Home Ad Exchange News Michael Roth On Trading Desks, Agency Reviews And IPG’s Guts

Michael Roth On Trading Desks, Agency Reviews And IPG’s Guts

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Michael Roth CannesMuch has changed for Interpublic Group since 2005, when Michael Roth stepped in to lead the then-troubled holding company. His background, as the CEO of a life insurance company, was unconventional, but it made sense given his role was to push IPG back to financial solvency.

“The original profile for this job was financial,” he told AdExchanger at the Cannes Lions ad festival. “We were in trouble and we had to fix a whole bunch of stuff at IPG. We got that done and the rest is growth and profitability.”

And technology plays a core role in that growth and profitability – the “guts” of what IPG does, Roth said. “If you’re not talking technology, you’re not at the table,” he added. “That’s what clients see, and that’s where the efficiencies are coming from.”

While Roth is upbeat, this year’s Cannes festival takes place during a tense moment in agency-brand relations. Morgan Stanley estimates $26 billion in ad spend is under review by big-time marketers like Unilever and Procter & Gamble. And discussion over rebate practices continues to distract.

In the meantime, Roth and his peers have to deal with ad tech companies looking to catch some holding company coin. And the way these vendors connect themselves with different units within the same holding company is both impressive and frustrating. It would be considerably easier, he said, if the tech aspirants would simply work with the Mediabrands confederacy, rather than approaching its individual companies like Universal McCann (UM), Cadreon or MAGNA GLOBAL.

“It’s a foolish play, because you need to find out who’s allocating the money,” he said.

Roth spoke with AdExchanger about IPG’s relationships with technology, the vendor community and its own clients.


AdExchanger: How do you decide whether to invest or buy tech?

MICHAEL ROTH: We’re not a mutual fund. Whenever we do an investment, it has to have a strategic foundation. A holding company allocates capital. [An investment] it has to have a strategic purpose, though we’ll also have an equity component in it.

That’s how we invested in Facebook. It wasn’t a stock investment. And when the strategic exclusivity expired, there was no need for us to own the stock, so we sold it, at a very nice gain.

Do you find companies or do they come to you?

It’s both. Usually at the end of our operating reviews, whether it’s a network or a media company, they have a wish list of companies they believe are strategically attractive from an acquisition standpoint.

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We ask whether we need to own it or if we can just rent it. In the early days of search, for example, we were looking to build search capabilities. We found a company called Reprise. It was easier to buy Reprise than build a search capability.

Sometimes we do it ourselves. Cadreon was organic growth. We may do bolt ons to those companies. I prefer organic, but if we have to buy it, it’s usually in a space where we don’t have the capabilities, or it’s in a region we need to add, or it’s a talent play.

There are a lot of bargains out there. The VC leash has gone tight for some of these companies.

When there’s a VC ownership, it’s hard to say there’s a bargain. They have an exit strategy profile. They’re sometimes the reason we walk away from deals. Their threshold for profit is different from management. Management would love to have a real transaction, but the VC partners might say they’re not getting enough.

Going back to Cadreon, Publicis recently disaggregated its trading desk VivaKi. But Cadreon’s global president Arun Kumar has unequivocally stated IPG’s trading desk is a centralized system.

It has to be a centralized solution. First of all, what are we going to do? Have everyone do their own [media planning and buying]? It doesn’t make any sense.

It doesn’t? Hill Holliday has its own media buying operation.

Right. They just announced that they do.

The question is what are they doing? What they’re doing with their clients is appropriate. What our multinational clients need is different. What’s great about Hill Holliday is when they need to rely on Mediabrands, be it Cadreon or MAGNA, they can.

There’s no mandate to use Cadreon?

No. We show the benefits and if they don’t use it, it’s at their risk. It should be a value-added proposition.

So why would an IPG agency want to build out its own media practice instead of relying on Mediabrands?

Mullen has its own media capabilities. Deutsch has it too.

Their argument to clients is: We do it all. And we have your primary interests at stake. We go to sleep thinking about you, we wake up thinking about you, we’re embedded in what you do every day, and we can buy just as effectively as the big guys. You can audit us and see we’re buying just as efficiently if not better than the big guys.

Their clients like that. But others want the global capabilities of Mediabrands and MAGNA and Cadreon.

Do you see a media-creative unbundling trend?

