Starcom CEO’s link with Tremor Video IPO raises conflict of interest issue

May 29, 2013

Laura DesmondYou can gauge the ebullience of equity markets these days from the number of obscure digital media companies with dodgy profit and loss accounts that are confidently seeking an IPO (or listing on the stock exchange as it is more commonly known). They’ve never had it so good… since 1999.

Right now video ad networks – companies that provide a digital video platform for the big marketing services groups serving their ads online –  are flavour of the month. The “space” is currently dominated by Google’s YouTube and Hulu (which you may also have heard of). But video industry experts expect YuMe and Adapt.tv (which you won’t have done, unless you’re in the biz) to declare their hand.

In fact one of them already has: Tremor Video, a big video ad network that has long been eyeing a public listing, announced its IPO a few days ago. It’s typical of the breed. Last year the company lost $16.4m on revenue of $105.2m, the previous year $21m on revenue of $90.3m. But hey, what’s a big red hole when margins are improving and losses decreasing? The stock market is not about today, it’s about tomorrow: and Tremor is selling a great tomorrow, about $86m-worth of it, it hopes, on the NYSE. Already Tremor runs ads on over 500 websites and mobile apps: that figure can be expected to increase exponentially with all the publicity attending a flotation.

So far, so dull. But don’t nod off, because things are about to become considerably more interesting. Tremor has lots of admirers in the business. One of them is Starcom MediaVest Group, owned by Publicis Groupe – which is nearly, but not quite, the world’s largest media buyer. So, a friend worth having you might say. In fact, SMG likes Tremor so much that its business accounts for nearly 20% of the video ad network’s revenue, so I’m told . What that says about PG’s in-house alternative Vivaki I’m not quite sure; maybe things aren’t working out there as well as they should be. But it’s one hell of a vote of confidence in Tremor.

And perhaps that’s as it should be. Except… my eye was caught by a further disturbing detail in the S-1 – a simple IPO pathfinder document filed with the SEC. One of Tremor’s principal directors is Laura Desmond. Not, by any chance that same Laura Desmond (pictured) who has been global CEO of SMG since 2008? I fear it may be the self-same. If so, she’s a very provident – and lucky – woman. Because a small fortune is coming her way very soon. Desmond (that’s Tremor Desmond) was only one of two Tremor board directors to get paid last year: she received a full grant of nearly $300,000 in share options, plus another $175,000-worth which can be vested in equal amounts every month over the next four years. Quite a tidy sum, you’ll agree. But that’s not the full measure of it. The options, I’m told, have been awarded in nominal 2012 terms – at about $1 per share. And should the IPO striking price be $10 per share? Imagine – $3m, or thereabouts.

Enough, certainly, to pay for that sailing trip round the world which the other Ms Desmond has been promising herself for some years.

UPDATE  4/7/2013: Tremor Video’s IPO got off to a rocky start last Thursday, and Laura Desmond may not collect quite so much as she hoped when passing “Go”. The flotation price was $10 per share (as predicted above), below hopeful initial forecasts of $11-13. However, the stock has since spiralled down to a tad under $8. Ms Desmond need feel little despondency, however. There is still a tidy package coming her way. By my calculations (based on the S1 012 Director compensation table), she has already vested over 35% of her 175,000 stock options. Meaning she can cash them in at any time. The rest she must accrue at the vesting rate of 1/48 a month until January 19th 2016. No doubt she would be wise to wait a while until crystallising her nest-egg. At $10 per share, the options would be worth – hardly rocket science – $1.75m. She may – we don’t know this for certain – have to pay the strike price of $3.34 per share, which would reduce her total haul to about $1.2m. Still enough for that ocean cruise, though….

One PPS. Some readers of my original article made the fair point that there is nothing untoward in SMG representing such a large proportion of Tremor’s revenue: it is, after all, one of the world’s largest media buyers. Up to a point, Lord Copper. Pretty precisely, SMG accounted for 17.8% of Tremor’s revenue in 2012. On the above rationale, you would expect GroupM, which is even bigger than SMG, to account for an equivalent portion of that revenue. It does not. As far as I can make out, it spent only $7.5m through Tremor during the same period, a tiny amount by comparison, and has only one major client with them, AT&T. Could be a coincidence, of course. On the other hand, investors should be on their guard that Tremor does not screw up its special relationship with SMG.

