Advertisers and Agencies Await Convergence and Cross Selling
LOS ANGELES--What's in it for us? That is what the nation's advertisers and agencies were wondering last week, following the groundbreaking news that America Online had agreed to buy Time Warner for $165 billion.
It's no surprise that Internet wizards immediately felt justified by the deal. When Steve Fu, chief executive of online investment site AngelTips.com, heard the news, he said he wanted to run out into the street and shout "I'm an Internet guy!"
For marketers and the media community, the benefits of the union are less immediate but far more significant.
AOL officials say advertisers will benefit from ubiquity and interactivity created by the union.
Certainly, the benefits range from the true realization of cross-media packages, to the convergence of content, to new channels of distribution and larger and more information-rich databases. The integration of resources and cross-media ad buys won't be immediate, but advertisers will be watching closely for their arrival.
Combining Time Warner's content with AOL's Internet technology enables advertisers to "skip a step," as Phil Guarascio, General Motors vice president/general manager, marketing and advertising, North American Operations, described it. "We are going to go where consumers go. In the final analysis, we will chase content."
Clearly, the merger makes the much-talked-about idea of convergence a reality, and that's something advertisers have been anxiously awaiting.
Four days before the AOL announcement, Dave Martin, president/CEO of PentaCom, the BBDO Worldwide division that handles media planning and buying for Daimler Chrysler, distributed a memo to clients and sister agencies, supporting marketing efforts built on the concept of convergence. Martin would like to see AOL Time Warner offer advertisers "convergence concepts" that take advantage of the new company's ability to deliver mass access with multiple media.
Of particular interest to some marketers is how AOL Time Warner plans to pool its resources into multimedia ad packages. To date, agencies and clients have been disappointed by media companies' attempts to create synergistic programs.
Despite the formation of cross-media selling entities by CBS, NBC, News Corp. and others, the structural challenges of combining different profit centers across various media into one seamless marketing program have not been solved.
"The broader promise of cross-media packages hasn't come to pass," said Larry Cole, executive vice president/U.S. media director at Ogilvy & Mather Worldwide. "[The AOL Time Warner deal] brings a whole new dimension if, for example, they can combine an Internet deal with a general media package. That hasn't been done yet."
Last week, Cole distributed an internal memo to staff and clients that summarizes "some topline observations and implications" of the mega-union for advertisers. Apart from the cross-media potential, the memo noted that "new types of products, such as video on demand, are likely to emerge" and that "while hardware and technology is important, content will be the most important factor influencing future developments."
"This is not about a media company's ability to sell cross-media deals," concluded Mike Lotito, CEO of Western Initiative Media Worldwide. "This is about the realization that the consumer controls information and how to get it. AOL is saying we realize this and we are going to take these branded media properties and drive them across the vast spectrum of media."
The potential for information gathering may be equally significant.
"It's all about the database," contended Monica Karo, corporate media director/North America for TBWA/Chiat/Day. "On any given day, 100 million adults are being reached by [either] an AOL or a Time Warner property. With that incredible mass and all the data they have on that mass of consumers, they should be able to provide tremendous specificity. [For example] could they combine the AOL database with the data from Time Inc. publications and come up with a book for 100,000 [targeted] customers?"
"When consumers can respond to a commercial," added Irwin Gotlieb, chairman/CEO of MindShare Worldwide, "what does that mean [for advertisers]?"
One observer noted a potential conflict issue with the merger. Karo said the ubiquity of the new monolith may give some dot.com advertisers pause. "We're going to end up with issues like how does [a dot.com execute a media plan] without touching one of the AOL Time Warner properties?" she said. "Will they want to spend ad dollars with any Time Warner property? We have a couple of clients asking those kinds of questions." K