Walk softly and carry a big checkbook
Forget Google. The real king of advertising is a mild-mannered 58-year-old media buyer.
(Fortune Magazine) -- It wasn't long ago that the ad biz was ruled by black-clad creative types who could charm an old lady into dropping her last $10 on a jar of get-younger cream. But those days are over. Now, with digital media at the center of the action - Google, Facebook, Microsoft's blockbuster bid for Yahoo - it's all about numbers. And one bookish media buyer is king. His name is Irwin Gotlieb. But we might just as well call him the $59 billion man.
Last year the CEO of media-buying shop GroupM, a division of the ad conglomerate WPP Group (WPPGY), quietly directed more than 16% of the world's $364 billion in global ad expenditures. He not only understands media better than most; he has the power to sway the industry to his vision. And lately that vision entails old media taking lessons from the web. "Say you want to sell grapefruit," he says over an egg-white omelet at London's Four Seasons, where he keeps an extra set of clothes for regular visits. To move a lot of citrus in the traditional way, he explains, you'd buy a spot on "Grey's Anatomy" or run an ad in Vogue, making behavioral assumptions and inferences built on viewer demographics. But in the digital world, ad buyers don't need to assume anything; they have data to work with. Online marketers track actual behavior, so instead of buying a type of audience, they can buy a click, an inquiry, or even a sale. Every time consumers take such an action, it becomes part of their "clickstream," which follows them around the web. This information trail gives marketers an increasingly sophisticated idea about each of us, allowing them to craft an ever more tailored online experience.
But why stop there? What the business really needs is a venue with the reach of old media and the data trail of the web. In 2006, GroupM placed, tracked, and measured 200 billion online impressions, and that figure jumped enormously last year, according to the agency. That's a lot of behavioral data, and it made Gotlieb - who serves as the top field general to WPP Group CEO Martin Sorrell - think how useful it would be to spray that fire hose of information at non-web media. And so whatever you may think it will do to your privacy, our clickstreams are about to follow us to our TVs, enabling marketers to "send a different message to every set-top box," he says. "If you've got three TVs in your home, the teen gets one message, Mom gets a different one, and Dad gets a third."
Gotlieb isn't just envisioning this scenario; he's making it happen. He was the lead investor last fall in a $25 million funding round for Invidi Technologies, a tech startup based in Princeton, N.J., that can determine the age, gender, location, income, and ethnicity of television viewers and send targeted ads to different sets within the same house. The investment, he contends, will help position GroupM to improve ad targeting on any screen - TV, PDA, or computer. "While the technologies are fairly well developed to enable all this stuff, the business rules don't exist," he says. The next step is to hammer out deals with the networks, precisely the sort of work he's been doing for 38 years. "Our single biggest challenge as an industry is to find fair and equitable ways of getting the business arrangements in place."
Born in 1949 to a Russian mother and a Polish father, Gotlieb grew up in Japan. As a teen he came to New York for high school but dropped out and later took an entry-level media job at an ad agency. Before long he had commandeered a computer the size of a desk, taught himself to code, and written the software that ad buyers would use for the next 30 years to determine prices for TV ads, radio spots, billboards, etc.
It's this tech fluency that distinguishes Gotlieb from his peers. He views the world not as a wild-eyed art director or a typical bean-counting media buyer but as an exacting engineer. When he purchased a custom road bike, he swapped out alloy bolts for titanium so that the bike would go faster. When he and his wife, Elizabeth, built their 5,600-square-foot dream house in Briarcliff Manor, N.Y., a year after their only daughter, Dana, left for Harvard, Gotlieb did the wiring himself. "Liz and I were in Europe, and Dana called to see how to turn on the light over the kitchen sink," he recalls. "I turned it on for her through the phone."
He's also got a knack for strategy. For years, media buying was an important but mundane function within an agency. But two decades ago, while running the buying unit at New York agency DMB&B, Gotlieb realized that his division was being hampered by its association with the creative side. He could represent more clients without a conflict of interest. So he spun off the business. Eventually most media-buying outfits followed suit. In 1999, Sorrell lured Gotlieb to run MindShare, the largest of WPP's buying agencies. "I went looking for the strongest media person in America," Sorrell remembers. "He has a tremendous background in traditional media, but he's also a geek. He understands new technology in a very detailed fashion."
