Frenemies: The Epic Disruption of the Advertising Industry

Another division, Market Visibility, is overseen by managing directors Brett Kassan Smith, Michael’s daughter, an experienced marketing and public relations executive, and Lena Petersen, who hails from the advertising agency world. Many of these divisions overlap at various points, but this one takes the lead in the promotional or connector role, including getting iHeartMedia or GroupM to invest in MediaLink events at Cannes or the CES, recruiting speakers for ad agency panels at conferences, making sure that the clients who come to Cannes or CES have scheduled meetings with agencies and brands. When Michael Kassan got Universal Music to gift Lady Gaga to perform at MediaLink’s CES party in 2016, it was Brett Kassan who had to intervene to halt her father from violating the fire code by inviting more guests. Her group, more than the others, performs the convener function.

Kassan himself is, of course, the ultimate convener at MediaLink.

Michael Roth, CEO of IPG, starts laughing when he describes Kassan as a “matchmaker,” and offers this example: “We hire him on a consulting basis. Or sometimes he wants us to sponsor one of his events, and he’ll call me up and tell me, ‘John [Wren, CEO of Omnicom] and Martin [Sorrell] are going to do it. Are you going to?’ Then he calls John and Martin and says ‘Roth is going to do it.’ Then we’ll all meet at the event and say, ‘Why the fuck are we doing this?’”

One gets a sense of Michael Kassan, connector, watching him confer with his chief of stuff, Martin Rothman, on the leased six-seat NetJet as it leaves Miami after a 4A’s conference in April 2016. They review a draft presentation he had dictated and the staff honed, which he’s to present to a client the next day, suggesting how the client should market itself and what new media efforts it should undertake. “One of the questions the client asked,” Kassan says, “is how do we benchmark against what our competitors are doing?” He smiles. Of course, he doesn’t say that “some of the competitors are also our clients.” Nor, he adds, do they share information with any of them. They review a list of potential speakers he will recruit to attend client Alan Patricof’s Greycroft Partners annual June conference in Montauk. They review a staff-drafted memo to a bevy of clients for his signature. They review and he prioritizes from a long list of phone calls he needs to make, and breakfast, lunch, cocktails, and dinners he needs to schedule. Although Rothman lives in New York, when Kassan is in Los Angeles or traveling elsewhere, he is usually at his side, taking notes at his meetings, briefing Kassan before his hundred or so daily phone calls, listening in on them and taking notes, and being copied on what he describes as up to five hundred “actionable e-mails” Kassan receives daily.

Kassan’s day is usually broken up into somewhere between five- and twenty-minute increments, and it begins around 7:40 A.M. and ends every day before or after dinner. Every meeting has a purpose, an action. “The only thing Michael has is his time,” says Grant Gittlin, his first chief of stuff and today MediaLink’s chief execution officer. Kassan is overwhelmed by a torrent of e-mails, calls, meetings, he says. “You get to a point where you’re so busy it’s hard to actually delegate. Having someone who can listen in lets him play jazz” while the chief of stuff takes notes and follows up. “My job was to be the steady rhythm man.” Of course, playing jazz is instinctual, improvisational. Kassan often drives his coworkers mad as he flits from meeting to meeting, subject to subject, unable to sit down for a meeting or to allow them to pry a definitive answer from him. “Michael invented ADD,” Millard says. “It is very difficult for him to focus on any one issue”—until he has to, she adds. Even his beloved Ronnie remembers how angry she was with him in August 2015, when they rented a home in the Hamptons. “The first two weeks in August he left me in the Hamptons and worked in New York.” When they rented a house in the Hamptons the following summer, she issued an ultimatum: “I made a deal with him. If he went to New York City I would fly back to LA.”

Kassan’s network of relationships grants him immense power. He is advertising’s Dolly Levi, the matchmaking lead character in the musical Hello, Dolly!, whose score he loves to hum. When Wendy Clark was being wooed by Omnicom to leave Coca-Cola and become North American CEO of DDB, she says he negotiated her contract, serving as “my attorney, my counsel,” and would take not a penny. “I have only paid MediaLink one time, when I was at Coca-Cola and he arranged an executive tour at CES,” she says. Facebook’s Carolyn Everson says of him, “He’s kind of like the Godfather of this industry. When Michael likes you and respects you, you become part of his family. He treats me like his niece. He invited me to his first grandson’s bris.” Dana Anderson, former senior vice president and CMO of Mondelēz, who joined MediaLink as its CMO in mid-2017, still marvels how with just two days’ notice he was able to deliver Kim Kardashian to a Mondelēz gathering.

