Vol. 23 No. 25 June 25, 2012 The Right Talk Advertising agencies are continuing to search for the ties to be more imaginative than ever before. Digital is best way to position themselves vis-à-vis their clients in just beginning to transform everything that we do, which this age of digital, social media, crowd-sourcing, flash is causing agencies to look at how they are structured in mobs, raves, demanding client procurement departments, terms of (client) teams and work flow. There is a need to fickle and sophisticated consumers, global economic in- create an integrated team with the right resources sup- stability and uncertainty, ad industry consolidation and porting clients. And there is a need to be more facile and when anybody can jump on YouTube to create an ad flexible so that every time there is a change at the client, campaign or attack one the client’s agency has created. agencies are able to recalibrate quickly.” In this age when online and mobile result in instant feed- The willingness to embrace change also is essential. back from consumers on any initiative a client may un- “There is no cement hardening on media anymore. It’s dertake, whether it’s an ad or an event. A viral age when messy and chaotic and liberating. You have to embrace everyone is a critic with his or her own likes and dislikes, the fact that things are always changing. That’s the new and is unafraid to share them. What’s an agency to do? reality,” said David Lubars, the global creative chief at “Stop talking the language du jour and being what BBDO Worldwide. Clients also need to accept that new you’re not. Stop worrying about technology. Don’t fall reality. “If you’re a client, don’t say you care about the into the ‘give me one of those’ syndrome. Concentrate new era of brand building, ask for something inventive on what agencies do best – providing great insights into and then ask for TV to test it,” Publicis’ Gianinno said. the consumer, what drives the consumer and what con- Of course, agencies want to be paid fairly for that in- nects clients to their consumers. In a time when it’s un- ventiveness, but complain that clients and client procure- certain for everyone, tell your clients that there are op- ment deparments often prevent or hinder fair value com- portunities, that they shouldn’t be following the herd, and pensation. “What you’re hearing a lot from clients and should be thinking about how every penny is spent,” said agencies is a sense of the new normal – more work, less David Sable, global ceo at agency Young & Rubicam. people and different compensation arrangements. What Added Sable, “agencies should be thinking about who you don’t hear much from agencies is how they want to their (client) partners are, and understand why they want be compensated for revenue-generating performances to be working with them.” Said Susan Gianinno, ceo for the client,” said Steve Blamer, head of consultancy of the North America operations of ad agency Publicis, Blamer Partnership. Added Blamer, “agencies need “agencies need to change their cultures. It means shifting to justify their existence in the era of the new normal. If the focus to being makers versus being managers. Never an agency doesn't think that the client revenue objectives lose sight of what we do which is marrying creativity and are do-able, then it should resign the business. Agencies imagination with consumer insights. There are opportuni- need to quit whining and get on with it.” Store Shopping Patience Worn Thin Ad agencies should give a call to still-struggling The troops at struggling online company Yahoo Inc. department store chain J.C. Penney. Reason: the ouster have mixed emotions – sort of. Reason: the problems last week of JCP president Mike Francis after only eight YI is still facing and the presence of its interim ceo Ross months in the job. Francis considered responsible for the Levinsohn, who recently took over the top job follow- misguided advertising the company has been running and ing the resignation of Scott Thompson, who left after it the selection of the ad agencies responsible for it. became public that he had falsified his resume history. Francis, a Target Corp. alumnus, is said to have tap- “(YI) people are thinking positively about Ross, but ped Target’s former ad agency, Minneapolis, Mn.