PR in a Changing World Richard Edelman CEO, Edelman July 5, 2007

The Pyramid of Influence One-way Hierarchical Packaged Messages Advertising Elites MASS Three Ads in Primetime TV in US would reach 95% of women in 1967 vs. 50 ads today (Forrester)

The World That Was . . . Relatively few credible media, including national TV local radio and newspapers, business and news magazines A true hierarchy, with elite media dominating the conversations News came as part of a package, subsidized by sports, fashion, metro A time of belief and trust in institutions and advertising PR served classic middle man function between company and media—pitching the story

Relatively few credible media, including national TV local radio and newspapers, business and news magazines

A true hierarchy, with elite media dominating the conversations

News came as part of a package, subsidized by sports, fashion, metro

A time of belief and trust in institutions and advertising

PR served classic middle man function between company and media—pitching the story

What’s Happened? Decline in Trust in Institutions, from Media to Government to Business – Need repetition & spontaneity to earn trust 90 percent of consumers trust recommendations from others while trust in ads under 10% (Forrester Research) Technology—rapid roll-out of broadband, acceptance of mobile devices The Empowered Individual—Demanding dialogue and role in brand/corporation – from consumer to participant Rise of Horizontal Conversation—Peer to Peer—Trust in Person Like Myself

Decline in Trust in Institutions, from Media to Government to Business – Need repetition & spontaneity to earn trust

90 percent of consumers trust recommendations from others while trust in ads under 10% (Forrester Research)

Technology—rapid roll-out of broadband, acceptance of mobile devices

The Empowered Individual—Demanding dialogue and role in brand/corporation – from consumer to participant

Rise of Horizontal Conversation—Peer to Peer—Trust in Person Like Myself

Intersection of Top Down and Peer-to-Peer Models Horizontal Peer-to-Peer Model Traditional Top Down Model Sweet Spot The ability to play between the two Mutually Reinforcing

# of Internet Users N. America = 35% of Users in 2000E; 16% in 2007E Geographic Distribution of Internet Users (MM) 390 491 621 724 851 977 1,122 1,302 Note: ROW denotes rest of the world Source: Morgan Stanley Research

Source: comScore Global MediaMetrix 4/07 User-Generated Content (UGC) – YouTube + Wikipedia + MySpace Have Moved to Top of Internet User Pack Total Global Unique Visitors (MM) Rank Property 4/07 Y/Y Growth 1 Google 528 12% 2 Microsoft 520 3 3 Yahoo! 468 1 4 Time Warner 267 21 5 eBay 248 (4) 6 Wikipedia 209 71 7 YouTube 163 506 8 Amazon 137 1 9 CNET 120 33 10 Ask 111 (9) 11 Apple 115 29 12 MySpace 107 86 13 Adobe 101 (5) 14 Lycos 79 (14) 15 Viacom 81 65

Sources: (1) Adapted from SRI-Knowledge Networks (2005). (2) Adapted from Universal McCann, (2005); Internet Advertising Bureau (2006). (3) Veronis Suhler Stevenson (2005), Yahoo! Analyst Day (5/04). Youth defined as age 17 and under. Ratios are calculated as percent of US media usage on a medium divided by percent of US ad spending on a medium Large Gap Between Internet Consumption / Ad Spending

At Critical Mass Inflection Point for Usage of High Speed (Broadband – 2.5+3G) Mobile Networks Source: Morgan Stanley Telecom Research Scott Coleman, John Marchetti. Global 2.5G / 3G Penetration 2.5G / 3G Ramp in 25 -30% Penetration Sweet S pot 3G likely at 25% penetration in 2010E…

Only 25% of 30 Year-Olds Read Newspapers Daily Source: General Social Survey Archive, 1972-2004 Daily Newspaper Readership by Age

Newshounds Migrating Online Sources: MS Media team, comScore US MediaMetrix 4/07 Circulation of top 50 newspapers vs. online news unique users US Unique Users (MM)

