From today’s Adweek: Carat, the only independent media agency network in the world, recently merged its media agency with its digital agency. Why? Because in the next two decades, approximately 80% of all advertising will be digital, and Carat knows that. Check out a quick-read interview with Carat’s CEO, David Verklin.
Q&A: Carat’s Verklin
July 30, 2007
By Steve McClellan
NEW YORK In a move last week that underscores the growing importance of digital offerings in the ad agency business, Aegis Group’s Carat merged its Carat USA traditional media agency with Carat Fusion, its digital shop, creating an entity with an estimated $300 million in revenue and $7.6 billion in billings.
Sarah Fay, who oversaw Isobar U.S., the group that housed Aegis’ digital assets, will run the new agency as CEO. She will report to David Verklin, CEO of Carat Americas. Scott Sorokin, who had been president of Carat Fusion, becomes president of the new shop, to be known simply as Carat.
Verklin talks to Adweek media editor Steve McClellan about the potentially trendsetting reorganization, why it was necessary and what it means for clients.
Is this merger the start of a trend?
This isn’t going to be the last time you’re going to write this story. Think about the recent news. Digitas is bought by Publicis. AQuantive [was bought by Microsoft]. Agencies are building these digital assets, and the next step is to integrate them into one cohesive online and offline holistic integrated digital marketing service enterprise.
And you believe your restructuring will serve as the model?
It will be a real challenge for some. We don’t have the traditional creative agency conflict to deal with, but the question one has to look at is to take your media services agency, your traditional creative agency and digital agency and find a new level of collaboration.
Why?
For traditional media to thrive in the future it’s got to come off a sort of digitally centric core. Integration means one thing: equal, all together. That’s what we’re pioneering because we’re breaking down that silo to a seamless enterprise.
In some ways this is bigger than just media because Carat’s digital operations include creative shops as well, correct?
That’s another part of the story, because this is a merger that combines a media services enterprise with a very large digital creative capability.
Will other Carat regions around the world adapt this model?
We actually did it in the U.K. about 15 months ago. It’s a little bit different because there it was a merger of online and offline media enterprises. Carat Fusion in the U.S. is a full-service digital enterprise that includes creative.
What about other regions?
I believe so. We’ve talked about it, but to some extent it will depend on market evolution. Not every market is at the same level of digital sophistication and digital need. It’s a future-facing move, and we’ll be looking at this in other markets.
How will this merger benefit Carat clients, during the upfront for example?
The benefits are clear. Look at this year’s marketplace. We still have not seen as much of the sellers selling integrated online/offline packages. Clearly that’s the future, and now we’re better organized than almost any agency to do that. It also puts digital at the heart of the strategy. Everything is going digital, including TV. What it does for Carat clients [is] it makes the idea of allocating budgets across touch points much easier. You end up with one agency following it from a consumer perspective, and you allocate accordingly.
What about research?
That’s another benefit: unified data. Underneath the new Carat is a data platform that is going to allow us to collect data online and offline on a seamless, holistic basis. That’s very exciting, to be able to integrate online data with customer satisfaction, sales data, market mix modeling and other data. It’s now much easier to come up with a common data platform against which both the client and the agency are operating.
What does this merger say about the importance of communications planning?
Communications planning is very important to many clients. And it’s definitely at the front end of this. But you have to create a company that is very flexible. Not every client wants communications planning. Some clients just want channel planning and some want only media planning.
There’s been speculation for months that Ray Warren, president of Carat USA, would be leaving. Comment?
I think Ray is a fantastic executive. What a roller-coaster ride if you look at the stuff that happened on Ray’s watch. Between [client] Pfizer selling its consumer healthcare division to Johnson & Johnson [which then stripped Carat of the account without a review] and Wal-Mart, which is a saga I probably should have written my first book about. He won Wal-Mart and then it was overturned. We’ve never seen anything like that and probably will never see anything like that again. And Hyundai canceling its dealer advertising. Ray was dealt a set of cards and, really, you can’t lay any of that on Ray.
That said, he is leaving.
As Mariano Rivera said, that’s baseball. And that’s advertising. He had a great run if not a lot of luck while he was here, and I find it impossible to put any fault at his feet. And I should tell you he was one of the architects of this Carat 2.0 that we’ve put together. It’s just not what he wants to do next.
Sarah Fay and Scott Sorokin, who will now run Carat, both come from the digital side of the business. Are digital people taking over advertising?
No, it’s not about a digital takeover. It’s more about talented people.
Why do this now, as opposed to say, two years ago?
We couldn’t have done it two years ago. Two years ago the marketplace was at the point where you needed a siloed digital capability to prove that you really had digital chops. Two years ago if I had offered this product to clients they would have said, “You’re just not digital enough. I need a Digitas or Avenue A.”
What’s changed?
The speed with which the market has evolved. Today the clients are saying, “Don’t talk to me about your digital brand or you offline brand, just manage the business.” Two years ago the market wasn’t ready for that.
How complicated was it to pull the reorganization together?
It’s not that complicated. It’s just the scale of it and capabilities and single-mindedness of it is what the market has been expecting. The question was who would do it first.
How many clients do these agencies share, and are there conflict issues?
No conflict issues, and they share an enormous number of clients. I’d say about 50 percent are shared and another 25 percent are either online or offline separate.
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