Louis Vuitton prepares global digital assault

September 30, 2009

Catherine DeneuveStand by for some crowing. Not from me, from WPP. It looks as if one of its agencies, OgilvyOne, has won a colossal piece of digital business from luxury goods company Louis Vuitton.

Reasons to be cheerful? Part One: this is a global account and, according to some, the largest digital budget awarded this year. Part Two: the LV pitch was held in Paris (as it would be, since LV is French-owned) and prominent on the shortlist were two agencies we are now intensely familiar with, Digitas and Razorfish (hint: they are now both owned by Publicis Groupe). WPP, you may recall, was the runner-up in the auction to buy Razorfish. So there’s a special piquancy in winning such a prestigious piece of business from right under the nose of Publicis group ceo Maurice Levy on his home ground.

More interesting perhaps is the question: why is this such a big account? After all luxury goods brands, however exclusive, are not generally known for the size of their budgets. A bit of decorous advertising in some upmarket magazines usually defines the limits of their imagination.

Not so LV – the luggage to watches to shoes and handbags operation owned by one of France’s most powerful businessmen, Bernard Arnault. Arnault departed from tradition a year back with the company’s first commercial, a two-and-a-half minute epic (originally) featuring Polish model Monica Krol and meditating on the theme Where Will Life Take You? More familiar perhaps will be the employment of uber celebrities such as Mikhail Gorbachev and Catherine Deneuve in the press ads.

Now Arnault seems to have found digital in a big way. In a study just out from New York University’s Stern School of Business, Louis Vuitton, Porsche and Tiffany have emerged as some of the very few luxury brands that “get” online. Among those that don’t are Trump, Bulova, Fabergé and Graff. The study surveyed 109 brands in all, and discovered that where only 33% were selling online a year ago, 66% are doing so now. Digitally savvy, or just desperate as a result of the recession?

Arnault himself take the internet very seriously indeed. He has involved LV in a titanic trademark dispute with Google, over the introduction of its AdWords service which – according to Arnault – recklessly encourages counterfeiting. The score so far? One all. Arnault won his case in the French courts but the finding was recently quashed by the EU’s highest court, which ruled that Google did not have a case to answer. We’ll see. Arnault is nothing if not tenacious.

Guess who’s not coming to dinner, Bernie

September 29, 2009
'Minor player'

'Minor player'

Was Formula One always this exciting off-track? Just as you thought it couldn’t get any more engrossing, along comes teflon-coated commercial F1 ringmaster Bernie Ecclestone with another clanger that defies all expectations.

This time, the diminutive hair-extended one has picked on a victim his own size, with unpredictable results for the future. The target being none other than Sir Martin Sorrell, head of the world’s largest marketing services group, who happens in his spare time to act as a director of CVC, the F1 operating company ‘run’ by Bernie.

Sorrell, a prominent Jewish businessman, has been watching with increasing dismay Bernie’s antics, which rival in amusement those of Iranian president Mahmoud Ahmadinejad. Ahmadinejad, you may recall, reckons the Holocaust never happened, so it’s OK to nuke Israel. Bernie reckons Hitler is misunderstood. After all, he had a way of “getting things done” (we’re not entirely sure whether this revisionist theory applies to the Final Solution).

Matters reached boiling point when Bernie opined that his disgraced poker-playing chum, Flavio Briatore, had been excessively punished for staging a little car-crash in last year’s Singapore Grand Prix. “Out of touch with reality” was Sorrell’s exasperated rebuke.

Bernie then gave Sorrell a comprehensive public character reference, the gist of which was that he was a minor player in F1, didn’t really know what he was talking about, and was not very bright anyway. Oh, and because he’s a Jew, he could never forgive Ecclestone for his unconventional views on Hitler.

The corker is that this diatribe was unleashed just days before Sorrell, according to Bernie, had invited him round to dinner to sort things out.

