Dave Penski | Publicis Groupe | Media in the Age of AI: PART 2

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0:22Dave Penski:Welcome to CMO Confidential, the podcast that takes you inside the drama, decisions, and choices that go with being the head of marketing. Hosted by five-time CMO Mike Linton. When is the last time you researched something on a website? If you're like most people, AI did that work for you. And that raises a question. If AI is doing the work, what is your website really for? This behavioral shift means AI bots are becoming your most important new visitors. A challenge our sponsor, Scrunch, is taking head on. Scrunch is the customer experience platform that helps you understand how AI agents experience your site, when and why they show up, and what's blocking them from being retrieved, trusted, or recommended.

1:13Scrunch shows you the content and citation gaps and technical blockers and helps you fix them so your brand shows up when consumers start with AI because your most important site visitor might not be a human. For our listeners, Scrunch is providing a free website audit that uncovers how AI sees your site and how you're showing up in AI versus the competition. Run your site through it at scrunch.com slash CMO. Welcome back to part two of our conversation with Dave Penske. Hey, I want to shift topics. Because you mentioned earlier in one of our chats that you are almost like an economist in that you get to talk to so many companies and verticals.

2:03And you mentioned that many clients are seeing what you referred to as the hollowing out of the middle class. Can you talk about what that means and how that affects business? So I'm not the first person about the K economy. I guess that was and I do think that we're looking at a very challenging situation in this this ability to not just the middle class, but a number of our clients that focus on lower income and lower middle class families as part of their business. If you look across a majority of our clients, it's a big part. And there's a number of our clients that have more on the higher end.

2:43Some of those, the ultra-wealthy have covered up some of the problem of the top 1 % or 2%. Just for our listeners, the K-curve is the high edge of the economic, higher earners, higher income, buy a lot of stuff. and that makes up for the gap of the middle folks and that's the k economy which you say what you want about it that's what people call it and yeah and so i think that there is that is a significant issue um and it's not going away anytime soon i don't want to get into a political philosophy conversation here but i certainly i'm not going to speak about but there is a our current uh focus with our country right now is going to be very challenging.

3:32And we can tell people that there's no inflation, but people go to the store and buy stuff. It's not like a genius. Yes, prices are in good shape, but sort of. And then a lot of other places are not, I mean, there's just, there's, there's, there's a real inflation here. And at the same time, you know, there are, our clients are being squeezed. You know, your CPG on the retail side who have their own challenges, on the retail media side, on the tariffs, on commodity pricing, all of those things have gone into a higher price for the consumer. And as a higher price for the consumer, this is a challenge for our clients across the board, and especially when you are focusing on the lower half of that segment.

4:22And that is something that I wish I had a solution for it. As an economist, I see it. I don't have a solution for it from a government standpoint. But this is going to continue to be an issue. And I'm not as focused on the stock market. It doesn't affect our clients as much. The one number that probably affects our clients most is corporate profits. The corporate profits haven't really fallen yet. So generally what falls in line with corporate profits is advertising spend. that hasn't really fallen. So it's an okay market from an advertising perspective, but from a consumer's perspective, I mean, if the consumer becomes finicky and you can lose consumer confidence, you then start losing advertiser confidence.

5:03It's a bit of a circle. Yeah, and if the K curve doesn't work, if the high end of the K curve doesn't work, if the K can become an ugly graph. Yeah, but even the high end of the K curve, it doesn't work across a number of categories. I think that one of the things is when you get into the verticals, the k-curve only serves certain verticals yeah and it and you even you know i always think of you with insurance mike i'm sorry but you can only charge you can think of me that's best but but yeah you can only charge so much uh at the high end and you still have consumers on the low end that can't afford it so they'll drop it and those types of things and the rising the other part is rising health insurance costs and how the country is dealing with it i think that that's probably one of the key things that hopefully gets solved before the midterms is, you know, if we, if you keep spending more money in health insurance, that's less money going into the consumer market.

5:56And, uh, that is a challenging situation where, you know, if people drop health insurance, it causes a different public health issue. Uh, but those, those are things that, that, that I wouldn't say keep me awake at night, but certainly make me mind race a little bit is, is you start looking at it and as i would say this is as uncertain a year um as we've had kind of going into it we're gonna the disappearing up front is as regards we have a lot of meetings coming with clients and and we're having it the the one kind of other interesting factor in the marketplace right now is you have this massive amount of money that was spent in the previous up front on both olympics and on the world cup and um will those dollars return or will all those dollars let's say two and a half billion of those dollars will those dollars return or those dollars just go straight to the bottom line um on the advertiser side at the moment if i'm betting i'm betting a lot of those dollars go to the bottom line because i would bet with you If the K curve becomes an F curve, you'll have no choice but to move them.