Mainstream Media Changing Newspapers-- In US, 56 million readers of newspaper websites, up 8% versus a year ago, versus the 45.4 million readers of daily newspapers, down 2.5% in past year. Rise of “Freesheets,” especially in Europe, squeezing traditional newspapers Newsweeklies —in serious trouble as advertising evaporates—Time Magazine ad revenue down 15% Business Magazines —web editions thriving as Forbes.com has more readers than the print magazine—more popular content (Top 100 lists). Economist is # 1 circulation – serious journalism works well Consumer Magazines —Full of advertising, strong niche appeal, celebrity focus Television —More cable viewers in prime time than network; TV viewing only fourth most popular activity for teens, behind Web, Friends, Movies - 65% of those with access to video on demand us it an average of 23 times a month. Network news viewership down by half in 15 years from 60 million to 30 million GM advertising on TV down 15% in ’06, advertising in newspapers down 60%

Newspapers-- In US, 56 million readers of newspaper websites, up 8% versus a year ago, versus the 45.4 million readers of daily newspapers, down 2.5% in past year. Rise of “Freesheets,” especially in Europe, squeezing traditional newspapers

Newsweeklies —in serious trouble as advertising evaporates—Time Magazine ad revenue down 15%

Business Magazines —web editions thriving as Forbes.com has more readers than the print magazine—more popular content (Top 100 lists). Economist is # 1 circulation – serious journalism works well Consumer Magazines —Full of advertising, strong niche appeal, celebrity focus

Television —More cable viewers in prime time than network; TV viewing only fourth most popular activity for teens, behind Web, Friends, Movies - 65% of those with access to video on demand us it an average of 23 times a month.

Network news viewership down by half in 15 years from 60 million to 30 million

GM advertising on TV down 15% in ’06, advertising in newspapers down 60%

Fragmentation of Media Shorter time spent on each medium—NYTimes.com holds reader for 8.5 minutes versus 34 minutes for paper NY Times From channel based and time fixed to non-linear and engagement focused; goal is deeper relationships with consumers Average person spends 3,500 hours on media End user subscription media projected to rise at 9% a pear 2005-10 Ad-supported media expected to decline 3% a year in 2005-10 Veronis Suhler study

Shorter time spent on each medium—NYTimes.com holds reader for 8.5 minutes versus 34 minutes for paper NY Times

From channel based and time fixed to non-linear and engagement focused; goal is deeper relationships with consumers

Average person spends 3,500 hours on media

End user subscription media projected to rise at 9% a pear 2005-10

Ad-supported media expected to decline 3% a year in 2005-10

Veronis Suhler study

MSM Moving On-Line Mainstream Media (MSM) original product and on-line staffs now merging—Destination Sites attract own audience and profitable in own right (Epicurious.com). Companion Sites, extending the MSM experience, now using photos, video, podcasts. MSM on-line now aggregating content from outside of “walled garden”, going beyond horizontal coverage to more vertical, in-depth coverage of each industry—example is Forbes.com, using content from 125 different sources or Newsweek.com sharing content with Facebook, a social network, and buying Slate BBC.com revamps its website around user-generated content, to create a public service version of MySpace.com—concept is “share, find and play”—editors forced to blog on editorial policy NBC’s Today Show content to be on “i-Village” – commerce linked to media beyond entertainment to personalization (ringtones and cellphones) 300,000 people download ABC Nightly News via i-Tunes weekly

Mainstream Media (MSM) original product and on-line staffs now merging—Destination Sites attract own audience and profitable in own right (Epicurious.com). Companion Sites, extending the MSM experience, now using photos, video, podcasts.

MSM on-line now aggregating content from outside of “walled garden”, going beyond horizontal coverage to more vertical, in-depth coverage of each industry—example is Forbes.com, using content from 125 different sources or Newsweek.com sharing content with Facebook, a social network, and buying Slate

BBC.com revamps its website around user-generated content, to create a public service version of MySpace.com—concept is “share, find and play”—editors forced to blog on editorial policy

NBC’s Today Show content to be on “i-Village” – commerce linked to media beyond entertainment to personalization (ringtones and cellphones)

