Publicom and on and on and on

August 15, 2013

Maurice Levy, John WrenNearly three weeks on from the seismic news that Publicis Groupe and Omnicom are to merge and still no end in sight to the discussion of possible permutations.

Not, be it noted, among the clients involved – who are mostly too stunned, or too busy topping up their tans, to react – but within the industry trade press. At AdAge, the merger has virtually gained supplement status with a regularly updated online sidebar.

But pickings are increasingly thin, as the few facts to emerge shear into speculation. My current favourite ramification? Did Messrs Lévy and Wren not consider the impact of their merger on the industry’s premier creative and effectiveness award schemes? It seems they did not, with dire consequences for both the Cannes International Festival of Creativity holding company of the year award and its Effies equivalent. Alas, these hallowed categories, engineered with such care and precision over the past few years, may now be consigned to the scrapheap by the appearance of a juggernaut so colossal that it will  steam-roller any conceivable competition for the heretoafter. Quelle horreur!

Here’s one factoid that may be of more than passing interest. In the four weeks to August 12th, WPP was the only significant loser in market value within a sector that is generally on the upswing. Its shares shed 1.8% in value. I owe this pearl to Bob Willott, editor of Marketing Services Financial Intelligence, who speculates that the back-track reflects investment community anxiety that WPP may embark upon something big and silly as a riposte. In other words, a price-inflated mega-merger.

I doubt it, given that the only acquisition with appropriate critical mass would be Dentsu. Just think about it, but only for a nano-second. For once, Sir Martin Sorrell is likely to play a waiting game. The sole visible benefit of the Publicom merger to clients – in whose name such things are theoretically carried out – is consolidated media buying in North America. Of traditional media, that is. The very thing that may attract regulatory interest. “Big data”? Don’t make me laugh. It’s a smokescreen, though admittedly a trendy one. How much data, exactly, do Omnicom and Publicis own and farm compared to the specialists in the field (from Google downwards)? And, even supposing it were enough, how long will it take to merge the holding companies’ two very different platforms?

One other thing. Who is actually going to run the new show? There are an awful lot of chairmen, current and sequential – Bruce Crawford, Maurice Lévy and John Wren – but who is going to handle the grubby job of steering the global behemoth from day to day? A Frenchman does not seem likely (though a Frenchman handling the finances, that’s another matter) – because of a lack of global projection. Other than Lévy, the only French adman of global standing is, er, David Jones (well, he speaks fluent French and has a French wife). The natural choice might be Andrew Robertson, head of BBDO and indisputably a citizen of the world (he started off in Rhodesia). But maybe I’m in a minority of two on this. How’s your French, Andrew?


Artist’s ‘playful riff’ on Charles Saatchi

July 31, 2013

Charles Saatchi – NotCharles Saatchi and Nigella Lawson have just been granted a decree nisi in the  High Court, near finalising their divorce.  We thought to mark the occasion with an item that puts former adman Charlieboy in his rightful context: as a celebrated patron of controversial Art.

A young British artist (who for entirely understandable reasons prefers to remain anonymous) has created a life-size model of Saatchi with a hand outstretched ready to choke anyone who interacts with the piece. The work is entitled ‘Playful Tiff’ – the words Charles used to describe the incident where he lovingly placed his hand around his wife Nigella Lawson’s neck at Scott’s restaurant in London. Viewers of ‘Playful Tiff’ are invited to place their neck in Saatchi’s hand and capture the historic moment with a photo on their mobile phone.
For good measure, and in line with the impish persona Saatchi has used to promote his book, ‘Be The Worst You Can Be’, the model is bright red and comes with a set of horns.
The artwork is on display at the Jealous Gallery at Crouch End in north London.

We suspect this particular exhibit will soon be occupying pride of place in the Saatchi Gallery.

Just choking.


Fallout from the Publicis/Omnicom merger

July 29, 2013

Richard PinderBy Richard Pinder

When first hearing the Publicis and Omnicom merger rumours you could have been forgiven for thinking it to be some silly season gossip.

