Our industry is going through structural change, not structural decline: Mark Read
The moment you put five WPP companies together in a campus, the level of collaboration grows exponentially, says the CEO of WPP
Published - 11-February-2019
While the media & advertising industry across the world had been for long talking about the need for better integration of the different verticals, WPP CEO Mark Read actually went ahead and did it, merging JWT with Wunderman and VML with Y&R. With the unions, he has set the stage for a more co-ordinated approach to work in this volatile advertising landscape.
Read, who took charge of the world’s largest communication services group last year, has a long-term plan for the transformation of WPP and a target to achieve an operating profit margin of at least 15% by 2021.
Nawal Ahuja, Co-Founder & Director of exchange4media group, caught up with the CEO while on a visit to the country recently to understand what he thinks will be the best model for the future, WPP’s transformation plan, role played by technology, expectations from the client, changes taking place in the industry and much more.
Below is the edited excerpt of the interview:
Roughly 20 years back, the creative and the media ecosystems split. A lot of people talk about these ecosystems getting back together. Clients want that. How do you see that shaping up, because it is not possible to go back to that era… and what is the best model for the future in the best interest of a client?
The future is that the creative and media need to work more closely together. But, that doesn’t mean that they need to be merged or combined. They’re all a part of WPP, and therefore, in a team, we need people who are coming out with ideas and people who are thinking about the media to work together. And it’s even more important given the change in technology. Because if you are trying to find an idea that lives in a Facebook channel, you need to know that before you write the brief. It’s not like the old days where you knew the media choices were either 15 seconds long, 30 seconds long or 60 seconds long. The media choice becomes much more important in the creative idea. So, it’s up to us to find ways of making them work more closely together. Actually that’s part of Srini’s (CVL Srinivas) job. I would expect him to make sure that in WPP India, our media agencies and creative agencies work well together.
If you have separate units and separate P&Ls focused on their own jobs, is getting them to synergise and think together a tad difficult?
Just because things are difficult doesn’t mean they are not possible. They are the right things to do is what I am saying. So one of the ways to make that happen is through leadership and talent. You want to have leadership that leads in it and talent that works together. A part of it is about culture, having a culture of collaboration. A part of it is about location, and we are in the process of moving our people into WPP campuses. I have seen all around the world that the moment you put five WPP companies together in a campus, the level of collaboration grows exponentially. Part of it is technology, where we need to use technology to collect the data. That’s ultimately what clients want - to understand how the data insights drive strategy? From those insights, what’s the best creative idea? How do I target my creative, and how do I use data to measure the results? So, we need to have a technology strategy that integrates the companies so that they can collaborate. I don’t want three people doing the same thing all the time. It’s understanding the different roles, and then understanding when to come together. The P&Ls are much more about measuring the success and the growth and knowing where to invest, also rewarding people. We should have a much more collaborative way of rewarding people in general across WPP.
At a leadership level, the leaders of WPP companies will sit together and work together to lead WPP. That will over time cement a culture of collaboration. It’s not going to happen overnight, but with the changes we are making, with Srini’s leadership, the campuses and the technology, we will work collectively so that clients see the results and get benefits. Then, we win. When people see that they win by working together, they will do more of it. That’s what I observed when I was running Wunderman, when we worked without the parts of WPP in one place. We just won the VW creative business in North America with a totally integrated team from 10 or 12 different WPP companies collaborating. Change in our industry has too often been made by clients. But clients want an integrated list of solutions. So, that’s what we are trying to sort out.
The media agency business has become an arbitrage sort of play. What is the future of the media agency business when you’re playing at small margins? These days, there are pitches where clients expect you to work on 2% commission. There’s hardly any money to go around. Does the business and remuneration model need to be fixed and how do you fix it?
If I look at the business globally, there’s no doubt that the business has gone from media buying scale being competitive advantage to technology differentiation, understanding and scale put together being an advantage. When you look at digital platforms, ironically there’s quite a lot of technology involved, and that requires more people to optimise, plan, coordinate traffic and analyse than the traditional media does. I think our media business around the world has been robust and we operate a number of business models. We work with complete transparency with our clients. I believe if we invest correctly in technology, and work well and partner with Google, Facebook and others, we’ll be successful.
How do you partner with Google and Facebook? A small client can go and buy ads directly on Facebook today.
Already in Essence, we buy all of Google’s media on Google for the world’s largest companies. How do we support smaller clients? There’s really an interesting opportunity for us. We have the expertise. We understand how to use the channels. They are complicated. It does require an integration of creative and media and serving solutions to the more sophisticated clients, where we can demonstrate the value of working with the partner. For instance, clients often need to decide whether they want to spend on Facebook or Google. It’s a tough decision and we can give people who work in the business training, but it’s easier for us to do that for clients.
In December, you unveiled your plans for WPP’s transformation. You said you wanted to achieve an operating profit margin of at least 15% by 2021. What are the sectors that will drive growth to get you to that number?
Each of the pillars of our business can grow. But we are seeing the fastest growth in those that are more technologically-enabled, where we’re helping clients understand how to use new technology, whether that’s for a campaign or experience manager or buying media, those are the parts of business that are seeing the fastest growth. The parts of the business that are most challenged are those that sit on the analogue channels, TV commercials, maybe not in India, but elsewhere in the world. We have to shift those resources and those parts of businesses, particularly commerce, technology and experience, where we will see faster growth than the traditional communications industry.
