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FEMALE SPEAKER: What a great topic for Kodak to sponsor.
It's a real pleasure that we're here, and it's an honor
to introduce this panel.
I have a question for the audience.
I'm interested to know how many of you guys
have heard of Kodak.
I know it's a silly question.
Thank you.
I'm glad that it was a silly question.
Now, how many of you guys, in your day-to-day lives, when
you're home, you're on vacation, how many of you
bring a film camera with you?
And I think that illustrates why this conversation is so
relevant to Kodak.
Kodak, over the past 5, 10 years, has undergone a huge
brand transformation.
And today, you might be surprised to learn that 70% of
our business is actually B2B.
And hopefully, most of you are Kodak customers on the B2B
side and use our entertainment imaging films in your
commercial production.
But that just gives you an idea of the huge
transformation that we've undergone and why we're so
happy to be kicking off this panel.
So that's it for me.
I just wanted to thank you for having us.
And please join me now in welcoming Mike
Chapman, editor of Adweek.
MIKE CHAPMAN: Thank you, Barbara.
Welcome to the latter half of Advertising Week, everybody.
And also, welcome to the tail end of the economic meltdown
that has wrought so much misery.
That is, unless you believe what was written in the Wall
Street Journal on Monday, because that seemed to imply
that in the advertising industry, we've got quite a
few more months to go of misery before we're wading
through the green shoots.
Perhaps we'll kick the discussion off on that.
But first to the panel.
And congratulations to Matt and the organizers of
Advertising Week.
We have an incredible panel for you today.
It certainly is the top brass.
And why don't you guys come on the stage now, and I'll
perhaps introduce you as you walk up.
So we have Marita Scarfi from Organic, Larry Woodward from
Vigilante, Matt Seller from Universal McCann, Richard
Pinder from Publicis, and Tom Carroll from TBWA.
Am I on?
Great.
TOM CARROLL: It's like Star Trek.
MIKE CHAPMAN: So we've got 45 minutes and five panelists.
So I was going to ask everyone to keep their answers to 140
characters or less, if that's OK.
That's the way we all write and read now, anyway.
All right, maybe 140 words or less.
How's that?
Can we manage that?
So I thought we'd start off at a very high level.
This is one that maybe everyone will want to comment
on, but I'll start you, Marita.
Without debating how many more months we have of this
meltdown before things are picking up and the green
shoots are all around us, at least we know there is an end
of the tunnel.
When we emerge from it, what, in your mind, will have
changed forever?
MARITA SCARFI: Well, I think the landscape that will change
forever is pretty much that the way in which marketing is
done today, obviously, is evolving.
It will continue to evolve.
There's, in my mind, in everybody's mind, a lot of
shift to digital and what that really means.
And overall, I think the budgets might not come back to
the levels that we had previously.
So there's going to be kind of a re-look on marketing overall
within marketing organizations and how they're structured and
then just within the agency structures as well too.
MIKE CHAPMAN: We'll get to, perhaps, some more of that
internal stuff in a minute.
Larry, what do you think, what's changed forever?
What will never be the same again?
LARRY WOODWARD: And I love the question, by the way.
The fact is, everything.
Everything and nothing.
If you look at The Great Depression, which seems to be
the only thing we can compare this to at this point in the
game, radio became dominant.
People were home more, and the entertainment that they could
afford was radio, and radio became preeminent.
The soap opera came out of radio, and the world was
changed forever.
In this way, even looking at this audience, you're all
people, but I see you as little broadcasting centers,
little satellite dishes on your head, because media now
is the individual.
So our job heretofore was entertaining you and making
you watch our commercials.
And now it's going to be giving you what you want,
because if you don't want it, we won't be able
to serve it to you.
And I think that's the big thing that's changing.
MIKE CHAPMAN: Thanks, Larry.
MATT SELLER: I don't think anything ever changes
permanently.
I think that we think that it's a cataclysmic event, and
we're never going to be the same, and then we are.
And we think we're never going to buy anything, and it's only
going to be promotions that drive everything, and then we
start buying stuff again.
So I think that we will have shifted around a little bit.
I remember post-9/11 being with a brilliant guy who was
asking that question.
Now things will have changed forever.
Like there will never be another hijacking.
Well, then you just switch to pirating.
There's a different kind of hijacking.
So sure, we have changed media mixes, and we have ended up
doing more geotargeting, and we've done smarter things
because of what's going on, but we'll drift back into
entertaining people into buying stuff.
MIKE CHAPMAN: Interesting.
And without getting too macro about it, do you think the US
economy is going to continue to be one that's driven by
consumer spending like it was before?
That's going to come back?
MATT SELLER: I do.
I've said this before, but I think that we are a nation of
poor dieters, that we diet all the time, and we think that
we're really going to make it work this time.
And then after a couple of months, we begin eating again.
And we have tried this not spending money thing for a
while, but we really like shopping, so we're going to
spend money again.
We're just going to be conservative for a little
while and then open it back up.
MIKE CHAPMAN: So perhaps nothing changes forever, but
Tom, are there things that you were doing at TBWA before that
you will never do again?
TOM CARROLL: No, I agree with Matt.
All the crisis did was exacerbate what should've been
going on anyway.
So it's not like the crisis hit and all of a sudden,
digital became a big issue.
Digital was a big issue before the crisis.
All the crisis did was exacerbate people moving
faster to change things.
If the crisis hadn't happened, we'd still be an industry
totally in upheaval without the crisis.
We still don't know what's going on.
We still don't know what the mix is going to be.
We still don't know what role digital is going to play, how
dramatic it's going to be.
Are people going to get bored with being in front a terminal
all the time reading stupid blogs from people they don't
know who they are?
