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Dear Mast Research Report Readers,

Below is one of the better articles I’ve seen regarding the shift in MARKETING strategies which is resulting in the shift in advertising strategy and revenue, accordingly. Sometimes we (as media people) tend to forget that our valuable ad dollars are only a portion of an advertiser's marketing budget. As economic pressures continue to dictate stronger ROI and less "waste" in marketing, greater emphasis is being placed on pricing, incentives, customer retention and loyalty programs as well as shifts in media and advertising strategies to digital and newer forms of communication. That, coupled with the fact that traditional ad agencies can make more money as marketing services partners versus traditional advertising consultants and providers, we can anticipate that this is a trend that will only get stronger…

Where's the Money Moving? Out of Media
Ad Dollars Drop, but That Doesn't Mean Marketers Have Stopped Spending
By Bradley Johnson Published: June 11, 2007

CHICAGO (AdAge.com) -- U.S. ad spending -- at least the measured kind -- fell 0.3% in the January-to-March period, the first down quarter since the ad recovery began in 2002. But a drop in reported ad spending does not mean a drop in marketing spending. That's because what marketers need isn't just measured media; it's measurable results.

Omnicom President-CEO John Wren said his firm's emphasis on marketing services has given it an edge over rivals recently.

Budgets are gravitating from old-line measured media to an array of marketing-services -- digital, direct, customer relationship management -- that offers better tools to quantify results. Marketing services includes some media offerings, such as online ads. But much of marketing services doesn't fit in the box of an ad to be sold. For companies in the business of selling media space and time, a shift to non-media forms of marketing poses a fundamental challenge.

Marketing services win outMarketing-services disciplines often fly under the radar, unmeasured by ad trackers such as TNS Media Intelligence, which put out the first-quarter data. But the shift is clear: In 2005, U.S. agencies generated more revenue from marketing services than from traditional advertising and media, according to Ad Age's DataCenter.

The trend has continued. In the first quarter, the top three agency holding companies -- Omnicom Group, WPP Group and Interpublic Group of Cos. -- collectively generated 53% of worldwide revenue from marketing services. Omnicom last quarter generated even more revenue -- 57% -- from marketing services, and President-CEO John Wren said those disciplines have helped the firm outperform its rivals. "We are much larger in the marketing-services area relative to any of our leading competitors," he told analysts in April. "You know, I definitely think that's been a significant advantage for Omnicom over probably forever, but definitely for the last five or six years, and maybe even accelerated over the past couple of years."

To be sure, the economy is soft -- first-quarter GDP rose at an annual clip of 0.6%, worst since 2002 -- and ex-Fed chief Alan Greenspan sees a one-in-three chance of recession this year. Advertising can be a leading indicator: Measured spending began to fall three months before the official start of the 2001 recession, and it didn't begin a sustained rebound until six months after the downturn ended. But the agency business, boosted by digital work, is growing: U.S. agency employment in April hit its highest point since the 2001 recession. In contrast, traditional media companies have slashed 40,500 jobs -- 4.6% of workers -- since the measured-ad-spending recovery took hold in 2002.

Good for the web As traditional media disciplines struggle to adapt, internet media are gaining share. The internet's share of measured spending rose to 8.1% in the first quarter from 5.4% five years ago, according to TNS data. Even when they lose share, disciplines still can grow revenue. Consider the advent of TV: Every other consumer medium lost share from 1950 to 1960, yet every medium still managed to gain revenue during that booming decade. Even radio, most threatened by TV, managed a small gain. And by one measure, first-quarter measured media spending actually rose a little: Jon Swallen, senior VP-director of research at TNS, said the 0.3% drop becomes a 2.2% gain if you factor out Olympics advertising that boosted year-ago figures.

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New York Times May Ad Revenue Drops
New York Times May Advertising Revenue Down 8.5 Percent, Internet Ad Sales Up


NEW YORK (AP) Thursday June 14 10:19AM ET -- The New York Times Co. said Thursday that advertising revenue from continuing operations dropped 8.5 percent in May as national, retail and classified ads all declined.

The company said its total revenue from continuing operations fell 5.8 percent compared with May of last year.

The New York Times' media properties include its namesake newspaper, the International Herald Tribune, The Boston Globe and more than 30 Web sites including NYTimes.com and About.com.

Advertising revenue for the New York Times Media Group dropped 9.1 percent as national, retail and classified advertising all declined. Ad revenue for the New England Media Group fell 8.8 percent. The Regional Media Group saw the largest decline, with a 14 percent drop in sales.
Internet ad revenue for the New York Times, New England and Regional media groups surged 21.4 percent as display and classified advertising increased.

Circulation revenue for May rose 0.1 percent, as increased sales at The New York Times Media Group offset declines at the New England and Regional Media Groups.

Advertising revenue at the company's About.com Internet business jumped 32.6 percent with more display and cost-per-click advertising. The company said the data reflects the acquisitions of ConsumerSearch.com in early May and UCompareHealthCare.com in late March.

Unique U.S. visitors to the company's Internet properties gained 11 percent at 43.8 million, from 39.3 million unique visitors in the prior year.

The company said TimesSelect, a fee-based product on NYTimes.com offering columns and archived articles, has about 741,000 subscribers.

New York Times shares fell 40 cents to $26.04 in morning trading.

High Speed Internet Is Going High Speed!