But as we know POG is not a passing fancy, it is for real. Hats off to Maurice Levy who has consistently shown his ability to be daring, decisive and dynamic just when people least expect it.

So what drove it? And who are the winners and losers? First, two sets of observations:

The announcement was made in Paris, not New York. The Group will be called the Publicis Omnicom Group, not the Omnicom Publicis Group. The revenues of Publicis Groupe are some way below those of Omnicom Group though their market caps are much closer, but it will be a merger 50/50 owned by the two companies shareholders.
After the dust has settled and the merger is done, the silly co-CEO thing is finished with and the company starts to operate normally, the CEO will be John Wren, from Omnicom, the CFO likely to be Randy Weisenberger from Omnicom, the ticker marker on the NYSE will be OMC and largest market for the combined entity will be the USA.

Once the incredulity subsides, you can see the attraction to Maurice and John. And as the above simple summary shows, you can see the game that is being played by both to get the other to agree to the deal. The former gets to show the French establishment what world class really means, a brilliant retirement gig as non executive Chairman of the world’s number one advertising group and without having to go through with the charade of making good his oft delivered promise to Jean-Yves Naouri to be his successor. The latter, within 30 months, gets to run something nearly double the size of OMC today, in seriously good shape in Digital and Emerging Markets, the number one ad agency of the number one spending client in the world – P&G who had only just taken most of their business from OMC – and all without the pain and risk of taking the long road there.

For Elisabeth Badinter it’s a fabulous end to her tenure as Chair of Publicis – seeing the company her father founded in 1926 become number one globally, as well as securing the very strong valuation on her holding that today’s Publicis stock price provides. For a number of senior managers there will likely be the triggering of various unvested options, stock grants and other goodies, not to mention the special dividends, that will mean good will all round. So, off on the August vacances with a spring in their step? Well not everyone…

For a start there is precious little in the announcement about WHY this is better for clients. We can see it’s better for doing deals with the big media partners, old and new. Scale counts there. But when the bulk of the enterprise’s activity is still about finding, creating and executing inspirational ideas to motivate the world’s population to choose one brand over another brand, there is a point beyond which scale can actually be a disadvantage – talent feels lost, ideas get killed by people who have no idea what the clients’ needs are and everything takes too long and costs too much. Well that’s what a large number of large clients have been telling me this past two years since I left Paris as COO of Publicis Worldwide.

There is also the small matter of the $500m savings mooted in the announcement. Publicis Groupe runs lean. Margins are already industry best. So the chances of finding much of the savings there seem slim. It will be interesting to see how the board of BBDO reacts to the likely loss of their top tier international travel rights, or the agencies of DDB cope with tough bonus rules that tie every unit in the company to the performance of those around them, as happens at Leo Burnett or Publicis today.

As a footnote on the winners and losers, spare a thought for those who fought, lost and thought they had won in the long-running soap opera called Maurice Levy’s succession. Just as the game looked like it would soon be over, the sport got changed and everything was different.

It will also be fascinating to see what WPP do about this. They have got used to being the world’s largest and Sir Martin is rarely quiet for long on any topic, let alone one so close to home. Bookies will surely be giving poor odds on a shotgun WPP/IPG or WPP/Havas union.

And me? Well as client choice reduces, the need for new global alternatives will continue to increase. It’s why we started The House Worldwide and it’s why we think it will  be increasingly relevant to clients who want to get back to a world where the client and the brand are more important than the agent promoting it, and where the money is better off going to the talent than to the accountants counting it.

Bigger and smaller, that’s the future of the ad network game.

Richard Pinder is co-founder and CEO of The House International. He was formerly the head of Publicis Worldwide.

 


Publicis Groupe and Omnicom disclose $35bn merger

July 27, 2013

Maurice LevyAs merger rumours go, they didn’t come much better. Omnipub. Or more probably Publicom. But let’s come back to that later.

