Welcome to the stage, Mark Penn, CEO of Stagwell. Mark founded Stagwell in 2015 and has served as its CEO ever since. Mark has a career spanning 40 years in advertising, market research, public relations, polling, and consulting. Prior to founding Stagwell, he was a founding member of the global market research firm, Penn, Schoen & Berland Associates, whose clients included Texaco, AT&T, Ford, Verizon, and other Fortune 500 companies. He has also held senior executive roles at Microsoft, serving as EVP and Chief Strategy Officer, before leaving in 2015 to found the Stagwell Group. Mark attended Harvard College with an AB in Social Studies, and he attended Columbia Law School. That AB in Social Studies doesn't mean anything to you, but it's one of the hardest degrees at Harvard because it's interdisciplinary. So you worked really hard for that degree.
Nobody knows but other Harvard people. So let's talk about leadership. Mark, as you know, we keep track of sort of revenue efficiency per employee. You're running about 11,000 employees. Is that, a round about, right? 11,000-12,000 employees. And my question is about culture. My belief is that lower churn drives higher returns on capital and more productive people. So my question is, when you think about culture at Stagwell, what's the culture you're trying to create, and what metrics do you look at to figure out whether your culture is actually working and being implemented?
Well, I think when it comes to culture, I try to say that we are trying to drive a high performance, collaborative culture.
Interesting.
I think that those are the two key words. We're trying to drive home that being collaborative is not inconsistent with high performance, that in fact, the opposite. I always joke that most of the people who run the business units were entrepreneurs.
Yeah, that's true.
Very few of them played team sports.
That's true.
Right? They always played the individual sports. So that's why every two weeks, they all get together. That's why they, y ou know, we just all got together, in Miami, as we do, really three times a year. But the whole idea was, if you didn't really know each other, you didn't trust each other, you didn't work together, that and too many. You know, I kind of looked at the other holding companies, and I was in, I was in one of them, and we hated all the people who were who ran the other companies. We had no connection whatsoever.
You competed with them.
Yeah, we-
Mm-hmm.
Generally, new business was like feeding piranhas.
Mm-hmm.
So, I think that one of the core values here, in terms of what I have to provide as the leadership for people, is that they can be high performance, they can maintain their own characters and cultures, and they can learn to work together to the greater good of servicing bigger clients on a larger scale and, stadium.
Is your point of view, d o you track turnover? Are there any metrics you use to?
We do, we do track turnover. The truth of the matter is, if you look at our senior executive teams, there is almost no turnover.
Okay.
And we have not lost, you know, I mean, on a voluntary basis, even the people who everyone predicted would leave after.
The turnover, yeah.
E arn-outs were done in two years, did not leave, right? Because they see this as a culture where they have freedom, they have opportunity, and the ability for it to grow. I think one of our chief assets is, you know, not technology, but talent, the ability to attract talent. You look, we just added David Sable as Vice Chairman, right? So, you look at him, he ran Y&R.
Mm-hmm.
He headed one of the biggest units. He had, like, 50,000 or 60,000 employees. You know, he brings to the culture kind of a knowledge of the scaled businesses, you know, which I was in, but a lot of the people who ran it ran smaller businesses. Right away, I think he's making a good difference.
Well, and I would say, when I picked up coverage, I think I talked to seven division heads of your different divisions, and I would say one of the things everybody told me was they have these weekly call-in meetings where they work together. They all feel like they can service larger clients or get new business easier because some other division has a relationship, and so it's a warm lead. I think most people said l ike, I'm like: "Why are you there?" Because these are really entrepreneurial guys. When you talk to them, they're about inventing new things and innovation. You're like: "Why are you sitting in this?" And they're like: "Because I can do more business here.
Mm-hmm.
I can have more impact. I can have." And I think most of them said that, that there's real advantages to being, to attracting the kinds of clients in a bigger enterprise than they could have standalone.
I look at our presence just at CES last week, right? So, of course, we announced a partnership with MNTN there.
Yeah
In terms of selling our tech products and also us kind of carrying more of their media. But at the same time, you had a collection of all of the agencies working together in a single Stagwell space. And again, bigger client traffic than ever. Major pharmaceutical companies, car companies, fast food companies, really coming through our space and sitting in and listening and learning. And then we administered the tours. We saw our rival tours were empty and ours were kind of completely filled.
