The Way Forward (9/21) - incl. Bob Greenberg (R/GA) and Barry Wacksman (R/GA)

BOB GREENBERG: Thank you all for coming this afternoon.
And we'll get right into a presentation that we're
calling "The Way Forward." First of all, in 2009 we think
that there was a perfect storm that has never happened before
in our industry.

The impact of technology on the advertising business has
been tremendous.
But it was happening at the same time there was a global
economic downturn, one of the biggest
recessions we've ever seen.
And that created a real crazy situation for
the advertising business.
There's also a digital revolution that's taking place
at the same time as we're moving into
the Information Age.
Moving into the Information Age is something that I rarely
hear people talk about.
And I think it's a natural evolution from manufacturing
and the Industrial Age, Machine Age, et cetera.
But we don't know how far we're into it.
And every year, everybody says the same thing.
It's just never going to stop, and it's moving
at such a fast pace.

And all industries are challenged by these two
components.
Certainly, we know the music business has been extremely
disrupted and changed forever.
I think the most important thing to take away from the
music business is that there's a lot more music, it's just
distributed differently.
Publishing is another hard hit industry, whether it be
magazines or newspapers.
And we're in the infamous New York Times building right now.
Again, I think people read more papers and magazines and
then ever, just again distributed differently
because of the Information Age and the digital revolution.

The entertainment business, I think, is something that a lot
of people are not thinking will be disrupted like the
music business.
But it's exactly the same formula.
The only difference is the size of the file.
And the thing that gets cheaper every day, every
minute is storage.
So we think that the movie business will go the same way
as the music business.
And of course that leads us to advertising, which is changing
dramatically.
In fact, whether this is the exact number of months, it
could be between nine months and a year, but having been in
the business for 32 years now, I think more has happened in
the last nine months to disrupt the advertising
business than in the last nine years.
Clients are continuing to cut budgets, which is something
that was in The Wall Street Journal today.
I have two things that I'll talk about about Sir Martin
Sorrell, but one of them is he says the business will never
be the same.
And his projections were continuously off in the last
few times that he made them.
There's a tremendous, also, squeeze on agencies to lessen
their margins and to do things differently.
I have a friend that runs a media company, and every
morning he gets up he's in another pitch.
So it's even things that this large company
has won very recently.
They're just squeezing profits out of agencies.
And the reason is because there's just been tremendous
commoditization which is going to require reinvention, which
is something that Barry's going to talk
about in just a moment.

One of the things that we've noticed, and I'm sure all of
you have noticed, is the tremendous
complexity of media today.
So in the past, you'd get up in the morning and you might
read a newspaper, which might lead you to listening to the
radio or, for instance, possibly reading some
particular magazine that's important to your company.
You may pass a billboard or two, watch TV at night, and
possibly read a magazine.
But that's all changed today with the incredible number of
things that we're bombarded with.
And I think it'll continue to get to be more and more--

Thanks.
Which leads us to quote of Sir Martin's.
He said very recently, like a month ago, that the
advertising industry can return to what it was but
it'll never be the same.
It's not going to be about the 30-second TVC and ads.
It's not going to be about newspapers or magazine ads.
It's going to be about Russia, India, China, Vietnam and dot,
dot, dot digital.
That's very interesting that that's coming from the person
who's running the largest holding company in the world.

So what we need to do and how we're going to do it, I'm
going to turn it over to Barry and he'll take us through that
part of the presentation.
BARRY WACKSMAN: Great.
So all the things that Bob talked about in terms of the
disruption of the industry and the complexity have really led
us to these two questions that are the most fundamental ones
in our industry.
What is it that agencies do nowadays?
And then, how do they do it?
And I think if you have the answer to these two things,
that's really what the way forward is all about.
So let's start with what do we do.
BOB GREENBERG: I think you have to point to data.
BARRY WACKSMAN: You have to point at it.
And now it's not doing it.
BOB GREENBERG: Watch this, guys.
BARRY WACKSMAN: That's why he's the CEO.
Which one did you hit?
BOB GREENBERG: This one.
BARRY WACKSMAN: OK.
BOB GREENBERG: I hit forward.