The idea that the world’s number two marketing services group, Omnicom, is about to combine with the number three, Publicis Groupe, and topple WPP from its premier spot (by market capitalisation) eventually proved too much for Bloomberg News. Yesterday, after the New York Stock Exchange had closed, it went ahead and published on the basis of a single source, probably but not certainly a disaffected investment banker.

Hats off to Bloomberg: it got it right. The new entity is to be called Publicis Omnicom Groupe. Fuller details will be announced in Paris tomorrow. But Omnicom chief executive John Wren and Publicis CEO are expected to be joint CEOs of the combined companies. At least, for the time being…

Commentators have rightly fastened upon the many impediments to Wren and Lévy pulling off this $35bn marriage in advertising heaven. They range from anti-trust legislation, to rampant nationalism (Publicis is a French chauvinistic icon, and seen as a bulwark against Le Defi Americain), to apparently unbridgeable divergence in the two companies’ strategies, not to mention the little matter of crippling client conflict.

So that’s it then? It can’t possibly work? Well, no. I can’t speak for the thicket of legal obstacles likely to be thrown in the way of the touted merger, but most of the other objections can be turned on their head, sometimes to advantage.

Let’s take strategy as an example. Lévy is relatively weak in the USA, but has emphasised emerging markets and put his money where his mouth is – sometimes too much of it – with expensive digital acquisitions such as Digitas, Razorfish, Rosetta, Big Fuel and LBi. Wren is archetypally American – over 50% of his business comes from the States; he has shied away from digital acquisitions, which he regards as over-priced, and some (including shareholders) would argue that his conservatism, or complacency, has cost Omnicom dear in the Far East. So different strategies, yes; but incompatible ones, no.

Nor is client conflict the neurotic impediment to mergers in the advertising business it once was. Some clients – McDonald’s, Mars and Procter & Gamble for instance – are held in common by the two groups. The real deal-breaker – if there is one – is likely to be Coca-Cola (PG) and PepsiCo (Omnicom). Then again, maybe Wren knows something about the state of the PepsiCo business we don’t.

Next, might a merger not help to address some chronic succession problems in both organisations? Readers of this news site will be very familiar with those at Publicis. Jean-Yves Naouri, once 71-year-old Lévy’s favoured protégé, seems to have fallen by the wayside. While Arthur Sadoun – the capable, ambitious managing director of the elite Publicis Worldwide network – was probably too young and too little known outside France to assume the global mantle. An added piece in this jigsaw is Elisabeth Badinter, the daughter of Publicis founder Marcel Bleustein-Blanchet, who has been a member of PG’s supervisory board since 1987 and its chairman since 1996.

Badinter will, according to the Wall Street Journal, co-chair the new Publicis/Omnicom entity with Bruce Crawford. But she is expected to retire at the end of 2015. Which would be a convenient moment for Lévy to metamorphose into an emeritus role. It might also be a convenient moment for Badinter to bow out and cash in an enormous cheque. She is a 9.1% share holder in Publicis Groupe.

John WrenTurning to Omnicom, the problems of its senior management are less well ventilated. But two things are certain: its directors are not getting any younger and there hasn’t been much mobility lately. The average age of the board is over 70 (my thanks to Bob Willott for this pop-up statistic), making 61-year-old Wren look a comparative spring-chicken. Omnicom remains a well-run company, but there is an unmistakable air of geriatric stasis hanging over it. It has lost some big, perennial, brands in the recent past: Gillette and Chevrolet. Another signature account – Anheuser-Busch – has been cut to ribbons by the cost-conscious Boys from Brazil (InBev). By contrast Publicis – for all its chief’s distinguished grey hair – is viewed as dynamic; a perception reflected not only in PG’s recent stellar results but its consistently superior stock market rating.

