Tri-Agency Buying Arm Created by SMG

NEW YORK Starcom MediaVest Group, the Publicis-owned media-agency network, is realigning its approach to the advertising marketplace with the creation of a new entity called the SMG Exchange (SMGX). The exchange, a new ad-buying unit that will serve clients at all three SMG media shops, will be managed by John Muszynski, who has been elevated to the newly created post of chief investment officer for SMG and who is tasked with building the new operation from scratch.

The idea behind the new operation is to maximize the leverage of the estimated $22 billion in buying clout brought to the marketplace each year by Chicago-based shops Starcom, Spark and New York-based MediaVest. SMG executives hope to enhance that leverage by combining the sheer scale of the buying volume with more precise applications of data and marketplace intelligence.

The new operation will focus first on local media, including TV and radio, out-of-home and newspaper, as well as kid’s and sports, including events, sponsorships, licensing and merchandising opportunities, totaling as much as $7 billion in spending.

National broadcast will be phased in by 2010. The buying chiefs at the separate shops, including Donna Speciale, MediaVest’s president of investment and activation, and Chris Boothe, Starcom’s president of activation, continue to report to the CEOs of their separate agencies while having a functional dotted line reporting responsibility to Muszynski.

Muszynski will continue to report to Laura Desmond, worldwide CEO at SMG. Desmond, who said the project has been in the works for six months, noted, “When we first sat down to talk about this, we did not believe anything was broken and it wasn’t about addressing a concern or a gap or a need. The question was how do we ensure we are leaders of the next marketplace. It’s an attempt to leapfrog to where we think things are going.”

The big dollars are just one piece of the equation, said Desmond. “What is equally important is the fusing of data and market intelligence and advance technology with scale. Those three things work hand in hand.”

Muszynski has a busy schedule ahead of him in the next several months as he both staffs up the new platform while doing client-by-client assessments of just how much of their budgets they should be contributing to the new entity.

For clients, the SMGX model is “opt-in,” meaning they can choose between it or keeping their dollars at the specific shops where their budgets are currently parked. Part of Muszynski’s task is to maximize those client commitments.

Desmond said that SMG has been discussing the new approach with clients and “they are very encouraging of the model.” She also described the model as “open source,” meaning clients can choose between SMGX or their individual shops and shift budgets between the two as different opportunities arise. “We want to build a scaled operation that has the agility of a very fast, agile automobile that can accelerate quickly,” she said.

Given all the change that’s occurred in media in the past several years, said Muszynski, “you really need to look at the way we operate in the marketplace differently than the old traditional way.”

Technological advances have flooded the market with oceans of data that weren’t available five years ago, he said: “We’re not using that data properly to adjust the way we approach the marketplace and the decisions we make.” In part, SMGX is designed to change that. “That’s probably the number one thing that excites me about this,” he added. “How do we harness all the data available to us in the 21st century?”

SMGX will also analyze how clients can best take advantage of addressable TV, other advanced TV platforms and platforms such as auction exchanges.

“This is an enormous opportunity that goes far beyond the aggregation of dollars,” said Muszynski. “This is a redefinition of what scale is … a push on innovation and a harnessing of all the data and intelligence that exists today.”

In terms of staff, Muszynski said it is likely the new unit will be comprised of a combination of “structure specific to SMGX along with a matrix-type organization tapping into each individual agency brand.” He stressed that the agencies “still drive their clients businesses, needs and objectives and continue to play a critical role in this.”

The SMGX template is based on similar models Publicis media shops operate overseas. The China Media Exchange, for example, rolls up the buying clout of both SMG and sister network ZenithOptimedia, al-though executives stress there is no plan to add ZO to the mix in the U.S.-based SMGX platform given numerous client conflicts.

There are also some similarities to what SMGX is doing to what WPP’s GroupM has done in the U.S. For example, two years ago Rino Scanzoni was appointed chief investment officer for the group. Within the last year, it pulled its spot TV operations out of its brand agencies — Mindshare, Mediaedge:cia and MediaCom — and created two spot TV units that operate at the GroupM level reporting to Scanzoni. The investment heads at the three shops report to Scanzoni and their agency heads but still go to market individually.

Muszynski has been CEO of Chicago-based Starcom since 2005 and is a 25-year-plus veteran of the organization. The shop is one of the two larger agencies within the SMG network (the other being MediaVest). He will be replaced by Lisa Donohue, who is returning to the agency after a five-year stint with sister shop MediaVest, where she most recently was president of the Truth & Design Planning Practice.

Beside Muszynski, the only executive currently confirmed at SMGX is Tracy Scheppach, svp, director of video innovation, who will oversee the new operation’s advanced media and technology practice. That group will focus on digital and emerging marketplace platforms and new metrics.

Donohue has spent her entire career at SMG, and Leo Burnett, joining that company in 1987 (the same year that Desmond joined the company). She spent 17 years at Burnett and Starcom before shifting to sister shop MediaVest five years ago. In addition to overseeing the shop’s planning operation she led the agency’s Proctor & Gamble investment group.

Commenting on her new assignment, Donohue said the first order of business would be to, “do a lot of listening and get reacquainted with all that’s going on at Starcom. It’s a powerhouse brand with a great list of clients and I will work with the leadership team to develop a plan to continue the growth and to remain competitive in the new business arena.”

At MediaVest, two executives will assume Donohue’s duties. Sarah Kramer has been elevated to evp managing director and will co-manage the Truth & Design division with evp managing director Marla Kaplowitz. Kramer will also oversee the agency’s buying AOR for P&G.