Clients need to do what they need to do. What happens often is that the next pretty girl is whispering sweet nothings in the clients’ ears and the client is intrigued by the possibility, and would trigger a pitch to explore it. It is absolutely true that the clients know what the capability of the incumbent is. Some clients today believe that even if they are perfectly satisfied with their agency, they have a statutory obligation to review the media… It used to be that unless something went terribly wrong, the client didn’t initiate a review. Today, clients initiate reviews whether something is wrong or not. Very often they significantly underestimate the trauma to the entire system on both sides.
And it is not every day that Irwin Gotlieb, Global CEO, GroupM speaks to a packed house of delegates in India on a future waiting to happen. While his keynote address at the exchange4media Conclave was on the digital distribution of media, Gotlieb spoke to exchange4media’s Noor Fathima Warsia on various issues pertaining to the industry, the special relation with Sam Balsara for MediaCom and the way forward.
Q. Does it bother you that despite many agency professionals working on putting a pitch fee in place, the media agencies have not been able to, but a client has gone ahead now and almost done that...
As an industry, we continue to have too much competition. There are too many of us. Whoever is not doing well would do something desperate to win. There is an inclination to accept unsustainable terms. What is shocking to me is that clients would refer to us as partners, on the one hand, and on the other hand, would behave in this manner.
I am trying to be intellectually honest in the evaluation I am about to give you. Most people in media agencies have gone through their careers putting clients’ interests ahead of their own, and their agency’s interest – it is how we are trained, it is what we do. And it may not be good business practice. A client may view this as a few rupees or dollars and be short term about it. But I have seen net loss in some of the talent in the business. People have left and gone to the other side because they have become disheartened with the way clients have treated them, the way clients are treating the business they are part of. Client interests are not being served by this. In fact, if one were to contemplate how small agency remuneration is in the overall content, it is an extreme case of penny wise and pound foolish.
If I was a client, and there was an agency accepting silly terms, I would question if I want to work with them.
Q. Sure, but the truth of the matter is that there are many clients and many agencies that are working on very ridiculous terms. Does this not threaten the business itself?
It is damaging the business, but it is not threatening the business’ existence. While there are some clients that are behaving badly, there are clients that know that we are businesses that have to function, we have to earn profits for the benefit of our stakeholders and employees who have to be paid competitive wages. Many clients understand that and they understand that incentivising agencies properly produces better results. I spoke earlier about how there would be greater ROI in what we do, and our current fee and commission structures are going to evolve more towards a form of base compensation, because we are moving towards a world that would be more measurable, and it would be possible to quantify the contribution of media agencies to business growth, and clients can pay us appropriately.
Q. Alright... Moving on to another so-called allegation, and this one on the digital side. Media agencies are said to not have invested enough on the digital side in terms of developing talent and capabilities, and later we saw a digital agencies acquiring spree of sorts. Did media agencies lose out in the digital race?
I can only talk about GroupM. We have consistently invested in the space. Around 8-9 years ago, we invested in Visible World in the US. We invested in Invidi, which is an addressability technology, one that controls most of the patents and IP related addressability. Then in TRA, which is a business that takes set-top box viewing data and correlates that with frequent shopper purchase data, draw inference from what commercials people see and what they have bought. We have made countless investments in data management, data structures, giant data structure that allows us to duplicate across multiple digital vendors. We have our own ad networks that allow for the duplication, and analytics that go beyond what is otherwise available.
We have very significant digital clients, and we have them because we have unique systems, capabilities and data structures that allow us to do very specific functions in the space, and we have invested massively in these capabilities. We go beyond simply having a vision. Peter Drucker had said that to predict the future is to create it. If you are a leader in the business, you have the obligation to at the very least act as a catalyst to ensure that the business moves in a direction that serves your interests and those of the clients. If we had been passive and reacted after the fact, we would be doing ourselves, our clients and our community a serious disservice. In fact, if you look at our behaviour in the last many years, we have acted like the catalyst to ensure the form that the future takes is one that serves our clients’ interests, and we have invested hugely in this.
Q. But we saw even GroupM freeze costs and hires...
Yes, we did, but we grew our search business last year, we grew our digital business last year, and the painful part is we never seem to have as many digital people as we need. Finding them is difficult, and if we could simply take our existing staff and train them in digital, life would be much easier. But training them is difficult. The second thing that happened is that the talent we have is often in the wrong geography, so we may be cutting people in one geography and hiring in another geography, and in the course of doing that, we are suffering the cost of severance on one side, and hiring on the other side. Geographies and discipline allocation is a challenge we have to manage. But throughout 2009, we grew our search, display, ad network and data management capabilities – that was the core of our investment strategy.
Q. We recently saw Unilever place its digital business in India in the OmnicomMediaGroup. Do you think it makes sense when clients break down mediums, and award businesses on the basis of mediums?
No, there is no circumstance where that makes sense. This experimentation has been going on for years, and if you look at the course of the last 20-25 years, there has been not even a significant trend towards consolidation across all media services. Two decades ago, we saw one agency buying television, another one buying print and so on. That way of doing business doesn’t exist anymore.
We perhaps see that to some extent with traditional media with the media agency, and digital with another. Digital should not be detached from media. These are exceptions that are far and few inbetween and don’t often remain that way.
Q. The year 2010 began with many significant media pitches in India. And in many cases, the client has retained the agency. One would assume that before a pitch is called, the client has done his due diligence and has called for a pitch only after realising the agency needs a change... Is that being fair?
Clients need to do what they need to do. What happens often is that the next pretty girl is whispering sweet nothings in the clients’ ears and the client is intrigued by the possibility, and would trigger a pitch to explore it. He is either swayed by the sweet nothings, or isn’t. It is absolutely true that the clients know what the capability of the incumbent is. Some clients today believe that even if they are perfectly satisfied with their agency, they have a statutory obligation to review the media. I don’t believe that is the case – the legacy in our business never had that as a requirement – I have been in the business for a long time and I have had clients for decades without a review. It used to be that unless something went terribly wrong, the client didn’t initiate a review. Today, clients initiate reviews whether something is wrong or not. Very often, they significantly underestimate the trauma to the entire system on both sides. Agencies have employees who feel that they work for both the client and the agency. There have been reviews that I have witnessed, where agency people feel quite differently after the review is over. It is the equivalent of a company asking an employee to prove to the company that he should continue to work for them – ‘you are fired in 90 days unless you prove to me’. It is traumatic. It has consequences on agency employees.
Q. What about when you know a pitch is about remuneration, like we saw in Nokia last year, and yet there are agencies that line up...
Without getting specific, let me just say that we are on the cusp of having much better measurement of the outcome of our work, and we would be a participant in that outcome. That is how the model has to evolve. When you can assure a specific outcome at a cost, that cost will factor in the media cost, the social work, the earned-owned-paid model, and it would be a very different kind of a game.
Q. Great, so with that is my final question. GroupM in India is extremely strong and a very clear leader. But there are more agencies in the country now, and they are all serious players. They do not necessarily have a differentiated product. In light of all this, what is the role that you want GroupM India to play in the way forward?
On the one hand, we have to have a view of the future and we have to invest our resources into fulfilling that vision and in creating the path in the direction that we want to go, we also have a responsibility to ensure that we never take anything for granted, we don’t tolerate complacency and we use the position we have to do the best possible work and optimise the best from our resources. At the same time, we have to ensure we always stay steps ahead of the competition.