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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?

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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.

 


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.


Why Aberdeen Asset Management wants to be the Intel of financial services

May 7, 2013

Piers Currie - Aberdeen Asset ManagementWhat’s the biggest, most successful, company you’ve never heard of? Impossible to say, of course. But a good candidate would be Aberdeen Asset Management.

It’s in the FTSE-100; it’s genuinely global. And it’s very profitable indeed, judging from its latest interim figures. Just to make the point: profit before tax increased 37% to £223m; earnings were up 43%, while the dividend increased 36%. And it manages financial assets of £212bn.

Yes Siree, the people at the top of this company are heading for deferred bonus payments that will make Sir Martin Sorrell’s look like a storm in a teacup. And, do you know what? There won’t be a squeak of dissent from shareholders.

Anonymity – outside the global capital markets – has served Aberdeen well these past 30 years. It has had little need to trumpet its wares through the megaphone of mass-media publicity, since what it does – trade in equities, fixed income instruments, properties and multi-asset portfolios – is mainly aimed at the wholesale financial market (other people sell the product on), and has little resonance with the punter on the street – unless that punter happens to be reasonably wealthy in the first place. True, Aberdeen has spent some trifling amount on a corporate ID (it looks a bit like a mountainous ‘A’) and does dispose of a £20m annual global marketing budget (peanuts for any equivalently-ranged consumer products company). But most of that money goes on getting a word in the right, expert, ear – via the rapier of PR and that trusty old ambush-marketing technique, the roadshow, rather than the blunderbuss of advertising.

Not any longer, however. This week Aberdeen is launching a global corporate branding campaign – its first since 1983. “Simply asset management”, the strap line, may not sound like rocket-science but, in fact, it is shrewdly timed. And for that, presumably, we must thank Aberdeen’s long-serving head of marketing (now group head of brand), Piers Currie (pictured above).

At a time when interest rates on deposit accounts are near zero (after inflation is factored in, you effectively pay the bank, not the other way round), investors are finding it increasingly difficult to gain a reasonably safe return on their financial investment. They must therefore turn to more risky asset classes – fixed income instruments and, more fashionably, shares. Who to trust in this treacherous financial world, however? Certainly not the universal banks – discredited bancassurance conglomerates that were yesteryear’s financial toast – who have comprehensively fleeced us of our savings, through rank incompetence, downright fraud or a combination of both.

Aberdeen’s modest proposition is that it is a narrow specialist; but within a field where it has gained great expertise and evidence-based returns. Stuff that isn’t going to be lost in the miasma of a bank’s balance sheet, and is there for all to see – should you wish to. There’s been an element of luck here, but also a good deal of judgement. When chief executive Martin Gilbert set up Aberdeen (it was a management buyout from an investment trust, which owed its name to its physical location in Aberdeen), he deliberately targeted emerging markets, and in particular the Far East, as the company’s area of fund management expertise. At the time, ’emerging markets’ were the financial equivalent of  the Wild West. Today, they’re mainstream. Anyone without a decent chunk of his or her portfolio in China, Brazil, India, Hong Kong or Singapore is probably suffering from asset imbalance.

Aberdeen’s sweet-spot won’t, of course, last forever. But while it does, it has – on the evidence so far – a reasonable claim to being regarded as the Intel of financial services.

Which is what this corporate makeover seems to be about.


It’s the Age of Google and Sorrell has no time – or money – for Twitter

April 29, 2013

Martin SorrellThe most interesting thing about WPP Group’s first quarter financial results were not the numbers, but its chief executive’s obiter dicta.

The numbers themselves were a curate’s egg. They beat the revenue forecast, bizarrely enough they delighted in Britain, but they disappointed in the United States. Which is just about the only part of the world economy currently showing signs of dynamism.

The obiter dicta, on the other hand, were curiously memorable. WPP CEO Sir Martin Sorrell used the occasion (well, near enough: he was actually speaking at the FT Digital Media Conference the previous day) to highlight a singular phenomenon. So far as his company is concerned (and it  is, after all, the number one spender of advertising money in the world), Google will soon become a bigger destination for his clients’ money than the biggest traditional media owner in his stable, News Corporation. Google is currently in receipt of $2bn of WPP’s quarterly spend; while NewsCorp gets about $2.5bn. But, given the Google figure represents a 25% increase year on year, it can only be a short time – Sorrell assures us – before the search giant moves into pole position.

I say “search giant”, but that of course is history. Sorrell’s underlying point is that Google – after some initial fumbling – has made the transition from a techie company, peopled by nerds, into a multi-media corporation with global reach. He calls it  “a five-legged stool”: there’s search (of course); display advertising; social media (google+); mobile (via Android and AdMob); and video through YouTube.