Okay.
So, I think we have you know, a gain, that's all because the leadership teams are top-notch, and they are working together and cooperating.
You've gotten big enough. I mean, you have these entrepreneurial people, but in a, it's gotten big enough that people have to care. Okay, let's, let's move to the future of work, Mark. So what's your current work-from-home policy versus in-office, and what percent of your folks are not coming into the office?
Uh.
On days that are mandatory?
I think that on the corporate group, we just went, as of Monday, as of next Monday, to four days a week.
Wow, that's the highest I've heard.
So, and I think that was a request. All the senior managers are in five days a week, right? Except when they're traveling or sick or have an Amazon delivery. No. So but they the senior managers are in, and they wanted their teams in more often. And but I'd say the individual companies, we have left it to the, to the cultures.
I see. Okay.
What I would say that, it ranges from the engineering companies, which tell me they're never getting another office.
Okay
To the public relations companies that say they want their people back, to the agencies that are sort of in the middle. And so there's a fair degree of work from home. I think there's more and more trickling in. It enables us to continue to cut our footprint in office space, which, of course, has always been a major. I had already been doing that.
Mm-hmm.
I wish they had accepted the measures that I wanted to do before the pandemic.
Yeah
T hat then they were ready to accept after the pandemic, but I think we continue that person.
So your view is that work from home is gonna be, like, forever hybrid and forever, like, about half and half in office, out of office? What do you think?
Yeah, I think that's my point of view of where this is going to settle out, right? Right, I think companies are settling to that they are, they're just not, "Are we going back to the office culture that we had?" No. "Are we going to the pandemic level of culture?" No. "Are we gonna land somewhere in between? Is it gonna depend company by company?" Yes. I myself go into the office every day. I don't like working from home. I feel you're not aided by the team, that you really need to carry out things, and I think, like I said, the corporate group agrees with me. The creative groups, as I say, I think they're gonna continue to vary widely.
Mm-hmm.
I arrived at one of my L.A. offices, and it was locked, and nobody was there on a Monday.
Seriously? They didn't know you were coming, presumably.
They didn't know I was coming.
Wow! You were locked out of your own office. Lovely, lovely. I would guess that's a faux pas somebody hears about.
Yeah.
Okay, let's talk about Stagwell goals. So we're gonna sit here a year from now, Mark, and I'm gonna hold you to some goals. So a year from now, what do you want Stagwell to accomplish?
Well.
B etween sitting here today and sitting here a year from now?
Yeah. So look, I think we want 2024 to be a good, solid year. I think that a lot of the headwinds we saw this year do not seem to be present. The tech companies are moving, you know, from a year of efficiency to what I call a year of competition. We got rid of the auto strike, we got rid of the entertainment strike. I think businesses are not in the crouch that they were in, which is fearing a recession so much that they were all holding back. So I expect 2024 to be a solid year. The political cycle is going to be a record cycle. By the end of the year, you know, I expect us to have and I, you know, obviously, we're gonna have guidance February 27.
Mm-hmm.
But I expect it to be a solid year. I expect us to get our research products to market. In particular, I think that's what we're focusing, you know, right now, right now on the cloud. I would expect us to have done, you know, we have one more disposition, you know, in the workings. I would expect us to continue, you know, our prudent M&A, maybe even doubling up to make up for, I think, this year and kind of keep us kind of growing on that platform. I'd expect us to be down at the 2x leverage when, when I look forward to next year. I would expect us to be ready to deliver another 10 Super Bowl spots like we're gonna deliver this year.
Okay, 10 Super Bowl spots. Okay, I'm gonna hold you. That's a lot of goals. Fair enough. Let's talk about Stagwell Marketing Cloud. A year ago, when you sat on this stage, you said, "My primary focus is the Marketing Cloud, building out cloud, getting its capabilities, getting up and running." What have you accomplished over the last 12 months, and where does Marketing Cloud, Stagwell Marketing Cloud, go from here?