Once onboard, Gotlieb persuaded Sorrell to combine MindShare with WPP's other media-buying shops. More clients would mean more information and more power. "We didn't build scale for bragging rights," Gotlieb says. "We knew the value of data would only escalate."
That scale is the key to Gotlieb's influence today. Last spring, for example, he crafted a $1 million pact with NBC Universal (NBCU) that changed the age-old model of how TV ads are bought: The bigger the hit, the more you pay. With DVRs allowing people to skip commercials, Gotlieb decided that a show's popularity no longer mattered. He told NBC executives that he would pay based on who was watching the commercials. It was a controversial move, but again competitors adopted the new system. Rino Scanzoni, GroupM's chief investment officer, who negotiated the deal, credits his boss. "He was saying, 'Digital video recorders are being incorporated in set-top boxes. Television is going digital by 2009. What impact will that have on our business, now and in five years?' " says Scanzoni. "This is something we needed to do to get ahead and drive the change."
As the line between the web and TV blurs, viewers will have even more control over what they watch. Inevitably that'll mean watching fewer commercials, and Gotlieb knows it. So while spending money on increasingly dear (and often unwatched) spots in "Lost" and "The Office," he also wants to own the shows themselves to figure out new ways to infuse them with ads. That's why he started GroupM Entertainment, a throwback to the 1950s, when shows like The "Colgate Comedy Hour" dominated primetime, to create everything from rock concerts to TV series. In March, GroupM Entertainment produced "October Road," a series that aired after "Grey's Anatomy" and has been picked up for another year. (In exchange, ABC gave GroupM discounted ad slots to pass along to clients.) It also produced "Dr Pepper Band in a Bubble," an MTV reality show. The goal isn't to turn TV shows into run-on commercials. But having a hand in content creation gives GroupM a better idea of what types of shows will be hits - not to mention first dibs on prime ad buys. "The Digital Age requires advertisers not to interrupt content but to create it," says Peter Tortorici, a former president of CBS Entertainment. "Programming only works if people really enjoy it and keep coming back."
Needless to say, Gotlieb's not alone in trying to exploit all the changes happening in media and advertising. Part of Microsoft's (MSFT, Fortune 500) rationale for its $44.6 billion Yahoo (YHOO, Fortune 500) bid is to strengthen its online ad business. And then there's the other elephant in the room: Google (GOOG, Fortune 500). If Gotlieb's strategy is like renovating a rickety house of media, Google is trying to tear the old relic down. The search engine behemoth talks about partnerships even while launching products like GoogleTV Ads, an online auction system for selling cable ads. Who needs media buyers when you can secure commercial time the same way you buy banner ads?
Of course, GroupM and Google do work together. GroupM spent more than $300 million last year buying search ads from Google. But that just makes the relationship complicated at best. Google is dropping $3.1 billion to acquire DoubleClick, a pioneer in selling advertisers clickstream information. (In May, WPP spent $649 million to buy 24/7 Real Media, which collects web data in nearly the same way.) Google's heft can obviate Gotlieb's advantages. GroupM's clients pay in part for Gotlieb and Scanzoni to get the best deals and the sexiest ad placements. Such relationships become less important when technology makes the whole process transparent. So Gotlieb is wary. "Google can do something without regard for whether they can actually make money on it," he says. "That can be very destabilizing to the rest of the business."
Google's take? "I believe WPP coined the word 'frenemy,' " jokes ad president Tim Armstrong. "We've never seen WPP as a competitor."
Sorrell says he'll deal with the Google threat partly through further acquisitions. But Gotlieb won't say who, when, or how much. He's a market mover, and so he must choose his words carefully.
It's Friday afternoon at Gotlieb's favorite lunchtime spot, Sushiden, in midtown Manhattan. We're discussing all the flux in the industry, but he won't talk about Facebook's Beacon ad property because one ill-timed statement can cause a business to collapse. He nods to the sushi chef in front of us to make his point. An accomplished chef in his own right, Gotlieb has a fondness for quality knives. He looks on with admiration as our host strips a cucumber of its skin in one cylindrical cut. "In the wrong hands that knife would have butchered the cucumber," he says. "And it wouldn't be the fault of the knife."
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