While few fail to mention Kassan’s charm and intelligence as reasons for his success, Rishad Tobaccowala of Publicis has known Kassan for many years and offers this explanation of his power: “What he has managed to do is to play on all sides of the party. I don’t know how he did it, but hats off. I would feel somewhat squirrelly because I wouldn’t know whether I could trust you. But what he has basically done is become a sort of synapse of the industry. And so now people are very scared that if they don’t pay him they will lose something. No one opposes him, and the reason no one opposes him is because he runs pitches like the Bank of America agency pitch.” This feeds into Tobaccowala’s underlying explanation for Kassan and MediaLink’s power: “This industry is full of deeply insecure people who don’t know what is happening and are buying hedges.” Over the years, when agencies discussed with Kassan the possibility of acquiring MediaLink and mentioned that under them it would be a conflict for MediaLink to conduct agency reviews, Kassan knew that would neuter MediaLink, because agencies would no longer fear what he whispered in the ear of advertisers. Often, he is retained by agencies as well as advertisers and platforms that sell ad space. Tim Andree, executive chairman and executive vice president of Dentsu’s operations outside Japan, said his agency retained MediaLink for certain projects. So too, chimes Havas CEO Yannick Bolloré, does his agency.

Veteran advertising observer Jack Myers, chairman of MyersBizNet, which provides a steady stream of marketing and other data to companies, says of Kassan, “Michael is a maestro at convincing people they can’t do business without him. He is the most powerful of the power brokers in that business. No one comes close.” Bob Pittman, chairman and CEO of iHeartMedia, the largest radio company in the U.S., likens him to nineteenth-century Chinese compradors, who built trading bridges to the West. Les Moonves, chairman and CEO of CBS, describes him as “a wheeler-dealer” who “represents everybody. He was always a player, but in the last six, seven, eight years he’s definitely become a power broker.” Kassan regularly solicits CBS executives under Moonves, suggesting they meet one of his clients. “He’s a little slick. But he gets stuff done,” Moonves says.

What surprises people is how little muscular competition MediaLink confronts. Beth Comstock of GE says, “I am shocked that MediaLink doesn’t have more competition.” Yes, there are individuals like Shelly Palmer, whose Strategic Advisors serves advertising clients, distributes a regular and smart blog post, and arranges tours and meetings at confabs like CES. But he lacks size. “No one else has scaled it,” Irwin Gotlieb says. “You can’t scale if you’re just an individual. What Michael did most successfully was he expanded from a one-man operation.” There are consultancies that headhunt or advise on management, but these are siloed efforts. After operating largely uncontested since 2003, MediaLink benefits from network effects.

Michael Kassan has his critics, though the fiercest criticism is usually volunteered only after the critic is guaranteed anonymity. “MediaLink is like the Mafia. You pay them for protection,” the CEO of one tech firm who retained them says. “I used to pay them twenty thousand dollars per month during year one. Year two went up to twenty-five thousand per month. At first I’d meet with Michael and Wenda. Then you’re dealing with a kid. … You pay them money so you can go to their CES party. I no longer pay so I’m no longer invited.” Kassan counters, “Only clients are invited.” Aghast at what he sees as the contradiction between where advertising is heading and the P. T. Barnum character that Michael Kassan represents, one digital executive fumes, “We have an industry that says we are moving from art to science, away from the hucksterism and legerdemain of the last two centuries and into the era of definable return on investment that can identify who watched an ad and whether it registered a sale. And who is the character that is the connective tissue for the entire industry? It’s a guy who is all legerdemain and hucksterism.”

