Q&A: Carat’s Andy Donchin

NEW YORK Andy Donchin, evp, chief investment officer at Aegis Group’s Carat, says the current recession will redefine how buyers and clients allocate their future ad expenditures. “It’s changed the way we look at our business forever,” he maintains.

In the following Q&A, Donchin explains the “new normal” and discusses what clients will expect from sellers in this upfront and beyond.

How will this upfront differ from the previous few given the economy?
It’s pretty clear volume will be down, but beyond that it’s a little too early to tell. We’ve got to see what kind of [dollar] volume shows up. It’s all about supply and demand, and we’ve got to figure out what those mechanics are.

Okay, but there’s no question there will be an upfront, right?
There’s definitely going to be an upfront. To what degree is still to be determined — in terms of both volume and the amount of money clients actually decide to spend in the upfront versus the scatter market.

It’s clearly a buyer’s market right now. How will buyers exploit that in the upfront?
We want to realize more efficient pricing. We’re looking for savings. More now than ever, clients have been very adamant that they’re looking to achieve their gross-rating-point objectives and spend less money doing it.

This industry has been through recessions before, but this one seems to have confounded advertiser plans more than previous downturns. Why?
It’s somewhat unique because this one is so much more of a consumer recession than a business recession. And it’s affecting consumers of all income groups and therefore to a greater degree all consumer marketing plans.

When will things get back to normal?
Even if prosperity came back tomorrow, I think there will be a new normal. This recession has changed the way we look at our business forever. We’re prudent now, but I think we’re going to be a lot more prudent moving forward in terms of where we can cut and what’s really working for us in order to achieve greater accountability.

Has the current environment fueled a greater demand for flexibility by clients with respect to their national TV buys?
I wouldn’t argue with that. There’s always been some flexibility built into deals, but there is going to be much more focus on that moving forward. There’s a need on the client side to be in control of the money longer both in the upfront and scatter markets. In the case of the latter, that’s why you’re seeing the money come in much closer to airdate now.

Will there be a sizeable shift of upfront dollars to scatter in order to achieve that flexibility?
Yes, I could see a greater reliance on scatter because of the need to have greater flexibility. But remember that for the past couple of years there’s been a shift of money from scatter to upfront. Will some of that money move back to scatter? Absolutely. There is a client need to be able to maneuver more nimbly in the marketplace as marketing plans change. That said, the upfront continues to work for both sides.

Will more marketers skip the upfront altogether in order to achieve flexibility?
Some advertisers may do that.

What about timing? Will negotiations be extended and blast out to the summer?
Possibly. It could be a longer process because we’re all trying to feel each other out here.

David Levy, the head of Turner Broadcast Sales, has made a pitch to clients and buyers to conduct a single market combining both the broadcast and cable networks on the theory that prices will go down with a bigger group of seller competitors. Reaction?
We do try not to silo it as much. But network TV is still dominant in ratings and reach. We don’t want to pay the same [cost per thousand] for half the rating. And when you do the math and only buy the top cable shows out of a network prime-time budget that’s what happens.

Consumer-goods marketer Reckitt Benckiser said last month it would shift $20 million from its TV budget to digital. Can we expect a wholesale shift in that direction this year?
I don’t think we’ll see a wholesale shift, but more money will migrate from traditional to digital platforms as they become more prevalent and build scale. We’re recommending those platforms to clients, but TV is still doing all the heavy lifting and driving people to the digital side.

Are there any robust categories out there? We’re heard a lot about the weak ones like auto, banks and retail.
No category is immune to the recession. Within each category you may have a player or two that are doing okay. You may have a retailer who’s a little bit better positioned or an automotive like a Hyundai/Kia that’s a little bit better positioned.

What about media?
Again, nothing is immune. But national media haven’t suffered as much as local because clients realize if your trying to build reach and awareness the most effective and efficient way still is through national.

Is scatter pricing still in line with its upfront counterpart?
For the most part it is. But in some areas scatter pricing could be slightly below. Overall, the networks have been trying to protect the integrity of the upfront advertisers.

How much more significant was the option pullback in the second quarter versus the first quarter?
There was a lot more money taken out in the second quarter. The TV economy tends to lag behind the general economy. I mean, the first quarter was pretty much okay. But it caught up to us in the second quarter.

Will branded integrations play a bigger role this year?
I think they’ll be more of a factor given the emphasis on accountability and everyone being keen on added-value integration. In a softer marketplace there will be focus on it. If the money is down and you’re going to be more selective on where you spend your money, obviously you’ll want to spend it where you can get a bigger bang for your buck and beyond just reach and delivery.

Are you happy with C3 as a currency for buying ads?
It’s not the be-all and end-all, but it’s better than program ratings and hopefully will evolve into something more granular. But it’s a big step-up and takes into account DVRs. And channel-changing behavior is recognized. So it’s good for both sides. I think we need to extend it to areas where it’s not currently used, like sports.