by: Idris Mootee
My last post was three days ago, it is not common for me. I try to do at least 5 a week but it is getting difficult. I had only 4 hours sleep the last three days. Anyhow I feel good. Maybe because spring is here.
I was in Montreal most of this week, met some very exciting people and had some productive meetings..from the top creative minds to VCs and bankers. Scott showed me this place that makes bagels by hand. This city has so much to offer. I love Montreal, it is one of my favorite cities. I used to visit Montreal every week but it's been a while since I got to see the city's best side.
Today's headline from an Ad Age story caught my attention: WPP's MindShare has launched a wholesale restructuring of its business splitting the agency into four distinct units. The idea is to move the shop beyond planning and buying to McKinsey-style business consulting. According to their CEO Scott Neslund MindShare's restructuring--six months in the making--involved a complete reexamination of "what we were doing with clients".
He listed three key client benefits of the new agency framework:
- a more streamlined process of working with agency services
- the weaving of digital resources throughout the entire organization
- stronger, more creative media work.
He believed the company has implemented the "largest sweeping changes in the industry," and that those changes "will energize the next generation of media and marketing specialists." Looks like this media giant is finally waking up to what's going around them. The company was formed as a scale play through the merger of the former media departments of JWT and O&M. MindShare quickly became the largest of the new breed of media-only agencies. MindShare ranked No. 1 among media agencies in the U.S., with $11.3 billion in billings during 2006. We all know media buying is a commodity business.
Neslund explained that the MindShare restructuring is to strengthen its emphasis on creating branded content, particularly for the new media space but also for TV, out-of-home and radio. But it's not only about creating content. The move is also a clear delineation of just what services are on offer, and a way to eventually get paid for those different functions by establishing the value of each discipline (much as the controversial unbundling of media from creative was a way to get paid for both those disciplines). This puts them in direct competition with Time Warner, Meredith or Redwood custom publishing. So now the agency is competing with the media and want to be paid for higher value services.
Here are my thoughts. Content development and content delivery are very different from marketing services. Although over the years these content providers try to provide branded content for their clients by working with the ad agencies. Now they are likely to do so if the agency is attempting to eat their lunch. I also doubt if they can build the digital capabilities needed given the tight digital talent market. Even the interactive agencies are struggling to fill these gaps, what makes them think a media buying agency can do that?
Their plan is to build a McKinsey type business-planning group that serves in a management-consulting-like capacity, focusing on solving issues most relevant to the CEO, rather than simply developing a media communications plan. I am not sure media and content are the most relevant to the CEO. Nor do I think they can attract (or afford) talent of those calibre.
They will create an invention group who's job is to create content that reaches consumers in a way that meshes with a marketer's business goals. The group, which is defined as media neutral, will also handle strategic planning and contact planning. My question is, since they have a media buying unit (named Exchange) and media buying is their core revenue stream, not sure how media neutral they can be. I personally think agencies should not be in the business of content creation. Branded content does mean custom magazines and websites, the power lies in the innovative integration of branded content into the marketing strategy. The true power is to combine branded content with social media content and apply them across the customer life cycle. The combination can deliver credible, objective editorial content that appeals directly to your customer interests and concerns while building your brand image. It is definitely one of the most effective tools to drive customer engagement.
The only interesting play here is being an arbitrageur. They will be getting into the business of both buying and selling media. They will buy chunks of TV inventory, make it addressable and resell it to marketers. MindShare will seek out similar opportunities where it actually owns media space it can sell to marketers. At the end of the day, they are still a media buying company but instead of media planning and placement services, they are now into wholesale and repackaging business.
Print publishers are not doing well. Many believe that most dollars lost to the Internet will never return to print when the economy improves. The last time the economy went into recession, in 2001, employment classified spending in newspapers fell by about one-third from the previous year to $5.7 billion. While the economy rebounded, employment classified-ad spending has never reached those levels again and dropped to $3.8 billion last year, according to data from the Newspaper Association of America.
Publishers are seeing growth in their online ad revenues, that's unlikely in the near term to make up for what they've lost in print. They will turn to marketing services based on their content to make up for the loss. Even the New York Times Co., which has been ahead of the game online, with 11.1% of its total revenue coming from Internet business in the first quarter, didn't see big enough online increases to offset its revenue decline. Goldman's Appert estimates that industrywide Internet ad revenue eventually will grow enough to generate overall increases, but that won't be 4 or 5 years away. Publishers need to look for new formats. Unfortunately many cannot see beyond the storm.