Frenemies: The Epic Disruption of the Ad Business (and Everything Else) (14 page)

Months after the deal closed, Kassan remembers walking into
London's Connaught Hotel with a client who spotted Sorrell and went over to say hello. Kassan followed and offered his hand. “He wouldn't shake my hand.” Kassan says they only began to speak again some years later when he was hosting a dinner at Nobu for his client, AT&T, also a WPP client, and Kassan told his friend Irwin Gotlieb that Sorrell was not welcome—unless he apologized. He says Sorrell apologized. Told of Kassan's account, Sorrell says he doesn't recall the hotel incident or the AT&T incident. What he does recall is this: “Michael was not involved in the Cordiant negotiations. He was paid a fee by Cerberus for advice.”

Sorrell is famous for his intensity, which is almost exclusively devoted to WPP. His second wife, Cristiana Falcone, says he has few close friends, and even his oldest friend, Simon Schama, says they see each other maybe once a year. Longtime client Jack Haber of Colgate says of Sorrell, “I enjoy his company. He's very funny. . . . I respect him.” But “I never for a minute don't remember that Martin is my buddy because I'm an important client to him. It's a billion dollars of business.” He remembers attending a cocktail party at the Consumer Electronics Show and he and three WPP executives agreed to go off to dinner. “I said, ‘Let's ask Martin.' They said, ‘Nope.' He wasn't going to be fun at dinner. I don't mean any disrespect, but he's a very tough, demanding boss.”

Cristiana Falcone likens her husband to the obsessive Dustin Hoffman character in
Rain Man.
Seeking to add variety to his life, she booked a vacation to Uruguay for ten days. He quickly developed a routine. “We must go to lunch at one
P.M
. He would have a tantrum if we didn't sit at the same table.” He would ask the waiter what the dessert choices were, but he always ordered the same dessert. His BlackBerry and iPhone and iPad accompany him everywhere. “This guy lives and breathes for WPP. He's persistent. It's what makes him
successful.” Yet she takes care to introduce the testimony of three sons from his first marriage: “His sons say they had a great father.”

To understand Sorrell's persistence, consider how he pursued Falcone. She was born in Rome in February 1973, the daughter of an airline pilot and senior Alitalia executive. After receiving an MA from the Fletcher School of Law and Diplomacy at Tufts University, she worked for Shell and for the UN's International Labor Organization. She eventually joined the World Economic Forum as a senior manager (and later, director) of the media and entertainment industries group, which coordinated with executives from these sectors who attended the World Economic Forum in Davos and elsewhere. When Sorrell laid eyes on the tall, slim, vivacious blonde with an Italian accent and a feisty I-don't-bow-to-anyone personality, he was smitten. “For four years,” she says, “he invited me to join him for a drink in Davos and I did not go. He tried to convince me he was the right partner for me.” She had a Swiss boyfriend, and she declined. When she attended the Cannes Film Festival, she left a general message on her office phone that she was in Cannes. He showed up there. He pursued her by appearing at Forum meetings in South Africa, India, and Japan. Knowing that the Italian name her parents gave her was “Savage,” he says, “I named my dog [an Irish setter] after her.” He wore her down. She worried about the three-decade age gap, but was taken by his ardor, and his charm. She says, “He listens very well. He takes it in. He's very inclusive.” He treated her like an equal. They married in 2008.

Charlotte Beers, who once reported to Sorrell and remains a trusted associate, vividly recalls his bitter divorce in 2003 and how unhappy he seemed. She went off to work in George W. Bush's State Department and fell out of touch with Sorrell. When they reconnected after his marriage to Cristiana, she was struck by the change. “When I came upon him he looked ten years younger. He had a different energy. He
had a delight in life. I think it's from having a very happy union. He's amused by it. He has a wonderful capacity for play. You'd never believe that because of how hard he works. But Cristiana is a player. She likes to dance. She likes to go to unusual things.” She lured him to attend Burning Man in the Nevada desert. She gave birth to their baby daughter in the fall of 2016.

One can fill notebooks with the criticism heaped upon Sorrell. But these don't paint a complete picture. If we just froze the picture when David Ogilvy called him “an odious little shit” we would miss what happened next. After they met for the first time, Ogilvy wrote Sorrell: “To my surprise, I liked you. . . . I was flattered when you quoted my books, and even more so when you invited me to become chairman of your company, which goes by the name WPP. I accepted your invitation. . . . It remains for me to tell you that I am sorry I was so offensive to you—
before we met.
” When Ogilvy was dying of cancer, Sorrell visited him and promised to look after his wife. He did, and according to Miles Young, “it was Martin who paid for Ogilvy's nurses. His image is as Genghis Khan of the ad world. But he's really very caring.” When David Moore's wife was diagnosed with brain cancer in 2007 and was being rushed by ambulance to a New York hospital, Moore was in London. He told Sorrell he had to rush back to the States to be with his wife. “When I landed I had three voice messages on my mobile phone from doctors Martin had called. They called me to offer their services.”

