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Pivotal Research Group 200 Park Ave., West Mezzanine New York, NY 10166 Important Disclosures Are Located In The Appendix

PIVOTAL

Pivotal Research Group

U.S. Equity Research

Internet / Advertising

Madison & Wall

Mobile Marketing: Still Early Innings For Brands

January 16, 2015

Mobile Marketing: Still Early Innings For Brands

Over the past two years a case could be made that the year for mobile advertising finally arrived. As an increasing share of advertisements running on Facebook, Twitter and Google are executed on mobile devices, it is technically true that mobile advertising is growing rapidly, as each of these companies capture a growing share of digital media budgets. But it seems that relatively little of the spending going to these media owners does so because their customers actually have a marketing strategy that is dependent upon a consumer owning a mobile device or a consumer’s interaction with a brand outside of the home. We think that brands are beginning to put much more serious resources into mobile marketing, especially including the development and promotion of apps. As we discuss below, we continue to see mobile advertising and app-install ads as still in the early innings of a very long game.

Our Updated View on Internet Advertising And Digital Marketing

Stocks

This week we provided updated thoughts on a range of thematic topics impacting each of Facebook, Google, Salesforce.com, Twitter and Yahoo. Facebook remains our favorite name in the sector. Further commentary follows in this week’s Madison & Wall.

Pivotal's US Advertising Universe Comparables

We include here comparable operating and valuation metrics for companies under our coverage.

Pivotal's US Advertising Forecast

We also include our forecast for advertising in the United States, updated as of December 2014.

Brian Wieser, CFA

212-514-4682

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- 2 - Brian Wieser 212-514-4682 Pivotal Research Group

Mobile Marketing: Still Early Innings For Brands

For well over a decade, many pundits and practitioners within the advertising industry would claim that “next year is the year of mobile advertising.” Over the past two years a case could be made that the year for mobile advertising finally arrived. As an increasing share of advertisements running on Facebook, Twitter and Google are executed on mobile devices, it is technically true that mobile advertising is growing rapidly, as each of these companies capture a growing share of digital media budgets. But it seems that relatively little of the spending going to these media owners does so because their customers actually have a marketing strategy that is dependent upon a consumer owning a mobile device or a consumer’s interaction with a brand outside of the home. For the most part, the advertiser is simply looking for the biggest and/or most efficient seller of media, who then optimizes spending against their inventory and the advertiser’s goals, running ads on whatever device the inventory happens to appear on. That’s probably not what mobile advertising’s earliest evangelists had in mind for the medium.

Mobile media has become much more important than it ever was in the past. In a relatively short period of time, mobile devices have come to account for a substantial – and according to various data sources a significant majority – of digital media consumption. In turn, apps capture a substantial majority of content accessed within mobile devices (88% of minutes of use per comScore data from October of last year) which means that at this point in time a majority of digital media consumption is also occurring within apps.

Few consumers in mature media markets are mobile-only. This means that virtually everyone reached on a mobile device can also be reached via the desktop, while the opposite is less true, which means that we can

appreciate a rationale behind budgeting for digital media on a desktop-first basis. However, advertisers are

almost certainly under-spending on mobile media and mobile marketing relative to the potential the marketing channels can offer, especially via location-based strategies and apps. For spending, we can point to IAB estimates of mobile advertising spending which include the aforementioned allocations of spending across devices, and note that it amounted to only around a quarter of total digital ad spending during 2014. Given the aforementioned allocations, this figure conveys that only a small share of digital media budgets go to mobile environments with an actual mobile strategy behind it. Anecdotal commentary mirrors the data: we hear from agency executives specializing in mobile advertising who note that even among the minority of marketers who work with mobile specialists might still only spend a minority of their digital budget on mobile media.

The reasons for the desktop-mobile gap are wide-ranging. Spending by digital media tends to concentrate on environments which offer a greater potential for reach (i.e. on the desktop). Best practices in mobile marketing are evolving, and capitalizing on the potential of mobile requires a lot of imagination, too. Establishing KPIs for mobile beyond demographic-based targeting require a lot of internal politicking among brand-focused marketers. At the same time as those goals are established, marketers need to figure out how a consumer’s location data and a dimension of “place” can be applied towards marketing strategies. Identifying potential utilities that offer consumers value and provide branding opportunities via apps also require a lot of insight and even more skilled labor.

From our interactions with practitioners, we think that larger marketers are still in the early stages of deploying meaningful resources into mobile marketing, and these efforts are further aided by the development of an efficient mobile advertising eco-system. As marketers develop their mobile strategies, they also need tools which have been developed specifically to help with managing paid media in mobile environments (especially important for brands who need to promote their apps or to otherwise use mobile media to support mobile marketing strategies). Happily for marketers, mobile DMPs, mobile DSPs, mobile SSPs and exchanges, mobile ad servers and owners of inventory are achieving meaningful scale and becoming increasingly important given the very different processes they have established when compared with their historically desktop-focused competitors. On the demand side, the absence of cookies requires different approaches against which to target audiences. On the supply side, ad tech vendors must work primarily in an app-based environment rather than a browser-based environment, requiring different tactics in terms of technologies and business models. As pushing app installations will be a key goal, the most significant beneficiaries will probably be those who facilitate discovery (via app stores) and the media owners who can tie together data for targeting and distribution for ad inventory across owned and operated apps, third party apps and the broader mobile web. Facebook and Google both have powerful positions in this regard, and Twitter is becoming increasingly important too.

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- 3 - Brian Wieser 212-514-4682 Pivotal Research Group

Across all of digital media, large brands – those who represent the bulk of TV spending and work with agency holding companies, for example – represent around 30% of spending. Our guess is that few of these companies have much more than a bare-bones mobile strategy at this time, and we presume that they are substantially under-represented in terms of app usage when compared with e-commerce focused companies and game developers. Small businesses – which also probably account for 30-40% of digital media spending – are also likely under-represented in terms of possessing strategies and app usage. Both the large brands and small businesses alike are therefore also probably under-represented when it comes to spending money to promote their apps.

A question that investors often raise in the context of app-installation ads (on Facebook in particular, where these ads have contributed meaningfully to the company’s growth) is whether or not this category of advertising is potentially in the eighth inning of a nine-inning game, under the premise that many of the developers who drive spending may not have the most economical of business models. However, based on our observations of the sector, even if some of today’s largest app install advertisers went away, there still seems to be so much room for growth from other segments of advertisers. We are inclined to believe that what will probably prove to be a very long game has barely begun, and despite the mobile advertising industry’s reported successes of late, the year for mobile advertising to finally and truly arrive is still yet to come.

Our Updated View on Internet Advertising And Digital Marketing Stocks

Earlier this week we updated our models and price targets for companies we cover related to internet advertising and digital marketing services. Price target changes were primarily a function of changes to costs of capital embedded in our models which we have incorporated across our coverage universe. In our valuation framework, lower long-term costs of capital (driven at this time by falling yields on long-term treasury bonds) disproportionately impact companies whose stock prices are disproportionately dependent upon their terminal values. Each of Facebook, Google, Twitter and Salesforce.com remain as Buy-rated. We continue to rate Yahoo Hold, although we note that a majority of its value is dependent upon the value of Alibaba.

Facebook remains our favorite name in the sector. Our YE2015 price target is $105, up from $103 previously. Facebook can point to a wide range of factors which will sustain growth through 2015 and beyond, as increasing share of spending from small businesses and large brands alike as well as ongoing improvement in focus on performance-based marketers. Instagram is proving to be a successful enterprise in its own right and WhatsApp continues to gain traction among consumers around the world (although monetization is likely to be modest relative to its user base for an extended period of time). Efforts to establish an extended ad network, buttressed by LiveRail, Atlas and additional acquisitions or internal investments will also provide meaningful growth in the future.

There are other illustrations of the company’s potential to continue growing rapidly in the long-run: while Facebook has not captured meaningful budgets that would otherwise have gone to traditional television network owners so far, efforts to incorporate media-brand-adjacent video content (as illustrated via recent agreements with the NFL and ABC News) will help towards these ends over time. The establishment of a portal for video content akin to YouTube may also help Facebook given the success that Google has had in monetizing that property with some marginal TV-focused advertising budgets.

