Media Giant WPP Sees Its Digital Future
While you may be aware of WPP in general it may be worth a look to see just how big this media conglomerate is. Last week the company stated that digital will account for 2/3 of its business over the next three to four years. Considering they did about $13 billion in revenue in 2009 this is no small statement.
Those of us on the Internet marketing side of the fence tend to see this kind of announcement and scoff by saying “No kidding! You finally figured it out, huh?” which can be fun for a moment of over time starts to sound childish. The world has moved at breakneck speed to the digital side of the ledger and in the process is undoing how media has been bought and sold for the past 60 years or so. Nothing that big and entrenched changes overnight.
In the paidContent section of The Guardian is some more data to wrap your head around:
New media sales accounted for 27 percent of the advertising and marketing group’s revenues, or $3.6 billion. This is already a big step: to compare, one competitor, Havas, last month said that digital accounts for 16 percent of its revenues to account for one-fifth of its revenues by the end of 2010.
WPP appears to be pegging its own digital revenue share to stats that are coming out on how much time people are spending online. Sir Martin Sorrell pointed out that recent figures show that this too is currently hovering around the 27-28 percent mark.
Mark Read, director of strategy and CEO of WPP Digital, touted the company’s specialist digital expertise in the earnings call: “We have to have digital in all our businesses.” The company is continuing to integrate technology platforms into the business, and industry partnerships with companies like Google (NSDQ: GOOG), Yahoo (NSDQ: YHOO), Microsoft (NSDQ: MSFT), Facebook, MySpace (NYSE: NWS) and Omniture (NSDQ: OMTR), now owned by Adobe.
A curious omission (probably more of an oversight) is no mention of Twitter but hey they are still trying to figure out this digital thing, right? I suspect that WPP being this aggressive in their statement is sending a message to their competition that they are going to be a leader in this area. Of course, this has not come easy thus far
Digital is a blessing and a curse, says Read: “Technology is shaping our industry…however this is confusing for our clients and extremely complicated to manage.”
OK, as any good agency guy is going to do he is going to push the “confusion” to his clients. It may be more confusing to clients as to why it has taken WPP this long to figure all this out. Read set up a nice “out” as well by saying this is extremely complicated to manage. Isn’t that why you are hired as an agency for these things? Oh well, like I said earlier, this is a process.
Well, if you want to learn more keep your eyes open for WPP’s “Digital Day” on April 23 where they will share more information on their digital strategy. Sounds more a class trip so maybe they’ll supply a box lunch too!
Madison Avenue Sees Slight Uptick in Ad Spend for 2010
While it is important to try to see what lies ahead in the advertising industry it is also important to watch exactly who is reading the tea leaves. On Tuesday some of the heavy hitter from the agency world predicted slight increases in spending on advertising in 2010 and did not see returns to 2007 levels until as late as 2012 (an election year, hmmmmm).
The New York Times reports on the meeting that these predictions were unveiled.
The predictions were made during a panel event at the second day of the 37th Global Media and Communications Conference, sponsored by UBS. The conference, in Midtown Manhattan, typically assembles executives from media agencies to offer forecasts for ad spending in the year — and years — ahead.
In ascending order, the forecasts for 2010 compared with 2009 call for an increase of 0.8 percent, from the GroupM unit of WPP; 0.9 percent, from the ZenithOptimedia division of the Publicis Groupe; and 5.9 percent, from the Magna unit of Mediabrands, a division of the Interpublic Group of Companies. (A forecast from UBS, offered during the panel discussion, was for an increase of 3.9 percent.)
Not exactly robust growth but at least there may be a halt put on the skid that advertising spending in traditional mediums has seen. Wait, did I just say traditional? Yes, I did and what was said by these ‘experts’ as it relates to the other side of advertising, you know that Internet marketing and social media piece we talk about from time to time?
Adam Smith said GroupM was encountering difficulty in measuring the ad spending in new outlets like Facebook, which could eventually affect the accuracy of the forecasts.
“We may adjust for it next year,” Mr. Smith said, to acknowledge the increasing role such media are playing.
