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Advertisers: What is most important to you?

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Presentation on theme: "Advertisers: What is most important to you?"— Presentation transcript:

0 Marci L. Ryvicker, CPA, CFA
Ignite! OAAA/TAB National Convention & Trade Show Marci L. Ryvicker, CPA, CFA Los Angeles, California May 2013 All estimates/forecasts are as of May 15, 2013, unless otherwise stated. Please see page 30 for rating definitions, important disclosures and required analyst certifications. Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report and investors should consider this report as only a single factor in making their investment decision.

1 Advertisers: What is most important to you?
REACH OF TARGET AUDIENCE EASE OF USE MEASUREMENT CONSISTENCY RETURN ON INVESTMENT Source: Wells Fargo Securities, LLC 1 1

2 How Does Out of Home Stack Up?
Source: Wells Fargo Securities, LLC 2 2

3 Wells Fargo Analyst Survey
We surveyed all 60 Wells Fargo equity analysts and asked them ONE question: DO YOU ANTICIPATE YOUR SECTOR(S) TO: INCREASE, DECREASE, or MAINTAIN AD SPEND OVER THE NEXT 12 MONTHS? Source: Wells Fargo Securities, LLC 3 3

4 Wells Fargo Analyst Survey: The Results
Rank Category % of Revenue Expected in ‘13 1 Misc. Services & Amusements 18% Increase 2 Media & Advertising 10% 3 Retail 9% 4 Restaurants 8% 5 Public Trans., Hotels & Resorts 7% 6 Financial Same 7 Communications 6% 8 Insurance & Real Estate 5% 9 Government, Politics & Orgs. Decrease 10 Schools, Camps, Seminars 4% Source: OAAA and Wells Fargo Securities, LLC 4 4 4

5 Wells Fargo Analyst Survey: The Results
Increase Stay the Same Decrease Agriculture Machinery None!  Auto Railroads Beverages Tobaccos Food Utilities Software Source: Wells Fargo Securities, LLC 5 5 5

6 The Digital Revolution
“We are changing the world with technology.” --BILL GATES, Co-Founder, Microsoft Source: Thomson Reuters and Wells Fargo Securities, LLC 6 6 6 6

7 WHAT Is Digital? MOBILE INTERACTIVE SEARCH QR CODES VIDEO PRE-ROLLS
POPUPS ONLINE RADIO VIRAL MARKETING BANNER ADS SPAM DIGITAL BILLBOARDS Source: Wells Fargo Securities, LLC 7 7 7 7 7

8 Digital: The Opportunity
100% DIGITAL REVENUES AS A % OF TOTAL REVENUE Digital as a Percent of Total Revenue 14% 12% ~5% ~5% Source: TVB, OAAA, RAB, and Wells Fargo Securities, LLC estimates 8 8 8 8 8 8

9 Digital: The Competition
GROUPON – A possible flash in the pan? Gross margin declined 9 consecutive Qs Trades 66% lower than IPO price S&P up over 30% over same time frame PANDORA – Still tweaking its business model. Just instituted a 40 hour cap At what price?? Source: Company data and Wells Fargo Securities, LLC 9 9 9 9 9 9 9

10 Digital: Your Audience Is Changing
TELEVISION – Time Shifting DVRs are now in 40% of TV homes vs. 20% in ’07 VOD – hundreds of thousands of choices 40+ % of viewers time shift the BEST PT shows NEWSPAPERS – Source Shifting Print circulation is down ~20% since ‘03 But online revenue is UP 150% RADIO – A Shift in the Dashboard TSL to terrestrial radio continues to decline But over 89 million Americans now listen online – more than double from 5 years ago Source: Nielsen, RAB and Wells Fargo Securities, LLC 10 10 10 10 10 10 10 10

11 Digital: Your Audience Is Changing
Facebook is used by: 72% of women and 62% of men 73% of adults year old 57% of year olds Twitter is used by: 15% of women and 17% of men 18% of year olds Pinterest is used by: 25% of women and 5% of men 19% of year olds 19% of year olds Instagram is used by: 16% of women and 10% of men Source: Wells Fargo Securities, LLC 11 11 11 11 11 11 11 11 11

