This document summarizes Bruce Biegel's presentation on marketing trends in 2010. It discusses how (1) marketing budgets fell significantly in 2009 but are expected to rise modestly in 2010 as the economy recovers, (2) digital marketing will continue growing while traditional channels decline, and (3) direct mail volumes may stabilize but suppliers will need to focus on integration and analytics.

1. Thank you for your sponsorship

2. Outlook 2010:
What to Expect in
Direct & Digital Marketing
Bruce Biegel January 14, 2010
Managing Director New York, New York

3. Winterberry Group & Petsky Prunier LLC: Maximizing Shareholder
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4. Our Transition in Media and Technology Over the Past Decade;
By Simplifying Our Lives, We Have Complicated Them Tenfold!
2000 2009
TV channels in average U.S. household 61 130
% of U.S. households with a DVR 3% (2003) 25%
Daily time spent online (U.S. Internet users) < 30 min. 3-4 hours
% of U.S. households with broadband connection 5% 65%
Web sites indexed by Google 1 billion 1 trillion
Global Google searches per day 10 million 300 million
Global e-mails sent per day 12 billion 247 billion
% of U.S. adults who bought a product online 28% 55%
% of Internet users on a social networking site 5% 75%
% of U.S. adults who own a mobile phone 50% 85%
Text messages sent in the U.S. per day 400,000 4.5 billion
Sources: AMA/Carat, Forrester/Magna, Media Metrix (The Media Audit), New York
Times/Gallup, Nielsen, Pew Internet & American Life Project

5. Agenda
Outlook 2010
• What happened in 2009?
• What to expect in 2010:
Forecasts and trends in
direct and digital marketing
• Ten things to think about in
2010: Strategies for
marketers and suppliers

6. Marketing Budgets Fell an Estimated 15.6% in 2009
We learned quite a bit this
62% of marketers faced budget
cuts in 1H09
32% of marketers saw budgets
“year as we reduced our ad
budget, and, while we will
spend more in 2010 than we
did in 2009, there is no
hold steady reason for us to immediately
put everything back in place
40% of marketers expected
further cuts as of August,
compared with 49% in early
2009
”
that we had prior to the
economic environment
becoming so challenged.
– Jeffrey Hennion,
EVP & CMO
Source: Association of National Advertisers, July 2009 Marketer Survey

7. Marketers, Faced With Budget Cuts, “Followed The Consumer”
and Reallocated Spending in 2009
Survey of Marketers & Service Providers in 2009:
“Which channels are capturing or losing share of marketing budgets?”
E–Mail 72%
Search (Keywords & SEO) 71%
Capturing Mobile Marketing 50%
Online Display Advertising 50%
Print: Newspaper & Magazine 91%
Losing Direct Mail: Catalog 55%
Broadcast: TV & Radio 54%
Direct Mail: Non-catalog 46%
Source: WG Survey (2009)

8. A 5% Decline in “Above-the-Line” (ATL) Channel Spending in 2008
Accelerated in 2009, Falling Another 18%
2009E U.S. “ATL” Advertising Spending
$110.0BB
-12.7% Outdoor:
Cinema: -5.0%
$6.1BB
$0.5BB
-20.7% Radio:
$14.1BB
Television: -13.8%
-18.8% Magazines: -18.4% $48.0BB
$15.6BB
Source: WG Analysis, 2010
Note: Arrows reflect percentage change in
Newspapers: -25.7%
spend, by channel, from 2008 levels $25.8BB

9. In the Midst of Recession, Digital Still Grabbed $500MM of Growth
2009E U.S. “Direct & Digital” Advertising Spending
$151.2BB
-11.0% Insert Media:
$0.8BB Other: -10.0%
$2.4BB
-22.4% DR Print:
$15.5BB
Direct Mail: -16.8%
$43.7BB
-14.1% DR Broadcast: -11.3%
$22.8BB
Digital:
1.6% $26.5BB
Source: WG Analysis, 2010
Teleservices: -5.7%
Note: Arrows reflect percentage change in $39.4BB
spend, by channel, from 2008 levels

