• by Steve McClellan  @mp_mcclellan, September 8, 2011

Interpublic Group's Mediabrands is preparing to launch a third global media agency network this year or in early 2012. The new shop would join IPG's two other major media networks -- Initiative and Universal McCann.

The company already has a number of agencies in many markets around the world. The idea is to create a new North American shop and then create a global network with those agencies. Once the new agency in North America is established, the global network could be operational almost immediately, said Matt Seiler, worldwide CEO of Mediabrands.

According to Seiler, a new network is critical, if only to deal with new business conflicts that have kept the company from participating in pitches in "less than the last year" with total billings of $11 billion. "I am so tired of having to turn down opportunities because of the phenomenal incumbent base we have," said Seiler.

The new flagship North American agency would be more technology-based and likely with a smaller head count to run it, Seiler said. The compensation model would be mostly -- if not strictly pay-per-performance -- a model that both Initiative and UM are rapidly headed toward.

The exact timing on the launch of the new network has not been pinned down, said Seiler. "I really want it to be this year, but it could spill over into next," he said.

Seiler disclosed the plans for the new agency network in an interview earlier this week, when he also confirmed that after eight months on the job, he now believes the company's new structure is essentially in place. Not that there won't be more fine-tuning. "There's always more to come. How boring would it be if there weren't?" he said. "But the structure is done."

Senior staff changes are still ongoing. One example: Sean Finnegan, who joined agency Geomentum at the end of last year, has departed. Liz Ross, who runs the Mediabrands North American diversified services shops and who was Finnegan's boss, has taken over on an interim basis until a replacement is found.

Also, the firm just hired a new chief technology officer, Hagen Wenzek, who previously was a senior technology strategist at IBM. He replaces Scott Beltran, who has left the company.

Seiler said the company's new Media Lab based at Mediabrands headquarters in New York would open next month. At the same time, the company's 5-year-old lab in Los Angeles will be scaled back.

"This is the central lab," Seiler said of the New York facility, designed to expose clients to the latest advances in media technology that could impact their outreach to consumers. "This is the center of Mediabrands and the center of the networks and that is why the lab is here," he added.

The new lab is screen-based, and "thus able to stay a lot fresher than the LA lab," which has been more device-based, he said. "We will have an LA facility, but it will likely not have the look and feel of the current facility." Running the new lab is Reuben Steiger, managing director of the IPG Media Lab.

Mediabrands has also created a new "Virtual Lab" -- essentially a huge digital reference source that clients and staffers can tap into for information about roughly 500 vetted media channels and touchpoints from ABC to Zynga. "It's designed to help bring assets of greatest potential to our clients in a meaningful and productive way," said Seiler.

For example, if a client wanted to know more about reaching women via mobile phones, the virtual lab would respond with information about the iPhone and other devices, examples of how marketers have used the devices in campaigns, or a cost estimate.

Velociter, a unit initially designed to scan the landscape in search of new media ventures and investment opportunities, now has an expanded role that helps the Virtual Lab select the best new media opportunities for clients and filters out unproven channels. The virtual lab and Velociter are now overseen by Chad Stoller, who joined Mediabrands as a managing partner from BBDO.

It was just last month that one of the bigger pieces of Seiler's restructuring plan was put into place, with the division of the company's specialized offerings into three new clusters -- now dubbed "benefit bundles" -- based on how broadly or narrowly they are designed to reach audiences.

Thus, the so-called "Brand to Many" division will house operations aimed at broad audiences, like the demand-side digital ad platform Cadreon. The "Brand to Some" division will serve as the umbrella unit for shops Geomentum and Shopper Sciences. The "Brand to One" operation is where units targeting individual consumers, such as direct firm ID Media and Ansible, will be parked.

That move was triggered, in part, said Seiler, "to help the big networks [UM and Initiative] understand exactly what the [specialty] units provide and thus be able to offer them more fully to clients. It's also the way clients spend money."

Earlier this year, Seiler reshaped the global structures of the media agency networks UM and Initiative. Instead of being grouped geographically as most global advertising and media networks are today, they will be clustered in three main groups determined by strength and maturity of market, as well as their relative importance to clients.

The so-called G-14 division includes geographically disparate markets, such as Brazil, China, Russia, parts of Western Europe and Australia. The North America group counts the U.S. and Canada, while the World Group includes parts of Western and Eastern Europe, the Middle East, Africa and parts of Asia.

In essence, the shops reorganized into three clusters from the previous four global regions. While Seiler acknowledges there should, by definition, be some cost efficiencies, "the move was not really about cost containment. It was more about ensuring that sharing best practices actually happens. It's not about how much money we can save but about how much more money our clients make and how much more money therefore we will make."

That's because both main shops are well on the way to converting to an incentive compensation model that ties agency pay to client business growth. When he first took on the Mediabrands job, Seiler brought in McKinsey to explain how other industries have adapted pay-for-performance models, he said. Current nonperformance-based pay models are "dumb from a client perspective," he said. Most shops are paid some combination of commissions and fees that are tied to man-hours needed to accomplish a project, regardless of how a client fares. "There's no incentive" for agencies to be efficient, or to really care about client growth, he said. That changes when the shops have some skin in the game.

Increasingly, UM and Initiative have skin in the game, said Seiler. "We've seen a fairly significant switch from a bit of incentive compensation to a significant portion this year," he said. "We're farther along in 2011 that I would have guessed we would have been. And I think it will snowball," in the months to come.