Or are they going to go back to--
there'll be a balance.
But I don't think anything's really changed.
I think if you weren't changing before the crisis,
you're dead anyways.
MIKE CHAPMAN: Right.
Richard?
RICHARD PINDER: I think that's the debate.
For me, I'm not clever enough to know what's going to change
forever, because forever's a real long time.
But what I'm aware of is East-West, consumer-producer,
and analog-digital.
East-West, I was in Singapore last week.
The place is on fire.
Just going like this.
China, 10% growth already back predicted next year for the
advertising industry.
You won't see that in Western Europe or the US.
Analog-digital, we know the story.
We're already 15% digital.
Hope to be 30% within two years.
That isn't something we would say a few years ago.
So clearly, something has changed, but as these guys
have said, it's started.
And the consumer-producer piece is pretty clear to me,
which is that we no longer will be producing things
without caring how people will interact.
Now, if we ever did, that was pretty daft, but we could get
away with it.
Now we can't.
MIKE CHAPMAN: And anyone can take this.
What does all this mean, if anything, for the structure of
advertising agencies and the way they work, just to focus
internally?
As we've touched on, it might have accelerated changes that
were already ongoing.
But are there any structural changes in the way agencies
work, the way they relate to clients--
RICHARD PINDER: Lot less people.
MIKE CHAPMAN: --that are going to result?
RICHARD PINDER: I think a lot less people.
I mean, we're obviously going to have to make things work.
MIKE CHAPMAN: The jobs are not coming back?
RICHARD PINDER: Absolutely.
Productivity driving, people driving much greater
efficiency.
But you see that in Asia, anyway--
the speed, the lack of people to service each piece.
The real driver of that, I think, clients, like they do
in the US, around the rest of the world now will want less
people per job but cleverer people.
MIKE CHAPMAN: You think that's something
we're going to import?
RICHARD PINDER: No, I think you guys are already running
with people who are more focused.
Maybe not less people, but more focused.
The rest of the world was running this diverse strategy,
which I think is going to change.
I think there's a lot of that sort of
stuff's going to go on.
TOM CARROLL: I think the biggest impact has been on how
you define "creative." And I think the biggest shift is in
the creative department and what is creative.
When they throw "digital"--
you say "digital," and people think it's all about data and
it's all about techies.
And really, that's a creative issue.
Clients look and they say, well, I
want to be more digital.
I want to save money.
I want more earned.
I want to take all those efficiencies
of the digital world.
OK, great.
As your media costs go down, your creative costs go up.
And as your creative costs go up, you still have to pay--
creative people are expensive.
Really good creative people are extremely expensive.
It's how you think about what creative is and how you
recalibrate your creative departments and how you
recalibrate what the thing we sell most, which is insight
and creativity.
That's what we sell.
That's why people come to us.
Because if they didn't need insight and creativity, they
could do it themselves.
You can hire all the other stuff that goes on in terms of
how you do marketing.
It's creativity and the smart people who trigger
creativity--
planners and smart marketing people, brand people that you
have around.
We're still a creative industry.
We're not a tech industry.
Tech drives part of it, but it's about creativity.
And that's the change is how we think about, what is our
creative product, and how do we sell it?
MIKE CHAPMAN: Matt, have you got any thoughts--
MATT SELLER: Did his words fit on the
allotted piece of paper?
That was a lot of words.
RICHARD PINDER: We'll [UNINTELLIGIBLE] them.
MATT SELLER: Creative agency was the question.
TOM CARROLL: I'm like, what's his name?
Gaddafi.
Gaddafi had 15 minutes.
We've got another hour--
[INTERPOSING VOICES]
MIKE CHAPMAN: The word "rant" springs to mind quite quickly,
doesn't it?
MATT SELLER: Anyway, creative agency, agency, whatever.
I think that what hopefully will come of this, and in a
way, I think the economy hasn't gotten bad enough, is
we all still look and feel a lot like each other.
And I wish that creative agencies weren't so much like
each other with the same departments within, so that
when a client is looking for a new agency solution, they
can't just sort of go, I'll pick from A, B, C, or D.
The people within and the work gets done is different, but
the ways in which we're all structured is
just too much alike.
So I love the new models, that should come from crappy
economies like this, that are merging entities together--
retail plus a media, direct plus a traditional, digital
plus a mass.
Start changing up the structures a bit so that we
don't look and feel the same.
That's what I hope comes of this.
LARRY WOODWARD: I think that we're really changing.
We need to change in some fundamental ways that we're
not changing quickly enough.
And that's going to bring about a more radical change in
advertising than we actually want.
What we want to believe is that people have to come to
creative people to get creative ideas.
But might I remind you of what happened during typesetting.
I remember getting into the industry and spending $300 or
$400 for a headline, because you had to go to companies
that made headlines.
And you had people called typesetters who were very,
very, very technical.
And they would look at something that came out of
desktop publishing, and they'd say, there's too many widows
and orphans, and the kerning is wrong, and how can someone
look at it?
Well, it cost $0.10 to make, not $500, so people got used
to looking at it very quickly.
And then it became the way that you did things.
And now, there's a whole bunch of people that have in their
basements these pieces of equipment that cost 3/4 of a
$1 million.
And the people who did it don't do it anymore in any
way, shape or form.
And I believe that in advertising, it's pretty much
the same thing.
I'm like you.
I have a big budget for creative people.
But I don't believe it's heresy to believe that they'll
be creative people that will be perfectly suitable for the
task at hand that you won't have to pay 3/4
of $1 million to.
And that's coming quickly.
And it won't necessarily be because
they're not wildly creative.
They're just not creative in the right way.
And I agree totally with what you're saying about how you're
going to be putting some of these things together.