A “nil premium” merger (which is what Bloomberg has suggested this is) implies a combination of equals. In reality, although Omnicom is the larger company, Publicis will end up in the driving seat: we’re talking Publicom rather than OmniPub. The signs are already there: in the name, Publicis leading; and in the venue for the announcement tomorrow, Paris.

The important detail to look out for will be who becomes chief financial officer. My money is on Jean-Michel Etienne rather than Randy Weisenburger. It’s not only the French who have to be appeased, it’s also the investment community.

Bloomberg seeded one of the most galvanising “silly season” rumours in years. The only thing is, it turned out to be true.


Emirates global account quandary as Strawberry Frog splits with Amsterdam

July 11, 2013

emirates46_460If what I hear is correct, Scott Goodson, chairman of micro-network Strawberry Frog, hasn’t been kissing enough princes lately.

The mercurial Goodson – famous for saying his agency wasn’t up for sale, while putting the finishing touches to a deal with PR group APCO – has had a bust-up with his Amsterdam agency, Media Catalyst. That’s Amsterdam agency number two. He also managed to alienate Amsterdam agency number one, headed by SF co-founder Brian Elliott, which now trades as Amsterdam Worldwide. And then he fell out with his Brazilian partner, Alexandre Peralta, of Peralta Sao Paulo – an agency that has gone on to rather greater achievement without him. So, there’s a bit of history to this kind of thing.

But I digress a little. The latest split is unusually serious, because SF Amsterdam/Media Catalyst is the lead agency for SF’s backbone client, Dubai-based Emirates Airline – one of the world’s largest. The Frogs won the account against considerable competition from the likes of BBDO and Grey, back in 2010. And what an account to win: lead agency for a global rebranding campaign worth (according to AdAge at any rate) $300m. This wasn’t just a feather in the cap, but full plumage for a small digitally-inspired creative boutique making its way in the world. Timely sticking plaster as well, given the above-mentioned ructions going on elsewhere in the organisation.

It’s important to point out that most of the credit for winning – and retaining – this account seems to have been down to Amsterdam CEO Hans Howarth, the majority shareholder in Media Catalyst. Goodson, with his habitual talent for self-publicity, owned about 30% of the agency from which he has now been ejected, but somehow managed to maximise most of the plaudits.

The Emirates brief was to turn the airline into an aspirant, lifestyle brand (isn’t one enough in the world?) and SF duly delivered with “Hello Tomorrow”, announced with great pizzazz last April by Sir Maurice Flanagan, executive vice chairman of Emirates Airline : “Our new corporate image and global marketing campaign both underline the confidence we have in our existing products and services, and the vision we have for the future growth of the airline. Emirates is not just offering a way to connect people from point A to point B but is the catalyst to connect people’s hopes, dreams and aspirations.” What this boils down to is getting a younger “audience” hooked on the brand by dextrous use of social media.

Only last month, Omnicom – in the guise of BBDO New York and Atmosphere Proximity – won Emirates North American business, against competition from WPP’s Grey and JWT. At the time, we were assured that the pitch would not in any way affect Strawberry Frog’s tenure of the global branding account. But that was before news of the split with Amsterdam broke. It would be surprising if some of these agencies’ biggest guns are not, at this very moment, on a Boeing 777 heading for Dubai airport. An Emirates one, naturally.

Where all this leaves SF – apart from picking up the pieces – is anyone’s guess.


Cannes awards spat masks war to the needle between de Nardis and Sorrell

July 4, 2013

Mainardo de NardisWPP chief Sir Martin Sorrell has rightly been basking in the reflected glory of the Cannes sunshine. Three successive years, three successive triumphs as holding company of the year at the International Festival of Creativity. It’s the pinnacle moment for a strategy – his own as it happens, but one for which worldwide creative director John O’Keeffe has done all the hard implementation – designed to kick into touch that old myth about Omnicom’s creative supremacy.