7:13And so that's another piece right now where I think you're seeing some. So when you look at the marketplace, if I look at why some of our partners are doing well, is if you're in local, if you're in audio, if you're in outdoor, if you're in local TV, you are going to have a good year in 26 because of a midterm election, which will help your numbers. so you can probably buy yourself some time and some of that money will float up into national advertising and certainly with a lot of connected television and ability to buy that will help so that will kind of cover up a bit of this problem in 26 but you get into the even in january uh you know november december january of 26 into 27 when the political money is really going to be a long ways away from happening again if a whole year of no politicals no politicals no olympics no world cup that's a that's a pretty tough if i'm running an advertising company that's a pretty tough uh you call it f curve you called it mike yeah well i just created into a fail curve okay yeah i understood that so uh i i would say that that is a very bleak outlook in the 27 um if you're missing all of those things those dollars don't come back and i think there's a reality to if the midterms don't get helpful um and some decisions aren't made by our government to help um one way or the other is both sides of the aisle could do better here as we know here's the advice don't spend all your 26 bonus in 27 because i think that might be might not be so good i think that's a problem i wasn't gonna put that clearly but that might be a That might be an accurate way to put it, Mike.

9:04Not financial advice from CMO Confidential, but just a topic to service to our listeners. I do think that is, as I look forward into this up front in this season, we try to look ahead a bit. 27 looks like a tough year in the market without these other factors, which have been positive. I mean, that was an incredible Olympics. I mean, I will tell you, I wasn't sure how they would do. they had such, I thought NBC did so well in Paris. And then I thought Milan, which was a terrible time zone for them. And just like Paris without people, you know, no one was working during Paris in the middle of the summer and people were off and you had the kids off.

9:46I don't think it hurt that they snowed all of us in the Northeast for two weeks. You couldn't leave the house. Maybe that, maybe that was, maybe NBC did a great job getting us on to some freezing cold weather. I couldn't leave my house for 10 days, but, um, I do think for an 8 a.m. hockey game, I don't know anybody didn't watch the game. And I don't know if this is true, but I heard the other day that it was the most watched morning event of all time, which I have probably accurate. I don't know what else is better than that. And I think that was a nice thing to bring our country together. And I'm hoping that we have some more positivity like that, but I don't always feel that.

10:26And I thought they did a wonderful job on the Olympics in general. I thought the both the the the women and men's hockey teams winning was just absolutely fantastic. And I hope that we get more of that. But the challenge is in 27, none of that exists. The Olympics, I actually I think the World Cup should be great. You know, I think the amount of Americans are actually very excited for the World Cup is good. And we'll see how that pans out. I feel very confident in the World Cup. and I think we'll get better weather than the Olympics and I hope so. It's in June. I hope we get better weather. But it does feel a little bleak at the moment as I'm looking into a frozen Hudson River.

11:10I do think that there's a, I'm hoping that, again, the rest of the 26 can be positive about it. Again, if I was, if I'm, if I have my negative New York hat on, 27 looks tough, looks tough. There you go. Hey, I want to flip over to three other topics, streaming, sports, and gambling. yes you can take them anywhere you want streaming sports and gambling well well you have a cat's eye view of all of it all right so on uh on streaming uh the announcement yesterday of of paramount purchasing warner brothers i think is is great uh i think that would be a great you know real competitor um and i think that's a very strong uh place for it to go and i actually like that the whole thing's moving with CNN and you're going to have a whole ability to have this other very large competitor in there.

12:05So I think that is, it's a much better place for Warner Brothers. I think it's a, I think it's great. And I think Netflix being separate is, is, is, is, is probably better for our ecosystem. So I, I am, I was actually, I guess, happy to see that. I guess both of mine are both of them are clients of mine so i'd be careful with that but but yes what you're saying is a bunch of big players is good versus one or two big players by this yes and i think that the ability to bring those two companies together i think it's gonna be a strong fit i really think it's going to be a good situation uh so uh on streaming uh you know it's interesting you know if you go back, I'm picking on 2004, but you had basically six providers of most of the content, and we have six providers of most of the content back again.

12:59And some of them have the same names, like NBCU and Disney, and some of them are new, where you have, you know, now it would be a Paramount, a Google, an Amazon, a Netflix. But again, you're about six people controlling, and it was the same thing was true 20 years ago. So I don't think we want to, I think it's a good way for advertisers to have choices. I think it's good for us to negotiate with a lot of different people. I think it will provide enough supply. And I think that with what's happening now, the one piece falling out of this has been cable where the numbers really are scraping the bottom.

