advance08: The Future of Media

Panel discussion and remarks by Brian McAndrews, Senior Vice President, Advertiser and Publisher Solutions, Microsoft; Kevin Johnson, President, Platforms & Services Division, Microsoft, et al
Redmond, Wash.
May 21, 2008

ANNOUNCER: Ladies and gentlemen, please welcome back Microsoft Senior Vice President, Advertiser and Publisher Solutions Group, Brian McAndrews. (Applause.)

BRIAN MCANDREWS: Thank you. Thanks very much, welcome back. First of all, thank you all for coming back today, and thank you all for filling out the evaluation forms yesterday, you’ll see another form in front of you, and we encourage you to share your thoughts again.

I hope you all had a great time last night. I personally really enjoyed the opportunity to meet many of you at dinners and different events. I suspect some of the wake-up calls may have come a little early this morning, thanks to Dave Matthews, et cetera, but I hope you all enjoyed the show.

One follow-up from yesterday. As you may recall in my presentation I talked a bit about the ad platform that we’re building at Microsoft. I made the point that putting together all of these disparate pieces and different parts is very difficult and very expensive and it takes technology, expertise, and significant financial resources. The point being that it’s very difficult and we believe that very few companies will be able to do what it takes.

I’ve been informed this morning that Tony Fernandez, CEO of Air Asia, returned home to Singapore late last night, got his team together, and built an ad platform. (Laughter.) Total cost: $15 U.S. Twice the fun, one-billionth the cost, something like that.

Anyway, seriously, this morning we’re going move to our third phase of the day here, of Advance ’08, and we’re looking into the future of media. It’s our last pillar, it’s focused on where it’s all going, what our industry will look like in five years, 10 years, and beyond. In many respects, however, that future does begin now. I think you’ll see what I mean when you hear from the speakers who will be on stage here today.

With that, I’d like to kick things off with a brief case study video from our first featured guest of the morning, Universal McCann.

(Video segment.)

BRIAN MCANDREWS: Well, thank you. We’re very pleased to have with us this morning Quentin George, the global director of digital media and strategic innovation at Universal McCann. Great to have you here, Quentin, thank you for coming.

So a few questions I think following that very interesting video. First of all, from your point of view, what’s the media experience and what makes it so powerful?

QUENTIN GEORGE: Well, first of all, what a difference a day makes, and what a difference Dave Matthews makes. So media experiences — I think traditionally, the craft of media has been around the combination of content and context, the right message and right audience at the right time. I had to admit, I bristle a little bit when we continue to talk about content is king because I think that we are missing a great opportunity inasmuch as we are not seeing the value that a greater experience and greater utility can bring to a relationship and can bring to a marketer.

An example of that is sometime last year, we helped launched Core 2 Duo for Intel in China, the gaming market. Very difficult audience to pin down and really get to understand and interpret your message. And so instead of buying a bunch of banner ads, however targeted we might have placed them, we engaged in a relationship with a message in multi-player, online games. Think of it as like the World of Warcraft for China. And to play on the powerful attributes of Core 2 Duo, we created this set of half-step boots that if you put these boots on, you were able to run 40 percent faster than anyone else in the game. And in the course of two weeks, we had over two and a half million gamers download and use the boots. And I think it’s a brilliant example of giving something to the community of value that immediately translates into an impact, and at the same time, ties back to a value proposition that’s now made tangible and experienceable because it’s not just a message.

BRIAN MCANDREWS: Okay. What impact in your mind does the digital reality have on brand?

QUENTIN GEORGE: We believe that brands are no more than a series of interactions and a combination of experiences between an organization and its customers. And if you think of why brands exist or go to be, it essentially happened in the days when inventory was scarce and you had to compress your message or value proposition in a very, very small pace — 30 seconds or a single-page ad or an icon. And I think what digital media has given us is the ability to tell much richer experiences, much richer stories. Inventory is a remnant, it’s like air. Good inventory is still scarce, but there’s not a lack of inventory.

So we think that brands that are likely to be successful are going to be the ones that can create the most compelling set of experiences for these customers.

BRIAN MCANDREWS: What’s the role of the consumer in all of this?

