|Photo: Jake Herrle|
|Jack Klues, CEO of Starcom MediaVest Group, the U.S. Media Agency of the Year.
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Unseats Longtime Incumbent Universal McCann
"We pulled resources from everywhere, we went through five to six meetings and boiled it down to eight people," says MediaVest USA CEO Laura Desmond. "There was basic media planning and buying, research, consumer insights, programming, product placement, entertainment marketing and integration solutions."
Hotly contested review
One of the hotly contested reviews of 2003 came to a simmering conclusion in November. Decision day was Nov. 24, remembers Ms. Desmond, who says that waiting to hear from Coca-Cola was one of the most intense periods of her career. At 1:20 p.m. the phone rang; her secretary connected Ms. Desmond to Coke's David Raines, vice president of integrated communications.
His first comment was: "Congratulations [on winning the account]. How do you feel?" Ms. Desmond's response was, "It feels great, thank you." After a brief conversation, Ms. Desmond called SMG CEO Jack Klues on his cell phone. He was in London standing next to Maurice Levy, Publicis' chairman-CEO. Naturally both were thrilled.
"I have spent 10 years working on Coke business. That all prepared me for this moment," says Ms. Desmond. The company's 450 staffers crowded into the company's atrium for Coke-based cocktails, which flowed until 2 a.m.
After 20 years of partnering with Universal McCann for its media buying, Coca-Cola yanked its business away from the Interpublic Group of Cos. shop.
For pulling off its stunning victory, Advertising Age names Starcom MediaVest Group its 2003 U.S. Media Agency of Year. SMG faced tough competition for the Ad Age honor but tipped the scales largely due to the Coca-Cola consolidation victory (SMG already had Coke's planning account).
Not the expected winner
It was no easy feat: MindShare was expected to win. Industry observers agree that the WPP Group media
|Photo: Chris Cassidy|
|Dominic Proctor, CEO of MindShare.
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Coke's Mr. Raines said at the time he called the review a "very close" competition, adding that SMG's "highly collaborative" methods and global "all-star" staffing gave the shop an edge over its competition. "They have a suite of tools to support resource allocation and understand the best ways to allocate their dollars to have the right message to the right consumer."
As Ms. Desmond puts it, "We set the standard for strategic alliances, for moving beyond cash for media. It is no longer about [cost per thousand] efficiency. It's consumer value, and we are set up for that."
And it was the Coke victory that edged SMG ahead of rivals such as MindShare for the media agency honor. Omnicom Group's OMD was another close contender as the winner of the year's biggest review, the $1.2 billion global McDonald's Corp. account.
Speaking at Ad Age's Madison & Vine conference last year, Mr. Heyer called for a revolution in the way agencies operate on behalf of marketers. He even went as far as to suggest agencies think of charging media outlets such as TV and Hollywood to access Coke's huge global distribution channels.
Well, SMG didn't quite go that far, but it did make a lot of promises to Coke, according to executives close to the pitch. "I felt like that brief was mirroring what we were trying to drive here," Mr. Klues says. "I felt like we were well-qualified to address the brief. Maybe uniquely qualified."
Sponsorships and agency fees
Did SMG offer to help Coke out of sports sponsorship deals that the marketer had committed to and was looking to unload? The agency won't say. Mr. Klues appears to give some credence to industry commentators who suggest SMG promised to take no fee if it didn't deliver on pricing, still a staple despite Mr. Heyer's talk about sponsorships.
While Mr. Klues declined to discuss the agreement specifically, he did say: "No one should worry that we aren't going to get paid so long as we deliver. Do you expect to get paid if you don't meet expectations? We live in a world where you have to, and where if you overdeliver you might get paid handsomely."
Mr. Klues suggests that if agencies are to thrive, they have to live in the world of contemporary client thinking. "The expectation is big in both strategic innovation
|The full 19-page Annual Media Agency Report can be found in the Feb. 9, 2004 print edition of 'Advertising Age.'
