The Chief Executive Officer of this Big Five Media Company is excited about the future for Digital Media, and shares his insight into its current and future roles in the media mix.

As CEO of Carat North America, David Verklin oversees Carat's U.S., Canadian and Latin American operations. Under Verklin’s leadership, Carat has grown into one of the elite media services companies in the sector today with expertise in virtually all aspects of marketing communications with the exception of commercial production. The company today offers services in total communication planning, multicultural media, interactive television, e-mail marketing, event management, out-of-home programs and data base management, helping Carat to move beyond the scope of services that traditional media buying organizations historically offered.

Verklin continues to be a voice of change within the media services industry, advocating for the globalization of media services and the adoption of new technologies. He serves as a member of the Aegis plc Board of Directors, Carat's parent company, while also serving as a member of the Audit Bureau of Circulation.

Verklin will be a keynote speaker on Tuesday, February 4th at the iMedia Brand Summit in Bonita Springs, Florida. Here’s a preview of his insight:

iMedia Connection: What do you see the role of interactive being in the media mix?

Verklin: We’re seeing an increase in clients’ digital marketing spending in 2003 over 2002 and 2002 was actually above 2001. So the first thing is, more and more clients are recognizing that the Internet is playing a role in the sale of their goods or services. In the case of our car client, Hyundai and Kia, we’re seeing statistics that show that 85% of people that come into the showrooms have gone to the Internet to do some research of some kind before they buy the car – 85%! So the Internet is definitely part of the car-buying process. It’s a fact. Also, imagine Internet usage in the pharmaceutical industry -- people who are using the Internet to find information about a medical condition they have. So the answer to your question is, we’re not just seeing an increased role for the Internet; it’s playing an absolutely essential role in a client’s marketing mix.

iMedia Connection: And do you see the role of the Internet expanding? How?

Verklin: For pharmaceutical and automotive and the movie business, for all our key client categories, online is not a secondary or tertiary medium but, as I said already, a full partner in the marketing mix. Now, it doesn’t get the same budget that network TV gets but that’s really only because network TV costs are higher. A spot on ER costs $450,000. The media costs aren’t the same for the Internet, but it’s just as important as network TV.

For us, we’re extremely interested in broadband because broadband will really change the experience -- the speed in which the information comes up, the ability to get full-motion video, and you get a whole lot more content streamed in. I tell my clients, “If you like the Internet today, wait until you see tomorrow.”

Now how we monetize that and how we create advertising intervention and how we commercially use that experience for our clients, that’s the trick. It ain’t a banner. And it’s not about CPMs. I think about a broadband Internet world and the possibilities are endless.

And then of course the other issue that looms in front of us is the evolving technology of television, particularly on-demand television – something that someone can push a button on and order a movie or push a button and get a video downloaded or for that matter get a Lipitor recipe video downloaded – that’s the other technology in digital marketing that we need to pay a lot of attention to.

If I have a concern about digital marketing it’s that there’s a lot of really exciting activity happening on the Web: Broadband is creating some opportunities, and we’re seeing more pragmatism on the Web and we’re seeing more and more clients integrate Web programs into their marketing mixes. That’s good, but we miss the boat if were not also keeping our eye on the digital deliver systems that are starting to emerge in TV. So to me, digital marketing is not just about the Internet. Digital marketing could also involve iTV. I’m not predicting the demise of the 30-second TV commercial by any means. But I am predicting the advent of new ways to use television and new advertising formats and new advertising challenges.

iMedia Connection: What are your thoughts on wireless?

Verklin: Wireless also has enormous promise. Where wireless could really play a big role is in retail. Wireless could be a transformational technology at point of sale. If you’re in the grocery store, and you can get information, shopping lists, coupons, etc. on the technology piece in your pocket or purse, there’s potential for you to have a more effective shopping experience.

iMedia Connection: How does your agency arrive at a media mix that meets your clients’ objectives?

Verklin: The basic answer is that we have not found a formula yet that answers that question. It varies by client. However, we do have a set approach and that’s one of collaboration between the team of people who are managing all of a customer’s connection points.

We’re a company that is extremely analytical. If you study the Carat brand proposition, we’re a brand that really focuses on bringing superior research, knowledge, insight, and software tools to the business of planning and buying media. So we’ve really tried to attack that issue -- how much money should one spend in the online world vs. the offline world -- from all angles. And we’re starting to get some different answers. One way, the typical way that the decision is made, is, as I said, with a collaboration between the online and the offline media planning folks who look at creating a total communications plan and begin to work together to determine what a realistic budget is to accomplish the roles for each set of media.

Then, afterward, we typically do a lot of research to see if we can put metrics on effectiveness. One of our companies is a company called MMA, Marketing Management Analytics, which does something called regression analysis to calculate what the ROI is of every dollar that a client spends. So we actually do an analysis for some of our clients which says, for every dollar you spent on TV, you got this much back, for every dollar spent in online, here’s what you got back in sales, and so on. We do this even for branding campaigns. So, we also try to look afterward to see what worked and what didn’t and try to obviously increase spending against the media types that are working and decrease spending that isn’t leading to a positive return on investment.

iMedia Connection: What do you think offers the most potential – online advertising in the forms of banners, skyscrapers, etc, online advertising in the form of sponsorships, e-mail marketing, or … ?