Implications of More Challenging Business Environment for Media Reductions in Head Count—Reporters multi-task Philadelphia Inquirer from 500 to 300 reporters (2000-2006) now focused on business, sports, metro, lifestyle Mistakes—Jayson Blair at NY Times, BBC on Bhopal, CBS News on Bush National Guard Narrower ambitions—WSJ retrenches in Asia, Europe. Revert to national strongholds Focus on the large titles—Time Inc. drops 18 smaller titles, retains Fortune, People, Time, Sports Illustrated Smaller news hole—shorter stories, small pages

Reductions in Head Count—Reporters multi-task

Philadelphia Inquirer from 500 to 300 reporters (2000-2006) now focused on business, sports, metro, lifestyle

Mistakes—Jayson Blair at NY Times, BBC on Bhopal, CBS News on Bush National Guard

Narrower ambitions—WSJ retrenches in Asia, Europe. Revert to national strongholds

Focus on the large titles—Time Inc. drops 18 smaller titles, retains Fortune, People, Time, Sports Illustrated

Smaller news hole—shorter stories, small pages

Media Company Dilemma: Duty to Readers Vs. Shareholders Move to what people want, away from what they should read/watch People watch news they agree with – successful business model, e.g. FoxNews Shift away from objectivity, the standard for media for the past century Trend toward local, celebrity news away from accountability news that bears witness, offers explanation, investigation Quality news available but costly

Move to what people want, away from what they should read/watch

People watch news they agree with – successful business model, e.g. FoxNews

Shift away from objectivity, the standard for media for the past century

Trend toward local, celebrity news away from accountability news that bears witness, offers explanation, investigation

Quality news available but costly

Impressions Matter More Than Ever; A Sound Bite Culture 96% of consumers are multi-tasking one third of time while using media; 61% of those watching TV and using Internet focus more on Web Digital Video Recorders now in 10 million US homes, 42 million homes by 2010—90% of customers skip ads on recorded shows Merger of news and entertainment – Colbert Report and Daily Show, PBS News Hour, Rush Limbaugh Radio show, O’Reilly factor, websites of major newspapers are top seven sources sited by Americans who know most about current events

96% of consumers are multi-tasking one third of time while using media; 61% of those watching TV and using Internet focus more on Web

Digital Video Recorders now in 10 million US homes, 42 million homes by 2010—90% of customers skip ads on recorded shows

Merger of news and entertainment – Colbert Report and Daily Show, PBS News Hour, Rush Limbaugh Radio show, O’Reilly factor, websites of major newspapers are top seven sources sited by Americans who know most about current events

The Social Media Universe This is not your father’s Internet 1992 - 2002: Corporate America built the Web 2002 and beyond: Individuals build the Web – engagement media Communities are the new centers of gravity in this universe Everything revolves around me

This is not your father’s Internet

1992 - 2002: Corporate America built the Web

2002 and beyond: Individuals build the Web – engagement media

Communities are the new centers of gravity in this universe

Everything revolves around me

Watch Where Global Younger Generation Goes Social Networking Ringtone Downloads, Connecting Mobile to Net Video Web OS Programs In-Game Advertising Blogs Tencent Instant Messaging (PC / Mobile) Knowledge Sharing

Blogs As Subject Experts

Blogs Feeding Mainstream Media July 28 th 2005

Credible Sources for Information about a Company In general, how credible do you feel each of the following sources is for information about a company ? Is information about a company that you get from (INSERT SOURCE) extremely credible, very credible, somewhat credible, or not credible at all? TOP 2 BOX EU North America Latin America Asia % % % % Articles in newspapers 33 36 54 46 Television news coverage 41 35 53 57 Articles in business magazines 51 53 68 45 News coverage on the radio 44 38 54 52 Corporate or product advertising 11 13 41 19 Communications issued by companies such as press releases, annual reports, and newsletters 32 27 49 36 A company’s own website 18 19 47 31 Stock or industry analyst reports 54 46 67 43 Weblogs or blogs 17 16 24 20 Conversations with your friends and peers 44 37 63 48 Entertainment, such as movies and television programs 14 15 36 23

