Drugi jezik na kojem je dostupan ovaj članak: Bosnian
By: Ekrem Dupanović
Today I want to tell you a story about the GroupM Zagreb, and the agencies that operate in Croatia within this group: MediaCom, Mindshare, Wavemaker. To this end, I went to talk with Rajna Cuculić, CEO of GroupM Zagreb. We talked about GroupM, their agencies, and other important issues related to the media and advertising industry in Croatia and the whole region.
First let me present the corporate environment in which GroupM Zagreb operates.
Every third ad in the world today is rolled out through one of the media agencies within GroupM, which again operates as part of the largest global holding company – WPP. GroupM has evolved in our region from a trading organization, and is now a roof organization that provides its agencies, MediaCom, Mindshare, Wavemaker, with tech services. People working in agencies are in constant contact with clients, working on their strategies and other tasks. GroupM supplies all teams within the agency with technology, research, finance services, HR, and all the other “general” services let’s say.
Regarding the region, the first media agency owned by WPP in this region was MediaCom in Zagreb. It was founded in 2005 when it separated from Grey. Mindshare and Wawemaker operated here through their affiliates. In 2010, consolidation began, and today we have two GroupM hubs with agency business units. The one in Zagreb covers Croatia and Slovenia, and the one in Belgrade covers Serbia, Bosnia and Herzegovina, Montenegro, Macedonia and Kosovo. In Croatia, the largest agency within GroupM is MediaCom with 70% stake. Over the past thirteen years, since they’ve been operating in this market, revenues have increased multifold. Their traffic grew steadily, even in the six years after the 2008 when the market on average declined across the region.
ED: What is it that enables you constant growth? What is the competitive edge that makes you stand apart from other agencies in the Croatian market?
Rajna Cuculić: Local growth is generated from two sources. From the international market through global pitches, where we get about 30 percent of our clients, and 70 percent comes from the local market. Regardless of the fact that a significant number of these clients from the local market belongs to international companies, most of them organize local pitches.
Many things contribute to our success.
First of all, we know how to do this job, and we are great at it. We have great young people who have the know-how and love what they do.
The fact that we are an international network, and a part of GroupM, the largest global media group which services every third ad in the world, is our great advantage. When we started working, the inflow of new information was much slower than today. Some ten or more years ago, you had to travel and take part in the workshops, you had to constantly ask questions, ask for knowledge transfer. Today our system works in a way that we immediately get things that are happening in London, Shanghai or New York. We’re all connected and networked, and it all depends on how much your local people are diligent in using all of the resources we have globally. In the last couple of years, we have been focusing on making extensive use of everything that our network provides, so every individual in our team has a mandatory part of the job, where they have to go through intensive training sessions in various fields, and then each individual can educate themselves and progress in accordance with their own will, time and desires.
We went the furthest on the market in two segments. The first segment is insight – understanding consumers, brands, categories, etc. We did first and foremost thanks to all the resources that we buy from a central budget as a big network. Here I primarily mean research. This is one of our great advantages because many of our local competitors have no budget for access to WARC or Euromonitor. There is an entire universe of different sources that we can access and get a range of research. Also, the research firm Kantar Millward Brown is part of the WPP, which is a great advantage and an important leverage we have on the market, that the others don’t have.
Another segment that is very important is technology. We have implemented respectable technology and tools over the past two and a half years. We went very far with this, making it into a very serious infrastructure. What matters here is that our technology and tools are used by highly educated people. We are now starting to slowly monetize this investment, since the advertising segment – where technology is most needed – is growing the fastest, and we are the ones offering serious and comprehensive solutions.
ED: How much truth is there in the claims that AI will soon completely conquer media planning and buying?
Rajna Cuculić: It has already conquered it in a way. It’s not something that “will be”. It is already here. We can only talk about how quickly and widely will AI further expand.
ED: You mean the digital media?
Rajna Cuculić: I mean the vast majority of media, because everything is digital today. Even the TV is digital, and it is also slowly beginning to be bought through machines. Outdoor advertising is becoming digital. Radio is becoming digital, and so on…
ED: Will AI ever be smarter than us?
