Madison & Wall A Recurring Review of Topics Affecting Advertising-Supported Media March 30, 2012 Welcome to Pivotal Research’s “Madison & Wall”. The title refers to our work which sits at the intersection between the advertising industry and the financial world. We hope you’ll find these brief notes useful for their contrast to the hyperbole that pervades much of the chatter at that location.

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Internet / Advertising
Pivotal Research Group
Madison & Wall March 30, 2012
A Recurring Review of Topics Affecting Advertising-Supported Media
Welcome to Pivotal Research’s “Madison & Wall”. The title refers to our work which Brian Wieser, CFA
sits at the intersection between the advertising industry and the financial world. We 212-514-4682
hope you’ll find these brief notes useful for their contrast to the hyperbole that brian@pvtl.com
pervades much of the chatter at that location.
A MATCH MADE IN DETROIT - General Motors awards Chevrolet
account. The durability and desirability of the outcome is a matter of
perspective
RISING ONLINE ADVERTISING INDUSTRY CLIMBS HIGHER UP
“SILICON HILL” - Politics is the continuation of business by other means
Pivotal Research Group 853 Broadway, Suite 1406 New York, NY 10003
Important Disclosures Are Located In The Appendix

2. A MATCH MADE IN DETROIT
General Motors awards Chevrolet account. The durability and desirability of the outcome is a
matter of perspective
Assessing Detroit’s future prospects is something of a Rorschach test on optimism vs. pessimism in
overcoming massive economic challenges. Plenty of stories of human triumph and growth have emerged
in the last couple of years (urban farming anyone?) as the city and its regional economy attempts to
improve. But it’s still a place that is a shell of its former self, and one which faces numerous challenges
given the structural decline associated with the city’s severely diminished importance as a hub for the
automotive industry.
A similar Rorschach test can be applied to this week’s news of both Interpublic and Omnicom winning the
Chevrolet creative account (business which both agencies were already significantly involved with)
through a new agency called Commonwealth. You can see a hopeful new model for bringing great talent
together to produce unified messaging or you can see a corporate mess waiting to implode at no small
cost.
For a refresher on recent history, Interpublic’s Campbell-Ewald was the incumbent agency on the
Chevrolet brand from 1919 until 2010, when the account covering activities in the United States was
switched into Publicis Groupe’s Publicis agency. Months later the account was switched again by newly
appointed CMO Joel Ewanick to Omnicom’s Goodby Silverstein. Much of the branding work in many
international markets remained with Interpublic at McCann-Erickson, but up to 70 different agencies were
involved with the brand worldwide. This week, the parties announced the resolution of the global pitch for
the account with the creation of Commonwealth, which will nominally be a stand-alone agency, with a
board featuring leadership from Goodby and McCann, and work assignments and revenues – which
combined should be well under $100mm – associated with each holding company’s respective activities
recorded separately by Interpublic and Omnicom.
Agencies coming together in this manner could help their client achieve some important goals. The
structure of the account should allow GM to eliminate some “non-working” spending, either to support
overall cost savings or to reinvest in the Chevy brand. GM will undoubtedly benefit from access to
resources inside of both holding companies as well. But most importantly, it is apparently an effort to
facilitate more efficient interactions between GM and its agencies, and improve the consistency of
messaging in markets around the world by virtue of a massive reduction in the number of agencies GM
will work with for Chevrolet. While this effort is new in the context of bringing two holding companies
together to service one creative account, cross-holding company efforts to service accounts across both
media and creative are actually very common. Collaboration in the creative sphere is also common with
many accounts using one agency as a lead agency, with others to do related project work. For the most
part, nominally competitive professionals can collaborate to satisfy the client’s needs, while always being
mindful of being undermined in a future review. This relationship isn’t necessarily so different, if
considering that the work is mostly divided up on a regional basis rather than a functional one.
But on the flip side, several problems are evident. First, the financial structure of the relationship will be
challenging: assigning revenues and costs between individuals and activities attached to different holding
companies may impact who does or can do what. Further, there are real risks that individuals within the
organization will be undermined by their competitors ahead of what will likely be regular account reviews,
and this can create a politically difficult or toxic environment. Worst of all, the spirit behind the account –
reducing the number of agencies to streamline efforts – introduces risk of creating more homogenous,
“one size fits all” campaigns vs. the greater number of distinct campaigns for specific markets that may
otherwise have occurred. If for any reason GM sales are weaker in different regions, marketing – and the
CMO in particular – may be more likely to get the blame than it would get credit where growth occurs.
This creates some risk to the agencies involved in terms of their abilities to retain the account beyond the
next pitch.
-2- Brian Wieser 212-514-4682 Pivotal Research Group

