Advertisers buy into one-stop shoppingAgencies expect cross-platform deals to be the norm in five years 3/11/2001 07:00:00 PM Eastern
For years, big media companies including Time Warner, Disney, Viacom and News Corp. have been aggressively pushing the idea of "cross-platform," or integrated, marketing and advertising packages. Now, it appears that advertisers are buying into the concept in a big way.
At a recent conference sponsored by the American Association of Advertising Agencies, executives at three agencies with combined billings of $37 billion predicted that, five years from now, at least 40% of their U.S. billings will be tied to integrated marketing deals that involve multiple platforms of promotion and advertising.
Starcom Mediavest's Kevin Malloy predicted that perhaps 50% to 60% of his firm's U.S. billings and 25% to 30% of roughly $12 billion in worldwide billings (from such clients as Procter & Gamble, Kraft and Burger King) would be tied to integrated marketing deals. No one really knows what the current figure is industrywide, but estimates are it's 7% to 8% of domestic billings.
"I guess that 40% of our company investment will be done in some form of converged manner," says Lou Schultz, chairman, Initiative Media North America, which has billings of approximately $13 billion and such clients as AOL, Home Depot and Bell South.
Sean Cunningham, executive vice president and media director at Universal McCann, which has $12 billion in annual billings and clients that include Sprint, Johnson & Johnson and Microsoft, is even more bullish. Up to 50% of Universal McCann's billings, he says, might be tied to integrated marketing and ad packages.
Such numbers come as a welcome surprise to sellers. While they've been beating the drum for integrated marketing business, many advertisers and agencies have been skeptical. "When Sean Cunningham said that, I just about jumped out of my seat," says Larry Goodman, president of CNN marketing and sales. "It was like, whoa, this is great!"
In some ways, he adds, it's not surprising. In fact, his company was the first major media concern to create a separate cross-platform sales unit, in 1994. The four major network companies have all followed suit in the past three years-Fox and CBS in 1998, ABC and NBC more recently.
But to hear several of the largest ad agencies publicly state for the first time that cross-platform advertising and marketing is the way their business will be conducted in the future reaffirms efforts on the sell side, Goodman says.
Cunningham's prediction came just two weeks after Universal McCann announced formation of a separate unit to analyze and execute cross-media and integrated-marketing deals, apparently the first major agency to do so.
Not everyone on the buy side is convinced that the cross-platform strategy will be the dominant advertising paradigm. "I continue to be skeptical about the reality of these opportunities," says Allen Banks, executive vice president, Saatchi & Saatchi, whose agency does $7 billion in annual billings. "My skepticism has been based on the fact that, more often than not, these cross-media opportunities are the result of media owners' saying 'I've got some television, outdoor and newspapers; let's go out and sell all these things in a package.' But the package doesn't fit and meet the needs of the advertiser." In fact, he notes, agencies do cross-media deals for their clients all the time, just with different sellers: "That's what our role is."
Banks wouldn't hazard a guess on what percentage of Saatchi's billings might be tied to converged-media deals five years hence. "If I had to guess, I'd be very leery to guess anywhere near those kinds of numbers" put forth by Schultz, Malloy and Cunningham.
But most of the big agencies have executives, if not dedicated units, in place to specialize in cross-platform deals. TN Media, New York, is restructuring itself into Pervasive Media, in part to get the media-planning and -buying functions to communicate with each other better, says John Lazarus, director of national broadcast buying. He will take on the new role of overseeing integrated marketing strategies for the firm's clients.
"Every selling organization is gearing up and creating dedicated integrated sales units," he points out, "and the forward-thinking agencies are starting to put this in place also. The advertisers are very much in support of this," he adds, "because it combines real value and promotion maybe with some efficiencies."
This latest great push toward integrated marketing and advertising is being driven by two seemingly contradictory things: media fragmentation, which is pushing and pulling consumers in more ways than ever, and media consolidation, through which, according to Goodman, a handful of behemoth media companies control more than 90% of the available electronic media impressions.
The big challenge for advertisers is to grab consumers' attention in an increasingly fragmented media world at a time when demands on their time and attention are greater than ever. What advertisers and agencies now believe, says Lazarus, is that, in a highly consolidated media world, there are benefits "to have all these assets of one sales organization driving one marketing message. As long as they can interrelate the platforms, you have this common message. Wherever consumers turn, your message is there. That's the strength of it."
So synergy works after all. At least that's the message that AOL, Viacom, Disney and News Corp. have been pitching and that advertisers are beginning to accept.
CNN's Goodman says AOL President Bob Pittman is a big believer in integrated marketing and cross-platform sales.
That thinking at least in part drove last week's reorganization of the Turner cable networks into a new unit that will also include The WB and will be headed by The WB Chairman Jamie Kellner (see page 18).
Among the Big Four networks, Fox was the first to set up a cross-platform marketing unit-in spring 1998 under Kayne Lanahan, senior vice president, News Corp One.
"There are levels of what I would define as cross-platform," she says. "One is to just bundle together deals across a media company and across an agency. But there's also a much deeper, richer kind of approach that has to do more with fully integrated marketing client-based objectives and custom programs." The latter type, she says, will benefit clients more: "how to work with one media company across content, media, promotion, event marketing and public relations and wrap it all up in an integrated communications package."
Viacom President Mel Karmazin created CBS Plus, which became Viacom Plus after the two companies merged last year. "Mel felt there was interest from a lot of advertisers to work across divisions but no mechanism to make it happen," explains Lisa McCarthy, senior vice president, Viacom Plus. "At the time, he also felt we were really much stronger when it came to local radio and out-of-home and there should be a way to leverage who we were."
Both buyers and sellers say cross-platform packages are more about good marketing and promotion ideas than about pricing discounts. At the same time, sellers admit that one objective in offering an advertiser an array of media is to get a greater share of that client's ad budget. If that happens, says TN Media's Lazarus, "we expect some economic accommodations," or better pricing. But, he adds, "this is not to drive prices low. You're asking [the media companies] to build promotions for you. You're asking them to do some on-site things. There has to be some charge for the services. You're really building a promotional platform that will drive brand business."
According to Laura Nathanson, executive vice president, national sales, ABC Television Network, it took about a year of planning to put together ABC Unlimited, the integrated-marketing unit for Disney-owned media that report to her. "We didn't want this to be about forced sales or discounts; it's got to be fair-market value," she says. "The biggest challenge is coming up with the big marketing idea that ties it all together."
At NBC, Sales President Keith Turner recently put NBC Connect in place. It can package the TV network, owned stations, Internet, cable properties, NBC Enterprises, and even the NBC stores and outside print partners. "It's still very much a work in progress," he says. "But talking to one person instead of 12 is certainly an easier way to do business." And if enough business is tied to a deal, he adds, the buyer "will recognize some economies, too."