In the global village, Web buys need Web buyers.
In the world of wired advertising, where trends are but a dime a dozen, the formation of yet another Web-induced division may seem as newsworthy as Monica’s e-commerce purse gig. Unless, of course, that trend can help put the online world into what passes as perspective.
Thus it is with the recent addition of specialized online media units at such companies as Darwin Digital and Leo Burnett’s media subsidiary Starcom Worldwide. Darwin, itself a unit of Saatchi & Saatchi, recently spun off Darwin Digital Media Services, while Starcom launched Starcom IP last January. They join relatively old (read: two years) online media specialists at such companies as Ogilvy & Mather’s Ogilvy One unit and Organic, pointing to the ever-growing influence of a medium that, for all intents and purposes, has yet to prove its clout. In fact, for old-line media types who have witnessed the ongoing consolidation of traditional media dollars into the hands of a powerful few, the need for an online media spinoff probably isn’t even apparent.
According to data from McCann-Erickson, advertisers spent a total of $47.5 billion on broadcast and cable advertising in 1998. Online advertisers spent a paltry $2.1 billion last year, and that was a record-breaking performance.
It surely isn’t for clout, then, that these new online media units have taken hold. So why?
“This medium changes so rapidly that if you’re not staying on top of it twenty-four seven, you’re missing out on opportunities,” explains Jeff Minsky, partner and assistant media director at Ogilvy One, whose clients include Ameritrade, the Office of National Drug Control Policy, Sears Online and mega online buyer IBM, which spent $28.5 million online last year alone, according to InterMedia Advertising Solutions.
Jim Lorden, director of media services for North America at Darwin Digital, adds that “at this point, it’s such a complex media environment that we really need people who live and breathe it twenty-four hours a day. We can spend every waking hour, and sometimes that’s literal, in the online world evaluating the research and trends out there, without being–I hate to say the word–distracted by all the complexities of the evolving traditional media world. We can be specialists.”
Darwin’s history clearly shows parent company Saatchi & Saatchi’s commitment to online buys: Sister company Zenith had a small, three-person interactive planning and buying group, but the agency decided this past spring that more was better, spinning off Darwin Digital’s media group, and growing the division to 14 people total in New York and San Francisco. Its client list includes Procter & Gamble, PaineWebber, Hewlett Packard and Office.com.
Starcom’s new media group, Starcom IP, has clients including Oldsmobile, Hallmark.com, Nintendo and Miller Brewing. Rishad Tobaccowala, the unit’s president, says he sees his online media group as the third media model to pop up in the online world’s brief history.
“The first generation [still very much alive] were basically media groups of Web development shops,” Tobaccowala says, geared “to find a way to generate traffic. … They made money not through placing and buying media, but through creating the banners that the medium required.”
Next, he says, people realized that despite the fact online media buys are work intensive and don’t generate a proportionate share of revenue–“General Motors,” he explains, “spends more in media than every company in America together spends online”–media companies heard a deafening buzz. “Large media companies, traditional media companies,” he says, “said ‘We have to pay attention to this; it’s growing, and our clients want us to pay attention. … And when push comes to shove, this is just another medium, just another way to interact with consumers.’ “
But hanging out an online media shingle proved more difficult than the traditional media firms figured. Hiring specialists didn’t work, Tobaccowala says, because online media professionals need to work more closely with creative people than their off-line counterparts due to the vast array of online ad models. “They didn’t have the internal creative capabilities,” he explains.
The third model, he says, recognizes that “the whole idea that this is just another media is bullshit. … [We] need to give clients the ability to truly integrate across media, but also recognize the importance of creative and content.” Starcom IP, adds Tobaccowala, “works hand in hand with our client’s creative company.” Despite the company’s ownership by Burnett, Starcom IP works closely with whatever agency handles the creative portion of the business.
Indeed, mini-storefronts, e-mail marketing, enlivened banners, CD-ROMs–to name just the tip of the iceberg–mean that the truly effective media buyer will not only understand these options, but be a step ahead when it comes to citing the “next big thing.” Banners, which in some people’s view are online advertising, are just the beginning.
“Half the dollars are spent on banner advertising, and the rest are sort of promotional type deals,” explains Ogilvy One’s Minsky, “which means having to negotiate beyond placement of sponsored buys and different banner units or ad units; we have to coordinate events, coordinate talent, come up with micro sites, and decide what those things will be.”
But creative is half of what an online media executive needs to be well versed in. The other half is technology, which has always come hand-in-hand with content and creative on the Web. For clients facing the brave new world, it helps to have a team that understands its ins and outs, and that can make informed decisions, say, about whether a client’s target is by and large accessing the Web over a 14.4 modem or a T1 line. In-house technical sophistication can have some payoffs for clients in other ways; Darwin Digital’s 1998 “Now” banner technology, for instance, allowed banners to be updated in real time across multiple placements so that clients could quickly and automatically update their marketing messages.
“Technology makes this a whole new ball game,” says Minksy. “A :30 [TV] spot is a :30 spot. … [Online] it’s 30 seconds plus x amount of bytes of memory.” Besides, he points out, in online media, clients and agencies have to constantly monitor whether an online ad is working or not working, and be prepared to change the media schedule and creative accordingly.