May adjust for it? Could affect the accuracy of the forecasts? So in other words, this kind of ‘advertising’ is almost viewed as a nuisance or afterthought to these traditional agencies, I suppose. They don’t even appear to fully recognize the online space. Nothing was said specifically about search marketing or any other online advertising either.
Do you find it curious that the advertising ‘industry’ seems to still be disconnected from where advertising is moving? What are your thoughts about traditional agencies from Madison Avenue to Main Street that still clump online under the interactive tab on their site and say they perform these functions but then don’t even consider them in the grand scheme of advertising?
Madison Avenue See Slight Uptick in Ad Spend for 2010
While it is important to try to see what lies ahead in the advertising industry it is also important to watch exactly who is reading the tea leaves. On Tuesday some of the heavy hitter from the agency world predicted slight increases in spending on advertising in 2010 and did not see returns to 2007 levels until as late as 2012 (an election year, hmmmmm).
The New York Times reports on the meeting that these predictions were unveiled.
The predictions were made during a panel event at the second day of the 37th Global Media and Communications Conference, sponsored by UBS. The conference, in Midtown Manhattan, typically assembles executives from media agencies to offer forecasts for ad spending in the year — and years — ahead.
In ascending order, the forecasts for 2010 compared with 2009 call for an increase of 0.8 percent, from the GroupM unit of WPP; 0.9 percent, from the ZenithOptimedia division of the Publicis Groupe; and 5.9 percent, from the Magna unit of Mediabrands, a division of the Interpublic Group of Companies. (A forecast from UBS, offered during the panel discussion, was for an increase of 3.9 percent.)
Not exactly robust growth but at least there may be a halt put on the skid that advertising spending in traditional mediums has seen. Wait, did I just say traditional? Yes, I did and what was said by these ‘experts’ as it relates to the other side of advertising, you know that Internet marketing and social media piece we talk about from time to time?
Adam Smith said GroupM was encountering difficulty in measuring the ad spending in new outlets like Facebook, which could eventually affect the accuracy of the forecasts.
“We may adjust for it next year,” Mr. Smith said, to acknowledge the increasing role such media are playing.
May adjust for it? Could affect the accuracy of the forecasts? So in other words, this kind of ‘advertising’ is almost viewed as a nuisance or afterthought to these traditional agencies, I suppose. They don’t even appear to fully recognize the online space. Nothing was said specifically about search marketing or any other online advertising either.
Do you find it curious that the advertising ‘industry’ seems to still be disconnected from where advertising is moving? What are your thoughts about traditional agencies from Madison Avenue to Main Street that still clump online under the interactive tab on their site and say they perform these functions but then don’t even consider them in the grand scheme of advertising?
Is This Recession Over Yet?
We appear to be caught in a rut as of late. No one wants to make a definitive statement as to whether or not the recession / slow down / depression / aberration or whatever we call this thing is over or not. Depending on who you talk to we can either be on the edge of a recovery or the edge of a cliff. Is there a way to tell if this dark economic time is seeing some light at the end of the tunnel?
We at Marketing Pilgrim are not analysts and we don’t claim to be. What we can do, however, is tell you about reports that are out there that can provide some insight or at least help us think differently. As marketers we tend to land on the hopeful / optimistic side of news because we want people to buy our stuff, right? Well, if the folks at Millward Brown Optimor which is owned by WPP are right with their BrandZ Portfolio study then there may be indications that at least the strongest of the strong, brandwise, are showing signs of life.
The analysis shows the top 100 brands, which Millward Brown refers to as the BrandZ Portfolio and includes many technology companies like Apple, Vodafone, Microsoft, Nokia, BlackBerry, Intel and others, are recovering from the recession at a faster pace than the market. As the chart above shows, the most valuable global brands have been outperforming the S&P 500 for a number of years now but show a much faster recovery from the recession than the market in recent months.
As noted by Robin Wauters of TechCrunch it’s a relief of sorts to at least see both of the performance indicators showing movement in the positive direction.
So why would big brands show a quicker recovery than the S&P as a whole? Well, who really knows? While this data is interesting it may be a stretch to make this kind of comparison since the ranking of the Top Brands is something that needed to be ‘crafted’. Here is some of the criteria.