10. Substantial Declines in U.S. Direct Mail Volumes Began In Q4 2008—
And Have Only Recently Begun to Abate
U.S. Direct Mail Volume, 2004-2009 (BB of Pieces)
160
130.8BB 136.2BB 137.6BB 136.9BB 128.4BB 109.0BB
140
Annual Piece Volume (BB)
120 35.3 -0.4% 35.1 -2.7% 34.2
35.3 -0.1% -5.6% 32.3
100 -10.5%
28.9
80
5.5% 1.5% 0.2%
60
95.6 100.9 102.5 102.7 -6.4% 96.1
40 -16.6% 80.1
20
0
2004 2005 2006 2007 2008 2009
Y-o-Y
Source: WG analysis of data from USPS
Standard Class First Class DM Change
Household Diaries

11. Make No Mistake: 2009 Brought a “Market Correction” to Direct Mail
$60.0 10.0%
2007 Y-o-Y
Decline:
Y-o-Y Growth in Mail Spending (%)
$50.0 $55.6 5.0%
$54.8 1.4%
U.S. Spending on DM ($BB)
$52.6
$51.7
$48.3
$40.0 0.0%
$43.7 2008 Y-o-Y
Decline:
$30.0 -5.0% 4.1%
$20.0 -10.0%
2009 Y-o-Y
$10.0 2004 2005 2006 2007 2008 2009 -15.0%Decline:
16.8%
$0.0 -20.0%
Direct Mail Spending Year-over-Year Growth
Source: Winterberry Group analysis of data from the Direct Marketing Association and various other sources

12. Volume Deterioration Skewed Toward Traditionally Heavy DM Users;
Mail Doing Better in Other Markets
2009 U.S. Direct Mail Volume Y-o-Y Change, By Vertical
Mortgage & Loans Credit Cards
(68.3)% (60.1)%
Automotive Technology
(31.1)% (29.9)%
Investments Banking
(27.8)%
(23.8)% (7.2)%
Telecom Travel/Leisure
13.1% 11.3%
Insurance
2.5%
Source: Winterberry Group analysis of data from Mintel Comperemedia

13. Multiple Forces Converged in 2009 to Depress Mail Spending and
Volume
“Virtually every element of the
mailing industry has been
experiencing the effects of
reduced employment, reduced
spending and reduced
Recession Driven Budget Cuts
Credit Card, Auto & Tech
Industry Pullback
consumer confidence…this Consumer Preference for
movement toward electronic Digital Media Rising
alternatives will also cause
continued downward Continuing E-mail
pressure on mail volume Substitution
into coming years.
– Jack Potter,
Postmaster General” Culmination of events have irrevocably
changed the direct mail industry

14. Five Digital Trends in 2009
1• “Year of social adoption” (though not % Global Reach (Across Internet Users)
spending yet) 30%
• Massive consumer adoption (top three
social networks have grown to rank 5% 5%
globally in the top 15 sites, by reach)
• Slight decline in marketing spend due to #13 #5 #2
unproven ROI
2• Proliferation of “smart phones” drives
mobile marketing opportunity
• Increasing consumer adoption of “smart
phones” as utilization grew 72% this year
• Large % increase in marketing spend as
marketers followed consumer migration to
mobile devices for web content /applications

15. Five Digital Trends in 2009 (Cont’d)
3• Rise of the audience buying in display
• Slight decline in spending after 2H 2008 slowdown
due to recession-driven budget declines
4• Search – Did Bing matter?
• 2H09 search volume increased as consumers
sought out holiday retail sales (retail being one of
Bing’s specialties)
• Slight increase spending as marketers (and their
agencies) emphasized SEO and improved tools
leading to SEM keyword reduction
5• E-mail and social media integration
• Slight increase in spending as social media
adoption increases consumer dependence on e-mail
as a primary online communication method

16. Impact of 2009
• Recession drove budget declines and shift from acquisition to retention
• Delay in marketing technology investments
• Longer test periods, more channels activated
Marketers
• Staff reductions despite increased marketing complexity
• Severe pricing pressure across services, data and campaign production
and execution
• Reductions in staffing to compensate for revenue declines
• Significantly increased purchase/license cycles for technology
Suppliers providers
• Profit declines inhibit investment in capabilities and operating
efficiencies
• Lack of capital availability and confidence constrains M&A activity, with
the exception of early-stage VC funding

17. Agenda
Outlook 2010
• What happened in 2009?
• What to expect in 2010:
Forecasts and trends in
direct and digital marketing
• Ten things to think about in
2010: Strategies for
marketers and suppliers

