• by Joe Mandese , December 8, 2009

WPP's GroupM is buying media at "wholesale" and reselling it to clients at retail prices, albeit in a greatly enhanced and "optimized" form, the holding company's chief economist said this morning during a series of presentations by Madison Avenue's leading forecasters at the UBS Media Week conference in New York. "We're going to own that inventory outright," said GroupM Futures Director Adam Smith, adding that GroupM's clients are "opting into this. It's completely transparent."

Smith was speaking in response to a question about how much of the shifts taking place in the advertising economy are due to "structural" changes versus the cyclical impact of the global economic recession, and his response was that a significant part of the changes taking place now are the result of a fundamental shift in the way advertisers and agencies think about the value of media, and who defines it.

"The long-term change is about who optimizes media," Smith asserted, adding that Madison Avenue is moving away from "industry standard metrics" for defining the value of media to "things that only the client knows."

The surface manifestation of that, he said, was a shift toward behavioral-based targeting and performance-based measures of ROI, and away from the impressions-based models that have historically been used to plan, buy and sell media.

"When I started buying TV airtime 20 years ago, we bought audiences. Now we are trying to buy outcomes. We're trying to buy results," Smith said.

While he did not specify exactly how GroupM was procuring and reselling media, he alluded that it has moved beyond the kind of demand-side online advertising networks formed by big agency holding companies such as Havas, Publicis, Interpublic and others, to encompass TV inventory as well.

GroupM has been a leader in both the fields of online behavioral targeting, as well as in the development of its TV advertising equivalent: addressable TV ads. Among other things, he has an equity stake in Invidi, a leading developer of addressable TV advertising.

If GroupM has managed to begun buying and optimizing TV that way, by pooling inventory and reallocating it to advertisers, it would represent a significant leap forward, as other agency holding companies -- principally Interpublic's Mediabrands -- have said they also plan to eventually create demand-side networks and exchanges that procure television audiences the way they have begun to do for online users -- on a user-by-user basis.

"For me, that is the most fundamental structural issue," Smith declared.

All of the executives presenting this morning, including Brian Wieser, global director of forecasting at Interpublic's Magna unit, and ZenithOptimedia CEO Steven King, agreed that at least some of the shifts taking place now are part of long-term structural changes that will linger beyond the effects of the global economic recession.

Those shifts also include changes in the underlying value Madison Avenue places on specific media, the increasing role of performance metrics, the increasing role that emerging markets play on the overall advertising economy, and the role that so-called "below-the-line" or unmeasured media and marketing are having on the overall mix.

The medium that appears to be most challenged, according to the industry forecasters, is not traditional media like TV, radio or newspapers -- which are actually doing better than many observers believe -- it is consumer magazines.

"Newspapers are not the worst medium. They are actually growing globally," Interpublic's Wieser said, adding: "Radio is not the worst... Magazines actually, universally, are underperforming all other media. And that doesn't bode well for that sector."

GroupM's Smith concurred that magazines have fared worst among the major media, although he said the recession has actually led many traditional media to address "productivity" problems that were being masked in healthier economic times.

ZenithOptimedia's King did not specifically address the vitality of magazines in his comments, but the forecast he released this morning showed consumer magazines' share of global ad spending declining to 10.3% this year from 11.6% in 2008, and projected it would fall to 8.9% by 2012.

Interestingly, the forecasters said that TV's share of ad spending has actually increased during the recession for two reasons. One is that consumers are actually watching more of the medium, not less of it. And two is the fact that it's still proving an effective medium in terms of marketing ROI. And if GroupM's Smith is right, it may actually be increasing its relative ROI via new means of targeting and performance metrics.

Many of those advances, of course, were pioneered by online media -- which continues to be the fastest-growing of the major media, and the only one to grow significantly during the recession.