Archive for the ‘Consolidation’ Category

Via the JasonHeller.com blog

sd-collageMany readers of this particular blog may not be aware of my dual lifestyle. One part marketing maven, one part commercial photographer and adventurer. Today is one of the rare times where my two lives have come together (well, at least I’ve found an angle to make it relevant to the digital marketing community). Yesterday, Bonnier Corp, the parent of Sport Diver magazine, #1 title in the scuba diving category (where I am a regular photographer & author of the IMAGES column), acquired Scuba Diving magazine, #2 title in the category.  Scuba Diving magazine, for many years was owned by Rodale and more recently by F+W Publishing, has been an iconic title for some time. As is happening all around us, the new media era has allowed only the absolute strongest to survive and to a degree forced the consolidation of yet another category.  About 5 years ago another iconic dive magazine Skin Diver had folded, and Sport Diver subsequently acquired the remaining assets of their brand and customer lists. Congrats to the team at Bonnier and at Sport Diver for a job well done, and for maintaining a position of dominance in an evolving market. I am proud to be involved with the team at Sport Diver.

We are observing the result of massive changes in consumer media consumption. Niche categories have fared better than broader titles due to the passion their readers have for specific lifestyles. However, even niche categories are being affected by the shift to digital media.  The down economy and large infrastructure of primarily print-based media companies have been colliding lately. Look at what happened to Tribune, the largest newspaper conglomerate in the US.  The print media business is in a state of flux. Many publishers have heard the chants but ignored the mantra of “evolve or die”. Being a media company today means understanding how to distribute your content across multiple channels,  providing consumers the experiences they expect, and building revenue models that will morph and evolve as quickly as media consumption patterns. Easier said than done, of course.

We are watching history unfold in so many ways.

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As someone who follows the digital agency world very closely, and the former CEO of an agency that once was in talks with Avenue A about an acquisition – my hats (because I wear multiple of course) go off to the agency for becoming the recipe of legend. After arguably becoming the most powerful stand alone digital media agency, developing what is now the second largest ad server in the industry, building a behavioral targeting network, creating a holding company (aQuantive) , and acquiring Razorfish (and a few smaller shops that everyone seems to have forgot already – remember i-Frontier?), and eventually getting acquired by Microsoft – Avenue A has basically accomplished what no other digital agency has and secretly wished for.

An acquisition of Avenue A by WPP would be a huge boon for the holding company, albeit would damage a lot of egos and create an awkward totem pole within GroupM. In the grand scheme of things however, this deal would help secure WPP’s positioning as the digital powerhouse among the agency networks, providing a significant boost in both scale and talent.

The potential deal would actually be an interesting structure, considering that Microsoft overpaid for the agency in the first place.

According to Ad Age:

Consider that in May 2007 Microsoft dropped $5.9 billion for aQuantive’s three businesses: Atlas, DrivePM and Avenue A. The deal was completed last August. While Microsoft was primarily interested in the first two businesses to help build out a massive ad platform, the latter accounted for 60% of aQuantive’s revenue. While $3.5 billion — 60% of $5.9 billion — isn’t necessarily indicative of Avenue A’s valuation in the Microsoft-aQuantive deal, there’s no way Microsoft would get even close to that for the shop. That figure approaches the market cap of WPP rival Interpublic Group of Cos. ($4.4 billion), and WPP’s own market cap is $10.7 billion. Selling Avenue A for market value would only highlight how much Microsoft overpaid for the No. 2 player in the ad-serving space. (Weeks before the Microsoft deal, the No. 1 player, DoubleClick, was snapped up by Google for $3.1 billion.)

According to the Ad Age article and people familiar with the discussions: Microsoft may “unload” the agency in exchange for a WPP package that would include 24/7’s Open AdStream publisher ad-serving tool plus cash.

Exciting times…

As the shift of strategy development and stewardship continues to move into the realm of the media agencies, IPG has launched a group to manage and oversee all of the media services groups within the holding company. This move gives IPG the equivalent of WPP’s GroupM, a hub that creates efficiency through resource and information sharing. This is an essential move in this era of increasingly labor intensive, complex and collaborative client service requirements. The next step will be data systems that finally bind these units together from an analytic and insight perspective, across media. The eventual dashboards from each media services conglomerate will be the value center of the organization.

“The moves we are making today are part of an ongoing evolution in our approach to media as an increasingly strategic and high-value marketing service,” said Michael I. Roth, IPG’s Chairman and CEO. “The creation of ‘Mediabrands’ will allow our media companies to share and leverage resources, as required to meet the needs of our clients in a highly complex and rapidly-changing media landscape that’s being transformed by digital and the proliferation of content and media platforms.”…

The acquisitions and vital components of the “new agency” structure are being aggregated by each of the holding companies. So far it seems that WPP has the most momentum in the process, but ultimately this will be a focal area of competition among the agency holding company heavyweights as they aim to continue to serve the largest clients in the ecosystem.

