Apple outsmarts its competitors

March 31, 2012

Unmistakable stress signs among competitors appear to herald a tectonic shift in the smartphone sector – to Apple’s advantage.

One rival RIM – maker of Blackberry – has retired hurt from the consumer ring. Another, Apple’s principal adversary in the field, is having to carefully rethink its ‘open-door’ strategy.

No surprise, perhaps, that the cracks are appearing at RIM, which has been heading for the casualty ward almost since the iPhone first appeared. After a disappointing financial year and downright disastrous Q4, new RIM chief executive Thorsten Heins has cleared out most of the old guard, including former co-CEO Jim Balsillie – still on the board – as well as the COO and CTO. And announced at the same time that RIM is all-but jettisoning the consumer market in favour of the business and public sectors.

At very least this means RIM will cease to develop content and music services. But the strategic review could signal a lot, lot more where that came from. Why exactly should business and government be interested in propping up the failing Blackberry brand, just because consumers aren’t? Even if they are, would RIM – so pared – still be a scalable global business? These are two of the questions Heins has, understandably, failed to answer so far. And yet, even at this stage, he has admitted that the future is “outsourcing” and possibly a trade sale. Echoes of Palm here, the PDA innovator which – despite a superior operating system – was eventually gobbled up by Hewlett-Packard.

More nuanced than Blackberry’s rout is Google’s response to worsening sales figures in the most hotly contested smartphones sub-sector, tablets. Here, Android-powered product is being squeezed by the exotically priced but more glamorous iPad (entry-level, $399) and the bargain-basement ($199) Kindle Fire, made by Amazon.

Reportedly, the search and smartphones titan is preparing to sell Google co-branded tablets directly to consumers through an online store.

That shocking, you say. So what?

Superficially, Google adding its awesome brand to the Android-powered tablet platform looks like a sign of strength. But that’s not what the techno-commentariat to a man and woman believes is behind the move.

On the contrary, they say, Google is attempting to shore up its position in a fracturing market. Unlike Apple, which maintains a dictatorial control over its operating system at all levels of innovation, manufacturing and distribution, Google has always favoured a laissez aller approach. By opening up its Android operating system to outside manufacturers such as Samsung, HTC and ASUS. This strategy has the merit of reducing development costs and potentially speeding up market penetration, with the corollary of making a killing in the apps field. If it succeeds, that is. But the downside is a lack of quality control; meaning that the Android brand and, indirectly, Google will be tarnished by the poor performance of its weakest collaborators.

It is this perception of fragmented user experience that has driven Google to intervene more directly in the market by taking over distribution.

With what effect we shall see. Commentators have been quick to point out that Google has tried this stratagem before, with the HTC-manufactured Nexus One smartphone.

And failed. The co-venture was shut down in mid-2010.


Publicis Groupe raids top Chinese shop Betterway after corruption scandal

February 20, 2012

News reaches me that Publicis Groupe has raided one of its most important marketing services outlets in China, after corrupt practices came to light.

Betterway/Publicis Dialog, the outlet in question, is China’s largest field marketing network, with offices in Shanghai, Beijing, Chengdu and Guangzhou.

The company is said to have raided its subsidiary last week and to have sent all staff home. Arrests are rumoured, but unconfirmed.

The driving force behind Betterway is CEO York Huang, a former Procter & Gamble executive, who joined the company in 2001. In 2006 PG acquired an 80% stake in Betterway. Huang and junior partner Jenny Zhang remained minority stakeholders.

Two years ago, PG claimed Betterway had 346 full-time employees and 15,000 part-time staff operating in over 100 cities. Principal clients include Wrigley, Kraft, Microsoft, J&J, L’Oréal, Coca-Cola and Samsung. Betterway won a substantial contract from China Mobile and China Telecom to represent them at the high-profile 2010 Shanghai Expo.

What has gone wrong? It seems that despite the Chinese marketing services economy growing at over 10% a year, some just can’t get their hands on enough money. The speculation – and I stress that it’s no more at this stage – is certain senior Betterway executives created a ‘shadow’ agency which then pumped revenues into Betterway in order to inflate revenue, and thereby substantially boost their earnouts.

