How Pepsico and Mondelez are tackling their biggest challenge to date - turning marketing into a revenue center
In the past six months two of the world’s highest spending advertisers have come to the same radical solution to their marketing problems; that to survive in world where ad blocking is rising while attention spans dwindle they must now be in the business of creating content that is so good that they can actually sell it.
PepsiCo’s marketing boss predicts that the days of paying any and all platforms to shove adverts down people’s throats are quickly drawing to a close. And so it, and fellow FMCG-behemoth Mondelez, have realised that the future lies in acting like a publisher. But like any good publisher, the ultimate goal needs to be finding a long-term solution to monetizing that content.
Mondelez - Heaven Sent
Mondelez has chief media and ecommerce officer Bonin Bough while PepsiCo has president of its global beverage business Brad Jakeman forging the path; two senior marketers who have been given the remit to ask: ‘If we are a growth company, then where is the growth coming from?’. Those areas could be anything from mobile apps and online games to live-action stunts or a TV series, but each is grounded in the idea that to evolve from media spending to media monetisation their brands – quite simply – need to entertain.
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“My ultimate goal is to have our billion dollar brands [Pepsi, Dorritos, Gatorade] funding their own marketing so that we leverage the equity of the brand to produce content which we can then sell. That money we can then put into the marketing of those brands,” said PepsiCo’s Jakeman at the Cannes Festival of Creativity in France last month.
So, how are they getting to that point? And what exactly does it mean for the entire ecosystem built around their billion dollar ad spend? It’s still early days for both Mondelez and Pepsico. They’ve each taken different routes (one in-housing while the other is relying on partnerships) and along the way the same challenges and opportunities are being identified.
First up, PepsiCo. It has lofty ambitions for its internal division - dubbed the ‘Creators League’ - powering the tactical shift, expecting it to become a “double digit million-dollar business in the next three years,” according to Jakeman.
It was originally born out of the need to create more content in-house after realising that its agency partners had neither the structure or capabilities to move from producing five pieces of content a year to 5,000. Since launching last year it has lured a raft of creative talent through its doors but – against a backdrop of ad blocking – a second, more lucrative pillar has emerged.
Now, the Creators League’s attention is being turned to crafting large-scale ‘Hollywood-esque’ entertainment properties that are intrinsically linked to its biggest brands. After creating that content, it then sells to the highest bidder be it a broadcaster, publisher or other online media owner.
“We imagine if you could watch behind the scenes of the NFL through or watch a series about how the [Super Bowl] half time show is put together, created by Pepsi,” explained Jakeman. “We have to change the way we engage with consumers to actually produce the stuff they want to see.”
Mondelez is taking a slightly different approach. After Bough hired its first global head of content and media monetisation in Laura Henderson last year the Oreo-maker has been quietly forming a number of third-party partnerships in order to get its content plans off the ground. Where PepsiCo seems to have gone for scale early with the Creators League, Henderson admits that her team is still functioning like a start-up within the wider marketing organisation.
However, this hasn’t stopped it inking deals with the likes of Fox and Buzzfeed to co-create and run its content. The end goal for all the initial activity is for at least 10 percent of the company's global media investments to break even or turn a profit by 2020.
Setting the creative bar
The chance of success or failure under this model solely lies with Mondelez and PepsiCo's remit to entertain. Or, as Digby Lewis - formerly head of brand strategy at Buzzfeed and now head of platforms and distribution at Iris - puts it: "Whether through streaming and download fees, in-app purchases or subscription revenues, the creative bar needs to be set very high. The Lego movie was successful precisely because it wasn’t a monument to consumerism, but a medium though which to tell a story and entertain."
The fact that the product cannot be centre of attention is something that Jakeman and Henderson both recognised quickly, even if their bosses didn't. PepsiCo is referencing back to the 'good old days' of the Soap Opera whenever its Creators League is crafting something new.
"I honestly believe the world works in cycles and we’re coming back to where advertising first began and it didn’t begin by 30-second ads, it began with P&G sponsoring content. They were called Soap Operas for that reason and they didn’t have episode after episode of women washing clothes. It was entertainment and the brands got credit for bringing that to the consumer. I think that’s the way marketing is going to work more now.”
The first piece of content to come out of Mondelez’s venture will be a TV documentary airing on Fox which follows the journey of a man as he trains to jump from a plane without a parachute. It’s being tied to Mondelez’s Stride Gum brand, but aside from the tell-tale ‘sponsored by’ message at the beginning of the show there will be virtually no reference to the product throughout.
