By S AATCHI & S AATCHI & TEAM ONE September 13, 2006 Establishing LDA in China

China – Basic geographic information

3 Source : China Statistics Yearbook, Nielsen, SAIC China – Geographic overview by income level Hubei Hunan Guangxi Sichuan Yunnan Tibet Hainan Xinjiang Uygur Shaanxi Anhui Gansu Shandong Jiangsu Zhejiang Fujian Guangdong Beijing Tianjin Shanghai Upper : Rmb Above Average : Rmb Lower : < Rmb 6500 Medium : Rmb Disposable Income Inner Mongolia Shaanxi Jilin Heilongjiang Anhui Jiangxi Henan Shanxi Qinghai Guizhou Gansu Hebei Liaoning Chongqing

4 Source : China Statistics Yearbook, Nielsen, SAIC Tier 1 markets Shandong Jiangsu Zhejiang Fujian Guangdong Beijing Tianjin Shanghai Tier 1 56% of Adspend 30% of Population

5 Source : China Statistics Yearbook, Nielsen, SAIC Hubei Hunan Guangxi Sichuan Yunnan Tibet Hainan Xinjiang Uygur Hebei Liaoning Chongqing Tier 2 22% of Adspend 37% of Population Tier 2 markets

6 Source : China Statistics Yearbook, Nielsen, SAIC Shaanxi Anhui Gansu Inner Mongolia Shaanxi Jilin Heilongjiang Anhui Jiangxi Henan Shanxi Qinghai Guizhou Gansu Tier 3 21% of Adspend 33% of Population Tier 3 markets

Media environment in China

8 MediumNationalProvincialCity/CountyTotal Newspaper 2,137 Magazine 9, (31) (1,636) (1,668 stations) 367 TV (31)(1,663) (1,696 stations) 304 Radio Internet 595,550 Registered Domain Names 595,550 Outdoor Millions …. billboards, buses, illuminated signs, MTR, bus shelters Millions Media overview in China

9 TV categories in China National network (CCTV) Provincial cable stations Provincial stations Local city stations National coverage Provincial coverage Local city coverage

10 Media Coverage 93% TV Local TV Provincial TVNational Provincial Sat. Foreign Sat. CCTV Provincial Terrestrial CCTV-1 CCTV-2 CCTV-3 CCTV-4 CCTV-5 CCTV-6 CCTV-7 CCTV-8 CCTV-9 CCTV-10 CCTV-11 CCTV-12 CCTV-13 CCTV-14 Coverage 70%+ Coverage less than 70% KEY FACTS 1. 1,668 TV stations among 31 provinces in total. 2.Except for the 27 approved foreign channels, all owned by the government. 3. Foreign National Satellite TV include ESPN, BBC World, HBO, Phoenix Movie, etc. They are all charged by government. TV - Overview

Three kinds of provincial TV channels:  Satellite, Terrestrial, Cable Provincial Satellite:  The signal covers the whole country, but it depends on whether local cable operators broadcast it  Viewership is usually low outside home province Provincial Terrestrial:  Usually covers most area of a province. But the penetration varies from channels to channels. Provincial Cable:  Penetration is usually low outside the capital cities. Provincial TV

12 2 ways of distribution: terrestrial Vs. cable All households can receive the terrestrial channels. For cable channels, subscription is required. In major cities, cable subscription rates are high (more than 90% in the urban are of 3 primary markets) Local TV

13 77% Local Coverage National Coverage KEY FACTS: 2,150 registered titles Can also be classified into national, provincial, and city-level Local papers are still dominant Launch of regular supplement (e.g. automobile) or weekend edition All titles’ circulation are un-audited and their claimed circulations are grossly inflated Newspaper Media Coverage Newspaper- Overview

14 Magazine- Overview 48% Media Coverage KEY FACTS: 1. 9,029 registered titles skewed to key urban areas 2. Many “new” titles are launched by using an existing registered numbers 3. Over the past years, many new titles on computer, commercial, leisure were launched 4. Foreign publishers rush in to gain share in this market by investing in existing local titles e.g. Fortune China, Globe, etc. 5. More flexible in execution method 6. Similar to newspaper, nearly all titles are un- audited and their claimed circulations are grossly inflated

15 KEY FACTS: Local governments influence is large Increasing used by international/JV advertisers, e.g. Shanghai GM, Nokia, Coke Good locations are always high in demand and premiums are often levied on sites Regulations vary by city Very limited research data Outdoor Individual siteOutdoor network owned and managed by professional company which can cover a certain area e.g. MTR, bus shelters, bus body, etc. owned and managed by individual vendor. e.g. Unipole, neon sign, etc. Outdoor - Overview 92% Media Coverage

Lexus in China – Dealer Locations

Lexus Dealer Locations – Present (as of August 2006)

Lexus Dealer Locations – Phase 3 (within 2007)

19 Consideration points for building LDA in China Designated marketing areas (DMA):Allocations Future plan Advertising revenue:Cost structure of MSRP Matching fund from TMCI Cost allocations for DMA Operation:Operation structure Responsibilities Financial management Procedures Media/production planning Others:Future plan for CPO

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