18. 2010: Marketers Encounter a Somewhat Healthier Economy
Real GDP growth resumes, forecast
up 3% in 2010, outlook will drive
increases in marketing investment
• 3Q 2009 marks “The End of Recession”
• Economists expect that U.S.
unemployment rate will peak between
10.0% and 11.0%
• Corporate attention will shift from cost
control to revenue expansion—that is,
customer acquisition—to drive growth
• Consumer caution likely to continue
through at least 1H10

19. 2010 Also Ushers In a More Active Regulatory Agenda
Focus on the economy slowed 2009
regulatory initiatives; watch for the
following in 2010:
• Online Privacy and Behavioral advertising
guidelines
- Self-regulation guidelines in 2009 likely to
become government regulation in 2010
• Fight over “Freedom of Speech” over new
blogging disclosure rules
• Tightening of telemarketing consent rules
• Consumer protection initiatives including
“Red Flag” rules for identity theft and
consumer financial protection implementation

20. Spending to Fall Across Traditional “Above-the-Line” (ATL) Channels,
Though Growth Returns for Television
2010E U.S. “ATL” Advertising Spending
$108.8BB
-0.5% Outdoor:
Cinema:
$6.1BB 0.0%
$0.5BB
-4.4% Radio:
$13.5BB
-6.2% Magazines: -1.2% Television:
$14.6BB $50.7BB 5.6%
-9.2% Newspapers:
$23.4BB
Source: WG Analysis, 2010
Note: Arrows reflect percentage change in
spend, by channel, from 2009 levels

21. Direct and Digital Channels: Digital to Accelerate, Mail to Stabilize
2010E U.S. “Direct & Digital” Advertising Spending
$153.9BB
Insert Media:
2.4% $0.8BB Other:
$2.6BB 6.1%
-3.6% DR Print:
$15.0BB
Direct Mail:
0.0%
DR Broadcast: $43.7BB
3.8% $23.6BB
1.8%
Digital:
8.3% $28.7BB
Teleservices:
Source: WG Analysis, 2010
$39.5BB 0.1%
Note: Arrows reflect percentage change in
spend, by channel, from 2009 levels

22. Direct Mail 2010 Spending Flat, Though Volumes Will Rise Slightly
Acquisition mail starts to recover;
retention mail declines as e-mail
presents viable low-cost alternative
• Financial services led the way down;
will rebound slightly along with retail
and auto
• Better use of analytics, database
management and hygiene restrains
piece volume growth
• Excess production capacity to keep
costs in check
• Postal rate freeze in 2010 should help
mailers keep postage costs at bay

23. Impact on Direct Mail Suppliers in 2010
In 2010, direct mail suppliers should expect:
• Further consolidation among direct mail production providers
• Stabilization in list pricing as acquisition mail returns
• Additional dependence on workshare to adjust to decreased volumes
Going forward, direct mail suppliers
should focus on:
• Integration of single platform
cross-channel execution capabilities;
Print, PURLS, Social and Email
• Targeting and analytics capabilities
that enable highly targeted campaigns
in a lower-volume environment

24. Digital Marketing Continues to Grow and Take Share From Traditional
Consumer digital media
U.S. Advertising and Marketing
consumption passes 30% share Spending, by Share of Approach ($BB)
of all media
$400 Digital
• Consumer adoption of social media BTL
5% 6%
plateaus $350 7% ATL
• Increasing standardization of digital $300 8.3% 9%
metrics leads to broader adoption 54% 55%
$250
55%
• Marketers focus on digital channel
$200 56% 56%
integration and optimization
$150
• Marketers’ staffing gaps delay more
aggressive shift in spend; internal $100
41% 40% 38%
execution silos begin to fall $50 35.7 35%
• Supplier capabilities continue digital %
$0
shift to capture demand and profit 2006 2007 2008 2009E 2010E
opportunity in emerging channels
Source: Winterberry Group analysis of various sources, 2010

25. Search: No Slowdown in Sight for 2010
Search spending projected to Search Spending vs. Other U.S.
accelerate 6.4% to $15.6BB in Digital Channels, 2006-2010E ($BB)
2010, up from 0.8% in 2009
$35
• More spending shift from Search
All Other Digital
traditional media channels, driven $30
by predictable ROI $25
• Increased adoption by SMB $20 54%
marketers (local search) 56% 55%
$15 55%
• Focus on picture and video search
51%
grows as rich media proliferates $10
• Unresolved issues around 45% 46%
$5 45% 44%
49%
ownership of audiences to
$0
challenge engine/publisher 2006 2007 2008 2009E 2010E
relationships
Source: WG Analysis, 2010

