1. 1 Shifting Paradigms From Promised-Based to Performance-Based September - 2005

2. 2 Agenda I.The Big Picture – Overall Trends in Advertising II.The Multiple Hat Phenomenon – User Perspective III.Trends in SME Behavior IV.Towards a Performance-Based Model for Yellow Pages

3. 3 Advertising Industry Trends

4. 4 1900 – 2000 Advertising = Mass Media TV Radio Yellow Pages Newspaper

5. 5 Television Ad Recall Declines Source: Newspaper Association of America, Cable TV Advertising Bureau, and Nielsen Media Research Cable TV goes mainstream Remote control introduced World Wide Web arrives Tivo / DVR In homes

6. 6 Costs Increase Super Bowl Advertising Rates 1972 30 Second Spot = $86,000 Reach: 56,640,000 CPM: $1.52 2002 30 Second Spot = $2,100,000 Reach: 88,465,000 CPM: $23.74 Reach = 1.5X CPM = 15.6X

7. 7 Tenuous Trust Source: 2004 Forrester/Intelliseek Research

8. 8 Consumers in Control “Penetration will reach 31 million households by the end of 2006…The shift to on-demand TV will cut traditional advertising by 19% shaving $7 billion from traditional ad revenues…” Forrester Research

9. 9 Blogosphere – Consumer Generated Media (CGM) Source: The Pew Internet & American Life Project, The State of Blogging, Washington, D.C. * As percentage of 120 million U.S. adult Internet users

10. 10 Mass Medium (Contextual/Participatory Directional) TV Radio Yellow Pages Newspaper Mass Medium to CPD

11. 11 US Ad Spending Totals by Media Source: Robert J. Coen’s Universal McCann Direct Mail$48.375.0 Newspaper44.841.8 Broadcast TV*41.93-0.3 Radio19.101.2 Cable TV18.8115.4 Yellow Pages13.900.9 Consumer magazine11.444.0 Internet5.6515.7 Out of home5.445.2 Business publications4.000.7 All other31.994.1 Total245.483.6 2004 2004 US Ad% Change US Ad% Change Spending(2003-2004) 1 2 3 4 5 6 7 8 9 10 11 12

12. Change in Share of Ad Spend by Medium 2000 - 2004 Source: eMarketer, based on IAB/PWC (for online ad spend, which includes search, display ads, rich media, classifieds and other) and Universal McCann (for total ad industry spend, which includes direct mail and yellow pages), 2005 +52.7% -10.4% -8.2% -0.5% +3.6% +3.8% ($185 bn) ($197 bn)

13. 13 Online to Grow as Share of Total Ad Industry Source: eMarketer, based on IAB/PWC (for online ad spend, which includes search, display ads, rich media, classifieds and other) and Universal McCann (for total ad industry spend, which includes direct mail and yellow pages), 2005 $20 $15 $10 $5 $0 18% 15% 12% 9% 6% 3% 0% $7.1 $6.0 $7.3 $9.6 $11.5 $13.4 $15.6 $17.6 Online Ad Spend ($ bn) % of Total U.S. Ad Spend Online

14. 14 Trends in Directional Advertising Source: ConStat/TKG Local Commerce Monitor Tracking study among small business advertisers. Small Business Advertisers who Use Media

15. 15 Awareness CPD (Contextual / Participatory / Directional) TV Radio Yellow Pages Newspaper Next Shift:Towards Performance-Based Advertising Performance Based “Money where the clicks/calls are”

16. 16 Percent Breakdown of Total Online Advertising Activity Source: Interactive Advertising Bureau/PricewaterhouseCoopers, “IAB Internet Advertising Revenue Report” Q2 2004.

17. 17 Paid Search Advertising Spending 2000-2005 Source: eMarketer, December 2003 (as a % of total online advertising spending)

18. 18 The Multiple Hat Phenomenon

19. 19 Consumer Information Use Trend NA Base: Total Consumers Indicates significant differences between waves at the 95% confidence level Source: ConStat/TKG Userview consumer study.

