Frenemies Read online

  By contrast, turmoil remained MediaLink’s friend. The K2 report “forced the agencies not to make money the way they used to,” Michael Kassan says. He doesn’t believe they were doing anything criminal. They were doing what their contracts allowed. However, motivated clients questioned their agencies more severely and amended their agency contracts. “We’re in more agency reviews now than we were in 2015 and 2016,” Kassan says. In the summer and fall of 2017, MediaLink would conduct agency reviews for Anheuser-Busch, Intuit, Lego, Mattel, and Subway, among others. At the same time, troubled agencies sought Kassan’s counsel, as did newspaper and magazine companies, consulting firms, Facebook, Google, and many digital aspirants.

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  Few companies escaped the turmoil. Although Les Moonves’s CBS seemed in particularly good shape—its revenue sources swelled, its profits exceeded those of two decades ago, by the end of the 2016–17 season CBS had been number one in prime time fourteen of the last fifteen seasons, and its stock price had soared. But there was no ducking the fact that it confronted existential threats. Live viewing is dropping, and one day the networks would not be able to charge advertisers more for less. “The joke’s going to be over at some point,” Kassan, among others, flatly predicts. A hit show like American Idol on Fox in 2002 attracted a prime-time audience of nearly forty million viewers. A hit show like Empire on Fox in 2016 attracted one quarter as many. Even if delayed viewing and a swelling American population yielded comparable audiences for hit shows over the course of a month, advertisers knew that many fewer commercials were watched. “What is declining is people watching the ads,” Kassan says. “Brands need to find another way to communicate their brand message.” Plus, the young viewers advertisers craved were fleeing, many to shorter videos watched on smart phones where 30-second ads are a no-no. Prime-time viewing among those under the age of thirty-four, Nielsen reports, plunged by 34 percent over the past five years. And unlike digital television streamed over the Internet, which scooped up data on its viewers, broadcast television could only tell advertisers the broad demographics of who watched but not supply deeper data on those who actually watched. By the end of 2017, Michael Nathanson of MoffettNathanson projected that total TV advertising would drop by 5 percent, which would include network as well as cable and station declines.

  Long term, Irwin Gotlieb believed the networks were making a potentially fatal mistake by selling their programs to video on demand competitors like Netflix, and that this would pose a future risk to advertisers. “There are two fundamentals that are impacting the television business today,” he says. “The first is we are gradually training people to consume less linear content—you watch it when a network schedules it—and to consume more nonlinear content—you decide when you want to watch it. That’s a problem because television as a medium was initially built around the concept that you create a schedule and a promotion strategy that relies on people seeing the promotion at the right time.” Nonlinear watching means networks need “new ways to think about scheduling, and it will weaken their ability to promote their schedule,” inevitably shrinking their audience. “Second, viewing is moving from advertiser-supported content to subscriber-supported content. We have already passed the tipping point where subscriber-supported content can outbid the advertiser-supported channels anytime they choose to. This trend will have long-term implications. This is a huge problem, because supply will go down because there are no commercials. That’s a huge problem for advertisers. And it’s a huge problem for legacy media.”

  Mindful that content platforms like CBS and Disney were, in the short term, corralling huge profits by selling movies and TV programs to Netflix while in the long term building up a muscular frenemy, Disney announced in August 2017 that it would cease selling movies to Netflix in 2019. In another potentially disruptive move, CEO Bob Iger also announced that it would begin streaming sports (including ESPN) and movies and TV programs directly to consumers—as Les Moonves had earlier promised for CBS’s own streaming services, highlighted by the exclusive offering of a popular Star Trek series. Both were implicitly proclaiming that they were competing with Netflix. They were also, in effect, admitting they were competing against their cable distribution partners, allowing more consumers to potentially drop their expensive cable subscriptions and substitute cheaper “skinny bundles” of Disney and CBS and other content. Whether cable distributors would continue to pay hefty retransmission consent fees to networks for “exclusive” content that was not exclusive invited a potentially massive and destructive future clash.