This harsh critique dovetails with another criticism sometimes lodged against Kassan: that he blows smoke at people, too eager to be everybody’s friend. When he conducts interviews onstage, as he does at confabs like Advertising Week, CES, and Cannes, he asks knowledgeable questions but only after unashamedly lacquering his guests with praise, telling the audience that Bob Pittman’s rebranding of iHeartMedia, which, he fails to mention, has to pay down huge debts and through the end of 2016 lost money over twenty-seven consecutive quarters, is “a great story.” He usually spares his real or potential clients uncomfortable but essential questions, as when he interviewed Les Moonves in Cannes and did not ask if he would support a merger of CBS and Viacom and whether he yearned to become CEO of the new entity, as the controlling shareholder, the Redstone family, desired.

There are several ways to look at Kassan’s ingratiating manner. One, as the critic who compared him to P. T. Barnum does, is to label him a bullshit artist. Two, as his friend Howard Weitzman does, who when told that Kassan reached out and recently invited to dinner his nemesis, Dennis Holt, said, “I’m not sure I would have done that. Michael sees the good in people, and sometimes ignores the bad. He’s a generous person.” Like Weitzman, Ronnie Kassan would not have gone to dinner with Dennis Holt. She agrees that her husband is a generous soul. But she adds this twist, which she means as a loving observation that others may interpret differently: “Michael has got some insecurities. He really wants to be liked.”

The other criticism aimed at Kassan centers on MediaLink’s perceived conflicts of interest. How, critics wonder, can Kassan represent companies that are rivals—Facebook, Google, and Microsoft, or Disney, 21st Century Fox, and NBCU, or both buyer and seller—and wall off information from each side? How can Kassan personally invest in companies—Maker Studios, or marketing companies like Buddy Media—without being tempted to urge his brand clients to divert ad dollars to them? How can he represent all sides in a negotiation—the buyer of ads (the client and the agency) and the seller (the publisher or platform)?

Those who deal with Michael Kassan acknowledge his charm. Armies of friends attest to his capacity for friendship and loyalty. And as to his alleged conflicts of interest, Kassan likes to say, “No conflict, no interest.” Even when he represents clients on opposite sides of the same table, he says, “our special sauce” is that they trust MediaLink not to betray them or their information. Although his is an unusual definition of neutrality, he insists he is “transparent” because everyone at the table knows he represents both parties. “We really do represent everyone. We’re so conflicted that we’re not conflicted anymore. There’s an old joke about the lawyer who used to say, ‘Two clients in a category is a conflict, three is a specialty.’” He laughs, charmingly.

5.

ANXIOUS CLIENTS

“If you want a good kisser, we’re your date!”

—Michael Kassan

At dinner at one of Michael Kassan’s favorite Italian restaurants, Scalinatella on East Sixty-first Street, a darkened, downstairs cave where waiters greet him by name and he hugs Johnnie, the majordomo, and everyone knows he prefers his vodka martinis dry without olives and straight up, Kassan ordered a tomato-and-onion salad followed by a generous veal chop with a side of broccoli rabe. Tucking into his meal, attired casually in the California style he prefers of a sweater over an open-necked shirt, dark khakis, and soft, black shoes, he recounted a pitch he’d made to the CEO of a major advertiser. “You talk to all my competitors,” the worried CEO told him. “How can I feel comfortable opening my kimono to you?”

“Look at it this way: we’re fortunate that we get to kiss lots of girls,” Kassan told him. “We never kiss and tell. It just informs our ability as kissers. So if you want a good kisser, we’re your date!” Kassan likened his mix of powerful clients to the Hollywood law firm of Ziffren Brittenham or New York entertainment lawyer Allen Grubman: “You go to them because they represent everybody and know everything.”

Spurred, in part, by Jon Mandel’s assault on agency holding companies, throughout 2015 and into 2016, brand clients reviewing whether to kiss their agencies good-bye—Unilever, Bank of America, 21st Century Fox, among others—turned to Kassan for guidance. The trust issue went far deeper than a matter of hidden kickbacks, as Bank of America’s longtime CMO and now vice chair, Anne Finucane, would explain. Finucane believes that financial transparency can be codified in agency contracts, and she has done so, but a larger issue is that the agencies are now parts of bigger marketing Goliaths offering a range of services, which pull agencies away from “thinking like a client.” It bugs her when agencies bombard her with “hard sell” proposals for new services from their sister divisions.

