Sorrell prepares us for some tough LUV

July 29, 2010

Takeover activity (see Mitchell story below) is not the only indication the ad economy is on the mend. Publicis Groupe has just delivered what can only be described as a cracking set of second quarter figures.

Among the highlights was organic revenue growth of 7.1%, a further improvement from the 3.1% posted in Q1. Organic growth is regarded as one of the purest metrics of growth or decline, because it strips out such things as currency fluctuations and acquisitions.

More importantly, perhaps, a bullish performance emboldened Publicis Groupe chief Maurice Lévy to stick his neck out with this bold assertion of global recovery:

“Even if we don’t know for sure that the crisis is over and despite some worries about sovereign debt and public spending, there is a strong feeling that we have reached the end of the crisis.”

Let’s hope Lévy is right. IPG’s own set of quarterly figures, out today – which reveal similarly strong organic growth (admittedly from a lower base) – give grounds for optimism. But Lévy’s bullishness has left at least one of his rivals frankly incredulous. Don’t expect the same enthusiasm to suffuse WPP’s half-year figures when they come out on August 27th. LUV, I gather, is in the air, but it will be tough LUV.

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Harold Mitchell hedges his bets in shrewd £200m Aegis deal

July 29, 2010

Aegis Group’s bullish chief executive, Jerry Buhlmann, has been as good as his word. Back in March, on the coat-tails of some rather disappointing annual results, Aegis announced it was raising £175m through a convertible bond issue to “…bolt on acquisition capability.”

Now we know what he has bolted on: Mitchell Communications, Australia’s largest independent media-buying group. Actually it’s a bit more than that. Harold Mitchell, who set up the company in 1976 and still owns 30% of it, has been careful to diversify into other marketing services areas –public relations, branded entertainment, sponsorship and digital marketing among them.

There seems no reason to doubt Aegis’ boast that the acquisition is a good cultural and geographical fit, which will immensely leverage its position in Australasia. Whether the £208m deal, 60:40 in cash and shares, is as “earnings accretive” as the company makes out is another matter. At 18x earnings, it looks a wee bit pricey.

Then again, quality costs. And there may be hidden strategic wisdom in this apparent money madness. The deal will, in the short term, make it even more difficult for 29.9% shareholder Vincent Bolloré to bring to fruition what must by now be the longest-running takeover bid in corporate history. Despite Aegis’ historically low share price in recent times, Bolloré has not had the wherewithal for a coup de grace. Indeed, he seems to have been casting about for allies to help him in a break-up bid. If so, the revving tank engines will now be switched off while he considers his next move.

One important insight here is Harold Mitchell’s decision to take up all his rights in shares not plump for the cash – which has the effect of making him a 4% holder of Aegis stock. You might argue that he had little choice if he were not to appear disloyal to his new owner. Even so, a smaller amount taken out in cash would not have been unreasonable. So why has he done it? One possibility is that the wily old bird scents the inevitability of takeover. Not now, perhaps, but in the medium term. A bid premium would have to be at least 30% above the recently traded share price: better than any return made on cash taken out. He’s shrewdly hedging his bets.

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Coke mired in legal wrangles over Glaceau Vitamin Water and Dr Pepper

July 26, 2010

Dr Pepper isn’t the only Coca-Cola brand to cause offence to consumers. Glaceau Vitamin Water is now facing a federal class action in the United States, which could end up costing the corporation millions of dollars and considerable damage to its reputation.

Glaceau is notorious for its “irreverent” (for which read “silly”) and cynical posturing. But that’s not what has landed Coke in deep water, or not overtly. Some folk evidently believe Glaceau has been peddling phony health benefits when, in reality, it is nothing more than sugar water with a few vitamins thrown in. In other words, far from preventing “age-related eye disease” (as the brand has claimed), its only durable side-effect is to make you fatter, if you consume enough of it.

The stakes are higher than they seem. Success for the plaintiffs would make Coke appear little better than a huckster apothecary hawking snake oil. But it will be years before we know the result – in all probability.

While on legal matters, I hear things have turned nasty at Coke over the Dr Pepper digital foul-up. Lean Mean Fighting Machine, the agency responsible, has resorted to lawyers after Coke decided to terminate its newly-won Diet Coke account without (as LMFM sees it) adequate financial compensation.