Technological choices swipe media buyers and clients from all sides. According to Tom Kiernan, VP, managing director, Organic Media, whose clients include Avis, barnesandnoble.com, Compaq and The Home Depot, the plethora of complex technologies clients have to choose from include affiliate programs. “There are probably six or seven big affiliate program companies out there,” he says, “and there are differences between them. We help our clients make sense of which technologies are right for them based on overall objectives and strategies.”
Because such buys are extremely labor-intensive while at the same time costing very little compared to traditional media, online media units acknowledge that commissions have to be structured differently. Even if the medium’s biggest advertiser, Microsoft, were to pay its agency a healthy 5 percent commission on the approximately $35 million it spent in online advertising last year, it would net the agency only $175,000 for the effort. Many, therefore, work on yearly retainers, some of which contain incentive clauses covering such things as click-through goals. Kiernan notes that while Organic works primarily on a retainer basis, for a number of clients they’ve “engaged in performance based [fees]; actually getting paid on the value we bring, not the numbers we bring, to their business.”
Despite the specialty’s differences, online buyers say that they are, in fact, working closely with offline media divisions.
“We’re more and more integrating with the general agency because of all the dot-com companies coming out of the woodwork,” says Gerard Broussard, senior partner, director of Mediametrics and Analytics at Ogilvy One. “We realize the value of traditional media to drive people to Web sites, and are doing more integrated work with Ogilvy & Mather. We see that trend happening right before our eyes.” IBM, he says, which is the company’s big blue-chip client, “has many corporate contracts that go from the print arena into the Web.”
Minsky adds that the offline and online media groups meet regularly together, and that there is “constant communication back and forth.” Further, he says, given that many of the most powerful sites are owned by offline media companies, the two units sometimes negotiate deals together.
Darwin Digital’s Lorden describes its working system within Saatchi as a “a tripod relationship; Darwin, Zenith and Saatchi media planning people work together for Saatchi clients. We tap into the Saatchi planning folks as a central communication point because they’re closest to the overall marketing strategy for the client, and we’ll make sure that if we have differences in our target audiences versus the traditional media plan, that we can justify them. … As far as media buys go, we’ll always seek synergy.”
“Typically in the beginning when looking at an annual budget [showing how buys] should be split up across mediums,” says Kiernan, “we work closely to coordinate the timing [of all buys]; the power of online media is a lot more powerful when running at the same time as offline.”
But with online media buys a small percentage of most cross-media buys, the niggling question is, is it worth the overhead and new hires? Clearly these new hybrid companies think it is–but perhaps that’s because many of these online media groups are but an interim model, designed to both conduct research and work out the online kinks before full convergence descends.
“I came in from a traditional media background,” explains Lorden, “and I came in because I do view this as an interim [model]. But in the end, it can bring in a whole new way of thinking.”
“I think there will be more consolidation, and clients will demand more integration,” says Kiernan. “We’re setting ourselves up to do that.”
As for the future, Starcom IP’s Tobaccowala weighs in with a prediction. “It’s our management’s belief that all media will become either Internet-driven or Internet-influenced media,” he says. “Any media company that’s forward thinking needs to embrace Internet-driven contact points because everything will become influenced; I’m not saying everything will be Internet-delivered, but down the line a lot of it will become Internet-delivered. … It’s very important to have those skill sets slowly imbedded in the rest of the company.”
Tough Buy: Fact or Fiction?
Is it really harder to interpret the media opportunities in cyberspace? Or are on-line media gurus just bellyaching when they say that their jobs can be more complex than those of their traditional media counterparts?
In our ongoing search for truth and justice, the IQ staff rifled two months worth of IQ News, looking for trends, site launches and new ad opportunities that an online media executive would feel the need to know about. Here’s a sampling of what we found:
July 19: 24/7 Media said it would launch
a nationwide ad sales force exclusively for the convergence of TV and the Internet; PC Games publisher eGames unveiled a proprietary ad-serving technology; and Enliven announced features that would allow advertisers to serve dynamic ad content and access consumer databases in real time.
July 26: Foofoo.com is announced, a site that merges content from tony mags with tony e-tailers; and Opt-in
marketer emaildirect announced a new performance-based pricing scheme for its Value-mail service.
August 9: Initiatives were announced by DoubleClick and AdKnowledge that provide new data to gauge return on investment–part of an ongoing trend among media shops to provide more and better data mining technology; also, LaunchPad Technologies was reinvented as EntryPoint, a site that offers, among other things, the option of a competitor’s credit card popping up when a user selects his/her card.
September 13: PointClick.com says it will pay users cash to surf its advertiser-laden site; and Spinway.com previewed proprietary technology offering full-motion video at dial-up.
September 20: Global Music One announced music-playing postcards, sent via e-mail; Internet-only action sports company Nirve launched its Web site; and StarMedia Network, targeting the Spanish- and Portugese markets, unveiled Periscopio.com, a Spanish-language portal.
Hey. Online buyers. Bellyache away.