Stagwell’s Mark Penn: ‘No other holdco, or consultancy, has the right balance’

Let’s pretend there are people out there who don’t know what the Stagwell Group is. What do they need to know about Stagwell?

Stagwell has been designed, for the last six years, to be the challenger holding company – to be a digital-first, modern marketing company from the ground up. That was the idea I had after I left WPP [in 2012] and went to Microsoft. That was the idea that Steve Ballmer said, ‘you know, that’s a good idea. I’ll be your core funder.’ So we started building it piece-by-piece, in performance marketing, research, digital transformation. And I said, ‘you know what, we really need to offer the complete picture.’ The only way to really take down market share from the majors was to get a big enough platform, have the technology, have the creativity and have the global scope. So we now have the technology, the top-grade creativity and we continue to expand the global scope.

Holding companies get a bad rap. Give me a few examples of why Stagwell is different.

I looked at what things were done right ... and then looked at the things that were done wrong: digital adaptation, management of talented people, too much competition rather than collaboration. And, I said, ‘OK, I’m going to design this differently.’

Obviously, the first component is: were the holding companies able to adapt to the changing digital and addressable nature of modern marketing and advertising fast enough? Well, obviously not. That was really why I left WPP to go to Microsoft – to really make sure I understood [how to do] that. The second principle is: have [the other holding companies] created such a competitive mess internally? [The answer is yes, so] I said, ‘look, I want the leaders who know the business like me to take a suite of services and organize them in teams that can really be more effective in the marketplace and create a global marketing services group that can take from everywhere.’ And then I was going to give incentives not for competition but for collaboration. Those were the philosophical ideas, and we executed them.

We built a global performance marketing operation. The biggest difference the MDC merger has made is that the media department is a holistic, multi-skilled, talented media group with $5bn of placement of media, giving it scale now to compete.

We’re the first company really to get to the scale to have the diversity of modern services, [and] have the agility that got sapped out of the holding companies. The big companies are behind on digital. The digital consultancies are behind in creativity. We’ve put together the right mix. We have the right balance.

You mentioned the merger. How’s the integration of MDC going?

The really unique part of this transaction was that they asked me to be chief executive of MDC three years ago. That period really enabled me to socialize the teams and get people to know each other. If we’d done this deal and I just dropped in, there would have been a year of chaos. I was able to get the MDC costs under control. I was able to reorganize it into the networks. I was able to really encourage growth among the pure digital companies and there were some good ones in there too. And I was really able to accomplish this new atmosphere that didn’t exist under the previous CEOs. So that everybody was like, ‘oh, when’s the merger? When’s the merger?’ as opposed to, ‘what the heck is this merger?’ That was a very unique feature that turned out to be invaluable.

You’re positioning yourself as the challenger marketing network. S4 is trying to own that perception too. How do you differentiate?

The first question is, who are we winning business from? If you look at the bigger accounts won: Dunkin’, Lenovo, another health company that hasn’t [been] announced, H&R Block; in each of those instances the loser wasn’t S4. The loser was one of the well-known majors.

The biggest difference is S4 offers niches of marketing services, right? And what you really see is if you’re going to take on a $15m-$20m account, you need the right combination of creativity, research, data and targeting. You need to kind of synchronize those services and have them really operating at a high level and being able to operate them across cultures. That’s quite different than coming in with just a programmatic advertising piece, or tier-two or tier-three content piece. Those may have good growth for a while, but they don’t really challenge the majors for the real accounts in the industry.

Fundamentally, we’re a real alternative, right? I was chief strategy officer of Microsoft. I don’t come out of accounting. So what are the big features here? I mean, we’re building a Stagwell marketing cloud. We’re building full feature technology that we’re integrating into the services that we offer, and that we’re also going to sell separately for the do-it-yourselfers ... We have a very strong growth rate. You look how we divorced from the majors at a 20-25% growth rate outlined and guidance for this year. We offer digital transformation, research strategy, targeting and media acquisition, and creativity and communications. And the first three are right now 52% of the business. In two or three years that’ll be 65%. They’re growing at four times GDP rate and creative services are growing more slowly.