BARRY WACKSMAN: I hit the stop button.
So one thing to think about when you think about the
advertising industry business and what agencies do, it's
always been rooted in this idea of the campaign.
That's what agencies do for clients.
They create these campaigns.
And campaigns come and go, as we all know.
There are a few campaigns that have lived on for a long time,
but they're constantly refreshed with
new pieces of creative.
And I think even as ad agencies have migrated
themselves into the digital space, they tended to approach
it from the standpoint of the campaign.
So taking the cue from what I think is one of the greatest
agencies out there today, in terms of doing campaign work,
is our friends over at Crispin.
And just looking at their work last year for Burger King,
they started at the beginning of the year with this
brilliant campaign called Whopper Freakout where when
visitors showed up to a Burger King location in Nevada one
day, they were told that the Whopper had been discontinued.
And they filmed all these people having a freak out over
their favorite sandwich being removed the menu.
And that became a big video that played on the web.
Traditional television drove people to that web experience.
And millions of people went and
looked at Whopper Freakout.
And then a little later in the year, they come up with
another brilliant campaign which was
called Whopper Sacrifice.
And the idea with that one was that if you give up 10 friends
on Facebook, you get a coupon for free Whopper.
I think they were tapping into this really amazing cultural
insight that we're all on Facebook now.
I think they just announced latest numbers.
Over 300 million people are now members of Facebook.
But often we don't even know half the people that we've
become friends with on Facebook, so we're willing to
give up 10 acquaintances to get a free Whopper.
And then they ended the year with another great campaign.
It was called Whopper Virgins.
And the idea here was that they found people who lived in
the most remote corners of the earth that had never tasted
fast food and had never had advertising for fast food
permeate their consciousness.
And they brought these people to the US, and they did a
head-to-head taste test of the Whopper versus the Big Mac.
And of course, if you've never had fast food, Whopper, I
guess, tastes better to these virgins.
Three brilliant campaigns.
All three of them were very successful.
Millions of people came and viewed the online components
of these campaigns.
A lot of participation, a lot of viral activity behind them.
But campaigns are always in this cycle.
And it's even true when great agencies like Crispin do
campaigns in digital.
It follows this cycle of up and down.
When we're running a campaign and we've got media in the
market, our audience grows.
And as soon as we pull that media or as soon as the
campaign has run its course and all the people have seen
the Whopper Freakout video or the Whopper Virgin video, the
audience dissipates again.
And then we're on to the next campaign.
And we're always in this up and down cycle.
And that's pretty much what the entire agency business has
been about, correct?
Well, I think something has happening in the digital
arena-- and again, this thing's not working--
is that we've seen the rise in the last five years of what we
call platforms. And the idea behind a platform is that it's
something that's not a campaign.
It's something that's built to last. It's not something
that's launched into the market with a lot of media
behind it looking for its audience with paid media.
[UNINTELLIGIBLE]
We're seeing platforms that go into the marketplace, and the
audience grows over time.
And people continue to use these things.
And so when we define a platform, we're talking about
something that is rooted in utility.
There's something about this platform that a customer is
drawn to and that the customer can find occasion to use again
and again and again.
And so they integrate these platforms into their lives,
and they use them over and over.
Rather than just looking at the Whopper Freakout or the
Whopper Virgin site once and having the giggle and moving
on, a platform is something that they're going to revisit
it time and time again, and they're going to integrate it
into their life.
And that, in turn, creates what we call owned media.
So it's media that the brand actually owns rather than
renting eyeballs on someone else's property.
This is a destination that a brand might own
where people aggregate.
And it has reach and frequency just like any other media
channel, but it's actually owned by the brand.
And often these things trigger we call earned media because
they're rooted in innovation.
And so customers share them with each other across all of
their social networks.
I think a great example of a platform, and this is one that
is in the space of Nike.
And if you think about Nike's history and the main category
which they compete, which is in running, they started in
the early 1970s as a specialist in running shoes.
And over about a 20 year period of time, they grew to
become the market share leader through great innovative
products and through amazing campaigns, largely done by
agencies like Weiden and Kennedy that created this
massive audience of runners that were all drawn to the
Nike brand.
But really, starting in about mid '90s, they started to lose
market share in running shoes.
Their competitors, like new balance and Asics were
actually probably making better products at the time,
and Nike was going to lose its core audience of runners to
these competitors.
And they were in a situation where it was almost impervious
to advertising.
There was no ad campaign that Nike could run that was going
to bring these runners back.
Runners leaving the brand just felt that Nike no longer made
product that was great, that was relevant to their lives.
And then you've got the point where Nike couldn't launch new
products and get trial because runners weren't willing to
test these new products again.
And so they found themselves in a very difficult situation.
And in 2006, R/GA and Nike partnered to create one of the
first platforms in running called Nike Plus.
Nike Plus is an example of a platform.
It's not a campaign.
It's something that was launched in
the market in 2006.
The audience for Nike Plus has grown over time to the tune of
many millions of people who use this thing every week, and
it's integrated into their life in a very meaningful way.
The latest stats on Nike Plus is that the community of Nike
Plus runners has logged over 160 million miles in the last
three years.