26. E-mail: Rumors of Its Death Have Been Greatly Exaggerated
E-mail spending projected to grow
8.6% to $1.4BB in 2010, largely due to:
• Marketer shift to lower-cost media
• Relatively high ROI of e-mail campaigns
• Growing overall effectiveness,
especially with regard to “integrated”
campaigns launched in conjunction with
direct mail, events and outdoor
• Increasingly effective integration with
social, e-commerce and mobile channels,
driven by improved cross-media platforms
• Deeper and more actionable marketing
databases (for both acquisition and
retention purposes)

27. Display: Is It the Next Big Acquisition Channel?
Display spending projected to
grow 9.2% to $9.3BB in 2010
following slight decline in 2009,
driven by:
• Marketers focus on following the
audience, shifting spending from
traditional media
• Publishers’ improved ability to
attribute traffic sources and
monetize inventory
• Emerging targeting and
optimization approaches enable
“data-enriched” display ads for
better effectiveness
Artwork Source: AdExchanger.com

28. Audience Segmentation + Behavioral Targeting = Relevance =
Enhanced Share of Spending
“
U.S. Behaviorally-Targeting Spending,
The overarching benefit [of as Percentage of Online Display
targeted ads] is relevancy. Advertising Spending,
Relevancy means that the 2006-2010 ($BB)
$10
consumer has a more
9.5% 14.8%
appropriate experience and $8 8.2% 11.4%
reduces intrusiveness…On the $6
7.2%
business side, relevancy for an
$4
advertiser means better results,
and hence, for a publisher, $2
– Jeff Hirsch CEO
”
better yield on inventory. $0
2006 2007 2008
Behaviorally-Targeted Display Ad Spend
Other Display Ad Spend
2009E 2010E
Source: Winterberry Group analysis of data from eMarketer (2010)

29. Display: Challenges Remain
• Impending Regulation: Self Do you want Web sites to show you
regulation vs. legislative regulation ads tailored to your interests?
• Disclosure/Consumer Education: (U.S. consumer response)
Do consumers know they’re being
“tracked” and “targeted” for
66% of U.S.
No Yes
marketing?
• Transparency: Do marketers know Consumers
18 to 24 55% 45%
where their ads are placed?
Say NO to
25 to 34 59% 41%
Age of Respondent
• Attribution: Ability to track display
as influencer on search, lead gen “tailored”
35 to 49 66% 34%
and site traffic
advertising
50 to 64 77% 23%
• Complexity: Friction between
“moving pieces” of data, platforms, 65 to 89 82% 18%
networks, agencies, etc.
Source: University of Pennsylvania/UC Berkeley survey (2009)

30. How Will Marketing Service Providers Support the Display
(R)evolution?
As online display evolves, agencies will be tasked Online Display
with: Campaign Execution
Value Chain
• Developing strategies and budgets for effective display
usage for both branding and direct response marketing Campaign
• Integrating Demand Side Platforms (DSP) into the Strategy / Planning
media-buying process and driving attribution metrics Audience Targeting/
Data Utilization
Data and analytics providers will need to manage
and incorporate: Creative
• New data sets comprised of “intent” and “in-market” data
Ad Delivery (via
(combined with portal, co-op and other offline data sets) Networks/Exchanges)
• Audience segmentation within online display Pricing / Valuation (e.g.
• Ad exchange and data exchange tools and processes Yield Management)
• Web analytics data to feed into optimization cycles Measurement &
Reporting

31. Social Marketing: All That Traffic, Show Me The ROI
Social media spending projected to
grow 13.2% to $1.2BB—$900MM (75%)
of which is included in display—then
slow going forward. Growth will hinge
upon:
• Marketer ability to measure impact of
social on engagement and conversion
• Bifurcation of social landscape into
“listening” and “marketing” platforms,
each fulfilling distinct (but complementary)
roles
• Availability and expertise of marketing
staff and suppliers to lead social efforts
(and to make money!)
Spending Source: eMarketer (2009)

