In the latest chapter of ‘The Media Men’, a compilation of stories of the founders of today’s media agencies, John Perriss recalls the rocky road he had to travel to launch Zenith Media in the late 1980s.
I entered the media department of Davidson Berry and Tuck in January 1968 as a media assistant. It was a six-person team in a medium-sized agency and the media director was Allan Rich. To be candid, I’d rather overindulged in “the swinging Sixties” and at 19 had bypassed university, left the regional newspaper industry because of restricted promotion opportunities, and decided that London was the place to be if I was to find a career.
I must be one of the very few agency trainees who had actually obtained the IPA’s career leaflets and realised on reading them that an account manager had to have been to the right school or commissioned in the army, and that creative needed talent (incidentally, I’m still waiting for the result of my LPE copy test from 1967), but media might offer a way into what seemed very much a “swinging” London business to be in.
Maintaining the file of specimen copies of magazines and filing media data forms wasn’t quite what I had in mind, but the people were stimulating and charismatic and, after a few wobbles, I set my mind on getting promoted to planner/buyer. Allan Rich, who has my eternal thanks, took a chance and promoted me; now I had my own accounts, I began to meet the clients whose business I worked on and I became hooked on media as a career. However, media was a pretty low form of life within an agency. With so little choice and flexibility to negotiate, it was hard to differentiate between media departments and their performance, and few clients were interested in media.
Quietly, however, the change had begun. Clients such as Procter & Gamble, Mars, Rowntree Mackintosh and many of the direct-response advertisers began to believe that not only media selection impacted their marketing performance, but so did price. With this growing interest in media, certain agencies and individuals (several of my fellow authors amongst them) began to acquire a reputation as being better than others. Rarely did this cause an account to be moved from the full-service agency in whose media departments these movers and shakers worked.
“Media was changing around the world, and Saatchi & Saatchi was at the forefront of that movement”
By 1985 my passion for media – and a slice of good fortune – had led to my holding the position of worldwide media director for Saatchi & Saatchi (since 1983). This gave me responsibility for all of the media departments in the global network, whilst the individual media directors still reported direct to their national CEOs –an early lesson in the impossibility of dual reporting.
However, in addition to some fantastic travel, the job also gave me some major insights into media in other countries, particularly how media could be a very profitable business. I met SGGMD (later to become Carat) in France, and, in LA, Dennis Holt’s Western International Media, which had a very successful spot [local market] TV buying business, plus a programming unit and a very profitable barter business. In Spain, the Rodes family (who had founded Media Planning) were very impressive businesspeople, and I stayed in touch with the group of brave entrepreneurs in the UK who were gaining traction and taking business from us and others, particularly Chris Ingram, David Reich, John Ayling and Paul Green. In the Saatchi New York agency, The Program Exchange created and bartered shows for airtime inventory, and in Minneapolis another acquired agency had a wonderfully named syndication business, Cash Plus.
I also got to meet a lot of senior executives in major media companies and US television networks, programme producers, and investment analysts from banks and brokerages that were beginning to follow the media sector.
Media was changing around the world, and Saatchi & Saatchi was at the forefront of that movement as a result of a series of audacious and high-profile acquisitions which had taken the company from 12 people in a Soho basement in 1970 to owning the number one agency in the UK, the seventh-largest network in the world, and a household name in the UK at a time when most people didn’t even know that ad agencies existed. Saatchi was hot, and my role gave me unrivalled access to the way media could become even more core to how companies marketed themselves and their brands.
To this day, the client company which impressed me most and had the greatest impact on my thinking was Procter & Gamble. Not only did the people there believe in developing superior products with a demonstrable consumer benefit – incredibly useful in the early TV days, when you could for the first time see a product benefit being demonstrated – but they also believed in heavily advertising those benefits. They were also very single-minded in the way this was done. Every budget plan for a brand had to have clear objectives, a strategy, and an implementation plan. The approach was evidence-based, scientific, and rational, and it worked. As one of the original TV advertisers in the UK, P&G negotiated its airtime deals in the same way, but with one important addition – it had clout: lots of revenue and, even if it was discounted, sometimes heavily, every TV station wanted its money.