It's been sold all over the world.
There's runners in about 160 countries that use Nike Plus.
And the average Nike Plus user visits the website three times
per week on average to look at their stats, to track their
progress, and to see how they're doing in the various
challenges that run inside of the Nike Plus universe.
And it led to this famous quote by Trevor Edwards in the
New York Times, actually, just about two years ago where he
said, "We're not in the business of keeping the media
companies alive.
We're in the business of connecting with consumers.
People are coming into Nike Plus on average
three times a week.
So we're not having to go to them.
And that's this idea of owned media where the brand, Nike,
now owns this media destination that draws runners
in on an ongoing basis.
And in terms of the business impact of Nike Plus, in about
the first year that it was in the market, Nike's market
share in running shoes went up about 20%.
So this is a dramatic growth, obviously.
And it's something that I don't think traditional
marketing could have ever solved.
This is exactly the power of these digital platforms as
they're integrated into people's lives to really drive
the business metrics that matter to all of our clients.
So we think about platforms, we look at, instead of this
up/down curve that we saw with campaigns, there's something
that grows over time.
The audience for a platform continues to grow as more and
more people adopt it over time.
And in fact, campaigns can run on top of these platforms. And
campaigns are often the way that people discover them for
the first time.
But unlike the old scenario where the audience drops off
at the end of the campaign, if we've used a campaign to
recruit you into one of our platforms, we then have you
into perpetuity.
And it starts to look more like this sort of staircase
where every campaign brings more people into the platform
that then stick with it over time, growing the audience for
that platform.
And I'll show you an example of a campaign that we ran last
summer for Nike Plus.
And it was called "The Human Race."
NARRATOR: On August 31, 2008, history was made when Nike
hosted the world's largest running event, the Nike Plus
Human Race.
The first global 10K, it featured races in 28 cities
around the world, each with its own live concert at the
finish line featuring top artists.

But it wasn't just the size that made it historic.
It was the fact that it couldn't have happened without
the Nike Plus platform.
Because for the first time participants had a choice, run
an official race city or run anywhere in the world
by using Nike Plus.
As the lead agency, it was our job to connect people to the
race in a digital space and beyond.
The Nike Plus Human Race site was designed to help bring
together runners all over the globe, whether they shared the
same location, charity, or power songs.
Users could join running teams, train together, and
challenge each other.
And nothing says world unity like some good old-fashioned
trash talk.
FEMALE SPEAKER: Hey football jocks, you think you can run
more than one down at a time?
LANCE ARMSTRONG: New York, you want me to call a cab for you
at the halfway mark?
MALE SPEAKER: Hey Lance, stick to cycling.
You're going to need all your gears to keep up with me.
NARRATOR: Athletes and celebrities were more than
happy to join in through online videos.
FALL OUT BOY: You mother truckers want to race?
KANYE WEST: Let's run the world, baby.
NARRATOR: The videos were seeded out as online
exclusives and housed on a YouTube brand channel.
And let's not forget music.
To boost runners on 10K training runs, Nike Plus sport
music mixes combined expert coaching with
adrenaline-pumping beats.
Excitement for August 31 began to build until, finally, race
day arrived.

