Interview: Starcom MediaVest chief Laura Desmond

Laura Desmond has spent a career looking after the fortunes of some of America’s biggest brands. Ahead of the Publicis-Omnicom mega-merger, the chief executive of giant ad agency Starcom MediVest Group talks trends, tech and Twitter
Desmond says Starcom’s deal with Twitter provides users with “the seamless ad experience”.
By Ed Attwood
Fri 07 Mar 2014 10:51 AM

It didn’t take long for Laura Desmond to realise she had an affinity for the marketing industry. As a freshman in college, her class was given an assignment by her rhetoric professor to pick out an ad campaign for any brand and argue whether it was beneficial or negative for society.

“It was a class of 20 people, and I was the only one to say that advertising was good,” she recalls, with a smile. “The brand was Crest toothpaste — which is ironic because Procter & Gamble is now our biggest client.”

Alongside P&G, the list of clients with whom Desmond has worked reads like a who’s who of corporate America. Coca-Cola, Heinz, McDonald’s, Kellogg’s and General Motors have all come under her purview at one point or another in her career.

Along the way, the chief executive of Starcom MediaVest Group (SMG) since 2008 has been named one of the world’s most powerful women by Forbes, Executive of the Year by Mediaweek and one of the Wall Street Journal’s Women to Watch. As global head of one of the world’s largest creative ad agencies, Desmond is better placed than most to give a candid view as to what’s hot and what’s not in the fast-paced world of media.

While SMG doesn’t report its financials, parent company Publicis Groupe — one of the world’s ‘big four’ agencies, which owns other media giants such as Leo Burnett and Saatchi & Saatchi — posted an 11.5 percent growth in net profit in 2013, to $1.1bn. From a regional perspective, Publicis’ revenue performance in the UAE was up by 8.7 percent, considerably more than in most emerging markets. That figure compares more than favourably with an aggregated revenue decline of 5.9 percent during the same period in Publicis’ operations in the BRIC (Brazil, Russia, India and China) and MISSAT (Mexico, Indonesia, Singapore, South Africa and Turkey) nations.

The world’s emerging markets have come under the spotlight this year due to the US Federal Reserve’s decision to pull back on its bond-buying programme, which has caused currencies and stocks in a series of jurisdictions to plummet, but Desmond says that the strength of Starcom’s clientele and the demographics in those countries mean that she’s not losing too much sleep over the issue.

“In some countries, not only do you have economic variability, but sometimes you also get some political variability too, so there’s always concern,” she says. “What I also know is that the partners we do business with… are all large capitalised strong companies that can weather variability.

“That isn’t to say you won’t get the inevitable declines that you saw in 2009 during the great recession, but I also believe that because we are operating at scale in most of these emerging markets, we have the kind of base that can weather a storm.

“I have a lot of belief in middle class consuming markets around the world. They want a better life, they want to work hard — and that relates directly back to the clients we serve and the products they make. And I think that’s a very solid foundation from which to start.”

But perhaps the biggest item in Desmond’s intray is the merger between Publicis and Omnicom, a deal that will create a $35bn behemoth — easily the planet’s biggest ad agency. The merger is currently going through a series of approvals in various parts of the world, and Desmond is unable to comment widely on the deal as it hasn’t been fully closed yet.

But in response to a question about whether the merger will mean job cuts in the Middle East — where both companies have substantial operations — Desmond sounds a positive note.

“If you look at what John Wren [CEO of Omnicom] and Maurice Levy [CEO of Publicis] have stated publicly as well as privately, this merger is about resetting the standard of global communications. It’s not about job cuts, job reductions and redundancies — they’re quite serious about that. So there’s nothing in our pre-merger plans that indicate anything different.”

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Once the merger is settled, the new firm looks likely to garner a major share of global ad revenue growth. But where will that growth come from? Research from Zenith Optimedia (itself a Publicis unit) projects that there will be a 5.3 percent increase in the global advertising market in 2014, buoyed by digital ad spend. Desmond points out that more traditional channels — print, radio and out of home — are ‘flat to slightly down’ in terms of spending pace, while television ad spend is up by 2-4 percent in developed markets, and double digits in emerging markets. Digital spend is up by 15-20 percent everywhere.

With digital has come greater accountability; marketers are far more easily able to see exactly how much bang they are getting for their advertising buck. Desmond says SMG has been investing heavily into data analytics, as it “gives clients confidence to keep spending the dollars or even increase the dollars if they keep seeing the return on their investment going up”.

The elephant in the room is, of course, mobile advertising. Every year, industry experts predict that the shift to mobile is about to take place, but every year that shift doesn’t quite seem to take place. Research firm Gartner says global mobile advertising spend will hit $18bn in 2014, up from an estimated $13bn last year. It’s still a relatively small slice of a market that is worth over $500bn, according to Zenith Optimedia. Desmond says that mobile is yet to overcome two distinct challenges.

