The Outsider

Mark Penn on building Stagwell, his political and polling background and doing what it takes to make his gamble a success

When agency holding company CEOs are discussed, you will inevitably hear the names of Publicis Groupe’s Arthur Sadoun, WPP’s Mark Read, Omnicom’s John Wren and Interpublic Group of Cos.’ Philippe Krakowsky. The one that doesn’t come up is Mark Penn.

The chairman-CEO of Stagwell has built the world’s 13th-largest agency company by prevailing in a contested merger with MDC Partners. In less than two years since the merger, he has reined in runaway costs there and found a way to make the holding company’s once-fiercely independent agencies collaborate.

Still, one thing eludes him: ad industry recognition.

Maybe it’s his appearance—the slightly rumpled, 69-year-old Penn does not easily fall into step with other holding company CEOs. Perhaps it’s his personality—he lacks Sadoun’s suavity or S4 Capital CEO Martin Sorrell’s pugnacity. It could be Stagwell’s size—$2.22 billion in pro forma revenue for 2021, compared to revenue of about $17.6 billion for WPP and $14.3 billion at Omnicom.

Most likely, it’s Penn’s political background that makes him a relative outsider. He began his career as a pollster and gained notice working on political campaigns—particularly the successful 1996 presidential run for Bill Clinton and the failed 2008 run for Hillary. He is a regular guest on political news shows and a Fox News favorite. Yet, several executives at top-level holding companies claim to have no knowledge of Penn.

“Advertising industry leaders are so caught up in advertising that they don’t see or they don’t want to see the relevance” of Penn’s background, says an agency consultant.

“He’s always been in the shadows of these really interesting political people,” says Julia Hammond, president of Stagwell Global Solutions. “It’s interesting seeing him in this position where he’s public and he is the guy on quarterly earnings calls,” she says. “That’s probably what feeds the awkwardness, that vibe, because he’s used to being the guy on the side, and now he’s in the spotlight.”

“Mark has a brilliant mind; he’s a thoughtful, dogmatic thinker,” says an executive who has worked with him. “He just doesn’t fit the central-casting role of big-agency CEO. He’s a cultural misfit.”

The Stagwell vision

Penn believes his political background brings a much-needed perspective to marketing. His philosophy is that in today’s real-time, data-focused world, brands must have a constant finger on the pulse of the American consumer.

Stagwell, which bills itself as “the art and science of creativity,” melds ventures including Code and Theory, Targeted Victory, The Harris Poll, Observatory, SKDK and Assembly with MDC’s creative agencies including Anomaly, CPB, Forsman & Bodenfors, Doner and 72andSunny.

One executive familiar with Stagwell called its agency collection a mismatched “bunch of cats and dogs.” Penn sees it differently.

“MDC was the other half of the coin,” says Penn. He’s in Miami, where he lives, far from the major ad capitals. “It had the creative agencies we didn’t have. And so, to be able to put those together is what the modern marketer needs. The modern marketer doesn’t want some really boring standard ad that’s perfectly targeted. They want some exciting, interesting experience that’s perfectly targeted.”

“Numbers have never been a substitute for creativity,” says Penn. “My complaint was always that when advertising agencies were off the mark, it’s because they weren’t paying attention to the strategy and data.”

He gives a light karate chop on his desk for emphasis. “They were taking ideas that they thought were really cool and waited till they found a client that was willing to adopt it.”

“My thesis I think has been proven out since the merger,” says Penn. “We’ve had five quarters of double-digit growth.”

Since the merger, Stagwell’s stock doubled to $11.04 in late 2021 and now trades in the $6 to $7 range.

A young pollster

Polling interested Penn early in life as a quick and easy way to understand people. Born of Lithuanian parents, he and his two brothers were raised in Riverdale, New York. His dad, who partially owned a poultry factory, passed away when Penn was 10. His mother, forced to provide for the family, went back to being a substitute teacher.

Penn created his first poll when he was a 13-year-old student at Horace Mann School in Riverdale, inspired by one he saw on CBS. He then started conducting polls for the high school paper, one of which was centered on how many students were having sex and taking drugs. “I’m the only person that almost got thrown out of school for a poll,” he chuckles.

Penn as a member of the Horace Mann School debating society. Credit: Horace Mann School

After Harvard—a school that rejected him before he demanded to speak with the admissions officer and was subsequently let in—Penn attended grad school at Columbia University. He left early to focus on a research firm he began while at Harvard with his high school friend, Doug Schoen. Together they worked on polls for Ed Koch’s New York City mayoral run in 1977.

In the ‘80s the firm also began taking on corporate clients including AT&T, McDonald’s and Microsoft and a decade later was named Penn, Schoen & Berland Associates. In 2001, Penn, Schoen & Berland was acquired by WPP and eventually became part of PR firm Burson-Marsteller, of which Penn was named global CEO.