Yeah, I think that we now have kind of clarity of exactly what the cloud is, what our component products and organizations are related to it, right? When you look at the Stagwell, the Stagwell Marketing Cloud group, right, there's two divisions of it. There's what we call Advanced Media Products, right, Advanced Media Platforms, and those platforms include what we have in travel, what we have in news, what we have, what we've just built for RealClearPolitics, you know, and what we're building for the stadiums. We're just waiting for Major League Baseball approval on our augmented reality experience. If we get, we beta tested in two teams last year, and if we get approval.
I remember
W e'll be available in every team, and that will open up.
In every stadium?
Yes.
You don't have to get the stadium's approval, you just need MLB's?
No, we only need MLB, because then we're in, then we're in the MLB app.
Oh, I see.
And then the MLB app is carried in every stadium, and that will enable us to get the sponsorship revenue that will bring that down.
Increase the scales overnight instead of going venue by venue.
Right.
Okay.
Exactly.
Gotcha.
And so that's where we put the focus, the focus on, you know, the focus on that product. You know, I think our PRophet product is now being combined with Koalifyed to be PRophet.
So they all think it's spelled the way I spell it.
Yeah, with that.
Which is P-R-O-F-I-T.
P.R., yes, yes.
Who doesn't mean that?
It's a PRophet because it predicts.
Right.
It was before AI was a thing.
Like the Delphi.
Uh, yes.
Okay.
PRophet was PRophet before AI was a thing because it used AI to write your news release, then use predictive AI, which is a different kind of AI, to see who's gonna cover it positively, then write the pitches, then send it out. We've won two contests as the top product. I find the PR industry, which I was in, to be a difficult industry to sell technology to. If I were at Burson, I would have deployed this instantly.
I think we're making progress, but the product itself is really highly functional now, so we're really focused on sales. I think in the research products, that's really what's up at bat now. We have what we call the Harris, you know, brand terminal or Harris, which we've now branded, like, basically five products around a Harris Quest notion.
One just does tracking of your brand and your competitor's brand. Another product allows you to do DIY surveys, another allows you to do more professional DIY surveys, another allows you to form communities of, say, product interests or other interests. Another uses AI to analyze surveys and focus groups. And so that suite of products should really be to market by mid-year, as opposed to the Harris Brand Platform has about 150 major corporate clients now and is really getting good adoption.
Okay.
I really think that suite is going to have a very strong place in the market, and remember, I and the team have incredible experience in the research field.
But why do a set piece of hardware? Why not make it just software only?
Well, it is software.
But you said it had a Harris Terminal.
Um.
Why, why have that software?
Yeah, but it's a soft terminal. It's not a physical.
Okay, when you say.
It's a soft terminal.
Terminal, I think Bloomberg terminal.
Yeah.
Right. I think, which is really a big friction point.
Well, but even the Bloomberg Terminal, you can log on now if you have a key.
That's true.
Yeah, yeah.
You're not doing the terminal requiring.
No, we're not giving you any hardware.
So an app.
Mm-hmm.
What I would call an app.
Yeah.
Okay. Right, hard drive. And so when we think about relative size and scale of these, I get that they're all very sexy and new, and you're focused on, these are all using the cloud, right? We're on a cloud question.
Mm-hmm.
These all use the cloud, right?
And so they're all, the products are going to be centralized. By mid-year, they will all be centralized on a single platform, and that single platform will allow you to select which products you want to opt into.
Okay.
'Cause effectively, you're going to have, a nd then there's a suite of media products that are in development. So I am taking some, you know, as I say to investors, we are taking some of the investment. Instead of buying, we are, we have bought some pieces of it, and probably some we'll continue to buy, but we will finish out and get to market with the suite across these three industries. So where we are from last year is PRophet is out.
Yes.
The brand terminal is selling.
Yes.
The rest of the research products, which, remember, we bought something called Maru, and we're re-skinning and redeveloping kind of the interface to that product to give us the other capabilities. We'll, n ow, as you know, you're going to meet Elspeth-
Yeah
W ho is the new CEO.
Yeah
Who worked with me at Microsoft and was at Uber. And you know, it's a team of about 60 people, you know, behind the cloud and behind the individual elements of the cloud. So it is getting more and more real. Remember, it's about $200 million in revenue.