Sorrell's vivid personality can overshadow his professional accomplishments. “He's gone to places no one has gone,” Shelly Lazarus, who was CEO and is today chairman emeritus of Ogilvy, says. “He's explored the future. He's taken chances. He thinks long term. Everyone thought he was crazy when he invested in his first research company. He was right. He diversified WPP. He invested in programmatic buying when no one was sure what it was or where it was going. He is
constantly traveling, soaking up information, figuring out the next thing.”

The
Harvard Business Review
ranked him as the fifth best CEO in the world in 2015. The only other marketing holding company executive to make the list of 100 of the best-performing CEOs was Maurice Levy. Sorrell had to be pleased that Levy only ranked thirty-ninth. In 2016, Sorrell was placed in the top three. All three were lauded for their courage in implementing long-term strategies.

Whatever their differences, there are many shared views in the agency world. They commonly believe advertising and marketing should be viewed as an investment in growth, not just a cost. They share a frustration that too many clients, led by procurement and chief financial officers, focus on the short term. By wrenching costs out of marketing budgets, they complain that clients are crippling agencies and failing to invest in their brands.

As Sorrell looks down the road, the two grave nemeses he sees to WPP's business are the digital giants, like Google and Facebook, and the consulting and software companies. This is particularly awkward since the holding companies place billions of dollars worth of ads with Google and Facebook, and often employ the services of consulting and software companies. This is why Martin Sorrell popularized the phrase “frenemy” to describe companies that both cooperate and compete. On this point, at least, there is no disagreement between Sorrell and Maurice Levy, who says they are now going “directly to clients.” Uneasy lies the head that wears a crown, especially in an age of turmoil and
revolution.

“We are not trying to disrupt agencies. . . . I know people don't believe that.”

—Carolyn Everson

Carolyn Everson doesn't look like an existential threat or a frenemy, certainly not to Michael Kassan. Facebook's personable vice president of global marketing solutions evades the Facebook engineer clichés: no growling for her, no T-shirts and unwashed hair, no looking down at her shoes when she speaks. Her straw-blond hair is perfectly coiffed and curved into a helmet above her shoulders, her neck and hands are friendly to jewelry, her fashionable dresses might be featured in
Vogue
. Michael Kassan met Everson when she was COO and executive vice president of U.S. Ad Sales for Viacom's MTV Networks, and has served as a mentor for nearly two decades. They met when he was moderating a panel at CES and a debate between Everson and Publicis executive Pam Zucker ensued about how best to massage and employ data. To add a touch of levity, Kassan borrowed what he thought was a familiar joke from
Saturday Night Live
: “Pam, what you're really saying is, ‘Carolyn, you ignorant
slut! You don't know what you're talking about.'” The audience laughed. Everson did not.

The next morning, a Friday, a friend phoned Kassan and said, “You have a real problem with Viacom. You called Carolyn Everson a slut!” The CEO of MTV lodged a formal complaint with CES. Chastened, Kassan phoned Everson and tried explaining that he had borrowed a line from one of the all-time most popular skits on
Saturday Night Live
. “You actually think I would call you a slut onstage?”

Monday morning when Everson arrived at work she was greeted by a dozen roses and a signed note from Kassan: “Here's hoping I get a second chance at a first impression.” He did, and says, “We became best friends.”

Carolyn and her older brother, Bill, grew up in the middle-class community of Stony Brook, Long Island, where their mother taught elementary school and their dad was a midlevel executive at Grumman. From a young age she displayed the outgoing personality of a salesperson—taking part in ballet performances, public speaking, competitive sports, always eager to raise her hand in class, and “always in the good graces of her teachers,” her brother says. She received a full academic scholarship to Villanova. She didn't have a career plan, but she located one of many future mentors, sociology professor Bernard Gallagher, who was impressed by the three papers she wrote that were published in academic journals. He fervently recommended her when Arthur Andersen visited campus to interview seniors. After graduating summa cum laude in 1993, she was hired as an Andersen consultant. Her first task was to help Merck & Co. and Astra smooth any kinks in a joint venture and to research strategic alliances. Demonstrating her knack for being adopted by mentors, she read a book by Robert Porter Lynch on strategic alliances, cold-called him in Rhode Island, and recruited him to advise the two companies. He would
serve as another mentor. Carolyn also became friends with a divorced Merck executive, Douglas Everson, a friendship that would blossom one day into romance.

She left Anderson in 1995 to join Disney. By now she was dating Doug, and they married in 1997. Knowing that her career path was business, her brother urged her to go to business school. Aware of her large ambitions, her Disney boss, Charles Adams, stepped in as a mentor. “If you want to be a CEO or a general manager, the Harvard Business School is where you want to go.” As an alumnus, he put in a good word for her.