Perhaps the most important factor impacting Facebook’s top-line in the near-term will relate to the degree to which app install ads might remain as a significant contributor to growth. Although we have heard much about the notion that many of the earlier app developers might be pursuing uneconomical strategies (i.e. paying to promote installations of apps that get downloaded but rarely used) and that therefore the boom in app install ads might face some limits, it seems increasingly likely to us that there is more growth to come from this segment of advertisers, especially as large brands increasingly develop and promote apps of their own.

Across the whole business, our model incorporates revenue growth estimates of 49.3% for 4Q14 and 44.3% for FY2015. We presume margin compression during 2015 as management has indicated the year would be one for significant investment but we also expect an eventual resumption of 2014 level margins after 2016 before descending again in subsequent years. Our valuation on Facebook on a YE2015 basis is now $309bn, or $105/share. We continue to rate Facebook BUY.

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- 4 - Brian Wieser 212-514-4682 Pivotal Research Group

At Google, which we recently upgraded to Buy from Hold, many of the negative considerations we have been focused on in recent years have become more widely held among the investment community. These include compressing margins, investment of capital away from the company’s core competencies and weak government relations among other issues. While these concerns are real, we believe they are more-than incorporated into the company’s valuation at its current levels. More importantly, the company isn’t going anywhere: along with Facebook, Google will maintain a hegemonic position in digital advertising.

We continue to expect significant cash generation from the company despite its ongoing capital expenditures in and around its core business, and few of the threats facing Google are likely to have a meaningful impact. We think that currencies will weigh on Google’s top-line growth disproportionately in this quarter and for the year ahead, with around a 4% headwind on topline revenue growth by our estimates for 4Q14, (although Facebook has similar international exposure, a several percentage point headwind on total revenues will be more pronounced for Google). In total we estimate reported gross revenue growth of 15.8% during 4Q14. At the same time, we slightly diminish the long-term mix of revenue we expect Google to generate from third parties (such as Mozilla). This serves to highlight a key wildcard in Google’s revenue ex-TAC and line items further down the income statement: we believe that the company’s efforts to cull network partners (mostly due to partner site quality issues) in recent years provides Google with significant flexibility in terms of capturing incremental revenue ex-TAC in any given period (our guess is that a loss of inventory supply has only a limited impact on total demand for Google’s paid search product, meaning that if demand remains stable, fewer network partners means more revenue, operating income and cashflow for Google, all else equal. Our valuation on Google on a YE2015 basis is $425bn (including $79bn in cash), or $610/share, down slightly from $620 previously. We continue to rate Google BUY.

Twitter is another company we recently upgraded to BUY from HOLD. Our price target on Twitter is rising both because of the cost of capital changes described above (disproportionately impactful on a company like Twitter which will not produce cashflow for many years into the future) and also because we think there is a growing basis for positivity around the company’s ability to monetize its platform.

Twitter is evidently pursuing a more aggressive effort to monetize consumers who visit Twitter properties but do not log in. As well, Twitter is beginning to monetize its feeds which run on other media properties. Further, we are mindful of efforts to expand the company’s advertiser base which include enabling targeting by mobile carrier (helpful for capturing revenue from carriers and device makers alike given Twitter’s heavy consumption skew on mobile devices). As well, the launch of Tailored Audiences for mobile apps (which should help to monetize spending on app installations from brands and performance marketers alike) is illustrative of these efforts, too. Perhaps most importantly, commentary we hear from the advertising community remains overwhelmingly positive, as Twitter’s ad sales force continues to perform well, deepening relationships with the industry and helping brands find new ways to use the ad products that Twitter has on offer.

Given these successes, the focus that many investors and the press have placed on the leadership at Twitter seems unnecessary. It is clear that Twitter has underperformed on certain key metrics related to user trends, at least relative to expectations it caused most of Wall Street to hold. And of course, there has been turnover in the senior ranks. However, we think the problem has been that Twitter generally operates like a very large late stage venture funded company rather than a more mature public one. This means that we shouldn’t be surprised if the company pursues what might be aspirational goals (investors need to decide for themselves how realistic those aspirations are) and a “fail fast” mentality which produces turnover in the executive ranks. For Twitter’s position in the advertising industry, this is mostly well and good, so long as the company is delivering with its paying customers, advertisers. We believe it is.

As Twitter is maintaining its traction, we think it is appropriate to increase our revenue estimates on the company for this year and next. Following a more than doubling of size this year, our estimates previously incorporated a very conservative 20%+ growth rate in 2016 and beyond, or a level slightly above the digital advertising industry’s growth rate from this year’s plateau. However, we have increasing confidence in the company’s ability to outperform this level by finding new segments of marketers who will find Twitter to be an impactful supplier of advertising inventory, and thus our model incorporates slightly higher growth in 2015 and much higher growth in 2016 (up to around 40%).

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- 5 - Brian Wieser 212-514-4682 Pivotal Research Group

For 4Q14 we forecast revenues of $476mm (equal to 96.1% growth), which compares with guidance for between $440-$450mm. Our revenue figure is based upon a multiplier we apply to two quarters’ prior sales and marketing expense, as this is the line item (and the lag) we think most appropriately can be used to drive ad revenue expectations. We think that traction in the fourth quarter has accelerated incrementally, leading us to use an incrementally higher multiplier vs. the multiplier derived for 3Q14. Our valuation on the company’s equity is now $36bn, which we apply against 710mm shares on a YE2015 basis to derive our new $50 price target vs. $42 previously. Half of the increase is due to upwardly revised revenue estimates and half of the increase is due to the aforementioned changes to our cost of capital estimates. We continue to rate Twitter BUY.

Meanwhile, Yahoo’s value seemingly couldn’t be more removed from its core business if it tried, and the subjectivity associated with valuing its components remains challenging given the range of possible paths forward. Alibaba and Yahoo Japan shares are by themselves worth $49 per share if no taxes were ever paid on the disposition of those assets. But taxes payable on a straightforward sale – if one occurred – could amount to around 40%, or nearly $20 per share. This is, of course, behind Yahoo management’s stated intentions to find a tax efficient approach towards realizing value from its ownership of these assets. However, on the two prior instances during which shares were sold, full taxes were paid, and specific plans regarding management’s preferred tax strategy has not been forthcoming so far. This has led us to incorporate the highly conservative assumption that full taxes would be paid on future dispositions as well. Whether because of, er, “prompting” by the activist investor Starboard or because management had planned to do something around this point in time (following the Alibaba IPO) all along, we expect management will state their intentions around monetizing the Alibaba shares by the time of the 4Q14 earnings call later this month.

Still, despite Starboard’s conveyance of concern regarding reports that Yahoo was considering a cash-rich split-off as a strategy, we think something of this nature is probably still on the table as far as Yahoo management is concerned. Tax leakage, a sub-optimal valuation on the Asian assets, transaction completion issues and the high potential of further obfuscation of Yahoo’s core business are among the risks associated with a cash-rich split. But that doesn’t mean it isn’t the preferred strategy for the company’s management. It is also possible that Yahoo would decide that a preferred tax minimization strategy is unfeasible at this time for some reason, in which case perhaps a small percentage of the company’s holdings in these assets might be sold (with full taxes paid) in order to raise cash for further buybacks, acquisitions or both.

Of course, anything other than an approach which the investment community broadly accepts as optimal could very well lead to a proxy fight that Starboard would have a good chance of winning. And if this were the case, a scenario involving a trade of Yahoo’s core operating business to another entity such as AOL seems highly likely and mutually beneficial, producing significant value over an extended time frame. In short, we think there are plausible scenarios where Yahoo will pay a 40% tax rate and there are plausible scenarios where Yahoo will pay next to nothing. Taking these and other scenarios into account, we think assuming the mid-range of this tax rate most appropriately accounts for the range of likely outcomes vs. our prior assumption, we drive our price target for all of Yahoo up to $54 on a YE2015 basis vs. $47 previously.

