Lotito to head ad powerhouse joint venture

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Michael Lotito, the outgoing chief operating officer of Interpublic's Initiative Media, will be CEO of the independent company being formed by agency holding company giants Interpublic Group of Cos., Omnicom Group and WPP Group to create a standardized, Internet-based media management system for buyers and sellers.

The new company is expected to be announced within days, according to executives close to the deal. Bcom3 Group and Zenith Media, jointly owned by Publicis Groupe and Cordiant Communications Group, also have been invited to join the blue-chip venture. The only two major companies not in the mix at this point are Grey Global Group and Havas Advertising.

The idea for the venture was initiated one year ago by executives at Initiative, including Mr. Lotito, and was moved forward by Irwin Gotlieb, chairman-CEO of WPP Group's MindShare and Daryl Simm, CEO of Omnicom Media Group, the holding unit of media agency OMD. Mr. Lotito would not comment.

The venture will create a single Internet-based system to manage transactions and payments for traditional and online media buying throughout the U.S. advertising industry.

Some media executives believe the new system will compete directly with the Donovan Data Systems, currently in use by most media agencies. The Donovan system handles the financial side of media buying for the agencies. And yet other media executives feel that Donovan will be compatible. "It could run through Donovan," said a media executive whose company is participating in the new venture. "We're still going to manage the inventory through Donovan." A Donovan spokesman couldn't be reached at press time.

"It's a way to electronically talk to our suppliers in a unified fashion," said the media executive about the new venture, adding that talks also have taken place with executives at General Electric Co.'s NBC, Walt Disney Co.'s ABC and the American Association of Advertising Agencies, as well as Don0van.

"If Omnicom, WPP and IPG embrace a standard method, the networks will fall in line in a heartbeat, and so will, most likely, the rest of the agencies," the media executive said. "These three holding companies combined are about 40% of the market, so we decided to band together and take a leadership position on this instead of letting the NBCs, the 4A's or Donovan set the tone."

The agencies' venture was initiated by forces on the "buy side" of media, but the hope is that media sellers also will embrace it. The system could be adopted by media sellers, or it could be fused with existing media-selling management systems, such as Encoda Systems. Greg Smith, chief information officer at Zenith, noted Encoda lets sellers put all their inventory on one system. "It would make sense that if the agencies can get together with [the sellers and their systems], that would go a long way to getting the standards established."

"All of us are trying to build $10 billion enterprises," said another media executive whose company is not participating in the venture. "All of us are worried about our back offices, about paying our bills in 60 days rather than 120 days. The big problem for the biggest and fastest-growing companies is that it takes 3000 keystrokes to pay a $45,000 cable bill right now. A paperless back office is very appealing."

Executives stressed the new system will not be an electronic marketplace along the lines of defunct OneMediaPlace, in which media were bought and sold online. OneMediaPlace, formerly Adauction.com, was a business-to-business site launched in 1997 to buy and sell media. It merged in March with Media Passage following the layoffs of about 50 employees, including key executives.

The venture led by Mr. Lotito, 40, is poised to sign a lease for its own office space in New York, according to an executive. Ownership of the new company will be shared by the top holding companies, but not in a three-way split. The company is holding aside a considerable piece to offer shares to other agencies and technology providers-specifically, software or hardware providers-to become partners in the venture.

Mr. Lotito, a longtime Ammirati executive, announced last month he would leave Initiative for an undisclosed venture involving Interpublic.

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