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INDUSTRY SEGMENT PERFORMANCE

11/09/99

Advertising rose faster than the overall economy for the fifth consecutive year in 1998.
Spending on advertising (broadcast and cable television, radio, newspapers, consumer magazines, business magazines, Internet and online, Yellow Pages, and outdoor) and specialty media (consumer promotion, business-to-business promotion, direct mail, and sponsorships) rose 7.6 percent to $255 billion in 1998. Growth in 1998 was lower than the 9.2 percent increase of 1997, the result of slower growth in the print media (newspapers, consumer magazines, business magazines, and Yellow Pages), but higher than the gains posted in 1995 and 1996. Advertising rose by 8.0 percent, matching the 1997 pickup. A slowdown in the print categories, particularly business magazines, countered faster increases in television, radio, and outdoor advertising. Specialty media spending grew 7.0 percent, down from the 10.9 percent advance in 1997. Slower growth in business-to-business promotion offset faster increases in the other categories.

Advertising and specialty media spending directed to consumers totaled $182.8 billion in 1998, a gain of 7.9 percent over 1997, and business-to-business spending amounted to $72.3 billion, up 6.6 percent. For the 1993-1998 period as a whole, business-to-business advertising and specialty media spending increased at an 8.4 percent compound annual rate compared with a 7.6 percent advance for consumer-directed spending. We expect spending in both categories to grow at comparable rates over the forecast period. Spending on business-to-business advertising and specialty media will rise at an estimated 7.5 percent compound annual rate, and spending aimed at consumers will increase 7.4 percent compounded annually. By 2003, spending targeted to consumers will total an estimated $261.2 billion compared with $103.7 billion for business-to-business spending.

Over the next five years, we project spending on advertising and specialty media as a whole to increase at a 7.4 percent annual rate, down from the 7.8 percent annual growth of the last five years. Spending will total an estimated $364.9 billion by 2003. Advertising will climb at a 7.6 percent rate, four-tenths of a percentage point slower than the 8.0 percent annual gain of the last five years, and specialty media spending will expand by 7.2 percent, down from the 7.7 percent annual growth of the 1993-1998 period.
Source: Veronis Suhler Stevenson Communications Industry Forecast

1/04/99

Advertising revenues for publicly reporting companies rose 15.0% in 1997, the third consecutive year of double digit growth.
Acquisitions, coupled with a vibrant advertising market, propelled growth. Virtually all U.S. media posted larger increases in advertising spending in 1997 than in 1996.

Acquisitions fueling revenue growth included Interpublic Group's acquisition of Marketing Corporation, DL Blair Corporation, Media, Inc., DraftDirect Worldwide, Angotti Thomas Hedge, and GGK; True North's purchase of Wilkins International and Bozell Jacob's purchase of Kenyon & Eckhart for $440 million.

Operating income margins jumped 3.5 points to 11.5% in 1997; operating cash flow margin rose 3.6 points to 14.8%. Both figures represented five-year highs and substantially exceeded the previous period's highs.
Source: Veronis, Suhler & Associates Communications Industry Report

10/01/98

Advertising Agencies: The largest transaction in 1997 - indeed for the past five years - was True North's purchase of Bozell, Jacobs, Kenyon & Eckhardt for $440 million
That brought total transactions in the segment to $1.17 billion, topping 1995 and '96 combined.
Source: Veronis, Suhler & Associates Communications Industry Transactions Report

10/26/98

Internet Leads All Other Media in Advertising Spending Growth
For the 5-year period 1997-2002, online advertising is forecasted to increase at a 48.3% compound annual growth rate (CAGR), to $6.5 billion in 2002. Spending for online advertising more than quadrupled for the second straight year in 1997, rising to $906 million from a 1996 total of $200 million.

Computer penetration will continue to rise, but at a slower pace than experienced in 1997, as pricing of home computers stabilizes. While the percentage of U.S. households owning a computer inches up from 44.0% in 1997 to 52.7% in 2002, the percentage of computer households hooked up to the Internet will continue to rise dramatically, from 52.3% in 1997 to 79.9% in 2002.

The total number of online subscriptions in the U.S. will rise from 24.8 million in 1997 to 42.1 million in 2002. Monthly flat-rate access fees are expected to rise at a relatively flat 2 % annual rate. Total consumer spending on online access will rise at a 16.5% CAGR from $4.8 billion in 1997 to $10.3 billion in 2002.

Consumer usage hours will increase sharply over the 5-year period, thanks to greater quantity and quality of content available online. Consumer spending on online content is forecasted to grow at a 22.4% CAGR to $632 million in 2002, up from $230 million in 1997. By 2002, however, spending on advertising will be more than ten times as great as spending on content.

Total spending in the consumer online market will rise to $17.5 billion by 2002 from $6.0 billion in 1997, a CAGR of 24.0%. From 1992-1997, spending grew at a compound annual rate of 48.3%.
Source: Veronis, Suhler & Associates Communications Industry Forecast


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