July 6, 2010

Book Industry News Pearson, MCPS Partner for Curriculum Initiative..........................................................................................1 School Specialty Eyes Intervention, Science for Future Growth...................................................................3 Career Colleges Move to Improve Student Services as Feds Scrutinize the Industry .................................4 Catalog/Retail Industry News Destination Maternity® and Macy's Agree to Significant Expansion of Relationship ...................................5 American Greetings Introduces a Delicious New Concept to the Card Aisle................................................6 Apple Sells 1.7 Million iPhones in Three Days..............................................................................................6 Barnes & Noble Has High Hopes for E-Commerce ......................................................................................7 Amazon Acquires Woot.com .........................................................................................................................8 Baker & Taylor Expands Relationship with Shopko......................................................................................8 Staples Launches iGoDigital's Product Recommendation Platform .............................................................9 Direct Marketing News The Next Generation of Direct Mail Is Here ..................................................................................................9 Survey Says Few Merchants are Mobile-Savvy..........................................................................................10 Marketers Moved Dollars to Digital .............................................................................................................11 Directory Industry News Restaurant Category Remains Top Draw in Print, Online in 2009..............................................................12 United Industry Front Defeats California Bill Controlling YP Distribution ....................................................13 RBOC Billings Decline 5.1% to $605.4 Million in May ................................................................................13 Magazine Industry News Condé Nast to Launch Newsstand-Only Special Editions ..........................................................................14 Seventeen.com Relaunches with a Social Networking Push......................................................................14 Publishers Say New Products Go Beyond Digital Magazines ....................................................................14 American City Business Journals Launches Platform for Reaching Small Businesses .............................15

ECONOMIC UPDATE GDP: 2.7% in Q1 2010 (down from 5.6% Q4 2009) Unemployment Rate: 9.5% in June 2010 (down from 9.7% in May) Consumer Confidence: 52.9 in June 2010 (down from 62.7 in May) INDUSTRY UPDATE – BOOK Pearson, MCPS Partner for Curriculum Initiative (Educational Marketer – June 21, 2010)

Pearson (London and New York) and Montgomery County (MD) public schools have forged a partnership that accelerates development and implementation of the district’s K-5 online curriculum initiative, could put Pearson in the catbird seat for marketing an integrated program in sync with Common Core State Standards and provides Montgomery County schools with revenue from royalties if Pearson’s marketing is successful. Brian Edwards, the district’s chief of staff, said MCPS was not interested in entering the publishing business. He described the partnership as a practical solution for moving the district forward with its new curriculum in a time of budget challenges and limited district resources.

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“You’re in an era of shrinking budgets; you’re in an era of redoing curriculum from the focus on reading and math,” Edwards told EM. “We all have to look differently at what we’re doing. Now we can think outside the box.” While the Montgomery County district, the 16th-largest in the U.S., developed much of the curriculum in house and implemented the kindergarten portion in 90 schools in fall 2009, Pearson’s participation will accelerate implementation through grade 5 by two years and bring expertise in developing assessments and producing professional development components the district could not do on its own. Public/Private Business Model Pearson is paying the district $4.5 million (half is an advance on future royalties) and contributing personnel, materials and services to the initiative known as Project North Star. Ultimately, it will be able to market the MCPS-branded program to schools nationwide and globally. The partnership is one example of what Pearson and other publishers and instructional software providers have been working to do for years—collaborating on content and services to create customizable solutions for schools. Reginald Felton, director of federal relations and senior lobbyist for the National School Boards Association, views Project North Star as one more example of public/private partnerships. The key to success in such partnerships is for the district to drive content development rather than being just a testing ground for a publisher, said Felton, who served on the Montgomery County Board of Education from 1994 to 2004. MCPS used to put together its own elementary science kits and sold them to other districts. “If you have a great product, you make a business choice—sell or partner,” Felton told EM. “(Project North Star) is an issue of marketing and distribution rather than development.” Moreover, the current educational climate with tight budgets, limited local resources and demand for innovation is fostering entrepreneurship, suggests Sandra Fivecoat, CEO and founder of WeAreTeachers (Austin, Texas), an online marketplace and social media site for teachers, who more often share their ideas than sell them. Increasingly, education agencies, particularly regional ones, are expected to be self-sustaining and they often sell curriculum and professional development, she said. “Seeing that sort of trend dip down into the school district as another revenue stream is the logical next step,” Fivecoat told EM. “I don’t think districts partnering is any worse than the districts buying a lot of stuff from a publisher.” Appeal to Other Districts What remains several years down the road—MCPS won’t fully implement the K-5 curriculum until the 2012-2013 school year—is how great its appeal will be to other districts. Fivecoat said past efforts by districts to sell curriculum tended to fizzle out because the curriculum often was too specific to the home district to meet local objectives of other districts. However, technology that allows for customization and the spread of the Common Core State Standards could make the North Star curriculum more viable. MCPS initially will receive royalties of 2.5%, later rising to 3%, on domestic sales to other districts. Edwards expects the program to travel well, particularly because districts are so interested in online programs. “You’re going to have your first fully integrated curriculum that lines up with Common Core Standards,” Edwards said. “Districts can adjust it to fit local needs.”