-based there are still a lot of folks looking for the door. They Peterson Milla Hooks, to work on JCP’s ads, and, as a have run out of patience. Good people have left, but you result, the ads were criticized for being too Target-like. will see even more leave, which will have a large im- “Creatively, (JCP) needs help. The (ads) are still bad and pact in terms of the general perception of (YI),” said one (JCP) is keeping an open-door,” an agency source said. cont. page 2 The Delaney Report © 2012 is published weekly, 48 times per year by Informed Communications, Inc., 131 Block House Road, Tryon, NC. 28782. 212/979-7881. Fax: 212/979-0691. [email protected]. Subscription: $595 per year. International: $612. Fax: $615. This is copyrighted material and any reproduction or retransmission without written permission is prohibited. Page 2 The Delaney Report Yahoo...cont. Making It Mine online industry executive. Added an online executive, Look for Kazuo Hirai, the new ceo at Japan-based “Yahoo is too powerful a platform to go away, but it entertainment and consumer electronics company Sony needs to develop a story for itself that makes sense. Does Corp., to continue to make management changes. Hirai it become more of a definitive portal. More about service is eager to put his imprint on the struggling company and less about content creation. An editorial filter on the and already has made a number of top-level management web.” Ross has other challenges. “He has to bring in shifts. SC, for example, appoints its motion pictures unit more good people who are not caught up in the valley head Michael Lynton as the new ceo of SC’s U.S.-based (Silicon) talk about how messed up (YI) is,” the source subsidiary Sony Corp. Of America, SC’s in-house coun- said. YI, last week, hires Google Inc. executive Michael sel Nicole Seligman is the new president of SCA, while Barrett to serve as its chief revenue officer. SC cfo Rob Wiesenthal is the new head of SCA interna- tional (appointments are effective this week). “You’ll see (Hirai) make other (management) changes. He wants his The Evolution own team on board with him,” a SC source said. Look for publishing/media companies Meredith Hirai is getting early support from the troops. “(SC) Corp., Hearst Corp., Conde Nast and Time Inc. to con- people like him. He has the skills to sort out the priori- tinue to transform themselves in a bid to move beyond re- ties. He’s Japanese, but he has been educated in the U.S. liance on print advertising. Meredith led the transforma- It’s not all about his ego. He listens and is putting the tion a few years ago with a series of acquisitions in the company before himself,” said another SC source. Hi- marketing services/data/media strategy areas (Hyperfac- rai's obvious challenge: getting SC’s various units around tory, etc.). Earlier this year, Hearst purchased a 50% the world working more synergistically. “The company stake in the global credit ratings/data analytics company is built on islands. It’s not just about getting the divisions Fitch Group. Conde Nast’s parent Advance Publica- speaking with one another; it's getting the silos within tions buys a stake in San Francisco-based software/mar- each division speaking to each other. None of them want keting company Unified after buying Fashion Network to play together. (Hirai) has to create an ecosystem that International (fashion blogs, etc.). And Time Inc., with says ‘I’m a Sony family member.’ With computers, with Bain Consultancy’s help, is now looking at where to go. TV, with music, with (video) games, and he has to put “They realize the core revenue streams they depend- it all together,” the source said. Added the source, “the ed on for decades are not coming back. They know they way to do it is to award (SC) executives incentives based now have to serve clients in new ways. The problem is on collaboration. People will chase the money.” that very often you don’t know what you’re getting into and these (acquisitions) can be a distraction – the risk is you lose your identity. And there are executional risks,” Unpopular said a publishing executive. Added a publishing source, Publicly-traded media company Viacom Inc. isn’t “you need to hire the right people. Experienced execu- winning any friends in the cable industry or any addition- tives from those worlds who know how to make the busi- al viewers to its cable networks. VI is headed by its ceo nesses work and know what you will be getting into.” Philippe Dauman, who answers to VI’s 89-year-old ma- jority owner Sumner Redstone. VI operates cablecaster MTV Networks, which includes MTV, Nickelodeon, Unpredictability VH1, BET and Comedy Central. VI is incurring the an- Ad agencies who sign on with clients owned by pri- ger of its cable competitors due to its negotiating tactics vate equity have their own kinds of problems. “Dealing during the latest “upfront” session (the period when TV with companies owned by private equity is particularly networks, cable and broadcast, negotiate with the ad com- frustrating. With the private equity (clients), you’re nev- munity over the ad prices for air time on the networks’ er sure you’re dealing with the people who have the au- fall 8 p.m.