12 Digital: The Bundle THE GOAL: CREATE CUSTOMER STICKINESS
Example: The Cable Triple Play Video High Speed Data Phone THE GOAL: GRAB SHARE OF WALLET Example: Added Home Security to Bundle Source: Wells Fargo Securities, LLC 12 12 12 12 12 12 12 12 12 12

13 The Economy: Advertising Is Cyclical
+10% +8% +6% +6% +5% +3% +1% -1% Year over Year Change -2% -6% -5% -9% -15% -19% Source: The Federal Reserve of St. Louis and Wells Fargo Securities, LLC estimates 13

14 The Economy: Haves v. Have Nots
THE HAVES NOMINAL GDP GROWING 3%-PLUS RETAIL SALES REMAIN UP MSD AUTO – NEW VEHICLE SALES UP BY ANOTHER ~1M, to 15.3M UNITS INTEREST RATES THE KINDA HAVES HOUSING STARTS ARE EXPECTED TO APPROACH 1MM THE HAVE NOTS UNEMPLOYMENT IS EXPECTED TO REMAIN AT ~8% in 2013 Source: The Federal Reserve of St. Louis and Wells Fargo Securities, LLC estimates 14 14

15 The Economy: What To Watch For
UNEMPLOYMENT – Was 9.6%, expected to be 7.6% HOUSING STARTS – Were 600k, expected to be 1MM RETAIL SALES – Were $3.8T, expected to be $4.5T CONSUMER SPENDING – Was $10.2T, expected to be $11.6T GAS PRICES – Was $2.83/gal, expected to be $3.66/gal AUTO SALES – Were 11.6MM, expected to be 15.3MM SMALL BUSINESS OPTIMISIM INDEX – Was 89, expected to be 90+ INTEREST RATES – 30 Yr FRM was 5%, expected to be 3.5% REAL GDP – Was $13.0T, expected to be $13.8T NOMINAL GDP – Was $14.5T, expected to be $16.2T Source: The Federal Reserve of St. Louis and Wells Fargo Securities, LLC estimates 15 15

16 The Economy: SBOI WHAT IS THE SBOI? WHAT ARE THE INDICATORS?
The Small Business Optimism Index (SBOI) is based on ten survey indicators that are seasonally adjusted, analyzed month-to-month and set to an index of 100. WHAT ARE THE INDICATORS? Plans to increase employment? Plans to make capital outlays Plans to increase inventories Expects economy to improve Expects real sales to be higher Expects favorable credit conditions? Current inventory? Current earnings trends? Current job openings? Is now a good time to expand? Source: The Federal Reserve of St. Louis and Wells Fargo Securities, LLC estimates 16 16

17 RADIO REVENUE CORRELATES WELL WITH THE SBOI
The Economy: SBOI vs. Radio RADIO REVENUE CORRELATES WELL WITH THE SBOI Year over Year Change SBOI Index Value Source: The Federal Reserve of St. Louis and Wells Fargo Securities, LLC estimates 17 17

18 BUT OUTDOOR REVENUE CORRELATES EVEN BETTER
The Economy: SBOI vs. Outdoor BUT OUTDOOR REVENUE CORRELATES EVEN BETTER Year over Year Change SBOI Index Value Source: The Federal Reserve of St. Louis and Wells Fargo Securities, LLC estimates 18 18

19 Advertising: Recent Trends
LOCAL ADVERTISING HAS UNDERPERFORMED DUE TO PRINT (NEWSPAPERS/DIRECTORIES) Year over Year Change Source: OAAA, TVB, RAB and Wells Fargo Securities, LLC estimates 19 19

20 ’13E AD REVENUE IS DOWN DUE TO TOUGH POLTICAL COMPS
Advertising: Recent Trends ’13E AD REVENUE IS DOWN DUE TO TOUGH POLTICAL COMPS Year over Year Change Source: OAAA, TVB, RAB and Wells Fargo Securities, LLC estimates 20 20

21 DEBT LEVELS HAVE BEEN CONTINUOUSLY RISING
Advertising: Impact of Balance Sheets DEBT LEVELS HAVE BEEN CONTINUOUSLY RISING Y/Y Growth in Debt Source: The Federal Reserve of St. Louis and Wells Fargo Securities, LLC estimates 21 21

22 The Stock Market: Historical Trends
THE STOCK MARKET HAS STEADILY IMPROVED SINCE ‘09 AND RECENTLY HIT RECORD LEVELS S&P 500 Level Y/Y Growth Source: FactSet and Wells Fargo Securities, LLC 22

