1.
PIVOTAL U.S. Equity Research
Internet / Advertising
Pivotal Research Group
Madison & Wall September 28, 2012
The Temperature of Online Advertising
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.
The Temperature of Online Advertising
We recently conducted extensive outreach to our contacts in the industry to take its
temperature on online advertising. Conditions evidently vary, as we reinforced our
perspective on expectations of strength at Google, moderating conditions at
Facebook and a cool Yahoo. Among newer products, online video is seemingly the
hottest sub-sector, with tremendous promise ahead for growth in exchanges. Mobile
was, at least among those we have been in contact with, a moderating medium
despite the growth we believe to be driven by a broader set of marketers.
Pivotal’s New Advertising Comparables
As an updated feature of our weekly Madison & Wall, we now include comparable
valuation and trading data of our coverage universe.
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Important Disclosures Are Located In The Appendix

2.
The Temperature of Online Advertising
As the season shifts from summer and into fall across the country, we thought it a good time to take the
Internet advertising industry’s “temperature” on current topics and the companies we focus on. In short,
Google remains hot, Facebook is experiencing some moderation, and Yahoo is increasingly cool.
EXCHANGES AND RTB: A WARM FRONT WITH RISKS OF THUNDER. The industry is placing
increasing importance on real-time bidding (RTB) / programmatic buying and exchanges. However, two
countervailing views are loud and clear: many brands remain highly concerned about transparency issues
(i.e. knowing where and when impressions are delivered, how payments are divided up across the value
chain). At the same time performance from these media-types is widely acknowledged as very good. Still,
perceptions by marketers and some agency professionals that exchanges are “not fair” won’t hinder
exchange growth as long as a critical mass of publishers and advertisers are unconcerned by the
aforementioned issues.
ONLINE VIDEO UNDER SUNNY SKIES. Unsurprisingly, online video remains one of the hottest areas in
online advertising. In particular, online video via Google’s YouTube is particularly enthusing agency
professionals, who are using the platform in an effort extend the reach of their traditional video buys
(although we have heard evidence that the potential for this may be limited). As a result, budgets for
online video are seemingly growing faster than increases in any large digital media type, at least among
large brands.
MOBILE EXPERIENCING FALL-LIKE CONDITIONS AMONG LARGE BRANDS. Most of the
commentary we heard on mobile was negative, with concerns highlighted around the absence of cookies
on iOS, challenges with creating appropriate landing pages and more broadly, the fact that marketers can
still satisfy the bulk of their digital media goals via the traditional web (as reach of mobile advertising is
rarely incremental, and geo-targeting is not typically of distinguishable value to large brands). We think
what we heard was skewed by the kinds of brands represented in our recent industry interactions,
however. Mobile advertising grows in part because there are some large brands actively using
mobile, but more importantly mobile grows because of new segments of marketers (i.e. mobile ad
developers or others who are endemic to mobile environments), newly able to spent money to promote
their activities.
GOOGLE – HEATING UP; FACEBOOK – MODERATING, WITH POTENTIALLY WARMING FROM
FBX; YAHOO – REMAINS UNSEASONABLY COOL. Commentary from the industry on Google remains
almost universally positive. As indicated above, the exchange (“Adx”), the display network and YouTube
are growing particularly quickly. At Facebook, broader concerns remain among many marketers and
agency professionals (which, we note, have always been present). There is consensus among our points
of contact that billings should begin flowing into Facebook’s new exchange, FBX “at scale” in 4Q12,
although the question is how much money will show up right away (we’re guessing a ramp-up towards
$100mm per quarter by early next year). Importantly, we have heard what seems to be a consensus that
Facebook and the advertisers working with FBX can “flip the switch” and begin to operate at scale without
much delay. Yahoo remains appealing to specific kinds of marketers, at least where it has depth (i.e.
finance). However, headwinds remain as strong as ever as core display advertising is increasingly
commoditized. One of the strengths of Yahoo that has come across in our prior outreach to the industry
has been Yahoo’s sales force. However, anecdotes we have heard from recent periods suggest
increasing negativity and towards them. While this may simply be a function of the specific agency
professionals and marketers who we have been hearing from, we also heard sentiments of hope based
upon the notion there is still “considerable value that is not presently being harnessed” from within Yahoo.
Pivotal’s New Advertising Comparables
As an updated feature of our weekly Madison & Wall, we now include comparable valuation and trading
data of our coverage universe.
-2- Brian Wieser 212-514-4682 Pivotal Research Group