Publicis has had problems dealing with corrupt practices in its Chinese operations before, of course. Readers of this blog may recall that, in September 2010, it fired Vivaki Exchange’s chief executive Warren Hui and general manager Ye Pengtao .

More on the Betterway story when I have it.


Google/Motorola deal opens way for game-changing Microsoft merger with Nokia

August 16, 2011

Say whatever else you like about Google’s $12.5bn acquisition of Motorola Mobile, it’s a landmark deal, defining a new inflection point in the evolution of mobile communications.

How it will do so is another matter. Commentators are widely divided over its ultimate objective or even whether, all things considered, the deal will benefit Google.

Microsoft's Steve Ballmer: Last laugh?

Let’s start with something concrete: the high price. At $40 a share, paid in cash, Google’s offer represented a handsome 63% premium to the smartphone maker’s share price at the end of last week. Even allowing for the currently flustered state of world stock markets, that suggests a measure of desperation on Google’s part to get the deal done.

Why pay so much? Motorola may once have been a great mobile handset brand. But today it commands no more than 2.4% of the market that matters, smartphones – according to analyst Gartner.

Some would suggest that calling Motorola a brand at all is to miss the point. In their eyes, the deal is little more than a defensive gesture, aimed at raiding Motorola’s 17,000 innovation patents. These will bolster the already near-dominant position of the Android operating platform by allowing Google to segue, for the first time, directly into hardware development (tablets in particular). By so doing, Google thinks it will obviate increasingly destructive IP litigation. Mountain View now sees this as the tactic of choice deployed by its principal competitors Apple and Microsoft to slow up Android’s inexorable advance. Like caltrops strewn in the road to block a triumphant cavalry charge.

No less significantly, the Motorola acquisition will enable Google to improve Android user experience. Complete control over a handset manufacturer will mean, in theory at least, fewer glitches (compared with, say, the already intergrated iPhone experience) when it comes to software upgrades. Which in turn means more happy customers and apps developers.

So far, so positive. But, from here on in, the deal looks more risky. Google may not choose to highlight the issue of brand conflict, but Motorola’s competitors most certainly will. And it just so happens that some of these competitors, namely Samsung, HTC, LG and Sony Ericsson, are Android’s most important customers. Without them, their awesome distribution and massive marketing budgets, the “inexorable” advance of Android would be stopped in its tracks. So Google will have to work very hard at convincing them that Motorola will not get first-mover advantage in the event of some major piece of market innovation.

Cynically, Google may well have calculated that Android’s other “carriers” have little choice but to toe the line, there being no visible alternative to its own operating system at this moment.

But that would be to underestimate Microsoft (never a wise thing to do) and what is likely to be the most significant and unforeseen consequence of the Motorola deal. Which is: Microsoft buying Nokia – still the biggest, if no longer the best, mobile phone brand.

That would indeed be an irony. Without the catalyst of the Google/Motorola deal, Microsoft and Nokia might never have been able to convince their shareholders to go the whole hog and commute a peripheral collaboration deal into a fully-fledged merger. With what consequences for Google and Apple we can only guess.


Are brand valuation tables simply telling us the blindingly obvious?

May 10, 2011

No surprise to see Apple’s topping performance in the annual BrandZ survey, put together by WPP subsidiary Millward Brown.

Or is it? If we are to believe in these league tables which regularly assess the brand values of some of the world’s largest corporations, we should surely expect a certain consistency between them.

This is far from always the case. Take Apple itself. For the last year or two is has been the world’s top, or near top, company by market capitalisation with a simply stunning profit record. No one in their right mind would argue that branding, through Steve Jobs’ long career, has not been a salient feature of the technology company’s success (even when some elements, such as profitability, were clearly lacking). Put the two together, and you would surely expect it to be near the top.

