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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.

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Yell name change to hibu is the kind of makeover that makes you want to scream

May 23, 2012

Yellow Pages owner Yell has just changed its name to hibu, to the corporate fanfare of a £1.4bn annual loss.

If you want to draw attention to the fact that you are a loser, this is the way to do it in style. Don’t just disappoint your shareholders, really get their hackles up by spending yet more of their money on a makeover that will involve changing everything down to the last dot on letterheads and corporate literature.

It’s the kind of thing that gives rebranding a really bad name. The corporate equivalent of a crooked car dealer pushing a cut-and-shut write-off through the body-shop, in the belief that some mug out there will buy the flashy new paint job.

So why do it? Mike Pocock, Yell’s chief executive, claims to have a cunning plan. He’s actually proud  of the fact that hibu (unlike its predecessor, Yell) is a meaningless word. Yes, readers, unironically he spells it out for us: “high-boo”. As opposed to “low-boo.” Now you know.

Apparently, trendily ungrammatical hibu (lower case ‘h’, with some meaningless umlauts thrown in) is going to “connect” with under-25 year olds for whom telephone directories are relics. And while we’re there, let’s not forget “digitally-enabled housewives under 45 who have money to spend”. No, really. Must be the Sid and Doris Bonkers market that satirical magazine Private Eye has made its own.

By way of explanation, Pocock says nonsense words are now very much in vogue: “If you go back 15 to 20 years, Google and Yahoo! didn’t mean anything. It’s how you support the brands.”

You couldn’t make it up, could you? Please, Mike, stop digging and throw the spade away.  Google and Yahoo may have been nonsense words, but they represented thriving new businesses that earned the right to use a neologism. Not so tired old Yell, shackled to its Yellow Pages print platform. The best place for nonsense words is in the poetry of Edward Lear and Lewis Carroll.

WPP’s Landor, who dreamt up “hibu”, must be laughing all the way to the bank. Now comes the expensive advertising campaign to let Sid and Doris know they are being targeted.


Why the IBM brand made a comeback but Kodak never will

January 16, 2012

The imminent arrival of Kodak at the bankruptcy court underlines a curious paradox about technology brands. They come about by, in some way, incarnating a bold invention. They end because they have become too brittle and resistant to precisely the process of innovation that made them great in the first place.

No doubt the Kodak name will survive Chapter 11 in some guise. But it will be as a zombie brand, entirely reliant on its 131-year heritage. It can have no purchase in our future aspirations which, I would argue, is vital to the ongoing success of brands in this sector.

How did such a catastrophic failure come about after generations of success? The simple answer is that Kodak was a legacy company too heavily invested in analogue print technology to be able to embrace digital photography when it arrived, clearly suggesting a monumental lack of corporate vision. However, the simple answer ignores an inconvenient fact: in 1975 Kodak was the first major brand to launch a range of affordable digital cameras.

It’s not so much that Kodak failed to respond to the digital challenge as that it failed to provide a full and satisfactory answer. Actually, it tried very hard with a number of solutions, which included chemicals and medical-testing equipment. Finally, it settled upon consumer and commercial printers but, unfortunately, long after Xerox and Hewlett-Packard had sewn up that market. Unlike one-trick pony Polaroid, which faced the same digital challenge, Kodak had plenty going for it. It just wasn’t enough.

Things might have been very different if Kodak had possessed the ruthless entrepreneurial culture to exploit its first-mover advantage in digital cameras. The sort of culture that drove its founder, George Eastman, back in the 19th century. But it did not. Not only had it to confront a cash-cow legacy (who ever found it easy to jettison money-making assets?), it also had institutional shareholders to placate. Publicly quoted joint-stock companies aren’t about strategic risk; they’re about steady shareholder returns. Why worry about the day after the day after tomorrow, when tomorrow looks just fine?

Ah, you say: but what about Steve Jobs? Apple was and is a joint-stock company, isn’t it? And it had the wisdom to take Jobs back on board.

Yes it did. But don’t forget that Jobs was entrepreneurial-drive incarnate – he wasn’t some whizz-kid corporate manager – and that by the time Apple took him back it was in such a mess that he was able to dictate his own terms. The right-angled strategic turn into streamed entertainment, the iPod and all that followed from it was a huge corporate risk. Even Jobs may have been a little surprised by its eventual success.

