I would now like to turn the conference over to Mr. Alan Schultz, Chairman, President and Chief Executive Officer. Please go ahead.Alan F. Schultz Thank you, Douglas. I would like to welcome, everyone to the call here this morning. Joining me today are Rob Mason, our Executive Vice President of Sales and Marketing, and effective January 1, our company's next CEO; as well as Bob Recchia, our Chief Financial Officer. Rob and I have some prepared remarks, and then we, along with Bob Recchia, look forward to answering your questions. I'd like to begin with our decision to revise our full year 2007 guidance detailed in our earnings release. We recognize the magnitude of our adjusted EBITDA takedown, and we'll focus much of our time providing a detailed explanation of 4 significant factors affecting our second half expected results and hence, our reduced full year guidance. The first factor is U.S. advertising spend. Last December, when we announced our full year guidance for 2011, we shared a number of assumptions. One of the assumptions was a mid-single-digit increase in U.S. advertising spend for 2011. Our assumption was that ad budgets would steadily increase each quarter throughout the year in conjunction with a steadily recovering economy. As a result, we built a back half-loaded model for 2011. As the economic recovery became more uncertain and consumer confidence faltered, U.S. ad spending forecasts for 2011 continued to be revised downward. The latest industry forecast have 2011 U.S. ad spending rising as little as 1.6% versus 2010, according to MAGNAGLOBAL. Our assumption of mid-single-digit growth in U.S. ad spend for 2011 was built on an estimated growth in the range of 3% in the first half of the year and a 7% range for the second half of the year. Experts now believe that ad spending growth will be less in the second half of 2011 than what we experienced in the first half of the year. In fact, globally, advertisers are spending just 0.73% of GDP on advertising, which is less than anytime since 1980, according to ZenithOptimedia.
The impact of this deceleration of ad spending can be seen most significantly in the less-than-anticipated growth in our Shared Mail segment. The Shared Mail business continues to demonstrate its superior operating leverage. With just 1.3% growth in Q3 2011 revenue, we drove a 17.6% increase into the segment's profit. However, the growth in Shared Mail was significantly lower than we had anticipated just 3 months ago. During the last 6 months, we discussed the robust Shared Mail pipeline of plan business. Converting this pipeline to contracts was essential to a strong second half in achieving our 2011 guidance.During our last earnings call in July, we discussed an increased hesitancy among clients to convert pipeline program to committed orders. We began to see this hesitancy in June. We also discussed our 2011 adjusted EBITDA guidance was our most challenging 2011 metric and would be dependent on strong consumer promotion budgets and a successful conversion of our pipeline. Neither came to fruition. On a positive note. Pricing in Q3 was a contributor to revenue growth in Shared Mail for the first time since we acquired this business in March of 2007. The second major factor negatively influencing our projected second half results is the spike in coupon redemptions and its impact on annual consumer promotion budgets for our consumer packaged goods or CPG client vertical. After 4 months of year-over-year declining redemption volumes to start the year, what we did not anticipate nor do we believe our clients budgeted for, was a midyear 18% spike in year-over-year coupon redemptions in May through September. Read the rest of this transcript for free on seekingalpha.com