Runners sounded off in video booths on how it
felt to make history.
Meanwhile, people all around the world were running their
10K anywhere they wanted, thanks to Nike Plus.
As race results came in from around the world, they were
displayed on the site.
Users could even commemorate the event with their own
personalized race day book.
People begin flooding photo sites like Flickr, Smug Mug
and Photobucket as the buzz spread around the world.
When it was all over, the numbers were unprecedented.
800,000 people ran in 142 different countries.
running 2.5 million miles and competing in 280,000 new Nike
Plus challenges.
But perhaps more importantly, millions of dollars were
raised for three global charity partners.
And it couldn't have happened without putting a sensor in a
shoe and pairing it with the world's largest
online running club.
BARRY WACKSMAN: So "The Human Race" is an example of a
campaign running on top of one of these platforms. We'll look
at one other platform in a different
category, which is football.
The challenge with football is that the only kids who
actually buy this gear are high school kids.
So you have a very narrow window of time in which to
sell product to them.
And so this is an example of a platform that we built to help
recruit kids in at the beginning of their football
career and get them to stay with this thing the entire
time that they're playing high school football.
By the time they graduate from high school, if they're still
good enough to be playing at college, they're getting their
gear for free.
So we have this narrow window of about four or five years in
which to sell product to this particular audience.
And so this is called "Head2Head." And it was
launched at the beginning of last year's football season.
NARRATOR: They live for the hit.
The fingertip catch, the pancake block.
But how do you keep high school football players pumped
for the game when they're not in their pads?
You create an interactive tool that's useful in every aspect
of their football life.
With Head2Head, Nike football introduced a platform that
changed the way players scout their opponents, motivate
themselves, and train to become
better at their position.
At its most basic, Head2Head is a stat comparison generator
that produces a visualization of your stats versus an
opponent, any opponent, of your choice.
Let's say you set your bar high, and you'd like to see
how your season is measuring up against the NFL MVP
LaDainian Tomlinson.
A couple of clicks, and your stats are side by side.
If LT's got an edge on you in 2008, a quick scroll will show
how your stats compared to his last year, when he was in
college, or even a high school.
With Head2Head, you can compare yourself to any player
at any level at any stage of their career, and that
includes your current competition.
Want to see how your numbers stack up against your
cross-state rival?
Simply enter the names, and an instant Head2Head comparison
materializes on the page.
For the high school player looking to take his game to
the next level, Head2Head is an essential tool for knowing
where he stands in the ultra
competitive football landscape.
But that's only half the story.
Because what's a Head2Head comparison if not a motivator
for improvement?
Are your receiving yards coming up a little short?
Simply click on that stat column to watch a video
tutorial from All-Pro receiver Hines Ward.
Or maybe your open field tackling could use some work.
A quick click and pro baller Lofa Tatupu is taking you
through the proper form and technique.
So behind the stature of motivation is a video-driven
education from the NFL's best players, one that's easily
download to an iPod and taken out to the practice field.
And how do you launch a tool that's going to bring both
football training and scouting into the digital age?
You promote it in the right online spaces, and you see
that it drops at the same time as an epic TV spot featuring
two of your premier athletes going Head2Head themselves.
Part number cruncher, part data visualizer, and part
video trainer, Nike football's Head2Head gives players the
tool they need to get stats, get motivated, and get better.

