Advertising spend is a good barometer of economic activity. Core Media chief executive Alan Cox tells Siobhán O’Connell about current trends and how his organisation is planning the office return

On September 6, Ireland’s largest marketing communications agency, Core, opened back up its 24,000 square foot office at One Windmill Lane in Dublin’s Docklands for the first time since March 2020.

Despite the dystopian nature of the last 18 months, chief executive Alan Cox is chipper, pleased to be in an office that he had visited just three times since the Covid outbreak.

Core’s home since 2017 is spectacular. The foyer is as large as an airport hangar, with floor to ceiling windows and a piano in the corner. There’s a printed sign stuck to the keyboard lid telling people not to play it, because of Covid presumably.

Cox (54) leads an organisation with a client roster that includes some of Ireland’s largest brands. He has had quite the journey in adland, starting out in 1985 as a delivery boy in ad agency Peter Owens and then moving up in different agencies in production, account management and media roles.

Cox grew up in Dun Laoghaire and was schooled by the Christian Brothers. His mother Nóirín was a school teacher and a professional singer. His late father, Tom, had a senior role in Dublin Chamber and presented ‘Hospitals Requests’, the most popular  show on Radio Éireann in the 1950s.

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Cox’s route into advertising was through Rathmines College of Commerce. Over the decades, he has used mergers to build Ireland’s largest indigenous advertising business, with most of the focus on buying media space.

Turnover in 2019 for operating company Core 1WML Ltd was €212m, the same as the year before, so the relentless expansion may have hit a plateau. The gross margin on advising clients and booking ads is 15.6%, which meant that €33m was available to pay salaries and other overheads and costs. 

Core had 320 people at work that year, at an average payroll cost of €70,000 per person, for a total outlay of €22.6m, and property lease outgoings were €1.8m. Excluding depreciation, the operating profit was €3.3m, though net cash from operating activities decreased to €1.7m from €3.7m in the prior year.

Though profitable, the ad business is a cashflow balancing act. Media buyers like Core always owe lots of money to media, and in turn the company is owed lots of money by its advertising clients. In December 2019, for instance, Core had trade creditors of c.€38m and trade debtors of c.€40m.

In the notes to the 2019 accounts, signed off last November, the directors stated that prior to Covid the expectation was that Ebitda would double through 2020. The reality, according to the accounts, was “numerous cost reduction actions with the intention of negating the revenue reduction that the pandemic closures brought about”. However, after the initial shock of Q2 2020, advertising spend has proved to be resilient, as Cox explains.

What is your expectation for advertising spend this year?

We think ad spend growth this year will be in the region of 14% compared to 2020. Last year the decline was about 15%, so it won’t quite be back up to the level of 2019, but next year we are predicting growth of about 10%, and that growth will bring it above 2019 levels.

That level of growth and recovery is greater than you would’ve seen in any previous crisis. Television ad spend is up 15% this year, and radio is up 5%. Out-of-home ad spend hasn’t recovered yet to the degree that we probably would have liked at this stage, with 4% growth this year, but last year the out-of-home ad spend collapsed, falling by over 40%. In certain months, there was just no expenditure at all. With digital, we’re seeing about 20% growth this year.

In the past, marketing would have been the last thing to recover. This time, marketing is now being used the way it should always be seen – as a driver of economic growth as opposed to a beneficiary of economic growth – and that’s a big change.

Is there generally an over-reliance on short term sales gains to the detriment of long term brand-building?

Typically, you should invest 60% of your marketing efforts in emotional, long-term, brand-building messaging, and 40% should be in rational, short-term, activation-based messaging. That’s proven, empirically, to be the sweet spot of investment of marketing funds. Unfortunately, if you look at the overall level of investment in marketing today, it’s skewed much more to activation, which is rational, and not the emotional hooks that are so important to building brands.

The reason that marketing people are spending more on short-term activities is because they’re seeing instant results. Those results are tangible, and it encourages them to spend more and more, mostly on digital channels. But what they don’t realise is that they also need to feed and water the brand.

How much of Core’s media spend is digital-related?

It’s in the region of 55%. There is tremendous growth in that part of the business, as clients become more sophisticated around their use of data, and the controls and processes in place to manage that. Our role is to advise clients on the best mix of activity in order to achieve their commercial goals, and that situation is not going to change.

What is new is that organisations such as ourselves are becoming involved in our clients’ e-commerce activities. That’s because the communications strategy driving those activities is inextricably linked and needs to be integrated. Our job is to ensure we’re actually ahead of the curve and future-proofing our clients’ requirements.

How has remote working affected pitching for new business?

In a virtual pitch, you miss that whole interaction with the client, particularly when you are presenting to people that you don’t know. You also lose the ability to work and present as a team in a way that brings the presentation to life. Trying to achieve that online is not as easy to do. In fact, I don’t think you can achieve it to the degree you can achieve in person, with the physicality of the office to support you.

How is Core executing the return to the office?

We have had remote working as our policy for the last eight years, and pre-Covid we would have had one-quarter of our people working remotely. Post-Covid, we expect that the number of people working remotely will grow to maybe 40%, but it’s hard to say exactly.

At a practical office level, all the filters in the air-conditioning units have been changed. We have installed new software that will enable employees to book their desk in the office before they come in. Nobody will have assigned desks anymore, given the hybrid world that we’re going to be entering into.

We’ve also had to upgrade all of the technology in the meeting rooms. This means putting in new cameras and microphones, and an interface that allows people to share content. That equipment alone cost about €80,000. We’ve had two buildings up to now: the third floor in 1 Windmill Lane, and the entire building at 16 Sir John Rogerson’s Quay. We now plan to sublet No.16. We just won’t need the space if 40% of our people are working remotely.

How do you manage corporate togetherness?

That is tricky, but we have managed it well during the crisis, with regular online catch-ups. I do a webcast with the whole organisation, covering every aspect of what they need to know about our plans, how the business is performing, and any news. People can ask questions anonymously, nothing’s off the table, and there’s no editing of the questions.

How has the ad business changed since you embarked on your career, and what does the future look like?

When I started out, the full-service agency was basically ruled by the creative department, and everything else was secondary. The difference now is in how the model is being managed. The right level of investment is now going behind every service, in order to ensure that it is fully resourced.

For the future, we know so little about artificial intelligence and its potential, and what its impact will be. I think many of the roles that currently exist in marketing communications will be fully automated. However, creativity will never be automated, because you cannot replace the genius of the human mind.