The agency is gearing up to deliver on its promises. SMG's MediaVest USA has begun building Coke City, a separate team of people with skill sets along the lines of Starcom's GM Planworks, General Motors Corp.'s planning division in Detroit. MediaVest USA has lured Dan Donnelly from Anheuser-Busch Cos. to be director of investments under Nancy Mullahy, who is CEO of the new unit.
Thanks to the Coke win, SMG grew U.S. billings by 11% to 12% to an estimated $12 billion, though about 10% of last year's growth came from existing clients. Among SMG clients spending more in 2003 were Kellogg Co., Sun Microsystems, Walt Disney Co., Avon Products, Heineken and U.S. Army.
The winning streak continued into 2004 as MediaVest last week snared the consolidated $300 million media buying and planning account of Mars Inc.'s Masterfoods USA.
However, when asked how SMG has grown over the year, Mr. Klues puts less emphasis on new-business wins than the company's expertise in consumer intelligence. Mr. Klues has been working to bring what SMG calls Consumer Context Planners (CCPs) into the stable. They're a new breed of planners who mix expertise in consumer behavior with knowledge of media research. These executives might know, for instance, how many people watching NBC's Friends may also be Coke drinkers. The CCPs are media neutral in that they recommend that marketers reach out across a number of touchpoints in any single day, whether it's a TV spot or a public relations pitch.
Among the vice presidents of CCP are Kendra Hatcher, who works on Coke and joined the company in late 2002. Coming on board in 2003 were Bambi Kapp, who works on the P&G account; Jane Larcher on Kraft Foods; Katy Persky, who works on P&G; and Andrew Hebden in the SMG/P&G unit.
Other CCPs work at GM Planworks under Jana O'Brien, executive director of strategic research, as well as at Starcom offices in Chicago and Los Angeles.
"They don't come from media geekdom," Mr. Klues says. "It is a skill set that didn't exist. We've had strategic media planners and we were touching the surface, but not going after it. Planning is the new battleground," he says, commenting on the Masterfoods consolidation.
Michael Browner, executive director of media and marketing operations at GM, praises Mr. Klues for helping set up GM Planworks. "They deserve credit for collaborative plans on jointly funded research," Mr. Browner says. "Our research division came from SMG. Their work in planning is second to none." He says the agency has helped the carmaker understand the consumer's relationship with media in much more depth.
Senior management also saw some switches. Shortly after garnering an Ad Age Media Maven award in 2003, Mel Berning leaped to the buyer side, joining A&E Networks as executive vice president of ad sales in December. However, MediaVest plugged the gap bringing in Donna Speciale, who replaced Mr. Berning as president of U.S. broadcast at MediaVest USA. Ms. Speciale came from Grey Global Group and was formerly MediaCom executive vice president and director of national and local broadcast.
MediaVest USA bolstered its entertainment connections after hiring Brian Terkelsen, senior vice president and director of entertainment marketing. Mr. Terkelsen is a former executive producer who worked closely with reality guru Mark Burnett. He took over some of the responsibilities of Jeff Grant, who exited as president of worldwide programming.
Another addition to MediaVest in June 2003 was Adam Gerber, who became senior vice president and group director of strategy and innovation, a newly created position. Mr. Gerber works within the national broadcast group to devise interactive TV and new media strategies for brands such as Tide, Pampers, Crest and Charmin. Mr. Gerber was previously a digital media expert at WPP Group's Digital Edge.
D'Arcy closure and merger
New management had to face its share of challenges. The closure of D'Arcy Masius Benton & Bowles at the end of 2002 could have created some instability given that MediaVest was D'Arcy's buying group. As Publicis Groupe slowly erased the D'Arcy brand and distributed clients to other holding company agencies, there was a fear that MediaVest might lose shared clients such as Capital One.
Though the credit-card company did move creative to Interpublic's McCann-Erickson Worldwide, media stayed within the SMG family. Starcom lost Bank of America after two months to McCann sibling Deutsch.
Last year was also not noted as a great new-business year for any agency, but SMG grew substantial new business from existing accounts. Organic growth was 10%, and in October, Kraft upped its spending with SMG, adding the agency's Tapestry unit as multicultural buyer and other divisions such as SMG IP, a digital unit; SMG Entertainment; and sports specialist Relay.