There is an unbundling, but it’s not at the scale that makes a material difference. Hill Holliday can form its own media practice, but it won’t be a big deal because it doesn’t have a global footprint, which distinguishes Mediabrands.

What will be interesting is to watch Mullen. We put Mullen together with Lowe. Now they have a global footprint.

To what purpose?

We’re looking forward to using the Mullen media hub as a potential conflict shop when either Initiative or UM can’t participate. And we can white label parts of it.

What’s the future of programmatic TV?

Eventually, it’ll be real. But it’s going to be a while before Les Moonves puts his premium content in a box. That’s his leverage. Until it’s forced down his throat, he won’t do it.

Will it ever be forced down his throat?

This is a free market. He’ll fight it until he can’t fight it, then he’ll do it the way he wants to do it. As this evolves and as it increasingly becomes part of the landscape, eventually it has to happen. The clients will force it to happen. Unless it’s on [a programmatic] platform, they won’t buy it.

That’ll get his attention.

Because the networks are holding out, it seems the investments to support the necessary infrastructure aren’t there.

We’ve done experimental stuff with TubeMogul. But until it’s there and working, Moonves doesn’t have to worry about it.

You said “experimental stuff.” What are you hoping to discover?

Whether it works, whether there’s a market for it, whether we can buy efficiently, whether we’re giving up anything by doing it. It’s all about efficacy and price.

Based on early returns, what do you anticipate?

Programmatic buying will continue to grow dramatically and in the next three years, you won’t recognize it compared to what we’re doing now.

How involved are clients in the automated buying process?

I find it hard to believe that clients will be as efficient as we can be. I was a client once. Whenever we wanted to bring it inside and do it ourselves, we were never good at it. There are certain things clients can do in-house and do well and they should, but unless you’re one of the big global clients prepared to make the investment to bring it all in-house, it’s not efficient.

What can they do well in-house?

Social media is something they can do in-house. It doesn’t cost them a lot.

Is there an increase in holding company level deals with clients?

They’re not deals. RFPs come into the holding company. A lot of the big ones cross my desk. [Prospects are] looking to a holding company to put together a solution to meet their needs. They leave it to us to decide whether this is a holding company pitch, a global network pitch with add-ons from other agencies, if it’s a media company with add-on. The clients finally get it. Instead of them telling us which digital agency or PR agency they want, they’re sending it to us and saying, “Tell us what you got.”

What is the state of the client-agency dynamic? There are 20-plus major accounts up for review.

It’s an opportunity. Clients always want to be more efficient. That’s what’s driving these reviews.

The media would like to write about transparency and rebates being the reason for these pitches. For some, that might be a reason. Some just have routine reviews they do, no matter how much they like their agencies. We’re involved in a couple of those reviews. The clients tell us they love what we’re doing, but we’ll see what happens in the outcome.

In the end, clients just want to make sure they’re getting the best bang for their buck.

Is there a me-too thing going on?

Of course! When Facebook first came out, all the CEOs would go to cocktail parties and say, “Have you seen this Facebook thing?” Next Monday morning, they’d contact their CMO and say, “What’s our Facebook strategy?” Three weeks later, there’s a Facebook strategy. In this case, every day, they read about these big multinational media reviews and they call up their CMOs and say, “What are we doing about all these reviews?”

You also mentioned rebates, a situation partly created by clients putting margin pressure on agencies. 

The pressure on buying is what you’re talking about. You have to buy at the best price available, no matter what. They view it as a commodity.

But if you look at the rest of the media play [i.e. media planning], that’s the margin opportunity. That’s why you see some of the networks buy for nothing. The margin on buying is not very high.

The other side of that coin is it’s hard to be accountable for planning when you’re not doing the buying. You can have the greatest plan in the world and if it’s not executed properly, you’ll still be held accountable for a lousy plan. There’s got to be a way to put those together.

That said, there are cases where we do the planning and not the buying. And there are cases where we do the buying and not the planning.

How do you compete on talent? It’s really expensive to get them, considering the competition who’s also invested heavily in talent.

Our biggest leverage competing for talent are our clients. People like working with big brands. It’s always been true. The consulting firms, the Facebooks, the Googles – it’s hard for them to compete with what’s displayed at the Palais.

Zach Rodgers contributed

 

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