After graduating with honors, she held a number of executive jobs over the next several years, including the ill-fated Pets.com, followed by two years at Zagat and three years at PriMedia, Inc., before joining Viacom. Then, in 2010, with a nudge from Kassan, one of his consulting clients, Microsoft, offered Everson a position as vice president of global advertising sales and trade marketing teams in Seattle. After Everson received the offer, she turned to Kassan for advice. “Michael told me not to move to Seattle,” she says. He wanted her to take the job, but persuaded her that the ad community she needed to work with was located in New York. Microsoft relented.

Only four months later a headhunter called and asked if she would meet with Sheryl Sandberg, the COO of Facebook. At first she said no. “Carolyn was really torn,” Kassan recalls. “She's a very ethical and loyal person. But this was an opportunity of a lifetime.” Eventually she weakened, and on the way to Australia for Microsoft she stopped in the Valley on a Sunday to meet with Sandberg and Mark Zuckerberg. She spent a full day at Facebook. “I knew in my heart that's where I wanted to be,” she says. “It was so much more entrepreneurial. Advertising was the entire business of Facebook, whereas at Microsoft it was a tiny piece.”

Everson was the same age as Sheryl Sandberg, forty, and like her was a former Baker Scholar at the Harvard Business School and extremely well connected. She consulted what she refers to as “my board of directors” for advice. They include Kassan and Wenda Millard, Irwin Gotlieb of GroupM, Bill Koenigsberg of Horizon Media, Andrew Robertson of BBDO, Nick Brien, now the CEO of Dentsu Aegus in the U.S., Jack Myers, chairman of MyersBizNet and a prominent marketing consultant, and Terry Kawaja, CEO of Luma Partners, an investment banker. She also phoned Martin Sorrell for advice. These are hardly people hostile to the interests of the advertising establishment. Nine months after joining Microsoft, she departed for Facebook.

No one played a larger role in her coming and going than the unofficial chairman of her board of directors, Michael Kassan. He provided one-stop service, for “behind the scenes” she says he helped persuade his client, Microsoft, to let her go, and promoted her talents to another client, Facebook. “She absolutely worships Michael,” says her husband, Douglas Everson, who would take early retirement at sixty, after three decades as an executive at Merck, to care for their twin daughters when Carolyn's job at Microsoft and then Facebook required extensive travel. He says of Kassan, “He has been an amazing resource for Carolyn. Michael is like family to us.” As they are to Kassan, who “treats me like his niece,” says Carolyn. When one of Doug's two older sons from his first marriage had a child, they brought Kassan to the boy's bris. When the UJA-Federation of New York Marketing Communications Division honored Everson and Rob Norman, GroupM's global chief digital officer, in May 2016 and raised nearly a million dollars, the dinner chair for the past seven years and the person who selects the honorees was Michael Kassan, who also serves as the UJA's national cochair of its Entertainment, Media, and Communications Division. The Pierre ballroom was packed with advertising notables, for as Wendy Clark of DDB says, “Michael has convening power.” And when Everson rose to accept
her honor, after thanking her family she turned to offer a bow to Kassan: “Michael, you took me under your wing.”

As Facebook's point of contact with agencies and advertisers, Everson receives high marks. “Her enthusiasm and relentless optimism stand out. She's very collaborative. The collaboration she's driven at Facebook has set the tenor for others. She's a connector,” Wendy Clark says. “We are not trying to disrupt agencies. We are trying to help improve sales,” Everson says. “We are getting a seat at their table, helping them think through real business problems, and the faster we help them move to become more nimble and understand how mobile is impacting marketing, we will benefit in the end because they will invest more with us because we happen to have the dominant mobile platform. I don't go to meetings and ask for money. I don't think I've done that in five years. I know people don't believe that.” By “people” she means Martin Sorrell, who she believes—wrongly—stands alone in his wariness. “We are not a frenemy,” she says. “Do you hear that coming out of John Wren?” At least not publicly.

Martin Sorrell was becoming
alarmed about Facebook in the winter of 2016. When told what Facebook said about “not trying to disrupt agencies,” he disputed the claim: “They are not agnostic. They are selling Facebook inventory.” He knows Facebook benefits from the growing mistrust advertising clients harbor toward their agencies. And he believes they are selling under false pretenses, because “they are not a technology company. They are a platform, a media company. You wouldn't give your media plan to Rupert Murdoch, or Les Moonves, or Bob Iger. So why would you give it to Mark and Sheryl? That's a fact. There's a subsidiary point: If that is Facebook's case, then give us your data—which they don't.” He went on to say that he agrees with Facebook that what is crucial to know is “the outcome” of
an advertising campaign. “But the only way you can prove the outcome is through the data.”

