1. November 2006 Prepared by Atlantic Media Company 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends

2. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 2 Survey Highlights Most leading ad executives expect a significant portion of broadcast and cable TV ad dollars to shift to online video by 2010, with 33 percent of respondents predicting that switch will be between 10 and 19 percent. In addition, 2007 budgets for online advertising are expected to rise by an average of 42 percent over 2006. As to the challenge of integrating traditional with online media, broadcast TV is seen as offering the “most innovative” integration with online media, while magazines are seen as “most effective” for driving consumers online. Ad industry leaders utilize a range of online ad targeting, but over half find behavioral targeting to be among the “most effective” methodology. Search was deemed the “most effective” new media option and, not surprisingly, is expected to take the greatest share of the 2007 media budget. Industry leaders feel strongly (71 percent) that the online medium is “very effective” or “most effective” for direct response advertising, but note that there is difficulty reaching key demographics, particularly older audiences, online. Industry leaders rated Dove, Burger King, Volkswagen, Honda and Nike as the most successful recent integrated advertising campaigns. Nearly 63 percent of those surveyed perceive the demands of the advertising industry to be “higher” or “much higher” than those of other industries. In sharp contrast to findings of the past two years, leaders predict strong growth and recovery for careers in advertising, with overall career appeal cited as the healthiest category. The majority of industry leaders cite mentorship as important to their personal career success and a record 42 percent “always” mentor young professionals, a 68 percent increase over last year. The top campaigns of the year were (in order) Apple Mac and Geico (two-way tie); Dove; Budweiser, Target, Mini Cooper (three-way tie); Apple iPod; and Aflac Insurance. Top brands are (in order) Coca-Cola, Nike, Apple, Starbucks and McDonald’s. The most respected industry leader was David Ogilvy, followed by Bill Bernbach and Lee Clow. The most important factor in achieving success in the industry is “dedication.”

3. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 3 Respondent Profile Advertising Industry Sector (n=168) Years Worked in Advertising Industry (n=168) One hundred and sixty eight leaders from across all sectors of the advertising industry responded to the survey; over 58% have worked in advertising for 16+ years. Consultants Public Relations Trade Associations

4. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 4 Anticipated Shift of TV Advertising Dollars to Online Video A significant share of TV advertising dollars is expected to shift to online video by 2010; as online video advertising grows increasingly sophisticated, advertising leaders anticipate an even more dramatic shift in the future. Percent of current spending on traditional broadcast and cable TV ads expected to shift to online video by 2010 (% responding) “When online advertising figures out how to target a market with upscale, high quality advertising, it will gain a larger share with younger audiences. When it creates info-ads that demand viewer involvement, its share of advertising will increase.” - Academic “For clients to be willing to shift advertising dollars, they expect to see the ROI based on impressions, which should be able to be tracked better with new online tracking technology.” - Agency Exec “The determining factor will be the sheer volume of online opportunities. Will there be a handful of sites that rise above the fray or will there be so many sites to chose from that the media dollars can't possibly cover enough bases to be effective?” - Agency Exec Determining Factors

5. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 5 Online Advertising Comprises a Growing Portion of Media Budgets The percentage of media budgets allocated to online advertising is expected to rise by 42% in 2007 to an average of 23.2%. “Audience shift, duh!” - Association “New online web options such as lead generation programs are offering great new innovative approaches for new clients and we are increasing our ad spending with the continually changing Search Engine Keywords and AdWords options.” - Agency Exec “The ROI we generate for our clients is the highest with online media. We can demonstrate the lowest cost per lead and the highest return on investment. Clients gravitate to the medium that is most measurable.” - Agency Exec “The consumer market is only at the beginning of acquiring the new technologies for this marketing. When Apple’s iPod becomes a video- capable telephone, then the moment will have arrived.” - Agency Exec Drivers of Online Spending Percentage of media budget allocated (or anticipated allocation) to online advertising (average of all responses)

6. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 6 Targeting a Wide Range of Audiences Online Older demographics were repeatedly cited as the hardest for advertisers to reach online. Gender Neutral: 13-18 18-24 18-34 18-49 19-25 19-35 21-24 25-35 25-32 25-34 25-55 50+ 55+ What are your top target audiences for online advertising? (Write In Responses) Other: Ad Agencies Auto B2B Professionals Caregivers Educational/faculty Homebuyers Media Buyers Music Fans New Business Parents Men: 13-24 18-45 18-54 18-24 18-35 18-49 15-49 25-54 40-50 45-64 Women: 13-24 18-49 18-54 25-54 25-40 25-45 45-54 52-54 55-64 Real Estate Recent College Grads Retail Retirees/Seniors Shoppers Small Business Students Trade Upscale Young adults Youth What are the hardest audiences to reach online? “Older audiences not familiar with technology” - Media Exec “Women 25-54” - Agency Exec “Retirees” - Agency Exec

7. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 7 Volatility In Allocation of Media Budgets At best, TV can still command an average of 50% of media budgets, but allocations could fall as low as 29% on average; meanwhile, online advertising could see as much as a 24% share. Greatest and smallest anticipated allocation of media budget to each medium in 2007 (average of all responses)

8. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 8 Assessing Options for Online Ad Targeting Ad industry leaders utilize a range of online ad targeting methodologies, but over half find behavioral targeting to be among the most effective. Most effective online ad targeting methodologies (% responding) “The Internet is an information source. The ability to place ads within a relevant informational context is potentially very valuable.” - Industry Exec “If you have all those tools and parameters available it's great. Availability the key....” - Association Reactions to Targeting Possibilities

9. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 9 What Is Online Advertising Good For? Industry leaders feel strongly (71%) that the online medium is “very effective” or “most effective” for direct response advertising; while online is considered a less effective medium for brand advertising, executives still overwhelmingly feel that it is at least “somewhat” effective. Effectiveness of the online medium for brand advertising and direct response advertising (% responding) “Online advertising provides nearly instantaneous metrics, which has led most of us to view online as a direct response medium. We know that online ads also have solid brand building power, but this is often overshadowed by TV and other media that promote brand building power because they can't claim more measurable results.” - Agency Exec “Online is great for Direct Response advertising because we can use lead generation programs to target our specific audience and get a great return with very specific contact details of those seeking our specific products and services.” - Agency Exec Reacting to Online Effectiveness

10. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 10 Experimenting With New Online Media “The adoption rate for some of these new avenues is surprising fast. We are continually amazed at how quickly they catch on, especially with younger consumers.” - Agency Exec Thoughts on New Media Percentage of media budget planned to allocate in 2007 (average percentages) Effectiveness of medium (average percentages) Industry leaders are starting to experiment with new media like blogs and podcasts, but search advertising still dominates.

11. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 11 Media Integration Efforts Connect New and Old Media As to the challenge of integrating traditional with online media, broadcast TV is seen as offering the “most innovative” integration with online media, while magazines are seen as “most effective” for driving consumers online. “Greatest Growth Potential: Online Media. Lag Behind: Newspapers” - Agency Exec “The greatest potential growth lies in the integration of TV broadcast with Internet promotions and activities…Radio stands to be the media with the most challenges.” - Academic “Out of home has the most potential because it is so dynamic. New uses and opportunities are being discovered daily. Newspapers will lag behind most because of the downward trend of readership.” - Academic Out of Home has the greatest potential, with magazines lagging behind. - Media Exec Integrating online and other media (% responding) Direct marketing Telephone book Jingles Greatest/Least Potential for Significant Growth Direct mail

12. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 12 What Were The Most Successful Recent Integrated Campaigns? Select Responses to an open-ended question. Saturn Acura American Airlines Yahoo Wendy's IKEA Altoids Apple Citi ID theft 1. Dove 2. Burger King 3. Volkswagen 4. Honda 5. Nike Top 5 Campaigns Cadillac Brawny Paper Towels Tower Records Monster.com Careerbuilder Mini Cooper Wal-Mart Nissan Sentra Additional Responses

13. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 13 Getting a Hold on The Challenges of New Media Industry leaders are open to a number of different ways to get up the curve on new media; a majority of respondents (56.8%) thought case studies would be helpful learning resources. Clients Focus groups of online users Industry samples Useful tools in advancing your work in new media (% responding)

14. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 14 Strong Growth and Recovery Seen For Careers in Advertising After two years of cautious assessments of career opportunities in advertising, industry leaders showed a more optimistic perspective in 2006; metrics in all three categories rebounded substantially from last year. Health of the advertising industry in… (scored on a five-point scale, 1 = facing indefinite decline and 5 = showing signs of strong grow)

15. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 15 What are the Strengths and Weaknesses of the Advertising Industry? Selected responses to an open-ended question. “Strengths: Good quality creative, humor and information blended together. Weakness: The ‘chew ‘em up, spit ‘em out’ mentality that agencies have. People work one place 1-2 years as a maximum.” - Media Exec “Strengths: Still offers excitement, responsibility (and fun) faster than other businesses. Weakness: Instability, insane account and personnel turnover, decimation of middle aged exec ranks which has sent a terrible message to young up and comers.” - Consultant “Strengths are in the wide ranging opportunities replacing traditional media and message development. A weakness is that the industry is slow in making the transition to new media.” - Academic “Strengths: Creativity, fun, "glamour." Weaknesses: Instability, competitiveness, managing/keeping up with the changing media landscape.” - Association “I think the opportunity for creative and innovative work are still the strengths that draw interested people to the field. A weakness could be a lot of the negative press toward the advertising career field over the past five years or so.” - Academic “The clients will take control of creating their brand and communication strategies in order to control integration consistency. There will be no more advertising generalists. People must become specialists and act as a much larger team. A new kind of leadership will require far more collaboration.” - Consultant “Younger employees are encouraged by the success of smaller "upstart" agencies. On the other end of the scale, the giant agencies are viewed as dinosaurs and the mega holding company business model appears to be broken forever. I believe the growth in our industry will be with smaller, more creative and entrepreneurial independent shops.” - Agency Exec Direction of the Industry

16. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 16 Industry Leaders Feel The Benefits of Past Mentorship… Over 85% of industry leaders said that being mentored was at least “important” in their own personal career success (compared to 81% in 2005); significantly, no one who was mentored felt that the experience “was not very important.” Importance of mentorship to personal career success (% responding) “As a mentoree, it was important having someone pay attention to me (take me under their wing) when I was on my very first job out of college. I was so naive, so nervous, so intimidated by the more mature, more experienced employees. Without that mentor, who helped get me connected with the right people and kept telling me what a great talent I was, I think I might never have gone anywhere in the business.” - Ad Club Executive Director “I am still friends with the man that got me started in the industry. He is responsible for my success today.” - Media Exec “When I first started in the business I received a lot of encouragement from an agency founder. This helped me set my sights high and realize that I had the potential to achieve whatever I was willing to work toward.” - Agency Exec On Mentoring Experiences

17. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 17 … And Return the Favor By Guiding Today’s Industry Newcomers Today’s industry leaders work to pass on their own knowledge as a record 42.1% “always” mentor young professionals, a 68% increase over last year; additionally, zero respondents “never” mentor others. Do you mentor young professionals? (% responding)

18. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 18 The Continued Strain Of A Demanding Industry Industry leaders struggle to balance their professional and personal lives; 62.6% felt that the demands of the advertising industry are “higher” or “much higher” than those of other industries. Conflicts between personal life and career, in comparison to other industries (% responding)

19. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 19 No Shortage of Important Attributes For Success “Remaining a student of the industry. Always seeking to know more than anyone else except the best of the functional experts.” - Consultant “Consistently learning more and staying with or ahead of the curve. Being proactive rather than reactive in looking ahead and forecasting/predicting what's to come.” - Media Exec “Relationship building, integrity and a desire to help someone solve business challenges.” - Association “Being associated with talented people. Willingness to take suggestions. Plan your work. Work your plan.” - Media Exec Attributes for success in the ad industry (five-point scale, with 1 being not important at all and 5 being extremely important) What Has Defined Your Success? Talent Ability to listen Team player Critical thinking Passion

20. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 20 And the Winners Are… 1.Apple Mac and Geico (two-way tie) 2.Dove 3.Budweiser, Target, MiniCooper (three- way tie) 4.Apple iPod 5.AFLAC Insurance Most Successful Campaigns, 2005-2006 (Top responses, open-ended questions) 1.Apple iPod 2.Burger King 3.Target 4.MiniCooper 5.Hewlett-Packard, UPS and Verizon (three-way tie) 2005’s Top 5 “It’s the ROI.” - Multiple Respondents “They enriched the brand experience in ways that helped create tighter bonds with their customers and make the brands more appealing and "human" to prospects.” - Agency Exec “Memorable, creative – they brand without becoming overexposed in our mindsets.” - Media Exec “Creatively/aesthetically appealing; strategically sound; connection between strategy and creative; clear on target audience.” - Academic Defining “Success”

21. Source: 2006 AAF Survey of Industry Leaders on Advertising Industry and New Media Trends 21 The Best of Advertising’s Best Most Admired Brands, 2005-2006 (Top responses, open-ended questions) 1.Coca-Cola 2.Nike 3.Apple 4.Starbucks 5.McDonalds 1.Coca-Cola 2.Apple 3.Nike 4.Google 5.FedEx and BMW 2005’s Top 5 Dr. Arnold Barban David Bell (2) Alex Bogusky Bill Burnbach (3) Leo Burnett Lee Clow (3) Donny Deutsch (2) Fay Ferguson Craig Fuller Jeff Goodby Howard Gossage Mike Guarini Rupert Murdoch David Ogilvy (6) Crispen Porter team Keith Reinhard Janet Robinson Saatchi and Saatchi Siverstein/Goodby (2) Wally Snyder (2) Jim Stengel David Verklin Jack Welch (2) Will Wieden Most Industry Leaders (Responses, open-ended questions)