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School Specialty Eyes Intervention, Science for Future Growth (Educational Marketer – June 21, 2010)

Revenue at School Specialty (Greenville, Wis.) declined 14.4% to $896.7 million in the company’s fiscal 2010, ended April 24, as tightened school purses hit both the Educational Resources and Accelerated Learning Group segments. “Coming out of the year, we feel a little disappointed with the revenue but proud of our earnings and cash flow performance in a very tough environment,” School Specialty president and CEO David Vander Zanden said in June, when releasing year-end results. “We did not pull back on investing in the business during the year.” Among those investments was the $11.7 million acquisition of AutoSkill International, the reorganization of operating units and the signing of a new co-operative purchasing contract that the company expects will drive growth in its co-op business, currently worth about $62 million annually. The company did experience growth in technology products in reading and math intervention and in the special needs area. “The businesses or business segments within the industry that are growing are typically technology-based right now, as there’s some real good solid demand in the industry around those kinds of products,” Vander Zanden said. Companywide operating income declined 3.8% to $74.7 million, but the operating margin increased almost 1 percentage point to 8.3%. The company reduced selling, general and administrative costs 13.3%. Free cash flow in 2010 totaled $90.2 million; the cash balance at year’s end was boosted by $19.2 million. Tough Market Continues Vander Zanden does not see much upswing in market conditions in the near future, with financial pressures continuing to buffet school districts. “Fiscal 2011 state and school budgets are going to see additional cuts when they’re passed, and they are going to be passed a little late again this year,” Vander Zanden said. Vander Zanden believes the 2010-2011 school year will be “the bottom of the funding cycle” and that states’ revenue will begin to grow in the next 12 months. Coupled with anticipated growth in property taxes, the picture should brighten for the company in terms of revenue growth beginning again in its fiscal 2012. In fiscal 2011, Vander Zanden expects revenue to decline 17% to 20% in the first quarter, ended July 31, and full-year revenue to fall 5% to 10%, with most of the decline in the furniture, equipment and supplies areas. Publishing Portfolio Strategy While the furniture business lost some share, the company believes it picked up market share in reading and math intervention and special needs, and held its own in science, even as science adoption revenue declined by $21 million. Science revenue should pick up with upcoming adoptions in Indiana and North Carolina in the next two years, with the big states further out. Meanwhile, the company is focusing on open-territory sales in large districts. “Most of the product development projects are geared to customizing offerings in support of future state adoption opportunities,” including a revised 2012 version of the elementary FOSS program, said ALG president Steven Korte. School Specialty changed the name of its curriculum group to Accelerated Learning Group to reflect the “strategic path to e-learning instruction, assessment and management reporting,” Korte said. In fiscal 2010, the AutoSkill portfolio was the group’s standout performer, exceeding expectations and contributed $5.9 million in incremental revenue. Korte expects the reading and math intervention business to deliver double-digit growth in fiscal 2011 with an expanded sales force and the launch of three blended-media reading intervention systems.

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These types of investment should position the company well to benefit from spending of Race to the Top grants, when the funding reaches states and schools, Korte said. “The combination of targeted print-based curriculum and e-learning instruction, assessment and management-reporting provides an efficacy-based learning package and solution for the numerous struggling readers across the country,” Korte said. Career Colleges Move to Improve Student Services as Feds Scrutinize the Industry (Educational Marketer – June 21, 2010)

The U.S. Education Department in June released proposed new rules aimed at the for-profit career college segment of higher education. While the department did not propose to cutting federal grant and student loan funds to for-profit institutions if student-loan payments were too high a percentage of graduates’ starting salaries, proposed rules ask the institutions to supply data to the department so officials can determine the ratio of student debt to their post-graduation salary levels. Also, the Senate Health, Education, Labor and Pensions Committee has aimed the red dot of a laser pointer on the industry—it expects on June 24 to begin hearings to examine federal education spending at for-profit institutions. “Pell Grants and student loans now provide more than $20 billion to for-profit higher education companies every year,” said Sen. Tom Harkin, D-Iowa, adding that students at for-profit colleges borrow more money, and more frequently, than do their peers at non-profit institutions. Federal grants and student loans comprise a high percentage of tuition revenue in the for-profit sector. For instance, federal Title IV funding accounted for 80% of tuition income in the first quarter at Career Education Corp. (Hoffman Estates, Ill.), up from 77.7% in the first quarter in 2009. Taking Action Nationally, student-loan default rates are about 6.7%, according to U.S. Department of Education statistics, but default rates in the for-profit sector hover about 11%. At CEC, the overall default rate is about 10%, though the graduate core default rate drops to 3%. Career Education CEO Gary McCullough said he recognized there is room for improvement. Despite the fact that CEC schools are largely open enrollment schools, McCullough said the company is working with incoming students, testing them and counseling them. “We make them understand the commitments that they’re making as they move through … the programs because it does none of us any good, in our company or in the industry, to have a high level of starts but not a high level of completion,” McCullough said. At Grand Canyon University (Phoenix), CEO Brian Mueller said the combination of low tuition rates, program offerings and a 43% graduate-student share of online program enrollment would likely make the rule less of a concern at GCU. “The fact that nurses comprise a lot of our undergraduate students is a good thing, because their first-year salaries are very high,” Mueller said. One problematic area could be undergraduate teacher education—a small but growing area of study at Grand Canyon—because their first-year salaries are relatively low. DeVry (Downers Grove, Ill.), as are other for-profit institutions, is investing in expanding career services for students and hiring more career advisors. DeVry also has accelerated the rollout of its Student Central locations to provide students support throughout their tenure at school.

