Can a weaving spider collaborate? Or, A circular story about the evolving client-agency relationship Mark Linder WPP Global Client Leader National eMedia Conference 2008 IIR Finland Helsinki 21 November 2007 Contact [email_address] +44 774 00 7927

Advisors

“ JR ”

Topics we will talk about Overall theory is that the seed of tomorrow’s client-agency relationship are way back in history. We need to look back to look forward Marketing and mass communication starting from the advent of television – the nature of the business partnership and media commission… USP and the “compliance school”, and how we “slowed” ourselves What changed the dynamic of the relationship – separation of media, selling out, re-ingineering, etc The Internet / web 2.0 – why participation and new media is SO HARD to understand, just as hard as TV was. What the “utility” concept of marketing is about The new media landscape, and how to why we all need to become involved, not just the media agencies The client of the future, agency of the future Implications for Finland

Overall theory is that the seed of tomorrow’s client-agency relationship are way back in history. We need to look back to look forward

Marketing and mass communication starting from the advent of television – the nature of the business partnership and media commission… USP and the “compliance school”, and how we “slowed” ourselves

What changed the dynamic of the relationship – separation of media, selling out, re-ingineering, etc

The Internet / web 2.0 – why participation and new media is SO HARD to understand, just as hard as TV was. What the “utility” concept of marketing is about

The new media landscape, and how to why we all need to become involved, not just the media agencies

The client of the future, agency of the future

Implications for Finland

“ 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

A “destination” model of communication Besides, it’s easy to blow your own horn Brand marketer Interpreter Decoder The Mass Audience Many receivers Each de-coding Interpreting Encoding Each connected with a group where message re-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

Commission business model rewarded mass Agency takes risk Buys blocks of media space Offers to client at a profit Performs value-adding services

Remember the long-running campaign? One benefit of a trust-based relationship

Clients and agencies co-owned the business problem The word “brief” did not exist Client-agency partnership was in shared risk/ reward Agency investment Client spend (Agency revenue) Client profit

30 years ago, agencies managed programs Research and insights New product development Branding and packaging Channel management/ retail Communications Media investment Tracking and ROI Investment in solutions Insight into the socialization of the new technology A “blockbuster” business

Research and insights

New product development

Branding and packaging

Channel management/ retail

Communications

Media investment

Tracking and ROI

However when “marketing” = Advertising Advertising = commissions Commissions = exploitation

It is hard to overstate the culture of impressions-based “marketing” Global size of the industry, in $billions 34 Sponsorship 241 Direct marketing 700 7 24 394 Worldwide Total PR Research Advertising

A sidebar why the “USP” hinders true marketing

The USP Each advertisement must make a proposition to the customer: "buy this product, and you will get this specific benefit ." The proposition itself must be unique - something that competitors do not, or will not, offer. The proposition must be strong enough to pull new customers to the product.

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

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

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

“ 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

“ 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

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

Osgood-Schramm (1954) Communication is a two-way process Did we hear? Message Encoder Interpreter Decoder Message Decoder Interpreter Decoder

And there were a few other developments…

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

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

And at the same time, the emergence of new technologies

Acceleration… Gary William Flake Microsoft / MSN

Democratization Computing Content Commerce Community

Computing

Content

Commerce

Community

Over 30% of South Koreans are on high-speed braodband – 32MBit download

1966

The new media landscape Not how do we reach us, but how is it affecting us? Dual Sync 40 Million Homes DVR 3.5 Million Homes Gaming 80 Million Homes Video On Demand 16 Million Homes Interactive Program Guide 20 Million Homes Virtual Channels 2 Million Homes Ad Targeting 108 Million Homes 65.2% cell phone U.S. penetration Satellite Radio & Internet Radio 1.5 Million Subscribers / 70% Penetration Interactive/Placed Based Out of Home – 400M BB’s Internet / Broadband 150 Million Users / 57 Million BB Users DVD Player 50 Million Homes Portable Audio 15 Million Units Custom Publishing

The socialization of this technology is the real change

“We are connected, but not connecting” Rob Alexander, JWT Fragmentation creates the need for re-integration

We are worked over by the media

What about “non-media” Advent of actual UTILITY in marketing!! Why promise to be something, when you can actually DELIVER that thing!

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)

What role does an agency have?

Android Software Operators Semiconductors Handset Commercialization Plus $10M in prize money for developers!