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Nokia, Microsoft and AT&T hold their breath for Lumia 900 smartphone launch

April 9, 2012

Like me, perhaps, you missed one of this year’s most critical product launches. That’s because, for reasons still not entirely apparent, it took place on Easter Sunday.

Never mind that though. All the most influential tech reviewers are agreed: the Nokia Lumia 900 is undoubtedly one of the finest smartphones money can buy, with its big, 4.3in screen, intuitive operating system, 8 megapixel rear camera and VGA front-facing cam, not to mention 4G LTE data capability. And at the astonishing price of only $99 (terms and conditions apply, 2-year contract only, sorry rest-of-the-world, you’ll just have to wait and see…), it looks like a snip.

But will it be? The Lumia’s significance lies not so much in it technological prowess as who’s behind it.

This may be the first and only chance for Nokia, Microsoft and AT&T to break the iPhone’s increasingly assured stranglehold over the sector. Nokia, once hailed the world’s leading mobile phone manufacturer, has so far made almost no impact in the dynamic smartphone sector dominated by Apple and Google/Android. Microsoft, developer of the admired but definitely connoisseur-only Windows Phone 7.5 operating system, has so far lacked a suitable vehicle to gatecrash the market. And AT&T, the US carrier with sole Lumia launch rights, is playing a desperate market catch-up game with its rivals Verizon and Sprint Nextel, after earlier losing exclusivity over US iPhone sales.

Little, apart from that quirky Easter Sunday launch date, is being left to chance. And with some of the world’s powerful brands behind it (AT&T, for instance, is America’s second biggest advertiser) it seems hard to conceive of abject failure. AT&T alone is spending $150m through BBDO on the Lumia launch campaign – more than it ever spent on the iPhone. And there has been much hullabaloo in Times Square with a spectacular live event – watched by “tens of thousands of people” and videoed on Facebook – featuring 60-foot CGI-generated waves which cascade down a building.

If only smartphone marketing were simply about price, position, product and promotion, the Lumia 900 would have a field day. Alas, it’s also about apps. As a leading member of the tech commentariat David Pogue, of the New York Times, points out:

The Lumia 900 is fast, beautiful and powerful, inside and out. Unfortunately, a happy ending to this underdog story still isn’t guaranteed. Windows Phone 7 faces the mother of all chicken-and-egg problems: nobody’s going to write apps until WP7 becomes popular — but WP7 won’t become popular until there are apps.

And it’s anyone’s guess when that might be.


Omnicom closes $100m Communispace deal

January 25, 2011

Silence reigns at Omnicom Towers on its mooted $100m deal with eCRM and insight company Communispace. Which is odd, for two reasons. First, it is the biggest deal engineered by the marketing services juggernaut since its ill-fated acquisitions of Agency.com and the somewhat more successful Organic in 2003. Second, and rather crucially – I hear the deal has gone through.

At all events, Communispace founder, president, chief executive and 10% shareholder Diane Hessan is packing her bags (now presumably heavy with loot).

The question is, what happens now? In an earlier post, I pointed out that $100m is a very steep price – yet, curiously, it does not seem to have been a stumbling block for that wily operator John Wren, Omnicom president and chief executive officer.

At the time I concentrated on the financials, and speculated that there must be something very special about this deal for Omnicom to hazard such an over-priced acquisition. That logic can be applied with equal relevance to Communispace’s clients. True, there are many the two parties have in common, plus a few that Omnicom would like to lay hands on. Yet it’s hard to ignore the conspicuous conflicts. Not just on the brand side, either. A slug of Communispace’s business flows from Omnicom’s rival agencies. Here’s an excerpt from AdAge that neatly summarises the conflict dilemma:

One reason why an Omnicom deal would make sense? Communispace lists as its clients several marketers that work with agencies under the holding company’s banner, including HP, PepsiCo, FedEx, Kraft and Campbell. But the Communispace client list also includes agencies at rival holding companies, like Havas’ EuroRSCG, Publicis Groupe’s Starcom MediaVest Group and Interpublic Group of Cos.’ Martin Agency. Were an Omnicom deal to happen, such alliances would likely have to dissolve, as would accounts with clients like Verizon, a major competitor to a big Omnicom client, AT&T.

I’d add WPP’s Ogilvy to the list of competitors as well (check out Jim Edwards at BNET on this one).

How does Wren plan to steer himself around that one? His last experience with a major acquisition, controversially managed through off-balance-sheet vehicle Seneca Investments, was not a happy one. Let’s hope history does not repeat itself.


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