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Can a weaving spider collaborate?Or,A circular story about the evolving client-agency relationship

Mark LinderWPP Global Client Leader

National eMedia Conference 2008IIR FinlandHelsinki21 November 2007

Contactmlinder@wpp.com

+44 774 00 7927

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Advisors

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“JR”

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“Marketing” was invented in an unusual time

Mass production Mass communication

Mass consumption

In the 1960’s and 70’s, we were

GLUED to our TVs

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A “destination” model of communicationBesides, it’s easy to blow your own horn

Brand marketerInterpreterDecoder

The Mass Audience

Many receiversEach de-coding

InterpretingEncoding

Each connected with a group

where messagere-interpreted

Cheap TV

“Reach and Frequency”

Repetition

Increasing sales

Indirect feedback(research, sales, etc)

Inputs from social sources

Based on Shannon & Weaver’s 1947 process model

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Commission business model rewarded mass

Agency takes risk

Buys blocks of media space

Offers to client at a profit

Performs value-adding services

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Clients and agencies co-owned the business problemThe word “brief” did not existClient-agency partnership was in shared risk/ reward

Agency investment

Client spend

(Agency revenue)

Client profit

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A sidebar why the “USP” hinders true marketing

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The USP

1. Each advertisement must make a proposition to the customer: "buy this product, and you will get this specific benefit."

2. The proposition itself must be unique - something that competitors do not, or will not, offer.

3. The proposition must be strong enough to pull new customers to the product.

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“The tension lies in the fact that traditionally, marketing is done TO people, not FOR or WITH them. Messages are developed and broadcast to ostensibly passive and receptive audiences.

If they don’t respond, then there are “compliance issues” or “problems of communications uptake.”

--Jill Caldwell, a social researcher

The USP helped create the Compliance School of communications

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Agencies became USP “concept factories”and forgot about socialization of media itself

Percept

an external event that causes the activation of a certain category in the mind

Concept

an abstract idea or a mental symbol

Concepts are the basic elements of propositions, much the same way a word is the basic element of a sentence

"Nobody reads ads. People read what

interests them, and sometimes it's an ad.“

--Howard Gossage

"Nobody reads ads. People read what

interests them, and sometimes it's an ad.“

--Howard Gossage

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Osgood-Schramm (1954) Communication is a two-way processDid we hear?

Message

EncoderInterpreterDecoder

Message

DecoderInterpreterDecoder

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And there were a few other developments…

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Events of the 80’s and 90’s

• Re-engineering and Activity-based Costing Procurement moving into services

• Private agencies selling to public companies, monetizing the relationship

• High p/e source markets aggravating this

• Separation of media function

Result: damage to the trust between advertiser and agency

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And at the same time, the emergence of new technologies

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Acceleration…

The Internet Singularity

Loosely defined: the idea that a deeper and tighter coupling between the online and offline worlds will accelerate science, business, society, and self-actualization

1.Democratization and “macro-ization”2.Power law distributions and “long tails”

3.Internet ecosystems and network effects4.The Innovators’ Dilemma

The Internet Singularity

Loosely defined: the idea that a deeper and tighter coupling between the online and offline worlds will accelerate science, business, society, and self-actualization

1.Democratization and “macro-ization”2.Power law distributions and “long tails”

3.Internet ecosystems and network effects4.The Innovators’ Dilemma

Gary William FlakeMicrosoft / MSN

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Democratization

– Computing– Content– Commerce– Community

Democratization of Content

• Documents: Office, LaTeX, HTML• Images: digital cameras, Photoshop, iPhoto• Movies: camcorders, DVDs, iMovie, Xbox• Audio: MP3, GarageBand, podcasting• Publishing: blogs, RSS• Software: open source, VB, Flash• Research: search engines, wikipedia• Meta Data: tags, play lists, recommendations

Democratization of Community• Communication: IM, email, VOIP• Distribution: RSS, BitTorrent, P2P• Social: Friendster, blogs, Y/G/M groups,

Meetup• Romance: Match.com, eHarmony• Virtual Economies: Everquest, WoW• Reputation: eBay, PageRank• Preference: collaborative filtering• Affinity: implicit relationships via similarity

Democratization of Commerce• Hosting: Y! Stores, Office Live, Amazon• P2P Sales: eBay• Transactions: PayPal• Marketing: Overture, Adwords, AdCenter• Syndication: Adsense, RSS• Development: Web APIs• Trivial Work: Mechanical Turk, ESP game• Business Intelligence: Web analytics

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1966

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The new media landscapeNot how do we reach us, but how is it affecting us?

Dual Sync40 Million Homes

DVR3.5 Million Homes

Gaming80 Million Homes

Video On Demand 16 Million Homes

Interactive Program Guide20 Million Homes

Virtual Channels2 Million Homes

Ad Targeting108 Million

Homes

65.2% cell phoneU.S. penetration

Satellite Radio &

Internet Radio1.5 Million

Subscribers / 70%

Penetration

Interactive/Placed

Based Out of Home –

400M BB’s

Internet / Broadband150 Million Users / 57 Million BB Users

DVD Player50 Million Homes

Portable Audio

15 Million Units

CustomPublishing

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We are worked over by the media

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What about “non-media”

Advent of actual UTILITY in marketing!!

