In an apparent jab at Sir Martin Sorrell and WPP, France-based Publicis Chairman Maurice Levy referred to his company’s partnership with Google:
“Google is not a short-term friend and a long-term enemy. It’s a real partner,” Levy said.
Google would exchange its technological know-how for Publicis’s analytical and media planning expertise.
Sir Sorrell has demonstrated a desire to position WPP as a leading new media force. Last year he acquired 24/7 RealMedia for $649M. That not only gave WPP an edge in the ad networking business, but also in search marketing, which is Google’s bread and butter.
Google, on its end, is being coy by saying that it is not targeting advertisers directly, but rather, trying to cooperate with ad agencies who historically have been and will remain gatekeepers to the $300B US marketing ecosystem, of which only $25B is spent online in the US, and of which Google commands roughly 40%.
Publicis, on the other hand, has not shown the inclination to dive deep into complimentary digital assets (despite the Digitas acquisition which was a digital ad agency), as WPP has. In addition to the 247 RealMedia acquisition, WPP has invested in Spotrunner (a 3% stake) as well as VideoEgg (in its Series D round).
It is unclear right now which strategy will pan out over time. With all due respect to Publicis, I think WPP is taking the better approach because over time all media will be procured online… and if ad agencies want to own and protect their marketing terrain, then owning seems smarter than partnering. However, Publicis deserves kudos for the more diplomatic stance, for WPP’s Sorrell might regret picking a fight with Google in a digital ring.
Time will tell, of course.
Related:
- Tech Meets Media: MSFT buys aQuantive; 247RealMedia scooped up by WPP
- Is WPP Over-Exposing Itself to UGC?
- Google vs. Major Ad Agencies
- WPP eyes Nurun: Quebecor Media vs. Quebecor World: A sign of things to come?
Some time ago, Alley Insider pointed to Sandeep Aggarwal (an analyst at Oppenheimer)’s report on the impact of the mortgage crisis.
I’ve frequently raved about Alley Insider’s reporting, it’s a welcome addition to the landscape where most bloggers regurgitate corporate press releases and fail to question the institutional imperative…
But a few weeks ago, one of their posts made me question the logic and wisdom thereof.
In a nutshell, Alley Insider made a really big stink about Aggarwal’s revised numbers for growth. Sit down, are you ready? Aggarwal’s report suggested that online advertising will fall from 26% to 25%. Yep, a rounding error.
Analystitis
I was going to pen a post about how analysts of the 20th century will become a dying breed, mainly because they’re on the outside and “insider bloggers” will always have more accurate, albeit biased, points of view. Then again, analysts too were conflicted, we saw that front and center with the dot com revolution cum bubble in the late 1990s and early 2000s.
Ultimately, the bloggers (who unlike journalists probably have a day job and unlike analysts are literally on the front lines) who most accurately provide an insight into industries will command the largest audiences etc., at which point they will become part of the system and make room for younger, more hungry, less conflicted bloggers.
But, I did not write that post. Why pick on respected and influential folks like Aggarwal, Blodget or Mark Meeker; the latter despite the fact that she forgot to divide by 1,000 when trying to compute CPMs (which stand for cost per thousand - that darn M must have thrown her off).
I respect Blodget for sticking his neck out and doing a lot of projections, calculations and analysis. That kind of stuff stands out in the otherwise increasingly repetitive and staid blogosphere. But one example of Analystitis was Blodget’s calculations when Revver announced that it had shelled out $1M to partners (disclaimer: we’re a content provider to Revver, along with YouTube, Veoh, Joost etc., and no, we’re nowhere near a rounding error on that $1M). Anyway, Blodget’s Revver calculations forgot a major fact which made everything he said somewhat moot.
In all fairness, I was also shocked that Revver did not stress the following, because $1M is paltry in one perspective but impressive in another.
What’s this missing iota of information? It’s nothing earth-shattering, but it’s a key one when trying to make sense of revenue. Revver had up to recently worked on a CPC (or cost per click) model which is anything but effective with video.
Video vs. Text Consumption
From a consumer behavior, it’s a simple enough fact that users who are reading text content have a tendency to be leaning forward, hand on mouse, scrolling down a screen and trigger happy to click on something - be it a link to another article or an ad. As such, Google’s business model of indexing text content and serving text ads works wonders.
But with video, it’s an altogether different beast: you find what you want, press play, lean back. Chances are, your hands are off the mouse and keyboard… as such, the propensity to click on anything is low. Furthermore, Revver made its life really hard (and maybe that’s why under its initial model we questioned its survival) y running CPC ads as post-rolls, where most people don’t even get to!
Point is, the fact that Revver paid out $1M to partners largely running CPC ads at the end of videos is a testament to how much advertisers want to advertise online and just how viable video advertising will become for anything but user generated content (let’s not even get started on that).
So, if I was going to keep my trap shut and am now raining down this tirade, what gives?
Can I say “I told you so?”