13:39The streamers have moved most of that content and the new contents being produced on streaming with the cable basically being some some reruns and some other things which is you know kind of that's probably the biggest difference but you know we're not having consolidation like we did in accounting like you didn't you didn't go down from that you know just i feel i feel i feel very good about re-reaching on sports and gambling Sports is as AI proof as it gets. So I think as we continue to see this and I can't say enough positive things about both the college football and the NFL playoffs were some of the best events.

14:19I mean, it was must see TV. So I feel very good about the sports landscape. We are big believers in sports going forward. No one wants to watch tape, tape delayed sports. So the ability to get live viewers and, you know, I think probably the only thing I will say negative on sports is I think we got to get the NIL stuff cleaned up so that we have a more organized NCA sports opportunity. And I think that, you know, Amazon coming into this and they're bidding up, of course, it's good for the leagues. It's good for us. They're a very good provider of content. So I don't know what you're sure with it.

14:58they've done an incredible job with both the the the thursday night football games and now with basketball the the one thing that i would say on sports which is unfortunate we will see how the numbers pan out this year is because of the the providers whether that be the samsung's the lgs the the roku's the the world it is hard at the moment i think youtube tv put is the best job of, hey, if I'm watching the Knicks on MSG and I want to flip to Amazon to watch the Nuggets play, it's challenging. I have to go out of the app and in the other way. Out of the app. So I think if I was, as a consumer and probably as an advertiser, if I could fix one thing on sports, the ability for us to go back and forth, I mean, the amount of times that I'm watching my local basketball game, I used to go watch Kenny, Shaq, and Charles at halftime and then go watch a little bit of that game go back and forth it is a cumbersome annoying experience at the moment and you know i think the manufacturers would say it's the app guys that want the app set they don't want to leave the apps because you leave the app you're losing the customer well i do think there needs to be some type of of coming together on this exact issue if we want um uh if we want that to work because i think it's going to be a very hard, if you get all the viewership of the past, if you don't fix this issue, and as more and more sports go to the streamers, and think about how you watch college football, how you watch college basketball, and if you got to go in and out of four different apps trying to find stuff, it's a pain.

16:42So I think - Yeah, in the end, someone will solve this. We are taking a short break from this show for a word from our sponsor, Scrunch. Over the weekend, I asked AI to do dozens of things for me. Please help me make this dishwasher start working. Settle a debate between me and my partner. Is it safe to sleep at 80 degrees? It's not. Please help me find a robotics kit for a five-year-old operating at a middle school level. And even help me compare the Scrunch Agent Experience platform with Adobe's LLM Optimizer. In every one of these interactions, I never once visited a website. In this day and age, what's your website actually for?

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17:49Now back to our discussion with Dave Penske. So this will get solved, and this will be a – this, to me, is going to be a manufacturer or others. Google TV probably, again, does the best job of this. The ability to go back and forth is going to need it. I mean, if you think about it, even in the NFL, you've got – Netflix has got a game. Everyone's got a game. Everyone's got a game. And trying to find – to go back and forth is frustrating. It's very frustrating. And you don't want that consumer experience to be frustrated. And let's go. Let's go to the last gambling. All right. So I'm not sure your exact gambling question.

18:24I like gambling. I don't bet on sports very much, but I am. I am a gambler. I'm a poker player. I think the gambling aspect is a challenge. We don't have a gambling company as a client at the moment. So I'm not speaking from a client perspective. I think that gambling has brought interest in the sports. uh but i i don't know if it's it's always been in the the most positive light and i think if we've now had three or four of these things where players are getting paid um so i think there needs to be greater regulation around the gambling issue you know i i don't think because if you destroy if you destroy the fact that sports is if you make sports fixed you that's the killing of the goose over yeah so i i am hoping on nal and on this like i i don't think i don't know what i'm gonna pick on this school but like i don't think you should be able to bet 25 000 on a saint bon adventure game so i think that there needs to be some regulation on this and and and so my worry is that people are betting on these you know if you have effectively a the idea that the highest NAL player is$5 ,000 for the year.