Except that he hadn’t. Apparently, it was Bernie who took the initiative a few weeks back, when he phoned up Sorrell to “bury the hatchet” and suggested dinner. More revisionist history on Bernie’s part, it seems. And certainly a funny way to bury the hatchet.

How much more of this can CVC’s real boss, Don Mackenzie, take?

Citi smells ‘fishy figures in Publicis deal

September 28, 2009

PublicisNew evidence has emerged that Razorfish, the digital agency which Publicis acquired from Microsoft for $530m, was not be quite the snip it appeared at first sight.

In an earlier post, I expressed surprise at WPP’s reluctance to test Publicis’ resilience in the last round of bidding and suggested there may have been anxiety about Razorfish’s underlying performance.

I am not alone in this suspicion. Microsoft has just released more detailed figures on Razorfish financials and analysts at Citi have been quick to point out that they do not tally with the sunny, upbeat, picture portrayed by Publicis at the time of the acquisition in August. Specifically, revenue has been declining throughout the year, where Publicis said it had improved year on year; and the agency is set to make a loss of $50m, where Publicis claimed it would make a 6-8% margin. Citi cites potentially extenuating circumstances for the discrepancy, the more important being incentives for senior Razorfish executives which Publicis may have failed to count in. “While this doesn’t derail our positive assessment of the deal, it is strange,” concludes the Citi circular. Strange indeed. Particularly, one assumes, for Publicis shareholders.

The Legend that came after Beautiful

September 22, 2009

Nice new work from financial services company Allan Gray and South African agency King James, the team that brought us that other carefully choreographed black-and-white narrative, Beautiful. Theme: Given more time, imagine the possibilities. You’ve got to look at the long term with investments. A truism, but memorably portrayed.

The James Dean lookalike, Des Erasmus – a mechanic from Cape Town – is very convincing. But for some reason I keep thinking of Clint Eastwood whenever I see Dean in his alternative future. Mind you, you’d never have found Eastwood openly protesting against the Vietnam War.

ING Renault F1 Team gets last-minute reprieve, but is it too late?

September 21, 2009

ING RenaultThere was an air of hushed expectation at Place de la Concorde in central Paris yesterday. The first public execution for 200 years – since the time of the French Revolution – was about to take place. Formula One was bringing back the time-honoured custom for one day only. F1’s presiding body, the FIA (based in Place de la Concorde), was to be judge and jury and Renault F1 Team the victim.  At least, that was the widespread expectation. As it happened, Renault got a last-minute reprieve. The guillotine has been left on standby for two years.

Renault, it will be recalled, is at the centre of probably the worst example of sports chicanery ever exposed – which is saying quite something where Formula One and its track-record of multiple scandals is concerned. Briefly, Renault has admitted it manipulated the outcome of a Grand Prix race by causing one of its drivers, Nelson Piquet Jnr, to crash his vehicle in order that team mate Fernando Alonso might win the race. Renault F1 Team supremo Flavio Briatore, the principal conspirator, has already got the chop, as has his number two, Pat Symonds, director of engineering.

Some might argue that the FIA penalty was not enough; it could never be enough. After all Briatore & Co were knowingly risking the lives not only of their own driver but those of others on the track. Shouldn’t criminal charges also be in the offing?

Whichever way you look at it, Crashgate could not have come at a worse time. The horrendously expensive sport is strapped for cash as never before. It is struggling to fill the grid now that the likes of BMW have withdrawn. With Renault’s F1 reputation so badly damaged, who else is going to bother pouring billions of dollars into this discredited sport?

Come to think of it, current sponsors must be feeling pretty sick, and none more so than ING, the financial services conglomerate whose moniker presently prefixes “Renault F1 Team”  in all the headlines.