-10 p.m time slot). “(VI) has done a disservice thority. There are ‘shadowy’ people you may never meet to the cable industry because of the deals it negotiated at who are not that invested in the day-to-day running of low (prices). It has hurt cable’s ability to negotiate for the (client) business,” one agency executive said. There premium prices,” said a cable industry senior executive. are other issues. “The private equity owners are usually The situation comes as audience-ratings declines less interested in building a brand long-term and more keep hitting VI. “The problem starts with content. There interested in the short-term,” the source said. is a general life expectancy of the programs (VI) has had What can be done. “Be prepared for the unpredict- success with during the past few years that (VI) has not able. There is not much stability in the (client) manage- replaced aggressively enough,” a cable executive said. ment so make sure that the relationship is rock solid with Who is missed: Judy McGrath, who “resigned” a year whomever you deal. Private equity (clients) are constant- ago after a long-time stint of running MTVN. McGrath ly looking at budgets, so be more buttoned up in terms of was seen as MTVN’s creative spark – a spark Dauman explaining costs. The upside is that you may deal with has been falling short in replacing. Still an issue: the lack people who are more entrepreneurial,” said a source. of communication among MTVN’s cable arms. The Delaney Report Page 3 Improving Treatment Plan B T3 Micro Inc. is setting its sights on growth. The Publicly-traded personal-care/household product Venice, Ca.-based small appliance company markets a seller Prestige Brands Holdings is weighing its options range of hair-care products, from styling irons to hair after its discussions with Mexico-based Genomma Labs dryers at premium price points. “We’ve completed a sig- collapse. GL approached PBH about buying it earlier nificant reengineering and now have a management team this year (TDR, March 26), but GL/PBH could not agree in place to drive the business with a focus on the U.S. and on terms. “(GL) has sent a letter pulling the slate of di- Canada. We’re working our existing distribution so that rectors it wanted and backed out. We said that if it made our growth is organic – our growth is running at the high a reasonable offer, we’d talk,” one PBH executive said. double digits,” said company president Paul Pofcher. As a result, PBH, whose fiscal year ended in March, On the agenda: new products (T3 is launching a new is moving in a different direction. “This (fiscal) year is line of hot rollers and curling wands). “We’re pushing starting well. Our brands are getting the support they our R&D efforts, which have improved considerably. need and we intend to keep them growing. And we’re We’ll continue to launch new and innovative products,” looking for over-the-counter acquisitions,” the source Pofcher said. A goal: international expansion. “We’re said. PBH brands include Chloraseptic throat lozenges, beginning activities in Asia and Europe, taking our flag- Pediacare children’s cough/cold medicine, as well as ship products and launching them in the beauty space. brands acquired earlier this year from GlaxoSmithKline We’re doing a lot of work on the appropriateness of our (anti-gas entry Beano, aspirin Ecotrin, etc.). “The brands products in various countries,” said Pofcher. are integrated and we’ll be supporting them,” the source said. To be accelerated: PBH’s search for a buyer for its household products (Spic 'n Span cleaner, Comet cleans- Enhancing Decor er, etc.). “They are impeding progress,” said the source. Shelter magazine Elle Décor is marking its first year under the ownership of Hearst Corp. (bought the title a year ago from France’s Lagardere). “We’re part of the I Want Out! Hearst design group (Veranda, House Beautiful) and can They’re knocking heads at Prometheus Global Me- offer multiple (ad) packages. Our goals are to increase dia, which includes magazines The Hollywood Reporter, the (ad) rate per page, which we’ve done, and nonendem- Billboard (music), Adweek (ad trade), digital and events. ic (advertisers),” publisher Barbara Friedmann said. Who is said to be looking to