Why did BMW really pull out of F1?

July 29, 2009

BMW: Odd timing

A wry thought crossed my mind after I heard that BMW was going to pull out of Formula One. Yes, all right, they’re bad losers. They’ve frittered squillions of pounds a year on a sport that has brought them no glory. Their shareholders are upset, their workforce is incandescent – especially those now facing redundancy as a result of the worldwide squeeze on the car industry. Toyota and Renault will surely follow suit, etc…

But the timing of the announcement seems a little odd. After all, wasn’t BMW one of the leading lights in the prospective Fota championship breakaway? And wasn’t that, ironically, all about stymying FIA president Max Mosley’s plan to impose sensible, manageable budgets on the racing teams?

Now for the thought. Perhaps the increasingly “inappropriate” behaviour of F1 ringmasters Mosley and Bernie Ecclestone played a role, ever so small, in the framing of BMW’s decision?

Publicis and Dentsu cut up nasty over Razorfish acquisition

July 29, 2009

RazorfishWord reaches me that Razorfish, the digital interactive-cum-media placement agency being disposed of by Microsoft, is causing controversy as the bidding enters the second and final round.

Microsoft originally bought Razorfish as part of its $6bn acquisition of aQuantive in 2007, but clearly feels an agency of this size conflicts too much with its ad sales operation. The idea is to offload it, via Morgan Stanley, onto one of the big agency groups for well over $400m, plus  a commercial deal involving Microsoft proprietary advertising technology and a commitment to buy ad space across Microsoft web properties such as Bing. Conditional selling, you might say.

Interpublic and Omnicom have fallen by the wayside, which leaves WPP, Publicis Groupe and Dentsu in contention.

Publicis emerged as an early favourite, despite the fact that its platform technology (via Double Click) is more closely aligned to Google than Microsoft’s Atlas. So it was somewhat miffed to discover that its ally Dentsu – which holds a strategic stake in Publicis – has comprehensively outbid it.

But the $700m rumoured to be on the table may not be the knockout bid it appears. The trouble is Dentsu doesn’t have the US presence to do an appealing commercial deal. Which is where, in other circumstances, its ally might have come in…

Experts think that $700m is over the top in current market conditions, a symptom of Dentsu’s desperation to catch up. Maybe Microsoft should take the money and forget the side-deal. But then again, that side-deal has become more important now Microsoft is acquiring Yahoo!’s search business.

Biting the hand that feeds news

July 29, 2009

SharonBaylay006It seems the BBC is damned if it does, and damned if it doesn’t extend the hand of co-operation. Co-operation with others was a key stipulation in Lord Carter’s Digital Britain white paper. And it has clearly been taken to heart by the BBC’s new director of marketing, Sharon Baylay, who says, in response to my recent column: “We are playing our part in growing and re-energising ‘UK plc’, (we are) committed to forming new partnerships and recognising a special responsibility to maintain public service broadcasting beyond the BBC…”

But, oh dear, look what happens when it puts this doctrine into practice. The announcement that the BBC is to share video news content with four of our national newspapers has caused uproar. All right, part of this uproar is manufactured by News International. Given it owns BSkyB as well as The Times and the Sun, it was never likely to be happy about having BBC branded news content on its online sites. More to the point, though, is the apoplectic rage of ITN which is threatening to throw all its toys out of the pram by “pulling the rug” from the internet video market.

Clearly, Sharon, there’s no such thing as a honeymoon period.

No quarter for ad giants

July 29, 2009

GM bankruptAnother day, another dollar less. Quarterly results from the big agency groups paint a revealing picture of financial pain, and nowhere more poignantly than in the case of the stricken automobile sector.

Publicis Groupe recently disclosed that its exposure to bankrupt General Motors was ‘only’ $12.8m (about £8m) rather than the £78m (£47m) originally projected. That did little to soften the blow when the half-way figures came out a few days later: net income (pre-tax profit) down 13%, and nasty deterioration in organic growth in the last quarter. The only bright spot was a 6% increase in digital revenues over the six months. That, and the assurance of group chief executive Maurice Levy that things can only get better – from September onwards. Tell that to the 1,800 people (4% of the group) he has had to ‘let go’ this year.

Still, Publicis did a lot better than Interpublic Group, home of Lowe and McCann Erickson (one of whose biggest clients is GM). IPG has actually managed to achieve a loss of $53m (£32m) over the six months. So the reduction of its latest quarterly net income by 76% must be accounted something of a triumph by comparison with first quarter performance. Quite a lot of its losses are attributable to the severance costs of the 4,100 people it has made redundant – 9% of its workforce.