“One is measuring it; the Middle East is a great example of an under-reported, under-measured mobile market,” she says. “It’s hard to get your arms around it if you can’t get the data. The second issue is the creative ad unit — how do you put a brand unit into such a tiny space?”

“The first one we’re starting to get around — there’s much better research and much better data. ComScore’s [a firm with which Starcom has recently signed a series of deals] measurement of mobile is unique and making our decisions better.

“The second is actually going to be a non-issue. People are very quickly grasping the fact that video is being used more than anything on a mobile phone, so you  don’t have to worry about a display unit per se, you can integrate video experiences much more easily into a video download.”

While the shift into mobile isn’t likely to take place in 2014, Desmond adds, it is likely to occur over the next two or three years. In particular, she highlights social media site Twitter as a catalyst to that change. Last year, Starcom signed a deal with Twitter which reports at the time claimed would be worth hundreds of millions of dollars over several years.

That deal took place before the site went public in the most-watched tech IPO since the Facebook flotation in 2012, with share prices shooting well above their opening day values.

Twitter’s first set of results, released in early February, showed that while its revenues in the last quarter of 2013 had doubled to $243m year on year, its net loss had sagged to $511m compared to $9m in the year-earlier period.

Desmond doesn’t seem too fazed about the Twitter results, claiming that Starcom is more interested in “the seamless ad experience” the site provides, rather than the number of users it has. The two companies have created what they call a ‘social TV lab’ which is looking at how social media interacts with live programmes. Case studies have already been carried out during the MTV Music Video Awards, the Golden Globes, the Grammies and the Super Bowl, Desmond says.

“What we see is that in-programme tweet behaviour is quite high, and makes the programme and the propensity to watch commercials ‘stickier’ and more effective, giving advertisers the chance to have their message seen and then tweeted about… in real time. I think what Twitter is capturing is this whole idea of live television and people wanting to talk about it in a very unique way.”

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That certainly appeared to be the case at the Academy Awards last week. A ‘selfie’, featuring some of Hollywood’s top stars, was posted by Oscars host Ellen DeGeneres to her Twitter account, leading to over 2 million retweets by the end of the ceremony, a new record.

Desmond points out that one of Twitter’s problems is conveying to future users the benefits of using its platform, and reveals that Starcom is now working with the site to boost its appeal.

“That’s actually a conversation I had with Dick Costolo [Twitter’s chief executive] over the weekend via email, because I saw the earnings and we have a great relationship,” she says. “I just pinged Dick a note around the idea that people need to understand the power of this platform in the same way that businesses, brands, journalists and other players have been using it… So we’re actually talking to them a little bit about how we might be able to help with that.

“But the bottom line is that I’m not concerned at all about their earnings — they’re a smart company, they’ve done the best job of any tech company of seamlessly integrating the ad unit into their platform.”

Away from the fast-growing world of digital advertising, Desmond remains convinced that print media has a future. That assertion comes against a backdrop of declining newspaper and magazine sales, with many publications now wedded to a purely digital future.

“I sat in the boardroom of Hearst Communications in 2006 with Cathie Black [then chairman of Hearst Magazines] and her executive publishing team and we were starting to watch the beginning of print decline in terms  of ad revenue and pages. I basically said ‘print is not dead because it’s the content business. Your content is not your book — your content is the IP that’s inside the book’.

“And that can live anywhere, on screens or on mobile phones. I think that print will die if publishers hold onto the idea that this is a paper book business. But those who can make the migration to the digital space, and then figure out how to curate content for which you can charge a premium, can thrive.”

In the same vein, the chief executive also says that the recent trend — followed by the New York Times and the Wall Street Journal in the US, and the Telegraph, the Sun and the Times in the UK — of charging subscribers to access content — is entirely justified.

“I think that if you’re going to spend time with something, and that content is informed and educated, and giving you a perspective you can’t get anywhere else, I think that people should get paid for that,” Desmond says. “These content providers have to provide something different and unique and worth paying for. That puts enormous pressure on editors and writers, but at the same time I think there could be enormous benefit because people really hunger for content that is unique.

“Those who can migrate content to exist in liquid form faster, even if it means investing upfront and getting the pay out back-end will actually in the end benefit.”

Looking further ahead, one gets the impression that no matter how many ad dollars come rolling in, or how great Starcom’s market share becomes, Desmond will never be entirely satisfied. She cites the firm’s impressive turnaround in China in recent years and the progress made in the Middle East as moments which have made her proud, but she says there’s still growth to be had.

“For me, the issue becomes: what more can we do, how much better can we be?” she says. “I don’t think of my leadership style as arriving at any one point. There are lots of little moments that make me proud, but I don’t think we’re ever done. There’s so much opportunity ahead of us, and that’s what gets me up in the morning.”

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