Michael Kassan agrees that Sorrell is not alone among agency people who complain that Facebook is a frenemy. Increasingly, he says, clients feel more independent and consult with digital companies like Facebook, with potentially ominous consequences for agencies: “If you and I find out we speak the same language, why do I need a translator?” Facebook is clearly competing for advertising dollars. Sometimes Facebook complements television, Everson says, because with TV viewing down among millennials, Facebook “is great at finding that audience.” But, she concedes, “At the end of the day, we all compete for ad dollars.” Where Sorrell is wrong, Kassan says, is when he objects to Facebook meeting independently with its advertisers by, in effect, exclaiming, “‘You can't go to my clients!' Last time I checked, the Thirteenth Amendment outlawed slavery in this country.”

Paranoia about Facebook's advertising intentions are ignited by several factors: by its size, by the walled garden it maintains when refusing to share much of its data, by the immense volume of data it gathers, and by fear that it aims to displace agencies. By 2015, Facebook's size as translated by its market cap or worth was equal to General Electric's; by 2016, its market cap zoomed past the world's fourth most-valued corporation, ExxonMobil. By the end of 2016, Facebook collected $27 billion from ads, and basked in profits of $10 billion. Facebook and Google's size advantage was revealed in the first quarter of 2016 when Mary Meeker of Kleiner Perkins Caufield Byers reported that of every new digital ad dollar, eighty-five cents went to Facebook and Google. Their digital dominance increasingly mattered because digital advertising by 2017 was expected to surpass the $70 billion spent on the number one U.S. ad platform, television.

Monopoly fears magnified: “Facebook and Google are a digital duopoly,” Terry Kawaja says. “They have two thirds of mobile ad revenue,
and it's growing. They have first-party data on people, which in a mobile world is the only way to identify people. . . . They are sucking up all the oxygen.” Shane Smith, cofounder, CEO, and driving force behind Vice Media, speaks in sentences followed by exclamation points and shouts “FUCK” a lot. Facebook's power was a favorite exclamation, and after he boasted before an audience of Hearst executives in May 2016 that Vice was “going to become the fourth-largest or fifth-largest, or maybe the third-largest” media company in the world, he took aim at Facebook. “This is the biggest problem of the world: Facebook has bought two thirds of the new media companies out there without spending a dime because they own a majority of their mobile” and thus control access to media's content. Offering what he describes as “a reality check,” Randall Rothenberg, president and CEO of the Interactive Advertising Bureau, the trade association that represents digital companies like Facebook, says, “How different is it from when most advertising dollars were going to just three television networks?”

Those who compete with Facebook believe it
is
different, and feel especially vulnerable. Longtime digital executive Patrick Keane, former president of Sharethrough.com, where he sold the native ads of publishers to digital companies and worked with brand advertisers to link up with these digital publishers, does not hide his competitive fear of Facebook. “It's a Facebook world we all live in,” he says, noting that Facebook and Google leave advertising pennies for other digital platforms. “Facebook has this incredible, almost instantaneous, ability to be successful in anything. They turned their biggest liability—they were late to focus on mobile—into an asset almost overnight.” Now they are trying to better compete with YouTube in video. And “they've become a publishing platform with Instant Articles.” This program, launched in 2016, allows publishers to display entire articles within the Facebook app in much the same form as in their “home” environment. Harry Kargman, founder and CEO of Kargo, a MediaLink
client whose business mission is to create a mobile advertising platform to spread ad dollars to media company clients, is worried. He says, “The question is, What's Facebook's mission? Their mission is to get people to spend one hundred percent of their time on Facebook. Their mission is to become the Internet.”

If Facebook were to become the Internet, the site people never leave, where they share pictures, IM, get their news, shop, search, watch television and, one day, movies, it would create a nearly impregnable walled garden. And in the meantime, the complaint from both agencies and brands, which grew louder in 2016, was that Facebook, like Google, takes ad dollars but shields much of its data from advertisers, disabling them from targeting consumers on other platforms or in their future ad campaigns. “The less data we get from them, the harder it is for us to decide where to allocate our own dollars,” says Rob Norman. The more information agencies can extract from Facebook about what else their users like and do, the more precise their ad targeting.

Norman is clear about what agencies, and clients, want from digital companies that know much more about their users than do nondigital platforms like television, radio, or print. Comparing three digital giants—Facebook, Google, and Amazon—he says, “You could argue that Facebook has the best data on users based on their social interactions. You could argue that Google has the best because a search signals a person's intent. If you're thinking of purchasing intent, Amazon has the deep spear, which is actual purchasing data.” Agencies and advertisers would like the data from all three. Facebook, Google, and Amazon have a financial incentive to safeguard this data. Their public defense is that they are protecting the privacy of their users and their pledge not to share names or personal information.