3. No doubt, this solution offered certain advantages for each of the parties involved: McCann received a
badly needed win and some incremental revenue, while Goodby maintained a piece of a global account
and GM secured cost savings. But whether or not it’s a durable or desirable solution will depend on your
perspective.
RISING ONLINE ADVERTISING INDUSTRY CLIMBS HIGHER UP “SILICON HILL”
Politics is the continuation of business by other means
Online advertising is creating new centers of growth around the country, with names riffing off of Silicon
Valley (such as Silicon Alley in New York and Silicon Fen in Cambridge, UK). Silicon Hill is the
appropriate name for the tech community around Washington, DC (whose most prominent new company
may be LivingSocial), but we wonder if it’s not most appropriately used as a term to describe the growing
technology lobby focused upon the Capitol itself.
This week we hosted a conference call to discuss the state of media regulation in general – and online
advertising in specific – with Adonis Hoffman, a lawyer who is currently an adjunct professor at
Georgetown and formerly general counsel for the 4As (American Association of Advertising Agencies) as
well as a former FCC staffer.
The growth of Internet advertising has created an off-shoot for regulators seeking to apply their mandates
to a world in which technology is increasingly important. This means that lobbyists and consultants are
increasingly active in advising and advocating policies to regulators (primarily the FTC and FCC) and
Congress.
Key among our topics of discussion related to this week’s news from the Federal Trade Commission
which recommends best practices for the industry in protecting consumer privacy in a technology-driven
era. Happily, it appears that the FTC is relatively balanced in its efforts to secure consumer rights without
slowing the evolution of the industry. It is primarily doing this encouraging self-regulation, while reminding
publishers to do well by consumers or face the prospects of sanctions. However, to get there, the agency
invested significant time and resources, as did many consumer groups, industry lobbyists and other
interested parties.
On a seemingly separate topic during the call, we discussed how the anti-Google lobby is becoming
increasingly well-organized in DC. As that company becomes larger and larger – and its direct
competitors feel more and more threatened – it will continually find itself under more and more regulatory
scrutiny and this presence will undoubtedly need to consistently grow.
The common thread between these and other topics: given the ongoing efforts of regulators and
politicians alike, it is becoming increasingly important for Google as well as its competitors to establish
themselves to influence both regulation and politics, as these arenas are increasingly becoming a form of
competition by other means. While efforts to create jobs from emerging technologies are typically desired
by business people and politicians alike, we’re not so certain these are the jobs they had in mind,
however.
-3- Brian Wieser 212-514-4682 Pivotal Research Group

4. Appendix: Important Disclosures
Analyst Certification
I, Brian W. Wieser, hereby certify that the views expressed in this research report accurately reflect my
personal views about the subject company and their securities. I further certify that I have not received
and will not receive direct or indirect compensation related to specific recommendations or views
contained in this research report.
Legal Disclaimers
Pivotal Research Group LLC is an independent equity research company and is neither a broker dealer
nor offers investment banking services. Pivotal Research Group LLC is not a market maker for any
securities, does not hold any securities positions, and does not seek compensation for investment
banking services. The analyst preparing this report does not own any securities of the subject company
and does not receive any compensation directly or indirectly from investment banking services.
Stock Ratings
Pivotal Research Group LLC assigns one of three ratings based on an expectation of absolute total return
(price change plus dividends) over a twelve month time frame. The ratings are based on the following
criteria:
BUY: The security is expected to have an absolute return in excess of 15%.
HOLD: The security is expected to have an absolute return of between plus and minus 15%.
SELL: The security is expected to have an absolute return less than minus 15%.
Ratings Distribution
Pivotal Research LLC currently provides research coverage of 16 companies, of which 75% are rated
BUY, 19% are rated HOLD, 0% are rated SELL and 6% are unrated. Our company does not offer
investment banking services. This data is accurate as-of March 29, 2012.
Price Chart and Target Price History
Other Disclaimers
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accurate but are not guaranteed by us and do not represent a complete summary or statement of all
available data. Additional information is available upon request. Furthermore, information and opinions
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change.
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-4- Brian Wieser 212-514-4682 Pivotal Research Group

5. Commission Sharing Arrangements
Pivotal Research Group LLC has commission sharing arrangements (CSA) with numerous broker-
dealers. Please contact Jeff Shelton at 212-514-4681 for further information.
Additional Information Available Upon Request
-5- Brian Wieser 212-514-4682 Pivotal Research Group