Almost as an aside, there is positive activity at the core business worth noting. Acquisitions of BrightRoll and Flurry last year could generate an incremental $150-$200mm in net display (ex-TAC) revenue and $400-$500mm in incremental gross revenue during 2015, although at a lower net profit margin than Yahoo’s legacy business. As well, November’s agreement with Mozilla should several hundred million dollars of gross search revenue, and probably some incremental net revenue, too (although we note that Yahoo’s incremental gains in search query volumes will probably not be matched by growth in revenues, as most advertisers will continue to concentrate their search budgets with Google). None of these factors will have a meaningful impact on 4Q14 results, but we would expect them to be incorporated into 2015 guidance if it is provided during the upcoming earnings call. Of course, core display revenue is likely still declining, and search growth may have otherwise decelerated as prior improvements would otherwise be lapped. Still, on balance we see these actions as well as the recent hiring of a well-respected head of ad sales for the Americas as favorable for Yahoo if the business continues to evolve under its current operating and management structure. As a subset of the aforementioned $54 valuation for all of Yahoo, we continue to value core Yahoo (including its operations and cash on its balance sheet) as worth $15bn at YE2015, or around $16 per share. Our rating on Yahoo remains HOLD.

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- 6 - Brian Wieser 212-514-4682 Pivotal Research Group

Lastly, we are altering our price target on Salesforce.com to $80 vs. our prior $74 figure. We are leaving our operating expectations unchanged on Salesforce.com at this time, but are instead incorporating new coverage universe-wide costs of capital, which disproportionately increases our valuation of Salesforce.com given the degree to which its valuation is dependent upon the cashflow it can produce beyond our model’s terminal year.

We are mindful that the competitive landscape in marketing technology has come to increasingly favor Oracle and Adobe in recent quarters, especially given the recent acquisitions those companies have made. While acquisitions are not the be-all and end-all (organic growth is still most important) Oracle and Adobe have made more progress in shaping the marketing cloud offerings which we think will be core long-term drivers of CMO-driven technology budgets.

While we also recognize that most purchases of marketing technologies are bought as point solutions, at the same time, the market seems to be clearly moving in a direction which favors suites (we think this reflects what marketers want, too). This concern was amplified by last month’s acquisition of Datalogix by Oracle, which we expect will be a powerful combination alongside Oracle’s other recent buys (at least so long as those assets and key personnel are appropriately integrated). Still, it is early days for this sector and Salesforce.com should continue to grow at a much more rapid clip than the rest of our coverage universe for an extended time frame, as the marketing automation and marketing technology industry continues to offer significant opportunity. Further, Salesforce.com retains a strong presence in this space given its dominance of middle-market CRM solutions, and from this base the company retains a solid overall position.

In terms of valuation, primary among our assumptions is the notion that the company can produce $10bn in gross profit by our terminal year, the company’s fiscal 2020, more than double what Salesforce.com should see during fiscal 2016. This should translate into cashflow of around $2.8bn in 2020, also around double 2016 levels, with still-rapid growth ahead from that point on. From these figures, our valuation on Salesforce.com is $52bn on a fiscal YE2016 basis, or $80 per share. We continue to rate Salesforce.com BUY.

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- 7 - Brian Wieser 212-514-4682 Pivotal Research Group

Pivotal Advertising Universe Comparables: Operating Metrics

Operating Metrics

Figures In mm Except Per Share Amounts Interpublic Omnicom Publicis WPP Nielsen CBS Viacom Discovery Google Facebook Yahoo Twitter CRM

REVENUE

2015 $7,789.5 $16,104.3 € 7,908.1 £10,881.4 $6,435.4 $14,281.7 $14,368.7 $6,600.3 $66,083.5 $12,475.6 $4,654.9 $1,399.8 $6,482.3

• 2015 Growth 3.0% 4.8% 10.7% 8.3% 2.2% 4.2% 3.3% 5.5% 0.0% 0.0% 0.0% 0.0% 20.4%

2019 9,601.0 19,991.9 10,425.3 13,993.1 7,772.8 17,179.5 17,995.2 8,788.3 132,546.7 39,083.3 6,921.9 7,200.2 13,245.3

• 5-Year CAGR 4.9% 5.4% 7.9% 6.9% 4.3% 4.6% 5.3% 7.0% 14.9% 25.7% 8.3% 38.8% 19.7%

EBIT (Headline/Ex-Restructurings/Discontinued Operations)

2015 883.8 2,068.5 1,573.8 1,610.4 1,277.3 3,115.2 4,347.4 2,353.0 17,212.7 5,684.7 395.1 (371.8) (31.6)

• 2015 Growth 13.0% 6.3% 23.9% 9.8% 20.5% 7.8% 4.6% 10.9% 3.2% 12.6% 87.4% --- ---

2019 1,358.2 2,745.0 2,260.2 2,245.9 1,717.7 4,228.8 5,693.9 3,507.1 22,237.2 17,220.3 953.9 1,377.8 837.3

• 5-Year CAGR 11.7% 5.8% 7.5% 6.9% 10.1% 7.9% 6.5% 10.6% 5.9% 27.8% 35.2% --- ---

EBIT MARGINS (Headline/Ex-Restructurings/Discontinued Operations)

2014 11.7% 13.5% 22.0% 16.0% 20.3% 22.7% 31.2% 37.6% 26.0% 45.6% 8.5% -26.6% -0.6% 2018 14.1% 13.7% 21.7% 16.1% 22.1% 24.6% 31.6% 39.9% 16.8% 44.1% 13.8% 19.1% 6.3% EBITDA (Ex-Restructurings) 2015 1,105.8 2,388.5 1,618.8 2,009.4 1,872.3 3,395.2 4,579.4 2,717.0 23,131.1 7,957.3 1,603.9 1,677.8 416.4 • 2015 Growth 10.6% 5.8% 23.4% 8.7% 14.2% 7.2% 4.8% 10.4% 7.6% 25.8% 60.6% --- 38.6% 2019 1,371.2 3,125.0 2,455.2 2,712.9 2,417.7 4,478.8 5,937.9 3,805.1 34,509.6 20,989.0 1,703.9 1,977.8 1,367.3 • 5-Year CAGR 6.5% 6.7% 13.4% 8.0% 8.1% 7.2% 6.3% 9.1% 9.9% 27.1% 11.3% --- 35.4% EBITDA MARGINS 2015 14.2% 14.8% 20.5% 18.5% 29.1% 23.8% 31.9% 41.2% 35.0% 63.8% 34.5% 119.9% 6.4% 2019 14.3% 15.6% 23.6% 19.4% 31.1% 26.1% 33.0% 43.3% 26.0% 53.7% 24.6% 27.5% 10.3%

FREE CASHFLOW MARGINS

2015 5.6% 6.4% 9.4% 7.7% 13.2% 12.7% 17.3% 21.6% 17.6% 38.0% 7.1% 41.9% 18.6%

2019 7.4% 6.9% 10.7% 8.9% 17.8% 14.2% 19.1% 26.7% 15.6% 33.8% 14.8% 29.0% 17.2%

NET INCOME (GAAP/IFRS As Reported)

2015 486.9 1,145.0 931.6 1,117.8 631.0 1,737.8 2,437.3 1,283.8 14,650.2 2,953.0 778.8 (327.5) (56.4)

2019 816.8 1,530.2 1,405.7 1,540.3 981.2 2,444.2 3,486.8 2,144.4 17,802.9 12,840.2 1,388.0 961.3 520.4

NET INCOME (Adjusted)

2015 486.9 1,145.0 931.6 1,277.8 1,049.1 1,737.8 2,437.3 1,283.8 18,715.4 2,953.0 1,068.6 (327.5) 472.1

2019 816.8 1,530.2 1,405.7 1,740.3 1,363.4 2,444.2 3,486.8 2,144.4 25,705.8 12,840.2 1,844.7 961.3 1,329.7

NET INCOME MARGINS (As Reported)

2015 6.3% 7.1% 11.8% 10.3% 9.8% 12.2% 17.0% 19.5% 22.2% 23.7% 16.7% -23.4% -0.9%

2019 8.5% 7.7% 13.5% 11.0% 12.6% 14.2% 19.4% 24.4% 13.4% 32.9% 20.1% 13.4% 3.9%

NET INCOME MARGINS (Adjusted)

2015 6.3% 7.1% 11.8% 11.7% 16.3% 12.2% 17.0% 19.5% 28.3% 23.7% 23.0% -23.4% 7.3%

2019 8.5% 7.7% 13.5% 12.4% 17.5% 14.2% 19.4% 24.4% 19.4% 32.9% 26.7% 13.4% 10.0%

FCF = Net Income + D&A + Stock-Based Comp + Excess Tax Benefits + Pension Contributions - CapEx/M&A - Change in W/C + Other Recurring Cash Changes