At Saatchi, we had tried to copy the data-driven rational approach to negotiation and we had a high profile, which also helped. Although by the early 1980s the UK office was number one, we still needed the vendors more than they needed us.
For today’s reader, it may be hard to conceive just how big Saatchi’s impact had been on UK advertising and business. These people had chutzpah like no one before. A public company by 1975, it had used access to capital to build by acquisition as well as by organic growth. The Saatchi brothers, Charles and Maurice, had embarked on an unprecedented shopping spree with one goal in mind – to be the largest ad agency group in the world. They achieved their extravagant goal in 1986, in part through the purchase of three US-based agencies: Dancer Fitzgerald Sample, Backer & Spielvogel, and Ted Bates Worldwide. In 1985 alone, they acquired 13 companies, and the following year there were 80 subsidiaries with total billings of $3.2bn. However, unlike my heroes P&G, there was no clear plan on how these units could be integrated and managed to deliver benefits to clients.
This was most clearly articulated by Rupert Goldstein of P&G, a major client of the Saatchi & Saatchi Group:
“It’s not clear to me why two or three agencies operating with one ownership as parallel networks will contribute anything either to clients or the public, which those agencies operating separately would not contribute. In essence, when an agency creates separate networks and argues that these will be kept totally separate, there will be no communication, there will be no transfer of personnel or knowledge, they are making a public statement that they are not looking to gather economies of scale or size. They are basically saying that the companies we own are bigger, but the parts aren’t going to work together.”
This was manna to my ears, so, in June 1986, I decided to write a memo (no e-mail then!) to Maurice Saatchi, then chairman of the holding company Saatchi & Saatchi plc, proposing “the consolidation of all the communications division’s media expenditure into one centralised media buying operation worldwide or regionally”.
“As ever, Maurice – who was quickly bored by detail and process – simply responded, ‘Marvelous, John, let’s just do it'”
I used other third-party endorsements to validate the proposal. Donald Zuckert of the newly acquired Ted Bates said, “One of the advantages is more media muscle for our clients.” Mark Shepherd and Bill Seward of UBS, then London’s top analysts of the media sector (and, more importantly, Saatchi’s investment bankers) said, “Multinational clients whose advertising expenditures are growing at above average rates can now be offered the biggest and best resources in all markets, in terms of creative skills and media buying power.”
The New York-based Gallagher Report said on 9 June 1986 that “only a handful of shops [would] remain in media buying business by the end of the decade, [the] list to include SSC [Saatchi], JWT and Y&R”.
My memo to Maurice went on to list the possible advantages:
1. Buying clout/media muscle – this was accompanied by some tables from media spend monitoring companies to demonstrate that Saatchi accounted for about 14% of measured media spend in the US and UK
2. Increasing size of media vendor companies being matched
3. Growth potential – opportunity for third-party business from non-agency clients to compete with the independent sector which, as other chapters have shown, was having an increasing adverse impact on our business in many countries
4. The resource to deal with changing and expanding media opportunities
5. Help in overcoming conflict by conditioning advertisers to working together in pursuit of their mutual advantage.
I requested a meeting with the communications division heads of the ad agency networks and the various PR, direct marketing, and other businesses, excluding consulting companies which had been acquired.
As ever, Maurice – who was quickly bored by detail and process – simply responded, “Marvelous, John, let’s just do it,” while all the agency heads who owned the client relationships simply ignored the proposal.
During that time, the group was losing business quite rapidly, as clients realised that there was no additional advantage in size and the agency heads were all declaring their independence in different ways. There was little or no central management, and certainly no plan as to how these businesses were going to be run as a group.
How did we go about it?
The short answer is: unbelievably slowly. The gestation was about as long as an elephant’s – two years.
The problem was that, other than the resounding silence that my plan had generated amongst the agency heads almost everywhere, the Saatchi Group was beginning to implode internally as the issue of how to rationalise and combine this sprawling empire was belatedly addressed.