But I think that some of the things that you put together
will actually be different things.
They won't be an advertising agency.
It won't be advertising agency-like, but it will reach
consumers and cause consumers to do the things that we were
previously tasked to do.
MIKE CHAPMAN: So the companies that provide that service
obviously have to be different companies.
The rallying cry you always hear is getting rid of the
silos and be more flexible and we already touched on that.
Although silos used to be called "specialist
departments," didn't they?
And they were a good thing then.
But I guess--
correct me if I'm wrong--
demands from clients are the things that are forcing the
hand of agencies to change this.
MATT SELLER: But we--
sorry, [UNINTELLIGIBLE] gone yet.
But hold on a second.
When we were silos, we used to have these things called
"account people" that were incredibly valuable and really
well trained and all that kind of stuff.
And we kind of blew that off.
Clients stopped paying for it, we stopped training for them,
and all that kind of stuff.
So the silos end up being exaggerations of a problem,
which is that there isn't anybody who really takes
responsibility for the client's business.
And the holding company was supposed to do that, but the
holding company can't really do that, because then they've
got conflict situations all over the place.
The creative agency continues to have that legacy
relationship, but shouldn't necessarily, because they've
got a bunch of other silos that they don't actually
control the finances of.
It's a little bit of a mess.
TOM CARROLL: I don't agree with that at all.
MATT SELLER: Good.
Let's bring it out.
TOM CARROLL: I don't.
I just think you're crazy.
I think that good account people are more
valuable than ever.
And a really good account person knows how to deal--
they're more like a Hollywood producer than they were an
account executive, because they have to deal-- a
Hollywood producer has music people, writers, actors, blah,
blah, blah--
10 different people to deal with.
That's what a good account person does today.
It has PR, it has digital, it has creative, it still has
promotions, shopper marketing.
It has all this stuff that account guys never had--
account people had in the past.
Really good ones today are invaluable and will become
even more valuable, because it's not going to change.
You're still going to have to come and have one person who
drives the business for the agency, however that agency is
configured.
And it will be configured differently going forward.
RICHARD PINDER: But finding them is hard.
Finding them is almost harder than finding good creative
people these days.
TOM CARROLL: Well, because it's a stupid--
I mean, I'm a lifelong account person.
It's a stupid job on one level, unless you do it well,
and then it's not a stupid job.
Then it's an incredibly fulfilling job because you're
actually the one driving the bus.
RICHARD PINDER: Exactly right.
But the good news is, if we get thrown out of these jobs,
we've still got a good job, right?
Because it's hard to find people like us.
[INTERPOSING VOICES]
MATT SELLER: [UNINTELLIGIBLE]
by agreeing with me.
I was saying--
TOM CARROLL: You said account people, we blew them off.
I don't think we've blow them off.
I think what we've done is their roles have changed so
dramatically.
RICHARD PINDER: Yeah, but it's been hard to find them.
When [UNINTELLIGIBLE]
there was a lot of creative guys telling me, where have
all the great account guys gone?
There's a real sense of that.
TOM CARROLL: But they've been complaining about that--
RICHARD PINDER: Now, they always hated account guys.
TOM CARROLL: --since I was 12.
RICHARD PINDER: No, that's different, Tom.
They hate the account guys.
That's different.
[INTERPOSING VOICES]
MIKE CHAPMAN: Marita, you had something
to say on this before.
MARITA SCARFI: I don't come from the advertising business,
and I think the account function is a half function
the way it is in the advertising business.
I think a lot of the account folks, yes, I agree that they
have to shepherd all of these different skill sets and
disciplines together across multi-channel.
But they also need to solve business problems for our
clients much more than they do today.
And honestly, to make it even rarer, if it's rare to find a
good account person to go across channels, it's even
rarer to find an account person who actually can
understand the client's business and marry this very
dynamic space with the marketing problems that these
people are trying to solve.
It's very complex.
And in our business, I always say we recreate ourselves and
our talent every 18 months.
And we don't actually just have creatives.
We have creative technologists.
We have strategic creatives.
We have people that have a primary discipline and a lot
of secondary disciplines that come along with it.
And sometimes we really argue, quite honestly, about are they
in the creative group?
Are they in the technology group?
Are they in the strategy group?
And that is going to evolve more and more to the point
where I believe titles will go away, and it's going to be
skill-set-based.
And you're going to be doing different things all the time.
And that is even going to rock the boat much more, because
people like to know who I'm talking to on the other side.
And that's going to be complicated.
MIKE CHAPMAN: Moving on, then, looking, perhaps, more
externally to relations with clients,
financial or otherwise.
Are those kind of relationships something that
has to shift?
Even looking at the way agencies are paid for the work
that they do, is that something that--
I know it's an ongoing, ancient debate, but has this
crisis perhaps accelerated the need for those
relationships to change?
And in what way?
Matt, you're nodding.
MATT SELLER: Yeah, I'm nodding.
I get so bored with us talking about how there's a need for a
change in how we get paid.
MIKE CHAPMAN: Yes, my apologies for bringing it up.
MATT SELLER: No, I'm not bored with you.
But I mean, as an industry, I'm bored with us saying it
needs to change, and we've got to get more value based, and
then we keep getting paid exactly the same way, because
we don't really have the courage of our convictions.
I do think that the crisis meant that we were more aware
of our clients' business.
And it wasn't that they were trying to pay us less because
they were evil.
It was because their margins are going down.
Our margins go down necessarily with it, which
hopefully means there's a better correlation between our
business and theirs, that there's more of
our skin in the game.
Which gets to, remember 20-something years ago when
Proctor was trying to do the incentive based on their
business, and all agencies said, well, we can't actually
play that way, because we only handle a portion of your
marketing expense.