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- 8 - Brian Wieser 212-514-4682 Pivotal Research Group

Pivotal Advertising Universe Comparables: Profit and Cash Generating Metrics and Trading Multiples

Profit and Cash Generating Metrics

Figures In mm Except Per Share Amounts Interpublic Omnicom Publicis WPP Nielsen CBS Viacom Discovery Google Facebook Yahoo Twitter CRM

EPS (GAAP / IFRS / Unadjusted)

2015 1.18 4.73 4.24 89 2.83 2.40 5.67 1.98 21.62 1.02 0.80 (0.48) (0.09) • 2015 Growth 22.3% 12.7% 26.9% 15.8% 11.5% 0.0% 0.0% 17.8% 6.7% -4.6% -89.2% --- --- 2019 1.97 6.45 6.35 122 3.72 5.48 9.02 3.39 25.74 4.09 1.45 1.20 0.71 • 5-Year CAGR 15.5% 9.0% 13.7% 9.8% 13.0% 12.8% 11.9% 18.1% 5.8% 47.2% 2.6% --- --- DIVIDEND/SHARE 2015 0.42 2.00 0.16 44 1.00 0.60 1.32 0.00 0.00 0.00 0.00 0.00 0.00

DIVIDEND/SHARE/CURRENT EQUITY PRICE

2015 2.1% 2.7% 0.3% 3.2% 2.4% 1.1% 2.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

FCF/SHARE

2015 FCF/2014 SHARES 1.09 4.29 3.26 0.65 2.31 4.08 6.44 2.26 16.65 1.62 0.35 0.83 1.84

FCF/SHARE/CURRENT EQUITY PRICE

2015 5.6% 5.9% 5.3% 4.7% 5.5% 7.6% 9.7% 7.7% 3.3% 2.2% 0.8% 2.2% 3.3%

FCF = Net Income + D&A + Stock-Based Comp + Excess Tax Benefits + Pension Contributions - CapEx/M&A - Change in W/C + Other Recurring Cash Changes

Trading Multiples

Interpublic Omnicom Publicis WPP Nielsen CBS Viacom Discovery Google Facebook Yahoo Twitter CRM

Target EV/EBITDA 2015 8.5x 8.1x 9.4x 10.0x 13.1x 11.4x 11.8x 11.2x 15.2x 35.9x 6.0x 19.8x 120.3x 2019 6.9x 6.2x 6.2x 7.4x 10.1x 8.6x 9.1x 8.0x 10.2x 13.6x 5.6x 16.8x 36.6x Current EV/EBITDA 2015 7.2x 8.4x 9.6x 10.5x 11.9x 9.5x 8.7x 9.1x 12.0x 24.4x 1.4x 14.1x 81.6x 2019 5.8x 6.4x 6.3x 7.8x 9.2x 7.2x 6.7x 6.5x 8.1x 9.2x 1.3x 12.0x 24.9x Target EV/FCF 2015 21.5x 19.0x 20.4x 23.9x 28.9x 21.3x 21.7x 21.3x 30.1x 60.3x 28.9x 56.5x 41.6x 2019 13.2x 14.1x 13.6x 16.2x 17.7x 15.8x 15.7x 13.0x 17.0x 21.6x 9.3x 15.9x 22.0x Current EV/FCF 2015 18.1x 19.6x 20.9x 25.1x 26.2x 17.8x 16.1x 17.2x 23.9x 40.9x 6.8x 40.5x 28.2x 2019 11.2x 14.5x 13.9x 17.0x 16.0x 13.2x 11.6x 10.5x 13.5x 14.7x 2.2x 11.4x 14.9x Target P/E 2015 20.4x 15.4x 14.4x 15.5x 17.7x 28.3x 18.4x 19.7x 28.2x 103.1x 67.3x -104.4x -918.8x 2019 12.2x 11.3x 9.6x 11.3x 13.4x 12.4x 11.5x 11.5x 23.7x 25.7x 37.2x 41.5x 113.0x Current P/E 2015 16.7x 15.5x 14.4x 15.6x 14.9x 22.3x 11.7x 14.9x 23.3x 72.7x 57.6x -77.1x -633.0x 2019 10.0x 11.3x 9.6x 11.3x 11.3x 9.8x 7.4x 8.7x 19.6x 18.1x 31.8x 30.7x 77.8x

FCF = Net Income + D&A + Stock-Based Comp + Excess Tax Benefits + Pension Contributions - CapEx/M&A - Change in W/C + Other Recurring Cash Changes

(9)

- 9 - Brian Wieser 212-514-4682 Pivotal Research Group

Pivotal Advertising Universe Comparables: Target Price and Related Metrics

Target Price And Related Metrics

Figures In mm Except Per Share Amounts Interpublic Omnicom Publicis WPP Nielsen CBS Viacom Discovery Google Facebook Yahoo Twitter CRM

Near-Term 2014-2019 Growth Rate 4.9% 5.4% 7.9% 6.9% 4.3% 4.6% 5.3% 7.0% 14.9% 25.7% 8.3% 38.8% 19.7%

Long-Term Perpetual Growth Rate 4.0% 4.5% 4.8% 5.0% 4.0% 4.5% 4.5% 5.5% 6.0% 7.0% 2.0% 8.0% 9.0%

Near-Term 2015-2019 Discount Rate 8.5% 7.6% 8.2% 8.6% 4.0% 5.0% 6.6% 6.5% 7.9% 5.8% 0.0% 5.8% 7.8%

2015 Enterprise Value $9,444.3 $19,437.6 € 15,139.7 £20,124.8 $24,500.7 $38,694.3 $53,944.9 $30,476.7 $350,818.6 $285,954.5 $9,550.7 $33,153.1 $50,079.5

2015E Cash + Marketable Securities 1,680.7 1,408.9 (988.1) 451.0 311.8 (201.0) 739.7 799.8 79,195.6 23,226.6 5,687.0 3,787.6 2,664.2

Other Asset Values 0.0 0.0 272.0 800.0 0.0 1,000.0 500.0 1,100.0 0.0 0.0 37,365.2 0.0 500.0

Value of Cashflows, Cash, Other Assets 11,125.1 20,846.6 14,423.7 21,375.7 24,812.4 39,493.3 55,184.6 32,376.5 430,014.2 309,181.2 52,602.9 36,940.6 53,243.7

Debt (1,757.0) (4,003.0) (868.0) (4,462.0) (7,038.0) (9,209.0) (15,551.0) (7,898.0) (5,239.0) 0.0 (1,437.5) (1,293.6) (1,047.2)

Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2015 Dividends Payable 152.5 477.6 413.1 915.7 458.0 260.7 541.7 0.0 0.0 0.0 0.0 0.0 0.0

Target Price Equity Value 9,520.5 17,321.1 13,968.8 17,829.5 18,232.4 30,545.0 40,175.3 24,478.5 424,775.2 309,181.2 51,165.4 35,647.0 52,196.5

Target Stock Price $24.00 $73.00 $61.00 1380.00p $50.00 $68.00 $104.00 $39.00 $610.00 $105.00 $54.00 $50.00 $80.00

• Target Vs. Current Price 22% 0% 0% 0% 18% 27% 56% 32% 21% 42% 17% 35% 45%

Rating BUY HOLD HOLD HOLD BUY BUY BUY BUY BUY BUY HOLD BUY BUY

Current Stock Price $19.66 $73.15 € 61.15 1383.00p $42.20 $53.55 $66.48 $29.47 $504.01 $74.05 $46.23 $36.93 $55.11

Current Stock Price Implied Equity Value 7,887.6 17,466.4 13,907.8 £17,891.9 15,461.7 23,883.3 25,687.9 18,625.0 352,663.4 217,049.8 43,858.1 26,220.3 36,097.1

Current Stock Price Implied Enterprise Value 7,963.9 20,060.4 15,491.9 21,102.9 22,187.9 32,293.3 39,999.2 24,623.2 278,706.7 193,823.2 2,243.3 23,726.3 33,980.0

(10)

