Irwin Gotlieb is the chairman of the world's largest media buying and planning firm, GroupM, overseeing more than $100-billion in media billings each year, and has spent 47 years in the business. He spoke with The Globe and Mail during a visit to Toronto this week.
Recently there's been pressure around YouTube ads showing up next to questionable content. Facebook and Google are not companies from which you buy media space – they're also your clients in some cases and also your competitors. How do you manage that?
Look, the supply chain will never be 100-per-cent clean. It's just not going to happen. Ten years ago we became aware that significant chunks of our clients' money were going to sites with pirated content. We created a piracy blacklist. Then we began to blacklist other sites based on clients' criteria. An enormous amount of work has been done. The general problem of course, is that Google and Facebook ingest so much content, there is no way to monitor all of it. We believe it's our obligation to work with them to ensure that they do more. Media owners invest millions in content. What do you think Google invested in content last year? Facebook? A lot less. If they're not investing in content, and they're getting a free ride on other people's content, I think we can put a bit of pressure on them to spend the money to build the technology – if Google can build a driverless car, they can do better than they're doing. Is it going to be perfect? No. We want it to be as good as possible. Walking away from the media opportunity of a Google or a Facebook, for our clients, isn't the answer either.
As stewards of marketers' money, do media agencies have any obligation to spend money with companies that are actually paying to create content?
Absolutely. Media fundamentally works by creating content that is sufficiently compelling to attract an audience. You have to reward people who invest in content – not just steer audiences to different places and monetize someone else's content. [If] the media owners create less content, we start chasing our own tail down the toilet. That's not a good outcome. Everything we do is based around the premise that a healthy media ecosystem is better for our clients, and that's defined as one where audiences are growing. Audiences only grow when content is compelling, and people who create content are rewarded.
But if that were true, then the current media landscape wouldn't look like this.
It is going to change. Google has people now who are charged with developing a content strategy. Facebook has just hired their first content development people. It has to change. They can't get a free ride indefinitely.
The TV industry is working toward "addressable," or targeted, TV ads as opposed to the same commercial playing for everyone watching the same show. How will that change TV?
For years, the role of television has been purely about awareness. Its targeting capability has evolved slowly. Television owners have been too focused on their competition as the station across the street. They allowed [digital] to creep up on them. There are ways for television to capture dramatically larger chunks of money. The uptick in the value of addressable advertising could lead to somewhat lower commercial loads over time, and I think that will be terrific for the medium: You can charge so much more in an addressable context, and I think it would be wise for some media owners to take that incremental revenue and reinvest it in improving the engagement with the medium by decreasing commercials.
Privacy rules in Canada may mean you could only target at the postal code level, not based on data gleaned from people's set-top boxes.
Even that would be spectacular relative to what we can do now.
Do you think privacy regulations as they stand are appropriately strict?
I personally do. I ask the question: Do we know anyone who's been harmed by having ads delivered to them that are more relevant? There are a lot of politicians that, when you go to the public and say we're here to protect your privacy, how can anyone argue with that? But it's not like we're sharing your email passwords and your bank account records. We're using marketing data to make commercials more relevant for you. Privacy regulations are critically important for society, but their application to marketing data – how that marketing data is deployed – is probably much much less harmful, and probably helpful to the consumer.
You now have access to multitudes more data about people than ever before. In light of that, how do you manage your relationship with consumers?
If the first time you heard about a Mercedes was when you were 40 years old and finally had enough money to buy one, is there any chance you would buy the car? Unless I began to create aspiration in you when you were 12 years old, you're not going to buy the car when you can finally afford it. Would you put a toothpaste you'd never heard of in your mouth? Would you take a Brand X diaper and put it on your newborn baby? People need to have knowledge of the brand and some level of trust. With the availability of granular data, a number of agencies began to push ROI [return on investment as the measure of success of an ad campaign]. But the truth is, every time we have seen a client focused on return on investment, you shrink market share. It just doesn't work as a long-term strategy. Because what you're doing is using data to identify the lowest-hanging fruit. If I take all my money and use it to reach people who we know are within 30 to 60 days of a new car purchase decision – because their lease is expiring or they've paid off their financing on their existing vehicle – I'll do extremely well, because I'm capturing the low-hanging fruit. But nobody's watering the tree any more. It's not going to bear any more fruit, and you're out of business. Short-termism is a real problem.
Amazon has had a huge impact on the retail landscape. What does that mean for media?
[Consumer packaged-goods companies] need the end-aisle displays in supermarkets, and you have to pay more for those. The value of brick-and-mortar shelf space is very, very high. Clients pay dearly for that physical shelf space. If you believe that you're still going to be going to the store for your toothpaste or your can of Coke or Pepsi five years from now, then don't change anything. But the disposable diaper category in the U.S. went from 100 per cent brick and mortar to 25 per cent brick and mortar in a six-year span. Everything else is going to go that way. If physical shelf space ceases to be the moment of truth [in a purchasing decision], then media becomes virtual shelf space: The last opportunity for the client to convert an impression into a sale. I believe it's going to happen through the interaction of a television and a second-screen device like this [phone] that will be synchronized. We're playing with a technology where there's one generic TV ad for a product, and on this device [points to his phone] there are offers for whatever you're interested in. We're playing with a luxury SUV client of ours, where there's a general ad, and the young mom gets [a message about] interior comfort and child safety, and the guy gets engine performance specifications. There are lots of ways to do this.
When you've got the world's biggest ad spender, Procter & Gamble Co., whose head of marketing has publicly called out the "crappy media supply chain," other marketers are going to pay attention. Where do you fit in, fixing that supply chain?
I am quite frankly shocked that it has taken this long to surface this particular issue. We are in the business of determining how to allocate money across multiple media options – digital, print, television, and so on. You need to compare them on some sort of apples-to-apples basis. If a commercial is clipped by three or four seconds on TV, you get a make-good [free ad time to make up the loss]. So how come two seconds out of 30 seconds is adequate in digital? Are you kidding me? We created a set of criteria: [An ad] has got to be 100-per-cent viewable. It has to play for 50 per cent of the duration. The audio needs to be on. This is just common sense.
This interview has been edited and condensed.