WPP’s Good Read

NEW YORKAs CEO of WPP Digital, Mark Read is charged with leading the holding company’s quest to infuse technology into its operations. WPP Digital has invested in several emerging media startups, and this year purchased ad technology company 24/7 Real Media and digital creative shop Schematic.

Now it is nearing another deal to purchase Canadian digital agency Blast Radius, sources said. Read, 40, discusses why WPP wanted 24/7 Real Media, whether Google is a friend or foe and how technology is changing the mission of advertising companies.

Q: What attracted WPP to Schematic?
A: Schematic has fantastically strong creative, very strong work on the user interface, and they’ve done some interesting work with clients across multiple platforms-not just on the Internet but in mobile, in gaming. They really do bring unique skills in that area and are a really strong creative shop.

Why are you aligning a creative shop with WPP’s Group M media agencies?
We see many opportunities for them to work with Group M companies, particularly as the lines blur between what’s content and what’s media. In the old days, there was an easy distinction between media and content. It’s blurry now. Schematic brings very interesting skills that will help in that area.

Is digital the way media agencies will do more creative?
In a way, media companies will do creative. Media companies will work very closely together with creative agencies to bring media and creative close together, which is what needs to happen.

Schematic, like 24/7 Real Media, will operate as part of WPP Digital. Is it shifting from a strategy position to an operating role?
What we’re trying to do strategically is to develop strong technology or strong digital capabilities in all of our existing businesses. We see WPP Digital as a complement to that. I don’t think that has changed, but we found opportunities in the technology area where it makes more sense for that to fit independently in any one of the groups. In other cases, like with Refinery and G2, we can be pragmatic about where these things sit.

Do you see other areas where WPP needs to make acquisitions in order to have these capabilities for your agencies?
I’m sure there will be.

Are we in a bubble right now for digital assets?
The market is very competitive and prices are being driven up. The bubble valuations apply to a very small number of the transactions. We’re not paying the same valuation for agency assets we paid for 24/7.

Was $649 million too much to pay for 24/7?
I’m not going to say it was a cheap transaction. If you compare the valuation to Microsoft-aQuantive or Google-DoubleClick, I think on the metrics it compared favorably. That’s not to say the right price wasn’t paid for all three businesses. If you look at the premium paid for the price it was trading at the time, it was a fair metric and significantly less than aQuantive. It’s a different type of asset from a traditional agency asset. Therefore, you’d expect it to be valued differently.

Still, a lot of people were surprised by the deal. Do you expect to acquire more tech companies?
We turned people’s heads, maybe the same people that were surprised when Microsoft bought aQuantive, an advertising agency and media agency, so I think the lines blur. If you look at the companies that are being successful, a lot of them have strong technology capabilities. We want to have that within WPP. We don’t want to do everything within WPP, but we want to have that capability within the group

How will WPP use 24/7?
They will develop solutions that will be made available to our agencies and elsewhere.

Like ad serving?
I would call it digital marketing technologies, the types we need to help our clients reach their customers. That may be around analytics, it may be around campaign management, it may be around reporting. Those are the areas we’re looking at.

Is the goal to not use DoubleClick or Atlas, which are owned by Google and Microsoft??
We have to use the best solution for clients.

What if you can create a better solution?
If we can, it would be fantastic.

What makes you think you can?
We’re not a technology company, but we have a technology group now within WPP. The core DNA of a holding company has to change over time. Just like the core DNA of Google or Microsoft has to change when they bring an ad agency into the group.

Do you see Google as a competitor?
Google is a customer in some areas and a competitor in others. We can continue to manage a relationship of that nature. You see that across the industry more generally with all of the recent acquisitions. The landscape just got more complicated.

What kind of value is WPP Digital getting out of the investments it has made?
I think the value is both financial and strategic. By financial I mean the returns that we get on the investments. And by strategic I mean the practical benefits in terms of bringing new ideas to our clients, in understanding some of the new developments and in helping our people get closer to the real developments.

Are agencies well prepared for the shift to digital media?
I think everyone is saying the same thing: It made a lot of progress, and there’s a lot further to go. We have tremendous assets in terms of relationships with our clients, the creative people we have inside our groups, our understanding of brands, the media knowledge. If we can actually combine that with stronger skills in the technology area, the new landscape offers tremendous opportunities to everybody. But we have to move faster. People always overestimate how long the change will take to happen and they underestimate the impact.

It seems like WPP is very interested in ad network businesses.
We looked systematically into various areas-social networks, gaming, mobile, video—and we looked at what we thought were the most interesting companies in each of those areas and took investments in them. We didn’t focus on networks.

Why is there such an intense interest in ad networks in the market?
There’s a land grab. We’re starting to see a shift in the value of media away from content more towards the individual. Businesses like Yahoo and AOL are trying to build up their ad platforms and their core content business across other platforms.

Is this something holding companies should do? After all, you have a lot of data from campaigns to use in targeting ads.
DrivePM, inside of aQuantive, was built exactly on that basis. I think the holding companies will start to think about how they can build those businesses out.

Any plans to do one for WPP?
We’re very busy. We’re going to look for opportunities that make sense for us to do.

What’s an emerging media area you would peg as overhyped?
Media exchanges. They’re overhyped by valuation. [But] I absolutely think that media will be traded electronically and on exchanges because it’s just going to get too complicated for it to be done in the traditional way. But do I think it is going to move to media exchanges overnight? No.

What’s underhyped?
I think data, because that’s where the value in the long run will be.