By that summer of 1986, a plan had been developed by Anthony Simonds-Gooding – a former chief executive of Whitbread who had been appointed CEO of the communications division – which merged some of the agency networks and incorporated a centralised media operation. However, so fraught were the agency mergers – with client losses, internal civil war, and resignations – that what was to become Zenith moved to the back burner as I was asked to sell the idea in the agencies (which were in open rebellion) rather than it being forced upon them.
In August 1987, after some months of research, I produced a paper which quantified what media expenditure the group had by media type. In the US, the agencies accounted for 19.8% of network TV spend, 15.8% in spot, and even 13.3% in magazines. In the UK, the four agency media departments accounted for 14.1% of TV spend and 12.4% of all press. The paper, entitled ‘The Benefits and Effective Organisation of Media Power of Scale’, made the case, supported by the numbers, and went on to outline a structure which would sit in parallel with the agencies and create group deals whilst all the buying implementation, and thus people, would stay in the media departments of the respective agencies.
“Carl Spielvogel, said, ‘If you think it’s such a great idea, why not go fuck up in your own backyard first'”
This was the concept I spent the winter of 1987–88 trying to sell, against an increasing sense of disillusionment among the senior managers in the newly created empire.
Charlie Scott, who was CFO from 1989, soon discovered that, in his words, “Morale in the companies was appalling. People felt they had been sold a bill of goods with grand plans for the future but no one ever saw Charles or Maurice.”
Consequently, I was selling the idea to people who, although recently made multimillionaires by the Saatchis’ largesse with shareholders’ money, increasingly saw me and the plan as something else from these remote, aloof people who they never got to see or talk with.
It was also becoming clear that, in many of the continental European operations, the profitability of the agencies was entirely due to the receipt of rebates and volume discounts paid to the agency and only partly, or not at all, disclosed to the client. In the US, although far more transparent, any weakening of the account management’s control over the account was anathema, and soon unbundled media was referred to as “the European Disease”. I recall a meeting with Steve Leff, then media director of Backer & Spielvogel, which had Miller Brewing, Wendy’s, and Hyundai amongst its major clients. Leff, a former US marine who was as broad as he was tall, listened to my pitch and responded, “I don’t know how things work overseas but I’d like to take your idea and wipe your dial with it.” I moved back a couple of paces and put him down as a doubtful convert. His boss, Carl Spielvogel, said, “If you think it’s such a great idea, why not go fuck up in your own backyard first.”
There were similar (if less physically threatening) problems in the UK and, by summer 1988, I was in despair. I now believed in the idea very strongly, but Simonds-Gooding was gone and I’d had to sell the idea anew to Victor E. Millar, my new boss, who had been head of Andersen Consulting. Everything had to be done using Harvard Business School techniques, which was interesting initially, but meant no progress was made in any market as we analysed the plan to near death in monthly meetings in Washington DC, Williamsburg Virginia, and other exotic locations.
By early summer 1988, I had been offered the fantastic job of CEO of the Carat network, with which I was very familiar, as we had negotiated for six months to buy it – only for Maurice Saatchi to scupper the deal on the day of signing with the Gross brothers. Desperate not to throw away my idea, and with more than a bit of heart-over-head thinking, I told Roy Warman and Terry Bannister, who had just been appointed co-CEOs of the communications division (my third direct report since approval of the idea), that we should either trial the plan in the UK or kill the idea and I would go.
Fortunately, they said “Let’s go in London, we’ll tell the agencies it’s going to happen”. I stayed, David Reich sold the balance of his TMD to Carat and took the job, and I now faced up to making the dream happen in three months.
The plan and overcoming problems
I retreated to London, as so charmingly suggested by Carl Spielvogel, and, on the hot afternoon of Friday 9 July the agency heads were convened by Warman and Bannister and told we were going to launch a centralised media buying operation, to be working by October. By now the plan had moved on to the creation of a separate company with its own premises and, most importantly, its own P&L account. The following Thursday, the story was on the front page of Campaign (no online news services in those days), having been leaked by one of the agency heads in the hope of derailing the plan. Previous rumours of our plans had caused something called “the Group” to be formed the previous November. This was said to be a buying co-op of 10 agencies who were alleged to be planning a scale counter to the Saatchi plan.