China overtaking US for fast internet access as Africa gets left behind
One in five people in the world has high-speed lines but the gap is growing

Richard Wray, communications editorThursday June 14, 2007The Guardian

Almost 300 million people worldwide are now accessing the internet using fast broadband connections, fuelling the growth of social networking services such as MySpace and generating thousands of hours of video through websites such as YouTube.

There are more than 1.1 billion of the world's estimated 6.6 billion people online and almost a third of them are now accessing the internet on high-speed lines. According to the internet consultancy Point Topic, 298 million people had broadband at the end of March and that is already estimated to have shot over 300 million. The statistics, however, paint a picture of a divided digital world.

While there are high levels of broadband penetration in western Europe, North America and hi-tech economies such as South Korea, usage in developing countries, and especially in Africa, is pitiful. Many of these emerging economies lack telephone services, let alone the sort of broadband internet access that has become available to every household in Europe.

In terms of total broadband users, the US leads the pack with more than 60 million subscribers. But second-placed China is fast closing the gap. From 41 million users a year ago, China now has more than 56 million and looks set to overtake the US as the world's largest broadband market this year.

Katja Mueller, research director at Point Topic, said: "What amazed me when compiling these figures is that China has leapt ahead and actually had more people sign up to broadband in the first three months of this year than in any other earlier quarter."

China's rampant growth is a result of economic changes and government intervention. The country's economic boom has helped create an affluent urban middle class clamouring for the social aspects of internet access, while the government has been driving the roll-out of internet access in rural areas.

Next year's Beijing Olympics has provided a fillip to the market with the government demanding that every household in the capital has high-speed internet access in time for the games.

Japan ranked third, with 26.5 million broadband users at the end of March this year, while Germany is fourth at more than 16 million. France scored the highest growth (9%) in take-up among the top 10 broadband nations to leapfrog South Korea - at 14.1 million - to take the fifth spot with 15.3 million.

The UK came in sixth with just under 14 million broadband users at the end of March, up 6.4%. Demand in the UK has been driven by fierce competition from the satellite broadcaster Sky, which launched its broadband service last year, and the introduction of "free" broadband offers from firms such as TalkTalk.

But in terms of broadband usage as a percentage of households, the UK's position in the global rankings slips to number 17, with 55.5% of households connecting to the internet at high speed.
Based on broadband penetration, South Korea is by far the world's top broadband user with nearly 90% of households online. Several small, economically vibrant and densely populated states are also high on the list such as Hong Kong, Monaco and Macau. The US, with broadband penetration at just under 53%, is in 24th place. Penetration in China, meanwhile, is 14.35% while in India penetration stands at just 1.15% of the country's estimated 200 million households.

Penetration levels in eastern Europe, meanwhile, may be low but the region scored the highest overall level of growth in take-up, becoming the only area to show growth of more than 10%.
The region's economic rehabilitation, in part thanks to the inclusion of several states in an expanded EU, is driving take-up, according to Point Topic. Poland saw growth in new broadband connections of 9% in the first quarter, with Hungary at 10.38%, Bulgaria at 10.94%, Ukraine at nearly 15% and Croatia at a staggering 25%.

"Penetration of broadband in eastern Europe was really low, but it is starting to catch up with Europe and we expect eastern Europe to continue to grow," said Ms Mueller.

In fact, Indonesia scored the highest growth across the world in the first quarter - almost 28% - but from a very low base. Greece, meanwhile was second with growth of over 26% due to the rather late introduction of broadband by incumbent operator OTE.

The figures, however, show just how large the gap is between the digital haves and have nots. Many sub-Saharan African states do not register in the figures at all: only South Africa, Sudan, Senegal and Gabon make it on to the list, with household broadband penetration running from 1.79% in South Africa - with 215,000 users at the end of March - to just 0.05% in Sudan with a mere 3,000. North African states fare slightly better with Morocco scoring 6.78% penetration with 418,000 users, and Egypt at 1.55% or 240,000. Many African states are now looking to mobile phone companies to provide access to the internet as they struggle to find a place at the digital table.

AD SPENDING COULD BE WEAKEST SINCE 2001
By HOLLY M. SANDERS

$LOWING SALES: In January ad growth for this year was projected
to be 2.6 percent. Now expectations are lowered to 1.7 percent growth over 2006 spending.June 13, 2007 -- After a bad start to the year, Madison Avenue is bracing for even worse news: Advertising spending in 2007 is expected to be the weakest since the ad recession in 2001.

Ad tracker TNS Media Intelligence predicts U.S. ad expenditures will grow just 1.7 percent to $152.3 billion, down from a previous forecast of 2.6 percent.

"Take two aspirin and wait for 2008," said Jon Swallen, senior vice president and director of research at TNS.

Swallen and other forecasters figured that ad spending would be down compared with last year, which had the double boost of the Olympics and election spending.

Still, TNS was forced to revise its full-year forecast after ad spending in the first quarter fell short of expectations.

"Spending through the first three months contracted at an even faster rate than we expected," Swallen said. "I'm coming up short on even my most pessimistic forecasts."

Swallen said marketers are being cautious, especially local advertisers that are sensitive to economic conditions and tend to pull back on advertising when faced with uncertainty.

The drop in dollars also reflects marketers that continue to shift their ad budgets away from traditional media such as TV toward less expensive digital alternatives including the Internet.

Television is a mixed bag. While ad spending on cable networks is expected to rise 5.9 percent, network TV expenditures will increase by just 1.3 percent. Without the Olympics-election combo, spot TV spending is expected to fall 5.5 percent.

Article Link (NY POST): http://www.nypost.com