NEW YORK — David Verklin, CEO of media services agency Carat North America, advised direct marketers at the DMA/AIM net.marketing show here yesterday to keep on eye on the rapidly changing advertising environment.
“There's been more change in the advertising business in the last 36 months than there has been in the last 36 years,” Verklin said. “The next 36 months will be even more profound.”
The evidence to support that observation is overwhelming. For example, 12 international companies control the buying of 95 percent of advertising time and space worldwide. This is down from 50 suppliers.
A similar dominance exists on network television. Seven ad agencies buy 75 percent of the inventory on networks. In outdoor media, three companies control more than half of all available space.
Outdoor is the first medium in which Verklin expects global ad deals, and not TV, as widely thought.
Clearly, this little corner of the U.S. economy is changing.
The biggest shift is the departure in the United States from full-service ad agencies. Now, there are two firms — one that creates ads and the other dedicated to planning and buying media. This structure is popular with large agency groups.
“The European model of advertising has swept the United States,” Verklin said.
That model separating creative and media duties is popular not just in Europe but also Asia. And the big shops in the United States have followed.
Publicis' Leo Burnett, for instance, spun out its media business into Starcom. That firm only last month won the Coca-Cola Co. and M&M/Mars business.
Similarly, WPP Group PLC's J. Walter Thompson Co. and Ogilvy & Mather units lack media departments. MindShare handles their clients' media planning and buying. And Young & Rubicam's media work is done by Mediaedge:cia.
Also, all Omnicom Group agencies' media planning and buying is channeled through the Optimum Media Direction division.
Many of these changes occurred less than 36 months ago, Verklin said.
“A lot of you compete for advertising time and space … with these 12 companies,” he said.
Marketers must keep in mind a few important trends in media, he said.
First is the price of TV. Networks raised their prices 14 percent last year and 12 percent the year before, even as fewer people watch network channels.
Another trend is that clients increasingly are interested in direct marketing models and targeting abilities as gadgets like digital video recorders proliferate. These recorders can fast-forward through commercials, much to the chagrin of advertisers.
In addition, Verklin said to expect a rise in non-voluntary reviews. Advertisers' purchasing departments increasingly make worldwide ad agency decisions for economies of scale and best value. It may not matter that a subsidiary is happy with its local agency if the head office goes with a global shop for other reasons.
Finally, there is multimedia packaging. Seven media owners — among them News Corp., Viacom and Time Warner — control most of the media. Viacom alone is No. 1 in billboards and owner of CBS, UPN, MTV Networks and Blockbuster Video. Marketers must learn how to strike package deals with these media giants.
Verklin identified three factors driving change in the media business that affect direct marketing.
New technologies are one. Verklin rambled off a list. Digital terrestrial is a case in point. The government is trying to take back the analog spectrum from TV networks and give that to wireless and telephone companies.
In return, networks are offered a digital spectrum. So a network like ABC will have four delivery systems in the next three to five years from the current one. European governments took in $100 billion in revenue from sales of analog licenses to wireless and telephone firms.
Other new technologies gaining ground include interactive program guides on TV (44 million households have this facility, letting them click on various options); ad-supported video on demand, with a library of content that can accommodate ads; addressability issues to target to the individual household; and personal video recorders in set-top boxes.
Then there is bookmarking of ads while continuing to watch TV programs; telescoping, or delving deep into programs; video games played by 47 million households nationwide; digital cable and broadband, each in 21 million households; and wireless (154 million people in the United States have cell phones).
A budding technology is the TV portal. Installed in 1.3 million households, the concept — where a portal pops up the minute the TV is switched on, just like Yahoo would appear on a computer screen — is backed by Microsoft Corp. co-founder Paul Allen's Charter Communications. The TV portal to watch for is Digeo.
Another factor Verklin cites is globalization. Seven agency holding companies — Omnicom, Interpublic, WPP Group PLC, Publicis, Havas, Aegis and GreyGlobal — own 90 percent of the ad and media agencies worldwide.
And then there is consolidation among media owners as they buy each other or add to their portfolios. Verklin suggests direct marketers talk with companies like Viacom, News Corp., Time Warner and Walt Disney Co.
“Ask what they're working on,” he said. “There are a lot of opportunities to work with. They're fascinated with your world.”