UPDATE 27/7/10. Legal fisticuffs have now ceased on the Dr Pepper/Diet Coke accounts, with LMFM and Coca-Cola agreeing to go their separate ways.

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Why BBH had to let Steve Harty go

July 22, 2010

First it lost the $270m Cadillac account, then it resigned the foundation Levi’s business after no new campaign in nearly two years. Now we hear Steve Harty, eminence grise of its New York shop these past five years, is being let go. It looks, to surface appearances, as if BBH and its micro-network model, is in a downward spin.

None of this is good news, granted. But it’s not quite so grim as it first appears.

Commentators have been quick to place Joel Ewanick, GM’s maverick new marketing supremo, at the centre of events; and they’re not entirely wrong. The rabid Red Queen of marketing (“Off with their heads!”) – as he’s becoming known – certainly didn’t help matters when he pronounced the death sentence on BBH’s “Mark of Leadership” strapline. But easy come, easy go. BBH New York had only held the account for six months. The business wasn’t there long enough to qualify as a foundation client, like Unilever or Diageo.

The loss does, however, have a direct bearing on Mr Harty’s “future direction”.  Harty, previously the ceo of Merkley Newman Harty, was brought in about 5 years ago as chairman of the New York office, to lend an American accent to what was seen as too quintessentially British. Things had not been going that swimmingly under his predecessor Cindy Gallop – herself a British national of long-matured BBH London vintage. In the event, I’m not sure how well the Stars & Stripes card, of itself, worked in pulling new business; but of one thing we can be certain: Steve Harty came with a very high price tag.

Fast forward most of those five years to winter 2010. A senior management reshuffle at BBH New York left Harty looking vulnerable. Emma Cookson, the long-serving ceo who seems to have done much of the heavy lifting in the New York office, stepped up to Harty’s role while he himself became group chairman of North America, in charge of digital production, brand-creation operation Zag and new acquisitions. The reshuffle happened immediately after the Cadillac win; but just as importantly, in the wake of a new dictum from London HQ: that senior executives should spend more time servicing key clients. In Cookson’s case, the client was Cadillac. Which means, in theory, that she now has a lot more management time on her hands.

Subtract Cadillac, and Harty – nice guy though he evidently is – becomes the white elephant in the room. A luxury too expensive to maintain.

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The conundrum at the core of Apple

July 21, 2010

Look on my works, ye mighty, and despair! Apple’s awesome quarterly results have made ‘Antennagate’ – the obscure controversy surrounding iPhone 4′s wraparound aerial – a storm in a teacup.

Sales up 61% to $15.7bn, $1bn ahead of expectations; earnings up 77% to $3.25bn; all product categories performing well, most breaking new sales records: these are the kind of things that Wall Street wants to hear. And which have enabled Apple – having lost ground to Microsoft after the iPhone  crisis ‘press conference’ last week caused a share-price dip – to recover its status as the world’s largest tech company, estimated by market capitalisation.

Most gratifying for the company will have been the success of the iPad tablet computer, launched during this reporting period. With 3.27 million units sold (worth $2bn in sales), Apple has once and for all disposed of the vociferous nay-sayers, who claimed it was launching into a non-existent market niche.

And yet, and yet. Quarterly figures, however good, are the rear-view mirror. The Antennagate controversy has revealed to the wider world a worrying chink in Apple’s corporate armour. Steve Jobs, the wayward business genius at the heart of Apple’s success is also its Achilles’ heel. “Control freak” does not do justice to his paranoia about the competition or his obsessive secrecy. Apple is a cutting-edge corporation powered by an old-fashioned command-and-control culture. One which proved pitifully inadequate in dealing with adversity.

If you haven’t already, read David Jones’ post on Pitch: ‘Why Apple needs some social media duct tape’. The light touch belies a serious purpose. For all its immersion in the white heat of consumer technology, Apple simply doesn’t “get” 24/7 media.

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Food Standards Agency to be shorn of powers – it’s official

July 20, 2010

Some enlightenment on the vexed future of the Food Standards Agency has just come my way. It will stay, but be shorn of many of its powers. Here’s today’s ministerial statement on the subject:

Food Standards Agency in England. The Government recognises the important role of the Food Standards Agency in England, which will continue to be responsible for food safety. The Food Standards Agency will remain a non-ministerial department reporting to Parliament through Health ministers.