  Another possible short-term enticement for the network entered the mix in the summer of 2017, when Apple said it planned to spend $1 billion annually on TV shows and movies to compete against Netflix and Amazon, and both Facebook and Google also announced they would expand their original program offerings, aiming to siphon some of the $70 billion advertising dollars now earmarked for traditional television. If these digital giants seek to buy network shows, once again Les Moonves and his network brethren must decide whether to take the easy money but risk strengthening a frenemy. If Apple, Google, and Facebook aim simply to launch their own original programs targeted at younger audiences, it will take them years to amp up.

  This battle awaits another day, perhaps after Les Moonves is gone. In the meantime, Moonves is not following Disney’s lead in yanking content from Netflix. He has received deserved plaudits for his skill at diversifying CBS’s revenue streams, which were projected to rise over the next several years. Standing on the Carnegie Hall stage for CBS’s Upfront presentation in the spring of 2017, Moonves glowed as brightly as his purple tie. Despite the speed of change and the many challenges, he told the audience, “In this fragmented world, the social and economic value of any medium with the power to bring people together is more important than ever, and that’s what we do here. . . . Great content is always king.”

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  Carolyn Everson was equally bullish as 2016 came to a close. She had just turned forty-six and was entering her seventh year at Facebook, a year that would see Facebook reach two billion monthly users. Google and Facebook were gobbling up 77 percent of every new global advertising dollar.* Everson believed the measurement travails of the fall were history. In the year-end diary she privately composes each year she wrote:

  Our business has exceeded all expectations and we are trusted by the industry as to “who has your best interests at heart?” When I speak to our closest C-level marketers, they believe that “Facebook delivers more than they take,” that we are a culture of givers, and we simply care more about growing their business than any other partner. We led the industry to develop standards for measurement that could be used across media and we have set ourselves apart from the “noise” about digital not being transparent.

  By January 2017, her optimism would resemble Voltaire’s Dr. Pangloss—this is “the best of all possible worlds”—as an avalanche of embarrassing Facebook and YouTube headlines stirred a massive backlash. Exposed was their reliance on automated machines to place ads on sites offensive to advertisers, their platforms’ role in transporting unverified “fake” news, a cascade of new measurement mistakes, and stories about how their data might threaten user privacy. Advertisers cried foul and began to pull some of their ads. Onstage at the June 2017 Cannes Lions Festival, Keith Weed complained that 60 percent of advertising online is directed to bots. “We want to buy eyeballs of viewers, not bots,” he said. Procter & Gamble’s Marc Pritchard warned that his ad dollars would not be funneled to digital companies unless their advertising and brand safety was verified by independent measurement firms. Then in the fall of 2017, Facebook embarrassingly disclosed that it had unknowingly accepted ads aimed at dividing Americans during the 2016 presidential campaign, ads that were paid for by a shady Russian company with Kremlin ties.

  The trust issue, which has hobbled relations between agencies
and clients, now subverted Facebook and Google’s relations with advertisers. Carolyn Everson and her Google counterparts made efforts to assuage advertisers. But it was a “serious” setback for Facebook and Google, Kassan said as he looked back later in 2017. “Last year at Cannes if you stood on the Croisette and looked at duopoly beach”—Facebook and Google’s popular cabanas on the beach—“you would have thought they were impregnable. What we found out in this last cycle was that they were penetrable. Facebook has all the issues around measurement and YouTube has all the issues around brand safety. In the Upfronts this week, everybody’s story was ‘Brand Safety, Brand Safety.’”

  Why did Facebook and Google screw up?

  “It happens online because they don’t have a filter,” Kassan said. He went on to say of his mentee, Carolyn Everson, “She was affected profoundly. Carolyn is somebody who has a high standard. This impugns her integrity, and she’s not comfortable with it. Nor should she be.” She knew advertisers and agencies were less trusting, more suspicious of Facebook.

