slowdown of 2014 as the sign that the television appeal and pricing power has somewhat deteriorated. Lower-than-usual inflation and ratings declines in the mid-single digits have combined to explain the stagnation of television in 2014. As to why television revenues would start to be affected by the rise of digital media in 2014, we suspect print and radio budgets have reached a low point where they are simply not big enough to fuel the digital effort, so television must contribute. Finally, some large spending categories (CPG, Personal Care, Pharmaceuticals, Food) that have been traditionally TV-centric and slow to embrace digital formats beyond display, have finally stepped up their investment in 2014, and that will accelerate in 2015. Other, more digitally-mature categories like automotive or finance have also accelerated their shift to digital in 2014 and broaden their use of digital formats.

Says Vincent Letang, EVP, Director of Global Forecasting and author of the report: “Because of its unique advantages (reach, immediacy, social impact), television will remain central to the marketing strategy of most brands in a foreseeable future, but traditional media budgets will come under increasing pressure because of the diversification of tactics and the opportunities created by digital formats and ‘big data’ ”.

2015: Acceleration Still on the Cards (+4.1%) For 2015, we anticipate that the continued improvement of the economic environment and the faster-than-expected decline in unemployment will finally improve retail sales, business confidence and marketing expenditure. We therefore expect US media suppliers’ advertising revenues to accelerate by +4.1% to $168 billion excluding P&O, compared to +1.6% in 2014.

In the absence of P&O events in 2015 the non-adjusted growth will stand at +2.7%. This is in line with our December forecasts but less than we would be predicting, with the current macro-economic outlook, based on a long-term statistical model (+3.2%). Again this is because of this new inertia of advertising spending to economic signals and the deflationary pressure observed in 2014 have changed the market and will continue to be exerted on digital and traditional media in the mid-term.

Television broadcasters’ advertising revenues will stabilize (+0.3% excluding P&O, -2.9% including P&O) while digital ad sales will accelerate further (+19%).

In our long term scenario, digital media will reach the same level of advertising investments as television by 2016 when both categories reach $68 billion (a 38% market share for each). Digital media will become the clear market leader from 2017.

February 2014

3

Fig. 1: Key Forecasts (2014-2015)

2014 ($bn) With P&O Ex P&O

Core Media (ex. DM) 163.6 161.2

yoy change 3.0% 1.6%

previous forecast (Aug'14) 5.1% 3.5%

2015 ($bn) With P&O Ex P&O

Core Media (ex. DM) 168.0 167.8

yoy change 2.7% 4.1%

previous forecast (Aug'14) 3.3% 4.9% Note: The previous full US model was published in August 2014. The top line forecasts was last updated in December 2014 (in our Global Forecasts)

Fig. 2: Forecasts by Media Category (2014-2015)

2013 2014 Prev. (Aug.'14) 2015 Prev.

(Aug.'14)

Total TV (incl. P&O) -0.6% 3.0% 6.1% -2.9% -0.9% Total TV (excl. P&O) 4.4% -0.4% 2.2% 0.3% 2.9% Digital Media 17.0% 15.4% 17.4% 19.1% 15.7% of which Mobile 110.2% 74.0% 63.7% 52.6% 51.1% of which Desktop 7.5% 3.8% 8.2% 7.9% 5.0% Newspapers -7.8% -10.7% -8.9% -11.2% -6.2% Magazines -5.1% -11.4% -10.9% -9.6% -9.4% Radio -1.2% -3.3% -3.0% -2.0% 0.5% OOH 4.3% 1.5% 1.7% 0.9% 3.4% Total Core Media (incl. P&O) 2.4% 3.0% 5.1% 2.7% 3.3% Total Core Media (excl. P&O) 4.5% 1.6% 3.5% 4.1% 4.9% Directories -23.9% -24.0% -26.9% -26.2% -28.0% Direct Mail 0.8% 2.8% 2.5% -3.1% -3.2% Grand Total Incl. DM 1.6% 2.5% 4.2% 1.7% 2.2% Traditional Media (Core, excl. P&O) 0.5% -3.4% -2.5%

Fig. 3: Long Term Forecasts (2002-2019)

4

About MAGNA GLOBAL Advertising Research For more than 60 years, MAGNA GLOBAL forecasts have been the industry’s leading source for measuring and forecasting advertising revenues. MAGNA GLOBAL forecasts media owners’ advertising revenues in the US and around the world through financial analyses of media companies’ public filings, government reports, trade association data and local market expertise. MAGNA GLOBAL’s new methodology was introduced to the industry in 2009 and has redefined measurement for the advertising-supported media economy, delivering unparalleled authority and accuracy.

Our Global Media Suppliers Advertising Revenue Forecasts include television (pay and free), internet (search, display, video, mobile), newspapers, magazines, radio, cinema and out-of-home (traditional and digital). Our report monitors media suppliers’ revenues in 73 markets, including all major countries, representing 95% of the world’s economy. Our forecasts are updated twice a year and available to our subscribers. Our US Advertising Revenue Forecast study includes detailed data for more than 40 categories of media on a quarterly basis from 1990 to 2015 and on an annual basis from 1980 to 2019, updated quarterly.

Please contact vincent.letang@magnaglobal.com for further details.

About MAGNA GLOBAL MAGNA GLOBAL is the strategic global media unit of IPG Mediabrands, comprised of two key divisions. MAGNA GLOBAL Investment harnesses the aggregate power of all IPG media investments to create power and leverage in the market, drive savings and efficiencies, and ultimately make smarter, more effective media investments on behalf of our clients. With a stated goal of reaching 50% automated buying by 2016, the team in North America invests across digital, programmatic, broadcast and all traditional media platforms and is therefore considered the most comprehensive buying and negotiating unit in the media industry. The architects of the MAGNA Consortium – a powerful committee of executives from A&E Networks, AOL, Cablevision, Clear Channel Media and Entertainment, ESPN and Tribune – MAGNA North America is also dedicated to shaping industry automation and audience specific buying. MAGNA GLOBAL Intelligence has set the industry standard for more than 60 years by predicting the future of media value. MAGNA GLOBAL Intelligence produces more than 40 annual reports on audience trends, media spend and market demand, and ad effectiveness.

MAGNA GLOBAL has offices in 24 countries around the world. For more information, please visit www.magnaglobal.com or follow us @MAGNAGLOBAL.

About IPG Mediabrands We were founded by Interpublic Group (NYSE: IPG) in 2007 to manage all of its global media related assets. Today that means we manage and invest $37 billion in global media on behalf of

5

our clients, employ over 7,500 diverse and daring marketing communication specialists worldwide and operate our company businesses in more than 130 countries.

A proven entity in helping clients maximize business results through integrated, intelligence-driven marketing strategies, IPG Mediabrands is committed to driving automated buying, pay-for-performance and digital innovation solutions through its network of media agencies including UM,Initiative, BPN, Orion Holdings, and ID Media. Its roster of specialty service agencies including MAGNA GLOBAL, Ansible, Mediabrands Audience Platform, Mediabrands Publishing, IPG Media Lab,Ensemble, and Identity offer technologies and industry moving partnerships that are recognized for delivering unprecedented bottom line results for clients.