ADVERTISING IN GERMANY (OCTOBER 2004)

ADVERTISING: MARKET SIZE

The German market for advertisement reached sales of €20.2 billion in 2003. This reflects an increase of
0.7% to 2002.

This figure excludes commission fees, production costs etc, which pushes turnover to €30 billion in 2003.

The market reached its nadir in 2002, when sales fell below 1999 levels.

According to experts, the market is expected to grow from 2003 onwards again, as consumer confidence
increase and the German economy starts to pick up again.

However, the figures for the advertisement industry lie bellow the general expectation of economic growth.
This is a novelty, because the advertisement industry tends to reflect the general economic climate in an
amplified way.

TABLE 1 MARKET SIZE 1999-2003

Euro million
market size

21,815.9
1999

23,372.3
2000

21,680.3
2001

20,060.0
2002

20,210.0
2003

ADVERTISING: MARKET SECTORS

The sectors reflect a strong emphasis within the advertisement industry, which has changed over the review
period.

Advertisement with its classical features of creative work and design declined by 7% between 1999 and
2003.

Interactive advertisement and consultancy services increased by 197% and 368% over the same period.
The increase of interactive advertisement reflects the now omnipresence of the Internet. Advertisement in
form of pop up windows and on WebPages is a common feature of present day Internet use.

The strong growth of consultancy services reflects the increasing holistic approach of agencies. They offer
a complete solutions service to their clients. This service, depending on the size of the agency, can range
from market research to the design of the product.

TABLE 2 MARKET SECTORS 1999-2003

Euro million
2003
1999

Advertisement 13,289.2 12,349.0

Sponsoring 3,036.1 575.0
Events 3,900.2 1,305.0
Interactive 840.4 2,503.0
3,478.0
750.0
Consultancy Services

Source: Euromonitor

ADVERTISING: SHARE OF MARKET

BBDO Group Germany holds the largest share of the German advertisement market. It is the German
subsidiary of the US agency BBDO Group.

BBDO was able to increase their share within the German market. It increasingly chairs pan-European
campaigns, like for example the one of Poly Country Hair Colors for Schwarzkopf.

Grey Group, another German subsidiary of a US agency, is a distant second with a share of 4%, followed
by the French Publicis Group.

McCann- Erickson and Ogilvy & Mather hold shares of 2,5% and 1,3%, respectively. They too could
increase their overall shares.

The increase of the shares of the major players indicates a growing consolidation of the market, from which
more and more small agencies have to withdraw. These small agencies are often not able to offer the all
around service that clients increasingly request.

TABLE 3 SHARE OF MARKET 2003

% value
2003

12.0
BBDO Group Germany

4.0
Grey Group Deutschland
 3.0
Publicis

2.5
McCann - Erickson Advertising Ltd

1.3
Ogilvy & Mather

Source: Euromonitor

ADVERTISING: MARKETING ACTIVITY

The increase and decrease of the single sectors reflects the overall economic development in Germany.

The mass media increased its adspend by 5.7% to the previous year. The automotive industry increased
their adspend too, to reach a volume of €1,703.0 in 2003.

Pharmaceuticals recorded the strongest growth of adspend of 14%, especially advertisement for OTC
medication was advertised more than ever.

Financial services increased their expenditure by 7.9% to reach €465.0 million. They are concerned about
getting the attention of potential customers, as the life insurance and pensions in Germany have entered
discussions in the public domain.

Beer and clothing, which are perceived as Genussmittel (things for enjoyment) decreased their adspend,
due to generally declining sales figures.

TABLE 4 MARKETING ACTIVITY 2003

Euro million
Year: 2003

1,853.0
Mass media

1,703.0
Automotive

1,109.0
Trade organisations

675.0
Pharmaceuticals

612.0
Telecommunications
 597.0
Confectionery

465.0
Financial services industry

421.0
Special distributors

365.0
Company advertising

329.0
Beer

299.0
Clothing

Source: Euromonitor

ADVERTISING: CORPORATE OVERVIEW

All of the major players recorded a positive development of their turnovers. Market leader BBDO was able
to increase the turnover most, by 10.2%.

Grey Group Deutschland, Publicis, and Ogilvy & Mather recorded moderate growths of around 3%.

The increase of the turnovers of the major players does not reflect the overall situation of the advertisement
industry in Germany. Through the era of economic decline, post dotcom boom, a huge number of smaller
agencies had to file for bankruptcy.