  To gauge and defang the level of mistrust toward Facebook, Everson retained Kassan and MediaLink. She did lean on Kassan for advice, she says. And she goes out of her way to praise Marc Pritchard, a forceful critic of digital practices, who she says, “called on us to lead the way to clean up what he would call ‘the digital swamp.’” Everson retains the humility to be a really good listener, which helps explain her ability to win over critics. Of Pritchard she says, “He’s been advising me. He’s been a mentor to me.”

  Yet by the fall of 2017, advertising clients still grumbled. In a presentation he made to an Advertising Week audience in September 2017, Keith Weed offered a report card to Facebook and digital companies. He gave them a mere C for Ad Fraud, and an even harsher F for Cross Platform transparency, insisting, “We’ve got to see over the walled gardens” and allow measurement companies to monitor and measure their claims.

  Everson knew another big challenge for Facebook in coming years was what she calls the “regulatory environment globally.” Beginning in the winter and spring of 2017, a chorus of critics weighed in against the digital giants, warning that governments must police companies like Facebook, Google, Apple, Microsoft, and Amazon because they threatened both competition and privacy. Data was “the oil of the digital era,” The Economist editorialized in May 2017. “Old ways of thinking about competition, devised in the era of oil, look outdated in what has come to be called the ‘data economy.’” Abundant data, they continued, alters the nature of competition, and companies with this data benefit from network effects. The data empowers Google to “see what people search for, Facebook what they share, Amazon what they buy.” They have the resources to erect “barriers” to entry by absorbing potential competitors. And their abundant data allows a peek into private lives, employing this information as a marketing tool.

  Apple raised its voice against Facebook and Google. With little reliance on advertising, in September 2017 Apple wielded privacy as a weapon against its digital competitors. For its upgraded Safari browser, Apple said it would limit how advertisers and websites could use cookies to track and target users. Apple was, once again, portraying itself as a company on the side of consumers and their privacy. Arrayed against Apple were the trade groups of the entire advertising universe—the Interactive Advertising Bureau, the ANA, and the 4A’s. In an open letter, they accused Apple of “sabotage,” insisting that the blocking of cookies could murder the advertising business.

  Governments were awakened. The European Union questioned Facebook’s privacy protections. The attorney general of Missouri announced an antitrust investigation of Google, and nearly forty state attorney generals demanded to learn how Facebook guards privacy. The Australian, the Murdoch-owned national newspaper, revealed a twenty-three-page Facebook presentation that offered advertisers the ability to target over six million Facebook users, some as young as fourteen, who have said in their posts that they felt “worthless,” “insecure,” “defeated,” and needed a boost. (Facebook denied that it offered tools to advertisers to target emotionally vulnerable people. But Wired magazine exposed their misleading response when it noted that Facebook did not “explain how the research on minors ended up in a presentation to potential advertisers.”) Convinced that Google was violating its antitrust laws by favoring sites it owned in its search results, the European Union wanted to inspect Google’s crown jewel, its search algorithm, which Google claimed was an attempt to protect European business competitors. By the summer of 2017, the EU announced it would impose a huge $2.7 billion fine on Google. In May 2018, the twenty-eight countries of the EU imposed a General Data Protection Regulation, requiring companies to limit what personal information they could collect—or face severe fines. Mark Zuckerberg was summoned to testify before Congress in April 2018. Concerned with maintaining their political control, China and authoritarian governments on various continents had already sealed their borders to Facebook and Google.

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  By early 2017, Aryeh Bourkoff had unearthed a surprise buyer and was close to completing the sale of MediaLink. His pitch, he says, was simple: “Michael Kassan sits at the epicenter of all that is going on in the advertising landscape. In an information- and events-driven business, you want to drive more connectivity and brand awareness. Michael is a rare figure whose relationship acumen can really help to blow up awareness and help businesses and brands everywhere.”