QUENTIN GEORGE: So in the video, one of my colleagues teed this up for us. We actually have been for the last three years the world’s largest digital survey for social media. It’s in its third year now, we have about 17,000 respondents in 29 different markets and it’s very interesting to see how social media and adoption of social media has advanced over the past three years.

A couple of things that jumped out: The first is we see this rapid expansion in adoption of social media in the emerging countries. But if you start to dig deeper in the data, you start to see things like astonishing statistics that China has more bloggers than the U.S. and most of Europe combined. That’s a phenomenal statistic. And in addition to that, you have one out of three of these bloggers actively talk about brands in those conversations.

So we suspect — we can’t be sure about this, but we suspect that there certainly is an opportunity over the next five to maybe seven or 10 years, could we find ourselves in an environment where in emerging countries there is a second grid of media that’s being created that’s outside of what we know as traditional media today. And so the question is: how do we participate meaningfully in those conversations? And specifically with Microsoft and many of our other clients, we’ve embarked on a series of emerging media trials that are hypothesis-based. I know it’s a slight — maybe it’s semantics, but if you run a test, you can fail, but if you run an experiment with a hypothesis, you will learn something whether the outcome is good or bad, and then we try our best to take that learning and deploy it elsewhere in tactics that we apply to our clients.

BRIAN MCANDREWS: Yeah. You mentioned the “content isn’t always king” piece, and I guess when Michael Eisner spoke yesterday, he talked about content a lot, and a question from the audience was about distribution. How, in your view, does one distribute these experiences efficiently?

QUENTIN GEORGE: So, you know, you have to look at this holistically. Yes, I’m talking about experiences, but we also need to understand the interplay between a persuasion-driven marketing that we’ve become so phenomenally good at, but also this latent and equally powerful force of influence in marketing.

So we’ve developed some mechanisms, and there’s a lot of work that needs to get done to really understand the right combination of impression-based media, branded content, content experiences, transaction experiences. And when you start to look at that combination, you start to understand what the trade-offs are when you have limited budgets to work with.

Interestingly enough, if you then focus on these influence categories and you give them utility, there is the potential of creating a new kind of mass. It’s not mass reach, it’s gravitational mass around niche audiences with real passions and that are there for more than just a brand delivering a message in a compelling and emotive way. There’s a reason to come back, there’s an authenticity in this, a level of relationship that I think is very, very valuable.

BRIAN MCANDREWS: And the video talked about being on the pointy end of the spear, and I’m sure we all feel that pointy end at different times. What opportunities do you see that you get most excited about in the future?

QUENTIN GEORGE: The two things — I think the first is from a media industry perspective, it really gives us the ability to — if you apply creativity and creative thinking in new ways, you can do some amazing things. We have to get much better at understanding how to bring the right creative partners, the right content partners, the right technology partners early on in the process so we can talk about not just the consumer, but what is the intentional set of experiences that go across the entire customer experience continuum.

But interestingly enough and because of our special relationship with Microsoft and the fact that we have, as I said earlier, both Microsoft as being a customer of, but also being the agency, I continue to be amazed at the amazing possibilities that the platform has. And the reason why I say that is because I think that if you want to create these rich, compelling experiences, it needs to get delivered on a platform that is far more sophisticated than HTTP.

I mean, we spoke yesterday — listening to Mr. Eisner and James Cameron, stereoscopic content — what are we going to do? Deliver that through HTTP and blow torch and bailing wire? I mean, it just doesn’t work. So where Microsoft comes in is you have Silverlight, you have Live Mesh, and you have this amazing platform in which you can seamlessly create experiences that take consumers in a very, very meaningful and precise way from one environment to the next, you span time, you span device, and you span interaction models. Again, it’s not just the content, it’s really, really deep, meaningful, elective experiences that have nothing to do with traditional interruptive interstitials. And I don’t think there’s another company on the planet that has the resources, the technical capability and the foresight to be able to respond to this. So I think it puts us in a really privileged position to be that partner and work with you, but also for the rest of the industry, you offer amazing capability and my wish would be that we stop treating Microsoft like another publisher and really start to leverage the technical capabilities and data capability and the analytics and the entire ecosystem that you put together, we think that it’s a really, really compelling proposition to deliver exceptional experience.