More analogous to the case of Kodak, though in a lesser state of decay, are RIM, maker of Blackberry (which has seen its shares drop 75% in value during the last year), Nokia and Yahoo.

What these companies share is a great past, present profitability but no visible purchase on the future. On present trajectory, they will end up like Palm, the PDA specialist: they will be bought, eviscerated then discarded on the junk-pile of corporate history.

An inevitable fate? Not necessarily. Rare though they are, not all turnarounds in the technology sector depend upon a messianic figure like Jobs – although they do demand pretty extraordinary corporate skills.

A good case in point is IBM. Like Kodak, IBM – whose roots go back to 1911 – found itself struggling with a destabilising transformative technology. It had grown great on the mainframe computer, which by the 1980s was obsolescent. Again like Kodak, it was not ignorant of the nature of, or need for, change. At one point it became the world’s largest manufacturer of the new game in tech city – the personal computer. What, unlike Microsoft, it failed to grasp was that the new technology was all about software control. Microsoft cleaned up the market with its PC operating system; IBM fell a prey to PC cloning, which cut its margins to ribbons.

It took an outsider to fix IBM’s cultural obsession with hardware. And not one from within the industry either. Lou Gerstner, who was appointed chief executive of IBM in 1993, hailed from tobacco and food conglomerate RJR Nabisco. Previously he had held a senior position at American Express.

The key to Gerstner’s remarkable 4-year turnaround of IBM was his realisation that the company had to harness its elite skills to not the current, but the next trend in digital evolution. Forget the PC, concentrate on the internet and make IBM the businessman’s natural friend with software solutions that embraced such issues as intranets and electronic commerce sites. While IBM prospered, Digital Equipment Corporation, its great mainframe challenger in the sixties and seventies, failed to embrace change and went under. Or rather, it was acquired by Compaq, which was acquired by Hewlett-Packard – itself now painfully struggling with its future corporate identity. Who now remembers the Digital brand name?


Publicis’ sweetheart ad deal with Google turns sour after kickback allegations

November 25, 2010

When is an agency kickback not a kickback? When it’s a strategic partnership with Google – according to Kurt Unkel, senior vice-president at Publicis Groupe digital arm VivaKi.

Google and Vivaki have found themselves in the eye of a hurricane, thanks to an exposé published by the respected online journal TechCrunch. It sheds disturbing light on the highly incestuous relationship between the internet giant and agency group, with particular reference to their collaborative display advertising operations.

The technicalities are complex, jargon-ridden and difficult for outsiders to understand, involving as they do the secretive workings of so-called agency “trading desks” and “demand side platforms” (DSPs). But at heart the issue is simple. It’s exactly the same one aired in one of my recent posts on a historic kickback scandal at Grey Advertising. It’s about playing the agency client for a mug, possibly because the client in question is indifferent, but more likely because he or she hasn’t the first idea about what is going on. Or, as one anonymous Publicis employee quoted in the TechCrunch piece bluntly puts it: “Our clients are so clueless it is a joke.”

So how does the scam, if that’s what it is, actually work? Google is desperate to prove that it is not a one-trick pony, relying pretty exclusively on search advertising revenue. It has made considerable inroads into display, which now accounts for $2.5bn a year revenue according to the company itself. Some of this comes from its own sites, which include YouTube, but quite a lot is also generated via special units, the DSPs mentioned above, which are attached to all the big agency network groups – Omnicom, WPP and Interpublic as much as Publicis. According to one source quoted by TechCrunch, these DSPs already handle 10% of online ad spending but, such is their power, they could handle up to half in a few years’ time.

The issue is not whether money changes hands between Google and Publicis to boost Google’s market share. An explicit bribe would be illegal, not least because the financial inducement would not have been remitted to the ultimate paymaster, the advertising client. Rather, what seems to be going on are a series of non-monetary inducements offered by Google to improve agency performance. These, according to TechCrunch, include investment in the agency trading platform, co-marketing and training.

Google does not deny this is what is happening with Publicis. That in itself is serious enough, because it hints at abuse of market power, which could in time attract the attention of the competition regulator. In a nutshell, is Google using profit gained from its search operation to distort the display market?

