Authors: Ken Auletta
Tags: #Industries, #Computer Industry, #Business & Economics
Googled (27 page)
DoubleClick’s promotional materials boast that they “track more than 100 metrics,” including which ads users download, how long they view them, where they scroll, what links they click on, if they view an ad and later visit the site, what products interest them, what ads “resonate the most,” what they buy and choose not to buy, and how much they spend. According to then CEO David Rosenblatt, the company delivered as many as twenty billion online ads each day. For the “sell side” (the content providers, who in the online world are called publishers), DoubleClick provides tools that help them evaluate the inventory they have to sell and where to target it, delivers the ads, and reports the results. For “the buy side” (advertisers), it provides the same service.
Google’s purchase of DoubleClick triggered a flurry of digital advertising acquisitions. Within months, Yahoo, AOL, Microsoft, and the WPP advertising/marketing colossus each swallowed online marketing agencies that compete with DoubleClick, with Microsoft spending six billion dollars, twice what Google had paid, to buy aQuantive. Why the rush to acquire digital ad agencies? And why was DoubleClick sold?
Since DoubleClick and Google share the same one-square-block building on West Fifteenth Street in Manhattan, CEO Rosenblatt joked that the free food was an enticement. But the main reason was that he saw the sell side changing. DoubleClick had promised to transform the business of selling remnant ads, the roughly 30 percent of an ad seller’s inventory that is hardest to sell: the least read part of the magazine, the least watched TV shows, the least listened to radio programs. Selling these remnant ads was becoming more expensive for DoubleClick, and Rosenblatt feared that a Google or a Yahoo would come along and offer to sell these for free in exchange for an opportunity to sell more of a client’s premium advertising, luring away his customers. DoubleClick needed to widen its scope. “We were selling transmissions. We were not in a position to sell cars,” he said. In Google, Rosenblatt saw not just “the single best monetization engine on the Web,” and a company with a base of over one million advertisers, but more vitally, a fellow and necessary “middleman” who did not compete with clients by entering the content business.
DoubleClick offered Google a way to pool the two databases and their networks of advertisers. But DoubleClick also brought something Google lacked: a dominant online position in display advertising (banner and video ads), which meshed nicely with YouTube’s video offerings and Google’s narrower text-based expertise. Tim Armstrong, Google’s president, advertising and commerce, North America, envisioned three advantages for Google: better measurement of all online advertising, from text ads on search results to display ads on YouTube; better targeting of ads, which pleases both consumers and advertisers; and finally, higher fees for these better targeted, better measured, ads. Google’s game plan, said Richard Holden, its product management director, is simple: “We’d like to create one-stop shopping for advertisers.”
With reason, the advertising bears translated “one-stop shopping” to only-stop shopping, provoking dread about market domination. Rosenblatt, a bald, cheerful man of forty-one with a bright smile that provides cover for the technologist within, rises and goes to the whiteboard in his office to draw what he envisions as the future of advertising. Between “buyer” and “seller” he elongates an “ad exchange,” a clearinghouse for all online inventory to be sold. There could be many of these, but Rosenblatt, who would become Google’s president, display advertising, makes clear he hopes the Google/DoubleClick exchange will be dominant. This new approach can be much more efficient, he thinks, likening it to how online trading siphoned business from brokerage houses. Imagine, he said, that “instead of just selling remnant advertising to the exchange, the seller said, ‘We’ll expose all of our inventory onto this ad exchange. Maybe we’ll carve out a small percent—maybe ten percent—of the really premium stuff and our sales force will sell that directly. But this other stuff”—he acknowledged that the distinction between remnant and premium ads can be arbitrary—“’I don’t know where the line goes. I don’t want to figure out where it goes. Instead, I want the ad network to bid.”‘
Why shouldn’t a media buying agency, such as Irwin Gotlieb’s GroupM, conclude that DoubleClick/Google might gobble his piece of the advertising pie by offering to charge, say, 2 percent rather than his 4 or 5 percent? And by promising better data about what ads worked? Irwin Gotlieb did see DoubleClick and its ad exchange as a potential disrupter. He was uncomfortable with the wealth of data that Google would now possess, and could one day refuse to share with advertisers. He was uncomfortable with Google’s dominant market share. He was wary of its deals with EchoStar satellite television and Clear Channel radio and some newspapers, allowing Google to serve as the media-buying middleman for their online ads. He was rightly concerned that Google could be trying to usurp his role.
