Razorfish

RAZORFISH

Seattle, May 24th 2010

John Fitzpatrick, Director of Business Development, Razorfish : started as a copywriter in the

advertising industry (2 years) for technology related items.

He then left advertising for Microsoft where he worked for 15 years as a product manager.

He lived in Paris and developed the Microsoft's ecosystem for banks and insurance

He subsequently went to Latin America and South Asia.

He then left Microsoft for venture capital in the mid-nineties.

He's now Business Development Director for Razorfish. His role: finding new clients.

[email protected]

Clark Kokich, CEO and early founder of Razorfish, [email protected]

Ron Gross, Director at Blue Goose Productions, [email protected]

Joe Mele, Managing Director Media & Marketing, Razorfish, [email protected]

Salim Hemdani, Vice-President Technology, Razorfish, [email protected]

Razorfish is the largest digital agency in the world. They have 15 years' existence. The agency was

divided in two divisions : technology and traditional agency, and counted 2000 employees. In 2007

Microsoft acquired it for 6 billion dollars. The technology company has built servers drive PM for

performance media. The advertising agency portion had problems with the Microsoft ownership

(conflicts of interests).

Razorfish became part of the Publicis group in 2009.

Digitas, one of the former big rivals, is now a sister company. They have phenomenal resources

around the world.

Digital agencies engage consumers in creating experiences. Razorfish is a 3rd type agency : Innovation

with digital in its blood. Build brand. Create experiences. Invent platforms and measure impact. All of

this requires a good bunch of technology layers and people.

Today's biggest trend is the ability to narrow-down and narrowcast. So many things are taking place

in social networks that people tend to narrow their perspectives and stay closed in their bubbles

more intensive consumers that you have to target more accurately.

The business of creating customers has changed in a very fundamental level. How do agencies and

advertisers organize in order to be more effective with this new kind of customers?

Advertising in the 80s and 90s, meant doing something to get attention, to be remembered. The

whole function of marketing was to get attention : media buying, advertising making, was TALKING

to CONSUMERS (one-way communication). It's what we call today "BLA, BLA, BLA". All of it was very

static, it didn’t change. Everything was structured, non changing : 60” radio spots, 30” TV spots,

street advertising format was set, etc.

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What we are experiencing as marketers today is a non-set, highly fluent, changing environment.

Communication is two-ways, newspapers are dying, consumers are communicating and influential.

Newspapers are readable on-line. The direct mail business is imploding, radio is bypassed by iPods

and MP3s. TV is becoming more and more fragmented. All video content is available anytime, on any

device, anywhere in the world.

Rules are changing and you don’t know how to be a marketer anymore. So we have to develop new

tactics to comply with these changes:

Process: in the old world process used to be completely linear. People became experts in their

specific job. Now you have to have an interactive process. The media person can have a more

creative idea than the creative himself. You have now -as an agency- to put all the functions together

to be effective in digital.

Componency: to go beyond media, to develop new competencies

Technology : we need to be able to work with the technology used at the clients’. In the

agency you have to have people that can interface with technology people at the clients’.

This is something that did not exist in agencies in the past. And then you have to be able to

host the data.

User experience: helping people navigating complex systems in a quick and delightful way.

And integrating this with design: things have to be beautiful and nice.

Analytics: segmentation modeling that looks like what you would have done in direct

mailing. Did not exist until 10 years ago

Culture : creating a culture of curiosity vs. expertise. People now have to be excited about the truth

and not only about their own idea. People have to behave like true teammates to understand what

the customers need. What can we do to create more delightful experiences for customers? Example

of Starwood hotels.

The important thing is to build a culture that includes change and that is non linear. The means will

continue to change (Apple, Twitter, Facebook, etc.) but you need to have teams that are constantly

able to adapt and that have consumer satisfaction as a main focus. The attitude has to be

collaborative, entrepreneurial, risk-taking, etc.

The collaborative process is more time-consuming. Non-working dollars : the part you are giving to

the agency. Working dollars : the money you give to the media. A Facebook advertising program is

100% agency fee (so –theoretically- non-working dollars) but can be much more effective than a 1

million $ program on regular media.

Recognized brands built their brands without any advertising, for example Google, Starbucks,

Amazon. What made their success is innovation, quality, word of mouth, customer experience. A

brand can’t lie any more: there’s nowhere to hide. Innovation will be rewarded.

The next question is: who are the key influential customers? Those who buy the most are not

necessarily those who talk the most about the brand in the social media. You really have to address

two groups of people: BUYERS and INFLUENCERS. We have to engage them in doing something. Only

20-25 % of consumers go out and advise on the social media. They are not the majority, but the

other consumers would never buy a new product without having checked on the internet the

influencers' opinion.