3.
Pivotal’s Advertising Comparables: Operating Metrics
Operating Metrics
IPG OMC WPP CBS VIAB DISCA GOOG FB YHOO
REVENUE
2012 $7,049.6 $14,196.1 £9,770.3 $14,915.4 $13,224.6 $4,556.9 $45,875.3 $4,971.2 $4,862.4
2013 7,337.1 14,810.8 10,356.7 15,811.0 14,688.5 4,914.9 53,322.3 7,347.3 4,740.8
• 2013 Growth 4.1% 4.3% 6.0% 6.0% 11.1% 7.9% 16.2% 47.8% -2.5%
2017 9,019.3 18,037.6 13,328.8 18,578.9 18,734.6 6,781.8 87,391.8 18,711.7 5,150.8
• 4-Year CAGR 5.3% 5.1% 6.5% 4.1% 6.3% 8.4% 13.1% 26.3% 2.1%
EBIT
2012 729.3 1,811.1 1,328.8 2,980.5 3,802.2 1,918.9 14,326.0 490.1 555.1
2013 813.3 1,978.3 1,470.6 3,270.7 4,008.6 2,124.4 15,188.4 2,419.8 907.7
• 2013 Growth 11.5% 9.2% 10.7% 9.7% 5.4% 10.7% 6.0% 393.8% 63.5%
2017 1,217.6 2,795.8 2,212.6 4,597.0 5,132.1 3,228.5 16,420.4 6,642.1 849.7
• 4-Year CAGR 10.6% 9.0% 10.8% 8.9% 6.4% 11.0% 2.0% 28.7% -1.6%
EBIT MARGINS
2012 10% 13% 14% 20% 29% 42% 31% 10% 11%
2013 11% 13% 14% 21% 27% 43% 28% 33% 19%
2017 14% 16% 17% 25% 27% 48% 19% 35% 16%
EBITDA
2012 930.8 2,089.8 1,518.8 3,513.5 4,042.2 2,027.9 17,898.0 1,090.1 1,189.9
2013 1,027.3 2,268.3 1,665.6 3,790.7 4,251.6 2,249.4 20,413.7 3,469.8 1,567.7
• 2013 Growth 10.4% 8.5% 9.7% 7.9% 5.2% 10.9% 14.1% 218.3% 31.8%
2017 1,402.6 3,145.8 2,658.6 5,037.0 5,369.1 3,356.5 27,255.7 8,342.1 1,549.7
• 4-Year CAGR 8.1% 8.5% 12.4% 7.4% 6.0% 10.5% 7.5% 24.5% -0.3%
EBITDA MARGINS
2012 13% 15% 16% 24% 31% 45% 39% 22% 24%
2013 14% 15% 16% 24% 29% 46% 38% 47% 33%
2017 16% 17% 20% 27% 29% 49% 31% 45% 30%
FREE CASHFLOW
2012 322.3 1,058.8 365.0 1,363.5 2,113.5 838.2 2,194.7 1,419.7 456.6
2013 426.4 1,093.3 900.1 2,208.3 2,328.7 1,050.3 11,294.9 2,240.1 274.6
• 2013 Growth 32.3% 3.3% 146.6% 62.0% 10.2% 25.3% 414.7% 57.8% -39.8%
2017 677.6 1,416.2 1,217.0 2,673.7 2,996.5 1,810.7 13,576.4 5,311.4 567.9
• 4-Year CAGR 12.3% 6.7% 7.8% 4.9% 6.5% 14.6% 4.7% 24.1% 19.9%
FREE CASHFLOW MARGINS
2012 5% 7% 4% 9% 16% 18% 5% 29% 9%
2013 6% 7% 9% 14% 16% 21% 21% 30% 6%
2017 8% 8% 9% 14% 16% 27% 16% 28% 11%
NET INCOME
2012 372.2 976.0 895.8 1,680.5 2,240.5 1,044.2 11,292.7 566.3 1,074.9
2013 420.8 1,073.3 1,010.4 1,878.3 2,315.7 1,165.3 12,757.0 1,532.1 1,334.3
2017 708.0 1,566.2 1,445.4 2,743.7 3,049.5 1,902.7 15,008.5 4,876.4 1,785.4
NET INCOME MARGINS
2012 5% 7% 9% 11% 17% 23% 25% 11% 22%
2013 6% 7% 10% 12% 16% 24% 24% 21% 28%
2017 8% 9% 11% 15% 16% 28% 17% 26% 35%
FCF = Net Income + D&A + Stock-Based Comp + Excess Tax Benefits + Pension Contributions - CapEx/M&A - Change in W/C + Other Recurring Cash Changes
Source: Pivotal Research Group
-3- Brian Wieser 212-514-4682 Pivotal Research Group