Rajna Cuculić: I believe it will. I’m just waiting for the day to see it (laughs).
ED: What? Losing your job?
Rajna Cuculić: Not necessarily. We could go full philosophical now about this, but I see it as an evolution. Not just an evolution of the homo sapiens, but the entire planet. It is quite normal that at one point AI will reach that point and switch to what we used to see in sci-fi movies. But I don’t look at it as some negative development. I actually think that AI cannot be evil. It is rational. This is pure mathematics, a very simple principle of pluses and minuses, or equilibrium. Homo sapiens probably won’t do so well, but maybe they didn’t even deserve better. ?
But let’s get back to our topic. As far as the machines are concerned, we’ve gone the furthest in this sense in our market, as we did the first programmatic buys already in March 2016, and since then we’ve been continuously developing the programmatic lease of media.
ED: How does the programmatic buy actually work? For some time it was very popular buzzword in the advertising industry, and then different opinions about its efficiency started to emerge.
Rajna Cuculić: Almost 70 percent of display ads globally are currently purchased programmatically. If it weren’t effective, it wouldn’t grow, right? The weaker development of programmatic in our region lies in the high cost of technology and data. We have been using programmatic for two and a half years now. Of our HRK 200 million annual traffic, this year nearly 25 percent went to online. And about 30 percent of that volume goes through the machines. We already have clients who put their entire budgets into programmatic buy, because their results are absolutely the best using that method. I won’t go into details about how the entire process works, but the point is, in layman terms, that we reduce the wastage to a minimum by using machines. For example, when you work on a classic online plan, you will buy a million impressions on a single portal, a million impressions on another portal, etc. And you, as a consumer, every day visit all those portals and get served those same ads on each of them. This doesn’t happen with programmatic. The machine defines the parameters of the person we are looking for, and the machine looks for that person wherever they are. This is important. To find you. Not to deliver impressions on different portals. And then, when you sum everything up, you realize that you have the least overlapping and the least wastage. You get the best results and you know you’ve spent most of your money efficiently. Advertisers recognize this, especially those internationals whose colleagues in other markets around the world have been working this way for years. Of course, they are satisfied when they can get such solutions in our local market as well.
ED: What is your opinion on Croatian media market?
Rajna Cuculić: I’m not satisfied, unfortunately.
Rajna Cuculić: When the crisis hit in 2008 markets across the globe started suffering, and everything started to record falls. But already in the next year things started recuperating, and the only market in the world that was steadily falling until 2014 is Croatia. In these six to seven years, we have lost more than 50 percent of the volume. The next two years we started to recover a little bit, but at the level of a couple of percentages of annual growth. And then Agrokor crisis happened last year – though even they didn’t have the biggest impact on the decline in the market. The worst thing is that Agrokor crisis coincided with a significant fall in telecom investment, and when you have two or three of the top five players reducing their investment, it pulls the entire market down. All the others, who were growing, could not compensate for that drop. Apart from those two years, when we registered the minimum growth, we are once again on a downward slope. And the problem is that we are not following the GDP growth. A good part of the budget slump happened because in the Croatian market, and also regionally, unfortunately, we have the majority of players in the industry who work exclusively on the day-to-day system. It is extremely important for them to make a business outcome this year, or this month – apart for a couple of exceptions, which really have a vision and a long-term strategy. However, these few exceptions are insufficient to recover the market. That’s the biggest problem. You have agencies that use horrible price damping in their pitches. There are no normal pitches here. People just put 20% to 30% lower prices in their spreadsheets, and that’s it. On the other hand, you have media that ultimately play along with those insanities that agencies put in the spreadsheets, and that’s how we ended up where we are today. The market has declined, advertising budgets have shrunk, the media have less money available to create content that in turn generates inventory. In all this madness we all lose, including advertisers and media consumers of course.
ED: Why is it a problem to explain to the clients, agencies and media that such attitudes are pulling the entire industry to the brink of demise?