A client perspective

But Penn seems to be most proud of his tenure at Microsoft—he has a habit of slipping in conversational references to “when I was at Microsoft” often enough that it could become a drinking game. He began as a strategic advisor to Microsoft Co-founder Bill Gates in the mid-1990s, eventually becoming executive VP for advertising and strategy and later chief strategy officer. It was ex-Microsoft CEO Steve Ballmer who bankrolled most of the initial $250 million to launch Stagwell Group.

“I was a client with a $2 billion budget,” says Penn in an earlier interview, held at the company’s One World Trade Center headquarters. It’s the day before the November midterm elections.

“Clients have all sorts of other business considerations, what their KPIs are, how much control or not they have over the organization,” he adds, gripping an ever-present Diet Peach Snapple. “I found out what it was like to be on the other side.”

Penn rankles at the notion that he is not creative.

“It’s fair that advertising people sometimes hear polling and they go ‘Oh my God, that’s data and we’re over here and we just do creativity.’ And yet I think that I’ve shown that I have a huge appreciation for creativity,” says Penn, noting that unlike many big-agency CEOs, he has created advertising. “Most of the time I didn’t get authorship of the scores of ads that I’ve written even though [people recognize] the ones I’ve done. Many were quite famous.”

Among them: The famed “3 AM” ad featured during Hillary Clinton’s 2008 presidential campaign that made Time’s top 10 list of political ads of all time and was parodied by “The Simpsons.” Penn also says he collaborated on Microsoft’s “Empowering Us All” 2014 Super Bowl ad, says he wrote ads for Gillette in 2017 and helped author Microsoft’s attack ads against Google called “Scroogled” in 2012.

“I don’t think there are any other holding company leaders that come out of politics—they come out of banking or they come out of more traditional advertising,” says the agency consultant regarding Penn. “He knows enough about advertising to lead and develop communications programs when he was the pollster for the Clintons—and that was constant advertising.”

In a big pitch—Penn participates in about three or four each quarter—“he likes to bring research into the forefront,” Stagwell’s Hammond says. “The first thing he does is identify who’s your core, who’s the swing voter and who’s the reach voter.”

Tech nerd

In Miami, Penn pilots his Lucid luxury EV to an interview for “The Business Traveler Show,” where he is being quizzed on travel trends for the upcoming Thanksgiving holiday. He replaced one of his Teslas with the vehicle because he wanted to try it out. He unlocks the car with his phone and navigates the GPS through a tablet perched on the driver’s side, streaming music through Pandora: Kenny Rogers, Toby Beau and Chris de Burgh.

This is Penn the tech nerd, who is most animated when discussing Stagwell Marketing Cloud, which creates digital IP. Penn says he’s “chiefly responsible” for creating this division, and is serious enough to bet up to $1 million on it, the amount paid to a Stagwell staffer to develop an approved IP idea selected in a “Shark Tank”-like contest.

This process yielded an augmented reality stadium platform called ARound, which has been used by the Los Angeles Rams and the Minnesota Twins. It was Penn’s idea to add a new QR code feature, introduced at CES this year, that would allow marketers to place ads within restaurant menus. The idea is that diners, when scanning the QR code on a menu, could be served ads for a branded cocktail or related items.

While he doesn’t say it directly, it seems to chafe Penn that Stagwell isn’t considered in the same camp when it comes to digital tech as S4 Capital. “We’re a lot bigger than a lot of the companies that people talk about,” he says.

S4’s Media.Monks is billed as a new-age digital anti-holding company launched in 2021 by Sorrell, who was once Penn’s boss at WPP. S4 posted about $1 billion in pro forma revenue for 2021—significantly less than Stagwell’s tally—yet media-savvy Sorrell attracts significantly more headlines. When asked about this, Penn takes a second to think before saying the comparison doesn’t bother him.

“We could have been an S4 if we had just stuck with a digital strategy and didn’t go the direction of incorporating MDC. I made the strategic decision that we would cover the entire market and be able to satisfy the largest clients across all services. And S4 really made the decision of cherry-picking certain services,” says Penn.

That said, he couldn’t resist a jab at his old boss: “Martin’s a lot older than I am, so he may not have the patience that it takes to build this up.”

Sorrell declined to comment.

MDC’s progress

Stagwell is “relatively under the radar from a lot of other holding companies as a real player,” according to Greg Paull, founder of global marketing consultancy R3. “It’s come a long way in the last couple years. It’s got something like 25% growth over the last two years.”

With MDC, Penn took on a wild beast. The holding company reported net debt of $959 million at year-end 2018, shortly before Penn signed on as CEO.