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“The most recent employment rate for DeVry University graduates in the active job market who are employed within their field of study within six months of graduation remains steady at 87.7%,” said DeVry Inc. president and CEO Daniel Hamburger. The average salary of those graduates from the three terms between October 2008 and June 2009 was $44,186. In addition to increasing attention to student services, Apollo Group (Phoenix) and Bridgepoint Education (San Diego) are focusing more attention on older students. Apollo is transitioning recruitment effort at the University of Phoenix to shift enrollment to bachelor-degree candidates from students interested in associate degrees, in part to “reduce our risk profile,” said Apollo co-CEO Charles Edelstein. Bachelor degree programs were the single-largest source of revenue in Apollo’s fiscal second quarter, ended Feb. 28, at $436.6 million and the second-largest behind associate degree programs in enrollment at 178,000 students in the second quarter. Similarly, to attract students with greater commitment, Bridgepoint beginning in April raised the minimum age of admission to 22 for all online programs. INDUSTRY UPDATE – CATALOG / RETAIL Destination Maternity® and Macy's Agree to Significant Expansion of Relationship (Yahoo! Finance – June 28, 2010) Destination Maternity Corporation, the world's leading maternity apparel retailer, and Macy's Inc., one of the premier retailers in the United States, announced the expansion of their maternity apparel leased department relationship. By the end of February 2011, moms-to-be will be able to find the quality, style and value they have come to expect from Destination Maternity at over 615 Macy's department stores throughout the United States. Currently Destination Maternity operates leased departments in 113 Macy's locations in the United States, typically carrying a mix of Motherhood Maternity® and A Pea in the Pod® branded merchandise. Destination Maternity produced merchandise will be the exclusive maternity and nursing apparel offered in Macy's locations. Destination Maternity leased departments within Macy's typically carry a combination of Motherhood Maternity branded merchandise and A Pea in the Pod branded merchandise and, consistent with My Macy's localization approach, product assortments will be tailored to each store location. With quality fashion and a broad assortment specially designed to complement the pregnant silhouette, and at price points ranging from $7.50 to over $200, Destination Maternity operated leased departments in Macy's have something for every mom-to-be. Ed Krell, Chief Executive Officer of Destination Maternity, commented "We are delighted to expand our relationship with Macy's under an exclusive multi-year arrangement that is a win for Destination Maternity, Macy's and moms-to-be throughout the United States. Our relationship with Macy's, which dates back nearly 20 years, allows us to bring our knowledge as the maternity apparel fashion experts to a broader customer base, while providing us exclusive access to Macy's shoppers. This expansion serves to deepen our position as the leading maternity apparel retailer in the world." "We are very pleased that A Pea in the Pod and Motherhood Maternity will be the exclusive brands offered in our maternity collection," said Jeff Gennette, Macy's Chief Merchandising Officer. "Both brands are recognized for their style and quality, which are important to our customer. With this expansion, we are able to offer expectant moms across the country merchandise that is fresh and fashionable." After giving effect to the Macy's expansion, Destination Maternity produced apparel will be available in more than 3,200 locations in the United States and Canada, including approximately 700 company-operated stores, approximately 1,500 leased department locations, and more than 1,000 licensed locations.

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American Greetings Introduces a Delicious New Concept to the Card Aisle (Yahoo! Finance – June 28, 2010) Receiving a birthday card is fun for many reasons, but perhaps the most important reason is that the greetings represent everything that is so great about your special day. Every birthday card recipient sees first hand just how special they are, hears the kind words of friends and family, feels loved and appreciated, and, now, they can even taste the sweetness of the incredibly thoughtful gesture. In its constant effort to bring fresh and exciting ways for shoppers to connect and celebrate, American Greetings Corporation (NYSE:AM - News) has introduced a memorable new experience in the card aisle with Tasties™. Each card in the new line features a deliciously dissolvable flavor-strip, safely sealed inside, which recipients can enjoy along with the warm wishes of friends and family. These tasty surprises correspond with the art and sentiment of each card to offer the perfect recipe for a fun greeting. One birthday card in the new line features a mouth-watering image of a cupcake and reads, "If nothing else, birthdays are a great excuse to eat cake." The inside reads, "…lots and lots of cake." The dissolvable strip included encourages recipients to "take a bite," and enjoy the taste of vanilla cupcake, expanding on the fun and sweetness of the greeting. Other flavors to help consumers celebrate include everything from donut to margarita. "Just think, haven't you ever secretly wished you could actually taste that delicious looking piece of cake on the front of your birthday card? Well, now you can literally have your cake and eat it, too," said Mary McClain, creative director, new product concepts, at American Greetings. "Consumers love giving their friends and family something that is completely new and fun, and with Tasties they can share their warmest wishes along with a sweet treat to offer the proverbial cherry on top of their thoughtful gesture." Apple Sells 1.7 Million iPhones in Three Days (Business Day – June 29, 2010)

Apple has sold more than 1.7 million new iPhones in the product's first three days on the market, the California gadget maker said after its most successful launch ever. The iPhone 4, which features video calling, a crisper resolution screen and the ability to shoot and edit high-definition quality video, went on sale in Britain, France, Germany, Japan and the United States on Thursday. Apple said it sold over 1.7 million of the devices through Saturday. "This is the most successful product launch in Apple's history," Apple chief executive Steve Jobs said in a statement on Monday. "Even so, we apologize to those customers who were turned away because we did not have enough supply." Apple said the iPhone 4 will be available in an additional 18 countries by the end of July: Australia, Austria, Belgium, Canada, Denmark, Finland, Hong Kong, Ireland, Italy, Luxembourg, the Netherlands, Norway, New Zealand, Singapore, South Korea, Spain, Sweden and Switzerland. The iPhone 4 sells for $US199 in the United States for the 16 gigabyte model and $US299 for the 32GB model. Carriers in the United States and France were forced to suspend early orders because of heavy demand and sales of a white iPhone 4 model have been delayed to the second half of July because of unspecified manufacturing difficulties. Apple last week also addressed antenna problems raised by iPhone owners who complained that holding the smartphone in a certain way cut signal strength.