Note well where Sorrell places his chips, however. From an advertising point of view, the Age of Google (as he calls it) is primarily defined by video. YouTube has made big inroads into what traditionally would have been television viewing. He’s bullish about mobile, too: Android is now the most popular smartphone platform and in some developing markets, like China, it accounts for two-thirds of all mobile sales.

But social media: Oh dear, what an advertiser’s no-no! Yahoo, though generally lacklustre these days, garners about $400m of WPP spend. Facebook, infinitely more successful with its audience figures, receives only $270m. And Twitter a lot, lot less. What’s the logic? Well, Yahoo “gets” the commercial need for a five-legged strategy (indeed, TechCrunch speculates it is about to buy Dailymotion, a smaller competitor to YouTube). Whereas Facebook and Twitter do not. Facebook, Sorrell reckons, is important for brands – but in a negative sense – absence of criticism, which has little to do with any advertising content. Twitter, on the other hand, is simply a PR medium with almost no value to advertisers.

“It’s very effective word of mouth,” Sorrell told Harvard Business Review last month. “We did analyses of the Twitter feeds every day, and it’s very, very potent…I think because it’s limited in terms of number of characters, it reduces communication to superficialities and lacks depth.”

Maurice Levy, CEO of Publicis, speaks during the Reuters Global Media Summit in ParisThat last may sound a little harsh. And is certainly not a universally accepted view among admen. Significantly, it is not shared by Sorrell’s deadliest rival, Maurice Lévy – chief executive of Publicis Groupe. Lévy has just announced a four-year pact with Twitter which will involve PG’s media planning and buying arm Starcom MediaVest Group committing up to $600m of client money to monetizing Twitter’s audience. Details, at this point, are sketchy.  It is clear, however, we are not just talking “pop-ups” here. Lévy makes specific reference to video links and “new formats” yet to be developed. He admits to there being “some risk” involved in the project, though whether this relates to his own reputation, clients’ money or both is not apparent.


Chris Wood helps to launch top-end male fashion brand Dom Reilly

March 28, 2013

Dom ReillyFor years, you’ve run your own brand consultancy. After successfully selling it, you step into the limelight as chairman of the Central Office of Information, only to find that mad axeman and part-time cabinet minister Francis Maude is cutting off at the knees the very organisation you’ve just been invited to head. What next?

I caught up with Chris Wood recently and found out. It transpires he is helping to give lift-off to a new top-end fashion brand called Dom Reilly. Never heard of it? Well, unlike Chris Wood, you’ve probably had nothing to do with Formula One. Wood, in his spare time, is an unreconstructed petrol head; and Dominic Reilly (pictured) – the eponymous brand name –  is the former head of marketing at Williams F1 Team.

Reilly’s company, where Wood is a non-executive director and adviser, is ambitiously pitching itself at the very top of a very discriminating market – with a price-tag to match. The initial range, admittedly exquisitely hand-crafted, starts at £95 for a tooled leather phone case and escalates to an eye-watering £1,400 for a weekender bag (roughly the price of a Manolo Blahnik handbag or a Jimmy Choo tote).  This new brand has no intention of being a Mulberrry also-ran, no siree.

So why is Reilly so confident about his ambitious positioning? The answer lies not so much in the quality of the goods – that’s a given when competing with the likes of Louis Vuitton, Armani and Alfred Dunhill – but in a judicious soupçon of Formula One. A soupçon, because too much of it will asphyxiate the brand with the rank odour of “petrol-head” and “anorak” – in short, death by downmarket male. While there’s no escaping Dom Reilly’s essentially masculine appeal, the idea is to imbue the brand with FI’s sophisticated reputation for engineering excellence and technological innovation. One of the accessories, for instance, is a beautifully finished crash helmet case; and some of the collection features a special high-density foam used in F1 cockpits that absorbs almost all shock on impact.

Reilly, given his 6 years as head of marketing at Williams, has second-to-none access to one of the world’s most sophisticated R&D departments. But he has to be careful how he plays the Williams card. Few team brands, with the exception of Ferrari, have much charisma off-track. And in any case, Williams has not performed well of late (one, but only one, good reason, why the Williams name is not directly associated with the brand). Instead, an aura of cutting-edge R&D is being subtly diffused through the person of Patrick Head, co-founder of Williams F1 and its fabled chief of design – who just happens to be a founder shareholder in Dom Reilly.

Dom Reilly EnglandIn truth, the attractions of launching an haute gamme fashion brand are there for all to see: salivating margins and high resilience to recession. Equally, so is the demerit: everyone’s at it. The sector has become crowded with participants touting increasingly obscure and recondite “provenance”: the 17th century Huguenot diaspora, the Empress Josephine’s personal dressmaker etc (I made those up, but you know what I mean). So attaching your brand to future-directed technology with wide aspirational appeal is certainly a point of difference.