cash out: PGM key investor ED will be migrating its web site Elle Décor.com to Jimmy Finkelstein, leaving equity firm Guggenheim the Hearst digital platform in August and just launches its Partners remaining. “He wants out and (GP) isn’t put- first app “Look Book.” “We’re promoting the app heav- ting any extra money into (PGM),” one PGM source said. ily on the web site and we have social media tricks up our As a result, morale is continuing to fall. “People are sleeves,” said Friedmann. The initiatives come as Hearst looking to get out. They’re worried other cutbacks are is gearing up the relaunch of its Elle Accessories title. coming,” said a PGM source. PGM has been trying to leverage its assets in other areas, but is coming up short. E.g., its Billboard music awards show is delivering poor Data Connection audience ratings. Being watched: what Janice Min, the Germany-based research company GFK Group has highly-paid editor of THR, will do when her three-year growth plans (GFK owns U.S. research companies, mag- contract ends (Min now completing year two). azine researcher MRI and ad effectiveness arm Starch). As a result, the publicly-traded GFK is rethinking how it wants to position itself globally (GFK also is involved in Drinks All Around media measurement and retail tracking). “(GFK) is de- Palm Bay International, the Boca Raton, Fl.-based veloping global initiatives to create cross-border syner- wine/spirits company, is staying active with brands that gies and asking whether it has the right structure. The fu- are at a variety of price points. “We’re offering a range ture is connecting with other partners – (GFK) has a divi- that meets every pocketbook. We’re at the higher end, sion devoted to data partnerships and is looking at estab- and in supermarkets. We’re maintaining the support for lishing linkages (GFK already teams with the Media all of them,” said marketing boss Marcy Whitman. Behavior Institute to develop data on consumers using PBI is keeping up the backing behind its affordable iPhones),” said Kathi Love, president/ceo of GFK/MRI. lines of wines Cavit and Santa Rita, for example (PBI just GFK also is pushing on the word-of-mouth data front. launches a 1.5-liter size of Cavit). And it’s jumping into With MRI, GFK is being active. “We’ll be releasing the sweet wine category with its Roscato wine. “We’re information on digital reading mid-summer – we’re put- saying that it delivers a fresh-fruit flavor profile and is re- ting a lot of time and investment in digital (what digital freshing,” Whitman said. Also getting attention: its Voli people are watching, etc.),” she said. “With Starch, it’s vodka entry, which is using singer Fergie as spokesper- launching in China and doing tests in Singapore and Aus- son. “She’s actively promoting it in social media,” said tralia with products measuring ad effectiveness.” Whitman. Due: advertising with TV and radio slated. Page 4 The Delaney Report Doing It Right Unsporting Specialty online retailer Zappos.com, owned by the Management is still scrambling at Engelwood, Co.- online retail giant Amazon.com, intends to keep expand- based sports equipment retailer The Sports Authority, ing. Z.c started as a shoe seller, but now offers a range owned by Los Angeles, Ca.-based private equity firm of products from eyewear to handbags. Z.c’s current big Leonard Green & Partners. TSA, operates more than push is in the apparel arena, which it expects to become a 400 retail stores in the U.S., hit by a series of top-man- $1-billion-plus revenues business in three years. agement changes with the ceo job becoming a revolving Z.c is pushing on a number of fronts. What keeps door. The post during the past three years has been held improving: its customer service (Z.c has been offering a by John Morton, Dave Campisi and currently Darrell 365-day return policy, free shipping both ways, 24/7 cus- Webb, who signed on as the interim ceo a year ago. tomer service). Z.c now offers customers the opportunity “There has been a lot of change so you don’t have a to become invitation-only VIPs (are offered next business consistent strategy. There’s no sense of what it is or who day shipping, special site to shop on, etc.). And Z.c gets its customer is,” one industry source said. A problem: support from high-end airport retail outlets that recom- TSA up against aggressive national competitors such mend Z.c if the store does not carry an item. “(Z.c) keeps as Dick’s Sporting Goods, which continues to expand. trying to improve its business model,” one source said. TSA has a poor reputation for working with