Of course, a chief executive cannot overlook investment on this scale without wondering exactly how it's impacting the bottom line but outdated systems and fragmentation across the landscape are making this difficult. Jakeman describes it as trying to duct tape together a raft of different methodologies, designed 40-years ago and so completely unfit for purpose, in a vain effort to “triangulate the causal impact of some piece of content that we publish”.
The solution, he argued, is to simply stop thinking of what’s coming out of the Creators League as advertising: “Every time we bring in a consultant to understand the impact our content is having they are looking for some direct line between making it, publishing it, and someone buying the product,” he said.
“But it doesn’t happen like that. We might have made it, published it, then someone did a Google search for it, and then they got more information and asked a friend and then maybe went online and bought it. So what role does the content have and what credit does the content get?”
It’s a similar story for Mondelez. Metrics such as awareness, intent, and sales are indicators of success in the short-term as Henderson’s team get the wind beneath them. But taking a long-term view Henderson told The Drum she will simply be measured on whether or not it makes money back on the content it’s producing.
“It’s almost adding a new dimension to ROI. Yes, we care about selling products and building brands but we also care about generating return because that’s going to make this model more sustainable,” she said
Changing the industry dynamic
It follows then that the entire community that Mondelez and PepsiCo supports will have to adapt as the relationship between publishers, agencies and brands becomes increasingly blurred.
The issue of rebates is one that cannot be overlooked in this ménage-a-trois; publishers are doing what they need to get business, agencies have to (somehow) make money as procurement clamps down and amid all of this the more forward thinking brands have realised too much spend is being lost along the way in just buying audiences.
PepsiCo has already seen the relationship it has with media buyers begin to change under this new strategy and is in talks with a number of media platforms about how the brand can produce content for them.
Likewise, Henderson said the industry is at a point of transformation. Maintaining strong partnerships with agencies and the likes of Google and Facebook remains important, but looking into the future Mondelez will have to restructure those relationships so that all parties can extract more value.
“[It will be] less transactional I guess, and more longer-term and more of an investment from both sides,” she said.
And therein lies the key for agencies to surviving this new way of thinking from brands – co-investment and co-revenue share. “The big thing is getting all of our different partners to put skin in the game and look at different models to unlock that,” urged Henderson.
Long before Mondelez and PepsiCo set out on this path, agencies such as AKQA and DigitasLBI recognised that the joint venture model was one which would ensure they wouldn't be seen as just another professional services supplier but a long-term partner to brand transformation. Changing internally to support this is a laborious and ongoing process, but one that for such agencies started years ago. Concern is for the more traditional creative shops and so it remains to be seen how they fare in this new economy.
But one thing is for sure, for this set-up to succeed, fresh thinking on how partners are compensated (regardless of size) is crucial. Mondelez is just starting to rethink payment models but PepsiCo has already taken steps to making the financial aspect of collaboration easier. With one of the biggest roadblocks to this new strategy’s success lying with procurement, Jakeman disbanded the function and gave the responsibility to brand managers within the marketing team in an effort to house cost where value sits.
“When people come in to collaborate they are not big agencies and they can’t – and won’t agree to the payment terms we have with our big holding company agencies. We have to reinvent that. If they’re producing content in six days we can’t spend two weeks developing a supplier arrangement and contracts and entering them into payment systems. The system is geared towards working with big corporate partners but we have to change all of that including payment terms," he said.
Perhaps more surprisingly in all of this is how the relationship brands have with others is inevitably changing. With Mondelez and PepsiCo going into full publisher mode and creating such compelling content, it is forcing other brands to reconsider what they might buy against.
Speaking on the same panel as PepsiCo’s Jakeman at the Cannes festival, P&G marketing chief Marc Pritchard said: “We like to partner with people making great content. If Brad [Jakeman] is making great content, then I want to advertise on it.”
As far-fetched as brands advertising on another’s content might sound, it could become the marketing norm sooner rather than later.
Under such immense pressure to start generating real, incremental revenue as their businesses become more dependent on value rather than volume sales, marketers like Jakeman, Bough and Henderson are stepping up and leading the way for other businesses to up their game as well. Acceptance that it’s going to be harder to sell more products more often has been the first big step, but getting the rest of the industry moving in the same direction will be their next.