The death of choice for global brand owners
An Elephant in the Room
Could it be that even Sir Martin Sorrell was a little shocked by the deca-billion consolidation of the ad industry? As Adage reported, August 27th at WPP’s half-year earnings conference he displayed a chart that naughtily painted the result of the future Publicis-Omnicom Group in a “sludgy brown colour” (his words).
He explained this is what you get when you mix the purple and orange corporate tints of the new Franco-American couple. He name-called it “POG”, and wished Maurice and John’s marriage trouble with regulatory approval.
Like a Che Guevara battling murky monopolies, comrade Sorrell defended the so-called collaborative “agency team” unite dogma for all. An anomaly designed years ago to help HSBC bank bring global order to the marketing of a disparate multi-local financial services group built by acquisition, now generalised into a single client-catch-all. Like a Richard Branson rebelliously standing up for customer rights and delights, he astonishingly dismissed scale in global creative services as a bad thing!
WPP is nothing if not a consolidated top-down empire. The performance was a smart, funny, cynical piece of propaganda to differentiate what in effect are monopolies jointly cornering over 70% of world client spend.
Jaded perhaps but not blind (clients have gone through their own ruthless series of consolidation and restructuring), the industry knows the next round, if it happens, could push the needle into the 90s.
The elephant in the room Mr. Sorrell deliberately ignored is the only one of real significance to brand owners and that is ‘the death of choice’.
The same day, the usually behind-closed-doors World Federation of Advertisers (WFA) publicly expressed “concern”. Its Managing Director Stephen Lorke shared the fear of the world’s largest brand owners that: “consolidation in the advertising market can (…) lead to a reduction in competition and transparency for our members.”
On the announcement of the deal the previous month, the share price of all holding groups had risen simultaneously (in different proportions due to the expectation of some shifting of accounts). As financial analysts know, with less choice, it is unlikely clients will get more bang for their buck.
Or to put it graphically: if you’re the nth client of a group that towers higher than the 209 levels of the Burj Kalifa in Dubai, lost on one of its service lifts somewhere between 29th and 30th floor, what do you do? You may be tempted to look for another, slightly less towering alternative, a little more fine-tuned to your unique multi-market brand challenges and opportunities. If there is one left.
Duopoly Disrupted
The good news is exaggerated consolidation creates a void and corresponding appetite for choice, which can lead to great competitive innovation.
By 1959, the rise of standardised mass production ice-cream factories had decimated the traditional business. A resourceful Brooklyn maker by the name of Ruben Mattus saw the opportunity to delight customers with a radically premium choice, and marketed 3 flavours of Häagen-Dazs (inventing modern “foreign branding” in the same go!). Today, together with Ben & Jerry’s, it is the leading international brand in its category. Ruben Mattus made a small fortune, and the world of desserts is a better place.
Facing a seemingly immovable global carbonated beverages duopoly, the Austrian and Thai founders of Red Bull pulled off a hat trick at least as remarkable. In 29 years, despite all their financial and manufacturing might, the historic giants seem unable to crack…and the list goes on.
As a self-made entrepreneur in global marketing, I am not interested in considering mass consolidation of the ad industry as a good or bad thing.
I see it as a once in a lifetime opportunity for the most ambitious, solutions driven independent partners.
While Mr. Sorrell, Mr. Levy (CEO Publicis) and Mr. Wren (CEO Omnicom), not to mention faceless Business Process Outsourcing groups such as William Lea (owned by a utility, the German Post Office) are busy cajoling investors, locking clients into “creative services advertising production factories”, feeding the beast while cannibalising themselves, brand owners are seriously questioning how to shop different.
Unease is spreading at the perceived devil’s trade-off between “one-size-fits-all-averaged-out-good-enough” global marketing, in return for handing over the lion’s share of one’s business on the sole premises of cost, control and size.
Some may realise at their expense that mass manufacturing “efficiencies” can turn out to be illusory once the contract is signed: the price war is over, and an array of extra specialist services and amendment charges rack up alarming bills.
Others might sense their challenges are forced to fit pre-manufactured solutions, or that beyond the honeymoon, being a client is not so different from being a number on a spreadsheet.
The growing suspicion that one’s local market activity could produce better return, if solutions were specially designed to fit very specific differing strategic and organisational challenges, may be a legitimate one.
After all, if you are a Marketing Director (or agency), it is unlikely you’ll get a bonus for how much you cut the budget or exercise cost control (the case may be different for a Procurement Officer).
But it’s not impossible you will get a promotion / raise / performance bonus for helping to increase overall profit, thanks to more effective international messaging and greater local market impact. At the very least, you’ll look good.
That is why I believe privately-owned groups which deliver a global effectiveness premium will win. The winners will not be everything to everybody, but the best at what they do. The most attentive and agile players will thrive, using technology as a leveller and talent as a differentiator. They will be sought after by brands and agencies that demand more effectiveness, transparency and choice.
With one caveat. Winners will need to demonstrate the prerequisite global track record, efficiencies and scale that allow substantial multi-market clients make a secure, trustworthy choice. Nobody wants to lose their job.
The writing is on the wall. Unless they find a way to grow significantly, small lifestyle cottage industry type suppliers will be marginalised or die, condemned to scavenge the dwindling scraps of globalised business.
Like it or not, in the end the bold deal Mr. Levy and Mr. Wren have done is inspiring. By putting aside their rivalry and not going it alone, for better or worse (only time will tell), they will game change the business.
There is no rational reason for game changing joining of forces not to happen at the independent level. It’s simple market logic. Combine the best, most effective global creative services with enough scale to allow the most demanding global brand owner to choose. Set a strategic direction and throw in a “nothing is impossible, we try harder” attitude. It might not dislodge the factories, but could give them a run for their money, spark some great innovation, open choice – and let an exclusive club of first class clients experience a little love.
My independent company Textappeal has made such a step by joining with an outstanding, underestimated privately-owned firm ten times larger, called Loveurope.
We did it to give our international clients more premium international services under one roof. We did it because we felt the time and fit was right. We did it because we recognised that very ambition in our new colleagues. We did it because we see this as once in a blue moon white space, and intend to fill it.
Perhaps, if the stars align, our butterfly flap of the wings will trigger a tempest of future iteration in our industry’s saga. We’ll see. In the meantime, relax and enjoy the show.
Ice-cream, anyone?
By Elliot Polak, founder and chief executive, Textappeal