The Customer’s PerspectiveAligning industry actions with customer needs

February 6, 2014

Today’s discussion

• Who are we

• What we’re hearing from our clients

• What we’re seeing in practice

• Key challenges in our industry

• Adapting to a changing marketplace

NOVUS @ A GLANCE

Company overview

Our points of differentiation

• Novus is a full service local print and digital media agency experienced in custom-building national and regional programs using local market knowledge

• We deliver the insights and solutions necessary to help clients navigate today’s changing local print marketplace

• We bring together expertise in direct response, brand and retail for accountable, efficient results

Novus is part of Omnicom Media GroupA global leader with North American billings of $19.4B

Our clients benefit from insight across categories

Partial client list

We are also leveraging local digital for a variety of marketers

Partial client list

THE BUZZ

What we’re hearing from clients

• Newspaper media still plays an important role with consumers and as a key sales driver

• Desire by all to become less reliant on print due to decline in responsiveness, outdated business models, high cost

• Print budgets are being reduced every year; each dollar spent must be maximized

• Greater scrutiny around accountability and ROI

• The price / value / auditability / accountability equation is an increasingly large gap

• Increasing urgency around new hyperlocal solutions

What we’re seeing in practice

• Clients getting more sophisticated with access and interpretation of data

– Driving decisions on budget allocation

– Continually optimizing buy is the new norm

• Need for accountable circulation– Low tolerance for waste in

footprint– Post-buy accountability

• ROI is king; if results trend is not positive, change must be made

• Increased involvement by procurement

THE CHALLENGES WE MUST OVERCOME

Significant ROP declines driven by poor results; high cost

• Consistently delivers lowest efficiency / lift across all channels

ROP

Display

Radio

TV

Search

Circular

ROP

Display

Radio

TV

Search

Circular

Media Lift Efficiency

1

Source: Novus proprietary data, 2013, where ROP and the other channels were used within a retail category

Growth of digital directly impacts ROP at both national and local levels

ROP Digital

Client apathy High level of client engagement / interest

High CPMs Low CPMs

“Old and boring” “New and exciting”

Broken model Model perpetually under construction

Few / no market choices Unlimited choices

No audience targeting Extensive, revolutionary targeting capabilities

No audience guarantees 100% control over audience delivery

Lack of serviceBuyer / seller engagement can be calibrated as needed

No innovation Continuous innovation

Unreasonable Highly competitive marketplace

Digital replica continues to grow both in sheer numbers and as a percent of total circulation

3/31/2011 9/30/2011 3/31/2012 9/30/2012 3/31/2013 9/30/2013

200,000

400,000

600,000

Digital Replica TotalTop 25 Newspapers - Sunday

3/31/2011 9/30/2011 3/31/2012 9/30/2012 3/31/2013 9/30/2013

5,000,000

10,000,000

15,000,000

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

Digital Replica as a % of Print + DR CirculationTop 25 Newspapers - Sunday

Print+Digital Replica DR as a % of Total

2

Source: AAM

Despite growth, there is a lack of data available to quantify the value of the digital replica reader

• Composition is not fully understood; duplication still exists

• Consumer’s location / proximity to market is questionable

• Engagement with print media in a digital environment is unknown

• Engagement with the replica issue itself not widely understood

• Device utilized for access important to the equation– Mobile experience not the same as tablet or PC much less

the printed edition

• Education makes up a large percentage of digital replica circulation

– 90%+ for some publishers, even on Sundays; clients do not see value in this circulation

Understanding the real value is imperativeIdeas for working together to find solutions

Novus and MediaWorks spearheading a study to help advertisers and publishers to help address issues

Push for industry adaptation / acceptance versus current AAM rules (“opened 1x in last 30 days”)

Align cost with that ad unit; can’t assume “digital replica behavior” is the same as “digital behavior”

Research

to understand audience

composition / engagement /

value

Socialize

learnings from Gannett’s usage

of the single-copy model

Determine

best type of advertising unit

for the space (versus a flat

ROP ad)

66% of newspapers still require either full run or zone buys despite advertiser need

• Considered “wasted” circulation for clients that is costly

• Negative impact on overall ROI for advertiser

• Sub-ZIP and lower level zoning becoming increasingly more important for advertisers

3

50%

16%

34%

Full Run Zone ZIP

Investment in digital continues yet interest in / growth of newspaper.com not keeping pace

• % YOY US digital ad growth, by format, 2008-2012

2008 2009 2010 2011 2012

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Display-related ads Newspaper OnlineTotal Digital Ad Revenue Growth

4

Source: Citi Research; eMarketer calculations, June 1, 2012 and Pew Research State of the News Media 2013 / Newspaper Association of America; Methodology: Data is based on information from Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers with Citi Research estimates.; Note: 2008-2011 data from IAB/PwC.

Current digital challenges for retailers

• Serendipity of the circular is lost; nothing to-date has been able to replicate this

• Item and price concept still challenged

• Doesn’t deliver the same results as a preprint

• Not reaching older, less tech savvy customers

• Difficult to find circular online unless you go to each store’s website individually

The digital item and price chasm is clearly looming

More effective, potentially lessspend for the same impact

Multi-channelPrint / FSI

Test / learn / shift Balanced usage Future ready

201XToday

Declining value in the marketplace

Circulation Readership Ad Revenues Enterprise Value

5

Data shown reflects marketplace changes from 2006-2012

20-40%

>25%

55%

>80%

Readership of circulars continues to decline at a significant rate

-35

-30

-25

-20

-15

-10

-5

0

-14

-11

-31

-26

YOY 3-Year

Source: MRI, Market-by-Market Study, 2010 - 2012

Daily Sunday

Printed circular response declining; promotions need to be more aggressive just to maintain

Print circular lifts

2005 2006 2007 2008 2009 2010

27% 27% 27%26%

23%

20%

Source: 2011 The Nielsen Company: The Evolution of Circulars; Nielsen ScanTrack

ADAPTING TO A CHANGING MARKETPLACE

Viewing the industry through the client lens will be key to future success

• Shift in mentality; traditional mindset vs. emerging media thinking

• Value delivered to advertiser needs to guide pricing, programs and new opportunities

– Definition of value varies by advertiser

– ROI is critical

• Need for flexibility; being nimble is essential

• Build a learning consortium across competing media companies

Thank you.Bridgit Wallace, Vice President – Media Investment