Now what was the logic of ING’s unconscionably large financial involvement again? Ah yes, I have ING’s then ceo, Michel Tilmant, on the record on June 27, 2007 – just after he first signed his company up. Here are some extracts:

“We believe our brand recognition does not quite match the scope and size of our business…We believe Formula One can help raise ING’s brand awareness, and ensure that we are known as one of the leading global financial institutions. …We see our F1 sponsorship as complementary to our other sponsorship, but very much in the lead to position our business globally.”

Apparently, Tilmant and his top team “conducted extensive research” into which sports would best offer ING a global audience, including “football, the Olympics and tennis amongst others” but “F1 was the best choice. It offered an unrivalled blend of a large global audience, with a profile that closely matched the needs of our business.”

Sounds as if you made the wrong call, mate. You should have stuck to boring old tennis or the Olympics. At least they are fairly clean.

As it happens, we can see an unflattering similarity between high-rolling finance and F1 all too clearly – but not in the way Tilmant will have intended when he signed away all those shareholder dividends on the deal. Let’s have a look at that parallel a little more closely. Both communities, banking and top motor racing, suffer from a surfeit of testosterone and are suicidally competitive – which makes them “reckless” with the rules when they think they can get away with it. Both are ludicrously overpaid for what they do – in the highest echelons that is – and are adept at finding new ways of enriching themselves whatever the collateral cost. Both are bloated  and have a dubious ‘social utility’ (to use FSA chief Lord Turner’s phrase). And both have shown only the most superficial contrition when faced with their misdeeds. A perfect fit, in short.

Any other parallels I may have forgotten? Probably.

TV product placement won’t rule the waves

September 13, 2009


If former culture secretary Andy Burnham may be said to resemble La Passionara (Watchword: “They shall not pass”; of course, they did eventually), his successor Ben Bradshaw appears to belong to the Canute school of pragmatism. He, if reluctantly, has waved through the inevitable. I’m talking about product placement on UK commercial television channels.

To be honest, the subject is something of a damp squib, except among content purists who emanate from another television age. Product placement is everywhere. Not only in the cinema, and therefore later on telly; but in virtually every American syndicated TV show (of which there are many) airing over here. Which means, in effect, that US brands like Coca-Cola on American Idol are getting a free ride second time round.

Not only that, there has long been a “grey market” which dare not speak its name. It gets around the regulations by giving branded props, free of charge, to programme makers. Specialist agencies take a turn, but TV stations can’t touch a penny: result, brand-owners are quids in because they don’t have to pay a real market price.

All that – barring continuing restrictions on the BBC’s and children’s programmes – will now be swept away. And not before time. Even our Brussels regulators think the UK position is absurd, which neatly sums the issue up.

Commercial television companies will be keeping the champagne on ice, however. Legitimising product placement is not exactly a financial panacea for our beleaguered broadcast media sector, beset by recession and destructive structural change. Initially, PP will be worth a measly £100m a year (DCMS estimate), compared with total TV advertising revenue of nearly £3bn.

Still, as a famous advertising slogan says: Every little helps.

Unilever, P&G and the mystery of Publicis’ Pour Tout Vous Dire CRM acquisition

September 9, 2009
Nicolas Zunz

Zunz: What conflict?

I cannot have been alone in wondering why Publicis Groupe made such a hullabaloo over its acquisition of French CRM site Pour Tout Vous Dire at the beginning of the month. Coming after the $530m Razorfish acquisition, it’s a drop in the ocean. Worse, so much publicity seemed to magnify a potential conflict of interest.

Let me explain. PTVD – roughly,  “Everything You Need to Know” – is a customer relationship project aimed at mothers, which has been developed by Unilever – although only in France. A magazine, which accompanies the site, comes out three times a year, but reaches 2 million people. PTVD is a tiddly operation, with no more than 15 staff. Indeed, this seems to be part of its problem: it is under-resourced and Unilever does not have the capacity to develop it further. Publicis has agreed to take it off Unilever’s hands for an undisclosed sum (for which read peanuts) and relaunch the site next year.

