An Ad Man Tests the Limits

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says Joachim Schütz, who runs the German Advertisers Assn., an industry body.

Rebates have been virtually unknown in the U.S. Now Gotlieb is looking to get money from outdoor advertising companies, which put ads along highways, in airports and multiplexes, and even in city buses. Asked if he plans to expand into other media, Gotlieb says local TV is "quite possible." The GroupM chief says that once he has inked enough deals, he'll tell clients how the rebates work. And he says the plan won't take effect until everyone is in the loop. He refers to the payments as just one "intelligent application of scale" and says they represent a minor part of a plan to derive new sources of income in an increasingly competitive world. "We're simply facing reality," he says. "We know what we have to do and will be proactive about it."

The danger for Gotlieb and GroupM seems clear: He risks alienating the very clients who helped propel him to the pinnacle of the media-buying world.

RISE OF A QUANT

When Irwin Gotlieb began working on Madison Avenue in 1970 at the age of 20, media buyers were powerless. People like Gotlieb usually represented one client and sometimes controlled just a sliver of that advertiser's budget—say, the money spent on ads during prime-time TV news. With budgets so divvied up and with so few options to reach masses of consumers, ABC (DIS), NBC, and CBS (CBS) practically dictated prices. Gotlieb dreamed of getting an edge over the networks.

Before becoming an ad man, he'd worked in New York's sharp-elbowed diamond district. There Gotlieb learned a thing or two about numbers. A savvy diamond cutter tracks prices for all sorts of polished jewels and imagines dozens of ways to cut up a rough stone before deciding how to milk it for the most money. Gotlieb wanted to bring a similar discipline to ad-buying. In 1976 he wrote a computer program that projected advertisers' demand for TV spots. This helped him decide how many ads to buy ahead of time at a discount. Later, he and his team began combing through consumer research and ratings data to find cheap but promising shows with which he could lock up multiyear deals. (One early find: a Chicago talk show hosted by a young woman named Oprah Winfrey.)

By the 1980s, Gotlieb was running the media department at A-list agency D'Arcy Masius Benton & Bowles and had become a nerd god to advertisers. For the first time, deep, analytical data—not just the gut instincts of Mad Ave ad-makers—were informing their buying decisions. "Irwin was the most forward-thinking person in media," says Bob Wehling, then Procter & Gamble's (PG) chief media buyer. "I trusted him implicitly." Gotlieb, having won his clients' respect, began looking for ways to wield his power more effectively.

He got his next big break in the 1990s, when a wave of consolidation transformed the industry. Scores of full-service ad agencies were subsumed into five giant, publicly traded holding companies. One was London-based WPP. To generate more income and please investors, the holding companies put their media-buying operations under one roof and spun them off into separate divisions. It made sense: The new media agencies would combine their clients' ad budgets, helping them achieve economies of scale, and start making real money.

In 1999, Gotlieb took charge of what was to become GroupM. But the world was changing fast, and by 2002 he understood he needed to stay ahead of the curve or risk being made redundant by a Google or a Microsoft (MSFT), which were threatening to automate the business.

His clients, bewildered by all the changes, were looking for a trusted guide. Gotlieb had an answer for almost every threat.