- 10 - Brian Wieser 212-514-4682 Pivotal Research Group

Pivotal Advertising Forecast December 2014: Summary Totals

Contact: Brian Wieser

(e) Brian@Pvtl.com (t) 212 514 4682 (m) 917 734 1980

2010A 2011A 2012A 2013A 1Q14A 2Q14A 3Q14A 4Q14E 2014E 1Q15E 2Q15E 3Q15E 4Q15E 2015E 2016E 2017E 2018E 2019E 5-YR CAGR TOTAL NATIONAL $61,556.9 $65,103.8 $66,621.0 $71,179.8 $17,505.6 $18,659.6 $17,289.4 $19,750.8 $73,205.4 $18,020.2 $19,217.2 $17,811.7 $20,333.4 $75,382.5 $78,552.8 $81,988.8 $85,630.8 $89,406.9 4.1%

• Annual Growth / Decline 7.9% 5.8% 2.3% 6.8% 4.3% 2.6% 2.9% 1.8% 2.8% 2.9% 3.0% 3.0% 2.9% 3.0% 4.2% 4.4% 4.4% 4.4%

• % of Mass Advertising 48.5% 50.2% 51.0% 52.7% 54.7% 54.1% 52.5% 54.6% 54.0% 55.7% 55.1% 53.5% 55.6% 55.0% 56.0% 57.0% 58.0% 59.0%

• Bi-Annual Growth / Decline -5.7% 13.7% 7.3% 6.8% 4.9% -1.2% 2.3% -0.6% 1.3% 3.5% -0.7% -0.9% -2.3% -0.1% 4.6% 4.7% 4.1% 3.3%

TOTAL LOCAL $65,349.3 $64,618.4 $64,128.5 $63,981.0 $14,469.6 $15,842.3 $15,629.4 $16,418.9 $62,360.2 $14,304.5 $15,670.6 $15,467.9 $16,233.6 $61,676.6 $61,720.1 $61,851.2 $62,008.5 $62,130.2 -0.1%

• Annual Growth / Decline 1.4% -1.1% -0.8% -0.2% -1.0% -3.1% -2.5% -3.4% -2.5% -1.1% -1.1% -1.0% -1.1% -1.1% 0.1% 0.2% 0.3% 0.2%

• % of Mass Advertising 51.5% 49.8% 49.0% 47.3% 45.3% 45.9% 47.5% 45.4% 46.0% 44.3% 44.9% 46.5% 44.4% 45.0% 44.0% 43.0% 42.0% 41.0%

TOTAL NATIONAL AND LOCAL $126,906.2 $129,722.1 $130,749.5 $135,160.7 $31,975.2 $34,501.9 $32,918.9 $36,169.65 $135,565.60 $32,324.75 $34,887.80 $33,279.55 $36,566.95 $137,059.05 $140,272.92 $143,840.00 $147,639.34 $151,537.18 2.3%

• Annual Growth / Decline 4.4% 2.2% 0.8% 3.4% 1.9% -0.1% 0.3% -0.6% 0.3% 1.1% 1.1% 1.1% 1.1% 1.1% 2.3% 2.5% 2.6% 2.6%

• % of Normalized Advertising 75.6% 74.9% 74.6% 74.7% 72.9% 74.2% 73.0% 73.1% 73.3% 71.9% 73.2% 72.0% 72.1% 72.3% 72.1% 71.8% 71.6% 71.3%

NORMALIZED DIRECT AND MASS $167,885.4 $173,178.4 $175,272.9 $180,965.0 $43,884.7 $46,503.2 $45,100.5 $49,457.7 $184,946.3 $44,981.9 $47,665.8 $46,228.0 $50,694.2 $189,569.9 $194,688.3 $200,334.3 $206,344.3 $212,534.6 2.8%

• Annual Growth / Decline 3.1% 3.2% 1.2% 3.2% 3.6% 1.7% 2.2% 1.5% 2.2% 2.5% 2.5% 2.5% 2.5% 2.5% 2.7% 2.9% 3.0% 3.0%

Political(f) $2,086.7 $363.5 $2,677.4 $313.4 $202.9 $258.0 $749.3 $1,467.2 $2,677.4 $56.1 $83.5 $93.8 $118.9 $376.1 $3,212.9 $451.3 $3,534.2 $541.6

• Bi-Annual Growth / Decline 20.8% 4.8% 28.3% -13.8% 0.0% 0.0% 0.0% 0.0% 0.0% 20.0% 20.0% 20.0% 0.0% 20.0% 20.0% 20.0% 10.0% 20.0%

Olympics(g) 605.0 0.0 639.0 0.0 800.0 0.0 0.0 0.0 800.0 0.0 0.0 0.0 0.0 0.0 750.0 0.0 550.0 0.0

• Quadri-Annual Growth / Decline -6.9% --- 6.5% 0.0% 32.2% 0.0% 0.0% 0.0% 32.2% 0.0% 0.0% 0.0% 0.0% 0.0% 17.4% 0.0% 0.0% 0.0%

TOTAL ADVERTISING REVENUES $170,577.1 $173,541.9 $178,589.3 $181,278.4 $44,887.6 $46,761.2 $45,849.9 $50,925.0 $188,423.7 $45,038.0 $47,749.4 $46,321.9 $50,813.0 $189,946.0 $198,651.2 $200,785.6 $210,428.5 $213,076.2 2.5%

• Annual Growth / Decline 4.5% 1.7% 2.9% 1.5% 5.8% 2.1% 3.7% 4.3% 3.9% 0.3% 2.1% 1.0% -0.2% 0.8% 4.6% 1.1% 4.8% 1.3%

Source: Pivotal Research Group, Cinema Ad Council, IAB, Magna Global, OAAA, RAB

(a) Excludes Internet-Based Advertising Revenues

(b) Includes Internet Classifieds, Email and Digital Display Less Internet Yellow Pages and Local Digital (c) Excludes Incremental Olympic Revenues

(d) Excludes Local Political Advertising Revenues (e) Lead Generation and Internet Yellow Pages

(f) Total Political Advertising Revenue on Local Broadcast and Local Cable TV (g) Incremental Advertising Revenue from Olympics on Network TV

(11)

- 11 - Brian Wieser 212-514-4682 Pivotal Research Group

Pivotal Advertising Forecast December 2014: National Media

Contact: Brian Wieser

(e) Brian@Pvtl.com (t) 212 514 4682 (m) 917 734 1980

2010A 2011A 2012A 2013A 1Q14A 2Q14A 3Q14A 4Q14E 2014E 1Q15E 2Q15E 3Q15E 4Q15E 2015E 2016E 2017E 2018E 2019E 5-YR CAGR

NATIONAL MASS MEDIA ADVERTISING REVENUES

National Television

National Cable(a) $20,424.4 $22,137.8 $23,307.6 $24,706.5 $6,256.6 $6,566.4 $6,109.3 $6,240.9 $25,173.2 $6,471.1 $6,784.1 $6,302.8 $6,454.6 $26,012.6 $27,405.3 $28,951.0 $30,538.5 $32,092.3 5.0%

• Annual Growth / Decline 12.5% 8.4% 5.3% 6.0% 3.3% 4.3% 0.8% -0.8% 1.9% 3.4% 3.3% 3.2% 3.4% 3.3% 5.4% 5.6% 5.5% 5.1%

• % of National TV 56.0% 56.9% 57.9% 58.7% 58.0% 60.3% 62.7% 55.9% 59.1% 59.2% 61.5% 63.9% 57.0% 60.3% 61.3% 62.5% 63.5% 64.7%

National Broadcast - English(a)(c) 13,094.9 13,691.6 13,692.4 14,017.3 3,769.2 3,391.5 2,804.1 3,995.7 13,960.5 3,713.3 3,328.0 2,742.2 3,935.6 13,719.2 13,759.4 13,804.4 13,840.0 13,789.3 -0.2%

• Annual Growth / Decline 1.3% 4.6% 0.0% 2.4% 6.6% -3.2% -1.9% -3.0% -0.4% -1.5% -1.9% -2.2% -1.5% -1.7% 0.3% 0.3% 0.3% -0.4%

• % of National TV 35.9% 35.2% 34.0% 33.3% 35.0% 31.1% 28.8% 35.8% 32.8% 34.0% 30.1% 27.8% 34.8% 31.8% 30.8% 29.8% 28.8% 27.8%