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Apple designed silver edging on handsets to be part of the antenna system to improve signal strength. "Gripping any mobile phone will result in some attenuation of its antenna performance, with certain places being worse than others depending on the placement of the antennas," Apple said. "This is a fact of life for every wireless phone." Apple advised users who experience the signal problem to "avoid gripping it in the lower left corner in a way that covers both sides of the black strip in the metal band, or simply use one of many available cases." Apple has sold more than 50 million iPhones since launching the handset in 2007. Barnes & Noble Has High Hopes for E-Commerce (Internet Retailer – June 29, 2010)

Bookseller Barnes & Noble Inc. sees the future, and it’s clearly online—a fact underscored in the retailer’s fiscal 2010 year-end financial results. In fact, after growing nicely in fiscal 2010, Barnes & Noble expects web sales to grow 75% in fiscal 2011, which would translate to just over $1 billion. In comparison Barnes & Noble projects comparable-store sales will remain flat or increase by 3% while total sales will increase 20% to 25%. “The explosive growth of digital books has created the most compelling opportunity in Barnes & Noble’s history,” says chairman Leonard Riggio. “We have found that Barnes & Noble members, our best customers, have increased their combined physical and digital spend with us by 17% since purchasing a Nook. Based on our assessment of the future digital landscape, I am confident that we have the right strategy and management team to drive Barnes & Noble’s next phase of growth and development.” Barnes & Noble, which switched its year-end reporting period to May after acquiring Barnes & Noble College Booksellers in October, for the fiscal year ended May 1 also recorded: � An increase in e-commerce revenue of 24.0% to $573 million from $462 million in fiscal 2009. E-commerce

sales include revenue from Barnes & Noble’s Nook business and related digital content, but the retailer didn’t separate that revenue from sales at BN.com.

� Year-over-year growth in total sales of 13.5% to $5.81 billion from $5.12 billion. Total sales include post-acquisition revenue from Barnes & Noble College Booksellers of about $836 million.

� Barnes & Noble comparable-store sales decreased 4.8%, while college bookstore same-store sales decreased 0.3%.

� Consolidated net earnings were $36.67 million compared with $75.92 million in fiscal 2009. “In light of the exciting digital opportunity before us, we are planning to redirect a significant portion of our financial resources towards investments in technology, sales and marketing,” says CEO William Lynch. “These investments will impact our bottom line in 2011, but we believe they will enable Barnes & Noble to capitalize on the significant mid-to-long-term growth opportunities presented by the digital markets.” Internet Retailer calculates e-commerce accounted for 9.9% of total sales compared with 9% in fiscal 2009. Barnes & Noble, No. 42 in the Internet Retailer Top 500 Guide, has spent much of the past fiscal year transforming itself from a traditional chain retailer into a more focused e-commerce and digital media company. In October, Barnes & Noble introduced its Nook electronic book reader and, in March, it promoted Lynch, the president of BarnesandNoble.com, to CEO. Higher e-commerce sales also are reflected in the retailer’s fourth quarter numbers: � E-commerce sales increased 51.0% to $141 million from $93.4 million in the fourth quarter of fiscal 2009. � Total sales increased 18.9% to $1.32 billion from $1.11 billion. � Net loss was $32.03 million compared with a net loss of $2.69 million in the fourth quarter of fiscal 2009. � Barnes & Noble comparable-store sales decreased 3.1%, while college bookstore same-store sales in

increased 2.9%.

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“We are pleased that in the fourth quarter each of our three channels of business have all gained significant share: physical bookstores, digital books and books sold online at BN.com,” says Lynch. “In fact, in just a brief 12 months since we launched the e-book store, our share of the digital market already exceeds our share of the retail book market.” Amazon Acquires Woot.com (Internet Retailer – June 30, 2010)

Amazon.com is acquiring daily deal site Woot.com, one of the pioneers in offering the one-day bargains that many online consumers seem to love. Amazon, No. 1 in the Internet Retailer Top 500 Guide, will purchase Woot (No. 176) for an undisclosed amount. Amazon, which just about a year ago acquired Zappos.com in a deal valued at almost $900 million, isn’t saying much about its latest acquisition. But in a series of blog postings on Woot.com, founder and CEO Matt Rutledge says his company looks forward to becoming an independent operating subsidiary of Amazon. “From a practical point of view, it will be as if we are simply adding one person to the organizational hierarchy, except that one person will just happen to be a billion-dollar company that could buy and sell each and every one of you like you were office furniture,” Rutledge wrote in a blog posting to employees. Woot, which generated Internet Retailer-estimated web sales of $71.6 million in 2009 and offers one discounted item a day such as computer hardware or an electronics gadget, is making the deal to take advantage of Amazon’s deep pockets and technology base, Rutledge says. “Amazon clearly knows what they're doing in a lot of areas, so we’re geeked about the opportunities to tap into that knowledge and those resources, especially on the technology side,” says Rutledge. “This is about making the Woot brand, culture, and business even stronger than it is today, and we expect that any changes will be for the better or we wouldn't bother with this endless paperwork." Rather than take the time to build a private sale or daily deal web site, Amazon likes Woot.com because of its already established clientele, says Scot Wingo, CEO of online marketing service provider ChannelAdvisor Corp. “Woot is one of the oldest flash sale sites, and while it doesn’t have all of the buzz of some of the luxury and apparel companies like Gilt Groupe or Ruelala.com, Woot has a huge and loyal following,” says Wingo. “It will be interesting to see what Amazon does with this asset moving forward. It could be used to come out with different verticals such as apparel.” Baker & Taylor Expands Relationship with Shopko (Yahoo! Finance – June 30, 2010)