We can't be held responsible for what happens in the store.
I think that we have to take responsibility for our
clients' business, and we have to be willing to be paid based
on their performance, not just ours.
And we dabble what that.
But we're fortunate to have Coke, who is blazing the trail
for what value-based comp is about.
And it's a really healthy dialogue.
It's a much richer relationship, because we
really are in each other's businesses.
I also think, lastly, that procurement gets a really
horrible name.
And procurement does not always appreciate the
qualitative bits that we do.
But I think that procurement asks to understand our
business better than some of our other
clients who know us better.
TOM CARROLL: Do you really think that's going to help?
MATT SELLER: I do.
TOM CARROLL: You really think that's going to help you with
procurement going forward?
MATT SELLER: I've seen it.
It has.
It has absolutely helped--
TOM CARROLL: I'm kidding.
MATT SELLER: --because it requires that you actually
deliver on what value is.
LARRY WOODWARD: I think that we're not in the--
TOM CARROLL: Matt Seller likes procurement.
Nobody write that.
[INTERPOSING VOICES]
LARRY WOODWARD: I think in now way are we prepared in our
small advertising business to actually be a great partner to
clients in a way that can benefit us
financially, currently.
I had a big brother.
I have a big brother.
He's five years older than me.
And the way that he used to always treat our candy, I'd
have a bag of M&Ms, he'd have a bag of M&Ms. He'd say, pour
them all on the middle, and you'll get more.
And I never got more.
And in the very same way--
MIKE CHAPMAN: And you believed him every time.
LARRY WOODWARD: --I have clients that shall remain
nameless that I've been on incentive programs with.
And funny thing, when we meet the number, the rules change,
and we don't get the incentive income that we've agreed on.
And the reason that we don't is because we've got no
ability to enforce, right?
They have the ability to say, do you
want to lose the account?
And they can open the door, and there's 17 of you guys in
the lobby waiting to take their business.
And as long as we are willing to do that--
I mean, we fight in our networks, right?
We compete to the death every day with people who we're
supposed to be partners with.
And as long as that's going to be true, it's going to be
impossible for us to get into a
relationship in terms of value.
Talk about feeding frenzy, your client Coke was in the
lobby a second ago.
How long was the line?
I was in it.
So the fact of the matter is that I truly believe that from
a compensation standpoint, right now,
we're screwed, right?
And the next time that we get something that they can't get
anywhere else, that's when we start putting it
up the other way.
TOM CARROLL: The truth of it is, good clients pay you well.
Bad clients don't.
You're either valuable--
I mean, this argument, to me, is so ridiculous, about your
point about, we're not paid enough.
People pay you what they see your value.
You're either valuable with your clients or you're not.
And they'll pay you if you're valuable.
So make yourself valuable, is my answer to that question,
which is, make yourself valuable, and
people will pay you.
The other thing we suck at, which we need to get better
at, is writing your contract thing up front.
I think it's a symptom--
we win a pitch before we get the contract gone.
Then we win the pitch, and then we get a crummy contract,
and we *** about it.
Sit down in the beginning and say, this is
how much we're paid.
This is how we like to get paid.
We believe we want to be a part of your business, have
some skin in the game.
We want an incentive.
This is the contract.
We expect you to deliver on it.
If they don't, you've got to have the guts to walk.
But it's our own problem.
We sit there and we say, well, we'll put in incentives.
And then when they don't pay them, we go, oh,
they didn't pay us.
Well, decide how you want to live.
RICHARD PINDER: Yeah, you know what?
Right now, if the clients are reading our second quarter
results as an industry, they're saying, so you've got
problems, have you?
You're down, what, one or two margin points, each of you?
TOM CARROLL: Did anybody send any money?
RICHARD PINDER: Hm?
TOM CARROLL: Did anybody send any money?
RICHARD PINDER: But seriously, we can't sit here having a
conversation about this, complaining that--
I'm with you, Tom.
You can't sit here complaining about it, because we're not in
a crisis on our profits as an industry.
So clients sit there and say, so why are you complaining?
And then you've got the whole conversation on their own part
of the piece, because you've got got car companies losing
everything and being rescued by the government.
You've got banks losing everything and being rescued
by the government.
You haven't got ad agencies yet being rescued by the
government.
I guess, Matt, you're probably in the middle there, no?
LARRY WOODWARD: Ooh!
MATT SELLER: Don't believe everything that you read.
RICHARD PINDER: No, I'm just trying to
help Tom pile on you.
It's all right.
But seriously, we've got to get efficient, because we
waste money on stuff.
We do, and we know.
And the smart clients help us find that.
And the good ones will pay us properly at the end of it.
And if we're not in that position, and we're not really
performing, we won't get paid properly.
There's too many people pervading, so it does become
hard to compete on the money.
But if we're sitting here moaning about the
money, we're idiots.
We should be talking about what we can deliver, what we
can add, because in the end, the client will save, what,
10%, 20%, 30% on an amazing deal he gets from an agency.
How much is that of his total marketing spend?
It's a rounding error.
It's just a great job for the procurement guy to succeed on,
so our job has got to be persuading them that the value
of what we do is much greater.
And I, frankly, don't like getting in these
conversations, because I think you lose if you moan.
We should be trying to sell what we do.
MIKE CHAPMAN: Interesting.
We touched on this before-- we'll
change the subject slightly--
the shift to digital.
Again, a perennial conversation.
But you pointed out, Tom, quite rightly that the
advertising industry was already going through a
seismic shift, a quantum leap, whatever you want to call it,
before the financial industry took the legs
away from the economy.