You’ve also spoken about consultancies, the likes of Accenture and McKinsey, also doing business consultancy for clients, which overlaps with what advertising agencies do. How do you ward off the threat from these companies because there was a time when advertising agency CEOs, for instance, would be involved in the entire marketing communication plan of a client? Today, that role is restricted to advertising communication largely.
I don’t think that’s totally true. The WPP client team made up of our agencies is overseeing the entire marketing mix for clients. The industry is making special efforts and we’re trying to bring that back. We are in that position with many of our clients and that’s one of our responses. McKinsey and Accenture are very different organisations. In fact, we work collaboratively with McKinsey on a number of clients and I’d say they have an expertise that we don’t have and we have an expertise that they don’t have. We bring creativity, innovation and understanding of the future that consultancies can’t do. Consultancy companies can tell you there are two arguments - that I have studied the data and it tells me this or I’ve observed that 25 other people have done something, therefore you should do it. That’s the basis on which they make recommendations to clients. We tell clients that we should launch this brand because based on our experience, it will resonate with consumers, or we tell them that we feel a creative idea is the best idea, if that’s what we believe in. And I think we are much better able to envision a future and those are things that drive growth for clients.
Now on the Accenture front, the way I see it, either Accenture could become a little bit more like us or probably we will end up becoming a little bit more like Accenture. I don’t think we’ll ever be the same organisation. We have WPP creativity in our DNA in a way that consulting companies never will and there are other things in their DNA that we don’t have.
Do you think that clients’ trust in advertising agencies has gone down?
No, I think that we do fantastic work for clients. Actually, we can also do a lot of more technologically-enabled work. We actually do have a much greater depth of technology expertise than clients realise, and more often than not, we are not marketing it well enough, and that’s our fault. That’s why we’re trying to re-position WPP in order to help clients understand what we can do. So I don’t think the trust in agencies is declining. I think there is a trust issue in digital media that we all as an industry must try to address. Agencies have to play a role in that, as do media owners and technology platforms.
So what, according to you, is at the heart of the trust issue on the digital media front?
I think it goes back to that famous cartoon in the New Yorker – ‘No one knows you’re a dog’. There is this sort of illusion of measurability. There’s issues around brand safety, issues around accuracy of measurement, bots – there’s a huge number of industry issues. And I would say that GroupM has taken the leadership position over the last 3-5 years on brand safety, piracy, driving higher standards; so advertisers know what they are getting. One element of trust is just the pace of innovation which means that sometimes clients don’t really know what’s happening. Sometimes trust breaks down when there’s an unpleasant surprise. There have been too many unpleasant surprises in digital media, and that’s something we need to fix. It’s about maintaining standards and it’s about education.
At the heart of this issue is the concern of measurability. We have seen apologies issued by large platforms about incorrect data and so on. Yet, year-on-year, companies are increasing their spends on digital.
Because digital works. Otherwise, companies wouldn’t invest in it. One of the great successes of Google and Facebook is their ability to grow small businesses, in particular.
For the larger businesses, however, how do you address the problem of measurability? What do you seek from digital platforms?
We seek what we’ve asked for so far – accountability and meeting basic standards. On that front, they have made significant strides in the past couple of years.
As the new head of WPP, what is it that you would ask of your clients, to do or not do for you?
We should have and aspire to have an open and transparent relationship with our clients where they tell us how we are doing and what we need to do better, and solve problems collaboratively. Our industry is tough for young people and we need to work with clients and celebrate the good things that we do and the achievements that we have. We need to have a partnership that is strong.
Why is there is a lack of transparency?
I don’t think there is a lack. I just think it could be better. But where we have a close relationship with our clients, that’s where we are the most effective.
You’ve just restructured your media agency business in India at Mindshare. That’s kind of a pat on the back for them for the Unilever business…
Well, we do have a really strong team here and all of our people are excellent.
The digital change has swept the industry completely and runs ahead of the advertising agencies’ agenda. Thirty years back, advertising agencies were the ones that used to set the agenda for the client’s communication needs. That is no longer the case. The client’s understanding has grown significantly. Agencies are now involved in only one part of the business. There is a lot of scepticism and pessimism about the future of the advertising business. Looking ahead 5-7 years from today, what would companies like Facebook, Google be doing? What do you see advertising agencies morphing into to keep themselves relevant and also the business sustainable at a large enough scale?
We define that for WPP. WPP is an advertising agency, and a lot more than that. We set out this vision of how we will be a creative transformation company and offer a broader range of services, not just advertising but the full range of communications, experience, technology, and help clients in that transformation, which involves all of those things. We can grow strongly. The irony is, while people inside the industry sometimes get too pessimistic about the future, it has in a way attracted consultants and the likes of Facebook and Google. So, they see something in it that we don’t. We have to recapture our confidence. Confidence is not the same as arrogance or competency; we have to change then we can do a lot more. I talk to lots of our clients around the world. And they really value what we do. They want us to change, to be simpler to navigate, more collaborative, invest in more creativity and invest in more technology. I am not pessimistic. I think our industry is going through a structural change, not structural decline, much like any business, and these too have evolved. I think it’s an exciting time.