Baker & Taylor, Inc., the world's largest distributor of physical and digital books and entertainment products, is proud to announce an expanded relationship with retail partner Shopko. Baker & Taylor, which already supplies music to Shopko's stores in 13 states, will now be the retailer's sole supplier of books and will also provide Shopko with both field merchandising and vendor managed inventory services. "We are thrilled that Shopko, a premier retailer, has chosen to outsource its book program to Baker & Taylor," said David Cully, President Retail Markets/EVP Merchandising for Baker & Taylor. "It truly speaks volumes about our expertise as merchandising professionals." The agreement with Shopko represents Baker & Taylor's latest expansion of its comprehensive vendor-managed inventory services and in-store service program for specialty and general merchandise retailers.

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"Shopko chose Baker & Taylor for its unmatched abilities as book merchants," said Bob Couch, Divisional Merchandise Manager at Shopko. "By partnering with Baker & Taylor, we will create a highly focused, relevant and on-trend book assortment for our customers." John Lindsay, Baker & Taylor's Senior Vice President, Merchandising, added: "Baker & Taylor delivers complete solutions for its retail partners. We offer superior merchandising and a complete suite of solutions for any and all retailers who sell books and entertainment products." Staples Launches iGoDigital's Product Recommendation Platform (Yahoo! Finance – June 30, 2010)

iGoDigital, the market and technology leader in Personalized Product Recommendations, announced that Staples has replaced its cart-level product recommendations system with iGoDigital. The Internet's largest office superstore, ranked #2 on the Internet Retailer 500 with more than $9.8 billion in annual sales, selected iGoDigital based on its proven record of success with 6 of the top 10 online retailers. iGoDigital's team of experts worked closely with Staples to understand their specific business goals. Some of the major factors that were addressed include the need to improve AOV (Average Order Value) and the desire for extensive merchant control over the logic behind the solution. Now, with iGoDigital's Product Recommendation Platform, Staples is able to offer a complete "basket" of related and compatible products to every site visitor that adds an item to the Staples shopping cart. This is accomplished through the display of product recommendations from the most relevant product categories presented to each customer after they've added an item to their shopping cart. This strategically placed page is presented to each customer before they begin checkout and is designed to increase AOV, items per order, and conversion rates. iGoDigital's intelligent merchant tool, customized to the specific needs of the Staples business teams, allows Staples to have vital input when determining the "basket" of items that will ultimately be displayed to the shopper. Furthermore, Staples has access to iGoDigital's suite of reporting tools, which provide insight into the effectiveness of the recommendations and their overall impact on revenue, average order value, and conversion rates. INDUSTRY UPDATE – DIRECT MARKETING The Next Generation of Direct Mail Is Here (Directmag – June 30, 2010) Marketers have heard the call to build brand loyalty and engage customers with their direct mail activities through the use of multiple media channels. Combining traditional direct mail tactics with new, interactive capabilities is a cost-effective way for every business—particularly small and midsize businesses without large marketing departments—to produce a higher return on their investment and generate business leads. Employing a multi-touch direct marketing program also offers the opportunity to gain a closed-loop system that tracks, analyzes, and measures the value of a campaign. The scenario used to go like this: John Smith receives a piece in the mail speaking to the masses who might be interested in the product or service being sold. There is, of course, a call to action with a phone number in the hopes that John is one out the many mailed to who is interested enough to make a call to get more information. This is often called “spray and pray” direct mail marketing, and rightly so. A prayer is the only thing that might spur action unless John really wants your product or service.

