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.

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Aren’t some Outdoor Plus shareholders compromised by a conflict of interest?

February 22, 2013

Marc MendozaThere’s a lot going on under the radar in OOH – or posters, as we anciently called it. And I’m not simply talking of Omnicom’s Eric Newnham-fronted effort to crash the charmed circle of UK specialist buyers – namely WPP-owned Kinetic and Aegis-owned Posterscope.

No, what caught my eye recently was something entirely different. It concerned premium digital site owner Outdoor Plus and its opening of yet another of the landmark London locations in which it specialises – in  this case The Spire, a 20 metre-high construct unmissably situated on the A40 exit from London.

The PR spiel, as conveyed in MediaWeek, was suitably gushing: access to a dedicated commuter and business audience; balanced male:female ratio; 60% ABC1; capable of targeting traffic both in and out of central London. What more could an advertiser ask for?

Very little, according to an excited Grant Branfoot, Outdoor Plus’s sales director: “The potential for advertisers is vast and through the addition of The Spire to our expanding digital portfolio (it includes The Eye in Holborn, the Euston Road Underpass and Vauxhall Cross), we think we can help advertisers exploit the immediacy, the creative possibilities and the opportunity for highly targeted messaging which is associated with large format outdoor digital screens.”

The potential for advertisers is vast, is it Grant? More correctly, the potential for some, carefully selected, advertisers is vast. Many will likely get scarcely a sniff of a placement. The reason is somewhat complicated, and to do with Outdoor Plus’s curious shareholding structure. But don’t go away, readers. It’s worth the wait, really.

Outdoor Plus is a reasonably sized, reasonably well-run private company founded in 2006 by Jonathan Lewis – who remains its managing director. Turnover was about £15.42m in the year to December 31, 2011 – the latest financial figures recorded in Companies House. Group operating profits – of which Outdoor’s comprised the vast majority – were £1.8m, allowing the six directors to award themselves collective “emoluments” (or fees) of about £770,000.

The roll-call of these directors makes interesting reading. Among them are Philip Andrew Georgiadis, daytime job: chairman of Walker Media; and Marc Sydney Benjamin Mendoza, better known as head of Havas Media UK. In other words, principals of notable media-buying organisations whose job it is, inter alia, to oversee without fear or favour the negotiation of the most advantageous placements for their clients on UK OOH sites.

Turn to the share structure of the company and things get even more interesting. It emerges that Georgiadis is also a 5.3% shareholder in Outdoor Plus. Mendoza (pictured) owns just a shade more. And then there’s Mendoza’s cousin and, technically, his boss, Havas Media UK group head Mark Craze, who owns 3.2%. But we’re not quite over yet, because Stephanie Gottlieb, wife of Colin Gottlieb – the EMEA chief executive of Omnicom-owned OMG – also owns 1%.

Now I’m not suggesting anything illegal is going on here. At one level, you have to tip your hat to Lewis, who has been extremely shrewd in persuading these media luminaries to come aboard, thereby – shall we say – reinforcing his revenue stream.

Indeed, even if the shareholding of the Havas, Walker and OMG representatives were to be combined, they could hardly be accused of concert-party style manipulation.

None of that, however, quite expunges the whiff of conflicting interest surrounding this cosy media buy-side/sell-side coalition. Clients whose accounts are not held by Havas, Walker or OMG may well be the losers. And those whose accounts are need to be assured that they are getting the very best deal for all the right reasons.

Senior media executives, like Caesar’s wife, should be above suspicion.

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£1.7bn global ad review is creative solution to Johnson & Johnson’s money problem

July 25, 2012

It would be nice to think that Johnson & Johnson’s newly announced review of its £1.7bn annual advertising spend was driven by a need for greater creative consistency. But it isn’t.

Money’s the thing – saving it that is. J&J may be one of the world’s biggest brands, but it’s also a company in trouble. Since 2009 J&J has suffered numerous recalls in the US, mainly of its over-the-counter drugs like Tylenol and Benadryl; but the prescription and medical devices businesses have also been hard hit. All in all, it’s said to have lost $1bn in sales, partly through bad luck and mostly through sheer incompetence.

At first it was the staff – including the marketing department – who paid, by being made surplus to requirements. Now it is the spend that’s being trimmed. Judge for yourself from the officialspeak: “Johnson & Johnson is conducting a global agency review and consolidation to build greater value and deliver innovative and fully integrated solutions for our consumer brands.” Well, they wouldn’t want less innovative solutions would they? And they could hardly be less fully integrated than they are at the moment.

In truth, there’s an easy win here for the new kid on the block, Michael Sneed – who became J&J’s top marketing (and PR) officer at the beginning of this year. There could hardly be a less efficient way of running your global marketing services than the one that exists at the moment. Uncle Tom Cobbleigh and All are at the advertising trough. It would be simpler to name a global marcoms group that isn’t on the roster.

WPP has business through JWT and AKQA; Publicis Groupe through Razorfish; Interpublic through Deutsch, Lowe, The Martin Agency and R/GA; Omnicom through DDB and BBDO; and Havas through Euro RSCG. That leaves, er, Dentsu and MDC off the list.