In addition to the big Coke win, SMG picked up the $168 million Gateway account, DirecTV, Cadbury Schweppes and Red Bull; in addition to Bank of America, it lost Polaroid Corp.
Existing client base
"We didn't have a phenomenal external new-business year," concedes Renetta McCann, CEO of Starcom, North America. Instead, she says her agency focused on the existing client base. "Our people put themselves to work to solidify existing relationships," she says. "A testament to how we worked the transition is Disney."
The business began with movies and moved into theme parks, ABC Inc. cable networks including ESPN, and home video. "We work on about 15-16 lines of business."
When asked to describe SMG, New York-based Morgan Anderson Consulting's Arthur Anderson says, "They are strong in nontraditional media, that's part of why they picked up Coke. They do planning for General Motors, which wouldn't be there if their strength wasn't in planning. Planning, research and nontraditional media are places to differentiate yourself and they have two of the three."
Overall, Mr. Anderson says, most media agencies have had a hard time distinguishing their capabilities. He says SMG could do a better job of showing how its expertise in new and emerging media has helped marketers. "Reality has to get ahead of perception," he says.
Building a broadband marketplace
SMG would argue that it's not all talk. For six months in 2003, SMG took a leadership position in building a broadband marketplace. In May, Mr. Klues told an audience at the iMedia Summit in Phoenix that he wanted to expand digital opportunities for clients to distribute their ads via the Internet.
At the time he said: "With streaming video and gaming sites like Atom Shockwave, services like Yahoo! Platinum and compelling technologies like Unicast, clients can use the Internet as another way to expose their video messages to key clients."
By August, an SMG Broadband team had finalized a series of policies and practices to make the digital marketplace more measurable and had buy-in from a group of sites including Yahoo!, Time Warner's America Online and Feedroom.
Rishad Tobaccowala, executive vice president of SMG, oversees SMG IP, the company's emerging technology division. SMG IP expanded its capabilities in 2003, launching SMG Play, a new unit targeting gamers. Play is aimed at finding marketers opportunities with video and online game creators such as Electronic Arts.
Slams product placement
Mr. Tobaccowala criticizes those who think product placement is the answer to their problems. "The industry is running to Hollywood and saying product placement will solve everything," he says. "We think product placement and buying shows is the lazy person's answer." SMG's way of doing business places the emphasis on the partnership. "Here is an insight we have, let's come up with something. We say let's develop something together."
Other SMG IP units include TV 2.0, which tackles interactive TV opportunities, and SMG Next, an incubator for new-business projects that look to capitalize on technology.
SMG IP increased staff from 62 to 70 and grew revenue by 20% though no real figures are given. "The key thing in 2003 was to build on the momentum of what was regarded as one of the best digital planning and buying units," says Mr. Tobaccowala.
Projects have included work on goarmy.com, the U.S. Army's recruitment site. "SMG is hoping the future comes real fast," Mr. Tobaccowala says, adding that SMG Next is currently discussing some music ventures, though he won't be specific.
Publicis umbrella media group?
As the new year unfolds, Publicis watchers will be waiting to see how the relationship between SMG and ZenithOptimedia Group unfolds. Talk of an overarching media-buying umbrella structure, dubbed Publicis Media, is premature, says Mr. Klues. He doesn't appear to support such an idea.
Mr. Klues, who's tipped to rise further within the Publicis hierarchy, says any merger between SMG and ZenithOptimedia would be unthinkable. But that's not to say the two won't be cooperating more fully.
SMG knows it needs to improve outside the U.S., and even Mr. Klues concedes it could be doing better in Asia. When asked what he would like to see SMG achieve in 2004, Publicis' Mr. Levy responds, "I'd like to see growth from everywhere, and it is coming. What [SMG] needs is to strengthen in Asia to make them an even bigger player."
Mr. Levy, who participated in the Coke pitch, says what he saw there was the reason that SMG continues to thrive. "They are working with a much wider angle than the competitors," he says. "Something everyone could feel [at the Coke pitch] was the passion, about their jobs, about the clients."
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Lisa Sanders contributed to this report.