But the implications are even more serious for Publicis, which depends on digital advertising revenue to sustain its industry-beating profit margins, of which we have been hearing so much from Groupe chief Maurice Lévy of late. According to a Publicis secret squirrel quoted in the piece, Publicis will run $1bn of advertising through Google this year, most search but about $200m display. To put this figure in context, digital was nearly 30% of Publicis’  Q3 €1.3bn revenues. And the rate at which digital revenues are growing – 28% in North America, which is the hub of global activity – is much higher than the industry average of 17%. Just to round off the point, there is an incestuous relationship between Google and VivaKi’s DSP technology: the technology is effectively licensed from Google.

If that’s the case, the not unreasonable question arises: are media planners at VivaKi acting in the best interests of clients when they allocate client funds, or the best interests of their employer?

I should point out at this stage that VivaKi does do business with display ad exchanges other than Google’s DoubleClick; for instance Yahoo’s Right Media. It also has a sweetheart display advertising deal with Microsoft, struck as a clinching quid pro quo during the Razorfish acquisition last year.

Nor does Google have an exclusive partnership with Publicis. It has a relationship with all the major advertising holding companies and a similarly structured deal to the Publicis one with Omnicom.

Whichever way you look at it, however, this exposé is a wake-up call for clients. Advertisers really need to pay a lot more attention to how their money is being spent.

POSTSCRIPT: Troubles, they say, always come in threes. To add to Publicis’ Google woes, there is a still-breaking corruption scandal in its China media buying operation, plus fresh news that Matthew Freud’s high profile PR subsidiary is plotting defection. For more information on this last, see what my old chum Stephen Foster has to say over at More About Advertising.


Phil Rumbol lays his reputation for creativity on the line

September 8, 2010

For months it has been an open secret that Phil Rumbol, former Cadbury marketing director, was plotting to set up an advertising agency. The trouble was, most of us were on the wrong scent; the idea being he was going to head the London arm of Omnicom’s creative boutique, Goodby Silverstein & Partners.

At the same time, there were ominous rumblings of discontent at Fallon, the creative outpost of SSF, which also runs Saatchi & Saatchi London. Fallon – once highly praised for its Sony Bravia and Cadbury work – has latterly been dubbed “Fallen” by industry wags who, no doubt, have in mind the successive loss of the £70m Asda account, Sony, and the transfer of the £100m Cadbury account to Saatchi after some controversial Flake work went awry. The talk was of a possible management buyout. In the event, it is chairman Laurence Green and creative director Richard Flintham, rather than the agency, who have walked.

What we had failed to do was mix these two things together and make an explosive compound. All the more so since the story – broken by my colleague Sonoo Singh, editor of Pitch – has self-detonated in the very week that Saatchi & Saatchi celebrates 40 years of success in its party of the decade.

Details remain sketchy. We don’t, for example, know what the breakaway agency is to be called, nor whether it has any business. Kerry Foods has popped into the frame, specifically the Wall’s sausage brand. If so, it must be a gift from Saatchi.

Whether that’s the case or not, what’s really interesting about this start-up is the key role being played by a former client. Rumbol, so far as I can make out, has never worked in an agency himself, but he has had a distinguished career as a client, which has resulted in some memorable advertising. Boddington’s Cream of Manchester campaign was one of his early achievements, he was the Stella client (need I say more), and the commissioning force behind Cadbury’s Gorilla and Eyebrows campaign, not to mention the more controversial launch campaign for Trident chewing gum.

Rare is the client with such a creative pedigree. Possible examples: David Patton, patron of the Sony Bravia “Colour like no other” campaign; Simon Thompson, long-time sponsor of Honda ads such as ‘”Cog” and “Grr” ; and – long ago – Tony Simonds-Gooding, who tore up some unsupportive research and gave Lowe Howard-Spink the go-ahead with ‘Heineken refreshes the parts other beers can’t reach’. Rarer still is the client who is physically involved in a start-up and prepared to put his reputation, and possibly career, on the line; as rare in fact as hens’ teeth. It’s said that Rumbol earlier got close to signing a deal with Goodby, but that the stumbling block was the creative process, which would be shipped out to HQ in San Francisco. I can well believe it. Here’s someone who clearly has the courage of his convictions.