The plan called for each agency to retain a media planning unit, but all buyers would transfer to the new unit under a newly created management team. The agencies would be charged a break-even commission for buying and the client relationship would remain theirs. Third-party business directly contracted from clients would bring the growth and profit. Profits would be repatriated to the agencies in order to motivate them and prevent them from undermining the new company. However, by now I had come to the view that in order to kick-start the business it would need an immediate injection of direct clients. Furthermore, many of my former agency colleagues in the agency media departments were far from enamored with the new concept, and resistant to transferring to the new company. Inevitably, there were also significant differences in remuneration, benefits packages (cars etc), and – even worse – office size and location. I was convinced that we lacked the management talent internally to achieve success.
Agency account personnel were also less than helpful, continuing to perceive the whole thing as a threat to their hold on the client relationship as well as the financial impact. I was told many times that unbundling would reduce the overall commission from 15% to a lower aggregate sum and that this was a reason to reject the plan.
If we were to find a way through this and run a disciplined, well-organised, profitable business that could quickly establish its own brand, we would need outside leadership to be brought in. This would also remove any resentment over one agency appearing to be dominant.
The obvious way to achieve this at a stroke was by acquisition.
Why purchase RMP?
Since first working on P&G in 1972, I had been an admirer of Derrick Southon and the late Ray Morgan. At that time, they were respectively the media manager and media director of Benton and Bowles. Four agencies shared the P&G business, and several times a year the company held joint agency meetings. These were meant to be in the company’s interests, by hearing the best thinking on the market, planning costs for TV etc. Of course, they were incredibly competitive, with each agency trying to outmaneuver the others. B&B were always the smartest people and Derrick, in particular, would achieve this in the most understated way.
Ray had begun a “Zenith–like” concept at Benton & Bowles in 1974 by branding the media department Mercury Media and running it with its own profit and loss account. Mercury Media had also exploited the reputation of Derrick and Ray and their formidable management team to win third-party business from major clients Allied Domecq, General Foods, and Mars.
In 1985 Benton & Bowles merged globally with D’Arcy-MacManus, another US-based network. No one protected the best asset B&B had in London – Mercury Media and Ray Morgan – and indeed a D’Arcy-MacManus person was given the job.
“RMP was very profitable, had a great client list and a strong management. Despite this, there was a weakness – the lack of a network in an increasingly globalising world”
Within weeks, Morgan had quit (B&B had failed to put him under contract) and set up Ray Morgan and Partners (RMP), taking with him the media department and virtually all of B&B’s clients. Three years later, RMP was very profitable, and had a great client list and a strong management. Despite this, there was a weakness – the lack of a network in an increasingly globalising world. I knew that Ray was well aware of this, especially as they had a lot of global brands, and that RMP would have a limited life. I had already approached Ray with a view to acquiring RMP. I outlined the plan for a global network within the Saatchi Group, which Ray found exciting. Derrick was involved, and I told them that I wanted them to head the UK operation, allowing me to concentrate on the international roll-out. The deal was done in a weekend. We now had about seven weeks to get up and running; people, premises, equipment, systems had to be found, and a legal entity had to be formed and given a name. Most importantly, clients had to be kept on side although we still had no detailed plan to share with them. This is where Derrick’s attention to detail, calmness under fire, and dispassionate resolution to get a deal done came to the fore.
The birth and early years
The name was a priority; we wanted something which sounded global and on top of the sector. We already had a small media agency called Acme Media and an outdoor specialist called Pinnacle; we tried several names – Meridian and Paramount amongst others – which we couldn’t register. Finally, Zenith was decided upon.
However, a television program production company called Zenith objected to our using the name. The other Zenith was owned by Michael Green, who went on to found Carlton Television, and he was a great friend of Charles Saatchi. The lawyers told us their case would be rejected, but I thought I ought to alert Charles in case Michael rang him to remonstrate.
“Why aren’t you calling it Saatchi & Saatchi Media Buying?” Charles asked.