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But let’s fast-forward. Today John Smith receives a piece via traditional mail, or another initial communication such as an e-mail, with a personalized URL (PURL) or a QR code he can scan with his smartphone leading him to a microsite that houses the information he is most interested in receiving. Once on his microsite, John may find anything from an invitation to sign up to receive monthly e-newsletters to an embedded video to downloadable coupons for a chance to win a relevant prize. Shortly after visiting the microsite, John will receive an e-mail response thanking him for visiting the site. Based on information John chose to share while there, he may receive an additional letter, text, or social media notification as a follow-up to the product or service he expressed interest in. Now we have created a totally different experience for him—and for the business employing a direct mail campaign to engage him. Integrating interactive technologies into traditional direct mail campaigns allows you to receive demographic information and data on consumer behavior in real time. Additionally, using intelligent mail tracking (such as USPS’s Confirm service) enables you to receive e-mail from the Postal Service confirming the drop date of your direct mail piece. Delivery alerts make it possible for you to notify customers via e-mail or SMS to expect a personalized package in the mail, sparking curiosity. Another component involves PURLs, QR codes, and microsites designed to let customers choose how involved they want to become in the campaign and how much of their contact information they are willing to share. Providing the option to opt in or opt out of communications creates a stronger database of engaged customers for future campaigns. This sort of permission-based marketing can, of course, also be a source for referrals. Customers may forward links to videos and articles on their personalized landing page to their family and friends, expanding a campaign’s reach and effectiveness. Combining direct mail and interactive strategies also saves time and money. Rather than having to pay 47 cents for a business reply card and waiting for the post office to return the information, you can direct customers to respond online, through social media outlets, or via mail depending on their preference. With so many choices to efficiently communicate and participate in a campaign, customers are more likely to say yes to the offer. More good news is that smart direct mail campaigns just keep getting smarter. An integrated marketing program also provides the ability to populate CRM systems with information collected throughout the campaign. This intelligence indicates which calls to action and packaging drew the greatest response, information that is vital for refining future campaigns as well as helping to educate sales teams on business leads and development. Direct mail has always been an effective form of influencing consumer behaviors and strengthening brand identity. But times have changed, and consumer behavior has definitely changed with them. Now, with the advent of easy-to-implement, affordable interactive technologies—and the intelligence we can gain from them—your direct mail campaign can be more powerful and influential than ever before. Survey Says Few Merchants are Mobile-Savvy (Multichannel Merchant – June 29, 2010) Mobile browsers are generating 2.8% of overall site traffic and 2% of Web revenue, according to the results of the Forrester Research and Shop.org survey "The State Of Retailing Online 2010." But merchants have been slow to get in gear with m-commerce strategies. The survey, released today, finds that only a minority of those polled actually has an m-commerce plan in place. Of the 84 online retailers that indicated they have a mobile presence, just 20% said they have a strategy, implemented it, and are now refining it. What's more, 10% said they have a strategy and are starting to work on it, 8% said they have a strategy in place and 36% said they are in the early stages of developing a strategy.

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For the most part, survey respondents aren't doing much about m-commerce. Fifty-five percent said their site is not optimized for mobile, while 35% said they have a special site optimized for mobile browsers. They've got an app for that though: Thirty-three percent said they have an iPhone app, while 8% have an app for Androids and 8% for BlackBerrys. Merchants said they are investing a significant amount of money in mobile: Respondents plan to spend an average of $170,000 on a mobile strategy this year. Web-based merchants said they plan on spending $36,000 on their m-commerce strategy, while store-based merchants will spend an average of $244,000. "Mature" merchants – those that have been in business for more than 10 years –will invest an average of $287,000, while young businesses (less than four years online) will spend just $40,000 and medium businesses (four to 10 years) will spend $80,000. Marketers Moved Dollars to Digital (Adweek – June 28, 2010) For most traditional media, 2009 was an ugly year, but for print the tanking economy accelerated the digital migration for many large marketers. Many big-spending categories made sharp cuts in print, according to Nielsen data. Auto and light truck dealerships cut it 23 percent, real estate brokers 36 percent, financial brokerage services 35 percent, hotels and resorts 31 percent, and automobile insurance 26 percent. Ad spending overall fell 9 percent last year, per Nielsen. National magazine and newspaper spending fell 19.3 percent and 13.7 percent, respectively, for the same period. Marketers who made those cuts say that online media is both more accountable and has a better chance of bigger exposure, but many say print still has its place. One of the converts to digital media is Re/Max, which cut its print spend 53 percent, per Nielsen. Instead, Re/Max used display on sites that indexed high with buyers and sellers, and the company implemented behavioral targeting, tracking consumers who had been on sites like banks where they checked out mortgage rates. “We had done a lot of SEO, paid searches before, but in 2009 we made a much more concerted effort to serve more relevant information to consumers,” said Abby Lee, vp of Re/Max brand marketing. “It’s been very, very successful for us with much higher click-through rates. National print will be down again this year.” Hertz Car Rental blamed the economy for its 58 percent cut in print. Hertz rep Paula Rivera said that the brand’s digital spend rose “due to the effectiveness of the medium.” At State Farm, the print budget fell 55 percent as the insurer launched four online initiatives to reach female household decision makers. One of them was a highly popular Yahoo Webcast series featuring celebrity moms like Susan Olsen, who played Cindy Brady on The Brady Bunch. “It got a huge number of views. It’s times like that when digital is more cost-efficient because I don’t pay any more for all of those extra views,” said Ed Gold, State Farm’s advertising director. “The great thing about print, you know who the end user is. You know they’re there monthly; they pay for it, etc. But the level of viewers is not going to vary all that much unless it’s People and they put Princess Diana on the cover.” However, another State Farm effort was done in collaboration with Meredith Corp., publisher of titles like Better Homes & Gardens. The insurance company sponsored five different programs on topics related to insurance and financial services on the company’s Better.tv broadband network.