Let’s reel back here for a moment. Unilever selling a site to Procter & Gamble’s bulwark agency group? All right, client conflicts are not what they used to be. WPP, for example, now handles both P&G (at Grey) and Unilever (at JWT). And Publicis Groupe has long since managed to ringfence Unilever business through its 49% stake in BBH. All the same, call me old fashioned…

Light has been shed on these mysteries in an interview given to AdWeek by Nicolas Zunz, co-president of Publicis Dialog in Paris. Zunz has been named chairman of the new acquisition; Muriel Hayat, a former Unilever CRM manager, will be his chief executive. The interview raises as many questions as it answers.

It seems that Unilever was in over its head. It had developed an interesting property, but lacked a sufficiently wide portfolio to create traction for the site. Publicis’ plan is to create an open-architecture site, which will be supplemented by content from some of its other packaged goods clients, such as Nestlé, L’Oréal and…P&G. Zunz sees no problem here: “The contract with Unilever is very clear about this. We can have some brands for Procter & Gamble if they’re not (direct) competitors with the brands of Unilever. So, it’s a huge opportunity for P&G…”! And Unilever? Well, Unilever may eventually find itself written out of the script, once its five-year licensing deal comes to an end. It will be “a privileged partner”, of course, but the Unilever logo is to be dropped with the next iteration of the site. Zunz talks confidently about taking the eCRM concept abroad with the collaboration of “a Nestlé or with Procter & Gamble”. No mention of Unilever there.

Curiouser and curiouser.

It’s not over yet, says Hermann Simon

September 9, 2009

Hermann SimonIt’s all over then? Economists certainly think so. Data published by the National Institute for Economic and Social Research, a think tank, suggest the recession ended in May. There’s plenty of circumstantial evidence as well. House prices are apparently stabilising and the City seems to have been gripped with merger fever as the FTSE 100 brushes 5000 for the first time since Lehman’s collapse last year.

Not everyone agrees, however. One eminent dissenter, whom I met this week, is Hermann Simon, co-founder of international strategy and marketing consultancy Simon-Kucher & Partners. He’s not impressed by the uptick in economic activity and warns of a ‘W-shaped’ – or double-dip  – recession. In his opinion, a lot of credit failures have yet to materialise. He’s also suspicious of the economic statistics coming out of China. Exports are 40% of China’s GDP – and in June they dipped 26%. The state says it will make up the deficit from internal growth, but Simon is not convinced.

“There’s no easy way out of this recession,” he says. “We won’t get back to where we were merely by cost-side solutions. What we need are revenue-side solutions.”

Handily enough, he has some; 33 in fact, which form the core of his new book Beat the Crisis – 33 Quick Solutions for Your Company. That’s too many to enumerate here. But the gist is, whatever you do, don’t get involved in slashing prices because of a reduction in demand. By all means offer added value, as Hyundai did in the USA with its 3-month guarantee against job loss, or give a discount on bundled products, but don’t cut the price of individual items. One arresting example of  price support is the champagne industry. In 2008, it sold 340 million bottles of French bubbly. This year, it reckons on selling only 260 million, so it has taken the extraordinary step of destroying excess volume. Simon says this has worked. Prices have remained stable, despite champagne being a luxury, discretionary item associated with the good times.

Cadbury fights for its life

September 7, 2009

CadburyOne of our national treasures looks set to disappear. No, no,no. I am not talking about Sir Tel being replaced at Radio 2 by Chris Evans, but of Cadbury, which faces a £10.2bn hostile bid from Kraft Foods.

The chances of Cadbury retaining its independence after this unwanted intervention do not look good. Of course, it may not be Kraft that emerges the eventual winner. According to City analysts, the Kraft bid – though superficially attractive at a 31% premium to the pre-bid share price – is pitched far too low. What they have in mind is the same multiple that Mars paid for Wrigley last year, which would mean about £10 a share – a long way up from the 745p on the table. Also, only £4.1bn is in cash, so the bid is far from knock-out.