Yep
W hen you add it up, so we're not starting from a zero base. It will be a matter of growing the products and then, you know, right now, it's a lot of revenue, not much EBITDA, because we're investing in it, and that will change over the next couple of years.
Is it your point of view, o it feels to me like from all the things you said, the PRophet product or, it feels like the app is the biggest one. If MLB approves this, feels like that's the biggest economic upside. Am I wrong about that, or is the research the biggest? What's the biggest economic upside?
You know, in tech, when you have a portfolio, you never actually know which is, but-
Is that true?
Well, because sometimes you think that things are going to take off, and something else takes off.
Hmm.
Because, like, we've our latest product is called SmartAssets.
Okay.
Right? And SmartAssets, we haven't brought that to market, but what SmartAssets does is takes your asset, it figures out what the content of the asset is, it then tests the effectiveness of the asset, and then grades it, right?
Okay.
That product has incredible. E very time I unveil that at a client meeting. I get, "I want that.
Interesting.
Right?
Okay.
And, you know.
So that's going to get client adoption really fast, so it might be the fastest growing?
That actually is going to get. But you are right, the single easiest checkoff.
MLB app
Will be MLB approval.
Right, 'cause suddenly-
Everyone can say, "Oh, you know, they got MLB approval. They're going to be in all the stadiums." That will give us scale of an AR experience-
Mm-hmm
A cross tens of thousands of fans.
That drives revenue how?
Sponsorships.
Right. Okay, so I would call it advertising, but sponsorships.
Yes
I s a broader.
Yeah.
Okay. So that would be the biggest if it gets approved. The timing on that is, what, how does the MLB work? Do they have board meetings, so you know, like, once a month when?
We put the application in.
Okay.
It's a question of when they-
Decide to get to it.
Yeah.
Okay, fair enough. Okay, so in terms of cloud overall, when I think about 2024, moving from $200 million of revenue, how much growth would you expect out of the cloud business in 2024?
Well, like I said, you're still going to have to wait for February 27th.
Okay.
We'll have earnings and projections.
But you're going to give us general guidance.
Yeah, I am going to give you general guidance.
In terms of cloud, I assume it's going to be a faster growth rate, but it's a small number.
Correct. So, but I'm kind of, you know, the focus on that will be how individual products grow, right? Because we still have a-
I see
... in that number-
Yeah
... there's like multi view. There's a number of kind of established companies and products, which we're really, I think, focusing on is: Do the research products start to take off?
Mm-hmm, or PRophet.
Do SmartAssets get out?
Smart assets.
Right.
Mm-hmm.
Does baseball get its approval?
Yeah.
Because any one of those has, you know, can shoot up over the next-
Right
... two years pretty quickly.
Even if baseball doesn't give you approval, you can go venue by venue.
Correct.
It just takes three years instead of overnight, basically.
Right. What we decided on the product was, let's go all in on MLB approval, because-
... Might as well.
You're right. And at that point, I don't need 20 people calling 20 stadiums, right?
Yeah.
It's a lot easier.
Yeah, yeah. No, that makes tons of sense. Well, I like the cloud, 'cause it should have really high returns on capital, because it's a software idea, so-
Let me just kind of comment that coming from Microsoft, and, you know, having Steve Ballmer as my core investor, we didn't do that first. We did services first, because too many people develop tech products who don't have clients or any way to get them to the market.
I don't get this. We're talking about cloud, but you did services first because of something-
We did services first-
Slow that down.
Because we have 4,000 marketing clients.
Okay.
The people who are gonna buy the platforms are the same marketing clients. If you look, like, the biggest client we have-
Mm-hmm
... for the, influencer platform-
Yep
- is P&G.
Yep.
So, the fact that we have established all these client contacts will facilitate us getting these products to market.
You're making the point that you went to services first, because now selling them cloud services is an easier on-ramp into the cloud services-
Than doing it alone. Correct.
Than rather doing it alone. I don't really get that, though. Why would that be true?
You know, it's why we wind up picking. There are just so many tech products out there that are good technology but don't have clients.
I see. Okay.
Because getting the-
Cloud may have great tech, but if it doesn't have clients... These are all warm leads now that you have services?
