Who Changed the People Who Sell Ad Space?

Through the long reign of television and print, media agencies did what they had done for more than a century: buy ad space for advertisers. Now all of that has been turned upside down.

It looks like an ordinary sheet of black paper, slightly thicker than most, printed with the outline of a DJ controller. But a third of the way down there is a raised spot. Press it, an indicator light comes on, and music starts to play. Put your finger on the "record" and rub it back and forth, and the paper produces scratching sounds in real time. Bend it however you like; it keeps working.

"This is the ICPAPER VOX sound-effects series, the ICPAPER DJ controller. It's a print ad that can be slipped into a magazine," said Stella Jamie Lui, digital managing director of Carat China, as she showed us the agency's new products.

Stella Jamie Lui (far right) introduces the ICPAPER DJ controller

Carat chose to launch this line of advertising products at last week's consumer electronics show, held in Asia for the first time (CES Asia for short). The original show, held in Las Vegas at the start of every year, gathers tech products of every kind, from robots and drones to virtual reality headsets, along with car makers showing off new technology such as gesture control and automated parking.

At this very technical show, two media agencies, Carat China and OMD China, both had a presence. Carat China is the media agency of Dentsu Aegis Network, the world's fourth-largest communications group; OMD is the media agency of Omnicom Group, the third-largest. Carat launched two new products, ICPAPER and POPCON. On the first day of the show OMD brought along Accuen, its programmatic buying unit, and released the first white paper on programmatic buying in the Chinese market.

The media agency is arguably the oldest form of advertising agency. In the second half of the 19th century, as influential newspapers such as The New York Times, The Times and the Mirror were founded, a class of media brokers grew up alongside them. In 1841 Volney Palmer founded the world's first advertising agency in Philadelphia: it charged clients a service fee, bought up space in newspapers and sold it on to them. In 1869 the first advertising agency in the modern sense, N.W. Ayer & Son, appeared in the same city. It handled advertising on behalf of newspapers, finding clients for them and taking a commission from the papers. The method was later extended to magazines. Agencies of every size followed, and as the industry grew, media buying and creative work split into separate businesses.

Through the long reign of television and print, media agencies did what they had done for more than a century: buy ad space for advertisers. Even a dozen or so years ago, most of their work was still concentrated there. Today that work plainly no longer gives advertisers what they need.

"We are gradually moving away from pure media buying and selling. Those days are over," Anthony Ho, media marketing director of Mondelēz China, told QDaily. "We hand our budget to a media agency and hope to build a long-term partnership with them that covers innovation, data, social marketing and so on. Strategy matters too." Mondelēz grew out of Kraft Foods, which split into two separately listed companies in 2012; its global snack business became Mondelēz International. The company has worked with Carat for ten years and helped the agency develop ICPAPER. One of the ICPAPER posters on show that day was for its Oreo brand: touch the yellow patch on the poster and the cream filling of the Oreo lights up.

Mondelēz is not the only advertiser that wants this. BMW MINI and Adidas also work closely with Carat on new products. In OMD's Programmatic Buying White Paper, David Sun (Sun Yanbin), digital marketing and media director of Intel China, said: "Over the past two years, programmatic buying has become an inseparable part of our digital marketing." Programmatic buying is an automated, data-driven way of buying and selling ad space, so that advertisers reach the right audience at the right time, in the right place and at the right price.

The research firm eMarketer predicts that US advertisers will spend US$14.88 billion on programmatic digital display ads in 2015, up 47.9% from 2014. Next year that spending will grow another 37.6% to US$20.41 billion, 63% of all US digital display ad spending. According to iResearch, China's programmatic display ad market reached 3.3 billion yuan in 2014, up 116% year on year.

"Media agencies are transforming all over the world, and especially in China. Clients no longer just need an agency to buy media for them. They expect you to be their business partner, to give them strategy, optimization and a different way of thinking," Adil Zaim, CEO of Carat China, told QDaily. "We started to notice the market changing in 2010 and 2011. When clients buy media, they want to know exactly what they are getting. And they face plenty of challenges of their own, such as how to sell more products. When a client comes to a media agency today, buying media for them isn't enough; you have to solve their problems. It comes down to how an agency can help clients do better business."