Sneed is a company lifer who, at various stages of his J&J career, has shown considerable sensitivity towards advertising creativity. It will be interesting to see whether this natural instinct gets overridden by the all-powerful imperative of saving the company money. Don’t expect a self-aggrandising Ewanick moment – Sneed seems too modest for that. Do expect a financial deal, of the “Team WPP” or more likely “Commonwealth” variety, that dresses up financial expediency as a coherent creative solution.

The most interesting thing about this review may be the losers. If Interpublic is among them, perhaps group CEO Michael Roth will at last seek to do a deal with Publicis Groupe. The air is certainly thick with rumours to that effect at the moment.

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The jury’s out on Cannes’ creative verdict

June 27, 2012

One way or another the “C” word defined this year’s Cannes International Festival of Creativity. Naively, I came away from the ad industry’s annual Rivièra fest thinking “C” stood for Chipotle and Creative Artists Agency (CAA), the duo that pulled off the film grand prix and the top lion for one of this year’s new categories, branded content & entertainment. What a deserved breakthrough for the Colorado-based fast food outfit, whose wholesome message may one day may do McDonald’s some serious brand damage.

And here, just to prove that the Cannes judges not only know a winner when they see one but are prepared to back it without fear or favour, is that very “Back to the Start” grand prix winner, to the tuneful accompaniment of Willie Nelson:

How wrong I was about the “C” word, though. It turns out that “C” stands for Corruption. No sooner had WPP emerged as the top Holding Company of the Year for the second time in a row, and its subsidiary Ogilvy & Mather as Agency Network of the Year, than the allegations of vote-rigging began to fly. What, momentarily, had seemed WPP global creative director John O’Keeffe’s triumphal moment – in which he definitively proved that last year’s laurels were more than a passing fluke – was soon clouded by recrimination and counter-recrimination.

At the centre of the row is Amir Kassaei, worldwide creative head of Omnicom-owned DDB, who has accused WPP agencies on the Cannes jury of wresting what he clearly regards as Omnicom’s rightful crown from it by foul means. WPP racked up 1,554.5 points in the competition, and Omnicom – at number two – 1375.5, leaving Publicis Groupe trailing a distant third on 1032. Here’s what Kassaei had to say:

“We had a meeting in New York just ahead of Cannes, and I made a very, very clear statement to all our jury members that this festival is about integrity and responsibility. I said to them, you have to vote for the best work, no matter which agency is behind it.

“I have since been notified by no fewer than 12 jury members that people from other holding companies this week are being briefed to kill Omnicom, especially BBDO, DDB and TBWA, this is a fact.

“This is not about being a bad loser, or even supporting Omnicom, this is about the integrity and responsibility of the Cannes Lions Festival as a beacon of excellence around the world.”

Right on, Amir. But actually, no. It’s just part of the rough and tumble that afflicts Cannes voting patterns every year. Next year Omnicom may boycott Cannes, you say? Come off it. It’s about as likely as me selling my grandmother (if I still had one) into slavery.

The Great Holding Company Award Scandal is simply a continuation by other means of a long-running guerrilla war between WPP, Omnicom and Publicis Groupe over who’s best boy creatively. Before the award was given official embodiment two years ago, the bosses of the three big network groups used to engage in a covert but nevertheless acrimonious tally of who had actually bagged the biggest statue haul. Frankly, Omnicom used to win by a country mile, even after discounting any creative arithmetic; which meant that the most entertaining part of the contest – vigorously disputed by WPP boss Sir Martin Sorrell and head of Publicis Groupe Maurice Lévy – was over who had come second.

But with WPP out in front – and officially out in front at that – Omnicom seems to have lost its seigneurial disdain for such squabbling.

Not that WPP is exactly blameless in this regard. Clearly nettled by the fact that Omnicom-owned Manning Gottlieb OMD won the Media grand prix for a Google campaign, Sorrell recently told Mediaguardian:

“One thing I’ve noticed this year in particular [are] some practices creeping in that are a bit disturbing. Practices of pressure on the jury by [the chairman] of the judges. There are some techniques to these things. I was at a dinner and there was lots of chatter about one of the functional areas [awards categories] where lots of pressure was put on an organisation in terms of voting.”

Although Sorrell is not category-specific in his complaint Group M, the WPP media buying network that includes Mediacom and Mindshare, is known to have made a complaint to the Cannes festival management. While a little mischievous to do so, it is worth mentioning that the chairman of the media category judges was Mainardo de Nardis. De Nardis is, of course, chief executive of Omnicom-owned agency OMD Worldwide. But perhaps just as importantly, he is not best buddies with Sir Martin. The feud dates back to the Marco Benatti scandal, when de Nardis was a WPP employee.

Plus ça change, as they say at Cannes, plus c’est la même chose.

