Wednesday, March 17, 1999

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eMarketer Interview: J.G. Sandom
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15 March 1999: J.G. Sandom heads up OgilvyInteractive, a growing arm of one of the largest, most well-known and respected advertising agencies in the world, Ogilvy & Mather Worldwide, which was founded by David Ogilvy 50 years ago.

In 1955 Mr Ogilvy wrote, "Every advertisement must contribute to the long-term personality of the brand." He recognized that while it is an agency's job to made ads, fundamentally, those ads -- each and every one -- had to build the brand. He set out to build a brand-building company, and he succeeded. Starting with Hathaway Shirts and continuing to today's American Express spots, his company has defined what a multi-national, mass-communications advertising agency should be -- it helped define an era.

So it seems fitting that as the world enters a new era of marketing and communications, and though for years the big, global advertising agencies have paid little attention to online advertising, J.G. Sandom and OgilvyInteractive are setting out to redefine advertising yet again.

The agency bills itself as the world's largest interactive ad network, with offices in 34 countries and '98 revenues of $60 million, and with clients like IBM and Ford it's bringing the marketing expertise and brand integration that have been missing online, and it is pioneering new methods of communicating and brand building.

If you are an i-agency, you had better watch out. This is one dinosaur that is waking up.

To see how i-advertising is changing, how it is expanding in ways that make "beyond the banner" sound naive, read below.

The following interview was conducted on 5 March 1999:


eMarketer: Your resume says you opened the first interactive advertising agency in 1984. That was the year that the Mac was introduced and five years before Tim Berners-Lee invented the world wide web. How did you know the age of interactivity was about to dawn?

J.G. Sandom: It was a matter of luck, as well as foresight. A good deal of luck.

I was involved with a gentleman by the name of Jeff Einstein, who had written a ten-book series on personal computers. We could see that PCs were going to become very powerful tools. Already we had seen a number of studies showing how interactivity engendered much higher attention rates.

It's like when you're driving from point A to point B. If you're in the front seat, you remember your way because you're looking at the landmarks -- the signs, the trees, the rocks, what have you. In the back seat, if you're like me, you never remember how the hell you got there.

Technically. interactivity fires off more synopses in the head, you have more defined chemical paths -- you remember more. By now it's a platitude: you're going to remember more if you interact more. So that was one driver.

The other was -- at that time -- the very rarified demographic profile of the PC user: well-educated, well-off and difficult to reach using other media.

So we had the benefits of interactivity and the fact that we were targeting a very affluent and well-educated target group -- but there wasn't a lot online yet. In those days it was pretty much direct mail diskettes and some kiosk work. But there were about 15 to 20 million PCs, at that point, all around the states, and I thought, "What a great way of reaching individuals and delivering complex messaging and building a relationship in a two-way dialogue." It was inherent in the technology.

eMarketer: Did you have trouble selling the interactivity concept at first, or were advertisers receptive?

J.G. Sandom: What actually launched the business was a story in Ron Alsop's marketing column in the Wall Street Journal. I called him up and told him that I had just started the first interactive ad agency in the world. He said, "What's that? Sounds interesting. Sounds strange." He came up and spent an hour and a half with us and the result was a column in the marketing section of the Wall Street Journal, which in turn resulted in our winning Citibank, Manny Hanny and Intel Corporation as clients in the first few weeks of operation.

Some of our early clients came out of the high-technology space and understood demo discs and -- to a degree -- the value and importance and power of interactivity. Others, well, I spent the first few years in business educating advertisers and marketing managers and brand managers about what interactivity could do. Some understood, some didn't.

eMarketer: In 1994 you made the leap from a small ad shop to a big, traditional agency.

J.G. Sandom: That's right.

eMarketer: First at DMB&B and then Ogilvy. Why did you think it was time to switch?

J.G. Sandom: Ultimately, we're talking about the world wide web -- not the Northeastern United States Web or the North America Web, but the World Wide Web. It is a worldwide vehicle. It's an end-to-end vehicle. It enables you to generate awareness in branding, but it also goes through consideration, conversion and post-sales service and support. It's really the first medium to ever really do that -- go all the way across the sales curve.