If that was Google’s intention, Gotlieb did not believe they would succeed. He welcomed Google reaching into the long tail to match advertisers with smaller Web sites. But he did not think Google/DoubleClick could make inroads with brand advertisers, in part because these clients want to be serviced, to have relationships with media agencies they can consult. And he also expressed skepticism that Google would loom as large in the future as it now does. “If you and I were talking about this in 1998, we would have been talking about AOL,” he said. “Two years later we would have been talking about Ask Jeeves.”
IN THE ADVERTISING WORLD, if you say “Irwin,” insiders instantly know whom you mean, just as people in Hollywood know who Warren and Bar bra are without hearing their surnames. In four decades in the advertising business, Irwin Gotlieb has seen fads come and go, though he hasn’t changed his hairstyle (his bouffant, graying mane sits flat atop his head, like the deck of an aircraft carrier) or his attire (dark suits and ties). He is confident that with the largest worldwide market share of media buying—estimated to be 19 percent—GroupM is secure. He disputes the notion that there is a sharp definitional difference between new and old media. “As all media moves to digital delivery,” he said, “the distinction between media types is going to become less relevant, or perhaps irrelevant. Hypothetically, if I’m reading my newspaper on an electronic display and I see a photograph of a touchdown in the Super Bowl and I click on it and get to see a sixty-second video of that touchdown play, am I now reading a newspaper or watching television? Or does the distinction cease to be relevant?” And whether the consumer is leaning forward over a PC, or leaning back to watch TV, or a combination of the two with a mobile device, he believes each medium will be “addressable,” which means his agency will know a lot about that consumer, and each medium will allow the user to click a button for additional information or to make purchases.
Irwin Gotlieb approaches life with the air of a knowing skeptic, one who is conversant in nine languages, including Japanese, Russian, Polish, and Hebrew, and has lived all over the world. He believes Google, like most businesses he has observed in his sixty-one years, is a great company that does one thing brilliantly, but “will probably be leapfrogged by something that two Ph.D.’s in China are working on.”
Irwin Gotlieb knows China, and much of the rest of the world. He was born in Shanghai in 1949 to Jacob Gotlieb and Genya Diatlovitzky, who were second cousins and Belarusian émigrés; when he was a year old, the family left for the newly forming Israel. His father, Irwin said, bribed an official to allow them to exit with valuables, including small antiques and precious metals. Because Jews could not pass through the Suez Canal, the refugee boat took six months to arrive. A year later his father flew alone to Japan—Irwin does not know why—and several weeks later the family flew to join him. In Japan, his father suddenly had a new career as an exporter of pearls and an importer of diamonds. Irwin knew his father wasn’t a trained jeweler, and he knew Asian currencies “were not worth the paper they were printed on,” but he did not know how his father came to that business, or who funded it.
Irwin lived in Japan until he was fifteen and was a precocious student. His parents encouraged him to attend college in the United States and he was accepted by New York University, arriving alone at fifteen with a stipend of cash from his parents. He rented an apartment, learned to speak English, and served as his father’s U.S. representative, working with Japanese and Chinese diamond dealers. In keeping with the many secrets held by the Gotlieb family, he never told his parents that he dropped out of college ten days after entering. “They were teaching me stuff I already knew,” he said.
He met Elizabeth Billick, a paralegal, in 1968, when he was nineteen. They eloped the following year, fearful that his father, who at the time was not speaking to Irwin, might try to block their marriage. Irwin displayed the stealth of his father. “My mom and dad went to their graves,” he said, “not knowing that I didn’t go to school and that I eloped.”