BRIAN MCANDREWS: Well, thank you, Quentin, I like that vision of the future, it sounds great. Thank you very much, we really appreciate it. Quentin George. (Applause.)


BRIAN MCANDREWS: So before I introduce our new panel on the future of media as we continue on this track, I wanted to — you know, I think hopefully we’re trying to make clear in this conference as well as other places that we really are in listening mode here at Microsoft. And my boss, Kevin Johnson, who is president of the Platform and Services Division has really been on a tear in that respect. This video we’re about to show you, hopefully, will give you some insight into how Kevin makes sure that his thinking is informed by our advertiser and publisher partners.

(Video segment plays.)

Panel Discussion: The Future of Media

BRIAN MCANDREWS: So with that backdrop, I’d like to introduce our future of media panel. Our thought was to have the full spectrum on this one — the agency, the media creator, and the platform publisher. So we have three great people to speak to these points of view.

Nancy Hill is president and CEO of the American Association of Advertising Agencies, and as a veteran of the agency world, she will be our moderator.

Representing media creation and intellectual property, we have Philippe Dauman, president and CEO of Viacom, the world’s leading entertainment and content company.

Finally, representing the platform and the publisher, we have Kevin Johnson, president of the Platform and Services Division here at Microsoft.

I’m excited to hear what these folks have to say, please, let’s welcome them to the stage now. (Applause.)

(Break for direction.)

NANCY HILL: Good morning. Actually, I think I’m here because these two spend so much time together, if we let them just go on without a moderator, they’d go on. Welcome you guys.

(Break for discussion.)

NANCY HILL: Thanks for the lovely introduction, Brian. As the new head of the world’s largest advertising trade association — now there’s a claim to fame — we have over 750 different agency brands ranging in size, just in case Rob Norman’s in the audience this morning, covering over 2,100 offices in the U.S. I spent the last 90 days out talking to as many of them as I possibly can.

I’m asked every single day, “What do you think the future of our business is? What does the media landscape look like? What about digital? What about social networking? How do we all fit in and how do we live up to that?” So I think one of the great things about advance08 for me has been getting to see a glimpse as to what some of those answers might be, but certainly this morning we have two people who are living it, breathing it, partnering on it every single day, Kevin and Philippe, and I’m going to ask them not only as people who run two companies who are deeply involved in this right now, but also as consumers themselves, as fathers, as sons, as marketers, how they see the future of media.

I’m going to kick it right off with the first question, if that’s okay with you guys: In a sentence or two, when you think about the future of media, what do you think about for your company as well as for you as a consumer?

PHILIPPE DAUMAN: In a sentence or two?

NANCY HILL: Yeah, in a sentence or two. Elevator speech, please.

PHILIPPE DAUMAN: All right. Well, first of all, I want to say I watched you all playing Pong back there, and I highly recommend you switch over to Rock Band on Xbox.

Well, we are — our company is a pure content-based company. We own Paramount Studio, on the one hand, big consumer purchaser of advertising, and of course the largest media networks, cable networks group in the country, if not the world. So we sell advertising that way. But we’re seeing in our consumers who are relatively young, through MTV, Nickelodeon, Spike, BET, we tend to serve a younger audience. First of all, the good news for us is there is a lot more entertainment being consumed, a lot more time being spent on entertainment. TV viewership overall, although there are shifts between broadcast and cable, for example, but television viewing has actually increased, contrary to the perception out there, and people are spending more time, thanks to all the technology, consuming media on other platforms.

So as we see the future, we have to reach those consumers everywhere they are, every platform. We are getting into the games business, both casual games and Rock Band and so forth, because that’s what our audience is doing. And we are broadening our reach around the world through the brand. So we believe that engaging those viewers, those consumers in many different ways across many platforms creates tremendous opportunity if you have compelling, original programming. We’re investing more in original programming every day. And it creates greater value for brands. And from a monetization standpoint, you know, we’re happy to partner with Microsoft. I was listening to Quentin earlier, I think you have before you the best content partner and the best technology partner for all of you in the audience.