23 BOTH TRADITIONAL AND INTERNET STOCKS HAVE PERFORMED WELL AS OF LATE
The Stock Market: Media Trends BOTH TRADITIONAL AND INTERNET STOCKS HAVE PERFORMED WELL AS OF LATE Y/Y Growth *Traditional Media includes: Broadcast TV, Radio and Outdoor Source: FactSet and Wells Fargo Securities, LLC 23

24 THE TV INDUSTRY HAS BEEN ON FIRE
The Stock Market: Television THE TV INDUSTRY HAS BEEN ON FIRE WHY? MASSIVE INDUSTRY CONSOLIDATION USE OF INEXPENSIVE DEBT MULTIPLE EXPANSION ADDITIONAL FREE CASH FLOW YTD Stock Performance Source: FactSet and Wells Fargo Securities, LLC

25 AND OUTDOOR HAS BEEN NO SLOUCH EITHER
The Stock Market: Out of Home AND OUTDOOR HAS BEEN NO SLOUCH EITHER IT IS ALL ABOUT THE REIT CBS HAS OUTPERFORMED BY 1,400BPS LAMR HAS OUTPERFORMED BY 900BPS CCO HAS BEEN IN-LINE YTD Stock Performance Source: FactSet and Wells Fargo Securities, LLC

26 The Stock Market: Valuation
EV/EBITDA Multiple Source: FactSet and Wells Fargo Securities, LLC estimates

27 The Stock Market: What Investors Care About
Sustainability EBITDA margins and growth Expenses Fixed versus variable The REIT Peak to trough cyclicality Capital intensity Digital Penetration Cannibalization Competition Mobile Categories Real estate recovery? Source: Wells Fargo Securities, LLC

28 Our Forecasts: The Economy and Advertising
Source: TVB, CAB, RAB, OAAA, NAA, MPA, and Wells Fargo Securities, LLC estimates 28

29 Wells Fargo Securities, LLC
Questions? Marci Ryvicker, CFA, CPA Wells Fargo Securities, LLC 29

30 Additional Information Available Upon Request
Disclosures Additional Information Available Upon Request I certify that: 1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers discussed; and 2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this research report.  Wells Fargo Securities, LLC maintains a market in the common stock of Lamar Advertising Company, Clear Channel Outdoor Holdings, Inc., CBS Corporation.  Wells Fargo Securities, LLC or its affiliates managed or comanaged a public offering of securities for CBS Corporation within the past 12 months.  Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from CBS Corporation.  Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from CBS Corporation, Clear Channel Outdoor Holdings, Inc. in the past 12 months.  Clear Channel Outdoor Holdings, Inc., CBS Corporation currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided investment banking services to Clear Channel Outdoor Holdings, Inc., CBS Corporation.  CBS Corporation currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided noninvestment banking securities-related services to CBS Corporation.  Wells Fargo Securities, LLC received compensation for products or services other than investment banking services from CBS Corporation in the past 12 months.  Wells Fargo Securities, LLC or its affiliates has a significant financial interest in CBS Corporation, Lamar Advertising Company.  Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from an affiliate of Lamar Advertising Company, Clear Channel Outdoor Holdings, Inc., CBS Corporation.  Wells Fargo Securities, LLC or its affiliates managed or co-managed a public offering of securities for an affiliate of CBS Corporation, Clear Channel Outdoor Holdings, Inc., Lamar Advertising Company within the past 12 months.  Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from an affiliate of Lamar Advertising Company, Clear Channel Outdoor Holdings, Inc., CBS Corporation in the past 12 months. 30 30

31 Disclosures CBS: Risks include a downturn in the economic/advertising environment and/or ratings weakness (radio and TV). CCO: Risks include a high debt load which may become unmanageable during an economic slowdown, and a potential conflict of interest at CCU. LAMR: Risks include a negative REIT outcome (i.e. IRS does not approve it), or significant deceleration in top line growth. Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions. Wells Fargo Securities, LLC’s research analysts receive compensation that is based upon and impacted by the overall profitability and revenue of the firm, which includes, but is not limited to investment banking revenue. STOCK RATING 1=Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the next 12 months. BUY 2=Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market over the next 12 months. HOLD 3=Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12 months. SELL SECTOR RATING O=Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. M=Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. U=Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. VOLATILITY RATING V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the analyst expects significant volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading. As of: 5/15/2013 48% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Outperform. Wells Fargo Securities, LLC has provided investment banking services for 47% of its Equity Research Outperform-rated companies. 49% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Market Perform. Wells Fargo Securities, LLC has provided investment banking services for 37% of its Equity Research Market Perform-rated companies. 3% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Underperform. Wells Fargo Securities, LLC has provided investment banking services for 21% of its Equity Research Underperform-rated companies.