But that’s not so when we turn to BrandZ’s principal rival, the longer-established Interbrand Best Global Brands, owned by Omnicom. Curiously Apple comes in at a sickly 17, up from 20, in the Interbrand rankings for 2010, published last September – the latest available.

Apple may be the most conspicuous anomaly, but it’s certainly not the only one when we compare the two league tables. Why is Disney so highly regarded by Interbrand (it’s ninth), but relatively lowly by BrandZ (it’s 38th)? Why is Samsung only 67th in the BrandZ charts, while it is ranked 19th by Interbrand? Doubtless there are other glaring disparities, which the more eagle-eyed will spot.

Such mis-attention to detail, you say. It’s the differing methodologies isn’t it? A bit of capitalist differentiation in the brand valuation market. You pick the one you trust more and go with it.

Well, not exactly – despite the anomalies, there’s plenty of consensus too. Technology companies, however ordered, now overwhelmingly dominate the top ten (and in BrandZ’s case, the second ten as well); mostly the same names crop up as well. Louis Vuitton is clearly the top-ranking French brand: both tables have it in their top 30. Even some of the valuations are pretty similar. Coca-Cola’s brand-worth, for instance, is estimated at $74bn in BrandZ (just out); and $70bn in the Interbrand rankings. While BMW is valued at at just over $22bn by both.

Admittedly, Interbrand tends to be a little more economical with its overall valuations, in dollar terms. Then again, the real importance of these tables is not the absolute, but relative values conveyed: it resides in the dynamic interaction of the brands contained therein.

And yet it is precisely here that their biggest difficulty lies. Amusing though it may be to pick out the winners from the losers and also-rans, are we any the wiser once we have done so? True, such tables serve an important function as a marketing propaganda tool within the investment community – helping to prop up, or knock down, share prices. But many of the conclusions they reach seem blindingly obvious rationalisations after the fact.

So, in the case of BrandZ, Blackberry is down 20% and 11 places to number 22; while Nokia has tumbled 38 places to 79th and lost 28% of its value (now $11bn). Well strike me down with a feather. Nothing of course to do with the two brands well advertised failure to crack the current consumer smartphone market I suppose?

Mind you, at least the BrandZ analysis is consistent, attributing due weight to the two phone brands’ nemeses, Apple and Google. Which is more than you can say for the Interbrand picture.

On the subject of which, expect a major brand revaluation this autumn. Here’s a fairly safe prediction. If not actually top, Apple will be one of Interbrand’s top-performing brands this year.

NOTE: BrandZ table here. And Interbrand table here.


Hans Riedel – the Porsche mastermind behind Jaguar’s bright Sparks ad plan

February 21, 2011

I cannot be alone in wondering what possessed Jaguar to pluck the majority (not all, note) of its $100m global advertising and marketing communications account out of Euro RSCG and place it in the hands of an untried joint-venture called Spark44, which will be head-quartered in Los Angeles.

If you don’t like the agency, fire it; don’t leave it clinging onto the business in nearly a third of your markets. If you do like the agency, but you’re unsure about the quality of its work, call a global review and take it from there. What’s happened here, by contrast, looks amateur and ill-judged: an accident waiting to happen at a time when Jaguar should be worrying about other things. Such as its dealers’ morale and the reliability of its new core product, the long-delayed XJ large saloon range.

Jaguar, which is part of Jaguar Land Rover and now owned by the family of Indian billionaire Ratan Tata, has been rather cryptic about the new marketing services JV – possibly because the news got out prematurely. So let’s try to fill in some of the gaps.

They say it’s not in-house but will be “100% dedicated to developing the Jaguar brand”. I take this to mean that 1) Jaguar is to be the majority shareholder in the enterprise and 2) that Spark44 will not be permitted to chase other clients.

In other words, the model is slightly different to Samsung’s relationship to Cheil (it can, but is so smothered it has never been able to diversify satisfactorily). And perish the thought we should so much as mention Kevin Morley Marketing – which for 3 unhappy years during the early nineties handled the £100m Rover brand. Even so, there are some unsettling parallels with KMM. As will be seen.