Correct.
Okay. Are the margins, I assume the margins go up under cloud?
The margins go up under cloud, yes.
Higher, it's higher margins. Okay, great. Okay, that makes a ton of sense. Okay, cool. So on your third quarter call, you referred to this point: "We're going from the year of efficiency in 2023 to the year of competition in 2024, as FAANGs compete directly with each other." Let's expand on that idea, and how does that help Stagwell's economics? Like, I don't understand why it's important for your third quarter call, because I don't understand how it fits here.
Well, because what happened in the year of efficiency was that we had a lot. You know, if you look at our largest single kind of business is digital transformation.
Yes, that's true.
... Meaning a combination of design and engineering to solve, what I'd say, consumer touch points, right? Anything that touches the consumer, right? 1 in 10 employees overall are engineers.
Yep.
Like, 40% of the digital transformation sector is engineers. And the tech companies went into a year of efficiency, which meant they stopped all their projects, they fired a lot of people, and that had a definitely significant detrimental effect. Now, however, their AI is here. You know, if you think of AI in terms of chips, cloud, and applications, right? They're making plenty of chips. There's a competition for cloud, and then there's a competition for the applications. And then everyone who has a site or consumer experience is questioning: "Wow, how do I change that for AI, based on AI?" So, like, so this means an entire new group of assignments for us, with A, our largest clients, the tech companies, and B, digitally, generally, consumer companies or companies that touch consumers.
You know, I like to give a good example of, say, an office products company, and we're, we're changing their site so that you can say something like: "Hey, Needham, we're having a conference here. What supplies do I need for the conference with 500 people," right? And it will tell you everything you need to buy and say okay, and then will tell you what's the best ranked, and then "Okay, click, I'm gonna buy it." So you're gonna see a lot of things where AI is integrated into consumer experiences. So how is that good for us? That's gonna take a lot of new digital transformation work.
Okay.
Digital transformation is like everybody had a website.
Yeah.
Right? Everybody had a picture you can click on and buy.
Mm-hmm.
But everybody doesn't have an AI-based experience.
Yep.
Right? And those are... I think we're in the think what I need to have phase, and I really think by mid-year of this year, this should be really cooking.
So I guess my question on that is, one of the hard things about Stagwell is it sort of doesn't have a direct competitor, because it competes against the ad agencies in a lot of the marketing and creative stuff, and it compete-- digital transformation is sort of more competing against Accenture and Deloitte and these-
Mm-hmm
... efficiency. So this product here, this AI, is-- What you're saying is you're gonna pivot back towards the Accenture kind of work and away from-
I think in general... Well, that was always meant to be the higher growth engine of the company.
Okay.
Right? And so the year of efficiency cut into that.
Okay.
And when I say competition, what I mean is none of the tech companies own AI. None of the tech companies own the cloud.
Yes.
That means that they're gonna actually have to compete for that business for the first time, right? If you think of the tech companies-
Well, sorry, let me just... I'm stuck on a thing. I would say three companies own the cloud. AWS has a 35% share, Microsoft a-
Yeah
... 20% share, and Google-
Correct
... ten.
Right.
I would say those three companies do control the cloud.
Well, yes, but. Yes, that's right, but that's three.
Okay,
Generally, in tech, it's one.
Okay.
Yeah.
Okay, I gotcha. Okay. Okay.
Right, and I think the same thing with AI, and so I think that, again, is naturally gonna generate more business and activity.
Okay
... from these companies.
Okay, I'm with you. Okay.
'Cause they can't avoid spending the money on marketing and competition.
It comes back into digital tansformation.
Correct
... which is where it started. But then we had this year of efficiency, so everybody stopped doing everything for a while. Now we're gonna be back because they've got to figure out how to gener- By the way, I have companies telling me they're gonna cut costs by 20%-30% after investing money in 2024 to drive their generative AI. Then they're saying they think it's, automation's gonna replace a lot of their staff. So, that would imply that you're- I don't know if you agree with that, but that would imply these digital transformations have to happen faster? 'Cause if your competitor does it, don't you have to keep up? Become stable stakes.