  “It’s a big day for us. It’s a big day for everybody,” Kassan said on February 7 while standing in the open workspace at MediaLink, his staff arrayed in front of him, with the CEO of the company he would now report to, Duncan Painter of Ascential, standing to his side. Ascential is a public company in the UK that owns the Cannes Lions Festival, operates out of offices in sixteen countries, and offers nineteen different services and subscription products to businesses, including festivals and exhibitions and publications. With his booming voice amplified by a handheld wireless microphone, Kassan strode across the space in front of the windows overlooking the Avenue of the Americas. Casually attired in a blue zippered sweater over an open-necked pale-blue dress shirt and grey slacks, he came back to the center of the room to perch on a marble stool. Painter stood to his side in a charcoal-grey suit, white shirt, and plain grey tie. This was an 8:30 A.M. staff announcement; the media would be served a press release and invited to speak to Kassan and Painter by phone afterward.

  “We want to help you expand globally,” Painter affably said, speaking in a reassuring way. He was amazed, he said, to learn of “the high regard clients had for you. We see ourselves as enablers, and we’re proud to make you our twentieth brand.” MediaLink served about two-hundred-plus companies around the world, Painter said in the press release. “We serve 24,000, so we want to get MediaLink in with their business model through all the applicable businesses and clients that we work with.”

  “What this means for everybody,” Kassan said, “is that we’ll expand our global footprint. We will open London and Hong Kong offices this year.” Otherwise, “things will stay the same.” He said that he had signed a four-year contract and that Wenda Millard had also signed a long-term contract. “The name on the door will still be MediaLink. There will just be more doors.” He stressed their shared approach: “Neutrality is a key focus of both businesses.”

  Kassan and Painter later shared with the press for the first time that MediaLink’s revenues reached $56 million in 2016, generating a profit of $14 million. The purchase price entailed a cash payment of $69 million—less than half the $150 million Kassan had guessed in June, but the purchase price would climb to $207 million over three years if MediaLink hit its targets. In truth, MediaLink was a relatively small company, as was Ascential, its revenues just topping $300 million.

  Although Kassan told his staff MediaLink would “still be an arms-length partner with Cannes Lions,” he expected we “will expand what we do in Canne
s.” Just as they started an Entertainment vertical in Cannes in 2016, inviting entertainment figures to speak, which was highlighted by an interview Kassan conducted with Les Moonves. Perhaps a sports vertical was next, he said. What Kassan didn’t say that morning was that each of the 120 MediaLink employees would receive sizable bonuses, which he said came out of his own pocket from what was now his approximately 75 percent ownership of MediaLink. He also didn’t announce this day that Wenda Millard would step aside as president, become vice chair, and move to London to open their office there and begin MediaLink’s global expansion.

  The night before the announcement, Kassan took care to phone and alert five holding company CEOs: Maurice Levy of Publicis, John Wren of Omnicom, Michael Roth of IPG, Yannick Bolloré of Havas, and Martin Sorrell of WPP. He told friends that four of the five “were effusive in their congratulations and kudos. Martin just said, ‘Thank you for the call.’”

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  With Kassan and Sorrell seemingly secure in their roles, there promised to be lots of opportunities for these frenemies to interact over the next several years. Seventy-two and still robust, Sorrell was unlikely to voluntarily step down anytime soon. Lazard vice chairman Jeffrey Rosen, who was WPP’s lead independent director and served on the board for almost eleven years until June 2015 and is an ardent admirer of Sorrell’s, says the board’s independent directors “always thought about and discussed succession. Martin always hated discussing it because it was like discussing his own mortality. The board became much more systematic about it in 2010, and Martin started talking with us about succession formally once a year and informally more often.” For many years the board was not happy that Sorrell resisted appointing a COO or #2, which meant most of WPP's numerous CEOs reported directly to him. The chair of the WPP board, Roberto Quarta, addressed the succession question in April 2016: “Whether, in Sir Martin’s case, that happens tomorrow, in one, two, three, four, or five years, or even over a longer period, we have already begun to identify internal and external candidates who should be considered.”