US Credible Information Sources: Business Magazines Remain Most Credible In general, how credible do you feel each of the following sources is for information about a company? Is information that you get from [SOURCE] extremely credible, very credible, somewhat credible, or not credible at all? Highest ranked Lowest ranked TOP 2 BOX 2003 2004 2005 2006 2007 % % % % % Articles in business magazines 49 45 55 66 55 Stock or industry analyst reports 26 34 49 52 47 News coverage on the radio 32 36 40 48 39 Friends and family (2003-2006)/Conversations with your friends and peers (2007) 35 44 42 58 37 Articles in newspapers 35 32 42 44 37 Television news coverage 20 30 32 38 35 Communications issued by companies such as press releases, annual reports, and newsletters 19 30 31 36 28 A company’s own website 13 21 24 31 20 Weblogs or blogs N/A N/A N/A 17 16

Credible Spokespersons for Information about a Company In general, when forming an opinion of a company, if you received information from (INSERT PERSON) about this company, how credible would the information be? Would it be extremely credible, very credible, somewhat credible, or not credible at all? TOP 2 BOX E.U. North America Latin America Asia % % % % A person like yourself 53 51 83 54 Doctor or healthcare specialist 50 49 80 56 Non-profit organization or NGO representative 46 44 67 48 Academic 45 47 70 48 Financial/ Industry analyst 45 43 71 47 Regular employee of company 34 36 54 39 The CEO/leader of your company or employer* 32 31 62 48 Lawyer 30 16 35 43 Government official or regulator 25 22 30 41 CEO of a company 24 22 55 41 Public relations executive 15 12 46 22 Entertainer/ Athlete 14 11 39 24 Blogger 13 9 21 18 Highest ranked Lowest ranked * Asked only of employed respondents

US “A Person Like Me” Defined by Interests Not Demographics

Rules for Communicating in the Current Environment Yield control of the message in favor of a rich dialogue Move away from a sole reliance on top-down messages, by telling your employees and customers what is happening Enable the consumer to be co-creator Engage your critics Embrace new technologies e.g.- Anheuser-Busch launches Bud TV, Six Channels of IPTV; Coke.com launches “The Coke Show” a consumer generated online experience

Yield control of the message in favor of a rich dialogue

Move away from a sole reliance on top-down messages, by telling your employees and customers what is happening

Enable the consumer to be co-creator

Engage your critics

Embrace new technologies e.g.- Anheuser-Busch launches Bud TV, Six Channels of IPTV; Coke.com launches “The Coke Show” a consumer generated online experience

Unbundled News Release Pushbutton-publishing combines the familiar news release format with social-media-friendly features Modular layout and design Multimedia downloads RSS-enabled Comment / trackback Tagging / links to relevant conversations Rethinking the news release for PR 2.0

Pushbutton-publishing combines the familiar news release format with social-media-friendly features

Modular layout and design

Multimedia downloads

RSS-enabled

Comment / trackback

Tagging / links to relevant conversations

A New Level of Expectations Transparency Dialogue Honesty Immediacy Depth of content Updating as you learn more Journalistic level of accuracy—need multiple sources to corroborate claims

Transparency

Dialogue

Honesty

Immediacy

Depth of content

Updating as you learn more

Journalistic level of accuracy—need multiple sources to corroborate claims

The Risk if PR Fails the Test of Transparency and Veracity “ In a world of unlimited media choices, there will be a chance to embed advocacy messages everywhere but the risk is that our audiences will become cynical and will discount them. Mainstream media, with reduced staff, will be looking for packaged content and PR firms will be tempted to offer it without proper attribution. This will further damage the credibility of the media. PR should offer credible advocacy, journalism dispassionate, fact based coverage. ” Alex Jones, Director, Shorenstein Center, JFK School of Government, Harvard

“ In a world of unlimited media choices, there will be a chance to embed advocacy messages everywhere but the risk is that our audiences will become cynical and will discount them. Mainstream media, with reduced staff, will be looking for packaged content and PR firms will be tempted to offer it without proper attribution. This will further damage the credibility of the media. PR should offer credible advocacy, journalism dispassionate, fact based coverage. ”