I decided to add a new posting format to TheDigitalBlur.  The “Digital Marketing Round-Up” will be posted around the end of each month and will be a  combination of short thoughts on issues that I feel will have a big impact on us marketers in the not so distant future. This ranges from acquisitions to  companies restructuring, new applications of technology, and new ad programs. I hope you enjoy it!

So without further delay, The inaugural Digital Round-up for June 2008…

Google Applying Cookie Data: Despite the cries of privacy advocates, this can be a major breakthrough in online advertising. A few years ago Google changed its privacy policy to state that they might eventually use cookie data to “display customized content and advertising.” Apparently a securities analyst has discovered that they are indeed doing so, and this was confirmed by Google. Well, I certainly hope so!

I am waiting for the true integration of Google and Doubleclick units, and although this will present a fine privacy line as it relates to the personally identifiable data that Google does indeed have via Gmail etc, there should be an easy way of firewalling that data if need be. We live in a data driven world folks. This is the future of content and marketing distribution. Creating increased relevancy for the consumer is a good thing. I have posted many thoughts on this matter, and I expect that we will get past the perceived privacy issues as we have with every other aspect of digital marketing to date. Doubleclick has been the martyr of at least one round of this issue in the past. Relevancy is a benefit, I wish we could all just get over it and move on.

Microsoft Acquires Semantic Search Technology: After the failed attempt at acquiring Yahoo, Microsoft last week announced the acquisition of semantic search company Powerset. Of course this was in the works for a long time , but the timing of the announcement was classic. Does Microsoft + Powerset = a threat to Google? Not in a million years. The momentum of Google’s stronghold on search is going to be tough to beat, or even compete with, as Yahoo and Microsoft have both learned the hard way to date. But the advances in semantic technology will in theory make for better search experiences over time, and this is Microsoft’s first step in the direction of developing a new search mouse mouse trap, or least improving the existing one. I’ve reported previously about Yahoo adopting semantic web standards, and have predicted that the application of semantic technology will fuel the next evolution of the web itself. In the increasingly data driven world we live in, I fiercely stand by that prediction.

Nokia Acquires Remaining Part of Symbian: It’s no secret that consumers’ and marketers’ dependence on the carriers for on-deck mobile opportunities will change over the next few years. Nokia has been making headway in the mobile advertising space, and the acquisition of Symbian should prove to be part of paving the road to the golden goose. Symbian currently runs on over half of the smart phones in the global market. However, with Apple’s iPhone and the soon-to-be-rolled-out open platform “Android” from Google, Symbian’s market share can be eroded quite easily. By standardizing an open platform, Nokia should be able to entice additional development and remain a major player in the mobile OS world.

More Print Shift To The Web: The LA Times slashed 250 jobs last week, the findings – consumers don’t have the time to read the paper anymore. Editor Russ Stanton stated that “The Web and print departments will be merged into one operation with a single budget, and the company will also refocus on being more versatile. We’ve heard these sentiments before, and we’ll here them again from others.

Average TV Network Viewer Age = 50 Years Old: Of course this varies from network to network (CW median age is only 34), but the trend shows that TV viewing audiences are getting older as media continues to fragment. It’s a brave new world out there, and as digital media consumption increases, we need to solve some of the basic issues that have plagued our industry since the dawn of online marketing history, including establishing more industry level research and data on the correlation of various aspects of advertising as it relates to effectiveness, as well as educating marketers about digital measurement in general. It still boggles my mind how many marketers (and agencies for that matter) mis-align their KPI’s (key performance indicators) with their objectives, or chose to use irrelevant metrics like CTR. There’s a lot of experimentation happening with emerging media, and most have not mastered the basics yet. A year has past since I published an article in MediaPost on this very subject, and on an industry level I haven;’tseen  or heard of much change.

MySpace & Facebook – Battle of The Redesigns: Facebook is quickly catching up to MySpace’s market dominance, in part due to the open platform for developers and the streamlined nature of the profile design and application of the social graph. With Facebook’s upcoming redesign,  applications will be moving to a separate tab, and the news feed will become even more prominent than it is currently. This is a big change amid marketers’  experimentation revolving primarily around launching applications and subsequntly trying to foster participation.  Meanwhile MySpace rolled out a redesign a few weeks ago, which was primarily focused on streamlining the chaotic mess of  a structure that was once consumer profiles. Cleaner navigation and increased applications of the social graph has been Facebook’s strong point. and MySpace’s achilles heel. MySpace had no choice but to update., and ‘they done good’. Even though they are a leader today, there always exists the chance of  MySpace getting displaced as we have seen with other social networks like Friendster.

Publicis Consolidates and Creates Vivaki: Next in the big agencies to announce the consolidation of digital assets is Publicis. WPP and Carat have already sone so in varying capacities, and inevitably all the others will follow suit soon enough.  Note to David Kenny & Jack Klues: the first step to proving that Vivaki is the right digital solution is following best practices. That 10 second flash intro on the new Vivaki website needs to go! Rishad, same to you buddy on the Denuo site.