What little we definitely know about Spark44 comes from its website which, alas, has now been locked down with password protection (Nerves? Unreadiness? Both?). Before it disappeared from public view, a logo was to be discerned, in the form of a large spark-plug. The “44” part probably relates to the four partners ostensibly running the JV; and the fact that they will operate in Jaguar’s 4 main markets: the USA, Britain, Germany and China  – which, together, account for about 70% of the marque’s sales.

These four partners are: Alastair Duncan; Steve Woolford; Bruce Dundore; and Werner Krainz. Who? Well, good question. First, all of them have big agency backgrounds (McCann and BBDO figuring particularly prominently in their CVs), and specific experience on car accounts. Krainz (German, as the name suggests) and Dundore are creatives. London-based Duncan was until 2009 chief executive of McCann WorldGroup digital arm MRM Worldwide, and earlier helped to set up digital agency Zentropy. Finally, and most important, there is LA-based Woolford. Woolford, after a spell running a barber shop or two in LA, has been a group account director at BBDO (Mitusbishi being one of his clients); and also has a connection with McCann and Duncan, having – surprise, surprise – occupied senior positions at Zentropy and MRM.

But the really interesting thing about Woolford is his client-side experience: earlier in his career he worked for both Porsche and BMW. And it is this pedigree which has given him an entrée to the senior German car executives and consultants who now – effectively – run Jaguar worldwide.

Yes, the Indian Tata business dynasty may own Tata Motors – which bought Jaguar and Land Rover from Ford for £1.15bn in 2008 – but it is the Germans who run it. Last year, Tata put the respected former head of General Motors Europe and ex-BMW executive Carl-Peter Forster in overall charge of its global motor operations. Separately, but about the same time, it picked former BMW executive Ralph Speth as CEO of the Jaguar Land Rover division. Speth reports to Forster but – importantly for the future perhaps – the Speth appointment was made not by Forster but by Ravi Kant, vice chairman of Tata Motors.

Speth quickly set about refashioning JLR’s senior management in his own image. One of his most significant hirings is former senior Saab and Porsche executive Adrian Hallmark to the new position of Jaguar global brand director. Indirectly, Hallmark is a replacement – with much-reduced powers – for managing director Mike O’Driscoll, who leaves this year. Over the past 3 years, O’Driscoll – in charge of product and sales, as well as marketing – has been the key transition figure in the handover of Jaguar from Ford to Tata. Among other things, he was pivotal in cementing Euro’s relationship (which began during the Ford era in 2005) with the brand’s new owner.

There are a lot of names in this thickening plot, but let’s start tying it together with the introduction of yet another one. Speth has been surrounding himself with expensive consultants: in fact, Jaguar has been spending more on consultancy recently than it has on agency fees, according to one well-placed source. If so, that must be a tidy sum, since the Euro RSCG fee is commonly thought to be $10m per annum.

Prime among these consultants is one Dr Hans Riedel, who first made his appearance last summer, prior to the Hallmark appointment. It is Riedel (left) who is effectively calling the shots in marketing. Now about 62, he has worked full-time for only 3 employers in his life: Young & Rubicam; BMW, which he joined in 1980; and Porsche, from which, after 12 years, he retired in 2006. At Porsche he was Mr Sales and Marketing – the man who helped launch the sports-car maker’s third-leg strategy, the Cayenne 4×4 off-roader; and who oversaw an explosion of Porsche sales, which soared from 18,000 in 1994 to over 90,000 by the time he left. At BMW, he acquired extensive knowledge of the North American market helping, among other things, to reorganise BMW’s motorcycle operation there.

The point is this. Riedel quickly made his presence felt at Jaguar by cancelling an imminent global all-model ad campaign – to dealers’ consternation – and bringing in the relatively unknown Woolford as his right-hand man. Next thing we know, Woolford and his chums have carved out for themselves the lion’s share of Jaguar’s marketing communications budget.

In whose best interest is this marketing services JC being set up: Jaguar’s or the people running it? But, equally important: will it actually work?