National Broadcast - Spanish(a) 1,093.4 1,171.7 1,259.1 1,381.6 288.5 460.4 311.8 442.7 1,503.5 298.1 472.2 320.9 454.3 1,545.5 1,667.4 1,752.2 1,889.9 1,975.5 5.6%

• Annual Growth / Decline 8.3% 7.2% 7.5% 9.7% 4.3% 26.1% 3.0% 1.3% 8.8% 3.3% 2.6% 2.9% 2.6% 2.8% 7.9% 5.1% 7.9% 4.5%

• % of National TV 3.0% 3.0% 3.1% 3.3% 2.7% 4.2% 3.2% 4.0% 3.5% 2.7% 4.3% 3.3% 4.0% 3.6% 3.7% 3.8% 3.9% 4.0%

National Syndication 1,867.6 1,938.6 1,992.0 2,001.9 464.1 470.8 511.0 493.2 1,939.1 448.8 455.2 498.0 477.2 1,879.2 1,856.5 1,832.5 1,804.9 1,763.7 -1.9%

• Annual Growth / Decline 5.2% 3.8% 2.8% 0.5% -0.3% -3.4% -3.9% -4.7% -3.1% -3.3% -3.3% -2.6% -3.2% -3.1% -1.2% -1.3% -1.5% -2.3%

• % of National TV 5.1% 5.0% 4.9% 4.8% 4.3% 4.3% 5.2% 4.4% 4.6% 4.1% 4.1% 5.0% 4.2% 4.4% 4.2% 4.0% 3.8% 3.6%

Total National Television $36,480.1 $38,939.7 $40,251.2 $42,107.3 $10,778.4 $10,889.0 $9,736.3 $11,172.6 $42,576.3 $10,931.3 $11,039.5 $9,863.8 $11,321.9 $43,156.5 $44,688.7 $46,340.1 $48,073.1 $49,620.8 3.1%

• Annual Growth / Decline 7.7% 6.7% 3.4% 4.6% 4.3% 2.2% -0.2% -1.7% 1.1% 1.4% 1.4% 1.3% 1.3% 1.4% 3.6% 3.7% 3.7% 3.2%

• % of National Advertising 59.3% 59.8% 60.4% 59.2% 61.6% 58.4% 56.3% 56.6% 58.2% 60.7% 57.4% 55.4% 55.7% 57.3% 56.9% 56.5% 56.1% 55.5%

Total Magazines(a) 13,865.2 13,781.2 12,676.8 12,033.6 2,415.0 3,255.6 2,666.0 2,863.7 11,200.4 2,215.7 3,064.7 2,479.4 2,643.0 10,402.8 9,662.0 8,854.8 7,963.7 7,197.3 -8.5%

• Annual Growth / Decline 0.1% -0.6% -8.0% -5.1% -10.0% -7.0% -5.0% -5.9% -6.9% -8.3% -5.9% -7.0% -7.7% -7.1% -7.1% -8.4% -10.1% -9.6%

• % of National Advertising 22.5% 21.2% 19.0% 16.9% 13.8% 17.4% 15.4% 14.5% 15.3% 12.3% 15.9% 13.9% 13.0% 13.8% 12.3% 10.8% 9.3% 8.1%

National Digital

National Digital Display + Mobile Display 7,024.4 7,859.3 8,754.9 11,630.1 2,875.7 2,981.4 3,379.1 3,885.6 13,121.9 3,179.8 3,305.6 3,681.1 4,229.0 14,395.5 15,739.3 17,375.4 19,102.8 20,907.2 9.8%

• Annual Growth / Decline 22.9% 11.9% 11.4% 32.8% 13.4% 11.1% 14.6% 12.2% 12.8% 10.6% 10.9% 8.9% 8.8% 9.7% 9.3% 10.4% 9.9% 9.4%

• % of National Digital 83.1% 81.2% 79.6% 80.6% 77.3% 76.9% 78.0% 78.1% 77.6% 74.3% 73.9% 75.0% 75.1% 74.6% 72.6% 71.6% 70.6% 69.6%

Online Video 1,432.3 1,820.0 2,250.0 2,800.0 846.4 897.0 954.7 1,090.4 3,788.6 1,102.2 1,169.2 1,228.9 1,402.1 4,902.4 5,941.3 6,893.3 7,956.5 9,133.6 19.2%

• Annual Growth / Decline 43.2% 27.1% 23.6% 24.4% 35.6% 32.7% 37.8% 35.1% 35.3% 30.2% 30.3% 28.7% 28.6% 29.4% 21.2% 16.0% 15.4% 14.8%

• % of National Digital 16.9% 18.8% 20.4% 19.4% 22.7% 23.1% 22.0% 21.9% 22.4% 25.7% 26.1% 25.0% 24.9% 25.4% 27.4% 28.4% 29.4% 30.4%

Total National Digital $8,456.6 $9,679.3 $11,004.9 $14,430.1 $3,722.1 $3,878.5 $4,333.8 $4,976.0 $16,910.5 $4,282.1 $4,474.8 $4,910.0 $5,631.0 $19,297.9 $21,680.6 $24,268.7 $27,059.3 $30,040.7 12.2%

• Annual Growth / Decline 25.9% 14.5% 13.7% 31.1% 17.8% 15.5% 19.0% 16.6% 17.2% 15.0% 15.4% 13.3% 13.2% 14.1% 12.3% 11.9% 11.5% 11.0%

• % of National Advertising 13.7% 14.9% 16.5% 20.3% 21.3% 20.8% 25.1% 25.2% 23.1% 23.8% 23.3% 27.6% 27.7% 25.6% 27.6% 29.6% 31.6% 33.6%

Total Network and Satellite Radio 1,166.5 1,209.7 1,245.0 1,211.3 268.0 300.6 288.0 307.3 1,164.0 275.9 309.6 296.7 316.4 1,198.6 1,209.7 1,221.6 1,233.1 1,242.8 1.3%

• Annual Growth / Decline 4.2% 3.7% 2.9% -2.7% -7.0% -2.0% -3.0% -3.8% -3.9% 2.9% 3.0% 3.0% 2.9% 3.0% 0.9% 1.0% 0.9% 0.8%

• % of National Advertising 1.9% 1.9% 1.9% 1.7% 1.5% 1.6% 1.7% 1.6% 1.6% 1.5% 1.6% 1.7% 1.6% 1.6% 1.5% 1.5% 1.4% 1.4%

Total National Newspapers(a) 930.2 849.5 755.6 695.0 161.1 168.1 121.6 208.1 658.8 147.8 153.9 111.9 189.5 603.1 549.9 500.1 453.8 411.3 -9.0%

• Annual Growth / Decline 1.3% -8.7% -11.1% -8.0% -3.0% -6.0% -5.0% -6.3% -5.2% -8.2% -8.4% -8.0% -9.0% -8.5% -8.8% -9.0% -9.3% -9.4%

• % of National Advertising 1.5% 1.3% 1.1% 1.0% 0.9% 0.9% 0.7% 1.1% 0.9% 0.8% 0.8% 0.6% 0.9% 0.8% 0.7% 0.6% 0.5% 0.5%

Total Cinema 658.3 644.3 687.6 702.5 160.9 167.8 143.7 223.1 695.5 167.4 174.7 149.9 231.7 723.7 762.0 803.5 847.7 894.1 5.2%

• Annual Growth / Decline 12.7% -2.1% 6.7% 2.2% 11.0% -14.0% -19.0% 20.5% -1.0% 4.1% 4.1% 4.3% 3.9% 4.1% 5.3% 5.5% 5.5% 5.5%

• % of National Advertising 1.1% 1.0% 1.0% 1.0% 0.9% 0.9% 0.8% 1.1% 1.0% 0.9% 0.9% 0.8% 1.1% 1.0% 1.0% 1.0% 1.0% 1.0%

TOTAL NATIONAL $61,556.9 $65,103.8 $66,621.0 $71,179.8 $17,505.6 $18,659.6 $17,289.4 $19,750.8 $73,205.4 $18,020.2 $19,217.2 $17,811.7 $20,333.4 $75,382.5 $78,552.8 $81,988.8 $85,630.8 $89,406.9 4.1%

• Annual Growth / Decline 7.9% 5.8% 2.3% 6.8% 4.3% 2.6% 2.9% 1.8% 2.8% 2.9% 3.0% 3.0% 2.9% 3.0% 4.2% 4.4% 4.4% 4.4%