BARRY WACKSMAN: So they're in there week after week looking
at their stats, comparing it to their rivals.
The scouts from colleges and universities have now gotten
in on the act, and so they're in there using it as a
recruiting tool, which is drawing even more kids into
this platform.
And I think this is another great example of something
that's an owned media destination for Nike in a
different category of football, but it's something
that these kids are going to use the entire time they're
playing that sport.
And so it's a place that Nike can rely on for this built-in
audience over time.
So I think we've covered off on a lot of what we think that
agencies do today.
We think it's this combination of building these platforms
for clients as well as creating campaigns around them
as really being the biggest opportunity
of the digital age.
It's where we've seen the most success with our clients is in
the creation of these platforms and in the
construction of campaigns that are used to support them.
And
That I think leads to the next question of how
do agencies do it.
How should agencies be organized to seize the
opportunities of this digital age, as we call it?
I think it starts with this very simple insight that
there's a formula that really drives our industry, that
technology comes along and it completely transforms the
lives of consumers.
And this, in turn, creates opportunities for agencies.
It also creates opportunities for media companies, like the
New York Times, and it creates opportunities for brands.
But we're going to tell the story from the point of view
of the agency business.
And in the last century, this technology emerged called
television, of course.
And it created this consumer that had never been seen
before, this mass-aggregated consumer, millions of people
all watching the same thing at the same time in this very
passive matter where they were open to
receiving advertising messages.
And really, I think, there were three people who were the
pioneers of this creative revolution of the 20th
century, David Ogilvy, Leo Burnett, and Bill Bernbach.
And really the three of them were the pioneers of the
agency model of the analog age.
And they went on to build massive global agency brands
that employed thousands of people around the world and to
this day are still very large companies and their own right.
And they were the geniuses who, I think, are the
inspiration for a lot of what we do.
I think what was so interesting was how simple the
model of the agency was.
Those of us watching Mad Men can see this
playing out in real time.
The ad agency model that was created in the '50s and '60s
was rooted in to creative disciplines coming together,
the copywriter and the art director working side by side.
Media was still integrated inside of the agency, the
planning and the buying of media.
The account managers functioned both on the
business development side as well as the client partnering
side to help make the relationship run smoothly.
And if you've been watching Mad Men, you just saw they had
a big rework at Sterling Cooper in last night's
episode, and actually they organized creative, media, and
account management.
Those were the three overarching ways that the
agency was organized.
This model is so powerful, and what they were doing was so
important, that, typically, their client was the CEO.
It wasn't even the CMO.
I'm not even sure if CMOs existed back then.
They were working with the owners of companies and the
CEOs of brands because what they were doing had such a big
impact on the business.
And it largely stayed unchanged for the
next 20 or so years.
It wasn't until the 1970s that we saw some changes in the
model of the ad agency.
For one, media was pulled outside of agencies, and it
was put inside of a specialist company, the media planning
and buying firms. And we saw the rise of a new role inside
of the agency called account planning.
And the job of the account planners was to use a bit of
social science and research to get to insights that the
creative team could leverage to make their work more
targeted and more on-strategy.
And then, over the next 20 years, we saw the rise of all
these new marketing disciplines, like direct
marketing and branding and events and PR alongside of the
other things that existed.
Interactive came along about 1995 with the rise of the web.
And all of these things were built as siloed companies.
There was never any thought that inside of the traditional
agency structure, if we just had a few more people, we
could do more things for our client.
Instead all of these things were built as silos, a
separate business units, or as just
completely separate companies.
And many of them relied on production companies on the
back end to execute their work, so the picture got
complicated even further in terms of the ecosystem of the
agency business.
The clients began to replicate the sort of siloed structure
of agencies by creating their own internal silos, and they
all had their own client teams inside of each agency.
And this is largely the picture that we're confronted
with today where we have a client that's looking for an
idea, a big idea that can somehow move the needle and
work across all of these channels and disciplines.
And they're leaning, for the most part, on that team on the
far left there, the traditional agency team.
But that team had become a factory for the creation of TV
spots, and so that team is not really equipped to solve these
larger issues of what clients need in this new digital age.
And yet this is the structure, I think if you go look at the
websites of any major ad agency, you'll see all of
these silos just listed on the site.
So you can just see the whole model playing out in action
and real time even today.
And unfortunately, our little formula came along again where
technology transforms consumers, and that, in turn,
creates opportunities for agencies.
We saw this new technology emerge called digital and all
of its incarnations and forms, from the web to mobile to all
the digital stuff that confronts us as we just go
about our lives here in New York City with all the digital
signage all over the place, even in the backs of the taxi
cabs, of course.
And this has created this entirely new consumer so we're
no longer mass-aggregated.
We couldn't even be more fragmented, hearkening back to
that chart Bob showed earlier that just shows our media
lives and how diverse they are today.
And this relationship, in turn, I think, is creating
opportunities for new agencies, like R/GA.
We're certainly not the only one.
There's a lot of agencies that are out there that are
pursuing new models today.
We're only one of many.
But I think there are agencies that are trying to figure out
this new technology relationship between digital
and the consumer the way that Ogilvy, Bernbach, Leo Burnett
figured it out in the 20th century.
And I think at the core, you have to look at how agencies
are model to respond to this challenge.
So just looking at the model of R/GA--
and, like I said, we're just one model among many--
we have three strategic disciplines that we combine
inside of our agency.
We have planners.
Planning has evolved.
It's no longer about getting to insights that can inform a
piece of communication.
We need insights that can drive a
platform, for instance.
The role of planning has changed dramatically.
And I could be the topic of an entire other presentation.
Media has been brought back inside of the agency.
We look at it as more of a connections approach.
It's not just about what you can buy with paid media.
We think one of the biggest opportunities is what we were
talking about just a few minutes ago with unpaid media
with earned media with consumers passing media along
between each other.
So we need people who think very broadly about media, not
just about what we can buy but also we can earn or what we
can own as a brand.
And then, analytics is core to everything that we do.
We need to be able to measure everything that we do.
And also, because we're proposing that our clients
make investments in these things like platforms, we need
the ability for them to model these businesses going forward
and see what they're likely to pay out in terms of ROI.
That's combined with three creative disciplines inside of
our agency, interaction, design, copy
writing, visual design.
And then everything is rooted in technology.
And that's probably the biggest difference between an
agency like R/GA and traditional agencies is the
role of technology inside of the agency.
About a quarter of our staff are
technologists, as an example.
And that's what gives us the ability to create these
platforms like Nike Plus or Head2Head.

