After 15 years working with McDonald's, running the San Francisco media office of OMD and now global media account director for the world's biggest fast food chain, Australian Paul Davey has a few stirring thoughts on the local media agency market and what we should expect when personal video recorders like TiVo really start to bite.
Davey is one of those characters never short of a viewpoint and he let rip on the Australian media agency scene. "It's the toughest market I've ever worked in," Davey says of Australia's media agencies. "The margins we have to work on in Australia we don't work on in the US. There seems to be a much healthier understanding by clients in the US that agencies need to make money as well. That's in some of our contracts - that terminology is there respecting the need for agencies to make a healthy profit." Davey says it's "not uncommon" for media agency contracts in North America to agree to profit margins of 15% to 25%. The equation looks like this: media agency salary costs plus 100% for agency overheads plus 15% to 25% profit margin. "If agencies could get paid what they really should be paid it would be better all round in Australia," he says. "The US has a healthy respect for their business partners. It allows us to employ and keep the best people." And the penchant for Australian advertisers keeping their media agencies lean even affects Davey's McDonald's business. "Australia, from my experience so far in the negotiations we've done with McDonald's business around the world, still has the slimmest margins of any country I've had to deal with." Davey should have a fair idea on this front. In December last year, the food chain announced it was consolidating its media activities globally with OMD - a decision made after Davey helped lead the charge for the deal six months earlier in a speculative proposal to McDonald's head office. Davey won't say it but no doubt his old DDB Australian links to McDonald's worldwide chief executive, Charlie Bell, helped. Until that happened, Davey had been rather happy ensconced in San Francisco running OMD's operation there. Although still living a stone's throw from Silicon Valley with his family, Davey flies to Chicago every Monday morning at 5am and returns about 11pm every Thursday night. "I live in San Francisco, my boss is in New York and my client is in Chicago," he says. "Is it a pain? Yes. Is it fun? Of course it is. I've worked on McDonald's for a long time and it was a natural progression that I should head it up." While musing about the Australian market - he still follows it closely with intentions to return "one day" - Davey figures media agencies here are partly to blame for the difficulty they're in. "A lot of it we've just created for ourselves by cutting and cutting margins to win a piece of business. If you're not making money on them you've got to reduce staff and the service and it's a downward spiral. The margins in Australia are just too small." Ironically, after trooping around the world this year managing the international transition of McDonald's to OMD offices - every market will have been completed by year's end - Davey says Australian media agencies are more advanced than most. "Australia is innovative," he says. "Because we try different things and we're not as formula driven. The States is pretty inflexible. The buying and strategy function is split down the middle. The buyers are unbelievably specialised. They talk a different language to the strategists or planners. Agencies are generally geographically spread. All our buying is in New York and you have some spot buyers in a number of offices. My personal opinion is the training you got being a jack of all trades in Australia where the integration of buying and planning was much tighter makes you better able to solve problems. In America if you don't have the right five people in a room, sometimes you can't solve a problem because your strategists have never bought in their life and have no idea of the buying market and don't need to." At an international level, Davey says what won't be happening on the newly consolidated McDonald's media business at OMD is global commands being sent to the ends of the earth from the US. "Gone are the days when best practice was being written in the US telling every country they have to do it this way," he says. "Countries are so different. I've been on the receiving end when I was in Australia getting emails telling us how things should be done and saying it just doesn't fit here. That's the biggest learning curve we're on is cutting the cloth according to the market we're in. We've got some markets where our media is 50% newspapers, some use 80% outdoor. America is still 80% TV." Which leads us to one of Davey's most cherished subjects - personal video recorders, namely TiVo. "TiVo is fantastic,' he says. "I haven't quite worked out its lack of home penetration yet but it's one of those scenarios like being in a room with a born again Christian. There are those who have TiVo and like myself will evangelize and tell everyone and there are those that don't know what we're talking about and haven't seen the light. "I know when I get home [San Francisco] there is West Wing, Six Feet Under, BBC News every night and Australian sport. I watch it when I get home at 10pm. There is no zone 1 anymore. There's no primetime. Prime time is when I want it to be. My children only watch programs through TiVo so I've got total control over what they're watching. With over 400 stations available at home I don't have to worry about that. Their favourite show at the moment is Little House on the Prairie I'm pleased to say." But as a media buyer, doesn't TiVo worry Davey? "It does because we've got to think of other things other than TV," he says. "TiVo is a brand name but cable operators are actually putting in set top boxes which are not TiVo but are similar. Once you get penetration up, it's a very different market we're rowing in. The technology will change the way people operate."
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