MOBILE ACTION CODES IN MAGAZINE ADVERTISING INCLUDING QR CODES AND WATERMARKSQ1 2012

1365 codes were printed in Q1 2012 versus 352 during the same period last year.

The market for mobile action codes in the top 100 U.S. magazines continued to grow in Q1 2012. Mobile action codes include all 2D barcodes, QR codes, Microsoft Tags, SnapTags and digital watermarks.

Every magazine title in our survey, except for one, contained at least one mobile action code during the period. More than 450 brands ran at least one advertisement during Q1 that included a code.

As the chart below shows, 1365 codes were printed in Q1 2012 versus 352 during the same period last year. The rate of increase from January to March was also greater in 2012 than 2011. If the trend

By Roger Matus, Executive Vice President, Ann Carver, Analyst, and Maria Tricca, Marketing Manager, Nellymoser, Inc.

Nellymoser, Inc. | 11 Water Street, Arlington, MA 02476 | t: 1-781-645-1515 | questions@nellymoser.com

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™

Action Codes By Month

Ac

tio

n C

od

es

Top 100 Magazines

Source: Nellymoser

700

600

500

400

300

200

100

295

394 373

278

370

507

587

681

631598

449

318

2011

2012

8894

170

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P2

continues, the overall adoption of mobile action codes will grow at an even faster rate during the year.

Action codes are popular with publishers and advertisers because they o!er a compelling way to activate print with mobile and social content that engages readers, builds brand loyalty and captures new business.

To understand how QR codes are being used in magazine advertising, Nellymoser surveyed the top 100 U.S. magazines by circulation. This study includes all issues dated during Q1 2012 as well as information from previous Nellymoser studies of magazines published in 2011.

The study is limited to national titles readily available on newsstands. This eliminated regional publications and any that require a membership, such as AARP The Magazine. For the purposes of this study, we refer to this list as the Top 100 magazines.

To compile the data, Nellymoser counted and analyzed every page in the Top 100 magazines. We analyzed 38,719 pages in Q1, including 15,691 advertising pages.

Nellymoser scanned every QR code, Microsoft Tag, SpyderLynk SnapTag, Digimarc watermark and all other codes with an iPhone or Android phone. We

For the !rst time, the percentage of magazine pages containing an action code exceeded 8% each month in the quarter.

Percentage of Ad Pages With An Action Code

activated every campaign, ran every video and visited every web page.

Action Code Growth

Every magazine in our study, except for Taste of Home, contained at least one code in Q1. The percentage of magazines with at least one code is up from 96% in Q4 2011.

Overall, the total number of action codes printed increased to 1365 in Q1 2012 from 352 in the same period of 2011. Period-to-period comparisons are important to seasonally adjust the data. Some magazines do not publish a January issue. Some others create a combined issue that spans December and January. (We count combined issues as being in December. ) In addition, advertising pages increased around the holiday season in the magazines that did publish.

The percentage of advertising pages with an action code may provide the most accurate measurement of mobile action code adoption.

For the "rst time, the percentage of magazine pages containing an action code exceeded 8% each month in Q1 2012.

The average and median number of action codes per issue returned to the levels found in Q3 2011, when there were no

2011 2012

Ac

tio

n C

od

es

Top 100 Magazines

10

9

8

7

6

5

4

3 3.55%

4.02%

5.02% 5.16%

4.96%

6.48%

5.76%

7.42%7.96%

8.36%8.90%

8.30%

8.05%

Source: Nellymoser

Nellymoser, Inc. | 11 Water Street, Arlington, MA 02476 | t: 1-781-645-1515 | questions@nellymoser.com

holiday season promotions. There were also fewer mega-promotions in Q1 versus Q4. The greatest number of codes in a magazine issue during Q1 dropped to 32 from a holiday season high of 70.

QR Codes Lead Market

QR codes clearly dominated the market with more than 80% of all codes in the Top 100 magazines during Q1, up from 72% in Q4. This is a signi"cant change from Q1 of last year when the market was closely split between QR codes and Microsoft Tags.

All other codes combined had less than 10% share. Digimarc watermarks and SpyderLynk SnapTags had an impact with major campaigns with multiple codes in select issues. For example, 25 Digimarc watermarks appeared in the February Sports Illustrated swimsuit issue while 24 SpyderLynk Snaptags appeared in the March issue of Glamour.

How Action Codes Were Used

In contrast to last year, it is now unusual for a magazine reader to be sent to a desktop-P3

QR codes clearly dominated the market at more than 80% of all action codes.

Number of Action Codes Per IssueQ1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012

Average number of codes per issue

2.33 4.23 4.83 6.50 4.88

Median number of codes per issue

2 3 4 5 4

Greatest number of codes in an issue

12 29 54 70 32

Number of action codes per issue for issues that contained at least one action code. Each weekly issue of a weekly magazine counted as a separate issue.