No, I agree with you on that. I've always agreed with you on that, right? And in terms of, as I used to illustrate that I used to do surveys with 65 people-
Yeah
... and 50 interviewers, and key punchers, and now we're down to 3.
Mm-hmm.
And so I think you kind of, you look through an examination of processes where you can really skinny down, you know, the labor, and build in, and build in efficiency on it. And the question is: How, always, how wedded are people to doing things the old-fashioned way, and how much can we shake them up? I think internally, for our operations, we're more of a Tier One content-
Okay
... which means that we're more highly people creative.
Okay.
Consequently, I think there's less impact on the processes than, than, say, if we were a Tier Two, you know, mass content producer. Those, I think, had better... You know, they're gonna have a tougher time in terms of kind of adapting as quickly as possible.
I'll tell you, I came into today thinking the big benefit of generative AI was gonna be cost cutting. No way. Every CEO has said the big impact in 2024 of generative AI is ten times more content creation, a lot of it crap. And that has all kinds of implications about the value of premium versus user-generated and cost-
Well, that's where SmartAssets, you know, that's where I'm getting in just an incredible response because every customer is saying, "We have this huge mass of content, and we don't know how to rank it, and we don't know how to place it." And this is why the SmartAssets concept, as we roll that product out, just may wind up being. You know, it was. You know, we hold an internal Shark Tank each year.
Mm-hmm.
The Harris Brand Platform won one year. Shark, the SmartAssets, won last year. So it's been in, you know, basically a year of development to get it out, and we have 40 entries for this year's internal Shark Tank.
Well, and it came out right when generative AI was starting up, 'cause generative AI started in November of a year ago now.
Right.
It was gaining speed as people are seeing content being created by Generative AI.
Exactly
... really increasing their ability to make content. But to your point, ranking it and giving it sort of where it should be sitting is a smart idea on how to represent-
Right, and just being able to categorize it all.
Yeah.
Sort it, and stick it in the right bin.
Yeah, well, Generative AI should be good for that.
Exactly.
Any kind of AI should be good for that. Okay, great. So Stagwell recently bought Movers + Shakers, the number one ad agency making TikTok ads. Can you talk about how marketers are comparing UGC, so user-generated content, with premium content, like film and TV ad units? Which will grow faster in 2024, and which will be larger in 5 years in terms of total ad spending?
Well, there's no question that what you call USG-
Yeah
... is growing faster.
Yep.
I mean, I think that the-
UGC, I think.
Yeah, UGC.
Yeah.
But it's not really, it's still created by agencies. So we've invested in Movers + Shakers. We, you know, will probably keep investing in the space because that kind of content is created by a different group of creatives than create the Super Bowl spots. And so I think a lot more resources are gonna flow into that, but I think that it's part of having a complete offering. I think when people hire a marketing company, they don't wanna hire one marketing company to do the TikTok and another company, you know, to do their major campaign. They want it all in sync.
Mm-hmm.
And, that's why I think that actually Movers + Shakers really helps our overall offering greatly.
Well, and one of the things you've been tracking, you've been giving us for a long time is, like, new business wins. Hasn't your new business wins been stepping up every time you add one of these pieces that you didn't use to have, 'cause it keeps more in-house, and a guy's like: "This is a one-point solution. I can deal with one firm"?
Exactly. I think that new business has been strong. Even during kind of this more difficult 2023, new business has continued to be strong because the Stagwell name and a place for people to understand that it's not about one agency or two agencies, but about getting fully serviced by experts across these disciplines, right? And so if you look at it, we're not smushing together all the brands. We're saying that, "Look, here's now a partnership with 72andSunny and Movers + Shakers, and this partnership gives you the best in, say, you know, original creative and the best in doing these shorter TikTok videos. And they can really work together on your business and be co-responsible for the outcome," but they still maintain their individual character that makes them so special.
I remember talking to you early on and saying: "This is really confusing. Can't we just put all these into one thing?" You're like: "No, they have brands, and people come to there for that brand." And if they went... What's the one that's 72andSunny ? And S- what's that called?
Yeah, 72andSunny .
If they come to 72andSunny , they aren't coming to S-. I'm like, "Okay, I'm lost," but, but-
Well, also in terms of talent, right?