However, the labor force of the major agencies was pared down due to a declining number of
advertisement campaigns. With a smaller number of employees and a concentration on the core business,
the top five were able to survive the crisis nearly unscathed.

TABLE 5 CORPORATE OVERVIEW 2003

Companies (brands)
market share
avg. sales growth

10.2
0.0
BBDO Gruppe Deutschland

3.0
0.0
Publicis

Grey Gruppe Deutschland 0.0 2.9

Source: Euromonitor

ADVERTISING: BBDO Gruppe Deutschland

BBDO Group Germany does not publish financial since 2003. As the subsidiary of a US agency, it is
according to the Sarbanes-Oxley Act not obliged to do so.

However, it can be estimated that the turnover of the German branch reached €2,213.0 million in 2003.
This is an increase of 5% to the previous year.

Gross income is predicted to have grown even more, by 10.8% to reach €350.0 million.

BBDO offers an all around service for their clients, including consultancy and communications.

For consultancy services, BBDO uses Cobra. It bought a 49% stake in the company in 2002. Cobra is
specialized in marketing consultancy.

The agency has major players amongst its clients, like Masterfood or Schwarzkopf. For Schwarzkopf it
designed an international campaign.

TABLE 6 BBDO GRUPPE DEUTSCHLAND

Euro million
Turnover
Profit

1,552.0
233.0
1999

1,900.0
270.0
2000

2,008.0
301.0
2001

2,109.0
316.0
2002

2,213.0
350.0
2003

Source: Euromonitor
ADVERTISING: Grey Gruppe Deutschland

Grey Group Deutschland does not publish financial data anymore, according to the Sarbanes-Oxley Act.
The company stresses that the year 2003 was characterized by a stable growth.

It can therefore be estimated that the turnover and gross income of Grey Group Deutschland increased
moderately, by 3% and 1.8% between 2002 and 2003.

Grey offers a 360° service, which includes advertisement, sponsoring, events, interactive media and
consultancy services.

It clients range from the tourists boards of Switzerland, Canada, and Venezuela to Seat, Payback, Nokia N-
Gage and O2.

Grey Group won 57 awards for creative designs in 2003.

TABLE 7 GREY GRUPPE DEUTSCHLAND

Euro million
Turnover
Profit

768.1
1999

910.2
135.3
2000

1,004.7
150.7
2001

1,006.0
150.3
2002

1,035.0
153.0
2003

Source: Euromonitor

ADVERTISING: Publicis SA
Publicis SA is Germany's third-largest advertisement agency network and maintains 19 offices across
Germany.

In 2002, the firm grew by 2% to €924 million (US$ 1.1 billion) in terms of billings.

However, gross income actually fell in 2002 for the first time since 1998. Gross income contracted by 7.7%
in 2002. Publicis was the only company amongst the first six players whose gross income declined.
Furthermore, Publicis fell from sixth to fifteenth place in w&v's ranking.
Despite the disappointing performance in 2002, the firm picked up at the end of 2002, following the merger
of Zenith and Optimedia and Publicis' acquisition of Bcom3.

TABLE 8 PUBLICIS SA
Euro million
Turnover
Profit

752.0
113.0
1999

888.0
133.0
2000

906.0
136.0
2001

2,926.0
216.0
2002

3,863.0
263.0
2003

Source: Euromonitor

ADVERTISING: McCann-Erickson Deutschland

As its competitors, McCann-Erickson Deutschland does not publish financial data since the Sarbanes-
Oxley Act.

It can be estimated that the company increased its turnover and pre-tax profits. Due to a new corporate
identity the agency is now able to exploit fully synergy potentials.

McCann-Erickson whose slogan is "Truth well told" was voted global agency of the year in 2003.

Its clients are wide ranging. Amongst them are Nestlé, Langnese, Opel, AIDS-Hilfe, Baccardi and Japan
Tobacco International.
TABLE 9 MCCANN-ERICKSON DEUTSCHLAND
Euro million
Turnover
Profit

683.2
99.8
2000
 712.0
103.9
2001

742.0
111.0
2002

760.0
117.0
2003

Source: Euromonitor

ADVERTISING: Ogilvy & Mather

Inline with the Sarbanes-Oxley Act, Ogilvy & Mather does not publish financials data since 2003.

The development of the financial figures of the agency can be described as positive. The turnover has
increased by an estimated 1,7%, and the pre-tax profits by 2.7% between 2002 and 2003.

