IPG Mediabrands CEO Daryl Lee: Media agencies are 'moving away from scale to strategic capabilities'

The new boss of Interpublic’s media buying operation has claimed it can close the gap on larger agency rivals because "strategic capabilities" in data and technology now "get you to parity with the strongest players".

Daryl Lee, who was promoted to global chief executive of IPG Mediabrands in September, said the Interpublic media division's recent growth shows trading scale and size of billings are no longer as important, because clients want an agency that can solve their business problems, rather than just deliver on pricing.

"We’re moving from serving to solving," Lee said, looking across the agency sector. "We have to become more consultative."

Lee, 48, started his career at McKinsey & Company and worked at Ogilvy, including at its then fledgling consulting arm, before taking global strategy roles at UM and then McCann Worldgroup.

He became global chief executive of UM, one of IPG Mediabrands’ two flagship agencies, in 2012 and said media shops can learn from a consulting approach.

"What consultancies do is build for clients. If agencies build for clients and also then get to execute" media and content on behalf of those clients, "I think we’ve got a pretty competitive offer," he said in an interview with Campaign in IPG Mediabrands’ New York office.

Lee took over from Philippe Krakowsky, the architect of last year’s acquisition of data business Acxiom, who has become chief operating officer at Interpublic while remaining chairman of IPG Mediabrands – an indicator that media has a growing role at the holding company level.

No longer an underdog?

IPG Mediabrands is the world’s fifth-largest media buyer, after WPP’s Group M, Publicis Media, Omnicom Media Group and Dentsu Aegis Network, and employs close to 13,000 people.

The media unit has had a strong run in the past two years, thanks to flagship agencies UM and Initiative.

It was the fastest-growing of the big six buying groups last year in terms of net new business and it has been the second-best performer so far in 2019, according to research company COMvergence.

UM, which has about 5,200 staff, has picked up American Express, Just Eat and Mattel. Eileen Kiernan, who ran UM’s J3, a dedicated team for Johnson & Johnson, replaced Lee as global chief executive.

Initiative, which employs about 4,000 people and has been run by Mat Baxter since 2016, has won Carlsberg, Deliveroo and Lego, and retained the prestigious Amazon business.

Graham Brown, co-founder of MediaSense, an intermediary that ran the Just Eat pitch, said: "IPG Mediabrands has until recently been the underdog in media agency land, overshadowed by players with more muscle and power.

"As the perception of size has diminished with the levelling effect of digital media, UM has been resurgent, particularly in the US, where Daryl Lee has led its significant growth from the front."

Initiative is also "very much showing signs of green shoots", Brown added.

The flagship agencies are 'client solution integrators'

Lee said the key to success is "building solutions that are custom for clients".

However, having client-centric teams does not mean agency brands will play a lesser role.

"You’re not going to see less of UM and Initiative," he said. "UM and Initiative are the client solution integrators."

That is a shift from a couple of years ago, when "there was definitely this idea of one IPG Mediabrands, one aggregate view – a Group M model," Lee said.

As data and technology have risen in importance relative to buying power, Lee has seen some rivals "shift from building investment platforms to building technology platforms", but he warned that "aggregation" approach is "indifferent to specific clients".

IPG Mediabrands has a clear proposition that is "different" from rivals, because it is "an objective advisor to clients" and "we don’t arbitrage – we don’t buy and resell media", Lee added.

The group's other agencies include outdoor division Rapport, performance marketing arm Reprise, programmatic business Cadreon and barter unit Orion.

Lee said: "What you’ll see differently [in future] is mostly all the other capabilities in Mediabrands lined up more directly behind UM and Initiative and more directly behind core clients."

His philosophy extends to those working in back office roles.

"The mantra I have is: ‘You don’t have to be client-facing to be client-focused,'" he said.

Moving away from scale to strategic capabilities

Lee, who grew up in Zimbabwe and South Africa, and studied at the University of Oxford, recognises the agency landscape is changing as new entrants, including management consultants, emerge and some clients bring marketing services in-house.

"Media holding companies in the past were built around people who had a lot of investment experience," Lee said.

"There’s been a pivot towards people who are strategic leaders in different ways – a lot of them coming from the technology and data space."

That is why Lee believes media billings are becoming increasingly irrelevant.

"I don’t think it’s the right measure because it doesn’t seem to determine who wins new business," he said, noting that UM has won Nestlé in Latin America and Spain despite IPG Mediabrands being significantly smaller than rivals in some of those markets.

IPG Mediabrands has a 10% global share among the big six groups, but that varies from 12% in North America and 17% in Latin America to 8% in EMEA and Asia-Pacific, according to COMvergence.