But maybe we’re getting too technical here. Cadbury is definitely in play and Kraft is, at first sight, better positioned to haul the booty away than Nestlé or Hershey. In fact, it cannot afford not to win; neither can its competitors stand idly by and let it. Here is a landscape-changing deal in the offing, which would propel Kraft to the world’s largest confectionery company in an industry where scale is increasingly important (as the Mars deal showed).

Nestlé and Hershey would have considerable problems with the competition authorities (even if they divided the spoils between them), but there are few apparent conflicts of interest affecting a Kraft/Cadbury combo. Kraft, which owns Milka, Terry’s and Toblerone, is strong in confectionery in Europe and Latin America, where Cadbury is weak. Cadbury, on the other hand, offers Kraft a high-growth gum business and exposure in a number of invaluable emerging markets.

Kraft has suggested it will keep the Somerdale factory going, which Cadbury itself is threatening to close. That’s politically astute, but it won’t alter the fact that any alternative Cadbury owner will have to make some medium-term decisions likely to squeeze the culture out of the acquired company. Nestlé did no less when it acquired Rowntree, another Quaker company, over 20 years ago. There will be too many cost synergies involved, debts to be paid off and shareholders appeased, post-deal, for Cadbury culture to be maintained in aspic.

What of the brands? The Cadbury Dairy Milk kids may well twitch their last in one big wide-eyed rictus, which would be a great pity. But, if the Kraft deal does come off, I know someone likely to come out smiling. Kraft places a fair bit of its promotional spend with JWT, which also has a toe-hold in the Cadbury gum business.

And lastly, what of Nestlé? If Kraft triumphs in the takeover battle, that will leave Nestlé’s carefully laid plans for becoming the dominant global confectionery player in tatters. There’s more on this in my column this week.

Carolyn Carter bids adieu to Grey Europe

September 3, 2009

Carolyn CarterGrey’s enigmatic ice-maiden is on her way at last. Carolyn Carter, ceo of Grey Europe, has been the target of almost constant speculation about her ‘imminent’ departure since 2006, which she has successfully quashed with Mark Twain’s famous rejoinder. Now, after over 20 years’ service in the higher echelons of an advertising empire long treated by Ed Meyer as his personal fiefdom, but latterly owned by WPP, she really is on her way out. Gone by Christmas time, they say.

Originally, Carter was a client: she joined Grey from General Foods in the early 80s. In 1996 she moved to London as global account director for Mars, a staple Grey client. From 2002  she gradually took on the mantle of John Shannon – possibly the longest-serving senior executive in advertising history – becoming ceo Grey Global Group EMEA in 2004. She, like Shannon, might reasonably have expected to see herself through to retirement age. Meyer was incredibly loyal to senior executives who quietly and efficiently accomplished his aims, which might be defined as personally enriching him, but not at the expense of alienating any of his key clients. It could be a harrowing, stressful role. Which is one reason why top Grey executives used to be some of the most highly paid in advertising.

But the world of Grey changed irrevocably when Meyer decided to cash in his chips and put his agency up for auction in 2005. WPP, the eventual winner, has been every bit as exacting as Meyer, but in a different way. Out went the stellar salaries, Carter’s own excepted.

Carter faced early disappointment when Jim Heekin, formerly of McCann Erickson and Euro RSCG, beat her to the top position at Grey, which anyone else might have interpreted as curtains time. Hence the speculation about her leaving. Cool, ruthless professionalism has seen her through. Until, at least, an unprecedented slump in advertising revenue forced WPP to wield the retrenchment axe more savagely than might otherwise have been the case.

Now it’s time for her to go. David Patton, UK group ceo, will be confirmed as the new EMEA chief. Chris Hirst, his managing director, may take over the top UK role. Carter will miss the London theatre scene, but how much else I do not know.

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