Ogilvy & Mather, which since 1989 has been part of the WPC Group, London, is present throughout
diverse range of industries.

Its clients are producers of necessities, luxury goods, financial service providers, pharmaceutical
companies, as well as companies dealing with tourism, media and telecommunications.

Ogilvy & Mather is responsible of the advertisement of 200 steady clients, as well as 330 ad hoc projects
on average.

TABLE 10 OGILVY & MATHER

Euro million
Turnover
Profit

667.5
87.0
2000

100.8 698.3
2001

711.0
105.2
2002

723.0
108.0
2003
Source: Euromonitor

ADVERTISING: END USERSHIP

Metro entered the top four advertisement commissioners, with a budget of €142.0 million in 2003.
Especially for its Media Markt subsidiary it strongly increased its expenditure.

Procter & Gamble has still the highest budget for advertisement with €185.0 million. This reflects an
increase of 3.8% to the previous year.

The ranks of Lidl + Schwarz as well as Axel Springer Verlag have not changed. They to increased their
advertisement budgets by 3.9% and 1.3%, respectively.

Henkel, which decreased its budget in 2002, is about to increase its budget again, and has commissioned
new advertisements for some of its subsidiaries.

Other major players, especially in the confectionery market, kept their budgets or decreased them. They did
not launch many new products and did therefore not see the necessity to advertise existing products more.

TABLE 11 END USERSHIP 2003

Euro million
2003

185.0
Procter & Gamble GmbH

181.0
Lidl + Schwarz

171.0
Axel Springer Verlag

Source: Euromonitor

ADVERTISING: CONSUMER PROFILE

Watching TV is the Germans favorite past time. On average, they spent 93 minutes of the day watching
TV.

In some households, the television set has substituted for the radio, and is now the source of constant
entertainment.

However, advertisement is a constant on both TV and radio. Public broadcasters will on TV run
advertisement before any show before 8 p.m., and after that in form of sponsoring. Commercial broadcaster
run advertisements about every 20 minutes at any time.

The situation on the radio is slightly different, public broadcaster run advertisement every 30 minutes
before the news, commercial ones have more breaks for advertisement.

In regard to the print media, advertisement is most very age specific. Certain age groups read certain
magazines, the advertisement is according.

The majority of Germans reads news paper. However, the advertisement are very different between
tabloids like Bild and national paper like Frankfurter Alllgemeine.

TABLE 12 CONSUMER PROFILE - % PURCHASING 2003

sectors/categories
40-59 years old
Total Men Women 20-39 years old

37.0
41.0 38.0 44.0 33.0
Books

40.0
39.0 39.0 40.0 35.0
Magazines

90.0
82.0 82.5 81.0 73.0
Newspaper reading

84.0
83.0 82.0 84.0 81.0
Radio

89.6
89.9 88.9 90.9 84.2
TV

Source: Euromonitor

ADVERTISING: MARKET FORECASTS

With a general up turn of the German economy, the advertisement industry is set to pick up to.

This is reflected in a market value of €26,219 million in 2008, a plus of 29.7% to the 2003 figures.

The growth is forecast to accelerate towards the end of the forecast period, after 2006.

Furthermore, agencies are predicted to realize exiting synergy potentials and exploit these more than they
ever have.
With a growing consumer confidence towards the end of the review period, companies have to compete
more for the attention of potential consumers. The latter are predicted to become more interested again in
new product launches.

TABLE 13 MARKET FORECASTS 2003-2008

Euro million
market size

20,210.0
2003

20,803.0
2004

21,200.0
2005

23,239.0
2006

24,987.0
2007

26,219.0
2008

Source: Euromonitor

ADVERTISING: SECTOR FORECASTS

As the industry is predicted to grow in general, all sub-sectors are predicted to increase.

The classical sectors of advertisement, like advertisement, sponsoring and events, are set to benefit after a
period of decline in the review period.

Interactive advertisement and consultancy services are expected to gain further, and become the second and
third largest sectors.

These, for advertisement agency's relatively new branches, are expected to gain in importance as more and
more customers wish for an all around service of the agency. This ideally includes the services from the
idea of a new product to the launch of it.

TABLE 14 SECTOR FORECASTS 2004-2008

Euro million
2008
2004

15,718.0
12,670.0
Advertisement

4,313.0
3,551.0
Consultancy Services

3,987.0
2,689.0
Interactive

1,523.0
1,315.0
Events

678.0
578.0
Sponsoring

Source: Euromonitor