So we’re very excited by new technologies and new forms of distribution because as we create content and experiences, we have more opportunity to get it out there — more than a couple sentences, but —

NANCY HILL: That’s okay.

KEVIN JOHNSON: That’s great. I’ll just complement some of the things Philippe said. I think there are three key trends: Number one is the digitization of content. We heard about that yesterday from James Cameron and the work that they were doing. The second key trend is just this explosion of consumer devices on the edge of the network, whether it’s IPTV, Xbox gaming, phones, mobile devices, PCs, kiosks. And that explosion of consumer devices, Robbie Bach and team demoed those yesterday. Means that consumers can now access that content and consume that content in new ways. They can consume it where they want, when they want, on the device that they want. Number three, I think it has to do with some business model transformation. Certainly Michael Eisner spoke of that a bit when he talked about the changing landscape of distribution, and this business model of online advertising, digital marketing and how that translates into economic incentives for creators of the content.

So those three trends I think are very key. Now, what do they mean to our company? At Microsoft, we’re investing in the innovation to help on the creative side of creating that content. So things that were talked about yesterday from James Cameron to things like Silverlight to Expression, we want to unleash the art involved in advertising and content creation.

In the area of distribution, certainly the fact that we’re investing in experiences on all these devices, that creates a platform for consumption of digital content. And third, we’re very focused on building the advertising platform and building it in a way that delivers value to publishers and value to advertisers. And so these three trends are very, very meaningful to our company.

As a consumer, it really is an empowering thing. It means that, you know, you can find and consume and view the content that’s interesting to you, you can share it with the people who are important to you, and it really starts to change the paradigm about how people consume content over the Internet.

NANCY HILL: Laura Desmond said yesterday that being consumer-centric meant that you had to organize yourself completely around the consumer and then partner with the right people in pursuit of those consumers. So when you think about that, how has that impacted the way you’ve organized yourself to go after that consumer and think about the consumer first? Just to build on what you said.

PHILIPPE DAUMAN: Well, you know, we serve a fragmented audience. We like to say we invented fragmentation in the cable world with MTV, Nickelodeon, BET, and so forth. We are devoting more and more resources to research understanding that audience. We always have and we continue to do that. We are organizing ourselves as we make shows to make sure that our creators are creating that content for all platforms, not just adapting the television content to the digital world or a mobile world. I think we’re the first and to date only media company that actually created content for the mobile platform, and it was so successful that we created an on-air show off of that piece of content.

So we have added flexibility to our creative organizations to make sure that they think of all the platforms, deepening our commitment to research, which we communicate and work with our advertisers on, that’s the value proposition we bring. You know, we understand those consumers. We create a comfortable, branded environment for the advertisers, and we show them how our consumers are engaged in the content. For example, we have a show called The Hill, which is a big hit on MTV. Just opened its third season, doubled the ratings of its predecessor show. It has a very popular online component to it, the site The Hill. It has a mobile component, it has a virtual world.

NANCY HILL: And it sells a lot of People Magazines.

PHILIPPE DAUMAN: And it helps a lot of other media out there. Lauren Hill has become — Lauren Conrad has become a major franchise unto herself. But our research shows that when you have consumers that are watching the show spending time online, entering the virtual world, the level of engagement, the word that was used earlier, is so much greater and the retention of the advertising associated with it is also that much greater.

NANCY HILL: That actually might be a great place to start talking about engagement mapping and some of the things that you guys have been talking about to get past that sort of measurement of the last click. So do you want to take that from there?

KEVIN JOHNSON: Well, certainly, you know, our company was built with the concept of partners. We’ve partnered throughout the history of our company. Whether on the PC side whether it’s hardware manufacturers, independent software vendors, our service partners that we have. And as we approach this opportunity in online, we’re taking very much the same approach that we’ve taken before in terms of partnering.

Now, taking a partnering model means that you have to have value. You’ve got to be able to create value for your partners. And so for a partner like Viacom, Philippe as a publisher, working very hard to make sure that yield management tools and things, we made an acquisition of a company called Rapt and we’re building out more technology that we can differentiate in terms of the value creation for publishers.