Accenture needed Droga5. You just can’t operate in this business if you don’t figure out how to blend creative talent. Television is still 31% of the industry. Online is 44% and growing. You really have to have the right balance of skills. I don’t really see that S4 has put together the right balance. I don’t think they’re close to it. They don’t even think they have our level of digital transformation. You look at us and we’re about 1,200 engineers now. Ballmer used to tell me, don’t let the agency build the website. And what he really meant was we don’t want a group that doesn’t really have the engineering as well as the design. We’ve got the right balance on that. I don’t think anybody is as well-suited to the marketplace as we are.

We know TV is still a big part of the business, but tell me a little bit about some of this geekier tech stuff.

Every year we run what we call ‘internal Shark Tank.’ That lets everybody in the company come forward with tech ideas. That’s spawned about eight or nine products that we’re putting together in a suite. Some of the more interesting products will really come to market big time in 2023. One of the more interesting ones is the augmented reality (AR) platform for stadiums. We’re testing this with the Minnesota Twins this season ... It can identify players and give more information. People get bored so they can play games against the other 50,000 people in the stadium. Then we can put in a whole new advertising and marketing layer on it as well.

We have a great product where you take your news release and it will assess who’s going to cover it, and who’s going to cover it favorably or unfavorably. It helps you see how to write or pitch it. We’ve got a major audience identification system fueled by the research companies. It’s being used for clients and was a critical part of the Lenovo win. At this point we’ll kind of finish up and make a consumer-ready version. We’ve got an influencer marketing platform we’ve developed with Procter & Gamble ... We’ve developed our own TV channel called Reach TV. We’ve got exclusive content for NFL games at the airports. So, there’s a lot of stuff going on here, right? It’s just not your traditional advertising and media placement.

You had some acquisition news. How are you putting it all together?

There are two areas that we’re concerned most about acquisitions: one is enhancing the global platform, [and] two is continuing to expand our digital-first profile into additional services.

Look at Goodstuff. It was a really well-known media agency in the UK. It extended our global capability to sell larger online and offline media contracts. And you look at Brand New Galaxy, it really has this combination of the e-commerce stack and creating all the content and the marketing and design development ... If you look at the acquisitions, we’re careful [to make certain] they are in line with a very specific strategy. I’ve always said that we’re a Noah’s Ark with one or two of a kind. Keeping it that way is an essential component to not degenerating into the kind of competitive cacophony that I think occurred in the largest holding companies.

Is the goal to be No 1? What’s the ambition?

The ambition was to create the next great marketing company. What the right size for that ultimately turns out to be I don’t know. But it certainly is bigger. We were at around $2bn. I’ve outlined a plan to get to $3.5bn in the next few years. I don’t see any reason we wouldn’t keep going as long as we can continue to invest to build, as long as we have the right culture and as long as we can be modern in the services that we’re offering people.

So speaking of services, a day doesn’t go by where we don’t hear about the metaverse. Any thoughts about how you’re playing there?

When I was at Microsoft, we had the secret project of the HoloLens. It was in a secret building and only a few people were allowed to go in and walk on the moon. And nobody was really interested when it came out ... you have got to make this something that appeals to a broader audience than gamers. You really have got to develop the simple devices for that to happen. To be honest, I think you’re still going to be more into specialty applications before you get to unlimited general applications. And that’s because I don’t think that people spend enough time building an experience that’s compatible with everyday life.

But how do you respond when a client comes to you and says, ‘we need to be in the metaverse, everybody’s in the metaverse, what do I do?’

Metaverse, NFTs, web3 – we’re there. But the metaverse is a 10- or 15-year project, right? You’re going to have to go step-by-step. We’ve got the combination of engineers and vision, but we’re also not going to want people to waste money before it’s ready. I think people can do some amazing metaverse-type experiences with our AR product and stadiums. That’s where we’re going to start.

OK, so what do you do for fun?

Now I have become an empty nester, I have a little bit more time for Netflix shows. I’m a big science fiction buff. I definitely would have given all the awards to Dune.

What’s your favorite sci-fi movie or show?

The Battlestar Galactica series. I might put that down as the dilemma of our time: whether we’re going to kill the computer or the computers are going to kill us seems to be the ultimate science fiction question.

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