Israel’s UM Digital Blazes Global Digital Media Trail

By Anat Bein-Leibowitz

Amir Weiss returned to McCann Erickson Israel to develop world-class digital media technology and solutions.

When Amir Weiss returned to McCann Erickson Israel in 2007 to establish Universal McCann Digital Ltd. (UM Digital), it was his second round at the group, which he had left three and a half years earlier for a successful, but sobering, stint as a bar owner and Tel Aviv night owl.

McCann Erickson Israel VP Alon Stern kept in touch over the years and made business proposals from time to time, Weiss rejected them until Stern told him that Ilan Shiloah was going big in digital media and needed someone to run the new operation. Weiss accepted.

“I said ‘yes’ immediately,” Weiss reminisces, “without closing on the money, because I knew it was McCann Universal, and what it means when Shiloah decides on something. I knew that this would be really big, and the only question was who would take it. If it wasn’t me, it would be someone else, because if an organization decides, that is what will be,”

Until Weiss’s return to McCann Israel and the establishment of the new media arm, its sole business, digital media was something ad hoc at the company, carried out by two media people at McCann Universal. The company’s jewel in the crown, which included the best digital people in the market, was the creative arm, McCann Digital.

Talking about Universal McCann Digital

In its first year, Universal McCann Digital was mainly engaged in displays and banners. At the time, McCann Israel was not even the leading player in this field, and the first challenge was to catch up with the enterprise’s size and seize first place there, too.

The new company first chose not to reinvent the wheel, and operated precisely according to Universal’s format, buying for agencies and other clients. Within two years, it became the market leader.

But Shiloah was far from satisfied. He knew that Google Inc. (Nasdaq: GOOG) was becoming the dominant power, and while most other agencies did not know how to deal with this, because there were no commissions and the work model was different, he pushed Weiss to find a solution.

Weiss led two measures that would subsequently turn Universal McCann Digital into a global player. The first was the acquisition of Compucall Ltd., a specialist in promoting search engines. The second was the acquisition of Sekindo Ltd., which creates a technology platform for managing display, video, and mobile activity.

“Compucall and our activity complemented each other, because advertising is the lid, and promotion is the pot. Advertising raises awareness and motivates people to do something, and when people do something in the digital world, it almost always begins and ends with Google. The merger brought together a comprehensive sheet that includes strategy and finance, and professionally, it also resulted in a jump in power,” says Weiss.

“In the digital world, it is hard to separate the creative and the media. Media people cannot see the television movie that is aired, and it is still possible to say that a campaign is a failure or a movie is bad, but that the media company did great work. In digital, there is a tight connection, because digital is measured by cost per act, so the responsibility of the media for the results of the overall campaign is greater. That is why it is hard to separate them.

“At McCann, we build the asset, and our objective is to distribute it. We get a product minisite, mobile, application, a part on Facebook, a conversation on Whatapp -and we make sure to distribute it to and cause the consumer to create the best interaction for measuring this and put a price tag on it: it costs x shekels to create this.”

“Globes”: Almost no place today does the full breadth of this.

Weiss: “You need a lot of skill to know how to do everything in one place, and I do not see another company that has it. Digital is built from a great many small units that touch on specific things. By the time something is understood, something new comes along, and it is hard to stabilize the system. It is constantly developing, and we, as a company, develop with it. At first, we brought in Compucall and obtained a solution for search engines, then we’ll be on Facebook, mobile, and video, and these things ultimately affect technology.”

What was the background to the acquisition of Sekindo?

“Before Sekindo, we developed automatic technologies and systems which interfaced with the Google systems and give automated performance, because there is a vast amount of numbers. It was clear to me that if I want to be a big and important player, with unique value, I needed my own technology. There were some technologies outside, but they were not mine – Adler Chomski & Warshavsky Grey, Baumann Ber Rivnay Saatchi & Saatch , or someone else could have used them, and I would have no differentiation. Our market is also different, and foreign technologies often do not fit with local media. In our search, I met Sekindo, and its technology was advanced.”

Weiss met Sekindo, run by Eyal Betzalel, Oren Berdichevsky, and Rotem Shaul, when the company was new with a turnover of only NIS 10 million. That did not prevent most ad agencies from being interested in it, but only McCann Israel paid up.

Sekindo, under the wing of Universal McCann Digital, had a turnover of NIS 100 million in 2014 and is projected to have a turnover of NIS 160 million this year.

Shiloah pushes to go global

“One of the objectives in acquiring Sekindo was the opportunity for international activity. Israel is a tiny market, and the advantage of working online is that it possible to work with the whole world from here. Shiloah was constantly telling me, ‘Open an international arm,’ and it was clear that this meant hundreds of millions of users and millions of dollars in budgets. But so long as we did not have a technology arm, we had no way to get into it, because the international digital world is wholly technological. If you don’t use technology, you are not a player, The acquisition of Sekindo gave the capability to think about this.