4.
Pivotal’s Advertising Comparables: Target Price and Related Metrics
Target Price And Related Metrics
IPG OMC WPP CBS VIAB DISCA GOOG FB YHOO
Near-Term 2012-2017 Growth Rate 5.1% 4.9% 6.4% 4.5% 7.2% 8.3% 13.8% 30.4% 1.2%
Long-Term Perpetual Growth Rate 4.0% 4.5% 5.0% 4.5% 4.5% 5.5% 6.0% 7.0% 2.0%
Near-Term 2012-2017 Discount Rate 10.9% 8.2% 8.3% 11.2% 7.5% 7.9% 7.1% 8.0% 8.6%
Long-Term Perpetual Discount Rate 15.4% 12.2% 11.8% 14.2% 12.0% 11.4% 11.0% 13.0% 15.6%
Enterprise Value (PV of Cashflows + TV) $5,166.2 $16,233.2 £15,104.8 $30,796.6 $42,276.4 $24,262.6 $229,327.6 $70,605.4 $4,452.9
2013E Cash + Marketable Securities 2,154.6 2,516.4 2,282.7 2,990.0 222.7 1,614.5 60,010.9 16,557.8 3,621.6
Other Asset Values 0.0 0.0 300.0 1,000.0 500.0 650.0 12,500.0 0.0 13,310.3
Value of Cashflows, Cash, Other Assets 7,320.8 18,749.6 17,687.5 34,786.6 42,999.0 26,527.1 301,838.5 87,163.2 21,384.8
Debt (1,433.4) (4,422.0) (3,964.1) (8,619.0) (8,647.0) (5,986.0) (6,205.0) 0.0 0.0
Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Target Price Equity Value 5,887.4 14,327.6 13,723.4 26,167.6 34,352.0 20,541.1 295,633.5 87,163.2 21,384.8
2013E Shares 443.4 253.8 1,347.4 602.5 472.4 357.0 337.6 2,730.2 1,041.7
Target Stock Price 13.00 56.00 1,020 43.00 73.00 58.00 880.00 32.00 21.00
• Target Vs. Current Price 17% 7% 20% 20% 35% -3% 16% 57% 31%
Current Stock Price 11.14 52.36 853.0 35.96 54.15 59.49 756.50 20.32 16.04
Current Stock Price Implied Equity Value 4,939.5 13,289.0 11,493.3 21,665.9 25,580.5 21,237.9 255,403.8 55,478.5 16,709.2
Current Stock Price Implied Enterprise Value 4,218.3 15,194.5 12,874.7 26,294.9 33,504.8 24,959.5 189,097.9 38,920.7 (222.8)
Source: Pivotal Research Group
-4- Brian Wieser 212-514-4682 Pivotal Research Group