How do you encourage brand loyalty in this ever changing world? The metaphor of the small shop

down the corner where you are a unique and valuable client: they know you and try to make the

experience a pleasure for you. Delight them, thrill them and have them talk to friends.

Clients have to change more than agencies do. They are still working with distinctive sections:

advertising, retail, customer care, etc. Very often these divisions are separate and hate each other,

and are hated by the technology department at the agency, whereas they should be working

together! This approach will be very difficult to change.

The leading-edge of change are products that are expensive and that you spend time researching

about online. Packaged goods and luxury goods are apart (behind the curve). Luxury goods are based

on un-rational buying motivations and packaged goods are too undifferentiated for you to read

information about in the internet before buying.

Relation with the Publicis group : Razorfish operates as an independent brand. They haven’t changed

anything in their working model. Maurice Lévy does not wish to modify the way companies work.

And this is also true for Digitas and Starcom. The aim is to maintain individual brand integrity but

then find ways to work together as a group.

RON GROSS – DIRECTOR – BLUE GOOSE PRODUCTIONS

Blue Goose Productions has been invited as a supplier to understand how the production side in

agencies is changing. Ron has worked for the biggest agencies in the world.

The platform has changed dramatically and the habits of using those platforms have been modified,

too. More eyes are on the internet than they are on TV screens. The new platforms and the way to

interact with them have caused a profound change. The production industry behaves differently :

social marketing (blogs, special interest groups) makes people work more collaboratively: groups of

photographers, web designers work together to finalize production for many different platforms and

uses. A high value is now accorded to "a story well told", because you choose (or not) to watch it. A

rule that Ron applies when creating a TV commercial is to ask himself : why would a person come

back and watch it again?

Question: impact of video games on production? There’s small opportunity for real production to

come up with something similar to games. The consumers are much more empowered because they

can now create their own commercials. In the end what counts is always "a story well told".

Isn’t there a risk of creating clutter on the internet now? The amount of unfiltered information on

internet is daunting there’s much more of a premium to be able to create a viral piece of

communication. Viral is clutter-immune.

JOE MELE - MANAGING DIRECTOR MEDIA & MARKETING - RAZORFISH

Clients are adjusting their investments. To reach customers they have to continue to push into new

areas. Small formats are preferred, because of the increase of digital screens as a means of

advertising.

CMOs are pushed to talk about sales. You have to have smart people in your organization to make

smart things about the whole bunch of data you have.

You also need technology : you now need developers in your creative department.

The controversial point is that creative is not creative anymore: the media planners' job is not to find

a space anymore but about the fitting of creations to different plat forms and the whole experience

you want to give to the customer.

We have to re-think ways that agencies are compensated. Percentage media does not make sense

anymore because it incentivizes the agencies the wrong way : the most money there is the most you

can spend.

SALIM HEMDANI –VICE PRESIDENT TECHNOLOGY - RAZORFISH

A traditional agency : has to have a good idea. How am I remembered by consumers?

A digital agency : develops a two-way communication. How do I bring customers to interact? What

kind of experience can I bring? You cannot run away from the consumer.

Consumers do not interact with a brand only in their website or retail shops. I can now interact

through YouTube, Twitter, forums, etc. The experience is fragmented.

Mobile has really picked up so now we can interact with a company through mobile displays or

phones : Apple iPad, Microsoft contact-table. New digital interfaces are coming up every month. All

of these are coming up in one place. It’s no longer traditional advertising. You need interaction

with the consumers. You need people on the technical side who can make this happen.

5 technologies that will change the way to do business:

1. Cloud computing: benefit of the scalability. You only pay for the processors and servers you

actually use. It takes away the stress of managing the IT infrastructure. It's a pay-per-use

business model.

2. Cloud services will be everywhere : Facebook Connect will be more used than Facebook.com

itself, as the application will be available on other sites. More business will be conducted

through the cloud. Perhaps even stock trading will go through Facebook and Twitter

3. Touch interface: window 7 now supports the touch screen interface to foster interaction of

the consumers with the products, especially in the retail space. Mobile devices are becoming

the glue that connects online and retail experiences.

4. The mobile revolution:

a. Geo-triggered SMS platforms will enable delivery of messages based on the user's

time and location, significantly increasing the relevance of messages

b. Cloud computing and augmented reality APIs will exponentially increase the amount

and types of information that can be delivered through mobile services.