Well, not only were Oppenheimer and Alley Insider wrong, but in fact, it turns, one (yes, admittedly biased) ad agency says that au contraire, online advertising will increase this year:
ZenithOptimedia, part of the Publicis Groupe media agency, has revised its spending forecast for internet advertising upwards yet again: it now predicts a 29.9 percent gain over 2006, up from 28.6 percent three months ago, and 85 percent growth between 2006 and 2009 (up from 82 percent previously). Online video and local search are the new, fast-growing segments, but Zenith notes that display, classified and the rest of search are still expanding. Looking ahead to 2009, Zenith expects online ad spending will make up 9.5 percent of all ad expenditures, slightly up from the 9.4 percent the company forecast three months ago.
Gee, ain’t that something we argued recently?
Total Marketing vs. Online Advertising
In a nutshell: I have long argued that we’re not in 2000, and that any reduction in marketing will help, not hurt, online advertising. That’s right, if I am Anheuser Busch, that means I’ll spend a little bit less on TV, billboards etc., and shift a bit more of that budget to online.The difference between 2001-03 and now is, when the marketing dollars flow back, they won’t go back to TV, print and newspapers.
Targeted Media vs. Non-Targeted Media
Mark my words, we are seeing the accelerated decline of offline and online advertising will be the main beneficiary. It’s not so much that marketers dislike offline, that’s not the issue. Half of the global trend comes from following the user, but the other half comes from the fact that online offers marketers targeted media, whereas print, TV, radio and billboards are non-targeted media. As such, targeted media will increase quite more rapidly than offline in an environment where there is pressure on total, global marketing expenditures.
But the reason why the entire sub-prime mortgage matter shows that analysts’ future will resemble that of offline, non-targeted media is the following:
Anyone who has bought or sold advertising knows that the mortgage-related advertisers are the least likely to be buying display/banner advertising on a CPM basis. They’re not in branding, these are performance-driven marketers. Most of these buy performance based search advertisement, or CPA-based display/banner advertising. Do a search for “mortgage” on Google and tell me if you saw a dearth of text ads around the organic results? You don’t, there are more than enough advertisers picking up the slack, which is why Google will probably not be affected by it, either (note: if they see a softening elsewhere or an overall slowdown in their torrid growth, they might use this as an excuse, but I doubt it will and that they would).
All right, I feel better now. Back to work.
From a NYT article on the shifting agency business. Some tidbits that stood out, then some links back to previous posts we’ve made on the agency world:
Mr. Kenny is reshaping the digital advertising strategy for the entire Publicis worldwide conglomerate, which includes agencies like Saatchi & Saatchi, Leo Burnett and the Starcom MediaVest Group and the global accounts of companies like Procter & Gamble, American Express, Hewlett-Packard and General Motors.
The plan is to build a global digital ad network that uses offshore labor to create thousands of versions of ads. Then, using data about consumers and computer algorithms, the network will decide which advertising message to show at which moment to every person who turns on a computer, cellphone or — eventually — a television.
(…)
“There’s a chance to invest right now in China, India, Russia and Brazil, which will pay off big over the next five years,” Mr. Kenny said. “These economies are going to boom, and ads there are going to go directly to mobile and directly to the Internet.”
(…)
Greater production capacity is needed, Mr. Kenny says, to make enough clips to be able to move away from mass advertising to personalized ads. He estimates that in the United States, some companies are already running about 4,000 versions of an ad for a single brand, whereas 10 years ago they might have run three to five versions. And he predicts that the number of iterations will grow as technology improves.
(…)
The Publicis digital plan can be viewed as a reaction to the changes in how consumers live, but it is also a response to competition among Google, Yahoo and Microsoft. Publicis is trying to carve out a niche as a middleman between those online giants and the consumer brand companies that buy advertising. The role is not unlike the way agencies have long connected advertisers to offline media like television networks, newspapers and magazines.
“How do we see Google, Yahoo and Microsoft? It’s important to see that our industry is changing and the borders are blurring, so it’s clear the three of those companies will have a huge share of revenues which will come from advertising,” said Maurice Lévy, chairman and chief executive of the Publicis Groupe.
“But they will have to make a choice between being a medium or being an ad agency, and I believe that their interest will be to be a medium,” he added. “We will partner with them as we do partner with CBS, ABC, Time Warner or any other media group.”
Mr. Lévy’s view of the dominant Internet portals diverges from that of other advertising executives. Martin Sorrell, chief executive of the WPP Group, another ad agency conglomerate, has publicly called Google a “frenemy” and has recently acquired 24/7 Real Media, an advertising network that positions his company to compete more directly with Google and other online portals.
Mr. Lévy, who has a penchant for grand ambitions, says he does not plan to compete with Google — rather, he wants Google to need Publicis.
Read the whole thing here. From our vault:
- 2021: Web Ads Larger than TV Ads?
- Software/Technology vs. Advertising/Media, aka. If you’re old media, what do you do?
- Can AOL Take Behavioral Targeting from concept to reality?
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