Verklin: A lot of things offer promise. I’m absolutely fascinated with e-mail marketing. There’s a fine line of difference between spam and interesting, useful content and I think we need to figure that out. Opt-in is probably the key differentiator. But I think the whole concept of opt-in e-mail, the idea of a client or a brand being able to have an ongoing relationship with its customer that is easily customized, that has enormous promise. If you think about the holy grail of advertising, the holy grail of advertising has always been 100% composition – said another way, clients just really want to talk to their own prospects. Since the time people have been writing on the sides of caves, they haven’t wanted waste. If you’re a denture cream seller, you want to talk to people who don’t have teeth. If you’re selling a baby product, you want to talk to someone who has a baby or is soon to have a baby. So the whole point with e-mail is that it offers the promise of us to be able to self-select in people who are interested in a product and then have a dialogue with a community of people who are 100% interested in that good or service. That is the holy grail of advertising – no waste. I’ll pay more money if I can only talk to my prospects. So I’m extremely bullish on e-mail because it allows that, and it also allows for customization.

A second area is anything to do on the transactional side. We’ve seen with our clients like Radio Shack, there’s just no question that people are very comfortable buying stuff on the Web. And it’s growing. It’s a nice way to buy. So the area of using advertising to drive people to buy from a Web location has enormous promise and that’s going to be bigger every year.

The third area is just more interesting advertising experiences. Clearly there are some rich media applications that are really kind of fun. Those are areas of greater exploration.

I also think a affiliate marketing is a big advertising application.

Search engine optimization is also big. Everybody uses search engines, and our research shows that 80% of people don’t go beyond the first 10 listings in a search. So getting clients meta links combined and getting clients well located in search is another enormous opportunity.

Finally, I think online/offline promotion linkage continues to be good. The Pepsi Stuff promotion continues to fascinate me -- pull off a bottle cap, you get a code number, you can go to the Web site, enter the number you found and redeem points for merchandise. And of course, what do I get if I have people enter on the Web? I get an e-mail address. And this process is a hell of a lot cheaper than printing up 10 million catalogues. So I Web as promotional medium will be the next area where we’ll be experimenting.

iMedia Connection: I love your excitement and enthusiasm about this.

Verklin: I do get excited. I also get frustrated because for the uninitiated clients, they still think of a static banner and they think that’s Web advertising but that was an eon ago. I wish the banner had never been invented because I think the Internet would be better for it.

iMedia Connection:: When do you see advertising in general picking up on a sustained level.

Verklin: I think you’re going to see the beginnings at the second half of this year, barring the unforeseen – I can’t predict war in the Middle East or a terrorist attack. But we’re already seeing some signs of recovery. A lot of people had good fourth quarters and first quarter bookings look pretty good, but I think the beginning of a sustained recovery will come at the second half of this year.

iMedia Connection: Who’s leading the charge at the moment in terms of creating truly integrated organizations…clients, agencies or perhaps even publishers?

Verklin: In all three sectors, we are seeing some companies organize themselves better to provide integrated offerings. So I’m not sure any one of those three sectors is leading because the majority of companies in those three sectors aren’t creating integrated offerings but there are a few in each. So I’m not sure I can say, “Gee, clients are really leading the integrated charge,” because I could point to a bunch of clients who I don’t think are. Nor can I say, “Hey, agencies are really leading the integrated charge.” A bunch of them are and some aren’t.

I can comment on agencies’ role, though. Agencies, particularly media services agencies of which Carat is one, actually are doing a pretty good job of integrating their online and offline offerings, mainly because of what I said when we started the interview: Most media planning and buying companies like ours recognize that they need to be able to help clients in television and manage their offline but they also need to be able to help their clients online if they are to be able to provide holistic services for their clients. So I actually think the media services companies are doing a pretty good job of creating an integrated online/offline offering. Is because companies like Carat are so brilliant? Of course not – it’s because we have no choice. If I want to keep the Pfizer business, I need to be able to handle its online and offline work. That makes you integrate rapidly. If I want to win the Phillips business, I need to be able to handle its online and offline work. So I think media services companies were actually forced to integrate by gunpoint but we have managed to integrate our offerings.

iMedia Connection: Could you comment on the alternatives facing clients: one stop shop for all needs vs. best of breed in each specialization/niche category?

Verklin: You have to take a step back: Remember that there has been more change in the American advertising business, particularly the media side of the American advertising business, in the last 36 months then there has been in the last 36 years. So we have seen tectonic change in the American advertising business in the last 36 months, profound change. The American advertising business has been reshaped in the last 36 months, particularly the media planning and buying side. There are now basically seven media services companies buying almost 70% of all the network TV time in the United States, and that has happened in the last 36 months. So, the degree of consolidation has been incredible.

Because of that, you’re seeing clients consolidating media planning and buying. However, it’s more difficult to get them to consolidate creative. When it comes to creative, clients want best of breed, they want different agencies to handle the different aspects of their campaigns. So getting clients to consolidate creative has been a challenge over the last 30 years. But over the last three years, they have become willing to put all of their media eggs in one basket.

Here’s an interesting statistic: 54 out of the top 100 advertisers have reviewed who does their media work in the last 48 months, and this has been a result of consolidation.

iMedia Connection: How much longer can the trend of consolidation in the advertising industry continue?

Verklin: I think we have another 24 months of it. The agency business is down to eight or nine global players already, but I think more consolidation will take place until we’re down to about six.

iMedia Connection: Without giving too much away, could you give us a glimpse of what you plan to talk about at the upcoming iMedia Brand Summit?

Verklin: I’m going to give my view of media at the crossroads and talk about the enormous change that has taken place in the last 24 months. And I’m going to tell people that I believe the next 24 months will be a time of more profound change. It’s a great moment to be in this industry. The last two years combined with the next two years, I believe, represent a media revolution and we’re lucky to be a part of it. It’s an unbelievably great time to be in the media business.