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TWST: Have there been any stocks that have rewarded investors well over this period?

Ms. Fine: Yes. True North Communications, Inc. (NYSE:TNO) has outperformed the market year-to-date by about 14%. (On a 52-week basis, the whole group has outperformed, but if you look at year-to-date 2000 performance, True North is the only name that has outperformed).

TWST: Have there been any that have been particularly disappointing, where you had expected something more?

Ms. Fine: Yes. The rest of the sector has been disappointing as the revenue growth and earnings have been quite good but the stocks have been lousy. The revenue and earnings growth has been so exceptional that I’ve been surprised that the whole group hasn’t at least kept pace or outperformed the market. In terms of why True North Communications has distinguished itself, I would argue it’s a combination of factors. First of all, the company had underperformed the industry so greatly that it was safe to say it had nowhere to go but up. In fact, it’s now starting to perform better and is catching up to industry growth, and investors are much more comfortable that its momentum can continue to accelerate because it’s still not at the same rate of growth as the peer group. So even if the rest of the group were to decelerate, there’s still room for them to meet in the middle, so to speak. And on the margin side, their margins were lower than the peer group, so as they’re getting better revenue performance, they’re getting the margins and their earnings are substantially outperforming the peer group. Finally, the valuation is so compelling that it has represented a lower risk way to play the group. It’s finally getting its day in the sun. Investors are getting rewarded with multiple expansion as well.

TWST: Let’s look at the issues that you’re factoring into the outlook for advertising in the near term and longer term. And will you comment on a recent forecast by Veronis Suhler that advertising growth going forward will be driven largely by Internet advertising?

Ms. Fine: I don’t disagree that Internet advertising will rise as a proportion of total ad spend. It has to because as people spend more time online, it makes sense for the ad dollars to follow. I’ve always said that advertising will go wherever there are eyeballs, and this is no different. And I fully believe that advertising will continue to underwrite some of the costs of the Internet, much like it does with TV. But more importantly, I think Internet advertising will prove to be very effective. The term Internet advertising is often used loosely. In the offline world, advertising means the purchase of media time and creating an ad; this is in contrast to marketing, which includes activities such as sales promotion, public relations, direct marketing and the like. Online, when people refer to advertising, they mean both advertising and marketing. In fact, we think the growth will largely be in online direct marketing and e-mail marketing. This makes enormous sense because it’s a more efficient way to reach a lot of people. It’s a way to target messages that are going to be more relevant to people. So I think online marketing will continue to grow at a rampant rate, but I don’t think I would agree with the assumption that it will be big enough to add to the overall growth rate in the next couple of years. ompanies are experiencing because of advances in technology as well.