Okay.
So if you're like a TikTok social video maker-
Yeah
... you're gonna wanna work at Movers + Shakers, right?
Right.
We're gonna get the best talent. We're gonna get the best research talent at Harris.
Mm-hmm.
I do think that that's why, you know, getting the brands to work together but keeping their character is more complicated, but ultimately more successful.
By the way, this is a piece of culture you didn't mention, right? You're saying... I mean, that's a hard thing to do, to keep these all independent, but all have them you know, running in the same direction. Racing in the same direction is harder when they're all allowed to keep their own individual cultures, in a sense.
Well, and that's why we've built more of a Noah's Ark, meaning-
What's that mean? I hope it's not sinking.
Meaning no more, no more than two of a kind.
Oh.
Right. So you see ...
Okay.
What I think happened in the large holding companies is they'd have five of a kind, and that just bred too much competition.
Two of a kind doesn't do that because?
Not really, because there's conflicts, there's shared marketplace.
Okay.
Two of a kind is okay, but four of a kind-
Is overreach.
or five of a kind, really.
Okay. I, I have lots more questions for Mark before I move on. Any questions from the audience for Mark? No. Okay. Performance and data revenue grows 11% to $72 million in third quarter, driven by M&E, so media and entertainment in the travel verticals, and also very strong in the first nine months. Is digital advertising most effective at the bottom of funnel, and it's not, there's not really room for it at mid or upper funnel growth?
No, I don't think so. I mean, I think that digital advertising works, works pretty much across the funnel. I think digital advertising and its use is related to the size of the brand. Okay, well, let me see. I have an article that I wrote: Are you Coke or are you diaper, right? So-
I hope diaper, 'cause I don't drink Coke.
So if you're selling this, you're selling this to, you know, hundreds of millions of people. So does digital advertising make the most sense, not targeted digital advertising? Probably not. Probably sponsorship of the Olympics and the Super Bowl and broad scale marketing is most cost efficient. If you're selling diapers, there are only 3 million babies actually born in this country. Maybe 1 million are born to people who've had previous children, and so they already have their diaper picked. So that means there's only 2 million potential customers whom you have to reach in the final stages of pregnancy. That takes a digital marketing machine.
I'll turn that right off.
I love that.
Yeah.
It takes a digital marketing machine.
Okay.
I always say to clients: Are we talking about Coke, or are we talking about diaper, or are we somewhere in between, where there's an ideal mix-
Okay
... right, of the kinds of mediums that you should utilize.
All right, so it can be full funnel. I would have said connected television is the best example of a digital ad format that's top of funnel. And what we're seeing is a lot of my CEOs are pushing that down into performance, because digital, the go-to reason to go to a digital ad, is performance or feedback loops or... And so what I see is that connected television placement of top of funnel in digital world being pushed down towards bottom of funnel performance, which makes me believe that digital advertising actually doesn't have a full funnel applicability. But you would push on that?
I would push on that. I think that it also depends somewhat on the ad formats, right?
Okay.
Right. For what you're thinking of as top of the funnel, you know, you're looking for a somewhat longer form, an ability-
Yeah, I am.
... to have a greater impact. And I think that you're gonna have to see, as connected TV evolves, is it gonna have the kind of longer, more satisfying, more emotionally communicative formats? You know, is it just gonna be linear TV, but somewhat more effective, right? And then, as I said, you know, top of the funnel is like Super Bowl, it's sponsorships, it's, you know, it's-- there's lots of events and so forth. So I don't think it's gonna be limited to that, but then I think what's happened is that CFOs and CEOs have turned to marketing, and they want more immediate results.
Yeah.
Right? And they're not as content to say, you know, "Oh, we're building the brand this year, and we're gonna sell it next year." And I think that pressure, again, favors Stagwell, because Stagwell is primarily a performance marketing company engineered from those techniques.
Right. But that also argues, you're the, what do you call yourself? The contender. What do you call it? You're the challenger brand.
Yes.
You're newest, 2015, and you're all, I'm just gonna say, bottom of funnel. So you're sort of agreeing with me that marketing is moving bottom of funnel, and digital is best placed at bottom of funnel-
Yeah, I do agree.