POSTSCRIPT: Spookily, Fallon has just conjured a new chief executive out of the hat, after a 6-month search. She is Gail Gallie, who was responsible for the BBC becoming Fallon’s first client in 1998.

PPS. It has been pointed out to me that the nearest precedent to Rumbol is the revered John Bartle. Oddly enough, Bartle himself was a Cadbury client. He worked at the confectionery and food company for eight years and, among other things, fostered Boase Massimi Pollitt’s celebrated Smash campaign. The significant difference with Rumbol is that Bartle then spent nine years in an advertising agency, TBWA, before forming the breakaway group that set up Bartle Bogle Hegarty in 1982.

UPDATE 24/12/10: The new agency is to be called 101 (not, thankfully, Room 101). The name has nothing to do with the agency’s official opening day, 10/1/11 – I’m told by a reliable source. We have yet to learn whether it has landed a big fish.


Will Razorfish make Publicis cutting edge?

August 11, 2009

RazorfishPublicis Groupe may have dramatically trumped Dentsu’s higher offer to acquire digital and interactive agency Razorfish, but has it cut a good deal  ?

I ask the question because WPP Group, the third contender in second-round negotiations with Microsoft, has played a curiously muted role in this contest. That, to say the least, is unusual. Normally a locking of horns between WPP and Publicis is enlivened by the electric personal animosity between their principals, Sir Martin Sorrell and Maurice Levy. It’s a sore point with Levy that Sorrell has often outgunned him, most conspicuously in the hostile takeover bids for Y&R, Cordiant and Grey. But there was no war of words this time. WPP allowed itself to be meekly outbid.  Why?

The answer has nothing to do with the strategic value of the acquisition, which is indisputable. Razorfish has, by common consent, considerable scale and skills in digital and interactive, particularly in the US market. A recent AdAge survey ranked its revenue behind only Publicis-owned Digitas in 2008. It has over 2,000 employees and a raft of blue-chip clients which include Kraft, Ford, Visa, McDonald’s and AT&T. Moreover, while admittedly US-centric, it has valuable outposts in London, Beijing, Shanghai, Hong Kong, Tokyo and Sydney.

levy

Levy: Digital king?

Fitting Razorfish into Publicis’ VivaKi unit will undoubtedly help it to build that global presence, not to mention its client list. But the acquisition is a big coup for Publicis, too. As David Kenny, managing partner of of VivaKi, has pointed out, more than half of his division’s revenues will now come from digital for the first time – and Publicis itself will be able to boast that, with 25% of its income derived from that same source, it will have more digital assets than any other advertising holding company.

“It gets us a culture that’s more savvy about technology and innovation, more nimble and more connected to Silicon Valley. We’re very connected to Microsoft and very connected to Google – the big platforms underneath all this,” he adds.

So far, Publicis has been much more aligned to Google’s DoubleClick adserver platform. Now, by embracing Microsoft’s Atlas platform, via Razorfish, it has redressed the balance; not unimportant given that Microsoft has bolstered its competitive position vis-a-vis Google with the Yahoo! search deal.

So, a strategic snip, bought in the midst of a recession and under the very nose of WPP into the bargain?  Well, not necessarily. As with any deal, the devil is in the detail. In this case, the detail is what allowed Publicis’ $530m cash-and-shares offer to best Dentsu’s $700m one. Superficially, it comes down to the fact that Dentsu has almost no media buying presence in North America, whereas Publicis has a lot. Microsoft made it clear it wanted a conditional deal whereby it could exploit that very buying power – and it has duly got its pound of flesh. Under the terms of the agreement, the two companies Microsoft and Publicis have signed up to a five-year alliance that will allow Publicis-owned agencies to buy display and search advertising from Microsoft on supposedly favourable terms. But here’s the rub: the discounts only kick in above a certain volume of business. I hear that Publicis will have to commit $3bn-worth of clients’ business over those five years to make the deal work, and that there will be financial penalties if it does not. I wonder what Publicis clients P&G, Coca-Cola and General Motors think of that.

This may be one reason why WPP shied away from a more aggressive bid. Another seems to be that the Razorfish profit and loss figures simply do not add up – and that it will actually make a loss this fiscal year.

Even so, Publicis has scored a considerable propaganda triumph with its acquisition.


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