5. Agile technologies

a. Individual and interactions over processes and tools

b. Working software over comprehensive documentation

c. Customer collaboration over contract negotiation

d. Responding to change over following a plan

Agile will push businesses to think of software development as a solution to innovation.

There will be greater Agile adoption by offshore development shops, enabling global

distributive development.

JOHN FITZPATRICK – DIRECTOR OF BUSINESS DEVELOPMENT – RAZORFISH

The brand is a “post perspective” (i.e. it is built by converging experiences of customers) and not a

“pre-perspective” (where you tell people what you want to be).

Razorfish built the first tracking tools to track social networks conversations. The crisis creates unique

opportunities for social media.

Measuring techniques: most people consider purchasing search words as the best ROI. Proper

analytics enable to optimize and maximize the ROI through a consistent mix. The problem is getting

clients to care enough about all these precise and analytical reports. If you do, as a client you can

save lots of money. But the problem is that analytics are in competition with many other issues of

importance in a company.

THE STAR WARS TENDER AND PITCH

Star Wars is one of the most iconic brands in the world. It can be considered as a Grimm's fairytale of

the XXth century.

Money is made through:

Licencing

Marketing partnerships (ex. Mc Donald’s)

Digital : they are trying to figure out how digital can be a revenue source and they’re not

very good at it. Their website is a mick-mack of information. These guys have lost control of

their story. If you search for a specific scene you are far more likely to find it on Youtube than

on the Star Wars’ site.

Razorfish wants to demonstrate to the Star Wars teams that a number of new revenue streams are

possible : advertising revenues, mobile revenues, … = 7x revenues Razorfish is going to generate a

lot more money than they cost (1 million dollar cost against 7.7 million dollars of projected additional

revenues). The final cost turns up to be 12% of the revenues.

Integrated approach of Razorfish:

Attract: consumer research and digital strategy, paid search media

Engage: brand definition

Convert

Retain

Razorfish benefits from a worldwide presence and worldwide clients : Audi, Pepsi, The New York

Times, Mc Donald’s, CocaCola, Fanta, XM2go, pc.com, Levi’s, …

When you get people to do things (experiences) as opposed to listen to things, you get them to

interact much more deeply.

Examples of Razorfish realizations:

New York Times : Razorfish created a complete digital business model so that they were not

dependent on traditional models.

ESPN was losing control of their content

HULU : Razorfish designed the business model around the joint venture between Fox, NBC

and ABC

Mattel: 50th anniversary of Barbie. Razorfish brought Barbie to life in Facebook, Twitter, etc.

She's the best friend and fashion adviser. She’s the equivalent of Lindsay Lohan without the

drugs and legal problems.

For years and years the digital agency was the ugly little child that got the lowest budgets where

larger agencies were getting the big budgets : but this is shifting as budgets are shifting to digital.

Right now, although people love Star Wars, it is difficult to find a real Star Wars experience. Star

Wars are losing money to other websites. And accounting on the fact that the average expenditure is

72$, that makes a terrific amount of money-loss.

So Star Wars are losing what’s theirs.

If they get it back, they can get back an awful amount of money. Star Wars.com must become the

place where people go to find information and experience about Star Wars.

Star Wars have to become publishers to generate new sources of revenues.

Let's take the example of the Xbox : they have created a computer, not only a game console, so kids

can go on Facebook or shop with an Xbox.

Another good example is Nike. One could almost say that Nike owns the iPod, given the incredible

number of Nike applications that you have in it.

60% of the traffic on Facebook is generated by 30 years old and over.

In the 80s Star Wars created 800 comics that can now be used in readers like iPad. in the new Star

Wars site imagined by Razorfish, any time there is content, you can roll over the content with a

mouse and purchase the product linked to that content.

Watch episodes

Play games

Connect with fans

Buy

Learn

How can Star Wars make money with it?

Today they are selling low CPM ads. They can gain exclusive contracts and partnerships . Razorfish

built a complete business plan to show how the traffic could increase and how Star Wars could be

getting revenues on their mobile rights (messaging, mobile games).

1 million dollar cost for a 7,7 million dollar forecast revenue. The financial part is very important in an

era of measurement. Fun fancy websites are good, but to show the client where he can earn money

is even more important. Clients are not accustomed to this type of approach and they are absolutely

enchanted of finding somebody who cares about their business. Razorfish presents assumptions to

explain how the business plan was constructed.

Sepian, RGA, agency.com, etc. are their usual competitors in these types of tenders.

Problems related to the pitch : producing a good pitch means 20 people working for three weeks.

The total cost of it is of 30 to 50 k$. How can the pitch be monetized? The problem right now is that

you do the pitch and that the client takes the ideas and does not choose you.