In England, nutrition policy will become a responsibility of the Secretary of State for Health. Food labelling and food composition policy, where not related to food safety, will become a responsibility of the Secretary of State for Environment, Food and Rural Affairs.

In effect, these changes will disembowel the FSA. Expect substantial cuts in its £135m annual budget and its 2,000-strong staff.

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US admen cash in on the Brit-bashing act

July 20, 2010

Anti-British sentiment is now a viral contagion in the USA, thanks to BP and that liddle ol’blowout in the Gulf of Mexico.

Obama has recently cooled the rhetoric, presumably after someone pointed out to him that half  BP’s shareholders are American (must be a few US pensions in there as well). But that has not quelled the ardour of less sophisticated state governors with only one object in mind – re-election in November. Florida governor Charlie Crist (who is seeking election to the Senate, so the stakes are even higher) recently had to be put in his place, firmly but politely, when he came back for another sting, this time for $50m. Allegedly to support a tourism campaign in a state which has, as yet, barely suffered. BP had already coughed up $25m.

Hell, BP’s even responsible for letting convicted Lockerbie killer Abdelbaset Ali Mohmed Al Megrahi off the hook. Many American victims of the bombing believe, rightly or wrongly, that it was only due to some grubby oil deal struck by BP in Libya – and connived at by HMG – that Al Megrahi got his freedom.

It’s a toxic combination, and who better to exploit it than admen? Here’s Chrysler, courtesy of Wieden & Kennedy Portland, cashing in on the anti-Brit trend:

Yeeahs. For Brits in red coats, read Nazis (see my other post on the pioneering role played by James Mason as Rommel). While we’re there, I’m certain the Germans would have something to say about American car-building expertise. They’re less expert on the subject of freedom, though. See Pitch for more detail about the campaign.

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The Curse of Cannes strikes again

July 19, 2010

They’ll shortly be calling it the Curse of Cannes. Win a gong at the International Advertising Festival and sooner or later you’re bound to bomb.

First there was the Old Spice Guy, who waltzed off with the film grand prix, only to walk slap-bang into a controversy over the brand’s lacklustre sales performance.

Now Lean Mean Fighting Machine, the first UK outfit to have won the Cannes interactive ad agency of the year award, has come a cropper with one of its major clients, Coca-Cola, after an embarrrassing foul-up over a Facebook promotion. I doubt that they will be remaining on terms for much longer.

Coke has had to pull the internet promotion, featuring its Dr Pepper brand, after it was accused of enticing children by making reference to a pornographic movie. From what I can understand, users had to give the company access to their Facebook status boxes, which then filled them with silly (but largely harmless) messages designed to give their internet mates a bit of a rise.

All went well, with over 160,000 people signing up, until a certain Mrs Rickman noticed that the profile of her 14-year-old daughter had been updated with a direct reference to a hardcore pornographic film, Two Girls One Cup (aka Hungry Bitches). Perhaps hardcore doesn’t do it justice: coprophagic fetishism would be a polite description of its main theme. Unfortunately for Coke, Mrs Rickman is an adept of social networking site Mumsnet. Result: uproar and a hasty pledge by Coke to can the promotion and mount a full-scale investigation.

Even then, Coke couldn’t get it right. To quote Mediaguardian:

‘She was offered compensation of theatre tickets for a West End show and a night in a London hotel.

“Fat lot of use to me, we live in Glasgow,” she said.’

Coke has admitted the nominal responsibility (with the extraordinary claim that it had approved the offending reference without realising its true significance). But I suspect it won’t be taking the blame.

For that we must look to LMFM, an offshoot of Tribal DDB which was set up six years ago and is chaired by advertising luminary Paul Bainsfair. You can’t be too careful with internet promotions. Someone is always watching over you. Even so, it was unusually bad luck for an agency which only won the account in spring – after it devised a successful April Fool’s Day ad for Coke. This time, the joke backfired.

AND IT GETS WORSE. I gather Coke, under the guise of reviewing its overall digital media strategy, is now considering sacking LMFM, full stop. Only this week, it landed the digital ad account for the Zero brand. For more insights into Coke’s ineptitude over its LMFM hiring see Jim Edwards’ post on bNet.