ad agencies. Agency Rumblings. . . Shops might poke around Prestige Brands Holdings (see story page three). PBH for years utilized the Carrafiello- Diehl & Associates agency to handle the advertising for its lineup of brands (Chloraseptic, Clear Eyes, etc.), but C-D&A sold itself to New York-based The Gate late last year and PBH’s union with The Gate is said to have deteriorated. PBH, for example, is using small shop Vision Creative Group to handle ads for its motion-sickness product Dramamine. PBH has been upping its ad expenditures. . . . With WPP’s acquisition last week of San Francisco-based digital agency AKQA, the search for digitally-oriented agencies will become more difficult. “There are still private (digital agencies) left, but none have the scale of Rosetta, Digitas, Razorfish (all owned by Publicis Groupe) and AKQA. You’re looking at (di- gital agencies) with revenues in the $50-million range. Most of the really successful (digital) companies are in the hands of WPP and Publicis,” one investment banker said. The spotlight, as a result, is falling on the other agency holding com- panies Omnicom Group, Interpublic Group, Havas, MDC. “Omnicom loves to talk about how wonderful Tribal is (OG’s organically-created digital unit), but over time, the acquisitions that Publicis and WPP have been making will have an impact on Tribal’s ability to grow. IPG couldn’t do a meaningful (digital) deal even if it wanted to because it doesn’t have the money. Havas and MDC are in a come-from-behind mode in digital and media,” said the source. A danger with the acquisition sprees Publicis and WPP have been on: talent defections. “If you look at Publicis, people are leaving at all three (Rosetta, Digitas, Razorfish). It’s the question of management style,” another banker said. Where there is grow- ing acquisition interest: shopper marketing and analytics, and, in the distance, social media. . . . Who is getting increased pressure now that its marketplace performance is faltering: the agencies for consumer products giant Procter & Gamble, which is projecting a disappointing 2012. . . . Shops might poke around financial services company State Street Corp. Publishing. . . Publishers are holding their breaths, awaiting the advertising-performance results of the coming third and fourth quar- ters. “It’s hard to read the tea leaves right now. You’re picking up a lot of indecision from advertisers. There doesn’t seem to be a sense of urgency about spending on much of anything. And when there is movement, it’s at the last minute,” said one publisher. Added another publisher, “you’re hearing trepidation. Corporate executives are trying to sort through their (print) optimization. There is a lot that’s under evaluation. And with the Olympics coming, you’d think you’d see a lot of money flooding in, but there isn’t. But it’s not just print. Digital isn’t ‘crushing it.’ Digital expenditures have come down to more realistic levels.” . . . Conde Nast staffers are starting to question CN president Bob Sauerberg’s goal of having the company generate some $300 million from nonprint sources. “It’s a big number. It means that each (maga- zine) title has to generate $15-$20 million. That’s going to be a challenge,” one CN source said. And there are questions about whether CN is repeating history with its major commitment to its new entertainment arm (CN went out and hired TV network veteran Dawn Ostroff to oversee it). “There are a lot of resources being committed to it at once. It smacks of what (CN) did with Portfolio (CN’s attempt at launching a business magazine that eventually was closed). Maybe, it would have been better to have started small,” said a CN source. . . . With the launch last week of Microsoft Corp.’s tab- let entry Surface, publishers, who quickly jumped on Apple Inc.’s iPad, are having to rethink their tablet strategies. “You are watching the next chapter of tablets beginning. There will be more (tablet) transitions. It will be hard to pick a win- ner, so you’ll need to have exposure on them all because if you bet on one, you may lose,” one publishing executive said. At Deadline. . . More management changes are set to hit Carlsbad, Ca.-based golf equipment company Callaway Golf Co., which has been undergoing senior management changes during the past 12 months. . . . Another smart way Apple Inc. is engaging consumers: it’s now sponsoring free music concerts with big-name artists at its Apple retail outlets in New York. President and Publisher: Thomas F. Delaney. Managing Editor: Julia Igoe. Associate Editors: Peter Duncan, Patricia Hailey.