But that’s not to say fashion and high-octane auto culture are natural bedfellows, as the history of the Ferrari brand all too clearly illustrates. “It’s interesting,” says Wood, “That in the last Top Gear programme I watched, they were extolling the virtues (and innocence) of Pagani (750bhp hypercars, costing three times as much as a Lamborghini and correspondingly rare), while referring to the Maranello mob (i.e. Ferrari) as ‘purveyors of key rings and baseball caps’. And about Lamborghini as a contrivance of Audi. Out of the mouths of children, and even Clarkson, can come a certain wisdom.”

Indeed.


Richard Pinder launches global network with Maserati as a client

March 26, 2013

Richard PinderAfter years of being a jet-setting senior suit in someone else’s service, Richard Pinder has decided to go global on his own account with the ambitious launch of international network The House Worldwide.

Pinder, it will be recalled, was head of Publicis Worldwide for five years until group succession politics (the imposition of Jean-Yves Naouri as executive chairman) made further tenure of his position unrealistic.

That was two years ago. Since then, Pinder has been pondering how to cash in on his experience with global clients (he’s worked for over 25 years in Asia, Europe and the USA; for Leo Burnett, Ogilvy & Mather and Grey, as well as Publicis) by building a new-model worldwide agency network.

No mean cliché, the cynic will object. We’ve heard the rhetoric before. What’s the reality?

It’s true that the agency world has long been struggling with a “post-analogue” structural solution to the increasingly financially unviable traditional creative agency network, with its army of regional bureaucracies. Some have proffered a solution in the form of the fleeter-footed international micro-network (step forward BBH, Wieden & Kennedy and – in its heyday – StrawberryFrog.

Pinder, however, has gone a step further in presenting a top-down managerial solution – or perhaps that should be management consultancy solution – in place of the piecemeal creative one. His starting point is that the traditional global advertising business – unlike professional counterparts such as lawyers and accountants – loses most of its senior talent to the management of regional geographic fiefdoms, which are there primarily because of historical legacy. What this talent should be doing is servicing the client’s agenda rather than their own corporate one. The exception, where the client really can insist on top-level personal service, is a vanishingly small number of mega-clients, such as Ford and Procter & Gamble, which have specially structured teams to pander to their requirements.

Pinder’s idea is to provide this level of service for global, or at least international, clients further down the budgetary league table. Each client should be serviced by no less than three senior people at any one time. To do this, he has joined forces with a core team of like-minded senior executives: initially, Peter Rawlings, former chief operating officer DDB Asia, Chris Chard, former chief strategy officer of Lowe Worldwide in New York and Ben Stobart, former senior vice-president (chief suit) of Burnett Chicago. These will deal directly with top clients on a day-to-day basis; the specialist skills base, on the other hand, is to be provided by a network of over a dozen associated network companies, of which the best known is Naked Communications (see AdWeek for a full list).

Note the absence of an overall chief creative officer. This is deliberate: Pinder does not believe a single individual can adequately address the creative needs of all client types.

Why is Pinder convinced this model can operate from a single fixed geographical location (well, actually two in THW’s case – London and Singapore)?  Because of consolidation on the brand management side. More and more marketing power is being concentrated into the hands of Chief marketing officers and indeed chief executives; less and less being delegated to regional and country power bases.

But, the acid test is: has Pinder got any clients? Yes he has. He has been collaborating with two over the past year in honing the organisational structure of THW, during what he calls “beta mode” (how digitally au courant).

And they are? Maserati and an upmarket specialist haircare brand, GHD (stands for “Good Hair Day”). Both, he tells me, are poised at an interesting fulcrum of development, from the brand and new product point of view.

Maserati, an ultra luxury sports car marque lodged in the Chrysler/Fiat stable, has been given a €1.6bn injection to broaden its model range and take on Porsche.

GHD – which produces premium-priced hair stylers – is also cash-rich after being bought for £300m by Lion Capital. Lion is investing in npd, with a view to bringing GHD out of the salon and onto the international stage. Inevitably, that is going to involve careful brand positioning as GHD moves into a broader market segment.

However, Pinder is coy on the subject of who, apart from Maserati and GHD, is bankrolling all of this. It seems likely that both principal founders (Pinder and Rawlings) have skin in the game. But a project of this scope is financially beyond most individual investors, even if they are relatively wealthy admen. Private equity seems to the answer. Among the list of network associates is, rather intriguingly, a UK-based hedge fund called Toscafund, whose chairman is former RBS bigwig Sir George Mathewson. Pinder claims Toscafund is very handy on the “analytics” side. No doubt. But my guess is it’s providing a lot more resource than that.


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