May 2001

Business Information Markets

Presentation by Presentation by

Kenneth B. MarlinKenneth B. Marlin

Managing DirectorManaging Director

Presentation to

National Online 2001

2

Where are we?

What happened?

Where are we headed?

What to do to take advantage?

Business Information Business Information MarketsMarkets

3

Where are we?Where are we?

Over the past 12 months many content-oriented firms Over the past 12 months many content-oriented firms have seen significant decreases in market value.have seen significant decreases in market value.

At least 500 Public Companies have seen 90% plus declines in Market ValueAt least 500 Public Companies have seen 90% plus declines in Market Value

Source: Bridge

Bright Station Comtex C-Net Dr Koop Edgar Online Hoover’s Infonautics iVillage

-89%

-77%

-71%

-94%

-57%

-88%

-84%

-90%

Market Watch .com NBCi NewsEdge Screaming Media Terra Lycos Verticle Net WAVO Yahoo

-91%

-92%

-72%

-83%

-87%

-96%

-99%

-89%

4

CBS – Market Watch

Conde Nast

Disney – Go.com

Dow Jones – Interactive

Forbes.com

Hearst – Woman.com

NY Times – Digital

Primedia - Intertec

Traditional Content Companies have not Traditional Content Companies have not been immune to Cutbacks and Layoffsbeen immune to Cutbacks and Layoffs

5

B2C

B2B

Subscriptions

Advertising

CPMs

Metrics

Business Models are in QuestionBusiness Models are in Question::

6

Venture EquityBanksJunk Bonds

Money seems to have dried upMoney seems to have dried up

300+ Dot Coms have Shut Down in 4 months

7

What HappenedWhat Happened??

Business InformationBusiness Information

8

Merchant Bank Founded in 1981 – – 20 years

Solely Dedicated to Information Media and Communications

Largest Firm in the Field – – 125 People – New York & London

Two Primary Functions

– M & A Advisory

– Private Equity Investing ($1 Billion LBO Fund)

Veronis Suhler & AssociatesVeronis Suhler & Associates

9

Unique Combination of SkillsUnique Combination of Skills

PAST OWNERS & SENIOR EXECUTIVES OF MAJOR COMMUNICATIONS COMPANIES

MEDIA-EXPERIENCED INVESTMENT BANKING AND LENDING PROFESSIONALS

CBSPublishing Group

JAMES D. WOLFENSOHN EXXON VENTURE CAPITAL

DRESDNER KLEINWORT WASSERSTEIN

JP MORGAN CHASE & COMPANY

10

2000 Business Info. Expenditures ($ Millions) $44,200

Growth Rate in 2000 7.3%

1995 – 2000 Compound Annual Growth (%) 7.6%

Annual Increase in Spending ($ Millions) $3,000

Operating Cash Flow Margins 28%

Business Information Industry is still HealthyBusiness Information Industry is still Healthy

Source: Veronis Suhler, The Publishing & Media Group

11

Accounting Profit must equal Cash Profit over the long term

Real Cash Profit = Cash in (Revenue) – Cash out (Costs)

Revenue = Price x Quantity

Price must be rational

– TV = $17 CPM

– Outdoor = $2 CPM

– Banner = $30 CPM

Quantity must be Rational

– How big is the Pie?

– What is the Value Proposition?

Value = Present Value of Expected Future Cash

What Happened – What Happened – Some Dot Coms Forgot the BasicsSome Dot Coms Forgot the Basics

12

What Happened? – Bad Assumptions!What Happened? – Bad Assumptions!

– People don’t WANT to change – they need a good reason

Adoption of New Technology takes time

Brand building takes a lot of time (and money)

Customers’ Willingness to pay cash is based on a Value proposition

First Mover is not a Barrier to entry and may be disadvantage

Competitors will react – even old media ones– Success invites new participants

Valuations based on metrics other than expected future cash flow are not real

90% is Not Good Enough

13

• Veronis Suhler expects little growth during first half 2001 as energy prices and inventories remain high, consumer confidence remains low

• VS&A expects the US Economy to pick up by 3rd Quarter as interest rate cuts kick in, energy prices stabilize, inventories balance, and consumer confidence returns

• VS&A expects Nominal GDP and Real GDP to drop to 4.7% and 2.9% (CAGR), respectively.