Why promise to be something, when you can actually DELIVER that thing!

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Welcome to the brave new world of Branded Utility, where brands look to provide a useful service or a helpful application; to give people something they actually need – without demanding an immediate return. “

Simon Andrews – Chief Strategy Officer, Mindshare Interaction

"I believe the next stage of brand advertising is going to be in the realm of 'branded utility,"'

says Palmer (with Johnny Vulcan)

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What role does an agency have?

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Android

SoftwareOperators Semiconductors

Handset Commercialization

Plus $10M in prize money for

developers!

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OHA launch video

38Source: Interbrand Corp, Business Week Aug 2007, Brand Channel Reader’s Choice 2006

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2.

3.

4.

5.

6.

7.

8.

9.

10.

Value Change 2007 vs. ’06

-3%

+3%

+2%

+5%

-4%

+12%

+15%

+5%

+7%

+8%

Most Valuable Most Impactful in my life

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2.

3.

4.

5.

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7.

8.

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10.

Is it any wonder who is on top?

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Examples

• Nike Run London• Innocent’s Fruitstock• Nokia’s Royal Artist’s Club• Charmin’s bathrooms• Flickr’s “Interestingness”

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Crowd-sourcingGardeningMe SquaredInterestingness

-- Flamingo, for Nokia

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Jennierose, crowd-sourcing

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As technologies socialize, virtual becomes real24

Niche social networking the fastest route to face-to-face networking

The content (or vertical interest groups) is the momentum to move social networking into the face-to-face world

Niche

The more you have in commonThe closer your connection is

The more likely you will meet up face-to-face

EVENTS

GIGS

DATING

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Business models are evolving

Relationship Knowledge Relevance Interaction Effectiveness

Opt in Dialogue Profile

Blyk

Advertiser-supported MVNO

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To recap…

1. Marketing was “accidentally” defined through TV advertising – the new technology that caused social change

2. Agencies explained the socialization of the new media and showed clients how to take advantage of this. They used to be trusted business partners, when they ran programs and shared a risk/reward business model with clients. The erosion of trust has been over 25 years

3. “Web 2.0” is having a similar impact on social change as television. How are agencies interpreting this?

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What is the role of agencies in this context? What is the role of media owners?

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Landscape is changing, and everyone seems interesting!

 

Tactical

Strength of Advertiser Relationships

Strategic

Traffic and Inventory Control DirectIndirect

Advertising / OptimizationNetworks

Affiliate Marketing

Direct Navigation

Price Comparison

E-Mail Marketing

Niche Search

Yellowpages

Interactive Agencies

Vertical Portals

Behavioral Targeting

Lead Generation

SafetyNet

Strategic Advertiser Relationships / Vertical Expertise Key for Lead Gen

Tier 2 Sites with Traffic / Content Being Consolidated (e.g. Price Comp, Verticals)

Ad Networks Evolving Upstream into Direct Response / P4P

Strategic Advertiser RelationshipsAre Important Competitive Advantage...

eBay, MSN and AOL will Need to Expand Advertising Services and Monetization

Direct Response

...But Content and Traffic Drives the Economics

Niche Players Expandinginto Lead Generation

Ad Management

Online/ Mobile Advertising Landscape

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New media owners provide marketing services

WPP

Yahoo

Google

Microsoft

AOL

Ad ServingAd

NetworksAd

ExchangeMobile

MarketingIn-Game

Advertising

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Aimed at long tail marketers only?Who has become Google’s largest customer?

Number of producers that realize those numbers

Sale

s o

r p

op

ula

rity 20% that = 80%

of volume

The long tail

Flow of effect

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Microsoft takes an educator role

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Interactive Digital Media & Search

Mobile

Data & Analytics

ID Consultores

Century Harmony Viral

Boole

Who are all these guys?WPP entries

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New models

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“Six smart people around a table can solve any problem”

We have separated into sectarian disciplines

• Research into its own industry• Strategy and planning into consulting• Media into its own agencies, separated from creative agencies• Media agencies from quantitative analytics (some exceptions)• PR was separate, is still separate

• Marketers change jobs more frequently• The traditional agency is no longer the hub• The media owner provides marketing solutions• Integration is a bigger challenge

-- Shelly Lazarus, CEO Ogilvy

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“Group” consolidation vs single-point accountability

