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The economic environment in Germany developed positively over the course of the 2005/2006 financial year and was the basis for an equally positive development in the two sub-markets relevant to SinnerSchrader: marketing and advertising on the one hand and IT services on the other.

• According to the Federal Statistical Office, the gross domestic product (“GDP”) grew in the last quarter of 2005 and in the first two quarters of 2006, in each case by more than 1 % in comparison to the previous year. In its prognosis published on 19 October 2006, the Committee of Experts is predicting GDP growth of 2.3 %.
• According to the Central Association of the German Advertising Industry, expenditure on advertising in Germany will increase by 2 % in 2006 in comparison to a rise of 1.1 % in the previous year.
• The German market for IT services will probably continue its good development – which started in 2005 with growth of 4.4 % – with a rise of 4.5 % in 2006.

The continuing ingress of the Internet into everyday life has driven the development of SinnerSchrader’s business forward much more than the more general market development.

• According to a poll by Forschungsgruppe Wahlen, an institute which conducts election polls for German television, the proportion of Germans over the age of 18 who use the Internet had risen by another two percentage points to 66 % in 2006 in comparison to the third calendar quarter of 2005.
• The number of broadband ADSL connections, which enable more extensive use of the offers on the Internet due to higher transmission speeds, rose by 30 % to 13.4 million connections in 2006 according to information from the European Information Technology Observatory. In 2005 the figure rose by 54 %.
• Revenue from e-commerce (purchases and orders of goods and services by end consumers over the Internet) will increase by over 12 % to € 16.3 billion in 2006 according to figures from the Central Association of German Retailers.

Thanks to the above-mentioned developments, the Internet has continued to increase in importance for companies as a platform for customer acquisition and for shaping their relations with their customers. As a consequence, companies have increased – and are continuing to increase – their investments in establishing and expanding these platforms and in online communication with customers, from initial contact with the customer to support for regular customers. An impressive example of this is the development of expenditure for online advertising: the group of online marketers organised in the Federal Association for the Digital Economy is expecting expenditure for online advertising to grow by 59 % to € 1.6 billion in 2006.

This means that the growth in demand for interactive services that resumed two years ago continued in the 2005/2006 financial year and became even more dynamic. This greatly improved the business figures and the scope for action of the major providers on this market. Increasingly, they have considered and implemented – and are still considering and implementing – acquisitions to develop the provider landscape and their own positions. The aim of these efforts is, on the one hand, to utilise the convergence of interactive services with classic advertising and marketing services. On the other hand, a policy of consolidation in the still highly fragmented interactive service provider landscape is being pursued, while more new providers are entering the market due to growth. The announced negotiations about a merger between Pixelpark AG and Elephant Seven AG are the first time that a merger has been considered between two of Germany’s ten biggest providers listed on the stock exchange. In this financial year, SinnerSchrader occupied a place in the top 5 in this group.