Share is lower in some key markets, including the UK on 5% (which has been growing after a leadership overhaul) and 2.5% in China.

However, business success "doesn’t seem to be driven by size or scale" as much any more, Lee maintained: "We are moving away from scale to strategic capabilities – not for all clients but for the clients that we have won recently."

Strategic capabilities such as data, analytics and tech can "get you to parity with the strongest players in the marketplace", he said. "If you have data and analytics, you have the power to give your clients advice around growth and to drive their business."

Media agencies understand "how you activate growth" and "how to bring to that life" with a media and content strategy, he said.

'We are using the wrong language for agencies'

Lee believes strategic capabilities will determine the future of agencies – two decades after the media discipline decoupled from creative.

"We are using the wrong language for agencies," he said. "We keep talking about creative agencies and media agencies.

"There are two kinds of agencies. There are executional agencies and strategic agencies. 

"The strategic ones can do activation as well, but they lead with a strategic proposition – that’s whether it’s media or creative.

"You will continue to see the industry evolve towards strategic agencies winning business disproportionate to their size."

And agencies becoming more consultative "is where clients are taking us" and "we can get valued better", he said, adding: "As more of our compensation moves towards performance-based compensation, we need to understand how to drive growth because it’s how we will get reimbursed."

The rise of 'crossover talent'

IPG Mediabrands’ talent base is also changing as it hires "specialists in analytic thinking and building models" from maths PHDs to marine biologists and "a lot of people from retail and financial services".

Lee talks about the rise of "crossover talent", which he describes as "people who have had multiple careers in multiple categories".

Recruiting from creative agencies, consultancies, the music industry and entertainment studios is broadening the knowledge base.

While it is hard to match the tech giants on salary, Lee said agencies can compete on culture and variety of work.

"The ability to give people the space to bring all their multi-category experience to bear and the ability for them to cross over silos and geographies in our organisation is how we’re going to win and stay ahead," he said.

Investing in more "content resources" and performance marketing are growth areas.

And it makes sense to train people "on a very distinct skill" inside a specialist shop such as Reprise, because "that can get lost" in a generalist agency, according to Lee.

Kiernan added: "If you ask about our reputation in the marketplace, we have a very people-first, open, caring culture and it comes through.

"When we’re picking clients to pitch and thinking about new business, we think about the kind of clients that fit in with our culture. It creates a very different workplace and a very different kind of 'talent attraction magnet'.

"We know what we believe in. We’ve got a lot of integrity. We know where we’re different.

"It gives us a very – for the lack of a better word – honourable place to stand in the marketplace when we have this level of commitment to transparency, which allows us to be very agnostic and strategic in our partnerships, and our commitment to diversity and inclusion. You can feel proud to be here."

Data integration is key 

Lee said "data integration" has become a priority for clients as they grapple with digital transformation.

He cited UM’s business analytics engine BAE, which was developed for Johnson & Johnson and optimises media plans to sales forecasts. It becomes more powerful "the more you add actual customer data to it", he explained. 

Lee continued: "For all of our clients, we’re looking at how do we get [their] first-party data linked to our understanding of customer segments and what we’re seeing in terms of media behaviours.

"That’s a model that all clients will have, which is why Acxiom is so important to us, because it provides a privacy-compliant safe harbour" for clients to create custom data sets.

Brown says integrating Acxiom into the media offer will be a key test for Lee’s leadership.

In a sign of the direction of travel, Interpublic has just launched Kinesso, a "marketing intelligence engine", which combines assets from Acxiom and Cadreon.

Having a point of view on media

Like Christian Juhl, the new global chief executive of Group M, Lee believes it is important for media agencies and the media buying parent company, in particular, to do a better job of articulating a point of view.

To an extent, IPG Mediabrands needs to operate "deliberately behind the scenes" as an "enabler" that can support its agencies and fund investment, according to Lee.

But he said IPG Mediabrands can also play a "front of house" role in the wider ad industry.

"We need to step up," he said.

"There’s an opportunity now for media holding companies and media agencies to start leading on issues where maybe we’ve been on the backfoot as an industry for a while, particularly around things such as privacy, brand safety, data ethics.

"I feel like we’re too quiet or we certainly defer a lot to industry bodies and to client organisations.

"Agencies should be nimber and more agile and should be having a strong point of view. If there’s legislation, what should the legislation look like? If there are privacy standards and norms, what are the ones that we are advocating for our clients?"

Brown welcomes Lee's can-do attitude and energy: "For some time, IPG Mediabrands has needed strategic direction and leadership from a genuine media practitioner and now they have it in Daryl."