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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.

 

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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.


Age cannot wither them, nor shareholders vote them off the holding company board

April 16, 2013

David-Jones---Havas-007Whoever said advertising was a young person’s business? The conventional wisdom is that at 40, most ad executives would be advised to investigate a second career. And at 50, they’ll be positively clapped out and  have “post-economic” freedom foisted upon them whether they like it or not.

Superficially, membership statistics for the Institute of Practitioners of Advertisers (IPA – the UK adman’s trade body) bear this theory out. When I last looked (which was admittedly a while ago, but I doubt the demographic profile has improved), the number of members surviving their 50th birthday was a vanishingly small 6%.

But these are just the worker bees. Look at the nerve centre of the hive – the main board of the world’s leading advertising holding companies – and you’ll find that gerontocracy has never had it so good.

I was forcibly reminded of this the other day by Marketing Services Financial Intelligence editor Bob Willott.

Willott has done a demographic survey of the Omnicom main board and found the average age to be an astonishing 70. In his own words:

The oldest of the 13 board members is the chairman and former chief executive officer Bruce Crawford.  He is 84 and has been a director for 24 years. His successor as CEO John Wren is a sprightly 60 and has served on the board for 20 years.

I have yet to do the arithmetic upon the board composition of other global holding companies, but the most superficial of surveys suggests a similar age-profile, if their chief executives are anything to go by. At WPP Group, there is an evergreen Sir Martin Sorrell – still incontrovertibly ruling the roost at 68; and likely to do so for a good while yet unless shareholders go nuclear over his annual pay review. Interpublic Group chairman and CEO Michael Roth sails imperturbably on at 67, despite repeated attempts by the media to unseat him or sell his company to a rival. And at Publicis Groupe we have the grand-daddy of them all Maurice Lévy – 71 – with no successor in sight, despite repeated attempts to pretend he has found one.

All this looks terribly good for that comparative whipper-snapper, David Jones (pictured above). At only 46, the global CEO of Havas can anticipate at least another 25 years at the helm.



Sir Martin Sorrell – a fit and proper Olympic torch-bearer?

July 10, 2012

“Millionaire at centre of ‘fat cat’ row will carry the Olympic torch through streets of East London” howled the Daily Mail, in one of its ‘world exclusives’.

Downpage, there were 57 varieties of indignation from the good folk of the north-eastern London borough of Redbridge, all queuing up to express their disgust and dismay at the soiling experience of having someone not themselves carrying the sacred flame through their hallowed land.

Charlotte Law, 19, was typical (of Daily Mail reportage, at any rate): “I would be much better at carrying the torch than him. At least I’m from around here. Did he have to apply like everyone else? I don’t think so. It’s a disgrace.”

And you could sympathise with her. The bastard. He may have given up his £20m bonus rights, but here he was trying to worm his way back into the big time by wielding an Olympic torch.

But no, not Bob Diamond. It was someone most of them had never heard of, until coached by Mail hacks. Some bloke called Sir Martin Sorrell. Something to do with a big advertising company and a scandal. He’d asked for much too much money (don’t they all?) and been told he couldn’t have it.

We don’t want his sort round here. Michael Aldridge, a 51-year old care worker, summed it all up: “It goes completely against the Olympics spirit, but it’s not about that any more, it’s about money.”

Let me put you right on that, Michael: it always was. Even in ancient Greece, where a prodigious amount of vicious cheating and betting invested the quadrennial games like a swampy miasma. Come to think of it, the Olympic Torch Relay itself isn’t exactly of blameless historical pedigree. It was introduced in 1936, just in time to fanfare the Nazi games. The Nazis were very good at that sort of thing.

But, coming back to Sir Martin, what is it – precisely – that he has, or hasn’t, done to qualify as one of 8,000 bearers of the Torch? Well, behind the scenes, he has since 2005 been giving a good deal of his valuable time to promoting and supporting, pro bono, the London Olympics. And, as if that weren’t disqualification enough, he has actually been asked by the International Olympic Committee in Switzerland to carry the torch!

Outrageous. You know Sir Martin’s problem? He’s not one of the Little People – except of course in the literal sense. He’s one of them, the elite, who rule our lives. But then, the last I heard, the Olympics – motto: Faster, Higher, Stronger –  is all about elitism. It’s a gladiatorial contest where the best man – and woman – always wins. How inegalitarian is that?


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