Omnicom (BBDO, TBWA, DDB etc), too, posted pretty dismal figures, slightly more encouraging than IPG’s but not, on most criteria, as buoyant as Publicis’. It is laying off 3,500 of its staff, nearly 5%. Profits for the last quarter were 24% down, about the same as the previous quarter. Which was probably pretty good really, considering Omnicom’s $58m exposure to bankrupt Chrysler. On this subject, however, chairman and ceo John Wren was understandably vague – despite analysts’ obvious interest in the subject. It was the second biggest search term employed in Omnicom’s earnings call. There are, as I have pointed out before, some unresolved mysteries about Chrysler and Omnicom.

As for WPP, we will not be seeing its half-year results until the end of August. Things are not looking too clever, though. True, WPP is the odd one out so far as the car industry is concerned. Not only has Ford not made its way to the bankruptcy court, it has even managed a small operating profit this quarter. So no write-downs; but that’s slim cause for comfort, as ad spend is likely to be depressed for some time to come. Redundancies give us a fuller picture. In a trading statement released early in June, WPP admitted to making 4,300 employees redundant – about 4% – since the beginning of the calendar year. The final figure is expected to be about 7,200.

Both Publicis’ Levy and Omnicom’s Wren seem to be spinning the idea that we are at, or near, the nadir. Don’t believe everything you hear, though. Next  quarter’s earnings may look better than they really are simply because the dive they took in Q3 last year will flatter the percentage increase. That, at least, is the view of WPP ceo Sir Martin Sorrell.

Will Wal-Mart price-war shatter Windows?

July 27, 2009

imagesWal-Mart, judged by its sales, would be the 18th largest economy in the world. So, when the global retailer decides to do something, it usually moves markets.

Right now, analysts are pondering what impact its decision to stimulate a price-war in the laptop sector will have on personal computer manufacturers reeling from recession.

The PC community, largely represented by Microsoft, which produces Windows operating software, Intel, the chip-maker, and Hewlett-Packard and Dell, which manufacture the computers, is already under siege from an influx of low-cost, lightweight netbooks, mostly hailing from Taiwanese manufacturers such as Acer and Asustek.

If Wal-Mart carries out its threat of selling an HP laptop running Windows Vista with 3 gigabytes of memory and a 160-gigabyte hard drive for under $300 (£182), then that spells trouble indeed for PC margins. Mighty Microsoft, for example, has just reported a loss in its quarterly financial results – its first consecutive loss ever. And that’s before the Wal-Mart price promotion kicks in.

Believe it or not, the Wal-Mart threat and recession may only be mooncast shadows compared with another problem rocking the PC business. More in this week’s magazine column.

Fake sex ad leaves Sprite unshaken

July 22, 2009

SpriteI’m not surprised everyone – including YouTube and the ostensible advertiser – was confused by the sexually explicit Sprite commercial until its faker, MTV director Max Isaacson, put his hand up and admitted what he had done.

These days, it’s difficult to put a sheet of censor’s paper between what’s real and what’s fake. Take those naughty Mattesons radio ads, which have just been firmly corralled in an adult watershed after complaints to the advertising regulator, the ASA. The script included such gems as:  “I’m renowned for my big sausage hot pot. People are always calling by for a bit and my husband Roger loves it.” Silly fourth-form locker room humour perhaps, but the ASA was not amused and decreed that the ads “could cause harm to children”.

Now back to Sprite and oral sex. Initial confusion over the banned commercial was caused not so much by inappropriate imagery as the fact that the production values were so good they were indistinguishable from the real thing. Isaacson’s motive? Pure self-promotion. And it’s paid off: Coke, which owns Sprite, won’t be suing it seems.

Talking of the real thing, let’s say the Sprite fake goes some way beyond the raunchy 1976 Perrier ad in explicit imagery. But as Adfreak points out, that doesn’t necessarily make it more interesting.

For more background (now that the ad has been deleted from the record by YouTube): http://www.youtube.com/watch?v=kWr_hlxS8Ck

Campbell Lace wins £9m Thomas Cook account

July 21, 2009

Garry LaceCongratulations to Campbell Lace Beta, which has turned out not to be the first cuckoo of spring after all.

This start-up vehicle for the irrepressible Garry Lace and Rainey Kelly Campbell Roalfe founder Robert Campbell has just managed to win itself a sizeable slug of business, in the form of the £9m Thomas Cook account. It beat off Euro RSCG London, so this was scarcely a gifted account. News also reaches me that it has won Jackpot Joy, which was contested with Publicis, although I have no idea how much the account is worth.

The new agency opened its doors on May 1. Beta, by the way, is not a reference to a founding planner but internet jargon suggesting ‘work in progress’. More please, Robert and Garry.

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