• % of Mass Advertising 48.5% 50.2% 51.0% 52.7% 54.7% 54.1% 52.5% 54.6% 54.0% 55.7% 55.1% 53.5% 55.6% 55.0% 56.0% 57.0% 58.0% 59.0%

(12)

- 12 - Brian Wieser 212-514-4682 Pivotal Research Group

Pivotal Advertising Forecast December 2014: Local Media and Mass Media Total

Contact: Brian Wieser

(e) Brian@Pvtl.com (t) 212 514 4682 (m) 917 734 1980

2010A 2011A 2012A 2013A 1Q14A 2Q14A 3Q14A 4Q14E 2014E 1Q15E 2Q15E 3Q15E 4Q15E 2015E 2016E 2017E 2018E 2019E 5-YR CAGR

LOCAL MASS MEDIA ADVERTISING REVENUES

Local Television

Local Broadcast TV(a)(d) $14,977.9 $15,431.9 $15,854.0 $16,490.6 $4,126.1 $3,598.7 $4,139.9 $3,942.2 $15,807.0 $4,177.6 $3,665.4 $4,202.7 $4,007.2 $16,052.8 $16,312.2 $16,590.7 $16,756.2 $16,909.5 1.4%

• Annual Growth / Decline 7.7% 3.0% 2.7% 4.0% 0.0% -5.0% -5.0% -6.5% -4.1% 1.2% 1.9% 1.5% 1.6% 1.6% 1.6% 1.7% 1.0% 0.9%

• % of Local TV 79.5% 78.7% 78.5% 78.7% 79.4% 75.5% 78.0% 75.8% 77.2% 78.9% 75.0% 77.5% 75.3% 76.7% 76.2% 75.7% 75.2% 74.7%

Local Cable TV(a)(d) 3,854.2 4,182.7 4,352.5 4,465.7 1,069.8 1,169.3 1,168.2 1,261.1 4,668.4 1,116.4 1,223.4 1,220.7 1,316.0 4,876.5 5,094.9 5,325.7 5,526.0 5,727.1 4.2%

• Annual Growth / Decline 14.1% 8.5% 4.1% 2.6% 8.0% 3.0% 5.0% 2.8% 4.5% 4.4% 4.6% 4.5% 4.4% 4.5% 4.5% 4.5% 3.8% 3.6%

• % of Local TV 20.5% 21.3% 21.5% 21.3% 20.6% 24.5% 22.0% 24.2% 22.8% 21.1% 25.0% 22.5% 24.7% 23.3% 23.8% 24.3% 24.8% 25.3%

Total Local Television $18,832.1 $19,614.5 $20,206.5 $20,956.3 $5,195.9 $4,768.0 $5,308.2 $5,203.3 $20,475.4 $5,294.0 $4,888.7 $5,423.4 $5,323.2 $20,929.4 $21,407.1 $21,916.4 $22,282.2 $22,636.6 2.0%

• Bi-Annual Growth / Decline -5.7% 13.7% 7.3% 6.8% 4.9% -1.2% 2.3% -0.6% 1.3% 3.5% -0.7% -0.9% -2.3% -0.1% 4.6% 4.7% 4.1% 3.3%

• Annual Growth / Decline 9.2% 4.2% 3.0% 3.7% 1.5% -3.2% -3.0% -4.5% -2.3% 1.9% 2.5% 2.2% 2.3% 2.2% 2.3% 2.4% 1.7% 1.6%

• % of Local Advertising 28.8% 30.4% 31.5% 32.8% 35.9% 30.1% 34.0% 31.7% 32.8% 37.0% 31.2% 35.1% 32.8% 33.9% 34.7% 35.4% 35.9% 36.4%

Total Local Newspapers(a) 22,795.2 20,691.8 18,944.2 17,388.3 3,613.1 4,068.7 3,741.3 4,416.5 15,839.5 3,250.0 3,672.0 3,354.6 4,001.5 14,278.1 12,899.5 11,535.2 10,324.4 9,102.1 -10.5%

• Annual Growth / Decline -8.2% -9.2% -8.4% -8.2% -9.0% -8.0% -9.0% -9.6% -8.9% -10.0% -9.7% -10.3% -9.4% -9.9% -9.7% -10.6% -10.5% -11.8%

• % of Local Advertising 34.9% 32.0% 29.5% 27.2% 25.0% 25.7% 23.9% 26.9% 25.4% 22.7% 23.4% 21.7% 24.6% 23.2% 20.9% 18.7% 16.7% 14.7%

Total Local Radio(a) 14,181.0 14,060.0 14,205.0 14,054.0 2,942.0 3,554.9 3,573.5 3,502.9 13,573.3 2,872.6 3,477.2 3,497.9 3,422.6 13,270.3 13,279.6 13,307.8 13,341.7 13,367.9 -0.3%

• Annual Growth / Decline 4.9% -0.9% 1.0% -1.1% -2.0% -5.0% -3.0% -3.4% -3.4% -2.4% -2.2% -2.1% -2.3% -2.2% 0.1% 0.2% 0.3% 0.2%

• % of Local Advertising 21.7% 21.8% 22.2% 22.0% 20.3% 22.4% 22.9% 21.3% 21.8% 20.1% 22.2% 22.6% 21.1% 21.5% 21.5% 21.5% 21.5% 21.5%

Total Outdoor 5,484.5 5,744.1 6,015.4 6,298.2 1,395.4 2,050.8 1,488.1 1,551.2 6,485.5 1,436.7 2,091.3 1,534.6 1,598.5 6,661.1 6,974.4 7,298.4 7,627.0 7,952.7 4.2%

• Annual Growth / Decline 3.2% 4.7% 4.7% 4.7% 3.0% 2.0% 4.0% 3.3% 3.0% 3.0% 2.0% 3.1% 3.1% 2.7% 4.7% 4.6% 4.5% 4.3%

• % of Local Advertising 8.4% 8.9% 9.4% 9.8% 9.6% 12.9% 9.5% 9.4% 10.4% 10.0% 13.3% 9.9% 9.8% 10.8% 11.3% 11.8% 12.3% 12.8%

Total Local Digital(b) 4,056.4 4,508.0 4,757.3 5,284.1 1,323.3 1,399.9 1,518.4 1,745.0 5,986.6 1,451.2 1,541.4 1,657.4 1,887.7 6,537.7 7,159.5 7,793.3 8,433.2 9,071.0 8.7%

• Annual Growth / Decline 13.7% 11.1% 5.5% 11.1% 13.0% 12.0% 14.0% 14.0% 13.3% 9.7% 10.1% 9.2% 8.2% 9.2% 9.5% 8.9% 8.2% 7.6%

• % of Local Advertising 6.2% 7.0% 7.4% 8.3% 9.1% 8.8% 9.7% 10.6% 9.6% 10.1% 9.8% 10.7% 11.6% 10.6% 11.6% 12.6% 13.6% 14.6%

TOTAL LOCAL $65,349.3 $64,618.4 $64,128.5 $63,981.0 $14,469.6 $15,842.3 $15,629.4 $16,418.9 $62,360.2 $14,304.5 $15,670.6 $15,467.9 $16,233.6 $61,676.6 $61,720.1 $61,851.2 $62,008.5 $62,130.2 -0.1%

• Annual Growth / Decline 1.4% -1.1% -0.8% -0.2% -1.0% -3.1% -2.5% -3.4% -2.5% -1.1% -1.1% -1.0% -1.1% -1.1% 0.1% 0.2% 0.3% 0.2%

• % of Mass Advertising 51.5% 49.8% 49.0% 47.3% 45.3% 45.9% 47.5% 45.4% 46.0% 44.3% 44.9% 46.5% 44.4% 45.0% 44.0% 43.0% 42.0% 41.0%

TOTAL NATIONAL AND LOCAL $126,906.2 $129,722.1 $130,749.5 $135,160.7 $31,975.2 $34,501.9 $32,918.9 $36,169.65 $135,565.60 $32,324.75 $34,887.80 $33,279.55 $36,566.95 $137,059.05 $140,272.92 $143,840.00 $147,639.34 $151,537.18 2.3%

• Annual Growth / Decline 4.4% 2.2% 0.8% 3.4% 1.9% -0.1% 0.3% -0.6% 0.3% 1.1% 1.1% 1.1% 1.1% 1.1% 2.3% 2.5% 2.6% 2.6%