Rajna Cuculić: That’s not just a question for me, but I’ll give you my opinion. This is the result of the environment in which we live. It’s not just our industry’s problem, it’s the problem of the complete economy of the countries in the region. You have an extremely low level of competence and a lack of development strategies. On the other hand, you have, roughly speaking, the greed and the goal that some result must be achieved today, immediately – who cares about tomorrow.
ED: Who is most to blame in your opinion? Who was it that, so to say, dropped the ball?
Rajna Cuculić: We are all equally to blame. But, the largest responsibility in our industry lies with the media, and then on the agencies.
ED: Are there too many media in Croatia?
Rajna Cuculić: No. In fact, we have too few media on which we can advertise. For example, when it comes to TV, in Hungary there are 30 TV stations on which brands advertise. In Croatia you have two commercial TV stations and one public broadcaster. These three combined make up almost 75% of viewership. It’s a limited space for advertising. It’s unstable and difficult to target. It would be far healthier if the TV market was more fragmented.
ED: Advertising industry, and especially the media, are rapidly changing. Can you predict where it will all go in the next two or three years? Will it continue to decline, and will all the participants one day meet around a common interest and dial down that greed?
Rajna Cuculić: I’m not very optimistic. We go a step forward, and then take two steps back. And so on. We’ve had some bright moments in our market over the last 15 years, but always something happens to pull us down. But positive change will have to happen sooner or later. It’s good that there is an increasing number of advertisers who recognize and look for agencies and media that bring concrete business results.
ED: Next year for GroupM in Croatia? Will you change something? Will there be some novelties?
Rajna Cuculić: We are currently finalizing consolidation. By 2020 we plan to put all our resources in the region under GroupM. As far as our biggest shift in the market goes, it is the launch of Xaxis, which is an independent operation within GroupM. It’s our programmatic product – our bespoke technology. For some time we have been working on launching Xaxis in the region, but for programmatic the most important asset are data. We’ve spent this whole year for verification and are now testing our first campaigns.
MediaCom is launching System Planner, an online interface in which all of our tools are backed up by Kantar’s data. It’s a great tool for our planners who now have an automated process from insight to execution.
ED: Are you optimistic for 2019?
Rajna Cuculić: Both yes and no. According to what we see in the budgets of our clients, I have no reason to be an optimist. It’s not that something will be spectacularly bad, but there will also be no major progress. Budgets are relatively stable. They’re not declining, but they’re not growing either.
ED: Are there any new companies in the market who are willing to invest in advertising?
Rajna Cuculić: Everything mostly happens in the same circle, although new advertisers are coming. But they enter shyly. They are mostly smaller advertisers. The same thing is happening in Croatia that is happening across the world. The fall in investment in consumer goods advertising is not good, because the FMCG sector was very strong in advertising. And the telecoms are also lowering investments, and they were always the biggest spenders in our region. Globally they’ve fallen to third, fourth place for a few years now, and are steadily falling in our country as well. Growth is registered among retailers, pharmaceuticals and the automotive industry.
ED: How can we generally improve the situation in the industry?
Rajna Cuculić: We need more knowledge. I think we all need to work on the development of all of us individually and collectively. We have good conferences and events in the region, but that’s all not enough. I think that you in Media Marketing are on a good track and are doing a great job because you’ve managed to profile yourselves as a central place for the right information in the region. We should all help you to “put some more meat” on the portal so to say, and make it a central place of our industry in terms of education. You regularly publish texts that have been published in various global media outlets. People aren’t subscribed to those news, so it’s great that they can have them with you – so that the general public gets information about what’s happening globally in our industry. We talked internally in our company, to offer you the best of our practices and provide you with professional texts from which you can really learn something. It’s good to share news from the world, but we should talk more about what’s going on in the region. But not just in terms of promoting. We need to work together on raising the region professionally.
MM: Our main problem is that agencies who are specialized in communication for others, simply don’t communicate themselves.
Rajna Cuculić: That’s true. A shoemaker always wears the worst shoes.