On the advertiser side, this concept of engagement mapping is one example of things we’re doing to really build out a differentiated proposition for advertisers, enabling agencies and advertisers to have an end-to-end view of all the ads that they are running, whether they’re display ads, search ads, rich media ads, and being able to fundamentally look at the end-to-end campaign and understand what’s working, what’s not working. By doing that, that helps really maximize ROI.

So first is this concept of partnership, how do we use things like engagement mapping to deliver a better return on investment to agencies and advertisers, how do we use tools like our Rapt yield management to deliver better value to our publisher partners. And we really want to be an enabling force in that.

NANCY HILL: You know, this is probably a good point to talk about one of the things that I’m sure the agencies are curious about. You get to look at it from a completely different point of view. So give us a sense of who you — not necessarily who by naming names — but where is the agency world being successful in collaborating with both the publishers and the technology companies, and where do you think they’re falling down and they could improve?

PHILIPPE DAUMAN: I guess I keep going first, but we’ve found that there’s been a tremendous improvement both on our side, on the content side, and on the ad agency side in understanding how consumers use media across all the platforms. We’ve developed more capability and we’ve found that, increasingly, we’re dealing at the agency level and the client level with people who are not just specialists in digital advertising or specialists in television advertising, but looking at it as a holistic proposition, which is the way we think it has to go now.

More and more of our ad sales are cross-platform ad sales. And that is an increasing trend because our audiences will consume sometimes simultaneously.


PHILIPPE DAUMAN: And they’ll be watching our show on air and they’ll be communicating with their friends, chatting about the show and going online. So it makes a lot of sense that you look at it holistically as opposed to just having people who represent digital ad sales as a category and totally different people dealing with the other proposition. So we’ve seen a lot of improvement from all sides in looking at it more holistically.

NANCY HILL: Would you agree?

KEVIN JOHNSON: Yeah, I would. I think one of the interesting observations I’ve had over the last two years or so really engaging in a much deeper way with ad agencies was about a year and a half ago I spent an hour and a half with the leadership team of one of the major ad agencies on Madison Avenue, I won’t name names, but we had this great discussion. And I was really focusing on all of the innovation we were doing to help improve the return on investment and the targeting and the accountability side of advertising.

And the creative director was in the meeting and I looked and he had sort of a look on his face — I knew he wanted to say something, but the meeting ended. So afterwards I sent him an e-mail. I said, “Hey, there’s something on your mind.” So we spoke and it was basically, don’t forget the creative. And it’s highlighted for me this tension between what I’ll call art versus science.

And last year at SAS, Howard Graff gave a speech really about accountability and the tension between the creative side, the art side, and the accountability or the science side. And what I’m finding is agencies, they’re really embracing the fact that it’s not an either/or. It’s not art versus science, it’s art and science. And the technologies and the collaboration that we have, we can really enable and empower the creative side, and doing that in partnership with the publisher so that you’re reaching the consumer in a way that aligns with the experiences that they’re having in their content consumption or the usage experiences, and it’s then using the tools like engagement mapping to help be more efficient in the campaign.

So one of the learnings I’ve had is really how to embrace this concept of art and science in the role that plays, in the collaboration with agencies and with advertisers to make sure those two things go together.

NANCY HILL: Yeah, one of the things we hear over and over again is the science part of it is at the beginning and the end, and that the art comes in the middle because it takes a visionary to see through the ones and the zeroes to get past the technology and what you can actually do with it creatively, and then you have to figure out a way to measure it.

Now, one of the things that’s still sort of looming large is this issue of measurement and how do we get to a place where we have some standardization and, obviously, what you guys are trying to do with engagement mapping is going to take us a long way. But what other tools do you think that we have in our arsenal right now that are useful to start making those arguments to make that shift?