By STUART ELLIOTTBank of America plans to end five years of having a single advertising holding company in charge of its marketing communications. For the last two years, Bank of America, which spends an estimated $2.5 billion each year on worldwide advertising and marketing, worked almost exclusively with agencies owned by the Omnicom Group. For three years before that, the company worked predominantly with agencies owned by the Interpublic Group of Companies.But Anne Finucane, chief marketing officer since March 2006, said today that she had decided that the holding-company model “hasn’t quite worked out the way it might have.” “What works better is for us to choose the agencies,” Ms. Finucane said in a telephone interview. Otherwise, she said, it “limits our ability to align the best agencies and the resources for particular businesses.”Marketers that consolidate their accounts at a single holding company are typically seeking more effective campaigns as well as the cost savings that can come from placing eggs in a single basket. For instance, Ford Motor works almost exclusively with agencies owned by the WPP Group.Other marketers, however, prefer to seek ideas from multiple agencies with different parents, on the theory that limiting interaction to a sole corporate source may prevent the best ideas from emerging. For example, General Motors, which had long worked mostly with Interpublic agencies, has also hired agencies owned by the Publicis Groupe along with independent agencies.….Ms. Finucane said she will ask BBDO Worldwide in New York, the Omnicom agency that is creating the current “Bank of Opportunity” consumer campaign, to take a role as the company’s lead creative agency and then coordinate the assignments for other kinds of work rather than have the integration done by Omnicom.Under that plan, Ms. Finucane said, BBDO could continue to work with sibling Omnicom agencies — like Rapp Collins, for direct marketing; Organic, for online marketing; and TPN, for promotions — or with agencies that are not part of Omnicom.

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Single-point accountability is an answer, if the skills and incentives are right

“P&G says it's testing ways to change its agency model to improve collaboration and marketing plans while reducing the number of transactions for its brands and marketers. “

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Today’s agencies and networks

Advertising-centric skills replicated in every office

Original business was a talent business

Challenge: specialist skills

“Networks” consist of large numbers of offices with the same skills

Best people start “owned and operated” hot shops

The middle

Productiongoes to specialists

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De-coupling of the value-adding parts

Lose the middle

Strategic ideas, programme management from smaller units, some parent-controlled, some operator-controlled

Technology-enabled implementation shared by many originating units

Many specialist skills serving clients anywhere

Better career paths for all

Glue provided by strong work-flow and content management systems

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InsightsResearch

Media/AnalyticsPlanning

HolisticClient Team

One-to-manyCommsdesign

production

One-to-oneRelationship

Lifetime Value

IdentDesign

Concept/ Program

Leader

Social Networking

Branded utilities

Shopper/ Channels

Shopper/ eCommerce

Media/Buying

ExperienceDesign

Search

Mobile

OOH

SNS Content

Events

EthnoQuant

PerformanceMeasurement

Workflow/ CMS

Econometric modeling

Collaborative networkers

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A larger spider

InsightsResearch

Media/AnalyticsPlanning

One-to-oneRelationship

Lifetime Value

IdentDesign

Branded utilities

Shopper/ Channels

Shopper/ eCommerce

ExperienceDesign

Search

Mobile

OOH

SNS Content

Events

EthnoQuant

PerformanceMeasurement

Econometric modeling

Workflow/ CMS

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To recap…

1. “New media” companies see themselves as solving business problems, not just selling space

2. It takes time and effort invested to understand the dynamics of this fragmented marketplace

3. Meanwhile, marketers face the challenge of “pulling it together”

4. Single-point accountability migh be a more valuable concept than consolidation. Agencies who want that must develop programme management capabilities

5. Clients, agencies and media must become collaborative networkers

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In summary…

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Client of the future

• Strives for collaborative marketing management

• Does not tolerate sectarian planning

• Picks a primary partner as integrator and programme manager

• Moves to shared risk/ reward agency (and media) compensation

• Encourages trust. Does not allow procurement to take over business management

• Is not just about the blockbuster…takes risk, looks for everyday innovations

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Agency of the future is a programme manager

• Invests in understanding the sociological effects of the new media

• Re-builds strategic and conceptual skills, and invests in ideas and solutions

• Invests in leadership skills (this is different from “management”) to better collaborate with partners

• Embraces accountablity and is willing to be compensated accordingly

• Builds business and contracting skills

Insight into the socialization of all technologiesBringing its own investments(sound familiar?)

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What does this mean in Finland?

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Finland is an originating country

• The Nordics launch many born-global brands – not all B2B • Education orients youngsters to the world• Stable social democracy• Know how to trade• Confident yet liked in a leadership setting

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Polar access to the world

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My offer

• Help you – anyone – who wants to learn more about the other cultures

• Help work out a framework for market entry – how to identify and solve all the problems– Partners and distribution– Local marketing services

• Help you understand the new technologies and their impact on marketing

• Help you build back trust in the agency relationship

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To recap

1. Originally, clients and agencies were business partners, agency a programme manager

2. Cheap media and USP-thinking turned us into concept factories distributing impressions rather than advisers on new media

3. Trust declined during the 80’s

4. Technology democratised, consumer participates. New media much more complex and interactive. Agencies have to help understand

5. Client of the future must concentrate accountability to allow holistic skills – and trust -- to develop. Agency of the future must become a programme manager. Harder work for both – but better options

6. Finnish clients and agencies have “originator” mindset

7. WPP is here to serve your future requirements

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Thank you

Mark Lindermlinder@wpp.com+44 774 00 7927