2012

% o

f A

cti

on

Co

de

s 2011100

90

80

70

60

50

40

30

20

10

0

53%

75%

63%

55%

68%74%

65%

80% 82%80%77%

55%

BEEDigimarc

JagTagMSFT Tag

QRSpyderLynk

WIMOAR

Type of Code

1

1

136

157

1

176

217

94

279

7

88

175

7

1

14

152

202

1

1

10

109

343

40

2

3

9

145

433

10

226

440

5

5

3

105

502

14

2

2

72

244

29

3

57

359

1

8

3

69

493

24

1

Microsoft TagQR Code

Other

46% 45%

25%

32%41%

21%25%

33%

17%23% 13% 12%

1% 0% 0%5% 4%

11%

2% 2% 4%1%

7% 6%

Action Code Market Share By Month

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mobile campaigns. Our qualitative analysis is that most action codes were used for one or more of the following four purposes:

Branding and Demonstrations: By far, the largest usage for action codes was to showcase a video (35%). These videos are often created speci"cally for mobile use. Examples include:

A behind-the-scenes lookA product demonstrationA how-to videoAn entertaining video

Data Capture and List Building (Opt-ins / Subscriptions / Sweepstakes): Action codes are e!ective for building databases because readers can respond immediately and wherever they are reading the magazine.

Sweepstakes were, by far, the largest contributor in this category. While a sweeps can be run with just one action code, there is a growing trend towards sweepstakes that us multiple codes and span an entire issue with multiple advertisers and editorial sections participating.

style web site after scanning a code. Advertisers and editors are creating mobile experiences designed to engage the reader while they are reading the magazine.

Video continues to be the top mobile experience launched by an action code. E-commerce, sweepstakes and social media are the next most common uses, with each being around 20%. The rankings remain very similar to last quarter:

P4

It is now rare for a magazine reader to be sent to a desktop-style web site after scanning a code.

Video: 35%

E-Commerce: 21%

Opt-in/Subscribe/Sweeps: 20%

Social Media: 18%

Store Locator: 11%

Coupon: 8%

Photo Gallery: 7%

Downloads: 7%

Recipes: 2%

Voting: 0%

$

$

Source: Nellymoser

Uses for Action Codes During Q1

Engagement Q4 2011 Q1 2012Video 44% 35%Opt-in / Sweeps

23% 20%

Social Media 16% 18%

E-commerce 19% 21%Store Locator 11% 11%Coupon 9% 8%Photo Gallery 8% 7%Downloads 5% 7%Recipes 4% 2%Voting 0% 0%

NOTE: Columns total more than 100% because each action code may lead to more than one engagement. For example, it may show a video and then o!er to share the video.

Nellymoser scanned every code, activated each campaign, watched each video and completed actions requested for the

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“Smart Sweepstakes” are also used to increase scan rates. After a user scans and enters information, the smart sweepstakes retains the user’s entry data from one scan to the next, enabling instant entry and reducing the obstacles to form submission.

Commerce (On-line Store, Brick-and-Mortar Store Locator / Coupon): Readers can immediately scan and act on a desire to purchase. Links to a corporate e-commerce store led the category at 21% followed by in-app store locators at 11%. Some store locators used the phone’s built-in GPS to "nd the nearest location.

Social Media: Action codes were also used to enable Facebook, Twitter and to connect to email. In Q1, 18% of codes enabled readers to share a video link or product information via social media. (NOTE: Only social sharing that was part of the mobile campaign was included. Some video campaigns led to a YouTube Channel, which in turn

has a social sharing feature. These were not counted.)

Top Industries and Brands

About 45% of all action codes used in magazines (619) came from companies in just four industries: beauty, health, home and fashion. These were the same top in-dustries as during Q4 2011. We also found in our Retail Study that companies in these industries led the action code use in stores. Speci"c brands, however, have changed. None of the top 10 brands during Q1 appeared on the top 10 list in Q4. This quarter, the top brand was TurboTax tax preparation software. Perhaps this is not surprising given that most of their business is during tax season.

The number two brand was Tyson, which in one of their campaigns, used QR codes to directly link to their Facebook page. Q4 leaders L’Oreal and Bose did advertise in Q1, but did not make the top 10 list.P5

About 45% of all action codes used in magazines (619) came from companies in just four industries: beauty, health, home and fashion.