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Look at the man next to you, now back to me, now look at the Old Spice sales figures, now back to me

July 17, 2010

Flushed with success at Cannes, the progress of Procter & Gamble’s Old Spice Red Zone Body Wash campaign, featuring hunky actor Isaiah Mustafa, seemed unstoppable.

Now the geographical focus has switched from one end of France to the other: Waterloo. Not only has an ambitious foray into the real-time web, involving interactive video, gone into meltdown, but some embarrassing sales figures have emerged. It’s tempting to believe the two things are connected, though that’s doubtful.

“The man your man could smell like”, devised by Wieden & Kennedy, has been an undeniable succès d’estime, but it doesn’t sell product. Not, at least, if we give credence to the SymphonyIRI figures printed in Brandweek: during the 52 weeks ending on June 13, sales of the brand have dropped 7% (excluding the amount sold in WalMart). Bear in mind that the W+K campaign was launched at the Super Bowl in February, so it’s had plenty of time to register a difference.

Taken at face value, this is yet another example of a hackneyed and disagreeable truth. Great creativity may surprise and delight, but often fails to sell product. As Jim Edwards at bNet points out, that’s a great shame because it sets the cause back. Once, P&G was lambasted for its controlling and philistine attitude towards creativity. Now it has changed its ways, it’s probably going to be pilloried for not slashing the price and turning the brand into a moribund cash cow. Or something equally unimaginative. Is Old Spice a dad’s brand, beyond redemption? I don’t know. But it’s certainly possible the marcoms is too sophisticated for the task in hand.

To use a rare (for me) sport analogy, would Germany have won the World Cup had it stuck to its usual, brutally regimented, style instead of adopting the free-flowing, elegant, possession football identified as “gay” by its critics? At the end of the day, it’s all about scoring goals.

UPDATE 27/7/10. Have I been too harsh on the Old Spice Guy’s performance? New sales figures, produced below and printed in Ad Age, suggest a more complex picture than that originally conveyed by the Brandweek article. At first sight, Old Spice seems to have done well, especially in June. On closer inspection, however, P&G’s Gillette has done a lot better. The real winner in the period is probably Unilever’s Dove Men & Care, relaunched in the spring. As Ad Age points out, category uplift has been complicated by heavy couponing and price discounts. Whatever else they may be, the sales figures are not a clear-cut endorsement for Old Spice creativity:

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Michael O’Leary avoids his Gerald Ratner moment of truth – for now

July 17, 2010

I picked up Thursday’s Guardian with mounting anticipation and turned to page 9, as instructed. There it was, half a page of sheer, undiluted schadenfreude!

A half-page ad in which Michael O’Leary is forced to apologise fulsomely for calling his EasyJet rival Sir Stelios Haji-Ioannu a liar in print. Appearing in the Telegraph, too. And all paid for by Ryanair.

That’s the sadness of the Ryanair brand. For all the gritty enterprise that has made it Europe’s first airline, we don’t very much like it, or its leader. In fact, we can’t wait for him, or it, to get their come-uppance.

Not that O’Leary will be losing much sleep over such sentiment (see my Horlicks post). If anyone thinks this is his Gerald Ratner moment, they are very much mistaken. O’Leary’s arrogance is not yet so overbearing that he has lost touch with his market. Granted that both he and Ratner have the same contempt for the people they have served. But the difference is that O’Leary’s judgement of human nature is much shrewder. Spookily, he seems to know us better than we know ourselves. Just how much more are we prepared to be abused at the check-in counter, treated like cattle as we board and sheep once aboard, before outraged human dignity finally overcomes our greed for lower prices? A lot more, I suggest; even after Ryanair introduces the single paying loo. Ryanair never forgets that, despite our better selves, we don’t really have a choice – and rubs our noses in it.

Still, we can have a few laughs along the way at the great brand’s expense, and this is definitely one of them. The knife between Stelios and O’Leary is an outstanding illustration of mutual corporate and personal loathing. Others examples include Sir Richard Branson and Willie Walsh; and Sir Martin Sorrell and Maurice Lévy. My favourite, however, (for which I am indebted to the BBC News website) is the case of the two Dassler brothers, one of whom (Adi) set up Adidas, and the other (Rudi), Puma. The hostility between the two of them was so visceral that for many years the Bavarian town of Herzogenaurach, where both had factories, was in a state of undeclared civil war.

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