There was already a sort of air of crisis or consumers to
people were trying to speak to migrating away from the media,
and the [UNINTELLIGIBLE]
what in the hell are we going to do about it?
But as this crisis accelerated that shift--
and looking at the numbers, it has, just because online
advertising spending hasn't fallen as quickly.
It's gained about 5 percentage points.
It's about 15% of US advertising spending now, and
it was only 10% a year ago.
Has that accelerated?
Marita, we chatted about this briefly.
MARITA SCARFI: I actually do.
It has accelerated it.
I think marketers feel like they can see measurement.
I would say measurement's a big area to talk about.
And everything shouldn't necessarily be based on
measurement.
But since they couldn't see it and are starting to look at it
more like that, they feel like they can see where the dollar
goes and where it gets them.
MIKE CHAPMAN: It's a matter of, as money has become
tighter for clients, the appeal of online has
increased, because they--
MARITA SCARFI: It's a visibility issue.
MIKE CHAPMAN: --now account for--
see the ROI and the competetive expendable--
MARITA SCARFI: Yeah, it's a visibility
transparency issue, I think.
It's just more transparent.
And where I think, from a measurement basis, some people
really don't know--
everything gets measured differently across the board.
TV's measured different than--
using Nielsen might be measured different than using
all the different digital channels
than the retail store.
So they get a lot of metrics that come together that, quite
honestly, could be quite meaningless, because it's like
an apples and oranges comparison.
But with digital, they, at least across all the
different-- when you look at display and search and BT--
Behavioral Targeting--
at least they can make it consistent across that, and
they can kind of know what it stands for.
So I think it's somewhat emotional, somewhat
transparency.
And I think they can actually say to their CFO and their
CEO, if I spend this dollar, I can tell you what I'm going to
get in return.
That's why I think it's been a lot more aggressive than it
has in the past.
LARRY WOODWARD: I think in some ways,
digital is like Crispin--
and since they're not here, I can talk about them--
in that, a lot of sizzle, and then at the end, you start to
look at efficacy.
Did they move the needle?
And you've seen the articles.
Maybe not, with all those things that they
were trying to do.
And in the very same way, when you look at the real numbers
for digital, click through.
Think about search like the guy opening the door, right?
So certainly, someone has to walk in the door.
So your Google, your Yahoo, your those kinds of people,
search make sense.
But once you get past that, there's a ton of things that
we're trying to do in digital that just simply
don't really work.
There's no click-through.
The percentage of people who click through an ad is just
ridiculously low.
But it's new, and it obviously is the future.
There's no two ways about it.
MIKE CHAPMAN: And you know it doesn't work, right?
How do you know it doesn't work?
LARRY WOODWARD: Well, so many parts of it don't work when we
do it traditionally.
So when we use it in the traditional way.
We've got a a web banner.
MIKE CHAPMAN: See, that's the thing I think you know.
LARRY WOODWARD: We've got a [UNINTELLIGIBLE].
That's what we know.
MARITA SCARFI: You know if it works or it doesn't work.
LARRY WOODWARD: Right.
But the fact of the matter is that there are parts of it
that you know should work, like your ability to talk to a
channel, which is very inefficient in wider media.
So you're going to talk to African-Americans.
I'm fighting with a client right now.
They spend $40 million a year trying to talk to
African-Americans.
You go to a marketplace like Westchester County, and you're
trying to pick 2,000 people out of 300,000 people, it's
very hard to do.
But on the web, it's very easy to do.
But to them, it doesn't feel right, and they don't quite
understand it.
So it's hard to convince them to say, taken that, I can talk
to four and 1/2 million people with an email.
I have their email.
I know how to talk to them.
And it's only going to cost you $20,000 as opposed to this
$6 million that you're spending.
Very difficult.
It's just tough to move it that way.
So I think that's what's happening in digital is the
same thing that's happening within our organizations,
where we're having to try to figure out how to put it
together so that we have the right competencies, is very
much happening at the clients as well.
Quite frankly, you've got a 55-year-old client, he didn't
learn it in school.
And he is having a very, very difficult time understanding
how to apply it.
MATT SELLER: Yes, and I also think that digital isn't an
agency or department anymore.
Digital is a part of every single offer
that each of us has.
So whether you're a promotions agency or a PR firm or an
advertising agency or a digitally-expert agency--
that's your core--
everybody has digital, which means that everybody who's
interfacing with the client is representing a digital point
of view, partly because many of us have now lived a digital
world long enough that it's sort of part of who we are.
But I think that really helps a lot, because the client
organization and the agency-facing entities are all
about digital.
So it doesn't have a separate budget so much anymore.
It's a part of how we communicate.
TOM CARROLL: The whole digital story is being
written every day.
Still, I can't tell you how many clients go, I don't feel
that we're digital enough.
And I'll say, I don't think you are either.
And they'll say, why?
MATT SELLER: What do we both mean?
TOM CARROLL: I don't know.
I guess we're not digital enough, whatever that means.
It's being written as we speak.
So there's no answer to it.
And whether it's going to be, yes, traditional agencies are
having to have more digital capabilities,
more digital offering.
And then, is it going to end up being there will always be
traditional agencies and there will be digital agencies?
I don't believe so, but I don't know.
Will the digital agencies start doing
more traditional stuff?
Maybe.
I don't know the answer to the question.
But at the end of the day, the company that brings their
clients to market at all avenues seamlessly, with the
most efficiency, the most insight, and the most
creativity and distinctiveness about the brand, wins.
So this argument, this
conversation that we're having--
well, it's the digital agencies--
it's all ***.
Whoever figures that out and brings their clients to market
through all these things is going to be the winner.
And that's what's being written today.
The arguments are about, well, it's going to
be the digital companies.