Veronis Suhler Communications Industry Forecast, 2001 - (Pre Publication)

Bureau of Economic Analysis, March 2001

0.0%

2.0%

4.0%

6.0%

8.0%

1995 96 97 98 99 '00 '01 '02 '03 '04 2005

Nominal GDP Real GDP

Forecast

Economic Environment has contributedEconomic Environment has contributed

14

Where Are We HeadedWhere Are We Headed??

Business InformationBusiness Information

15

Over the next five years, VS&A expects Rate of Growth for Over the next five years, VS&A expects Rate of Growth for Business Information Services Spending to slow to 6.9%Business Information Services Spending to slow to 6.9%

$0.0

$30.0

$60.0

$80.0

$50.0

$40.0

$20.0

$10.0

1996 1997 2001 2002 2003 2004 20051998 1999 2000

Veronis Suhler Communications Industry Forecast, 2001, (Pre Publication)

From 1996 to 2000 BIS Spending increased at a 7.6% CAGR

$ BillionsForecast

16

Year Spending Nominal GDP

1996 8.4 5.61997 7.5 6.21998 7.1 5.51999 7.7 5.72000 7.3 7.12001 7.1 4.52002 7.0 5.72003 7.0 5.52004 6.9 5.22005 6.8 5.0

Business Information Services Spending Should Business Information Services Spending Should Continue to Exceed Nominal GDP Growth Continue to Exceed Nominal GDP Growth

Business Information

Services

Source: Veronis Suhler, The Publishing & Media Group

17

By 2005, Total BIS Market Should Exceed $60 BillionBy 2005, Total BIS Market Should Exceed $60 BillionMarketing and Financial Information Will Continue to LeadMarketing and Financial Information Will Continue to Lead

10.011.0

3.5 3.61.9

2.8

14.9 14.9

4.7 4.8

2.53.8

20.421.5

6.17.1

3.5

5.6

$0

$5

$10

$15

$20

$25

Marketing Economic &Financial

Credit Payroll & H.R. Product &Price

GeneralBusiness

1995 2000 2005

Veronis Suhler Communications Industry Forecast, 2001 (Pre Publication)

MarketingEconomic & FinancialCreditPayroll & Human ResourcesProduct & PriceGeneral Business

1995-2000 CAGR7.9%8.1%6.3%6.8%6.0%8.3%

2000-2005 CAGR8.2%7.6%6.2%8.5%7.0%8.2%

18

Bertelsmann McGraw Hill

Bloomberg Pearson

Dun & Bradstreet Primedia

Dow Jones Reed Elsevier

Gartner Reuters

Hoover’s Thomson

Hearst VNU

““e”-Content Continues To Be Integrated by e”-Content Continues To Be Integrated by Traditional Business Information FirmsTraditional Business Information Firms

Reed Elsevier reported $650 mm in “Internet” delivered Revenue in 2000up from $180 mm

Subscription Models RuleSubscription Models Rule

19

$6 Billion forecast to be spent in 2001

– $4.6 Billion in 1999

– $7.7 Billion spent in 2000

Long term trend is up

On-Line Advertising Is Not Dead, On-Line Advertising Is Not Dead, but it is concentratingbut it is concentrating

All sites are not created equal

– AOL gets 45% of on-line Ad revenue

– Top 9 Publishers get nearly 84% of Revenue

Depth, and Demographics count

Measured Effectiveness is required

20

Careful Strategic Business Plan

– Rational Revenue Model

– Clear Competitive Advantage

– Close Control of Costs

Reasonable Path to Profit – – near team milestones

Sane Valuations based on revenue and cash flow

Non-Strategic (Financial) Investment is Non-Strategic (Financial) Investment is Available But Investors are demandingAvailable But Investors are demanding

21

Forget What Your theoretical Value “Was”

– Market is much closer to Rational Now

– A very few firms over-corrected

– Some will fall farther

Real Cash Profit counts

– Everybody says they are going to be profitable in six months

Deals are moving slowly – – Six Months +– Be proactive – – Right now, mergers often are easier than cash sales

Last Minute Advice For Those Looking For Last Minute Advice For Those Looking For MoneyMoney

22

Questions & AnswersQuestions & Answers

Kenneth B. MarlinKenneth B. Marlin

Veronis Suhler & AssociatesVeronis Suhler & Associates 350 Park Avenue350 Park Avenue

New York, NY 10022New York, NY 10022 marlink@veronissuhler.commarlink@veronissuhler.com

Business InformationBusiness Information