"So we have to give clients strategy and do more to drive their business. That is marketing, not being a middleman," he stressed. "Clients no longer come to us and say, 'Here's this much money, go spend it.' They keep asking, 'Why should I buy this media? Why is it worth so much?'"

Adil Zaim (center) at the POPCON launch

Wang Huiling, CEO of OMD China, told QDaily much the same: "Many clients now demand integration. In the past, the creative agency did the creative, the media agency did the media placement, and integration was the client's job. Now the media agency and the creative agency sit at the same table and discuss every plan." On average, she said, OMD's clients have raised their digital budgets by about 50% compared with four years ago, much of it driven by online video.

Both agencies at CES Asia made the same point without prompting: they understand technology better now, but only so that they can help clients market better.

OMD's booth at the show

Marketing always follows the consumer: wherever consumers go, ads follow. If technology, mobile, digital and data have become what advertisers need, it is because consumer behavior has visibly changed. According to Mary Meeker's Internet Trends 2015 report, internet penetration rose from 0.6% (35 million people) in 1995 to 39% (2.8 billion) in 2014, with China accounting for 23% of users. And according to the 35th survey report from the China Internet Network Information Center (CNNIC), as of December 2014 Chinese internet users spent an average of 26.1 hours online a week, and China had 557 million mobile internet users. The phone has also become the leading device for online video: 71.9% of video users watch on their phones.

"What we do is adapt to a changing world. We don't divide things into TV, print and outdoor; we think across all of them, and innovation is at the heart of a campaign," Pete Mitchell, global media innovation director at Mondelēz, told QDaily. "For a company, innovation means changing how you operate and watching how people's behavior is changing. At CES, you can see a lot of those changes."

According to Anthony Ho, Mondelēz's annual budget for digital media has grown by 13% in recent years, and the company will keep watching growth there. "Spending on traditional media has of course come down, but overall we're investing more. The 13% is a combined figure. We aren't blindly chasing new media; we're responding to consumers moving."

Lindsay Pattison, global CEO of Maxus, believes consumers may be more forward-looking than brands, and that you have to understand what consumers are thinking before you can give clients a good plan.

These agencies have had no choice but to change. In just the past three or four years, every one of them has set up teams and departments built around digital, using specialist roles to widen the range of what they offer. The change is easy to see. It is not just that they buy more digital media for clients; they are changing across the board, becoming more technical, more diverse and more creative.

"If we don't change, we die," Pattison said bluntly. Maxus began trying to change more than three years ago, under the motto "Leaning into change," meaning a deliberate tilt toward transformation. Now it feels that the tilt may need to be steeper.

"We used to focus more on media planning and media buying, but our range is wider now. Besides the creative work I just mentioned, we also do research on data and modeling. And when we hire, we want people with a spirit of innovation," she said.

Play, a unit Maxus set up this March, is built around data. "What makes Play different is, first, that data is at its core. But there are two kinds of data: the (usual) numerical kind and the text kind. Text data is what consumers are talking about, what they're discussing, what catches their attention, and how those messages connect with our brand assets and become the messages and content we use in promotion, adding to a brand's digital assets. It isn't like before, when we just helped set up a TV partnership or a product placement. That still happens, but doing it better takes data to help us find better insights," Chen Hongjia explained.

Besides Accuen, its programmatic buying unit, OMD has since 2011 set up Fuse for branded content marketing, Resolution for search engine marketing, Social@omg for social media marketing and Airwave for mobile marketing. Each of these units calls for some creativity, or for data analysis or technology.

Fuse once helped Johnson's Baby place its products in the film of Where Are We Going, Dad? Unlike clumsy product placement, the job also required getting across the Johnson's Baby brand message, "This moment is irreplaceable."

