As for the upfront, he'll be thinking more about it when it's over--since, oddly enough, that's when the clients start calling.
Even after three years of running Media IQ, Lotito, 44, often has to explain why his is a different kind of media auditor, noting that the emphasis of the business is on strategy--unlike most audit companies, that are generally hired to uncover cost savings from media spending. "We're not about playing 'gotcha' with the agencies; we're not about verification or making sure the bills are paid," Lotito said. "What we're about is providing data to the agency to help them get better information so they can compete against the networks."
The independent company currently handles 11 clients--no names, Lotito said, as his clients--which have a combined media spend of nearly $2 billion and are major marketers in everything from fast food to finance--also claim year-to-year growth of 30 percent.
MediaPost: How is Media IQ different from other auditors? How did you devise the concept?
ML: Most U.S. auditors are based on the European model. The European auditors--I ran into them when I was global media director at Ammirati Lintas Puris--are based on pooling. The concept is to compare CPMs against a pool of advertisers, which are their clients, and tell each advertiser whether they're paying too much or too little versus their competitors.
What we're all about is saying, look, European auditors and us come about it the same way--we want to make TV more effective.
But our point of view is that while prices are certainly higher than they should be, there are two ways of skinning the cat in terms of making TV work again. One way, the European way, is to push to get prices down. Our approach is to say, maybe we can get more value out of TV and make it work the way it did 10 years ago. And the way we do that--we get at the main issues that have caused TV to be ineffective versus years ago.
The first one is the mix. Clients buy a mix of programs during the upfront, which is sometimes as much as 15 to 18 months--or even 24 months--before the show actually runs. And as we all know, there's a series of changes during the schedule, all throughout the year. Those changes often get downgraded into environments and programs that are of less value than the ones that were originally bought. But there was never a way to measure what happens to that value. We found a way to measure it.
The first thing we want to do is help the networks deliver the program mix they promised, because we believe--the clients and the media buyers--the program mix we bought is the one that's going to work best. So, in order to make TV work again, we have to make sure that the schedules we run in are actually the ones we ordered.
MediaDailyNews: Why did TV work better 10 years ago?
Mike Lotito: It's more an issue of the medium than of the advertising agency business. By that I mean it was the medium where you could buy a schedule and reach 95 percent of the country overnight. There was less clutter. There were less choices for the viewer. As a result, when you ran a schedule for a client, the CEO himself knew that stuff was moving off the shelves. That's how strong TV was. Today, TV still works--it just doesn't work as effectively as it used to.
Over the last 10 to 15 years, the demand and the amount of money that's being put into TV have grown exponentially, but there's still a limited number of hours in prime time. So what's happened is that the networks have had to increase their commercialization, so they put more clutter into the programs. They have started to take the best positions--the "A's" and "L's," which are the first position in the pod and the last position in the pod--for promos instead of running advertising because they need to promote the next show, as there's so many more options out there for viewers.
Through the realities of the marketplace, the networks have started to change the way they do business over the last 10 years. The biggest thing they do is downgrade your schedule more often, and the second biggest thing they do is not give you the commercial positions that help you break through and reach the viewer. So we've created a grading system for helping the advertiser understand how they're being treated by the networks. If they're not being treated well, we try to use that data with the network to convince them to make sure they improve the way they treat individual advertisers. The theory is that if they do treat advertisers well, then the advertisers will spend more money because it works better.
MDN: But you haven't really been thinking about TV much lately, since you've got new print-oriented products that you began rolling out this past year. How do you translate what you do for TV to print?
Lotito: We launched a print product in January of this year, called Positioning IQ. We're launching a second print product called Circulation IQ, which will help the agencies evaluate what healthy circulation is in the magazine world. And we'll be moving into other media--local TV, Internet, outdoor, newspaper--over the next two years.
The important thing is in launching into these other media types, we're not just repeating our TV model across other media. We are actually looking at each media and asking: What does each need to make it more effective for advertisers--and then we set out to build that product.
MDN: So in what areas is print not performing effectively for advertisers?
Lotito: When it comes to print, it's not a matter of it not working as well as it used to. For what it's worth, it's the immediacy of print which is an issue. Clients find that businesses are moving much faster than they did before. The average client can almost read their sales on a daily basis practically. Print still builds its reach slowly, unless you're talking about weeklies. To me, that's part of the issue with the print industry. Our positioning product and our circulation product are two different things. There's been a lot of attention on circulation for the last two or three years. Invariably, as the business has gotten more competitive, it's become an area that agencies have spent less time on than they used to.
So what we're providing is a tool to agencies and to publishers that allows them to evaluate circulation practices across different magazines in the category, so you can define which magazines have the healthiest circulation. That should save time and energy on the agencies' part so that they can better evaluate the publications where they're putting their clients.
On the positioning side, we're taking a macro point of view. Instead of simply saying, let's look at how one particular client is getting in positions across a book, we look at a client and its top five competitors in that magazine--not just in one issue, but across the entire schedule of a year. The data we provide to clients answers whether they're getting visible, front-of-the-book positions to make sure the ads are as effective as they can be, or are you getting buried against your competitors. We rank and grade each magazine according to how they treat the client versus their competitors.
MDN: Is your TV business seasonal? How does it react to the schedule of the upfront negotiations?
Lotito: For national television, the best time to bring us in is as soon as the upfront has been locked down--as soon as the buys been made. What we want to do is download that information, because that's what the client expects to get. The sooner we get what's ordered, the better off we are. Once the agencies get through with the upfront, that's when we'll start to see a lot of business.
MDN: Every year, there's a lot of talk about whether the upfront works or not, or how ridiculous it is or how necessary it is. What's your view of the process?
Lotito: There's been a lot of talk about whether the upfront is good for the market, good or bad for clients--my view is that we live in a free market. The upfront exists and clients are willing to play in it, as we have been for 25 years. We're hard-pressed to say that the upfront is a bad thing. The real issue is that it's the wrong time of the year.
For clients to be committing in May 2005 to what they're going to be doing in calendar 2006, it's really ridiculous. Clients are focused on what they're going to be doing for the rest of this year. They care most about making their sales numbers today. It forces clients to make decisions about programs when they know, in all likelihood, they're not going to be there a year from now. That's why it's important to have a company like Media IQ now. The average buy used to change five times from the time it was ordered to the time it ran. Today, the average buy changes 15 to 20 times from when it's ordered to when it runs.
UPS used to have a tagline, "We move at the speed of business." I don't think the upfront has moved with the speed of business. Clients are thinking three and six months ahead, and they're being asked to commit 18 to 24 months ahead. That's the problem. I think it would work much better if it were held in September. But I don't know if that would ever happen.