First, a bit of background. Euro’s advertising strategy performed an early and vital service for the Jaguar brand. The “Gorgeous” campaign definitively pushed Jaguar upmarket, by detaching it from the Ford name and repositioning it as a luxury item. Its task was assisted by the scrapping of Jaguar’s entry model, the unsuccessful X, and the revitalisation of the rest of its range, the XF, XS and the XJ. Whatever quibbles there may be over the XJ’s reliability, all three ranges have been well received critically; and the 2010 JD Power ratings – which measure customer satisfaction – prove the point by ranking Jaguar the highest-scoring luxury marque in the US auto industry.

The “luxury item” strategy is remarkably similar to that which has prevailed at Porsche over the years, at a noticeably lower cost in marketing services expenditure. Riedel  – who must be regarded as the eminence grise behind Spark44 – was not a believer in bloated advertising budgets then; and the evidence is, he is not one now (particularly when it comes to the flim-flam of digital and social media).

Maybe he’s right to be so conservative: his track record speaks for itself. But there are also reasons for suspecting that Spark44 will not succeed in the objectives it seems to have set itself. Will it save Jaguar money? Initially maybe. Its problem is the brand’s global reach. Although it has sought to circumvent the issue of network overheads by leaving all the messy bits to Euro, Spark44 is still lumbered with a fundamental problem. It is servicing only one brand, and that brand must therefore, single-handedly, subsidise the cost of regional presence. There is a complexity of engagement  – and therefore expense – in that presence which may, so far, have eluded the drawing-board agency strategists. The Kevin Morley (left) experiment failed not simply because of the posturing, pugnacious personality of Rover’s former managing director-turned-adman, but because it was and remained a one-trick pony. It could find no substantial partner to spread the costs of a European network. Nor, in the last analysis, could it give advice that was in any sense robustly objective, tied as it was to a single paymaster. Morley quit before his 5-year term was up and, shortly afterwards, the business was sold to Lintas, later a part of Lowe.

Jaguar  might have been better advised to approach Havas with the idea of a 50/50 joint venture run out of Euro. After all, the infrastructure is halfway there already. Jaguar is handled by a specialist agency with a dedicated strategy unit, operating out of its two chief markets London and New York (not always in that order), in order to avoid account conflict with Peugeot. That way the Jaguar JC could have spread the risk while asserting greater control over marketing communications and the associated costs. What’s more, as a global strategy it would have been a good deal more coherent.

For all that, let’s not prejudge Spark44’s chances of success. We’ll know it’s working when, in about a year’s time, Speth turns his attention to Y&R’s global contract with the more successful Land Rover brand, and attempts to replicate the Spark44 model. Either that, or he may find himself without a job.


I-Level default sends tremors through the industry

May 6, 2010

For those in marcoms, the descent of digital agency I-Level into administration has some alarming echoes of the sovereign debt crisis being played out in Greece.

Just a few short months ago, no one would have seriously contemplated the possibility of either event. Now, we’re beginning to worry that this portends the second leg of financial meltdown, and that a domino effect will ensue.

I don’t want to push the parallel too far, of course. I-Level’s management was always infinitely more competent than that of the Greek economy. Nonetheless, for those who had eyes to see it, this was a calamity waiting to happen. The detonator clock started ticking in February when I-Level, in alliance with Starcom MediaVest, lost out to WPP’s GroupM in a pitch for the COI’s £250m consolidated media planning/buying account. Up to that point, government digital media business accounted for £40m of I-Level’s billings, or about 40% of its revenue. Replacing a slug of income that big was never going to be easy, but the difficulty was exacerbated by I-Level’s financing mechanism. Private equity investors ECI bought a 60% chunk of the group in April 2008, as a precursor to its international expansion. The deal valued I-Level at about £46.5m, but had the effect of burdening it with debt of £32m – much of it redeemed at an unsustainable interest rate of 12%pa. Put another way, that meant the group had to earn pre-tax profits of at least £3m a year merely to cover its interest payments. Guess what? The punitive interest payments kicked in just as I-Level was beginning to lose business. And that was before the coup de grâce delivered by the COI.