KEVIN JOHNSON: Well, certainly, the advertising platform that we’re very focused on, there’s three properties as we’ve studied the advertising platform. Number one, it’s about scale economics. Certainly, the more inventory and the more inventory you get in that platform, the better job that platform can do driving yield. So scale economics come into play. The second thing is it is a software problem. It is software that makes a decision within a millisecond on what ad to serve, it is software that manages massive amounts of data. It is software that will automate the work flow of the buy-sell process. It is software that will enable the creativity on the agency and the advertiser side. It is software that will help publishers with yield management.

So now only does it have scale economics, it’s a software problem. And then number three, it is also an area that will require significant investments of capital, data centers and servers to house all that data. Now, you put those things together and you say, okay, that creates this opportunity. With the amount of data and information we have, it’s turning that information into insight that is key. And I think we’re just on the cusp of that. In fact, engagement mapping is the next step in the evolution and I think that evolution is just beginning.

And so the type of analytical tools that will be available, the real-time nature of those tools — you know, you can see over time how those analytical tools can actually start — software could actually start to modify a campaign real time while it’s in flight as it’s learning sort of what mix of ads and when to display them and the sequence of things that leads to conversion. And so I think we’re on the very beginning of that opportunity to really take advantage of the fact that you have all this data, and turning that into insight for advertisers and agencies.

NANCY HILL: I think it’s going to be great for our future because when you start thinking about we’re also at the very beginning of the creativity that’s applied to that, but who knows what we’re going to be talking about five years from now and where that goes.

I want to take a little sidestep and talk a little bit about social networking. Both of you have invested a lot into that, and I think it was Peter Chernin who said that it’s hard to put a monetary value on a friend. So talk to me a little bit about how you see — or if you don’t see — the ability to monetize social networking and where that might go in the future.

PHILIPPE DAUMAN: I think social networking is increasingly becoming a functionality, it’s a function that is now becoming widespread across all sites. We’ve put in a social networking feature across our 330 and counting a side supply (Inaudible) which we are rolling out, but it’s becoming — I think as you look into the future, and that’s the way we see it, if you look at our consumers, they are finding the content that they want through friends, friend recommendations, through search, other means. Social networking or social networks are less of a destination point but rather just a function that you utilize as you navigate content and communicate with your friends about it.

So in terms of advertising, I think many advertisers are very concerned about the environment that they will find their ads in, certainly the advertising clients care a lot about that and that’s why I think you’re seeing difficult sales proposition there where you have pretty low CPMs (cost per thousand), some concerns about where your ad is appearing. That’s why I think it is important to really focus on the branding, the placement of the ads in a comfortable environment and we are certainly emphasizing that as we go ahead and increasing the utilization of social networking in an adjunct to the content we created.

NANCY HILL: So you think we’re still in a learning mode in terms of what is acceptable and what isn’t acceptable?



KEVIN JOHNSON: I think there’s two observations that I would add. Number one is you have to look at the task or the interaction that the user is having on a certain set of experiences, and you have to think about advertising in the context of that interaction. If somebody is on a social network viewing family photos that their family or friends posted from a recent holiday or party, my view is they would probably be less in the mode of being receptive to advertising than they would in a different experience. Let’s say they’re watching or reading the news of the day, or they’re watching some video. So you have to think in the context of the user, and much of social networking are things like that. So that’s point number one.

Point number two is the real opportunity to break through in terms of monetization and doing it in a way that’s a positive user experience, has to be around targeting. The ability to not just provide a general set of ads to that user, but to really understand that that particular individual happens to be in the market for a new car and you know some things about the types of automobiles and the things they’re interested in and you’re serving ads that align with their interests, I think that’s where you have opportunities not only to do it in the context of a good user experience, but also to do it where the ads are much more targeted and drive better monetization. That, I think, is the learning that we will have going forward on how to accomplish those things.

PHILIPPE DAUMAN: Just to pick up on something Kevin said, I think it’s quite true that consumers are not accepting of ads in certain contexts, you know, as Kevin said. But they are attuned to understanding that if they are watching a professionally produced piece of video content that in order for that content to be available to them, they’re used to the proposition that you get some advertising associated with it. There is that tradeoff and acceptance of that, but there isn’t an acceptance in other contexts, and some people forget that.