Its agencies were known for being competitive and uncollaborative and their principals lavishly paid. Penn set to work slashing real estate costs by moving most of Stagwell’s New York shops under a single roof at One World Trade Center. Gone was MDC’s swank corporate office in the Bergdorf Goodman building blocks from Central Park, where a grand piano played in the lobby. (Stagwell’s Miami office is located in a five-story building steps away from the Lincoln Road Mall, where Penn often lunches.)

In a 2019 memo announcing the real estate changes, Penn claimed that the company’s real estate bills “defied logic,” totaling $85 million at the time.

This marked a 360-degree turn for MDC’s agency chiefs, accustomed to the holding company’s freewheeling ex-CEO Miles Nadal, who allowed them to call their own shots.

That independence was all well and good, says Anomaly Co-founder Carl Johnson, until finances became “a distraction.”

“You found yourself trying to sign a contract with a procurement of a new client and they would ask questions [like] ‘Is your holding company solvent?’” Johnson says. “We have none of that anymore.”

And although Stagwell insiders still talk about Penn firing an agency chief who refused to collaborate with other shops in the network, he is open to discussion. Johnson, for example, argued successfully not to move to One World Trade Center.

“I pointed out to [Penn] that I understood that move, but it was not right for Anomaly,” Johnson says. “He understood that even though he really didn’t like where I came from.”

A focus on collaboration

Penn’s direct and analytical manner can take some getting used to—one Stagwell executive calls him “an acquired taste.” And privately, some Stagwell executives say Penn has a tendency to get in their way. But Jay Pattisall, VP, principal analyst at Forrester, says his management style has been effective.

“Some of the efficiency mindset inside of Stagwell has benefited MDC Partners as an organization,” he says. “Mark has given the creative agencies inside MDC Partners the freedom to maintain their own sense of identity and their own brand. So, I would disagree with that perspective that Mark Penn is a creative agency outsider at this stage.”

Penn fostered collaboration by paring back salaries and adding layers of compensation through company shares as well as a referral bonus if one agency recommends another to help out with a client. “What he was doing was pulling options back in exchange for bigger rewards down the road,” says an executive with knowledge of the process.

“We can pay employees by including stock. We can bonus people in stock. We ourselves get our compensation in a combination of cash and stock,” says Doner CEO David DeMuth. “Some of our bonuses are a percentage of which is in stock. So, there are multiple levels where anybody at any level can be a shareholder.”

Penn also accelerated earn-outs, according to DeMuth. One example of this is digital agency Instrument. Stagwell, which had owned 51% of the agency, agreed to buy the remainder of the company in January 2022 for $160 million spread over a three-year period. The digital agency’s previous payment structure included a seven-year uncapped earn-out period. The new deal is structured with incentives tied to the holding company’s stock price, as opposed to the agency’s individual performance.

Stagwell’s shops have also been playing nicer with one another. Johnson says his agency recently brought on a PR shop from within Stagwell to help out a client, and he was invited by 72andSunny to sit in on a pitch that didn’t involve Anomaly.

“I started off as ice and I’ve gradually melted,” Johnson says. “The collaboration is really powerful when you choose who you’re collaborating with.”

Despite this collaboration, Penn’s Stagwell has yet to score a big-holding company pitch, such as WPP’s win of the $2 billion Coca-Cola account. Stagwell has won a few accounts like Atlantic Broadband’s creative and media duties, and creative for Blue Bunny owner Wells Enterprises. But neither are big spenders.

Next move for Stagwell

On the global front last year, Stagwell did pick up global agency-of-record duties alongside Dentsu for Lenovo. This was possible due to Stagwell’s affiliate program, which allows the company to partner with agencies globally without owning them. Currently, 85% of Stagwell’s Lenovo account is handled by its agencies and 15% is handled in conjunction with affiliates.

R3’s Paull says Stagwell is still “underweight” globally compared to the “Big 5” holding companies but says winning tech marketer Lenovo “certainly shows that they’ve got the capability to bat with the rest and compete.”

Mark Penn. Credit: Tim Soter

But while Stagwell counts among its holdings a number of strong data-focused companies, it lacks the firepower of IPG’s Acxiom or Publicis’ Epsilon. Paull says Stagwell’s challenge will be to create a data offering unique from those huge and expensive acquisitions.

“They’ve got to work on their data chops,” Paull says. “No one’s looking for a smaller version of [the other major holding company offerings], they’re looking for something completely different. “

Several executives suggested to Ad Age that Stagwell could increase its global footprint by merging with a company like Vivendi’s Havas.

A Stagwell spokeswoman wouldn’t confirm acquisition plans but suggested its next move may not be expected: “If you look at the acquisitions Stagwell has made, they have not been the ones that everybody else was thinking about.”