19:37You shouldn't be able to bet more than that on a game because the ability and then use the latest one is got these 25, 30 players that were playing these mid-major markets, not making much in NAL and someone offers them$25 ,000 to fix a game. You know, I'm not really blaming the kid here. I wish I could say that, you know, this is how you shouldn't do this. And obviously you shouldn't do this. And that's why I think that if we get the NAL fix where it's clean, clearer and cleaner and understandable. And, you know, I think that, you know, I was, you know, really happy with how competitive all the games were pretty much in the playoffs.

20:15But you're starting to see this, you know, I don't think the LA Dodgers winning, winning the World Series for the next 20 years is good. And I don't think you want to end up with four college teams i think what makes college always interesting is the ability that especially the ncaa tournament you saw a lot less upsets last year and i do get nervous that you're going to end up with the just like you have the ai winners and losers the nil winners and losers and you know whoever has the richest drama it's the drama that makes it work and if you beat the drama out of it whether it's through like fixing games or just know the dodgers are going to win the drama disappears, the audience may go.

21:00So I feel could not agree more with that statement. So that's probably one thing I'm very, very bullish on sports. I'm not as bullish on gamma. Hey, so what should you talk with CMOs all over the country? Yes. You know, and companies and everything. What should people be working on now for implementation in 2027? Well, I think that a few things. I think one, you want to make sure that you're able to understand who your customers are, who your prospects are, and the most efficient way to reach both of those groups. And I think that, and we believe it's an identity solution, but however you do that, I think that's very important to understand how consumers are moving through.

21:46It's a very connected ecosystem across that paid media, CRM, on influencer and commerce. How is that journey happening now? And that journey has changed even from a couple of years ago. If you think about it pre-COVID, if you're a QSR, there was almost no delivery. You now have a huge ability to reach a much younger consumer in delivery, which you couldn't. So there's some real positives to a DoorDash that's now bringing a much younger consumer to a QSR, which might have a much older base. On the other side, you know, is that that delivery comes in? Is that separating that customer from the the from that customer from the end user?

22:33So we said that that customer from the QSR. So all of those types of things, like understanding who your customer is, is more important than who your prospect is and what it takes to convert them. That's probably the most important thing to figure out. This is a really big strategic point I think you're making, which is understand your customer for real, not just by media type. Yeah, that's dead. Yeah. So I know we're at time, but we could talk with you a long time. So this brings us to our traditional last question. Practical advice and or funniest story you would like to share with our listeners.

23:07You can take either topic or both, but you must take at least one. Oh, yeah. That's a good one. I forgot. I did see this in the note and I forgot this one. So I was like, I'm trying to think of.

23:26All right. So I will, I will, I'm trying to think of a funny story that I could tell on this. That wouldn't be embarrassing. There's probably hundreds you can't tell. So I'm going to pass on that one and I will, I'll do an advice. I have a group of people that I mentor. And, um, I, I still think this is advice that I will give the people that is, um, uh, you know, uh, absolutely true. Uh, the most important thing in our business is still being on time. And it's shocking, uh, how many of our young people are not on time to meetings. And so I will say that if I had to take one piece of advice and ask me this, I said a few things, but I said on time is probably still the most important thing.

24:12And it's the one thing you can control most of the time. And so if I give one person a piece of advice, that's what I would give them. I agree. Punctuality matters. And it sends a signal that whoever you're meeting with, that that person is important. So thank you, Dave, for being with us. As I am four minutes late to my meeting right now, so I can't wait. But as I just said that, but yes, that is my point of view. All right. I will finish up. Thanks. We'll have you back. Thanks for listening to CMO Confidential. New shows drop every Tuesday, and you can find our entire catalog of our 160 shows on Spotify, Apple, and YouTube, which include Colonel Mustard in the study with the job spec, how poor design shortens CMO lifespans, a top venture capitalist analyzes the AI landscape, and Dave's first show, which ran in late 2023, a media maven discusses the marketplace, media, and CMOs.

25:02Hey, all you marketers, stay safe out there. This is Mike Linton signing off for CMO Confidential. When is the last time you researched something on a website? If you're like most people, AI did that work for you. And that raises a question. If AI is doing the work, what is your website really for? This behavioral shift means AI bots are becoming your most important new visitors. A challenge our sponsor, Scrunch, is taking head on. Scrunch is the customer experience platform that helps you understand how AI agents experience your site, when and why they show up, and what's blocking them from being retrieved, trusted, or recommended.

25:46Scrunch shows you the content and citation gaps and technical blockers and helps you fix them so your brand shows up when consumers start with AI, because your most important site visitor might not be a human. For our listeners, Scrunch is providing a free website audit that uncovers how AI sees your site and how you're showing up in AI versus the competition. Run your site through it at scrunch.com slash CMO.