I explained that it was deliberate, to separate us from Saatchi and in order to get more third-party business. After a silence, Charles shouted (not an uncommon experience), “I think your idea sucks. It’s outrageous that you’re not calling it Saatchi … I don’t care what the fuck you call it if you don’t call it Saatchi.” Charles never asked me anything else about Zenith in his remaining seven years in the Saatchi Group.
By now we had found premises in Paddington and were battling the agencies on every front. Zenith’s survival through this period owed much not just to Derrick and Ray but also to our finance director, Sheila Fawcett. She was magnificent, working unbelievable hours and remaining stoical throughout all the agency attacks on her and Zenith.
“The trade papers were full of reports of talks between x and y, and how Zenith might impact the sector”
Meanwhile, we had unleashed an unbelievable wave of press coverage and rumour–mongering, principally from our competitors. Media Week of 5 August 1988 had John Ayling saying, “At a time when the trend is towards selective targeting and segmented media, it is interesting that Saatchi has bought a company that has been a prominent specialist in commodity buying, which concerns my feeling that their concern will be with price and gross rating points”. Mike Townsin, then chairman and CEO of ad agency GGK, wrote in Campaign on 16 September, “If Saatchi’s intention to centralise the media buying of its various agencies is the beginning of a trend, then it is a retrograde one for advertisers. At best it will compromise the quality of advertising planning, at worst it opens the door to media broking.”
Others were far less critical. Mike Yershon, quoted in Media Week, said, “I think it gives the independent sector much more credibility. If Saatchi, as it claims, handles 15% of media buying, and you add that to the 20% that the independents handle, it means the sector now handles over a third of all billings.”
The trade papers were full of reports of talks between x and y, and how Zenith might impact the sector. By mid-September, Campaign was reporting the acquisition of Yershon Media by TMD, which was seen by Campaign as “part of the media buying shake up triggered by Saatchi’s centralised media buying creation Zenith Media”.
Campaign further wrote:
“For many years the media buying function was the poor relation to the creative core of the industry, but recent events underline that it is taking on some unaccustomed glamour. It is clear that today’s moves are a response to major structural changes whereby the size of market share controlled by agencies will become increasingly important in future years. Major agency groups like Saatchi are jockeying for position now in the belief that they can make their command over volume of purchasing power pay off later.”
My concerns that the plan might end in tears were greatly reduced when I saw the reaction of competitors, who would have worried me far more had they said nothing. Now only clients needed to be convinced.
Once we had key people in place, a name, premises, some ideas on how we would handle conflicts and so on, the dialogue with clients began. Often, however, this was still through the medium of the account management or the remaining media personnel in the creative agencies. Inevitably, by then we were also facing some hostage-taking by a few of our own potential senior management. Two former Dorland advertising directors in the media department demanded ridiculous remuneration packages, which I refused to grant, and they left before we opened our doors, taking the BT account with them. BT never met or even talked with us.
Every other client was fantastically supportive. Most were of the view that it was a sound concept, and they wanted to see if we could deliver the promise. They accepted our assurances on conflict and were very much on board.
On Monday 10 October 1988, the doors at Bridge House in Paddington opened for business. Paddington was very run-down and derelict in those days, with drug dealers and prostitutes on the streets around us, but the rent was very low. “The shed in Paddington”, as it soon became known, was basic to say the least, with bare walls, strip lighting, no air con, and inadequate loos (the subject of a staff petition in later years). One hundred and forty people from four locations moved in over a weekend and the DDS [Donovan Data Systems] terminals all worked. People got used to their new journeys, although we had a few scary moments with some of the strange people who used to inhabit some of the streets around the railway station in those days.
“Very quickly – helped by a certain siege mentality – a strong Zenith character and personality began to emerge”
Often the problems of hierarchy or benefits weren’t resolved by opening up, so we had managers who might previously have had director status and been entitled to a personal fridge in their office, sitting on an open plan floor with 120 others with a fridge full of beer next to their desk! Lunch became a walk to the Marks & Spencer on Edgware Road or the horrendous Dudley Arms across the road. Gone were the restaurants of Soho and Covent Garden. Our more glamorous female executives (of which we had a very high ratio) utterly bemused and entranced the staff of Travis Perkins, the builders’ merchants who were our nearest neighbour, at the Dudley Arms during lunch breaks.