20. 20 Reason for Using Specific Advertising Source First Source: ConStat/TKG 2005 Userview consumer study. %% To get a phone number, address or hours of ops34bc1015 To research the product or type of service172934a To find a retailer or business142315 Habit/used to it8b24 Don’t like/know how/want to use PC6bc---- Easy/convenient686 To research the retailer or business5117 To read reviews 318a10 In area/local2---- Base: Used/Would use media first(n=145)(n=49)*(n=64) Printed Yellow Pages Search Engines Newspaper abc Lowercase letters indicate significant differences at the 95% confidence level. * Small sample size; use caution when projecting data ^ Not all responses shown Reasons Used/Would Use Media First^ (Regardless of Shopping Situation) Media Used/Would Use Media First

21. 21 PYP Use – Last 6 Months Source: The Kelsey Group

22. 22 Search Use – Last 6 Months Source: The Kelsey Group

23. 23 IYP Use – Last 6 Months Source: The Kelsey Group

24. 24 Strength of PYP v. Search and IYP Source: The Kelsey Group

25. 25 SMEs Use of YP/IYP Print Yellow Pages Usage Where they look now… June ’04 31% Source: ConStat/TKG 2005 Local Commerce Monitor Tracking study among small business advertisers.

26. 26 Trends in SME Behavior

27. 27 Advertising Media Use (Traditional) Source: ConStat/TKG Local Commerce Monitor Tracking study among small business advertisers. (% Change 2001-2005) (-9%) (-3%) (+7%) (+6%) (-1%)

28. 28 Advertising Media Use (Online) Source: ConStat/TKG Local Commerce Monitor Tracking study among small business advertisers. * Began tracking in 2003/2004. (+13%) (0%) (-4%) (+7%) (0%) (-2%) (Percentage Points Difference 2001-2005)

29. 29 Budget Allocation Source: ConStat/TKG Local Commerce Monitor Tracking study among small business advertisers. Telco YPs Newspaper Company Web Site Pay-Per-Click/Search Engine Optimization Magazines or Trade Journals Radio June ‘05 June ‘04 Other YPs

30. 30 Future Advertising Budget Source: ConStat/TKG 2005 Local Commerce Monitor Tracking study among small business advertisers. Telco YPs Newspaper Direct Mail Paid Search Other Yellow Pages Plan to IncreasePlan to Decrease Internet Yellow Pages Company Web Site or Home Page June ’04 2%

31. 31 Local Paid Search Advertising Source: ConStat/TKG Local Commerce Monitor Tracking study among small business advertisers. Awareness of Local Paid SearchUsage of Local Paid Search

32. 32 Local Paid Search Advertising Source: ConStat/TKG 2005 Local Commerce Monitor Tracking study among small business advertisers. (Base: Small Business Advertisers using or extremely/very/somewhat likely to use local paid search) Billing PreferencesAmount Willing to Pay (Base: Small Business Advertisers who prefer being Charged according to the number of phone calls)

33. 33 A Performance-Based Model for Yellow Pages?

34. 34 The Opportunity Extract more value from current performance print YP already delivers to a segment of advertisers Extract some value from non- advertisers unwilling to commit upfront Incentive for the print YP industry to promote the category use One model for all distribution platforms - print, online, wireless, IPTV

35. 35 The Risks Advertisers reject the model as too complicated or “unjust” Sales lock-up – too complicated for commission based sales Too difficult to implement – phone number issues, tracking devices, etc. Possession and use decline substantially and reduce call volumes Individual advertisers find ways to corner the market for calls –(triple truck ads)

36. 36 ConStat, Inc. William D. Deaton, Ph.D. 70 Washington Street, Suite #225 Oakland, CA 94607 P: 510.267.3100 bdeaton@constat.com www.constat.com The Kelsey Group Neal Polachek 70 Tamalpais Avenue San Anselmo, CA 94960 P: 415.256.1268 npolachek@kelseygroup.com www.kelseygroup.com Contact Information