He had a friend in advertising and it sounded like “a fun business,” so Irwin, at age twenty, sent a resume to various agencies. Over the next five years he worked for two of them, amassing a quiverful of skills: cash and barter syndication, spot buying, research, planning, network TV negotiations. He was recruited by Benton & Bowles in 1977 to run their national broadcast group; over the next twenty-two years he helped build their overseas business and also supervised the production of prime-time shows and made-for-TV movies. Throughout, he dabbled in computer software, creating the first application to measure the audience that ads attracted, and building software to manage ad inventory. “I wrote my first full-blown software system in 1973,” he said. In 1979, he built “the first Monster system—eventually two million lines of code,” he said, which became the standard yield management software that determined prices, modeled the national marketplace, and allocated ads. His last job at Benton & Bowles was CEO of MediaVest, their media buying and planning agency. In 1999, Sir Martin Sorrell, the CEO of the WPP Group, who was knighted in 2000, recruited him to become global chairman and CEO of Mindshare, a MediaVest competitor. Sorrell acquired other media-buying and planning agencies, and in 2003 Gotlieb was elevated to run them all under the rubric of GroupM. Today, 73 percent of his company’s revenues come from outside North America.
Gotlieb’s background well served GroupM’s global expansion. “The fact that I didn’t grow up in the United States was incredibly helpful as the business began to morph globally,” he said. His techie background better prepared him to understand and compete against the Googles and Double-Clicks. His friend Michael Kassan, who had a successful advertising career and founded and is the CEO of Media Link LLC, which serves as a consultant to Microsoft and AT&T, among others, remembers the time he and his wife visited the Gotliebs’ Westchester home and watched a movie in his screening room. “In Hollywood, a screening room is a show-off room,” he said. “At Irwin‘s, he takes you behind the wall and shows you the wiring and how he does it himself.”
Gotlieb tries to stay a step ahead. When digital recorders allowed viewers to dodge TV ads, he pushed to place his clients’ products in programs, establishing a production arm of the agency to do it. He grew his digital staff, which now numbers more than two thousand employees. He invested in various companies with technologies that gather consumer data. Invidi, one of those investments, is a software system that resides in a cable box and monitors viewer behavior. It collects data on what we watch, what we like, and how much time we spend watching ads, and can correlate reams of television-watching data with other data collected from motor vehicle records, credit cards, purchase cards, and other credit-rating services and databases. The technology allows the advertiser to show different ads to different potential customers watching the same program.
Gotlieb doesn’t think Google, outside of its search advertising, can rival GroupM because most advertising was “not in the sweet spot of their capabilities.” Like Mel Karmazin, he believes that engineers cannot replicate what his sales force can do. They can’t do product placement, an increasingly popular form of advertising requiring subtle judgment to avoid offending viewers. They miss the “art” part of selling ads, the judgment required to build a brand, the relationships that seller and client forge and that spark ideas. “As complex as the Google processes are, as robust as they are,” Gotlieb said, “there is an inherent oversimplification because it is purely quantitative.”
ASSUMING THAT GOTLIEB is truly undaunted by Google as a competitor, his would have been a lonely voice in the advertising community. Sorrell, the CEO of the WPP Group, worried that DoubleClick would allow Google to “take our client data.” He began to refer to Google as a “frenemy,” not quite a friend or enemy but a rival power to guard against. With mounting anxiety, executives noted that Google TV Ads was selling advertising for EchoStar’s fourteen million set-top boxes and for Astound Cable, a small cable company. Google’s sales pitch was that it could find new local advertisers and help advertisers better locate their targeted audiences. The way it works, according to Keval Desai, the product manager and director for the project, is that Google finds the advertisers through ad agencies or by dealing directly with companies that advertise and brings them to one of one hundred satellite channels. Once the ad airs, Google has software in the set-top box that collects data and analyzes the results. Among the things they learned, he said, turning to a series of slides to make his point, is that when grouped together the shows that have “less than a half of one percent audience share can have a share equal to ESPN.” Unlike the Nielsen ratings, which make an estimate of the audience’s size by extrapolating from a relatively small sample, Google takes a digital measurement of actual homes. Desai said they learned that advertisers were spending half their dollars on the twelve largest cable networks when they could be reaching audiences of comparable size by grouping smaller networks together. Because the ESPN and other large cable network spots are much more expensive, Google is saving advertisers money, removing the “inefficiencies,” as Google had told Mel Karmazin they would. Or as Desai now said, “This slide fucks with the magic!” Through a digital box “we can measure second by second” what ads and programs viewers are watching or turning off, and share this information with advertisers within a day.
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