Media owners were, as ever, pragmatic in their approach. We never anticipated any problems with the media – after all, we had money to spend with them. A few said amusing things. Terry Mansfield, managing director of National Magazines, announced that he would not do business with us as we would ultimately destroy the business by driving down prices to an unviable level. It was immensely helpful to us to be credited with power so early on. His publishers and ad directors of course ignored him and traded with us.
In April 1989, Campaign ran a double-page spread headlined ‘Zenith gambit breaks through’. John Micklethwait, later editor of The Economist, wrote, “The merger of Saatchi’s media buying arms to create Zenith was billed as the beginning of the end for agencies. Seven months on, how far down this road have we gone? He found that unbundling was the name of the game and the 15% had wilted, but polarisation into specialists and supermarkets is in its infancy.” As ever, everything took much longer than I anticipated.
Gradually, the people we didn’t want, and those who still hoped everything could be unpicked, left by design or choice, and very quickly – helped by a certain siege mentality – a strong Zenith character and personality began to emerge. New accounts were won and a profit was made in year one.
The agency wars continued, now nearly all about money, particularly as the Saatchi Group problems became deeper and the 1990–91 recession adversely affected budgets.
We absolutely understood that our destiny was in our own hands, and that the way out of the siege war with the agencies was to control the majority of our revenue. We invested in a new business director, and agency billings became less important to us. Zenith also took over the payments to media owners, which dramatically improved our cash flow at a time of relatively high interest rates. Gradually, clients began to make direct contracts with us and the agencies’ role and influence diminished. Moreover, personnel at Zenith and the agencies changed and we were dealing with teams who hadn’t been in all the battles because they had entered the industry in an increasingly unbundled world.
By 1990, the financial problems in Saatchi & Saatchi plc were threatening to bring down the whole company, unbeknown to most of its employees concentrating on doing the best job for their clients. Once again, our expansion plans were hindered by the financial situation and the change of corporate management.
However, we opened more offices in Europe, and we opened in the US, where the creation replicated the issues with the agencies in the UK, but even more bitterly. At least we now had a very successful template, with a profit margin better than any of the agencies, and corporate financial management liked and respected us. By the mid-1990s, we were entering Asia, including China, so my vision was coming to fruition.
Unfortunately, the corporate issues resulted in another change of management – a change of ownership to a JV between Publicis Groupe and Cordiant, which was a nightmare. Once again, progress was delayed by slow decision-making, a lack of investment funds, and two shareholders with different views of where Zenith should go. We merged Zenith and Optimedia (Publicis Groupe’s media network) to become ZenithOptimedia in 2002, and today, 10 years after I retired, it is one of the ‘Big Five’ global media agencies.
“I was very lucky to work with very talented people who shared the dream and let me take them on what was a very hair-raising adventure at times”
In writing all this, I have had to work quite hard to remember a lot of the meetings, the endless wrangling, the blood that was spilt, and the relationships and friendships that were sorely tested by following our dream. I was very lucky to work with very talented people who shared the dream and let me take them on what was a very hair-raising adventure at times.
There were lots of people who became proud of Zenith and worked hard and fought for our success. The late Ray Morgan had retired by the mid-1990s to farm, and Derrick Southon retired in 1999, by which time he was heading our European operation. Sheila Fawcett retired sometime earlier, by then as the worldwide chief financial officer. Christine Walker left and started her own very successful media agency – ironically recently acquired by ZenithOptimedia, long after her retirement.
They and my successors have done the most fantastic job in building on those foundations. Steve King, one of the TV-buying group heads who transferred to Paddington in 1988, has, as CEO since 2004, taken ZenithOptimedia to new heights, both in the depth of the offering and its geographic reach and profitability, more than ably assisted by Adrian Sayliss, former CFO and now COO.
Many more of my former colleagues are also still there, which makes me very proud.
We set out to change our business world and we did. We were supported by wonderful clients who were up for the challenge, and managers and staff who also came on this great adventure.
They were great times, and I was very lucky to have been allowed to work and play in a Golden Era of media advertising.