All of these things are still managed by account managers,
but they're also partnered with producers.
In our model, we produce about 95% of what we conceive of.
That's very different from the traditional model where you
come up with an idea, and then you outsource the production
of that idea to an outside production company.
We produce most of what we conceive of, and so we need
producers who are partnered with the clients to make sure
that the work gets done.
And we've even added something that we call digital studio,
which is our ability to create linear content at a very low
cost but a very high level of quality.
And that's driven by the insight that clients today
have the opportunity not to have little 30-second pieces
of content that they can deliver to consumers, but they
can have hours worth of content.
The only challenge is how to make this stuff at a
cost-effective price.
And I think you saw that in Head2Head, for example.
I think there's about 40 or 50 different videos that make up
that experience.
And so, if we would try to bring the production model of
broadcast over to work like that, there's no way that it
could have ever happened.

And this is really the model of what you need if you want
to get into the business of creating platforms and
delivering campaigns that drive people to use platforms.
And that's largely what we view our
job as for our clients.

And we've built R/GA to interface
with very senior clients.
Again, we need to be able to have the audience with the
senior person because we're often
bringing innovative ideas.
And if you're not working at the right level, those things
will always get killed.
And I guess the last point, and I think this is a really
important one, is that, as you add new things to an agency
model, you can't think about the silos that were created in
the 1970s and the '80s and the '90s.
Everything has to be integrated back horizontally
into the organization.
You can't have these standalone things, like we saw
in that chart earlier in this presentation,
where there are silos.
Because the silos will end up competitive with each other,
and they'll never be integrated into
what clients need.