Action Codes

1

2

3

4

5

6

7

8

9

10

Beauty

Health

Home

Fashion

Automotive

Financial

Food/Bev

Television

Jewlery

Pharmaceutical

Travel

To

p I

nd

us

trie

s

90

141

174

214

81

63

58

52

52

48

47 Source: Nellymoser Source: Nellymoser

Turbo Tax

Tyson

O’Keeffe’s Working Hands

Pandora

Restart Fitness

Blue Buffalo

It’s a 10 Haircare

UPS

Swanson

To

p B

ran

ds

18

19

19

21

17

15

15

14

13

12

Action Codes

Luden’s, Jenny Craig, Miss Me,Gorilla Glue, Bill Levkov Dresses

1

2

3

4

5

6

7

8

9

10

Top 10 Industries and Brands

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The Top 10 Magazines were primarily women’s magazines and home magazine titles

Top 10 Magazine Titles

The best way to determine the Top 10 Magazines with action codes is to calculate them by the number of codes per issue. This puts weeklies, momthlies and those that skipped an issue on the same basis.

As in 2011, the Top 10 Magazines were primarily women’s magazines and home magazine titles.

Action Code Text

In Q1, 64% of all action codes were accompanied by information that described what happens after the scan. This is considered by many to be a best practice and follows the pattern of many other calls to action.

There is a clear trend moving away from having other content around the QR code, which is an indication of wider acceptance. Only 17% of codes were customized and only 6% were accompanied by an icon. Few codes were accompanied by an SMS campaign.

Action Code Page Location

More than 85% of action codes are placed on the bottom half of the page, the traditional location for a call to action.

The diagram on the next page divides a magazine page into quadrants and shows by percentage where the action codes appeared. Numbers that overlap quadrants

Action Codes Per Issue

1

2

3

4

5

6

7

8

InStyle

Brides

Teen Vogue

This Old House

Car and Driver

Cooking Light

Traditional Home

Glamour

Every Day With Rachel Ray

Shape

15.0

15.0

17.7

18.7

12.0

12.0

12.0

11.7

11.5

11.3 Source: Nellymoser

9

10

Top Magazines By Number of Codes Per Issue

Scan to ShopGet the Free AppFrom Nellymoser Go To: ScanNow.mobi

Or text SCAN to 800-555-1234

describes destination64%

28%use color

are customized17%

6%have icon

1.6%have choice to use SMS

3%

Source: Nellymoser, Inc.

have instructions to get app

Action Codes In Print

indicate that a code crossed quadrant boundaries.

Conclusion and Key Findings

During Q1 2012, Nellymoser reached these key conclusions based on this study:

QR codes and other types of action codes have become established in magazine advertising. For "ve straight months, 8% to 9% of magazine ad pages contained a code. This is up

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P7

More than 85% of action codes are placed on the bottom half of the page

signi"cantly from March 2011, when 3.55% of ad pages contained an action code.

QR codes are the clear market leader. Digimarc watermarks and SpyderLynk SnapTags entered the market with large campaigns in single issues.

Almost all action code experiences have been mobile-optimized.

Four types of campaigns dominate the use of action codes:

Video demonstrations and branding

Data capture and list building.

Links to e-commerce sites and store locators for brick-and-mortar locations.

Social media sharing with links to Facebook and Twitter.

About 45% of all action codes used in magazines (619) came from companies

2.9%

39.9%1.8%

44.4%

0.2%8.9%

0.1%1.2%

0 %

Source: Nellymoser, Inc.

in just four industries: beauty, health, home and fashion.

More than 85% of action codes are placed on the bottom half of the page.

Nellymoser intends to update this report on a regular basis to identify trends.

Get noti"cations of future updates by following Nellymoser on Facebook at http://www.facebook.com/nellymoser.

Copyright 2012 by Nellymoser, Inc. All Rights Reserved.Not responsible for errors and all information is subject to change without notice. Nellymoser and the Nellymoser logo are

trademarks of Nellymoser, Inc. All other marks are the property of their respective owners.

About Nellymoser

Nellymoser, a mobile marketing and technology company, creates instant, interactive consumer “engagements” and rich media apps on mobile devices, such as tablets and smartphones.

These engagements and apps range from contests and product videos to interactive multimedia engagements that can be shared on social media (e.g., Facebook, and Twitter) and include e-commerce for instant product purchases. Many clients use Nellymoser for responding to action codes, such as 2D barcodes, QR codes, Microsoft Tags, Digimarc watermarks and

NFC. Nellymoser’s customers include leading publishers, advertisers, retailers and consumer packaged goods companies.

Nellymoser was founded in 2000 and is headquartered in Arlington, MA.

Scan To See Nellymoser In Action:

Nellymoser, Inc., 11 Water Street, Arlington, Massachusetts 02476 USA +1.781.645.1515 www.nellymoser.comCopyright 2012 Nellymoser, Inc. All Rights Reserved. Not responsible for errors and all information is subject to change without notice.

NELLYMOSER is a trademark of Nellymoser, Inc. All other marks are the property of their respective owners.

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