It's a stupid argument, because it's not
what reality is.
The reality is, there are clients who need to bring
their brands to market.
That's the job.
Figure it out.
And that's what we're all in the middle of, I think.
RICHARD PINDER: Yeah, we are.
That's a very good exposition of it.
I won't try to add to that.
What I would do is add something different, which is
that, when you asked the question about the
acceleration of the change, I totally agree with
his point of view.
Everything's everything, and if you just try and silo it,
it's a disaster.
But if you go back to your question of digital, what's
fascinating is that the Asian digital growth is much faster,
much more aggressive than any of us expected, and that it
isn't Western Europe or the US.
And in fact, I think we're seeing significant slowdown in
the digital growth, if that doesn't make a complicated
statement, in the US and in Western Europe.
But what we're seeing, we're expecting 30% to 40% growth in
digital in Asia, because this small little word, "digital,"
means a hell of a lot.
It's not just web-based pieces.
There's more televisions than telephones in China, and
there's more mobile than there are telephones.
How do we access people in that space, and how do you
then reach them?
And they're the ones with the money.
So in places like China, India, and all these other
places in the world, where there's some real development,
they're the people with the money.
The people have these things.
So it's very easy to find them.
All this wasted stuff we grew up with goes away then.
MIKE CHAPMAN: And that makes me think--
I did want to ask you specifically, but everyone
else can chip in, of course, about the
international picture.
If we lift our heads a bit and look beyond the US, obviously
China, this incredible potential.
Third-largest economy in the world, with an advertising
industry about one-tenth the size of the United States.
So clearly, huge amounts of potential.
Which companies are going to succeed there?
Which types of companies?
Not specifically which.
Just staying with you for a second, Richard.
What's your thinking?
RICHARD PINDER: Well, I think it's always been the case that
China and India had potential.
When you've got a billion people, you've got potential.
And everyone's been talking about this potential since
1980, I think.
So there's no surprise, I guess, in that, because it's a
simple statistical fact.
I think what becomes interesting is that nowadays,
all of our clients and most of our industry are actually
making profits in China, which wasn't the case when I was
living there 10 years ago.
It was not the case.
Most of the competitors did not make money.
A lot of clients saw reduced margins.
But my clients have higher margins in China than they
have outside of China.
So there's a clear opportunity in that market from a
profitable growth, which is quite exciting for people in
the current climate.
The kind of companies that are going to do well, therefore,
are the ones who understand it's not just about the
billions, and, oh my god, it's a big opportunity.
Let's pile in.
It's the people who really understand how to operate in
an environment, which is quite hostile if
you're coming in naive.
Everyone has had their trousers taken down, at some
point, in China.
But pretty much every client, every agency, has had
something happen to them.
You go, holy crap.
How did that happen?
And that's because we didn't understand, we didn't look, we
didn't think.
So I think the people who will do well are the ones who
really understand what it's like to do business in an
environment where old friends need old friends, where if
you've been around for a generation, you have got
traction, and you really understand about building for
the longer term, not just trying to get
this quarter done.
And that puts the pressure on us, because we're
stock-market-driven by the quarter.
MIKE CHAPMAN: That's a very different perspective.
RICHARD PINDER: So we have to be quite careful with that.
Yeah, we have to be quite careful with that.
MIKE CHAPMAN: I see you nodding, Matt, particularly at
the trouser comment.
MATT SELLER: I think that we have looked at those markets
as huge department stores, where there was a quick
opportunity for us to make lots and lots of money.
And we probably looked at it with too much
of a Western view.
I know we have. And we have to really live it as China and
recognize that there are lots of different Chinas within
China, rather than in a Western approach.
So that's taken a while.
It isn't just money to be taken by the regular means.
TOM CARROLL: You're wrong again.
MATT SELLER: Oh, Jesus, Tom.
Am I going to be with you agreeing with me again?
TOM CARROLL: I'm kidding.
The numbers are there.
You're right, but the numbers don't lie.
These are monster markets that are going to accelerate much
faster than other markets developed.
And they're already developing at mind-boggling speeds.
And you're right.
Everybody got dollar signs in their eyes
for the right reasons.
And I bet you, once things settle down, that's where
you'll really see the BRIC markets accelerate, because
they're all pissed at us.
When I travel around the world,
[UNINTELLIGIBLE], they blame us.
They blame the US for--
RICHARD PINDER: Well, you.
TOM CARROLL: [UNINTELLIGIBLE].
[INTERPOSING VOICES]
MATT SELLER: It is mostly Tom's fault, by the way.
[INTERPOSING VOICES]
TOM CARROLL: The truth of it is, there's no shortage of
appetite for the global economy.
People like it.
They're glad that it happened.
We started it.
They love it.
No matter where you go in the world, people love being a
part of the global economy.
They think it's fantastic.
You can't shut that spigot off.
What we've done is we've turned it into a drip.
And they're pissed about it, because they were liking it,
and they want to be a part of it.
Once we get back to normal, and once we start a flow,
which is going to take longer than people think, then those
markets will explode.
We're the ones.
They were already on the bus.
They were already going fast and furious.
So I think that's why they're listening to us more, and
they're more anxious for the US to get back on track,
because once it happens, that's when
they'll really explode.
Because they were already there.
We screwed them up.
[INTERPOSING VOICES]
LARRY WOODWARD: I had just an ancillary perspective, which
has always interested me, traveling around.
And that is that in my neighborhood in Westchester
County, it's always amazing.
I've got to fly all over the world and be in newspapers and
stuff like that to have my house.
And the guy who lives next to me is a plumber.
The guy who lives on the other side of me is a dry cleaner.
So basically, what they did was they found something that
everyone in the world needed, right?