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Therein lies one of the few glimpses of optimism as print revenue is projected to continue to decline. Digital ad revenue for U.S. consumer titles hasn’t fallen along with print, even if its growth has dramatically slowed: Such spending rose 1.6 percent last year versus 114.5 percent in 2008, per a newly released annual global entertainment and media outlook from PricewaterhouseCoopers. “Inventory in the digital world is almost limitless, with a lower price point on the spending side so you can reach a lot of people more cheaply,” said Tim Corrigan, a PwC partner in its entertainment, media and communications practice. “Print’s in decline right now. At some point it will reach a bottom around 2012, and after that we’ll see some growth predicated on an overall upturn.” PwC expects print revenue to drop 7 percent this year, 3.5 percent next year and 1.1 percent in 2012 before rising 0.6 percent in 2013. Audrey Siegel, president at media agency TargetCast, isn’t buying into a direct correlation between the dollars cuts in print shifting into digital investments. Citing data from market research firm TNS, Siegel used the auto category as an example: In 2009, print spending decreased $263 million from 2008, but she argued that print’s portion in the overall percentage of media spending remained the same. “In regard to digital spending, there’s no reliable source in tracking it, so when we talk about print dollars migrating, it’s anecdotal,” she said. “Digital will continue to grow but not necessarily just at the expense of print. It can just as easily be a case of broadcast dollars shifting into digital. You can make the case that broadcast is a closer proximate to digital as we go forward, and digital becomes less about Web sites and more about things like digital video.” Another vote of confidence comes from E*Trade CMO Nick Utton. The online brokerage cut print spending 47 percent last year after introducing its "Talking Baby" brand-building campaign in 2008, with some of those dollars moved online. “Our increased focus on customer acquisition over the past year-plus has led to a recalibration of our advertising mix,” Utton said. “Regardless, print is still, and will continue to be, a key component of our marketing plan.” INDUSTRY UPDATE – DIRECTORY Restaurant Category Remains Top Draw in Print, Online in 2009 (Yellow Pages & Directory Report – June 2010) The top 10 print yellow pages headings accounted for 4.4 billion references or 36.9% of the total 12 billion print references in 2009, according to a study released by the Yellow Pages Association (Berkeley Heights, NJ). The top 10 online headings accounted for 1.1 billion references or 21.5% of the total 4.9 billion online references in 2009. Restaurants remained the top headings in both print and online with 1.29 billion look-ups for print and 286.3 million look-ups for online. The restaurant category in print was followed by the physicians and surgeons category with 987.4 million and auto repairing with 380.7 million. The restaurant category on the Internet was followed by government offices (city and village) with 158.1 million look-ups and food products with 100.8 million. YPA studies, which are conducted annually, are not easily comparable in 2008 and 2009 because there were conducted by different companies using different methodologies. Print usage was conducted by Burke (Cincinnati, OH) in 2009 and by Knowledge Networks/SRI (Cranston, NJ) in 2008. Online usage was conducted in both years by comScore (Reston, VA). Annual references to the yellow pages remained relatively stable in 2009 with 16.9 billion references compared to 16.98 billion references in 2008, according to Simba Information estimates. Simba is the publisher of YP&DR.

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United Industry Front Defeats California Bill Controlling YP Distribution (Yellow Pages & Directory Report – June 2010) A bill in the California Senate to enact controls on distribution of yellow pages was defeated early this month following an intensive lobbying effort by industry trade associations, according to an announcement by the Yellow Pages Association (Berkeley Heights, NJ). The YPA and the Association of Directory Publishers (Traverse City, MI) joined forced in May against the measure. Senate Bill 920, which was obtained by YP&DR, would have expanded the California Public Utilities Commission’s authority to include non-incumbent publishers, required specific opt-out information printed on the directories and would have required opt-out names and addresses to remain on the list until the addressee formally requested that delivery be resumed. “As the legislators learned more about the service we offer to small businesses, and the steps we’ve taken to put in place programs that allow consumers to stop directory delivery if they choose, it became clear that passing this bill into law was not worth the risks it presented,” YPA directory of public policy Amy Healy said in a prepared statement. Publishers have faced a barrage of environmental legislation that threatened the industry with government-imposed controls and “do not deliver” lists scattered around the 50 states. It was addressed and partially defused in 2009 with the united work of the YPA and the ADP. Despite obvious differences and goals—YPA primarily represents RBOCs while ADP represents independents—the associations joined forces and eased the pressure from environmental groups by launching an industry-wide opt-out Web site that allows consumers to search by ZIP code to opt-out of receiving yellow pages directories. The web site, which went live in early 2009, draws from the YPA’s Rates & Data system, which allows publishers to update information themselves. The environment movement against the yellow pages began in earnest in early 2007 when publishers found themselves in a frenzy of environmental issues at a meeting held by the Product Stewardship Institute (Boston) at the Environmental Protection Agency headquarters in Durham, NC, attracting representatives of federal, state and local governments, as well as officials from the YPA, ADP, telco publishers, independent publishers and suppliers to the industry. The meeting came about as a result of a bill introduced in the North Carolina Senate calling for yellow pages publishers to print opt-out requirements on their phone books. Although the bill died in committee, it was just the first of many that failed across the U.S. as the industry took the issue to heart and began a serious self-regulation movement spearheaded by the YPA and the ADP. RBOC Billings Decline 5.1% to $605.4 Million in May (Yellow Pages & Directory Report – June 2010) Billings for RBOC publishers declined 5.1% to an estimated $605.4 million in May in books with more than 50,000 circulation, according to YP&DR estimates. Yellow pages volume declined 4.2% to 36,973 pages. The drop in May revenue can be attributed to the decline in sales of more than 1,500 yellow pages in directories with greater than 50,000 circulation by the RBOC publishers—AT&T Advertising Solutions, Dex One (formerly R.H. Donnelley) and SuperMedia (formerly Idearc Media). A total of 88 directories with greater than 50,000 circulation were published in May, compared to 84 directories with greater than 50,000 circulation May 2009. SuperMedia led in billings with an estimated $344.9 million, followed by AT&T with $176.7 million. YTD through May billings are down 10.1% to $3.5 billion compared to the same period in 2009. Yellow pages to date are down 12.7% to 203,447 compared to the same period of 2009.