I felt that integration was going to drive the process forward.

Clients ultimately don't really want to have a web shop, a direct mail shop, a branding agency. They would like to manage their advertising more simply. They would like to have one person who really understands their brand and can leverage multiple channels.

That was one trend. The other was the globalization trend. We saw traffic coming in from around the world. I grew up in Europe. so I had a desire to work in an international way. Plus I felt that capitalization was required to build a business. We had a ton of blue chip clients -- in health care and government, high technology, financial services -- but despite the good client list, I felt we really needed a significant partner to grow. So I had a choice: either go out and raise money or align myself with a large global agency that already had the physical infrastructure, the technical skills, the knowledge of the various different disciplines for integration that would help us create the largest and the best global interactive ad agency.

eMarketer: You seem to have found it. OgilvyInteractive bills itself as the world's largest interactive network, with offices in 34 countries and '98 revenues of $60 million. But how do you position yourself against other global agencies? What do you feel that you have that they don't?

J.G. Sandom: The best way to answer that is by looking at what happened when I came to Ogilvy. After my experience at D'Arcy, I wasn't sure if I wanted to get involved with another big, fat, global ad agency that didn't get it. I thought, "I need this like a hole in the head. Why should I do this?" I threw roadblocks in the way of the marriage.

Ogilvy had their interactive offering for site development over in this thing called O&M Interactive. It was a separate little unit with its own P&L. The media component of interactive was still up in the general agency. I said what you should do is fold it all into the direct-marketing agency -- which was O&M Direct, and is now called Ogilvy One -- because though interactivity can do awareness and all these other things, it is predominantly a direct response vehicle, a one-to-one marketing vehicle.

I told them to fold the interactive unit into a culture where they already had 25 years of database marketing experience. After all, web sites are already moving away from static HTML to being database driven and architected. So leveraging that intellectual capital and being a part of the larger Ogilvy organization made more sense than to have a kind of appendix off on the side.

Concurrent with that, I said that they should make sure that all of their interactive folks reported up to the existing organization. For example, the Chief Interactive Creative reports to the head of all Creative. The Chief Interactive Media Specialist reports to the head of all media. Don't bring it into an O&M Direct or Ogilvy One and make it a ghetto of interactive guys. Really integrate it and institutionalize the learning throughout the organization.

To my great chagrin, they said yes to all these things -- and put me on the Board of Directors. Then I realized that they were really serious.

So we were able to start Ogilvy in the interactive business pretty early. We had the beginnings of things. We started, in essence, a kind of an entrepreneurial unit within Ogilvy One around this particular discipline. I'm happy to say we've now gone to almost 200 people and $60 million in revenues from a negative in the space of 24 months. So we're doing something right. Part of what wešre doing right, I think, besides the talent is making it clear the distinction between what we offer, what web shops offer and what other traditional global interactive or global agencies offer.

eMarketer: The criticism against the big agencies is that they don't get interactive -- and there's no reason for them to because the revenues aren't nearly as big as television and print, which are still huge in comparison. They don't pay attention to interactive yet. Why should they?

J.G. Sandom: We are driven by our dominant client IBM. There are things that TV and print and radio do better. There are things that direct does very well, and there are things that interactive technologies and interactive communications vehicles do very well.

For us it is an opportunity to really integrate an entire campaign in a very media neutral way. The way we're structured at Ogilvy people are compensated for working in a cooperative way. They're really brand teams. So I go to meetings and there may be TV guys, above-the-line guys, direct guys, interactive. I don't care who they are as long as they're adding value to the overall effort.

E-business has been a very successful campaign for IBM -- it is completely 360 degrees. It's TV that drove to the Wall Street Journal which drove to vertical market publications, ads in trade books, which drove to direct, which eventually drove to interactive. It was completely media neutral. We asked what do the different channels deliver? What do they do for us effectively? Then we leveraged each medium to surround that end user with the brand.