Jack Haber of Colgate makes a similar point about how agencies sabotage trust by constantly peddling a variety of services. Once, the relationship between client and agency was simple, he says. Instead of a lucrative 15 percent commission, agencies now negotiate a fee. And they are part of giant holding companies seeking more and more fees. “When I worked at an agency, I wanted to sell ads. Now our agency, WPP, wants to sell other services. Their strategy is to get more money out of clients.” In earlier days, “the focus was on the work. Now the conversation has shifted.” Agencies talk more about data, and spending more money to target audiences, and bringing in public relations and social network experts. He says he keeps asking, “Where are the creative people?” The biggest change in his own behavior as CMO, he says, was that “we had to be more demanding.”

There are, of course, other logical reasons for tensions between clients and agencies. Step into the shoes of the client: new technologies and a multiplicity of digital platforms offer baffling and expensive choices.

No secret drawer contains a checklist of the correct answers to the dizzying array of new choices clients face. No agency or McKinsey adviser who is not insufferably arrogant would declare they know the answers. The CEOs of the brands badger their team about company profit margins, as if marketing costs were an extravagance. The agencies complain they are being choked by low fees, but the CEO knows that agency holding company profit margins are still a relatively robust 15 or so percent. So the company CEO demands to know the return on investment of what is spent on marketing, and the honest answer is at best a guess. Corporate raiders are circling, pressing companies to manufacture short-term gains. The average CMO holds office for only about two years before being replaced by a new CMO. The new CMO is probably inclined to bring in a new agency and to insist that the agency reduce its costs.

What does the CMO do about the digital fraud issue? A 2015 study by Distil Networks concluded that one of every three digital ad dollars is wasted by ad fraud, meaning ads are clicked and paid for but are not viewed by desired consumers. Often, the culprits are computer programs or bots. The CMOs’ official spokesman, Bob Liodice of the ANA, said in late 2015, “Roughly at least twelve percent of digital ads are going to nonhumans, and twenty-three percent of digital ads are going to criminals.” He pegged the cost to his advertiser constituents at $6.5 billion, and bluntly blamed clients for being “negligent. We spend nothing on cybersecurity.” The Distil study totaled the loss to clients in 2015 at a much higher $18.5 billion. Liodice’s global counterpart, the World Federation of Advertisers, estimated that if fraud continued unpoliced, by 2025 global marketers would be robbed of $50 billion annually.

The CMOs feel trapped. Their CFO or procurement officer demands that the company stop wasting money on false clicks and ads that were paid for but never delivered to an audience. But how? Can the CMO fully trust social networks like Facebook, given that the more reported viewers of an ad, the more Facebook gets paid? The CMO doesn’t completely trust the ad agency, for they are compensated for placing the digital ads. The CMO is wary of Nielsen or other measurement agencies, for they still have a primitive way to gauge the size of the digital audience and whether an ad was actually viewed.

Not all clients are dissatisfied with their agencies. Keith Weed of Unilever, for example, has four hundred brands served by multiple agencies, foremost among them the agencies of WPP. Weed flatly says, “I don’t trust my agencies less.” And as for the cost cutters, he says, “Procurement works for me at Unilever.” It would have pleased advertising agency executives to attend a crowded panel discussion among CMOs on the beach at the 2016 Cannes festival. Marc Pritchard, the chief brand officer of Procter & Gamble, the world’s largest advertiser, surprised members of the audience by expressing sympathy for agencies and criticism of many clients: “When we treat our agencies as partners, we get great work. When we treat them as suppliers, we get crap work.” He heaped blame on procurement officers: “The single biggest complaint agencies have is that this relationship is managed by procurement. The problem is we are thinking of marketing as a cost rather than a value.”

Brad Jakeman, then president of the Global Beverage Group at PepsiCo, jumped in, noting that his company eliminated the procurement function earlier that year in order “to focus on marketing.” By moving procurement “out of a control function,” Michael Kassan would later say, PepsiCo had boldly relegated them “from first string violin to the orchestra.” Jakeman went on to express sympathy for beleaguered agencies: “They knew we respected that they had to make money. They’re a public company, like we are. They have margin commitments to hit, just like we do. They have revenue targets to hit, just like we do. And the only variable they have to play with to hit these margins is the quality of the people they put on your business. So if we pay them less, they’re going to put more junior people on the business. Probably not as talented people. And that’s going to show up in the quality of the work.”