Even in how-
Yes
... your strategy of formula-
Yes
... being formed.
I think that there can be a straddle position for Connected TV, but yes, I do agree with you on that.
That's interesting. Okay, questions from the audience? Okay, let's do Harris Quest.
Oh, there's one.
Oh, yeah, go!
If you'll indulge me, it's sort of on-
Clint is my next speaker. He's a CEO of Curiosity Stream.
Sort of on personal side, but I think, you know, makes a difference. I worked with a colleague of yours about 20 years ago. He told me a story about you. He said that Laura's alma mater initially denied you admission to school as an 18-year-old kid, and you went to the admissions committee and talked them into admitting you. Is that true?
That is a true story. I was on the wait list. I went up to see the dean of admissions. At the end of the, so the dean of admissions saw me. He said: "You know, we should have accepted you ahead of a lot of other people," and he sent me, four days later, an acceptance letter.
This was Vince?
One of... No, it was Rosen.
Oh.
Yeah, it was, and
Well, he was right, by the way. He had good judgment once he met you.
Yeah, I contacted him recently to thank him.
Did you?
Right, and he said:
That's gonna change your life.
Oh, I've been following you.
Change your life.
They only took 14 people off the wait list that year.
You were number one.
Oh, why? No, no, he just, I remember his phrase at the end of the interview, and he, you know, a lot of people say that, but they don't do anything.
... Well, they made a good choice, and you made a good choice. Everybody wins in the end. Okay, Harris Quest, can you explain what it is, pace of client adoption, how big its revenues could be over the next two or three years?
Explain-
This is the Harris. We're talking about research, so Harris.
Yeah
... Harris Quest product.
No, I mean, look, I think the Harris Quest, remember, it's somewhere around $50-$60 million in revenue. And so do I think really once we get that cooking, we can double or triple that over the next few years? And that's just really the tech products related to it. We're just seeing very strong adoption of those products in the tech industry. Unlike communications, the tech industry is fundamentally technology driven-
Mm-hmm.
It's speed-driven. You know, everybody has conceded that you have to do the interviews online.
Yeah.
I think we're also building a panel. The other thing that we're doing is that we're deliberately building up our panel because internally, we spend about $50 million a year on panel data.
Okay.
We can internally capture probably 25% of that.
Meaning you can lower by $10 million?
Yeah.
By spending $2 million internally and save $10 million. Is it all going to Nielsen? Is that where you get panel data?
No, no, there's like five or six specialized panels in the-
Oh, I see.
... in the survey industry.
Okay. Yeah?
Can I ask you a question? I understand Diet Coke. I understand the comparison with the doctors. That seems, the second seems obvious, but the Diet Coke, now, how do you measure success for that?
Well, look, attribution is never perfect in this industry r ight? So when I was on the other side at Microsoft, I would do a lot more testing than people usually do, or I would do, you know, market-specific tests, you know, to before I would put in totally new techniques, I would do more market-specific tests.
Okay. Were you there in 1999?
No, I was a consultant then.
My last question, because we're against time, is political ads. So Group M, I don't know if you saw, recently came out and said now it's up to $17 billion, is what they're projecting.
I saw that.
Goes up every three months. So now they're at $17 billion in political. How much do you benefit? I know you have a big advocacy group, and so tell me what you benefit from, from political in a presidential year like this year, where there's going to be record spending.
Well, I think you're again, about 10% of our business is political.
Yep.
It's, you know, low dollar fundraising is probably the biggest flywheel.
Yep.
But we also, you know, buy $hundreds of millions of political media-
Yeah
... which is interesting because it's local media, as opposed usually to, as opposed to national media, because it's got to be targeted.
Mm-hmm.
And so, you know, I think if you go back and look at the figures, you know, in the 2020 cycle, compare that... You know, 2022, we had a bump. You know, we don't- we expect to get a record bump out of that.
I was just going to say, 10% feels like it could be higher if we're going to have 34% higher spending than two years ago.
Yeah, and certainly in the fourth, when you get to the fourth-
Mm-hmm
... you know, when you get to our third and fourth quarters-
Yeah
... you're going to have a really nice bump, which is why I couldn't wait for 2023-