It’s an Ad, Ad, Ad, Ad World
It’s an Ad, Ad, Ad, Ad World
By LOUISE STORY
Published : August 6, 2007
It is only a matter of time until nearly all advertisements around the world are digital.
Or so says David W. Kenny, the chairman and chief executive of Digitas, the advertising agency in Boston that was acquired by the Publicis Groupe for $1.3 billion six months ago.
Now Mr. Kenny is reshaping the digital advertising strategy for the entire Publicis worldwide conglomerate, which includes agencies like Saatchi & Saatchi, Leo Burnett and the Starcom MediaVest Group and the global accounts of companies like Procter & Gamble, American Express, Hewlett-Packard and General Motors.
The plan is to build a global digital ad network that uses offshore labor to create thousands of versions of ads. Then, using data about consumers and computer algorithms, the network will decide which advertising message to show at which moment to every person who turns on a computer, cellphone or — eventually — a television.
More simply put, the goal is to transform advertising from mass messages and 30-second commercials that people chat about around the water cooler into personalized messages for each potential customer.
“Our intention with Digitas and Publicis is to build the global platform that everybody uses to match data with advertising messages,” Mr. Kenny said. “There is a massive transformation happening in the way consumers live and the data we have about them, but very few companies have stepped up to it yet.”
Publicis announced last Tuesday an important step in its digital plan: the acquisition of the Communication Central Group, a digital agency in China founded in 1995, for an undisclosed amount. The agency, to be called Digitas Greater China, will give Publicis a foothold in the Chinese advertising market, which analysts within Publicis estimate is growing at about 20 percent a year, much faster than global growth in the market, which hovers around 5 percent a year.
“There’s a chance to invest right now in China, India, Russia and Brazil, which will pay off big over the next five years,” Mr. Kenny said. “These economies are going to boom, and ads there are going to go directly to mobile and directly to the Internet.”
Beyond the growth potential, Publicis executives see these economies as important sources of low-cost labor for a Digitas subsidiary called Prodigious, a digital production unit that works with all agencies in the Publicis Groupe. Prodigious already uses workers in Costa Rica and Ukraine to produce copious footage for companies like G.M.
Greater production capacity is needed, Mr. Kenny says, to make enough clips to be able to move away from mass advertising to personalized ads. He estimates that in the United States, some companies are already running about 4,000 versions of an ad for a single brand, whereas 10 years ago they might have run three to five versions. And he predicts that the number of iterations will grow as technology improves.
The Publicis digital plan can be viewed as a reaction to the changes in how consumers live, but it is also a response to competition among Google, Yahoo and Microsoft. Publicis is trying to carve out a niche as a middleman between those online giants and the consumer brand companies that buy advertising. The role is not unlike the way agencies have long connected advertisers to offline media like television networks, newspapers and magazines.
“How do we see Google, Yahoo and Microsoft? It’s important to see that our industry is changing and the borders are blurring, so it’s clear the three of those companies will have a huge share of revenues which will come from advertising,” said Maurice Lévy, chairman and chief executive of the Publicis Groupe.
“But they will have to make a choice between being a medium or being an ad agency, and I believe that their interest will be to be a medium,” he added. “We will partner with them as we do partner with CBS, ABC, Time Warner or any other media group.”
Mr. Lévy’s view of the dominant Internet portals diverges from that of other advertising executives. Martin Sorrell, chief executive of the WPP Group, another ad agency conglomerate, has publicly called Google a “frenemy” and has recently acquired 24/7 Real Media, an advertising network that positions his company to compete more directly with Google and other online portals.
Mr. Lévy, who has a penchant for grand ambitions, says he does not plan to compete with Google — rather, he wants Google to need Publicis.
He is widely credited with the transformation of Publicis from a small French ad company into one of the world’s largest advertising holding companies, competing with the WPP Group, Omnicom and the Interpublic Group. Now his stated goal is to stir up the digital sea before he retires in 2010.
By Mr. Lévy’s account, the Publicis purchase of Digitas was the deal that set in motion a string of online acquisitions, as companies like Google, Microsoft and the WPP Group spent billions to buy the online advertising companies DoubleClick, aQuantive and 24/7 Real Media, respectively. Just last month, AOL purchased the behavioral ad network Tacoda.
“We took the initiative, and it has triggered a frenzy of acquisition in the industry,” Mr. Lévy said. “It’s something that can be checked by the date. It’s quite clear we triggered it.”
Digitas, like many digital agencies, started out as a direct marketing firm, reaching consumers mainly through the United States Postal Service. As the Internet emerged, Digitas developed a platform it calls Dashboards to break online ads into their components and figure out which pieces work for which audiences.
Digitas uses data from companies like Google and Yahoo and customer data from each advertiser to develop proprietary models about which ads should be shown the first time someone sees an ad, the second time, after a purchase is made, and so on. The ads vary, depending on a customer’s age, location and past exposure to the ads.
Digitas executives say that consumers end up with a better experience — even a service — if the ads they are shown are relevant and new.
“We now know how many times they’ve seen this ad, so stop annoying them,” said Mark Beeching, executive vice president and worldwide chief creative officer of Digitas. “The more you can standardize and automate in terms of making different versions, hallelujah. That money should be spent creating more content.”
Along with automation, low-cost workers abroad will help create more versions of ads. The Publicis Groupe’s new employees in China, gained through the CCG deal, are paid well by Chinese standards, said Neil Runcieman, former chief executive of CCG and now chief executive of Digitas Greater China.
Mr. Kenny said that Digitas constantly struggles to find enough employees with the technical expertise to use complex data to slice and dice ads for companies like General Motors and Procter & Gamble. As Digitas invests in countries like China and India, he said, the Publicis Groupe will benefit from the global talent pool — and perhaps create more demand for advertising in those countries.
“There’s this rising tide of advertising in emerging economies,” Mr. Kenny said. “But we can also help it rise by sending jobs there.”