32 Disclosures Important Information for Non-U.S. Recipients
EEA – The securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. For recipients in the EEA, this report is distributed by Wells Fargo Securities International Limited (“WFSIL”). WFSIL is a U.K. incorporated investment firm authorized and regulated by the Financial Services Authority. For the purposes of Section 21 of the UK Financial Services and Markets Act 2000 (“the Act”), the content of this report has been approved by WFSIL a regulated person under the Act. WFSIL does not deal with retail clients as defined in the Markets in Financial Instruments Directive The FSA rules made under the Financial Services and Markets Act 2000 for the protection of retail clients will therefore not apply, nor will the Financial Services Compensation Scheme be available. This report is not intended for, and should not be relied upon by, retail clients. Australia – Wells Fargo Securities, LLC is exempt from the requirements to hold an Australian financial services license in respect of the financial services it provides to wholesale clients in Australia. Wells Fargo Securities, LLC is regulated under U.S. laws which differ from Australian laws. Any offer or documentation provided to Australian recipients by Wells Fargo Securities, LLC in the course of providing the financial services will be prepared in accordance with the laws of the United States and not Australian laws. Hong Kong – This report is issued and distributed in Hong Kong by Wells Fargo Securities Asia Limited (“WFSAL”), a Hong Kong incorporated investment firm licensed and regulated by the Securities and Futures Commission to carry on types 1, 4, 6 and 9 regulated activities (as defined in the Securities and Futures Ordinance, “the SFO”). This report is not intended for, and should not be relied on by, any person other than professional investors (as defined in the SFO). Any securities and related financial instruments described herein are not intended for sale, nor will be sold, to any person other than professional investors (as defined in the SFO). Japan – This report is distributed in Japan by Wells Fargo Securities (Japan) Co., Ltd, registered with the Kanto Local Finance Bureau to conduct broking and dealing of type 1 and type 2 financial instruments and agency or intermediary service for entry into investment advisory or discretionary investment contracts. This report is intended for distribution only to professional investors (Tokutei Toushika) and is not intended for, and should not be relied upon by, ordinary customers (Ippan Toushika). The ratings stated on the document are not provided by rating agencies registered with the Financial Services Agency of Japan (JFSA) but by group companies of JFSA-registered rating agencies. These group companies may include Moody’s Investors Services Inc, Standard & Poor’s Rating Services and/or Fitch Ratings. Any decisions to invest in securities or transactions should be made after reviewing policies and methodologies used for assigning credit ratings and assumptions, significance and limitations of the credit ratings stated on the respective rating agencies’ websites. About Wells Fargo Securities, LLC 32

33 Disclosures Wells Fargo Securities is the trade name for the capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including but not limited to Wells Fargo Securities, LLC, a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of NYSE, FINRA, NFA and SIPC, Wells Fargo Institutional Securities, LLC, a member of FINRA and SIPC, Wells Fargo Prime Services, LLC, a member of FINRA, NFA and SIPC, Wells Fargo Bank, N.A. and Wells Fargo Securities International Limited, authorized and regulated by the Financial Services Authority. Wells Fargo Securities, LLC is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp. This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments named or described in this report. Interested parties are advised to contact the entity with which they deal, or the entity that provided this report to them, if they desire further information. The information in this report has been obtained or derived from sources believed by Wells Fargo Securities, LLC, to be reliable, but Wells Fargo Securities, LLC, does not represent that this information is accurate or complete. Any opinions or estimates contained in this report represent the judgment of Wells Fargo Securities, LLC, at this time, and are subject to change without notice. For the purposes of the U.K. Financial Services Authority's rules, this report constitutes impartial investment research. Each of Wells Fargo Securities, LLC, and Wells Fargo Securities International Limited is a separate legal entity and distinct from affiliated banks. Copyright © 2013 Wells Fargo Securities, LLC. 33


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