Media Analysis: Work in Progress

Now with the pieces in place, Carat looks to build a stronger identity in the U.S. Carat has been a puzzle in progress since it entered North America in 1996, composed of an expanding set of pieces that include acquisitions, new business and new hires. The media agency claims $2.1 billion in U.S. billings today, but it has yet to truly define itself in the marketplace. That sum is less than one-half of what its rivals, major U.S. players such as MindShare, Initiative Media and OMD, command in a year. Yet the shop is respected, sources say, because of its reputation as one of Europe's dominant media players and because the two media agency acquisitions which served as Carat's springboard into the U.S.--New York-based Media Buying Services and Los Angeles-based ICG--were well thought of here. But Carat wasn't finished; it built on those two pillars. Other acquisitions have also paid off. Wilton, Conn.-based MMA, one of Carat's first purchases in the U.S., is an ROI analyst specialist. In 1998, Carat bought Newton, Mass.-based high-tech media shop Freeman Associates and has reaped the rewards of dot-com fever as the renamed Carat Freeman went from an estimated $200 million in billings to $600 million today. Still, for the amalgamation of Carat entities to have real clout, it needed to be forged into a whole. The person assigned that task was David Verklin. Two years ago, Verklin, managing director of Hal Riney & Associates, San Francisco, was brought in to put the pieces together. President and CEO, Verklin, 44, is a big-agency player who knows how to run a business. His job was to make Carat a top-line competitor in the U.S. He's been busy. Last year, Carat opened an Atlanta office. In March of this year, a Dallas hub was opened. The last piece of the puzzle was staff--Ed Gaffney, former vp/group supervisor, strategic media insights at The Media Edge, recently joined Carat North America as svp/director of Carat's Knowledge and Information Group. Bruce Dennler, Carat head of product development and strategic services, was promoted to director of planning for Carat North America. Now, according to Verklin, the "componentry" is in place. Carat's drive is universal. Every major media agency has restructured to reflect a more strategic mission. The Verklin version is built around three core competencies Carat dubs "Knowledge, Insight and Tools." Gaffney's Knowledge Group is the data-information provider. Joanne Burke, regarded as one of the top media agency researchers, runs the Insight Group, which Verklin says will "do in media what account planning does in creative: be the consumer advocate." Helene Sperling, who joined Carat from TN Media a year ago, runs the Product Development Group, the Tools competency. Now that the Carat USA infrastructure is in place, the branding element must begin. Verklin has brought in Paul Singer, former marketing director for Post Cereals, to be director of marketing for Carat USA. This hire reflects Carat's European penchant for strong research and strategic counsel. "All I did was take [our] fundamental positioning and strengths and refine them for the American marketplace," says Verklin. "Carat North America is Carat." Bill Koenigsberg, president of Horizon Media in New York, agrees that Carat has "brought a lot of bells and whistles from their European toolbox which are sexy. But I don't think they've yet proven to have ultimate advertising effectiveness." Still, the Carat selling proposition does appear to have resonance in the marketplace. "They are very smart about using traditional media tools, particularly in the dot-com space," says Charles Labiner, who worked with Carat while media director at Ground Zero in Santa Monica, Calif., and is now director of offline marketing for Web site CarsDirect.com. "Their research department is extremely well equipped, and I think they are well regarded," he adds. Since Verklin's arrival, Carat has had new business success, bringing in Amana, Papa John's Pizza, Radio Shack, CBS, Midas and EchoStar, among other clients. The big prize came in January 1999 when Carat won Pfizer's $200 million account in a consolidation of media duties from various roster shops. But there have been a few disappointments, notably Ameritech and Primestar, both of which were lost when they were acquired by other companies. Still, observers point out, not all of these accounts were won in competition with major players. For Carat to realize its goals, they say, it must show a consistent ability to compete with and win business from A-list rivals. A big hurdle Carat must overcome is its relatively small network buying clout. Carat handles about $600 million in network billings, far below its competitors' media operations. "That's a weakness," agrees one source. "The only way you can get big in network is to win a huge piece of network business or acquire a shop that has a lot of network business. And there are not that many things out there left to buy." "That's true, there's nobody left to buy," admits Verklin. But he's quick to add, "When I took over, we did about $250 million [in network buying]. We went from $250 million to $600 million in 24 months. I'm not unhappy with that relative measure of growth ... [but] the bogey for us is clearly $1 billion in network billings. I think we're making good progress." Verklin also hints at more hands-across-the-ocean developments. "We really haven't extended that many Carat relationships into the U.S. yet," he says, citing such overseas Carat clients as beauty products marketer Henkel, Club Med and others. "We handle Adidas and Disney everywhere but in the U.S. We haven't even begun," he warns. The puzzle is nearly complete. Carat North America has a shape and ambitious goals: Verklin wants to increase billings to $2.8 million by the end of the year. "We go head-to-head with them in Europe, and they've been working to establish themselves here," says Lou Schultz, chairman and CEO of Initiative Media North America, who worked with Verklin on General Motors when Schultz ran Lintas media and Verklin was at Riney. "Carat has been on a global basis a major player and a great competitor. I'm sure the fire and desire to win that David has will be translated to the company. That's good for all of us because it raises the bar," says Schultz. "The tougher we make it the better I like it. I want to compete against the best."

Brand Marketing

Media Analysis: Work in Progress

Jack Feuer

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Jack Feuer