By Alexandra Bruell
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 29, 2017).
Around this time last year, WPP Chief Executive Martin Sorrell
addressed more than 100 top executives from the holding company's
ad agencies at a senior leadership meeting. He pointed to a screen
that displayed the logos of McDonald's, AT&T, Procter &
Gamble and Volkswagen.
What do these companies have in common, he asked. The answer:
Those were all accounts WPP had lost. He said WPP, home to agencies
like J. Walter Thompson, Grey Advertising and Mindshare, would need
to simplify its unwieldy structure for clients that want more
integration of functions like media planning, data analytics and
creative advertising, according to agency executives in
attendance.
WPP last week reported weaker-than-expected revenue growth in
its latest quarter and reduced its forecast for 2017, fueling a
stock selloff. A major point of focus were the cutbacks in spending
by consumer products and packaged goods companies and the business
headwinds those firms are facing. But agency holding companies are
also under pressure to revamp an organizational structure that has
gone out of style.
On the company's earnings call, Mr. Sorrell said, "Ensuring our
people work seamlessly together through client teams and country
and subregional managers to provide integrated benefits for clients
is absolutely essential."
WPP for years has been pulling resources from individual shops
to create dedicated agencies for specific clients. Mr. Sorrell uses
the term "horizontality" to describe the approach.
Big ad firms likes WPP, Publicis Groupe and Omnicom Group have
spent the past decade acquiring assets to help them adapt to the
online ad business. But at the same time, their existing roster of
agencies, assembled over many years, have developed their own
digital skills out of survival instinct. That has blurred the
lines, creating overlap and confusion for clients who are coming to
the agencies for clarity about the digital ad world.
The holding companies' complex structures have also impeded
their ability to move quickly at a time when clients are demanding
more real-time digital marketing responses to daily events,
particularly on social media.
Typically, marketers have separate contracts with various
agencies that offer many of the same types of services. (Media and
digital marketing agencies both claim to be able to create and buy
videos for social platforms, for example.) What they want is to
have a single business relationship that gives them access to
creative, technology and media expertise without having to
potentially pay for overlapping services.
Ad executives will find it challenging to transform their
cultures. Clients want the flexibility to pull in resources from
various agency groups, but agencies, many of which house big egos,
have been incentivized to generate revenue for their specific shops
and have fiercely competed with sister agencies for decades.
Still, after Mr. Sorrell's remarks at the leadership event last
year, the remit was clear: get past your differences and work
together. Clients want integration and simplicity. Turns out,
simplicity isn't so easy either.
Mr. Sorrell was later followed on stage by a handful of
executives talking about the WPP Data Alliance -- a group of people
devoted to helping WPP's agencies figure out how best to find and
use the data resources that already exist within the company. At
the end of that session, one executive openly complained about how
confusing the presentation had been, according to executives at the
event.
Following Mr. Sorrell's speech about simplicity, "that moment
was particularly a---backwards," said one executive in the
room.
The next holding company leadership meeting will take place
after Labor Day, at Google's Palo Alto campus.
The reshuffling is also likely to give data and analytics
specialists more influence, potentially giving media-buying
agencies a leg up over creative shops, another source of
tension.
For example, Omnicom recently created Hearts & Science -- a
media buying agency peppered with shopper marketing and data and
analytics -- to service its new P&G media account. Publicis,
which revamped its entire structure to create more collaboration
among its agency disciplines, also placed a former media executive
atop its storied creative agency Leo Burnett.
"I think the future model is going to be a reconstituted agency
a la the days of 'Mad Men.' The difference is Don Draper will
report to Harry Crane, not the other way around," said Lou
Paskalis, a media executive at Bank of America.
Agencies are trying to streamline their structures even as they
face new competition from consulting firms and media companies and
deal with strains on relationships with their marketing clients
over transparency in the business.
This year alone, WPP said it would be moving large digital shop
Possible into its CRM agency Wunderman; combining media agency
Maxus and MEC; consolidating its four large health-care agencies
into one group called WPP Health & Wellness; and reorganizing
Ogilvy & Mather. The company also acquired a consulting firm
that helps brands develop their Amazon marketing and e-commerce
strategies.
Mr. Sorrell also has been hosting calls with agency heads from
different types of shops, such as media, digital and creative, to
discuss ways to better collaborate on shared accounts, according to
people familiar with the matter. Executives involved have become
part of the effort, dubbed "SIG," which stands for strategic
implementation group.
Among the questions industry insiders are asking is, "Are the
current models for agencies still working?" said Wenda Harris
Millard, vice chairman at media and marketing consultancy
MediaLink. "With the emergence of many different kinds of
competitors, that raises even more questions for the brands."
As agencies grapple with client budget cuts, they must invest in
new resources to help clients reach people online, where they're
increasingly blocking and skipping distracting ads. The effort
requires investments in new analytics and measurement tools to suss
out fraud and other new issues plaguing digital advertising.
"Marketing is about to go through this incredible renaissance,"
Mr. Paskalis said.
Write to Alexandra Bruell at alexandra.bruell@wsj.com
(END) Dow Jones Newswires
August 29, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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