Martin, they used to say, has Asia (meaning he’s a shrewd strategist) but John (Wren, Omnicom CEO) has all the brands. Not any more. In the eternal battle for Cannes “statues”, WPP notched up a convincing lead of 2067 points over Omnicom, in number two position with 1552. Publicis Groupe trailed in third place with 989.5 (where did that half-point come from? No idea). Just to rub the triumph in, a leading WPP agency, Ogilvy & Mather, became the first network ever to win more than 100 lions and its Sao Paulo shop was named agency of the year. So now Martin can boast about having the brands, as well as Asia. Which is more than Alexander the Great could ever do.

But when it sounds too good to be true, it usually is. A few days after the festival ended, news that Omnicom was crying foul over the final Lions tally left Sir Martin spluttering into his breakfast of fresh strawberries at Connaught’s. His temper will not have improved on learning the identity of the trouble-fête behind all this mischief: none other than Mainardo de Nardis, CEO of Omnicom’s principal media planning and buying network, OMD Worldwide. Mainardo (pictured) and Sir Martin go back a long way…

More of that in a moment, though. First, let’s get down and dirty with some relatively boring Cannes festival award technicalities. The substance of de Nardis’ complaint is that WPP media company GroupM has massively over-claimed in putting out a statement – last Wednesday – saying it had won 45 awards, more than any other media agency holding company. Not nearly so, according to Omnicom. Thirty of the Lions (i.e., awards) claimed by GroupM are not verified on the Cannes Lions winners’ website.

Doh? Well, a majority of GroupM’s wins should be disqualified because its subsidiary agencies were not specified in the original competition entry. WPP may well have won something, on the creative side, but for whatever reason, failed to catalogue the media achievement. After the wins were announced, according to Omnicom, GroupM assiduously went back to each entrant agency and requested they be listed as the media shop for the work.

“Gaming the system,” says de Nardis, and a clear violation of the Festival’s rules in spirit if not in the letter (Cannes does make allowance for a few genuine oversights, but not wholesale ones). “Rubbish,” responds GroupM: just a few inadvertent errors and when the Cannes deadline for amended entries is published tomorrow (July 5th), all will be vindicated.

OMD, by the way, won 19 awards, which are seemingly confirmed on the Cannes website. So, if we subtract 30 from GroupM’s claimed 45, we can see that OMD has everything to play for.

All this might seem a storm in a teacup to most readers. But fuelling Sorrell’s irritation is some history. Mainardo de Nardis was once a senior WPP executive and the relationship with Sorrell did not end pleasantly.

Specifically, de Nardis headed WPP’s CIA.mediaedge, these days called MEC, before leaving for Aegis in 2006. Ironically, in view of what has come later, it was WPP which accused de Nardis of not abiding by the rules. Indeed, it became so convinced that de Nardis was playing a double game – working for a rival while still on WPP gardening leave – that it issued legal proceedings against him. Interestingly (from a revelatory point of view), the matter went to trial and quite a lot of Machiavellian shenanigans tumbled out concerning de Nardis’ relationship with Marco Benatti, another former WPP executive who was at that time country manager of CIA in Italy. Although they have managed to fall out from time to time, de Nardis and Benatti were (and probably still are) closely tied by family and business interests – for example, they once ran Medianetwork Italia. Benatti was himself the subject of WPP court proceedings, for alleged breach of fiduciary duty in failing to disclose a major holding in an Italian company, Media Club, which he had helped to acquire on WPP’s behalf in 2002. The trial lumbered on until 2008. Anyone interested in the minutiae of these (apparently) dusty events might look here and here.

So, nothing personal in this statues kerfuffle, eh? One other thing guaranteed to pour salt into old wounds is the prestigious Chanel account, recently up for repitch. Incumbent media agency? MEC. Prospective winner (according to the gossip at Cannes, possibly generated by de Nardis himself): OMD. Actual winner, declared yesterday: WPP, in the guise of a new bespoke agency, Plus – which harbours elements of MEC and Mindshare in its media-buying element.


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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