At the end of the day, I think most traditional ad agencies are still in their silos. They're still not fee-based. Many of them are still commission-based. So they have an incentive, in essence, to sell a lot of TV ads. That's where they make their money. We don't. Our incentive is based on solutions -- whether it's TV or print, or radio, or direct, or interactive it doesn't matter. Nobody is out there trying to build a fiefdom. It's all about the total package.

Because of the way we're structured, the way we've organized ourselves, we can look for the brand and consumer insights and then drive brand solutions through the channels. Not everybody is like that. Not everybody is organized that way.

The other salient difference is that we had significant buy-in from senior management -- from Shelly Lazarus on down to interactive. Part of that was due -- again -- because of IBM. We discovered that, in fact -- big surprise -- many of our targets would much rather be communicated to through the web than direct mail. We did a lot of testing to find out how end users want to be touched. Outbound, telemarketing, print ads, direct mail? For some campaigns, especially, it was the web. So, unlike other agencies that don't have the benefit of a client like IBM, we had a client where there was a natural propensity to migrate towards these communications vehicles in a very holistic way.

Frankly, we do more money out of IBM in New York than any other office -- and a large part of that is now coming out of Ogilvy One in the interactive part of the business. So in that particular sector with that particular client, interactive does account for a large amount of revenue. So whatever reservations senior management may have had where soon were swept away by looking at the bottom line.

eMarketer: Now when it comes to taking the online advertising channel as part of the whole, what does online advertising do better than traditional media? How is it best integrated into the total media mix?

J.G. Sandom: That's a difficult question because it's such a horizontal solution. It's not just the web. It's commercial online services, AOL, what have you, as well as diskettes and CD-ROMs and other things. More and more, it's iTV and pervasive technologies, too.

But I guess the best way to answer is to look at the two areas that we focus on.

We're not a management consulting firm. We won't sit there and figure out all of the supply chain management issues that clients have to wrestle with, nor are we back-end systems integrators. We don't sit there and link together their databases. But we can help clients reengineer their businesses around the web. No matter who they're targeting -- customers, the financial community, recruitment prospects, whatever it may be. Talking with entitled constituencies, such as existing customers, vendor suppliers or even your own organization through an intranet solution -- there's a branding implication in all of those communication. That's where we come in.

We're there to steer your brand in cyberspace. We design websites and web strategies. We define media plans. It's one thing to build a website, and it's another thing to make sure people go there. You have to drive traffic.

With $100 million in interactive media buying and planning, we weild a huge amount of buying power. About two to three times bigger than anybody else. So we do the planning and buying. We create the interactive elements -- the banners, the smart banners, the enlivened banners, the sponsorships, the event sponsorships, the content partnerships, the portal deals. We do all of that and create the assets that support those efforts.

Increasingly, we're seeing a shift from a slavish attitude of "Oh, we've got to drive everything to the website," to enhancing the marketing communications functionality of the media unit themselves.

I think that's especially true for packaged goods clients with products that are not particularly complex.

People joke about it in the office. They call it "Jay's Law." But I believe that if you're dividing up your budget and you have a complex product -- a high purchase price, a lot of complex elements and benefits -- then you probably want to spend more of your budget on the site side. On the other hand, if it's a relatively simple product, non-expensive, then put the bulk of your money into media.

There's no point in building a huge XYZ candy site. There are plenty of them already -- "temples to the brand," I call them. You would be better off going out and leveraging the eyeballs that are already there. Go to a kid's site and offer a game based on XYZ candy -- insert your content into already popular venues.

That was a long-winded answer, I know. What makes us unique is, one, we deliver the brand message across the board; two, we can target effectively on the web. We can track activity, behavior changes and actual e-commerce -- in ways that traditional media can't.

It's one, large Ogilvy super-structure. Without walls. The clients want solutions. That's what we give them.

eMarketer: You touched on the size of your online media department. How do you go about buying advertising? Do you buy on a site-by-site basis, or do you work through the large networks, like 24/7 and DoubleClick?

J.G. Sandom: We buy at over 800 sites. If you're doing over $100 million worth of advertising, you have to deal with a lot of sites. We do leverage the networks, the DoubleClicks and 24/7s and flycasts of the world. They have different strengths. Some are good for specific sites, and some are good for mass buys -- like flycast is for low CPM. Each network brings different benefits to the table.