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INDUSTRY UPDATE – MAGAZINE Condé Nast to Launch Newsstand-Only Special Editions (Audience Development — June 29, 2010)

Condé Nast today announced it will be launching "up to six" newsstand-only special editions starting later this summer. The specials will be published under the Bon Appetit, Glamour, GQ, The New Yorker and Vogue brands. According to the company, the editions will leverage the magazine brands, but will focus on specific content verticals or features—such as Glamour's Dos & Don'ts franchise. Glamour will also be the first special edition, hitting the stands in August, says a spokesperson. According to the spokesperson, the specials will be priced in the $9.99 to $12.99 range. While special editions have traditionally been solid performers on the newsstand—leveraging a long shelf life and high price points—the retail environment has been less than cooperative. In the last two years, annual unit sales of audited publications are down 23 percent. In January, Meredith scaled back its special interest publications from 150 to 90, citing the recession's impact on home improvement projects. Seventeen.com Relaunches with a Social Networking Push (Mediaweek — June 29, 2010)

Following the recent boom and bust of teen magazines like Teen People and Elle Girl, the remainder has less competition on newsstands. But they also face new rivals for readers who have come of age amid social networks and other digital diversions. To that end, Hearst’s Seventeen has relaunched its Web site with a massive social networking push aimed at pulling girls away from online networks like Facebook, instant messaging, games and the like. “It’s absolutely about having girls spend more time on Seventeen,” said Ann Shoket, editor in chief of Seventeen. Seventeen.com has incorporated Facebook’s Open Graph sharing platform, Twitter and Meebo liberally throughout the site to encourage visitors to share content and instant-message with their friends. A new quiz tool and videos round out the site’s new offerings. The redesign also is making a bigger play for gossip, with a new celebrity news channel that’s powered by LMK (Let Me Know), Hearst’s aggregation site. It’s one of the first times LMK is powering a news channel on a Hearst magazine Web site. Concerns about the teen magazine category’s future notwithstanding, Seventeen is actually holding its own in print. The 2.1-million circ magazine is the biggest newsstand teen title, with nearly 400,000 copies sold, and its sales held steady in the second half of 2009 while the other teen titles were down, per the Audit Bureau of Circulations. Paid subs grew 8.1 percent in the same period. Shoket contended that the proliferation of Seventeen in other forms has helped buttress print circulation. She also pointed out that while girls are spending a lot of time online, the magazine still serves a distinct purpose. “They come to the magazine for deep ideas they wouldn’t have thought of on their own,” she said. Publishers Say New Products Go Beyond Digital Magazines (Folio — June 30, 2010)

At a time when magazine publishers are racing to market with applications for tablets and smartphones, Bonnier Corp. and Interweave have launched new digital products specifically for viewing on desktops and laptops. As part of the magazine’s broader “360-degree multiplatform initiative,” Bonnier’s Skiing magazine has developed Skiing Interactive, a digital edition with unique content and advertising that was developed specifically for accessing on a computer. Each issue will include features like a navigation scroll bar at the bottom, high definition cover videos, interactive maps and ads that allow users to click through for additional product information.

15 The Weekly Industry Update is published by Quad/Graphics Marketing. Please contact Alberto Peña at 212-583-6636 or alberto.pena@qg.com with any questions or comments.

Each issue also will feature a “Best of the Web” section that includes user-generated videos, stories and photos that is aggregated by the magazine’s editors. “All the best stuff you normally find on Web sites, we're going to get it all together and put it here in one place so you won’t have to spend hours looking around the web to see what's cool,” Bonnier Enthusiast Group director Tom James says in a video announcing the project. Bonnier has 10 editions of Skiing Interactive lined up, the first debuting in late fall. A Bonnier spokesperson says the company is still weighing different pricing models and subscription plans. A More ‘Immersive’ Experience Separately, Loveland, Colorado-based enthusiast publisher Interweave has launched Quilting Arts in Stitches, a digital product (they’re calling it an “eMag”) that, as with Bonnier and Skiing Interactive, the publisher says is a “much more immersive experience” than traditional e-books or digital magazine editions. “This is not a magazine or an app or a digital version of a magazine,” Fiber Division vice president and publisher John Bolton says. “Quilting Arts Magazine readers have been accustomed to digital issues of our print magazines for several years, but this is an entirely unique digital product unlike any we’ve been able to deliver before.” Edited by the staff of Quilting Arts Magazine, Quilting Arts in Stitches will include video demos and interviews with artisan quilters, slideshows with zoom options, downloadable and printable patterns and hyperlinks to other content. It will be available for purchase in Interweave’s e-commerce Web site for $14.97 per issue. Interweave says it plans on launching three more “eMags” soon from its knitting, specialty fiber and jewelry-making groups. American City Business Journals Launches Platform for Reaching Small Businesses (BtoB Media Business — June 28, 2010)

American City Business Journals announced the introduction of a new marketing services platform aimed at the small and midsize business market. Called The Business Journals, the platform includes ACBJ newspapers such as Atlanta Business Journal and Charlotte Business Journal, ACBJ’s digital network of 42 bizjournals.com websites, Portfolio.com and mobile apps. To market this new integrated platform to advertisers, ACBJ said it is combining the national sales teams of its Bizjournals and City Business Journal Network units. “Now national marketers can fully engage these fragmented, hard-to-find and difficult-to-reach executives running small and midsize companies that spend trillions of dollars every year,” Mike Olivieri, chief revenue officer of ACBJ, said in a statement.