They put their infrastructure up, and they're all retired
and making a ton of money.
And I think that in the advertising industry, we've
overlooked some markets, which for any number of reasons, we
don't like.
We've overlooked Africa.
We've overlooked India and Pakistan.
Working worldwide with Western Union, I've just been
absolutely surprised at the lack of advertising
infrastructure for markets that are hungry for them.
And we just haven't done the job.
And I think part of not having done the job is that there's a
fair amount of, let's just say for the sake of this
particular panel, sameness to advertising and marketing in
the management levels.
So that sameness tends to make the same decisions over and
over again, just variations of that same decision, where some
of these marketplaces could be wonderfully large marketplaces
for people who see that opportunity and seize it.
TOM CARROLL: All you have to do is go around the world and
see how tuned in people are in all those markets to what we
do, whether it's digital--
everything.
They have access to everything, they're totally
ready, they need the experience, and they need the
business and stuff, but everybody's ready to go.
LARRY WOODWARD: Yeah, the same thing that happened in China,
remember, Africa's just huge, vast wasteland.
I was born in Casablanca, and the fact of the matter is that
what cell phones did was they connected everybody.
RICHARD PINDER: They've transformed Africa.
LARRY WOODWARD: And they've got two iterations of cell
phones past us.
And you go out in the bush, and the guy reaches into his
djellaba and pulls out a cell phone.
And we've got to be able to leverage that.
MARITA SCARFI: Well, I think one of the drivers is also
just the creation of, I'll call it the creation of wealth
within those marketplaces too.
So like in India, not really having much of a middle class,
and then more of the creation of a middle class, and China,
kind of the same thing, because you can't market to
people that don't have money either.
So I think part of the acceleration has been around
the consumer having, actually, more money to spend.
And when we were working with Best Buy, one of the things
they were talking about is when they launched Shanghai,
it was this completely different model, because Best
Buy here, they have a lot of vendors under the same store,
whereas there's a lot of electronic stores that was
like a vendor that solld that vendor, and
then they had pictures--
which was probably not even great pictures--
but a picture of the product.
And that was revolutionary for the other electronic stores.
So then everybody else started to have pictures.
So it's like the creation of all these things coming
together, which is, I would say, definitely mobile or
wireless has been huge.
The consumers, the people in those marketplaces actually
having money and becoming wealthier, and then just us
understanding the culture and bringing some of the way we
actually talk about product to them.
And I think the combination of all this coming together is
going to accelerate this a lot.
MIKE CHAPMAN: One last question.
Might try and leave a couple of minutes to get some
questions from the audience.
A lot of what we've spoken about is it's just going to
happen anyway, that companies that speak to consumers in the
right way in the places are the ones that
are going to succeed.
The ones that make the right moves
internationally will succeed.
That's all businesspeople.
That's what the market will make happen over time.
The debate, how long it is and what the right moves are to
make in the meantime.
But that's all predicated on the assumption that there is
fair competition, that agencies can compete and the
best man wins.
Is there anything about the structure of
the advertising agency--
and I'm being a bit coy here--
but is there anything about the structure of the
advertising agency that means that it isn't really as
competitive as it might be?
Are there impediments to the free market?
I'm referring, of course, to the way [UNINTELLIGIBLE] are
gathered together into large holding
companies, for example.
There was one example--
I won't name names-- but an example recently where a very
large brand was up for review, and they were
talking to an agency.
And it was one of the groups that was bidding for it, and
they were told not to because of an arrangement the holding
company had.
RICHARD PINDER: It happens in Formula 1.
It's going to happen in advertising, don't you reckon?
MIKE CHAPMAN: That's just one example.
Do impediments to competition like that, will that delay or
even stop the beneficial results of competition?
RICHARD PINDER: I don't think any advertising pitch is ever
a flat pitch.
I don't think it is ever truly fair, and I think it would be
completely naive and foolish to assume it is.
Every pitch I go into, I only really go into pitches I think
I've got a good chance of winning.
Otherwise, what's the point?
If I was chosen off the back of a Corn Flakes packet, it's
not very interesting to turn up.
So I'm hoping that the unlevel playing field continues,
because otherwise, I don't see how we're going to win,
because you have to have advantages.
Who do you have a relationship with?
Who do you know?
What do you know?
Do you have a guy who knows that category better than
someone else?
Do you have an expertise that's better?
Why do we buy Razorfish?
Because we want to be--
it's very digital, these are the sorts of things that you
have to do, I reckon.
So the holding company thing, I think it's a bit of a red
herring, actually, because I know that within the holding
company, we smile very politely around the table, and
then we will probably be pretty competitive behind it.
It's like a family.
You are very nice to your brother, but you might not
always agree with him.
It's like how it works.
So I don't think that's a problem, and I get more
beneficiary from Maurice Levy helping me than I do from
having to do it on my own.
So I'm up for that.
MIKE CHAPMAN: Right, right.
Benefits.
Definitely.
TOM CARROLL: I hope it doesn't change until I quit, since I
work at a big company with a holding company.
So I quite like it.
I compete more with the people in my holding company than I
compete with people outside of my holding company.
And it's as intense as it would be--
BBDO and DDB and Goodby and those guys are brutal to
compete against them.
I see them every day, as well as all the other
companies out there.
I think your question, if I'm reading it right, is back in
the '70s and '80s, when there was Ally Gargano and Chiat/Day
and Fallon McElligott, there were all these really cool,
medium-size creative agencies that did killer work that
really is who broke down the big agencies.
And all of a sudden, in the middle of that came the
[UNINTELLIGIBLE] and this whole holding company
strategy, which right in the middle of a huge creative
explosion came the holding companies.