We also leverage NetGravity for single server solutions. Single server delivery systems are a great way of tracking and making sure that you're reaching the right people.

We also buy a lot of individual sites. We rifle shoot in and negotiate independently. We do a number of things that we don't see a lot of. We make long deals with short exit clauses. We make sure that there are guarantees -- third-party audits.

Again and again we have seen our clients cut a deal with AOL, or some other large portal, and it's basically everything in favor of AOL. They've succeeded for a reason -- they know how to be very firm with advertisers. So we go in with experience -- for Kodak and Ameritrade and others -- and help renegotiate their large portal deals.

We'll exploit everything that works, single sites, networks, single-server solutions and in some cases we actually go and partner up with the content providers and co-develop content.

eMarketer: In your opinion, what is the best way to track, buy and sell advertising right now -- CPM, pay-per-performance, a combination of the two?

J.G. Sandom: I think the combination works well. There are lots of compelling reasons why people want to migrate from a CPM model to a cost-per-click or cost-per-buy, a cost-per-lead model. But while in principle it makes sense -- "Why should we pay unless we get a click?" -- it also gets a lot of resistance. Obviously, if the creative stinks, the site gets penalized for something that's out of its control. Besides, you can generate high clickthrough and still not achieve your objectives.

Is the brand really being nurtured by a sweepstakes offer that's getting a lot of people to click on a banner? Maybe, maybe not.

Basically, we use any number of different techniques to measure success. CPM is still the standard, and we'd like to bring down to the levels to $5 to $10 CPM. We fight with a lot of sites. One advantage of having $100 million in an interactive media buying power is that we can often cut very good deals. So we generally buy 50 cents on the dollar compared to other shops as a result of our mass.

eMarketer: What do you think about the current state of online sponsorships? You said you are developing co-content deals. Do you think sponsorship arrangements are going to grow?

J.G. Sandom: Yes, Sponsorships have always appealed to us at Ogilvy because they support the rule of relevancy. The highest clickthrough rates -- no matter how intrinsically fabulous your banner is -- occur when there is a greater relevancy between the media unit and the place where it resides.

The trick for us is to make sure that that happens. Sponsorship do that.

You sponsor thing that are sympathetic to your brand in some way. In the case of IBM, as an example, we want to reach young IT males. Therešs a brand gap problem. A lot of them used to not think of IBM as a credible proposition. "I'm a Microsoft generation guy." "I'm a Netscape guy." "IBM is my dad's technology company." So we had to turn them around. One way to do that was to go where their eyeballs are -- which is sports. IBM is not just advertising in sports sites like ESPN SportsZone -- it's going out and literally building sports sites, Superbowl.com, the U.S. Open, the Olympic sites--

eMarketer: The Winter Olympic site was an incredible site.

J.G. Sandom: It was great site -- and at that time got more hits than any other site, more original page views than anybody else.

So sponsoring makes a lot of sense -- particularly if the technology underpins that value proposition. For example, in the U.S. Open we built this Java applet that fed from courtside -- IBM was doing all the technology for the event as well as the U.S. Open site -- and the applet appeared on your screen so you could look at your tennis scores all day long, in case you couldn't make it out to the stadium. Fans could play with it all day long while they were doing word processing or stock trading. You could launch a shock-wave game and download it to your hard disk and then play on the commute home without being online. It also led off to a jump page or sitelets that told you everything that IBM is doing in the area of sports and then it led off to ibm.com.

We call this our satellite media model where in essence the center of the solar system may be ibm.com. While our primary objective is branding, to turn peoples minds around about IBM, these young IT males, it would be nice if we also sold some products. So we do try and lead them into ibm.com.

Mr Sandom went on to outline some of the exciting things OgilvyInteractive is doing for clients like Ford Motors and share his vision of the future of online advertising. Unfortunately, eMarketer's digital equipment broke down, and we have to save those discussions for a subsequent interview. Our apologies.


 

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