MediaPost ran a quick column today that summarizes some thoughts from Michael Roth, Chairman/CEO of the Interpublic Group of Companies. In case you’re not aware, Interpublic is one of the big four advertising agency holding companies, claiming agencies like Deutsch, Hill Holliday and McCann Erickson under its massive umbrella. Amongst other things, Roth discusses media becoming a commodity, and notes that the winners in the media business (and thus the winners of client media dollars) will be those marketers and agencies who can command the lowest cost for that media. Here is a link to the full article:
Now, while I tend to agree with the premise that media is fast becoming a commodity, I disagree with a few of Roth’s statements, such as:
“I think that’s what you are seeing right now is clients are demanding to see where their dollars are being spent,” Roth said during a presentation at Tuesday’s session of UBS’ “Media Week” conference in New York.
OK, so while this is true, I find it a bit odd that the demand to see where dollars are being spent is a “new” request. Were the Fortune 500 type clients of Interpublic NOT asking to see where their dollars were being spent prior to this financial crisis we’re in? Yikes.
“The buying business has become much more commoditized,” he emphasized, “and when you’re dealing with any commodity, the key component of that is are you getting the better price. If there’s a competitor out there that can provide a better price, then quite frankly, we don’t get the business.”
Completely agree that price matters. It matters a lot. However, price is not the only determinant of efficiency of media spend. That’s the old TV/radio model talking – reach the most people at the lowest cost. What about audience selection and microtargeting? What about the offer? What about the creative? What about the use of personalization and other tactics that drive higher prospect-to-buyer conversion rates? The smartest agency folks I know focus on designing campaigns from the inside-out, as opposed to the old way of building campaigns from the outside-in.
Asked if he feared that advertising agencies might become disintermediated by big digital media players such as Google, Microsoft and Yahoo that are accruing powerful consumer data streams and efficient systems for serving and measuring advertising results, Roth indicated that Madison Avenue’s strength was not media per se, but the kind of “big idea” normally associated by creative departments.
Would anyone be surprised if Google gets into the “big idea” business at some point? While Google currently straddles the line between embracing agencies and quietly offering its own agency-type services to AdWords clients, this line could disappear quickly if Google made the decision to offer its own “big idea” creative services.
I’d rather not be in the commodity buying and selling business. I’ll stick with the business of making those commodities more valuable.