The ranking is calculated using a methodology called “Economic Use”, taking into account the role that brands play in purchase decisions and identifying what proportion of the business value can be attributed purely to the brand. Besides inputs from the BrandZ study, the ranking uses financial data from Bloomberg and market and product data from Datamonitor. The ranking takes into account regional variations since even for truly global brands measures of brand contribution might differ substantially across countries.
So we need your thoughts again Pilgrims. Putting aside a larger worldview for a minute what is happening in your neck of the woods? Are you seeing signs of recovery or signs of ‘more of the same’? While it’s interesting to look at studies like this what is really happening at the street level. I see some more activity but I think the activity is more around preparing to spend more at some point in the future rather than getting back into the game right now. What about you?
Razorfish on the Razor’s Edge?
Microsoft’s interactive agency Razorfish is the subject of some varying rumors as of late. The one common thread in all of these reports is that Microsoft is shopping the company. That much we know for sure. Where they end up is the subject of much speculation.
In the Internet marketing press it depends on who you listen to and / or trust that will help you make your very own prediction. Publicis ending up with Razorfish has been favored by the folks at paidContent and they were willing to pay handsomely for the company although not quite the $800 million that it was supposed to merit. That may not be the case any longer. WPP is in the game as well but that is another that falls under the category of “to be determined”
Although three sources told paidContent that WPP had a cordial meeting with Microsoft execs about what it would it take to move Razorfish out of the Redmond software company’s orbit, a deal appears to be in doubt.
Several executives speculated it was a matter of demonstrating who wants Razorfish more, and so far, Publicis has gone to greater lengths to show its desire. For one thing, Publicis executives have indicated that they would be willing to pay upwards of $700 million to acquire Razorfish, while WPP has balked at paying more than $600 million.
Other sources including Business Insider have stated that Publicis’ interest is on the retreat (that was on August 4th). On the 6th both Reuters and The Wall Street Journal reported that the deal was likely to happen. Since none of the companies seem to be actually saying anything rather than this being a case of “he said, she said” between companies it’s one of “we said, they said” amongst various industry insiders.
If it were to happen, the deal is said to be slated for September but who the heck knows. Right now, it seems like there is much ado about nothing since Microsoft is supposedly talking to others as well. Comparatively this must seem like a vacation for Microsoft staffers following the Yahoo “Boatloads of Fun” event. Whether this is all a negotiation ploy or not matters most to Razorfish employees who are probably wondering what the future holds for them. Let’s face it, they’re the ones that will feel any impact the quickest and just how much impact will be felt depends greatly on who eventually walks away with the company.
Is Microsoft Ready to Shave Off Razorfish’s Conflict of Interest?
When Microsoft acquired aQuantive in 2007, it wanted to bolster its ad network. Unfortunately, it also ended-up with a conflict of interest, as aQuantive came with Avenue A | Razorfish–an ad agency.
Since then, you could argue that about the only good thing to come out of that particular acquisition was the re-branding from the awkward "Avenue A | Razorfish" to the more practical Razorfish. Really, what did Microsoft want with an ad agency anyway?
Well, the FT has yet another rumor–in a long line of rumors–that Microsoft plans to sell off Razorfish.
Microsoft has appointed Morgan Stanley to find a potential buyer for Razorfish, its digital agency…In August, two years after the aQuantive deal, more favourable tax implications will provide an opportunity for Microsoft to sell an asset some view as a conflict of interest with Microsoft Advertising, which sells technology to rival agencies.
So far French marketing firm Publicis appears to be the front runner–with barely a mention that WPP may once again be interested.
So what’s Razorfish worth? Back in 2008, AdAge slapped a $800 million valuation on the agency, but we’re in a totally different economic climate right now, so FT’s $600m-$700m might be more realistic. But, really, that’s just a very small drop in an insanely large Microsoft bucket. Why bother either selling?
Well, that brings us back to the conflict of interest issue again. Microsoft has a renewed focus on its own online advertising sales, and so the time might be right to get rid of any distractions.
