@ Ad Week ’07: Media Neutrality And Its Discontents; Trad Media Agencies Struggle To Evolve

In addition to the challenges brought by the rise of digital media in general, agency holding companies are coping with the fact that a lot of their competition is coming from outside the traditional creative shop/media buying/planning structure. After all, some of the largest interactive ad shop acquisitions have been taken on by companies outside the traditional ad agency arena – namely, Google (NSDQ: GOOG), Yahoo (NSDQ: YHOO) and Microsoft (NSDQ: MSFT). This has put the ad agency holding company model finds itself having to both justify its business structure and alter it at the same time . A number of media buying and planning executives, along with one major marketer offered their assessment of these and other related issues facing agencies at day-two of OMMA’s Advertising Week conference:

Tony Ponturo, Global Media & Sports Marketing, president & CEO, Busch Media Group: The notion of shifting agency resources 180 degrees from by marketers is a typical mistake being made these days. “I get asked what percentage of your media is digital. I think that question is irrelevant. A 25 year old doesn’t wake up and say this is my digital day, or this is my print day or my TV day. Whether it ends up 90 percent of your dollars or 15 percent, you just have to be in the space.”

Sarah Fay, CEO, Carat and CEO, Isobar U.S: The Google/DoubleClick deals have little to do with traditional media companies. Google and Microsoft are trying to be the gateways to digital and while they are surely successful, the agency model is still pretty solid. In any case, agencies should not follow the lead of those other companies. “The sort of valuations associated with those purchases can’t be applied to all the companies in our space, it’s just kind of crazy. In 2003, Aegis saw digital agencies as important and started acquiring companies in that area. We simply saw where consumer behavior was headed. Now, TV has set the model for media buying and digital changes that completely. And it is a challenge to find that hybrid person who can bridge the divide.”

Tim Hanlon, EVP, Ventures, Publicis Groupe’s Denuo: Publicis Groupe CEO Maurice Levy wants digital to supply 25 percent of the company’s revenues, which are now at 15 percent. The company’s $1.3 billion acquisition of Digitas was seen as kicking off the past year’s flurry of interactive deals. “I find it incredible that it’s taken so long for these purchases to become mainstream. Why is it now the hot thing to do? Maybe some of these valuations are a surprise. I have been an external and internal irritant about holding companies being the best way to manage advertising, media and branding. I don’t think adding a company here or there will make much difference. the fact that we still operate in silos is maddening to me. I’m surprised a lot of marketers haven’t moved a lot of initiatives in-house. There is creative destruction going on in terms of the the traditional agency model. Some companies are stepping up and building up their digital assets, others are not doing it quickly enough and will be supplanted.”

Scott Neslund, CEO MindShare North America: “We have a short window to integrate our media assets.”

Alec Gerster, chairman, Initiative Media: “It doesn’t matter what structure you have put together. It comes down to leadership. I like the idea of reaggregating audiences in new and different ways. But I’m not sure we should discount the Time Inc.’s of the world. That’s still a valuable audience. The value of a media company is knowledge and how best to put together a Warner Brothers with Sports Illustrated or CNN.”

Moderator Joe Mandese, editor of MediaPost, posited that the commissions for trad media buys are smaller – perhaps 1 percent – compared to the commissions derived from buying interactive. How much is the profitably a factor in buying decisions.

— Neslund: “It needs to be brought back to measurements of performance. We’re all continuing to experiment.”

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