NANCY HILL: Well, it’s interesting because when you guys announced your deal in December, which was quite a big deal, and I must say we were very honored that the conversation started happening during advertising week last year, it was announced as a very broad deal and a lot of details were not disclosed, that you thought you might be able to disclose later. Well, we’re how many months into it now? Five and a half months. Is there anything that you’ve discovered over that five and a half months that you can talk about now that you couldn’t talk about then?

KEVIN JOHNSON: Well, we’d probably say the first five and a half months are going very well — I don’t know if you would agree with that?

PHILIPPE DAUMAN: I would, yeah.

KEVIN JOHNSON: It is interesting. I was in New York for Ad Week, and I think we had a 30-minute meeting scheduled and it turned into —

PHILIPPE DAUMAN: You stayed over at my house.

KEVIN JOHNSON: Yeah. (Laughter.) We ended up having a big discussion and spent several hours in kind of strategy and different things going on, and that’s really what kicked off our partnership.

PHILIPPE DAUMAN: What we did was Kevin was paying a brief visit, and we started talking about the little things that we were doing between our companies, and we saw we could take it to a higher level. What we ended up doing, and we’re still expanding on our relationship as we learn more about each other and the capabilities of our companies, you know, we have great promotional vehicles. So Microsoft as it has interfaced with the consumer saw us as a great marketing partner. So that’s a component of the deal in Robbie’s division, and increasingly Kevin’s division to really reach those targeted consumers across our different brands.

We’re very intrigued by what Microsoft with its new aQuantive Atlas platform was planning to do, and being very receptive to the publisher and what our needs are and the kind of technological requirements that we have and how we saw advertising, and Kevin made a commitment which has been kept to really adapt the platform to what we as a publisher across all these sites are looking for.

And we also had components that dealt with video distribution on MSN, so it really was very, very broad based. There are gaming elements associated with it. So it’s a real — we’re never going to be a great technology company, but we need to understand and use technology and we look to Microsoft as being our technology partner as we get our content up there.

NANCY HILL: So the answer is: There are no details that you can tell us now that you couldn’t tell us —

KEVIN JOHNSON: Nothing new to announce today. (Laughter.)

NANCY HILL: Just thought I’d ask. Brian McAndrews said yesterday that agencies invented product placement. And I think we all know that, and it happened back in the ’50s. But in this new world, are the media and technology companies and the agencies all bosom buddies? Are we friends? Are we collaborators? Are we competitors or all of the above?

PHILIPPE DAUMAN: Well, we have Stephen Colbert as part of his show holding a bag of Doritos as he’s running for president. So we have no pride, our programming lends itself to having advertising promotional elements in the shows. You know, we’re not a news organization, we don’t have that much in the way of sports — football players catching the football holding up a can of Pepsi, but we do more and more integrated marketing. We work with the agencies to do that. In fact, many of the — we apply our creative skills to the ads themselves, working with the agencies.

We had — we’re in the midst of a very successful series for Dove where we have Alicia Keyes, I think five or six three-and-a-half-minute segments talking about issues relevant to women. And we find that during the commercial pause, there’s really no dropoff at all in the viewership during the commercial pause because it is creative, it’s engaging, it stars Alicia Keyes. So there’s more and more of that going on and we find ourselves working very collaboratively with the agencies and the clients on the creative on our shows and in the commercial pause.

KEVIN JOHNSON: That just reinforced my earlier comment. Our model and our approach is one of partnership. We want to have great partnerships with publishers, great partnerships with ad agencies and advertisers and that feedback that we get, much like the feedback from Viacom and Philippe’s team. It’s helping us build a world-class advertising platform. And we’re very focused on doing a great job of that in a way that meets the needs of our ad agency and advertising partners as well as our publisher partners.

NANCY HILL: So here’s a loopy question to sort of end this whole thing with: If either one of you could acquire a company — you don’t have to name names, I mean, we know there’s something going on right now outside these walls — but what kind of company would you acquire into the fold of what you already are and how do you think that would help you move forward? I’ll let you start —


PHILIPPE DAUMAN: — we’d buy Microsoft. (Laughter.)