And they kind of sucked the life out of that, because even
the Fallons and the Chiats and the Scali McCabes sold.
They sold because the money was too great.
Some guy came to you and said, I'm going to pay
you 10 times earned.
I'm going to pay you 10 times, and I'm going to give you a
contract for five years.
You'd have to be a fool not to sell it.
So the question, I guess I would argue, is does that
environment exist where you could have breakouts, where
you could actually have a legitimate breakout agency
that could compete against these holding companies?
I think it's tough, but I'm shocked that in this digital
environment, it hasn't happened, to
be honest with you.
Because if ever there was a time to break
it out, it's now.
And I'm kind of shocked no one's either had
the guts to do it.
Or maybe the math's just too hard, that you
can't pull it off.
But it's kind of a shame, because you like that.
I always thought that was one of the great
flavors of the ad industry.
MARITA SCARFI: I think it's hard because of the
relationships, because you look at the holding companies,
and I agree, it's kind of this unfair disadvantage sometimes.
And actually, sometimes our agency does pitch against the
quote, unquote "traditional" agencies sometimes.
And it's the relationships that are really hard.
The advertisers, if we remember the
market, they're confused.
There's all this stuff going on.
And the one thing that they hang on to more than anything
is that relationship.
And it's really hard to extricate that away and get
that real breakout.
And I would say Crispin was probably the one that's
probably been able to do it the best. But even then,
that's been, what--
TOM CARROLL: But aren't you surprised you
don't see more of them?
MARITA SCARFI: I know when you go up at the senior levels,
it's really hard to develop those relationships.
And I think you get those holding companies together,
and I will say, hands off to the traditional agencies.
They're masterful at the relationship development.
RICHARD PINDER: It's also never been expensive to start
an ad agency.
So the cost efficiency of digital, your point about how
easy it is, it's absolutely true.
But it's not a huge differential to starting an ad
agency in the tradition way.
TOM CARROLL: But I feel like they're the ones--
Crispin--
I like to look at.
I think they're fun.
They're, in my mind, the best example of somebody who's
combined everything.
They're kind of doing a lot of their own--
I don't know where they source it all--
but they tend to bring their brands to market on multiple
levels as well, if not better, than anybody else out there.
To me, I haven't seen enough of that, I guess.
I think agencies are catching up.
A lot more agencies are doing that stuff but--
LARRY WOODWARD: I believe that there's a fundamental flaw in
the structure of most of the holding companies.
I think that a holding company, in and
of itself, is agnostic.
And the fact of the matter is that you could even birth some
of these Crispins within a holding company if they were
properly set.
I think the problem is, and when you were saying some of
those names-- the Ally Gargano, certainly the Leo
Burnetts, is that those guys are gone.
There's a part in the Bible that says that there came a
time when the Joseph generation was dead, right?
And I think that in the advertising world, when you
look at the top of these networks--
and Maurice owns my company, and I love publicists, but the
fact of the matter is they're not ad guys.
And [UNINTELLIGIBLE]
not an ad guy.
And the fact that they're not ad guys means everything.
You can't talk ad stuff to them, because
they're not ad guys.
RICHARD PINDER: You can give Maurice a call.
I'll give you his cell phone number.
He talks ads lots.
[INTERPOSING VOICES]
LARRY WOODWARD: And again, not talking out of school, but I
hold that point.
And I know Maurice well.
And they're ad guys after a manner, but they couldn't
birth a Crispin, because ad people were just ad people
more than they were anything else.
TOM CARROLL: But they all sold.
LARRY WOODWARD: They all sold.
TOM CARROLL: That's the truth of it is they all sold.
And you can't blame the holding companies.
What they offer big global clients is efficiencies in
scale and things that--
LARRY WOODWARD: And math.
Math.
TOM CARROLL: It's certainly changed the
nature of our industry.
And that's what we're left with is because it was a
different world.
Before the holding companies came, you had big global
networks, right?
Ogilvy & Mather was run by a guy named David Ogilvy, who
was a creative guy, right?
And he ran a big global network.
They sold.
So you want to be public, you live in a glass house, you
live with the results.
And it's money, and that's just a fact.
So how do we get around it?
MIKE CHAPMAN: Matt, you're being diplomatically
silent on this one.
MATT SELLER: Wasn't I just?
I know.
I was just observing that about myself.
MIKE CHAPMAN: He wanted to be last so he couldn't be wrong.
MATT SELLER: I was thinking, it's one o'clock.
I haven't really said anything, but I don't have to.
LARRY WOODWARD: He was laying in the cut for the last word.
MIKE CHAPMAN: But yeah, it doesn't mean you
get the last word.
And unfortunately, I haven't left enough time for questions
from the audience, but if you wanted to chip in on that last
point, large point [UNINTELLIGIBLE].
MATT SELLER: I would just say that the fact that we're all
publicly held--
our clients are publicly held, we're publicly held--
certainly takes some of the freedom that we were all used
to enjoying when we were private.
But I don't think that's that's a bad thing.
I think that there is a huge advantage that each of us
enjoys with the holding companies of
which we are a part.
And I also think that it has helped us understand that we
are truly in a business, and it is our clients' results
that matter most. And in some of the heyday, when it was
pure creative for creative's sake, I'm not sure that there
was as much of a relationship between--
TOM CARROLL: It was more fun.
MATT SELLER: It was more fun, but it wasn't necessarily
driving a bottom line.
LARRY WOODWARD: There's rehab.
MIKE CHAPMAN: So under strict instructions to finish at one
o'clock, and it's now one o'clock, so my apologies for
not leaving time for questions.
But I want to thank the panel.
It was a great discussion.
Thanks for taking the time out, you guys.