• % of Normalized Advertising 75.6% 74.9% 74.6% 74.7% 72.9% 74.2% 73.0% 73.1% 73.3% 71.9% 73.2% 72.0% 72.1% 72.3% 72.1% 71.8% 71.6% 71.3%

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- 13 - Brian Wieser 212-514-4682 Pivotal Research Group

Pivotal Advertising Forecast December 2014: Direct Media

Contact: Brian Wieser

(e) Brian@Pvtl.com (t) 212 514 4682 (m) 917 734 1980

2010A 2011A 2012A 2013A 1Q14A 2Q14A 3Q14A 4Q14E 2014E 1Q15E 2Q15E 3Q15E 4Q15E 2015E 2016E 2017E 2018E 2019E 5-YR CAGR

DIRECT MEDIA ADVERTISING REVENUES

Direct Online

Total Paid Search (Incl. Mobile) 12,004.9 15,825.7 18,963.8 21,216.8 5,878.1 5,894.6 6,043.8 6,692.9 24,509.4 6,703.2 6,735.7 6,894.9 7,579.2 27,913.0 30,776.4 33,725.6 36,787.6 39,986.4 10.3%

• Annual Growth / Decline 12.2% 31.8% 19.8% 11.9% 17.0% 14.0% 16.0% 15.2% 15.5% 14.0% 14.3% 14.1% 13.2% 13.9% 10.3% 9.6% 9.1% 8.7%

• % of Direct Online 88.7% 90.2% 91.1% 92.0% 92.3% 92.1% 93.1% 92.8% 92.6% 92.5% 92.4% 93.4% 93.1% 92.9% 93.1% 93.4% 93.6% 93.9%

Other Direct Online(e) 1,523.1 1,723.0 1,846.0 1,850.0 490.5 505.1 446.3 516.8 1,958.6 539.7 557.3 489.3 563.1 2,149.5 2,281.0 2,402.5 2,515.4 2,620.3 6.0%

• Annual Growth / Decline -15.0% 13.1% 7.1% 0.2% 9.0% 5.0% 5.0% 4.6% 5.9% 10.0% 10.3% 9.6% 9.0% 9.7% 6.1% 5.3% 4.7% 4.2%

• % of Direct Online 11.3% 9.8% 8.9% 8.0% 7.7% 7.9% 6.9% 7.2% 7.4% 7.5% 7.6% 6.6% 6.9% 7.2% 6.9% 6.7% 6.4% 6.2%

Total Direct Online $13,528.0 $17,548.7 $20,809.8 $23,066.8 $6,368.6 $6,399.7 $6,490.1 $7,209.7 $26,468.0 $7,243.0 $7,293.0 $7,384.2 $8,142.3 $30,062.5 $33,057.3 $36,128.1 $39,303.0 $42,606.7 10.0%

• Annual Growth / Decline 8.3% 29.7% 18.6% 10.8% 16.3% 13.2% 15.2% 14.3% 14.7% 13.7% 14.0% 13.8% 12.9% 13.6% 10.0% 9.3% 8.8% 8.4%

• % of Total Direct Advertising 33.0% 40.4% 46.7% 50.4% 53.5% 53.3% 53.3% 54.3% 53.6% 57.2% 57.1% 57.0% 57.6% 57.3% 60.8% 64.0% 67.0% 69.9%

Total Direct Mail 20,599.1 20,403.8 19,479.3 19,660.6 4,932.6 4,933.5 5,068.3 5,558.5 20,493.0 4,925.8 4,933.4 5,063.7 5,556.4 20,479.2 19,861.6 19,208.0 18,492.1 17,689.3 -2.9%

• Annual Growth / Decline 3.8% -0.9% -4.5% 0.9% 4.0% 5.0% 4.0% 4.0% 4.2% -0.1% 0.0% -0.1% 0.0% -0.1% -3.0% -3.3% -3.7% -4.3%

• % of Total Direct Advertising 50.3% 47.0% 43.8% 42.9% 41.4% 41.1% 41.6% 41.8% 41.5% 38.9% 38.6% 39.1% 39.3% 39.0% 36.5% 34.0% 31.5% 29.0%

Total Directories(a) 6,852.2 5,503.7 4,234.3 3,076.9 608.4 668.1 623.3 519.9 2,419.7 488.3 551.6 500.7 428.5 1,969.2 1,496.4 1,158.1 909.9 701.5 -21.9%

• Annual Growth / Decline -23.5% -19.7% -23.1% -27.3% -20.0% -21.0% -22.0% -22.6% -21.4% -19.7% -17.4% -19.7% -17.6% -18.6% -24.0% -22.6% -21.4% -22.9%

• % of Total Direct Advertising 16.7% 12.7% 9.5% 6.7% 5.1% 5.6% 5.1% 3.9% 4.9% 3.9% 4.3% 3.9% 3.0% 3.8% 2.8% 2.1% 1.6% 1.2%

TOTAL DIRECT $40,979.2 $43,456.2 $44,523.4 $45,804.3 $11,909.6 $12,001.3 $12,181.7 $13,288.1 $49,380.6 $12,657.1 $12,778.0 $12,948.5 $14,127.2 $52,510.9 $54,415.4 $56,494.3 $58,704.9 $60,997.4 4.3%

• Annual Growth / Decline -0.8% 6.0% 2.5% 2.9% 8.5% 7.2% 7.7% 7.8% 7.8% 6.3% 6.5% 6.3% 6.3% 6.3% 3.6% 3.8% 3.9% 3.9%

• % of Normalized Advertising 24.4% 25.1% 25.4% 25.3% 27.1% 25.8% 27.0% 26.9% 26.7% 28.1% 26.8% 28.0% 27.9% 27.7% 28.0% 28.2% 28.5% 28.7%

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- 14 - Brian Wieser 212-514-4682 Pivotal Research Group

Appendix: Important Disclosures

Analyst Certification

I, Brian W. Wieser, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject company and their securities. I further certify that I have not received and will not receive direct or indirect compensation related to specific recommendations or views contained in this research report.

Legal Disclaimers

Pivotal Research Group LLC is an independent equity research company and is neither a broker dealer nor offers investment banking services. Pivotal Research Group LLC is not a market maker for any securities, does not hold any securities positions, and does not seek compensation for investment banking services. The analyst preparing this report does not own any securities of the subject company and does not receive any compensation directly or indirectly from investment banking services.

Stock Ratings

Pivotal Research Group LLC assigns one of three ratings based on an expectation of absolute total return (price change plus dividends) over a twelve month time frame. The ratings are based on the following criteria:

BUY: The security is expected to have an absolute return in excess of 15%.

HOLD: The security is expected to have an absolute return of between plus and minus 15%. SELL: The security is expected to have an absolute return less than minus 15%.

Ratings Distribution

Pivotal Research LLC currently provides research coverage of 34 companies, of which 76% are rated BUY, 18% are rated HOLD, and 6% are rated SELL. Our company does not offer investment banking services. This data is accurate as-of January 15, 2015.

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- 16 - Brian Wieser 212-514-4682 Pivotal Research Group

Other Disclaimers

Information contained in this report has been prepared from sources that are believed to be reliable and accurate but are not guaranteed by us and do not represent a complete summary or statement of all available data. Additional information is available upon request. Furthermore, information and opinions expressed are subject to change without notice and we are under no obligation to inform you of such change.

This report is has been prepared solely for our institutional clients. Ratings and target prices do not take into account the particular investment objectives, financial and/or tax situation, or needs of individual investors. Investment decisions should take into account all available information, not just that which is contained in this report. Furthermore, nothing contained in this report should be considered an offer or solicitation by Pivotal Research Group LLC to buy or sell any securities or other financial instruments. Past performance is not indicative of future performance and estimates of future performance contained in this report are based on assumptions that may not be realized.

Material in this report, except that which is supplied by third parties, is Copyright ©2015, by Pivotal Research LLC. All rights reserved. No portion may be reproduced, sold, or redistributed in any form without express written consent of Pivotal Research Group LLC.

Commission Sharing Arrangements

Pivotal Research Group LLC has commission sharing arrangements (CSA) with numerous broker-dealers. Please contact Jeff Shelton at 212-514-4681 for further information.

References

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