OHA launch video

Google Open Social MySpace Bebo iLike Salesforce.com LinkedIn Hi5 Friendster Oracle Flixster RockYou Slide and more

MySpace

Bebo

iLike

Salesforce.com

LinkedIn

Hi5

Friendster

Oracle

Flixster

RockYou

Slide

and more

Is it any wonder who is on top? Source: Interbrand Corp, Business Week Aug 2007, Brand Channel Reader’s Choice 2006 1. 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 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

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

Nike Run London

Innocent’s Fruitstock

Nokia’s Royal Artist’s Club

Charmin’s bathrooms

Flickr’s “Interestingness”

Crowd-sourcing Gardening Me Squared Interestingness -- Flamingo, for Nokia

Jennierose, crowd-sourcing

As technologies socialize, virtual becomes real

Business models are evolving Relationship Knowledge Relevance Interaction Effectiveness Opt in Dialogue Profile Blyk Advertiser-supported MVNO

To recap… Marketing was “accidentally” defined through TV advertising – the new technology that caused social change 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 “Web 2.0” is having a similar impact on social change as television. How are agencies interpreting this?

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

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

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

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

Landscape is changing, and everyone seems interesting! Tactical Strength of Advertiser Relationships Strategic Traffic and Inventory Control Direct Indirect Advertising / Optimization Networks 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 Relationships Are 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 Expanding into Lead Generation Ad Management Online/ Mobile Advertising Landscape

New media owners provide marketing services WPP Yahoo Google Microsoft AOL Ad Serving Ad Networks Ad Exchange Mobile Marketing In-Game Advertising

Aimed at long tail marketers only? Who has become Google’s largest customer? Number of producers that realize those numbers Sales or popularity 20% that = 80% of volume The long tail Flow of effect

Google led the way

Microsoft has a rich offer

Microsoft takes an educator role

Who are all these guys? WPP entries Interactive Digital Media & Search Mobile Data & Analytics ID Consultores Century Harmony Viral Boole

New models

Open agency model

“ 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

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

“ Group” consolidation vs single-point accountability By STUART ELLIOTT Bank 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.

By STUART ELLIOTT

Bank 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.

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. “

Agency of the future needs different skills THE AGENCY of the future will be confident in its ability to answer two absolutely basic questions for its clients. First, how much "money should they spend on marketing? “Second, through which mix of channels can it most rewardingly be spent? -- Martin Sorrell

THE AGENCY of the future will be confident in its ability to answer two absolutely basic questions for its clients. First, how much "money should they spend on marketing? “Second, through which mix of channels can it most rewardingly be spent?

-- Martin Sorrell

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 Production goes to specialists

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

Collaborative networkers Insights Research Media/ Analytics Planning Holistic Client Team One-to-many Comms design production One-to-one Relationship Lifetime Value Ident Design Concept/ Program Leader Social Networking Branded utilities Shopper/ Channels Shopper/ eCommerce Media/ Buying Experience Design Search Mobile OOH SNS Content Events Ethno Quant Performance Measurement Workflow/ CMS Econometric modeling

A larger spider Insights Research Media/ Analytics Planning One-to-one Relationship Lifetime Value Ident Design Branded utilities Shopper/ Channels Shopper/ eCommerce Experience Design Search Mobile OOH SNS Content Events Ethno Quant Performance Measurement Econometric modeling Workflow/ CMS

To recap… “ New media” companies see themselves as solving business problems, not just selling space It takes time and effort invested to understand the dynamics of this fragmented marketplace Meanwhile, marketers face the challenge of “pulling it together” Single-point accountability migh be a more valuable concept than consolidation. Agencies who want that must develop programme management capabilities Clients, agencies and media must become collaborative networkers

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

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

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

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

Clients, agencies and media must become collaborative networkers

In summary…

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

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

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 technologies Bringing its own investments (sound familiar?)

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 technologies

Bringing its own investments

(sound familiar?)

What does this mean in Finland?

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

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

Polar access to the world

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

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

To recap Originally, clients and agencies were business partners, agency a programme manager Cheap media and USP-thinking turned us into concept factories distributing impressions rather than advisers on new media Trust declined during the 80’s Technology democratised, consumer participates. New media much more complex and interactive. Agencies have to help understand 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 Finnish clients and agencies have “originator” mindset WPP is here to serve your future requirements

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

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

Trust declined during the 80’s

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

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

Finnish clients and agencies have “originator” mindset

WPP is here to serve your future requirements

Thank you Mark Linder [email_address] +44 774 00 7927