5.
Pivotal’s Advertising Comparables: Other Metrics
Profit and Cash Generating Metrics
IPG OMC WPP CBS VIAB DISCA GOOG FB YHOO
EPS
2012 $0.80 $3.66 61p $2.58 $4.27 $2.74 $34.04 $0.27 $0.90
2013 0.94 4.21 69 3.06 4.77 3.26 37.95 0.57 1.23
• 2013 Growth 17.7% 15.1% 13.7% 18.4% 11.7% 19.1% 11.5% 109.1% 37.3%
DIVIDEND/SHARE
2012 0.30 1.20 27 0.42 1.05 0.00 0.00 0.00 0.00
2013 0.36 1.40 31 0.48 1.10 0.00 0.00 0.00 0.00
DIVIDEND/SHARE/CURRENT EQUITY PRICE
2012 2.7% 2.3% 3.2% 1.2% 1.9% 0.0% 0.0% 0.0% 0.0%
2013 3.2% 2.7% 3.6% 1.3% 2.0% 0.0% 0.0% 0.0% 0.0%
FCF/SHARE
2012 FCF/2012 SHARES 0.73 4.17 27 2.26 4.47 2.35 6.50 0.52 0.44
2013 FCF/2012 SHARES 0.96 4.31 67 3.67 4.93 2.94 33.46 0.82 0.26
FCF/SHARE/CURRENT EQUITY PRICE
2012 6.5% 8.0% 3.2% 6.3% 8.3% 3.9% 0.9% 2.6% 2.7%
2013 8.6% 8.2% 7.8% 10.2% 9.1% 4.9% 4.4% 4.0% 1.6%
FCF = Net Income + D&A + Stock-Based Comp + Excess Tax Benefits + Pension Contributions - CapEx/M&A - Change in W/C + Other Recurring Cash Changes
Trading Multiples
IPG OMC WPP CBS VIAB DISCA GOOG FB YHOO
Target EV/EBITDA
2012 5.6x 7.8x 9.9x 8.8x 10.5x 12.0x 12.8x 64.8x 3.7x
2013 5.0x 7.2x 9.1x 8.1x 9.9x 10.8x 11.2x 20.3x 2.8x
Current EV/EBITDA
2012 4.5x 7.3x 8.5x 7.5x 8.3x 12.3x 10.6x 35.7x -0.2x
2013 4.1x 6.7x 7.7x 6.9x 7.9x 11.1x 9.3x 11.2x -0.1x
Target EV/FCF
2012 16.0x 15.3x 41.4x 22.6x 20.0x 28.9x 104.5x 49.7x 9.8x
2013 12.1x 14.8x 16.8x 13.9x 18.2x 23.1x 20.3x 31.5x 16.2x
Current EV/FCF
2012 13.1x 14.4x 35.3x 19.3x 15.9x 29.8x 86.2x 27.4x -0.5x
2013 9.9x 13.9x 14.3x 11.9x 14.4x 23.8x 16.7x 17.4x -0.8x
Target P/E
2012 16.2x 15.3x 16.8x 16.7x 17.1x 21.2x 25.9x 118.1x 23.4x
2013 13.8x 13.3x 14.8x 14.1x 15.3x 17.8x 23.2x 56.5x 17.1x
Current P/E
2012 13.9x 14.3x 14.1x 13.9x 12.7x 21.7x 22.2x 75.0x 17.9x
2013 11.8x 12.4x 12.4x 11.8x 11.4x 18.2x 19.9x 35.9x 13.0x
FCF = Net Income + D&A + Stock-Based Comp + Excess Tax Benefits + Pension Contributions - CapEx/M&A - Change in W/C + Other Recurring Cash Changes
Source: Pivotal Research Group
-5- Brian Wieser 212-514-4682 Pivotal Research Group

6.
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 28 companies, of which 71% are rated
BUY, 29% are rated HOLD and 0% are rated SELL. Our company does not offer investment banking
services. This data is accurate as-of September 21, 2012.
Price Chart and Target Price History
-6- Brian Wieser 212-514-4682 Pivotal Research Group

7.
Other Disclaimers
Information contained in this report has been prepared from sources that are believed to be reliable and
accurate but are not guaranteed by us and do not represent a complete summary or statement of all
-7- Brian Wieser 212-514-4682 Pivotal Research Group

8.
available data. Additional information is available upon request. Furthermore, information and opinions
expressed are subject to change without notice and we are under no obligation to inform you of such
change.
This report is has been prepared solely for our institutional clients. Ratings and target prices do not take
into account the particular investment objectives, financial and/or tax situation, or needs of individual
investors. Investment decisions should take into account all available information, not just that which is
contained in this report. Furthermore, nothing contained in this report should be considered an offer or
solicitation by Pivotal Research Group LLC to buy or sell any securities or other financial instruments.
Past performance is not indicative of future performance and estimates of future performance contained
in this report are based on assumptions that may not be realized.
Material in this report, except that which is supplied by third parties, is Copyright ©2012, by Pivotal
Research LLC. All rights reserved. No portion may be reproduced, sold, or redistributed in any form
without express written consent of Pivotal Research Group LLC.
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
-8- Brian Wieser 212-514-4682 Pivotal Research Group