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The worldwide recession is keeping the advertising and media industry in suspense. When will the most serious crisis for decades be over?
I don't know, and I'm not the only one who doesn't.
Do you at least see light at the end of the tunnel?All I know is that it is extremely hard to get an overview of the situation. Our business is changing from day to day, from industry to industry, from client to client. My son has a fine figure of speech for the situation we are in. When your head is in a refrigerator and your feet on a burner, the average temperature is OK (laughs). I am always cautious about averages.
But that isn't the answer to our question. When can we expect an improvement?
I see a positive trend in the fourth quarter of this year. The U.S. real estate market seems to be regaining stability. A number of our consumer goods industry clients are also reporting growth already. That is a good sign.
When you look at the map of the world, which regions will emerge from the international economic crisis sooner?
I don't know the details, but according to everything I have heard and read you can see it from two sides. The optimist would say it is an opportunity to earn 30 percent profit. The pessimist would say we no longer have a guaranteed profit.
Yet advertising markets are shrinking nearly everywhere in the world. How are you responding to this trend?
In our Group we have 287 agencies in 79 countries with around 1,200 clients around the world. What is important for us is to grow by gaining market shares. This competition will grow even fiercer. But we are successful with our strategy. Our business in France and the UK is growing even though the overall market looks bleak.
How is the serious financial crisis affecting your group of agencies?
The one direct consequence is that banks and insurance companies are spending very much less money on advertising. The indirect effect is much worse, however. Lending has grown extremely difficult. That has dramatic repercussions for the entire economy. It has sent consumption in its entirely down into the dumps.
Advertising expenditure by business is the crude oil of the media industry. Who will be the winner and who will be the loser in the future?
It is hard to generalize. You really have to look at every market and every industry separately. But when we study consumer behavior, we observe two major trends. Consumers are spending more time on the Internet and watching more online videos.
You mention videos and not to television. Do you look on the dark side for the TV industry?
Not at all. Television is a very effective medium. Its distribution costs are low, compared with the costs that newspapers incur. It invests in content, and that is what counts for consumers. People are spending more and more time on TV and videos. The young generation no longer distinguishes between television and the Internet, by the way. For them they are all "screens." To put it in a nutshell, full video - the moving image - will be a winner in competition between the media.
What about the print industry?
I reckon many newspapers and magazines will vanish because they no longer make a profit. In February my wife said, "Can you do me a favor? Please cancel our daily newspaper once and for all. I only want to read it on Saturday." "You what?" I said, "Cancel the subscription?" My wife said subscribing to it in the week no longer made sense because it just lay around in the kitchen before finding its way into the trash. That is an example of how people are rethinking. They are economizing on subscriptions. Those are subscriptions that never come back. In many instances the system of delivering newspapers and magazines physically no longer makes sense. Consumers are thinking hard about every dollar they spend.
Why are U.S. newspapers in such a poor state compared with European papers?
In the U.S. the newspaper business is much more local. Newspapers there face enormous competition from the Internet and cable TV stations. What is more, they mainly have regional advertising clients.
Internet advertising has reported enormous growth rates in recent years. Is it now about to mark time?
We will see slower growth in the online segment. On the other hand, however, people are spending more and more time on the Net, and advertisers will need to look increasingly to this medium in designing their campaigns.
We have talked only about the others so far. Let us now talk about the advertising companies. Will there be consolidation among the big guys?
We see the deep recession as a period when good advertising agencies can grow by gaining market shares. In other words, others will either shrink or perish. It was no different during the last advertising crisis in 2001. The demise of the new economy took a number of agencies down with it.
BBDO Germany is not exactly characterized by above-average growth at present. Sales revenue rose by two percent last year. Are you satisfied?
We are never satisfied. Never. That is our gut conviction. What we can say, though, is that our German business is headed in the right direction. Revenue grew in 2008. We have not a single advertising client. That alone is a major success these days. We have won many creative awards. Yes, there is much that we can be proud of.
BBDO Germany has switched CEOs frequently over the past ten years. When will the next one come along?
When I asked Anton Hildmann to come back to Germany and take on the job, we agreed that he would stay for at least two years. They will over next February. But that is not to be the end of it. I would like him then to stay in office for at least a further year.
What role do cost reductions play in these times of crisis?
They are definitely important, but they are only a part of the whole story. Costs must clearly be in keeping with the results that we aim to achieve. Evaluation must be undertaken from agency to agency and from month to month. That is the only way in which to create leeway for the other important task: repositioning ourselves. More endeavor, more energy, more talent - that's what we want.
You keep an eye on customer behavior around the world. What has changed during the recession?
The big trend is that consumers are spending money more deliberately. We have noticed that customers nowadays spend 20 percent longer shopping at the supermarket - without spending more money. In other words, they are studying products in much greater detail. Emotion-driven shopping is on the decline worldwide. Brands must realign themselves, especially in these difficult times. And communications agencies must concentrate even more on the client and constantly review advertising instruments. Fine advertising plans drawn up six months ago are now only good for the trash, I'm afraid.
Your competitor WPP takes a gloomy view. CEO Martin Sorrell sees a bleak outlook for the industry. Do you agree?
To be honest, we have long ceased to be able to make a full-year forecast. Our business changes dramatically from month to month, sometimes from day to day. I recently had breakfast with Jeffrey Immelt, the brilliant CEO of General Electric, and he told me "You still have to remember what you really believe in." We continue to believe in the value and the power of content.
And what else have you learned?
We have learned to pay attention to the immediate effect of advertising that leads directly to success for our clients. And we as an agency have also grown significantly faster and more flexible in everything we do. That is what counts in the recession.
The manager
Andrew Robertson has been with BBDO since 1995, first in the UK, moving in 2001 to North America, of which he was in charge. Since June 2004 he has headed BBDO Worldwide as Chief Executive Manager and President. In the industry the 48-year-old Brit has a reputation for being charismatic and tough. In interviews he is fond of emphasizing his agency's axiomatic performance principle. "Work, work, work" is his motto. A London University graduate, he began his career as a media planner with Ogilvy & Mather in London.
The company
BBDO Worldwide is the largest agency group in the international advertising holding company Omnicom. With its head office in New York and 287 offices in 79 countries and over 17,000 employees, BBDO is considered to be the world's second-largest advertising agency after Japan's Dentsu. For the past two years BBDO has won the Network of the Year award in Cannes. Its advertising clients include companies such as AT&T, Bank of America, Bayer, eBay, General Electric, Hyatt, Mars, Motorola, and Procter & Gamble (Gillette).
Reprinted with Permission