This is a topic near and dear to my heart, and I often write about the morphing agency structure. The fragmentation of media and the shift to a data driven marketplace has created a shift of general marketing strategy from the creative agencies to that of the media agencies. Many of the holding companies have even developed units that specifically specialize in the development and stewardship of strategy. We will continue to see re-bundling of agency services, although to a degree the specialist is needed more than ever . Agencies must attract and recruit specialized individuals to ensure the proficient execution across an ever growing palette of channels. We have seen many senior digital agency execs moving to the client and publisher side as an additional trend lately. Integration of services to offer a big picture approach while maintaining proficiency in the specialties will be the new agency positioning.

Social Media As A Formal Discipline?: As the opportunity cost of not monitoring the conversations and interactions surrounding your brands and products increases, the role of full time Social Media Strategists and Community Managers  have crept into recent rounds of recruitment for marketers and agencies alike. The required commitment to the social media ecosystem has made it apparent that the attention of at least one full time staffer on the agency or client side is going to be a requirement at some point for all brands.  Although brands can have their agencies assign a full time person assigned to their brand (today there are many specialized and integrated agencies who offer social marketing services), there is an economic reality that brands may be best served in this manner internally, with support from agencies for specific tasks and projects. It’s far too early to tell, but if I were a major brand I’d be looking for  an internal manager at this point. The costs of the monitoring tools are coming down and the players are becoming more diverse. The social media ecosystem is evolving before our eyes, it’s a lot to keep up with. Brands must commit to be committed – hire a social media manager or at least an agency that can help you wrap your arms around what’s happening in social media and what it means to your brand.

Google TV is now out of Betaand pulicly accessible.

Although not embraced to the degree they expected during the beta itself (my old agency’s TV buyers scratched their heads at it), this does offer the potential to create a marketplace similar to that of search, although the media dynamics are altogether different and the inventory is currently limited only to DISH. Media marketplaces represent a level of automation that commoditizes certain low value aspects of the buying & selling process that are labor intensive and erodes margins – it’s part of the future. Google TV merely sets a precedent on what is possible – trust me they are not the only ones attempting to create and automate a TV buying marketplace. Agencies have however been watching Google move into areas beyond their home turf, so to speak, and some of getting nervous.

I mentioned previously that in 2007 Martin Sorrell, chairman of WPP has referenced Google when discussing the competitive climate in the industry more often than he publicly discussed other agency holding companies such as Omnicom, or IPG. WPP also acquired or made investments in many media/technology companies in the last year or so, hedging their bets on a potential competitive suite of tools and products? Or simply diversifying a portfolio of complimentary companies to keep a level of spending under the same umbrella? Only time will tell.

The media agency and holding company portfolio landscape is changing before our eyes.

I’ve said it many times before – the competitive necessity for agencies to offer a more complete suite of services, or collaborate to do so is paramount to the success of the agency and the clients they service. The shift of importance to the media agency over the last 5 years or so has created an awkward situation for the holding companies, who are essentially managing a portfolio of complimentary agencies. The shifting nexus that once laid firmly with the full service creative shops has slowly moved to the media agencies, creating a new level of competitive issues for the holding companies.

The most recent announcement of MindShare Interaction, the digital arm of the largest media group in the world (MindShare/Group M), is the latest in a string of quiet agency evolution that first included the introduction of creative and technology services into the digital media agencies, and now has spawned traditional creative services as well, infringing on what has historically been the coveted ‘meat & potatoes’ of the full service shops. From online creative & web development, to TV production and branded entertainment, the media agencies are poised for catapulting success for one main reason – their Datanomic position.

Marrying this more complete service offering with the application of data analytics is the key to creating efficiency and effectiveness for clients. The scale of the agency and therefore the scale of aggregate data and subsequent insight generated, combined with a complete ability to execute, is (in my humble opinion) the holy grail we’ve been waiting for – or at least the beginning of it. Every campaign is only as strong as its weakest link. In this new media age, he who lacks the ability to apply deep sets of data at all levels of the organization and agency processes becomes the weakest link.

I woke up today wishing I never sold me Yahoo stock. Microsoft made a $44 billion dollar bid to acquire Yahoo, the equivalentMicrohoo! of  a 60%+ premium over the current share price. Ok, reflecting on my day trading days aside – this is a huge announcement!

Should the deal be accepted and pass FTC regulatory scrutiny, the combined entity of Microsoft (which has strengthened its position significantly since the groundbreaking aQuantive acquisition last year)  and Yahoo, would rival Google in a way that neither would have ever been able to achieve alone at this point.

I’ve been predicting that Microsoft is as much a player to look out for as Google is, in the age of “coopetition” and “frienemies”. In my ‘Agency Darwinism’ piece from weeks ago, I point out that lately WPP chief Martin Sorel has mentioned Google more than his direct competitors like Publicis, IPG, & Omnicom. I pointed out that Microsoft should be looked at equally as seriously, and wouldn’t you know it, 2 weeks later the industry is already moving in its next hyper evolutionary state.

This is a new era we are entering once again…

Mediapost today ran a statement from former aQuantive CEO Brian McAndrews, it’s a good read.