Even so, its disappearance is a shock. Set up in 1999 by Andrew Walmsley and Charlie Dobres, I-Level had near-iconic status as one of the few first-wave digital agencies that surfed the dotcom bust and managed to retain its independence. Among its blue chip clients are Procter & Gamble, The Sun, Orange, Sky, Renault, Comet and Samsung. Its top brass, who are now all out of a job, include respected industry figures such as Walmsley himself, chief executive Steve Rust and chairman David Pattison. Up to 100 people are expected to be made redundant. I-Level’s demise is a warning, not merely to those who would sell out to private equity investors, but of the fragility of fortunes, even in the relatively buoyant digital sector.

UPDATE: RIP I-Level. The administrator, Zolfo Cooper, has liquidated I-Level. Media owners such as Microsoft, Yahoo and Google will be faced with multi-million pound losses. It’s the biggest and most spectacular implosion of a high-profile agency since Yellowhammer went bust in 1990. The only part of I-Level to survive is the fast-growing social media operation, Jam, which was sold to Engine yesterday. That means about 20 staff out of a total of 120 have been reprieved.

ELSEWHERE IN ADLAND, I note the champagne corks are popping – and for good reason. DDB London learned this week that it had scooped the £75m Virgin Media account, previously with RKC&R/Y&R.

Woodford: Walking tall

Its understandably chipper chief executive Stephen Woodford tells me that the agency’s proposed integrated strategy was key to winning the business. Whatever, it’s not every day an agency wins an account that instantly boosts its income by 10%. And it gets better. DDB is heavily dependent upon international business, such as VW. Virgin is almost entirely domestic. It thus provides the London office with some valuable “shop window” advertising that should in time attract other local buyers.


Why sponsors won’t be dribbling away from John Terry. Unless…

January 31, 2010

Among the many footballing clichés pithily describing the dilemma of putative England captain John Terry my favourite is “Own goal”.

Perroncel: Single outing

Terry was poorly advised in applying for an all-gagging superinjunction on the grounds that the revelation of an adulterous affair with lingerie model Vanessa Perroncel might harm his “financial affairs”. It was another example of a bad call by celebs’ favourite law firm Schillings, which has been in the forefront of blunting freedom of expression through the exploitation of privacy laws that operate under Article 8 of the European Convention of human rights. Last December, Mr Justice Eady was widely ridiculed for the absurdity of an injunction which forbad sexual athlete Tiger Wood’s naked anatomy being taken in vain. And Schillings were the people who brought it before him. This time, they were less lucky in the choice of judge presiding over the case. Sir Michael Tugendhat seems, on reflection, to have taken a dim view of an orchestrated cover-up designed to protect the financial interests of an erring footballer.

Anyway, back to Terry. Presumably it was his estimated £4m-a-year sponsorship money he was concerned about rather than the £200,000 a week he earns as Chelsea captain. If so, he had – and I suggest has – little to fear on that account. Samsung, Nationwide, Umbro and Terry are all in this enterprise together.  I have no idea whether it is the stern disciplinarian or the shrewd pragmatist in England manager Fabio Capello that will win out as he reflects on Terry as a fit and proper symbol to lead England. And in the event it doesn’t much matter. Even if Terry is “demoted”, he will still be on the front bench – which is status enough for his sponsors to keep faith.

Ah, but what about the example of Woods, you say? Once it became apparent the golfing legend was guilty as charged of multiple adultery, Accenture and Gillette jumped ship. Even Nike, which continued to back its man, has begun to withdraw support.

The important difference between these two cases is contained in the word ‘multiple’. So far as we know, Terry has only had one extramarital affair. Woods, on the other hand, quickly became overwhelmed with an avalanche of revelations which effectively forced his withdrawal from public life. With no further glory on the links in prospect, sponsors became disillusioned. I doubt they will feel the same about Terry’s singular excursion from the straight and narrow. Unless, of course, there’s something he hasn’t told us yet…


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