And I guess the last point is that the business is really
challenging because, what Bob said earlier, the diversity of
output is almost staggering.
Looking at what we do as an agency, everything from
applications that we're writing to campaigns that run
inside of a mobile space to technologies that we're
deploying inside of a retail store channel, the diversity
of output is dramatic.
I think if you look at, it largely
falls into three buckets.
There's what we might call campaigns.
Campaigns are what I talked about earlier.
They tend to be short-lived.
They're about delivering a message to
a particular audience.
They rely on media.
They're rooted in a message.
Those are contrasted with what we might call programs. These
are the domain of CRM, w these ongoing communication cycles
where a customer opts into a stream of communication from a
particular brand.
And they're ongoing and iterative.
And then, lastly, there are the things I talked about in
the examples before of platforms that are systems of
interaction that people integrate into their life and
they use again and again.
And those are much more longer lasting.
And I think if you look at the three agency models that are
evolving today, it goes back to this set of tools that
agency have at their disposal for clients.
On the one hand, you've got a model of an agency, like
Crispin that I mentioned earlier, or Goodby.
These are among the best traditional ad agencies that
have really done a great job of migrating
into the digital space.
And their model is largely rooted
in the idea of campaigns.
You have all the amazing direct agencies, like
Draftfcb, Digitas, RAPP, and Wunderman, whose heritage is
more in direct marketing and CRM.
And as their work unfolds, it aligns a little bit more with
that program line that I showed earlier.
And then, of course, you have agencies like R/GA, Razorfish,
AKQA that come out of digital.
So just looking at these models, the Crispins and the
Goodbys, what do they do?
They primarily do campaigns.
How do they do it?
The creative is mostly in-house, and the production
has been historically been out-of-house.
Most of these agencies are building in-house
capabilities, but, historically, the execution of
these ideas has largely gone to
outside production companies.
The big direct companies, Draftfcb, RAPP, they do
campaigns, but on top of that they also do these programs
that are rooted in CRM.
Creative is in-house.
Analytics, very critical to what they do, that's in-house.
But for them, production is largely, again, an
out-of-house kind of model.
And then that leads to the third model of digital
agencies, like ourselves, AKQA, Razorfish, and others.
We're kind of playing in all of these things, but they're
all digital.
We do campaigns.
We do programs. We do platforms. Most of these
things only live inside of a digital context.
The creative is in-house, the analytics is in-house, and the
production is in-house as well.
So I think that's a landscape of how the
agency business is unfolding.
And all agencies need to map themselves against where they
might fit here or come up with something completely different
that's a new opportunity.
I'll turn it back to Bob, and we'll talk about who makes it.
BOB GREENBERG: I'll be brief.
And then, hopefully, we could take a couple of questions.

Finding the right talent is a very big challenge right now.

There's people that are thinkers, there are people
that are conceptual, and there's people that are doers.
And I think that combination in the digital space is
getting more and more complicated because the people
that come out of digital space don't really know storytelling
all that well.
And ones that come out of the traditional agency backgrounds
don't understand systematic, integrated communications the
way that it works in the digital space.
So the writer and art director that Barry pointed out earlier
would be up in this space.
And they would probably do some production, a business
R/GA used to be in.
Or they could go to a, if they're going to do something
digital, probably a company that could systematically put
together a campaign and a program in the digital space.
What's happening now is it's becoming complicated
integration people and ideas that's never happened before.
So again, the right talent, there's a huge gap right now.
Some of it is being taken up by the universities, like
Rick's program at Brandcenter where they're trying to bring
the presentation that Barry talked about earlier
capability-wise into the new agency business.
There's a democratization of tools, which has made it a lot
easier to get into the business.
People learn a lot about our business from their friends
and from just being young.

The way forward for agencies is really something that
they've been missing for very long time as a DNA capability
in collaboration.
Coming out of the feature film business and TV business,
commercials, one is naturally collaborative.
But agencies are more fiercely competitive in the way that
they work, even amongst themselves and
between sister agencies.
A lot of consulting has opened up for agencies now in the
digital space where one can compete with the McKinseys or
the Accentures, et cetera.
And in some areas, we're starting to compete with other
consultancies, like IDO.

I believe that big agencies will get smaller.
I think that they have to somewhat deconstruct and then
regrow their model, which could become, as Martin
Sorrell said earlier, it could get back to the agencies of
the past. But they're going to have to deconstruct and regrow
based on the model that Barry was showing, whether it's our
model or another new model out there.
And the smaller agencies will need to specialize.
And everybody's going to need to integrate better with
partners because clients are going to put together
best-in-class resources the best way that they can.
And I think it'll look more like what agencies did to
production companies clients will do with agencies.
And they'll take parts and pieces that are best-in-class,
put 'em together in the US and internationally and globally.
And one will need to be either the best at what they do or
perhaps the least expensive.

This is the last slide, and it's very obvious one, that
customers are changing.
But we think that agencies have lost
track of that change.
I think that day in, day out we actually think about, well,
what would a consumer or a customer do and base our
campaign around that.
They certainly have more choice than ever before.
They certainly have a larger voice.
And people are getting tired of hearing the
consumer is in control.
But nevertheless, I don't necessarily think that
agencies are designed to take advantage of that without
making fundamental architectural, structural
changes in their agency model.