“When it began to run smoothly, we began looking outside and playing. We first played in the exchange performance world, which was called Right Media (now Yahoo Ad Exchange), and built an automatic trading engine. In the world, all digital media is listed on the exchange, and trading is similar to the capital market: you give by hand, there is a public auction, and the each exchange has its own way of determining who the customer is, and space is bought in all kinds of models.

“The purchase is not like here, where there is a campaign to the customer, which I call ‘back-to-back’. In the world, you buy inventory and try to achieve results with it: for someone to click on something, download something, and work on the spread between them.

“It is possible to lose money this way, and we lost money. Not so much on media, but on technology and time. By the time we rode the wave and began making money, the market suddenly changed. Right media was acquired by Yahoo! Inc. (Nasdaq: YHOO) and [Yahoo CEO] Marissa Mayer decided on something in her office, and the next day they issued the decision, and boom – this world was over. We found ourselves in a place where we did not know what to do, and we turned to the video world, which is what we do now.”

What do you now focus on?

“The video world in North America and large European countries is part of the television mix. The viewer’s focus is increasingly going to the Internet and mobile worlds, on tablets, desktop, and so on. People watch content on other platforms; advertisers realize this, and television advertising money is headed there. We’re talking about billions of dollars. The estimated online video advertising market in the US was $5-7 billion last year. A player going there who give value can make money.”

How do the models work in this world?

“The value chain in this world is complicated and different. There are platforms, which require advertising on the Internet. These are corporate giants, which were acquired for hundreds of millions of dollars. These are technology platforms which receive advertising from advertisers either directly or through media companies. They are connected to hundreds of thousands of media sources – networks and sites, which must bring users to view ads.

“For example, a company with a $1 million budget wants to bring 500,000 target users in the US on the IP of Texas and Nevada, who will see the advertisement three times. There are many players who can put data into this. All this information is sent in real time to the exchange, and at Sekindo, I buy media and try to adapt it to demand.

“We are basically a video network. We have our sites network. We buy media from other networks. We’ve built a very sophisticated media platform, which cost a lot of money, and created value from this process. There are a million players, each of which says something. Every second, until the advertisement goes live, a process of hundreds of players giving value and putting together occurs.

“Those who know how to take this process and shorten it and make it a little bit better makes a lot of money. That is what we are doing. Advertisements from multinational giants, such as Coca-Cola, McDonald’s, and Chevrolet are on our screens. Everything goes through the demand players.”

How focused are you internationally now??

“I am now facing outward to the international market, to be in the major league. Israel is a game of minnows; Israel is the brother who stayed behind. In the world, it grown at a crazy pace and become something big. I want to focus on international activity, because I think that our level of technology and solutions are the best in the world.

“In terms of activity in Israel, we have a very good skeleton, with a good, strong, and stable management team. Activity is stable and mainly includes managing many companies and activities. We have people worth a great deal of money, and it’s a major challenge to keep them. People can cross Habarzel Street, where there are 20 global media companies, so there is no problem going to another media company. This is major labor-intensive work and my VP, Ofir Cohen, is gradually taking charge of it.

What about Sekindo?

“Sekindo’s people are managing the company in a fantastic way. They came to us with five people, and it now has thirty, and it is constantly hiring. Its advantage is that they understand the business.

“Technology people are like creative people: they want to create something beautiful, not always with the perspective of what it gives. There are many geniuses who develop amazing technologies, but they are not businessmen with an understanding that it’s necessary to create technology that creates value and makes money. That is where I help from above – building a company and advising on processes.”

How do explain that even at the level of market activity, there are no advertising companies with serious activity in these fields?

“As far as I am concerned, we are a digital marketing company. An old school advertising agency does not need this, but if it is a marketing and advertising group that wants to give value in the new world – without this it is irrelevant.”

So, according to this thesis, most of the market is irrelevant.

“Where are there so many problems in digital? Why don’t agencies offer a response and there is leakage to small suppliers? Every big agency now feels this leakage of money to small and specialized firms. It is because they lack these capabilities in-house. Contemporary marketing managers want these things, and if they don’t get them, they look elsewhere.

“Agencies don’t realize that they don’t know. They don’t understand that they do not understand. There a vast chasm between what they need to do and what think they need to do. The chasm is so big that I don’t think it can be closed. It requires so many people with expertise, experience, high pay, and patience, and people upstairs with vision and say, ‘This is what will be at the end of the game, and we have to be there no matter what happens en route.’

“We had a broad back and a lot of patience from the company, because it takes time and money. The company had the perspective of ‘go for it and don’t worry about the money.’”

That man was Ilan Shiloah.

“You need a man who gives the time and money, and pushes like crazy. He knows where the market is headed, what is going to be, and what should happen. Either you do it, or someone else will.”

Do you know how to make a profit? After all, the main argument is that there is no suitable financial model for this.

“Today, almost half of our money is non-commission. It’s a different model based on management fees, retainers, and hours. Most of the advertisers in these sectors use another model. Because it’s full of expensive people, you have to be very careful and manage it properly, but I know how to be profitable. It brings astonishing value to clients and, in the end, drives money for the campaign.”