The agency reviews of 2015 engendered some bitter feelings. Maurice Levy of Publicis, as we’ve seen, was angry that Omnicom bested Publicis to snatch the P&G account from them, and he was ecstatic to pluck the Bank of America strategic planning business from WPP’s Martin Sorrell. Levy was on his game for that pitch, exuding Gallic charm, and in control of the message from the broad strokes down to a granular level. He promised that his respected chief strategist, Rishad Tobaccowala, would be directly involved with BofA in planning and executing its annual $2 billion marketing spend. By contrast, BofA executives grumble that they were offended by WPP’s performance: Martin Sorrell brought in a truckload of different CEOs, many of whom did not seem to know one another, and their presentation was disjointed. Bank executives felt Sorrell and Irwin Gotlieb lectured them. “Martin spoke for a half hour,” a senior executive says, “and Irwin for one hour. That only left a half hour for discussion.”

There was nothing new about nailing a pitch in an agency review, or blowing it, for that matter, but the wave of agency reviews that started post-Mandel’s 2015 speech felt different. For the first time ever to this degree, efforts were intensifying to discard the middleman. Increasingly, clients were taking work away from agencies to do it in-house. Procter & Gamble has created its own proprietary programmatic ad buying system, taking some—not all—of programmatic buying away from its agencies. The ANA reported in 2016 that 31 percent of advertisers responding to one of their surveys said they had brought elements of programmatic ad buying in-house. Obstacles remain, particularly for smaller companies, because programmatic buying rewards scale, but for agencies the trends are ominous.

Even more worrisome, clients are also doing more creative work in-house. Unilever outsourced Unilever Studio to a company to perform tasks once outsourced to agencies. Airbnb CMO Jonathan Mildenhall, who left a top marketing job at Coca-Cola to join this digital upstart in 2014, says half his marketing department “are creative. They’re writers and art directors and photographers and videographers.” A major reason, he says, is that agencies don’t move fast enough. A client performing more of its own creative work was a practice he followed when he was at Coca-Cola, and it’s practiced at companies like Apple. It’s true as well in the world of fashion, where the designers’ vision is central, and where internal marketing departments are usually entrusted to create marketing campaigns.

More nimble public relations firms now commonly supplant ad agencies to tweet, blog, and podcast for advertisers. Edelman is the largest privately owned public relations firm in the world. For clients like Samsung or Taco Bell they engage in online discussions with consumers on social networks or on the client’s Web site, or recruit influencers to engage consumers on various digital platforms. For the Dove Hair team, for example, CEO Richard Edelman says they created a variety of colorful, curly-haired Love Your Curls emojis, generating 414 million impressions on sites like Fashionista.com, HypeHair.com, MarieClaire.com, and SheSpeaks.com. With newspapers contracting or closing, he says, “We’re trying to find other channels because we can’t pitch to reporters anymore. We’re now dealing with Buzzfeed and Vice and Business Insider. They want sponsored or branded content. They want something funny, clever” to sneak past the defenses of millennials on guard against interruptive ads. To millennials, he is selling advertising, not news.

But even with more work migrating to PR agencies or in-house for the creation and execution of big brand ideas, clients are still usually reliant on their agencies. While Mildenhall says “eighty percent of my content needs I do in-house,” he also says that his agency, TBWA\Chiat\Day, “gets eighty percent of my media budget.” His in-house creative revolves mostly around promotional materials and activities like designing corporate Web sites. Because speed counts, clients increasingly take in-house their blogging and tweeting and social network posts. What retards a client’s ability to do more of its own creative work is that creative executives don’t clamor to work for a single brand, as ad agency executives proclaim, because abundantly talented creatives don’t want to devote themselves to only one client. “The best people want to feel free to work for many clients and across many sectors,” Sorrell’s éminence grise Jeremy Bullmore says. Nevertheless, clients moving more work in-house poses an ongoing challenge to agencies.