Marketing

‘Best highs and worst lows’

Updated on: Mar 20, 2014
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Tax lawyer-turned-head of advertising network InterPublic Group says advertising has made the shift from generating impressions to triggering actions

Ever since the US-based Omnicom Group and French-headquartered Publicis Groupe announced their intent to merge and form the world’s largest advertising holding company in 2013, another advertising network finds itself in the spotlight.

The US-headquartered InterPublic Group — which runs agencies such as Lowe Lintas, McCann and FCB Ulka in India — is often asked about its likely acquisition by a larger group such as WPP. As Chairman and CEO of InterPublic Group, Michael I Roth is confronted with this question time and again.

Roth, who is betting on the India growth story for the long term, recently visited the country with the IPG’s board of directors. He dwelt on the past, present and future of the advertising business in a freewheeling chat with cat.a.lyst .

Thirty years ago, the big advertising guys were creative hotshots. Twenty years ago they hired smart MBAs in India from IITs and IIMs. Who do you think will be the future leaders of advertising?

I am a tax lawyer. So I guess you will put me in the financial category. Who is going to be running these businesses in the future? It will be those individuals who understand that it’s a business. I don’t purport to be a creative genius. I can’t possibly come up with stuff that some of the creative guys can come up with. But the reason I was put in this job is because this is a business and we need to approach this as a business...

Unfortunately, sometimes the creative genius that built the agency has no clue how to do that and that is when it gets into trouble. Frankly, that is how IPG got into trouble. I was on the board of directors of a financial services company, and I knew nothing about advertising. By the way, in my prior job I ran an insurance company and I knew nothing about insurance.

It is a people business, you have to know how to manage people, allocate capital and deal with your clients.

Advertising has been unable in recent years to attract top talent from business schools, or creative mindsets. Is that a serious challenge?

I think this is a unique business. I was recently asked what I thought of the business, given my background in financial services, and my answer was, it has been the best highs and the worst lows I have ever had in my career. It’s increasingly rewarding when things are going right and it’s absolutely miserable when it’s going wrong, and you need to be a certain kind of individual to be able to deal with that. But on the creative side, nowhere can you have the exposure to the kind of brands that we work with and the creative mindset that we have. And if you are a kid who gets excited by that stuff, if you associate yourself with those kind of opportunities, it’s a very rewarding career. I wouldn’t hesitate to recommend this as a career to someone, but they have to consider it as a career… not as something to get in and out of, and that is where the problem is. The problem is retention in this business and you have to be able to show that there is a career path in this business and we have spent a lot of time and effort doing that.

The last two years, growth has slowed in India and investors seem to be tired of waiting for the potential of projected growth to translate into actual business.

There are macro-economic factors that come into play, stability is the key …the demands for change, it always causes some form of instability. Whenever there is instability, big corporations get nervous and go back until there is stability. But there is an expectation with this election that there will be some stability and the economy will return to a more stabilised growth environment, and I think that would be a great result. Obviously, we have a significant investment in India and we would like to see that happen. Our history and relationships with clients go back many years in India. There have been ups and downs. We don’t make business decisions based on short-term movement. The year 2013 was good in terms of the India offering; and Asia Pacific, of which India is an important part, represents 12 per cent of our revenues.

Since your last visit, what are the key changes that strike you this time around?

The youth movement and the demand for change, that is consistent with our business. This is the marketplace we have to reach out to, and our clients are expecting us to communicate with, or help them communicate with. That has changed dramatically in India and it’s to be expected. And the issue for us: Do we have the resources and the ability to help our clients reach that marketplace today and where will it be? So when you see the potential infrastructure changes in terms of broadband, 3G and 4G, mobile … those are dramatic changes when they hit the entire marketplace, and opportunities will change dramatically. Social media is an important area of focus on the consumer side of the business, and that is nothing like it was two years ago. I think you have to make those investments today, and you have to have the belief that this will work its way through.

In response to the growth of the digital space, conventional advertising firms have been acquiring digital agencies as they have deep pockets. Do you think conventional advertising didn’t see the digital age coming?

In our business you follow the money. We could see the expansion of digital versus traditional, and we would tell companies they need to spend more money on digital space. But how were we able to prove that spending money in digital would provide return on investment? So it is not that we did not see it coming, (it is that) we didn’t see our clients ready to jump on the board and put money behind it.

We also had to be able to provide them the metrics that support it. The analytics and the metrics to support it (digital spend) were a little slow in coming.

We also put money where our mouth is. If we move the needle, we are going to get paid. Digital enables us to have accountability on a much easier basis than the traditional creative way.

What has been the big change in understanding these analytics or the digital metrics?

We have been able to move from impressions to actions, so in the early days all you were paying for were impressions. I can tell you 10,000 eyeballs are going to look at it, whether they did anything or not was irrelevant; We can now hone it and focus on what they did with those impressions, whether they went to another site or actually purchased the product. We have insights that we never had before, and that is compelling to clients who are looking for efficiency and reach, and that is the dramatic change in our industry. We have become more accountable about what we do. Now target marketing can be done.

With so many agencies, do you feel the need to consolidate?

You consolidate for two or three reasons. One is if we do not have an offering that is necessary to compete in the marketplace, there would be a need to consolidate to fill that void. We don’t have such voids. The second reason to consolidate, historically, from business perspective, is if one needs capital. We don’t need capital. The third reason to consolidate is if there is a compelling offer on the table that is in the interest of our shareholders which we have to accept — and the answer right now is ‘no’. Our focus is servicing our clients and growing our business – and what happens in the marketplace happens in the marketplace.

With technology budgets outstripping marketing budgets, and the entry of techies in the advertising business, how do you ensure your team keeps pace with the vast changes in technology?

It is a fundamental change in our business and in the training and capabilities of the people we recruit. When you don’t have capability you need to do something.

Some of our recent acquisitions was in digital space because we needed that capability. The most recent was in January, when we bought Profero, which is a global digital agency. Lowe, which is a global network for us, needed that kind of capability and it would have taken us too long to grow it organically. So we have many more of these techies than we had before. At the same time, you need the agencies such as McCann and Lowe to have their own digital platforms, and 90 per cent of the talent recruited in these agencies have digital capabilities. You need to build it internally and part of the offering is to integrate those techies and code with the big idea — the execution of it and distribution and media side of it, all of it has to come together and that is where the business has changed.

Published on March 20, 2014

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