32. Mobile: Ready to Move from “Test” to “Rollout,” In Spite of Ongoing
Bandwidth Concerns
Mobile spending projected to rise
27.1% to $2.2BB in 2010, driven by:
• Increasing utilization (and adoption) of
mobile coupons via SMS and now
search and display via smart phones
• Improved monetization of mobile apps
(2.3BB app downloads in 2009)
Growth is constrained by:
• Growing roster of dedicated
• Data network bandwidth/speed
suppliers—primarily offering mobile
e-mail and SMS/MMS support • Platform/software diversity
• Availability of location-based targeting • Poor/inconsistent browsing
technologies and integration with retail experience
• Proven success of early adopters, • Lack of marketer experience
inspiring other marketers into test modes with mobile campaigns

33. Growth in Digital Spending Driving Shift to Digital Capabilities in
Database Marketing and Marketing Technology
Marketing automation platforms for
campaign, workflow and operations
management will see increased demand as
agencies are pressured to become more
efficient and cost-effective. Areas of growth
include:
• Media planning and buying platforms and
tools particularly for digital channels
• Loyalty programs, which are increasingly
becoming digital
• Analytics platforms for emerging digital
segments (e.g. social media monitoring/listening)
• Online lead generation as acquisition returns

34. 2009 M&A Summary: 2H09 Began Gradual Recovery After Slow 1H09,
Though Valuations Remain Low In Line with Economic Risk
M&A slowed in 2009 with total
transaction value (down 27% YOY). 2009 Marketing Sector
The market was characterized by: Transaction Value, by Segment
• Strategic buyers ruling, but $26.2BB Total Value
financial buyers returning to offer a
Marketing Digital
variety of currency options (e.g. cash, Technology Media
$6.1BB $4.1BB
equity, debt) Advertising
& Promotion
• Longer closing cycles due to more $0.4BB
comprehensive diligence Interactive
Advertising
requirements $3.6BB
• Robust venture capital market Software & Out-of- Marketing
Information Home & Services
continuing for Web 2.0 second and $8.3BB Specialty $2.3BB
third rounds and Web 3.0 “A” and “B” Media
$0.6BB
rounds
Source: Petsky Prunier LLC

35. 2010 M&A Outlook: Much Stronger Year in M&A Ahead
Strong YOY growth is expected in 2010
M&A, driven primarily by strategic 2007-2009 Marketing Sector
buyers as financing options improve Transaction Value, by Quarter
($BB)
• Strong 2H09 transaction activity $25
implies improved growth into 2010, as
evidenced by transaction value doubling $20
each quarter since 2Q09 $15
• Improved stock markets open up the
IPO markets and allow strategic buyers to $10
leverage shares to complete deals $5
• Return of leverage financing for take-
privates and PE firms $0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
• Continued activity expected in mobile and
2007 2008 2009
Web analytics segments
Source: PetskyPrunier Deal Notes

36. Agenda
Outlook 2010
• What happened in 2009?
• What to expect in 2010:
Forecasts and trends in direct
and digital marketing
• Ten things to think about in
2010: Strategies for
marketers and suppliers

37. Ten Things to Think About in 2010
2010

38. Four Things We Think Are Going to Be Important in 2010
1 Mobile opportunities accelerate as growing adoption
of smart phones and apps—combined with marketer and
agency experience—allow for targeted and effective marketing
2 Local marketing dollars migrate online—from traditional
budgets—as geo-targeting capabilities improve (via search,
display and mobile)
3 Rate of consumer social adoption slows, but marketers
increasingly understand how to use and manage social media
(e.g. listening/monitoring, data collection, activation)
4 Death of the “digital” agency spurs the return of “Agency,”
blurring lines between traditional, direct and digital
agencies

39. Four MORE Things to Think About in 2010
5 Consolidation will accelerate as top-line
growth is driven through buying “good” companies
in order to take market share of slow growing spend
6 Understanding the new data taxonomy is
imperative for all direct marketing constituencies
7 Audience targeting in display—with online
brand “assurance”—spurs shift of spend to the
long tail of sites; thus, ad exchange buying grows
8 Globalization will become increasingly important
as marketers and marketing services providers
seek new geographies for growth

40. Two Things That Are No Longer Interesting in 2010
9 Economic recession is over, as U.S. GDP growth
returned in 3Q09, dawning a very slow but steady
jobless recovery
10 Do not mail legislation no longer as significant a
threat as the primary discussion has shifted to
digital channels and vertical advertising

41. Questions?
Bruce Biegel, Managing Director
bruce@winterberrygroup.com
Presentation download available at
www.winterberrygroup.com/ourinsights