Stephen Allan: “The media explosion is happening now in South America”

MediaCom's global CEO spoke with and analysed the current network status in the region during his visit to the agency's offices in Buenos Aires.

The British executive spoke with and analysed the current network status in the region during his visit to the agency’s offices in Buenos Aires. He commented on MediaCom expectations for the future and the region’s potential growth. Moreover, he described the problems of the agencies in terms of payment and affirmed that the investment in digital media advertising is still growing.

“Globally today the MediaCom network is number three and my wish is to be number one,” said Stephen Allan, Global CEO of the network.

“It is my first visit to Buenos Aires and the time is right. In MediaCom we take our operations in Latin America very seriously and we are very excited about the opportunities in this market to grow our business,” says Stephen Allan, Global CEO of the network, showing his enthusiasm for the future of MediaCom in the region. The British executive, in his first trip to Buenos Aires, spoke with in the agency offices in the city to analyse the network today. He also drew attention to the strengths and weaknesses of the advertising industry in Argentina and the region, and said that ad spending on digital platforms is delayed compared to other markets globally.

What is the value of Latin America for MediaCom?

We are growing in several aspects. We want to increase our presence and we are opening offices in countries where MediaCom had no presence. We also aim to increase our service offering in the region. We are doing many things very quickly, and that’s because I think the media explosion in South America is happening now and will continue.

We were in a similar situation in Asia five or six years ago; we were a smaller agency. We focused on growing our business and this year will be the third largest network in that region. Globally today, the MediaCom network is number three and my wish is to be number one. To achieve this we have to be strong in Latin America, Europe, North America and Asia.

What are the strongest countries for the network?

Excluding Brazil, which is a completely different challenge, I think the most powerful markets in the region are Mexico and Argentina. In Chile we made major changes last year and we believe that Colombia is a very large market that is growing very strongly. Although Colombia has not yet the size of Argentina, it has an enormous potential. Furthermore, we are investing in a good performance in the Andean region by opening new offices in Peru and Venezuela.

What are your expectations for this year?

GroupM forecasts 11.5 per cent growth in the advertising industry for Latin America in 2013. MediaCom doubled the market pace last year and project the same pace this year. We had a very fast growth and we do not see why it would stop in the future. Moreover, these figures exclude the acquisition of Massive in Colombia last year.

In a market with so many agencies, how does one differentiate?

We work hard on two aspects. The first is the most basic; it is about the planning and buying of advertising space payments that any agency makes. But in this new media landscape, with digital media, mobile and social networking platforms, that facilitates greater dialogue with consumers. We have to provide a different service and become a content distribution company. This involves creating content, producing and distributing it, not only on television but also via the Internet on different platforms. We are working on this through what we call MBA (Mediacom Beyond Advertising).

MBA basically meets all our specialties in content, SEO, mobile, PR and sports, because we understand they all work seamlessly. If we take the case of sports for example, buying the rights to a tournament or setting up a sponsorship is not enough by itself. You have to make it work. That means making people talk about it in social networks.

How does MediaCom plan to expand the MediaCom Sport division in the region in the coming years with the completion of major sporting events?

The division began a few years ago and today Latin America is a very interesting region for us considering the 2014 World Cup and the Olympic Games in Rio de Janeiro in 2016. Many of our clients are major sponsors of events and leading personalities of the sport. We believe that there is a great chance to help them develop a comprehensive communications strategy, to identify those relevant places that are meaningful and produce results (for example, the P&G ‘Mothers’ campaign in the London 2012 Games). I think the time is right. There are not many media agencies who have taken the sport seriously, and that’s what we want to do. The interest of our customers is high and the possibilities are enormous, from a small sponsorship to the organisation of a race or supporting a local team.

What do you believe are the weaknesses of the industry in the region?

One of the things I noticed, particularly in Argentina, is that the evolution of digital is slower than what I have seen in other markets. To put that in context, today on average 19 percent of global ad spending is on online platforms; however in Argentina the online investment is between 7 and 8 percent. This cannot be right, because if we look at how people consume media, we see a consistent growth in the use of laptops, mobile devices and other screens. People spend more and more time online and less watching TV, but the TV still accounts for about 40 percent of television ads.

You do not need to be a scientist to see that this is not going very well. In other markets, for example in the UK, a few years ago online overtook television. Today 30 percent of the investment is online. Even we have customers who invest 50 or 60 percent of their budgets into digital. This trend is similar in other markets in Europe and North America. I do not think that is a weakness of the market but it is a distinctive point.

Why are we in this situation?

It is an interesting topic. As I see it, while in other markets internet use is growing rapidly and affecting mainly print media,  in Argentina we still having the same share of the advertising investment we had three years ago. There has not been the same dynamic we have seen in other countries. One of the factors involved in this trend is that Argentina’s market is a very reader-friendly market. Argentinians like to read and if you look at the circulation of publications, the major newspapers on Sundays still sell over 600,000 copies.

The impact of Internet and digital advertising never ends, with a growing importance in electronic commerce. So I think it’s a matter of rhythm (pace), and that at some point the situation in Argentina will be adapted to the global trend. In addition, there is the infrastructure issue. If there is a lower adoption of mobile devices this is due to weakness in access to broadband connections in this country.

What are the main factors in Latin America that MediaCom is paying more attention to?

I think some of the factors that affect us are those of our company internally and others are in the advertising industry in general. MediaCom is a slightly less mature agency than other competitor agencies; there is still a lot of room to grow. We have a very strong network and we are very focused on sharing best practices and experiences among the different offices. The challenge in Latin America is to ensure that we are truly working as a network, providing the best service locally and sharing and reapplying our experiences to continue strengthening our service. Another important factor in South America is the compensation and negotiating guidelines for agencies.

How do you see the issue of compensation of the agencies?

In some places the calculation is simpler than in Latin America. The cost of labor and the number of people required for a project define the fee. In Latin America customers often see this situation differently and often a fair margin for agencies it is not contemplated. We always want to offer customers the best job with the best people, which come at a cost. If the best people are not paid fairly in our industry they leave to work at Google or somewhere else.

We want to be competitive to keep the best, and somehow the customers have to pay that. There are agencies that work with a fee of 0 percent with some clients. I do not know how they keep their teams. This is not the way we want to work with our clients. We want to be transparent with the clients, show them our costs, our investments and agree an adequate level of remuneration. In addition, inflation is a crucial issue, which makes compensation to agencies more difficult because it creates mismatches between costs and revenues.


First published here on 10th April, 2013

Winner of international Tell The Truth Competition announced
Mars – Wrigley awards media mandate to MediaCom