Alex Jones, Director, Shorenstein Center, JFK School of Government, Harvard

A Word About Wal-Mart: Engaging & Empowering Allies Objective To Combat Wal-Mart’s negative reputation in consumer-generated media and lessen anti-Wal-Mart activists’ impact by identifying and actively engaging with a network of company-friendly bloggers. Strategies Create a 24/7 conversation monitoring infrastructure that allows us to track and respond to inaccuracies and/or negative buzz being spread by the company’s critics. Create factual Web site, walmartfacts.com, which presents accurate company information and showcases Wal-Mart’s important contributions to the community Unify the network of friendly bloggers (and their readers) in one community – workingfamiliesforwalmart.com. (WFWM) Results Twenty-five sites linked to the “Stories” blog in just one week. Just twenty-six sites link to the two-year-old anti-Wal-Mart blog, walmartwatch.com! The new Wal-Mart Web site, walmartfacts.com, received more than 140,000 hits in a matter or days. WFWM now boasts 150,000 active members

Objective

To Combat Wal-Mart’s negative reputation in consumer-generated media and lessen anti-Wal-Mart activists’ impact by identifying and actively engaging with a network of company-friendly bloggers.

Strategies

Create a 24/7 conversation monitoring infrastructure that allows us to track and respond to inaccuracies and/or negative buzz being spread by the company’s critics.

Create factual Web site, walmartfacts.com, which presents accurate company information and showcases Wal-Mart’s important contributions to the community

Unify the network of friendly bloggers (and their readers) in one community – workingfamiliesforwalmart.com. (WFWM)

Results

Twenty-five sites linked to the “Stories” blog in just one week. Just twenty-six sites link to the two-year-old anti-Wal-Mart blog, walmartwatch.com!

The new Wal-Mart Web site, walmartfacts.com, received more than 140,000 hits in a matter or days.

WFWM now boasts 150,000 active members

Implications for Brand Communicators Listening online is becoming imperative You won’t ever have as much control over messages as you did a few years ago Co-creation is becoming a fact of life for brands Every company is a media company with direct access to end users Engage stakeholders in good time and bad

Listening online is becoming imperative

You won’t ever have as much control over messages as you did a few years ago

Co-creation is becoming a fact of life for brands

Every company is a media company with direct access to end users

Engage stakeholders in good time and bad

Italian Blogosphere First platform Splinder.com was launched in 2001 Now: Up to 1 million Italian blogs – ab o ut 3% of global blogosphere Italian top bloggers upload a post at least twice a week Too little business and corporate blogging Italians go online for leisure and fun They post as they chat. A lot of gossip A good presence of Italian VIP Many bloggers write about specific items: technology, movies, television, cars Fair presence of political related issues

First platform Splinder.com was launched in 2001

Now: Up to 1 million Italian blogs – ab o ut 3% of global blogosphere

Italian top bloggers upload a post at least twice a week

Too little business and corporate blogging

Italians go online for leisure and fun

They post as they chat. A lot of gossip

A good presence of Italian VIP

Many bloggers write about specific items: technology, movies, television, cars

Fair presence of political related issues

Italian Blogging Sites Live Spaces Splinder.com MyBlog.it Blogger.com … m any of most important (in terms of readership and authority) Italian blogs are located on independent domains (.com, .it)

Live Spaces

Splinder.com

MyBlog.it

Blogger.com

… m any of most important (in terms of readership and authority) Italian blogs are located on independent domains (.com, .it)

Frequency of blogging in Italy Q.1 How many days in an average week do you read so-called web-logs or blogs. These are websites that provide personal commentary, journal entries, recommendations and links to news articles and other sites of interest compiled by an author and his or her readers? % Read Blogs 16% 15% 23% 22% 27% 14% 16% % Do Not Read Blogs 73% 84% 75% 68% 69% 79% 85%

Blogging in Italy by age Q.1 How many days in an average week do you read so-called web-logs or blogs. These are websites that provide personal commentary, journal entries, recommendations and links to news articles and other sites of interest compiled by an author and his or her readers?

Other Italian Web 2.0 applications Babelgum.com New Tv p2p 2spaghi.it Social Network about restaurants

Babelgum.com New Tv p2p

2spaghi.it

Social Network about restaurants