KEVIN JOHNSON: Look, our view is that we have a very — we did some analysis called the value chain analysis. And in that value chain, we are very clear on the things that we are investing in R&D and we’re driving our organic growth. We’ve certainly made a number of acquisitions, smaller things to help round it out, and I think we’re on a path. We have a view of what we need to do and so there’s not a single company that I go through and say, “Hey, here’s the one company we would go acquire.” Obviously there’s dialogue about many things in the market, but our focus is really bringing together the assets that we’ve created organically combined with the assets that we’ve acquired over the last few years to create a world-class advertising platform, and that’s the mission we’re on.

PHILIPPE DAUMAN: So my serious answer on that question is, again, we are looking at acquisitions based on what our skill sets are, which is content, marketing, and so forth. So we have been focusing in the digital area, for example, on sites that fit in — and these are very small acquisitions, targeted acquisitions, that fit in with our brands. So we have made some acquisitions that relate to our kids’ brands, like Nickelodeon. We look to things that fit into our core. We acquired a company called Harmonics, which is the creator of Rock Band, which I mentioned earlier, because it’s content related, it ties in terms of the music that is at the center of our company, and it allows us to engage those consumers we know so well in different ways. You know, we have made some acquisitions that are generally minority interests in small technology-enabling companies that give us the kind of functionality we need in our sites.

Finally, we do look again at discrete opportunities around the world because if you look at the opportunity out there, we found I think more of a U.S.-centric discussion here and now, but there is tremendous development outside the U.S. around the world of media. And in many parts of the world, media are not as fully distributed or as diverse as they are here, we’ve been there for a long time and we look, again, at discrete opportunities to grow our footprint. So we recently entered into a joint venture in India, which is a very interesting marketplace, where media are growing at extraordinary rates, much faster than the fast-growing economy.

NANCY HILL: It’s mostly on mobile, which is not happening here.

PHILIPPE DAUMAN: And mobile is a very interesting area that we should touch on. We’re launching a Hindi language general entertainment channel along with MTV and Nickelodeon, which is already there in India. So there’s a lot of opportunity out there in our space, and mobile is a huge global opportunity. You know, we have deals with about 85 carriers around the world, and you see in some of the territories we’re in like Korea and Japan, much more advanced functionality than you see here. But that is coming here and as sellers of advertising, we view that as a very interesting platform. And you have to view that in a different way. You know, what kind of advertising will people accept on their cell phones? And we’ve started to do that, and that’s a very interesting area and an increasingly important area for Microsoft, I’m sure, as well as for us and all of you out here.

NANCY HILL: One last thing for you actually to sort of wrap this up. What lessons do you think we can take away from the writers’ strike that we can actually take into what is going to be probably an actors’ strike, and we’re going to have to deal with two separate unions, which is not going to be easy for any one of us in terms of how we look at all these cross platforms and how we negotiate those deals? Because it’s important to the agencies as well.

PHILIPPE DAUMAN: Yeah, there’s been — it’s a pretty complicated situation. We’re currently in discussion with the actors’ unions, SAG (Screen Actors Guild) and AFTRA (American Federation of Television and Radio Artists). What it means for the consumers among you is that every studio is getting all production done before June 30th, which is the looming strike deadline, so it won’t effect the movies coming out. Some of the issues that were resolved with the other unions had to do with approval that you need to get from the creators, in this case the actors, before you can have clips of movies online. And, obviously, the way technology works, you can’t go out and seek permission every time there’s a clip that’s put out on your site.

So part of it is an educational process with the negotiators involved. I’m sure we’ll get through it, and it’s — in that area where you have distribution costs associated with it, we have to — we cannot get into a situation where we have to pay huge amounts of incremental monies when the revenue streams aren’t that clean in many cases. So these are difficult negotiations, a lot of —

NANCY HILL: I’m glad you’re going to do it before we do, because ours is up in the end of the fall, and we’re going to have to go through that same thing.

PHILIPPE DAUMAN: But we successfully concluded it with the other guilds, so this is the last piece of the puzzle.

NANCY HILL: I think we’re just about out of time, so thank you so much.


NANCY HILL: It was really great to have you.


NANCY HILL: Thanks. (Applause.)