Another case involves Barilla, a food brand best known for pasta. Barilla asked OMD to help build awareness of the brand in China and get people to try cooking pasta at home. Led by Social@omg, OMD launched a campaign called "Give and Take." It recruited 1,000 "sharers" to help their friends with simple tasks. Barilla gave a pasta kit for two to anyone who asked for help, whether moving furniture, cleaning the house, looking after the car or some other small job; once helped, they would cook pasta themselves to thank whoever had helped them. It sounds more like something a creative agency would do.

Developing a product like ICPAPER is not what a media agency usually does either. It uses conductive ink, inkjet printing and other new techniques to turn a sheet of paper into a circuit board that produces distinctive light and sound effects. Besides ICPAPER VOX, Carat also showed the ICPAPER LUMOS lighting series, outdoor ad posters as thin as a sheet of paper that flash with light when you touch certain spots.

Adidas, for example, used ICPAPER to turn existing print ad material for its Supercolor line into an interactive "color picker." The LED lights, power supply and controller are all built into a single sheet of paper, plug and play. Consumers interact with the ICPAPER and get a color suggestion to help them choose the color of their sneakers.

Touch the colored circles at the bottom; the lights flash once around the circle, then a random shoe lights up

POPCON is an interactive video technology launched by Carat and Amplifi together with Mango TV and AVD. Viewers watching a video on a computer or mobile device can click on whatever interests them: click a celebrity and up comes information about that star; click a pair of glasses and you jump straight to a link to buy them.

The development of ICPAPER and POPCON was led by Carat China's innovation team, a 10-person group that acts somewhat like product managers. With ICPAPER, they came up with the idea first, then developed it with two technical partners from outside, AgIC and Yo-Ren. "We started developing this product last July and went through 40 to 50 versions," Lui told QDaily. "Today (May 25) is the first launch, and we expect to bring it to market in the third quarter of this year. It isn't only Chinese clients who are interested. Clients in overseas markets such as the US and the UK are getting ready to place orders too, but we will definitely start in China."

Besides the innovation team, Carat China has over the past four years set up other new teams, including an insight team and a strategy team. Adil Zaim calls them collectively "specialist teams."

Wang Zifeng, who helped develop ICPAPER, is a member of Carat's innovation team, where he is Associate Innovation Director. Before joining Carat he was an Interactive Producer at W+K (Wieden+Kennedy), an independent agency known for being creatively led, where he worked on many interactive projects, including Nike's "Find Your Greatness" campaign for the 2012 Olympics. He is also a DJ. In fact, the ICPAPER DJ controller described at the start of this story was his idea.

In the past, people rarely left creative agencies for media agencies, because media agency work sounded rather dull. Now some media agencies can offer jobs with more creative freedom. "The work (at Carat) is really product development. The model here is a bit like a start-up. I lead a small team of four, combining technology from third parties to develop ad products that make communication more engaging. Doing product development inside an agency is a rare opportunity in this industry, and that is the main reason I joined Carat," Wang told QDaily.

Other agencies are doing the same. Maxus, for example, is actively recruiting a wider range of people. According to Chen Hongjia, it set up a creative department a year ago, and hired its creative director and executive creative director from the 4A creative agencies Saatchi & Saatchi and BBDO. This year it also brought in someone who had spent 15 years working with data in IBM's solutions division.

"Digital, strategy and data analysis: that's the talent we want now," said Mykim Chikli, who wants to recruit for Zenith exactly the people media agencies once found unimportant and now cannot do without.

OMD's approach is the most unusual: it is trying to bring out its own employees' creativity. Last year the company adopted "innovation" as a slogan and launched the OMD Innovation Fund (OIF), which encourages staff to start ventures inside the company. Teams compete, the winner gets 300,000 yuan in seed money, and if a client buys in, the project is pitched further to investors. Eight teams entered the OIF last year; the winner built its project on iBeacon technology, and OMD plans to use that team's technology in a real ad campaign in the second half of this year.

Right after CES Asia, OMD will hold this year's OIF final to find the next project worth backing. Carat has its sights on the Olympic Games in Rio de Janeiro. "At next year's Olympics, we want to use waterproof ICPAPER to build the biggest art installation in Brazil," Lui told us.

None of this looks like the work of a media agency, and that is exactly the point: an old industry is changing, and the change has only just begun.