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Yes, we Cannes: WPP, McDonald’s and McKinney grab top Effie Index rankings

June 18, 2012

It might seem counter-intuitive to announce the global Effie ‘Effectiveness Index’ winners at the Cannes International Festival of Creativity but then, as my colleague Stephen Foster points out, Cannes has become such a monster event it serves as global launchpad for virtually any marketing services event these days. So, before becoming immersed in a week-long self-congratulatory orgy of advertising creativity, let’s just remind ourselves of those advertisers, brands and agencies that actually bring home the bacon:

  • Unilever is the most effective advertiser;
  • McDonald’s is the most effective brand;
  • WPP Group is the most effective advertising holding company;
  • Ogilvy & Mather is the most effective advertising agency network;
  • Ogilvy & Mather (Mumbai) is the most effective individual agency office;
  • McKinney (Durham, North Carolina, USA) is the most effective independently held advertising agency.

Yes, I was wondering about that last one, too. It recently appeared in ‘The Pitch’, AMC’s unscripted programme in which two agencies vie over 7 days for  a piece of business, in this case Subway restaurants. McKinney won. It’s notable for its Audi A3 campaign, Art of the H3ist, which garnered two Effies and a Cannes Lion. And also for something called “connection planning”, which I take to mean an integrationist skill that ensures campaigns work smoothly across all channels.

Good for McKinney, I say. But I do have a qualification. Last year’s winner in this category was the slightly more universally recognised Wieden & Kennedy of Portland, Oregon. Now, I’m all for merit making its way to the forefront without having to await Buggin’s Turn. But I also look for consistency in results. The Effie Effectiveness Index, which is sponsored by insight portal WARC and compiled from 39 individual national Effie competitions, was only inaugurated last year and therefore lacks granular historical perspective. That said, there is a repeat winner this year: McDonald’s, with the most effective brand accolade. Here, for quick reference, is last year’s roll of honour:

  • Procter & Gamble was the most effective advertiser;
  • McDonald’s was the most effective brand;
  • Omnicom was the most effective advertising holding company;
  • BBDO Worldwide was the most effective agency network;
  • Sancho BBDO (Bogota, Colombia) was the most effective agency office;
  • Wieden & Kennedy (Portland, Oregon, USA) was the most effective independent advertising agency.
I don’t suppose that Sir Martin Sorrell will be worrying too much about historical perspective, as he wipes the blood away from his nose. One way or another, WPP has collared most of this year’s top Effies. So, he is worth it, after all.

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Rita Clifton to step down as UK chairman of Interbrand

June 16, 2012

Rita Clifton, one of the UK’s best-known brand experts, is stepping down as UK chairman of Interbrand, the Omnicom-owned brand consultancy which she has headed for 10 years.

Clifton will officially leave on July 31st, although she is thought to have submitted her resignation earlier this year. She has long served on a three-day-a-week basis, and has a well developed career portfolio that includes several non-executive directorships. Besides being non-executive chairman of opinion pollster to The Times Populus, she is also a NED of Dixons, the electrical retailer, and BUPA, the global healthcare company. Since 2007, she has been a trustee of WWF-UK. In 2009 she was appointed president of the Market Research Society.

“Ten years in the chair (and 5 years as CEO before that) is quite long enough when it’s not your own company, and I have wanted to set up a private office to run/extend my non-exec and pro bono portfolio and do independent speaking and writing about brands for some time,” she says.

Clifton is a prolific writer on brands. Among her publications are the Future of Brands, published by Interbrand, and Brands and Branding, published by The Economist.

She began her career as an account planner at DMB&B and J Walter Thompson (JWT). In 1986 she moved to Saatchi & Saatchi London where she rose to deputy chairman and executive planning director in 1995.

Started in 1974 by John Murphy in the UK, Interbrand has morphed into a global organisation with nearly 40 offices and claims to be the world’s largest brand consultancy. It was acquired by Omnicom in 1993.

 

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McCann and Goodby to work together on global Chevy brief, but how harmoniously?

March 28, 2012

Once again, General Motors CMO Joel Ewanick has demonstrated his ability to surprise and to innovate, with the announcement of his “Commonwealth” solution to the global Chevrolet creative account.

GM spent $4.7bn on advertising last year, and the majority of that was channelled through Chevy, a brand accounting for 70% of GM’s US sales. So, all eyes will be on what Ewanick, after much agonising, has done with one of the world’s largest creative accounts.

Which is, exactly? The easy bit is that he has fired most of the 70 agencies that were, somehow, somewhere, working on the account – superfluously bloating management and production costs.

More controversially, Ewanick has placed the two winning agencies, Goodby Silverstein & Partners and McCann Erickson, in a joint venture dubbed Commonwealth. It will be based in Detroit, home of GM, but have 3 other creative hubs dotted across the globe at Milan, Mumbai and Sao Paolo. And the controversial bit is that the two agencies – Goodby, which holds the Chevy business in the USA, and McCann, which is strong in Latin America, Mexico, China and Canada – are owned by rival ad holding companies, Omnicom and Interpublic Group respectively. Omnicom and IPG are 50/50 owners of Commonwealth, we are told, but profits will be allocated “geographically”.

That in itself may be cause for friction. But just as interesting is who and what will be running Commonwealth day to day. It is to be led by an eight-strong “global advisory board”, overseeing creative initiatives and strategy, which consists principally of Jeff Goodby, the Goodby Silverstein & Partners founder, who will be creative chairman, Washington Olivetto, McCann Worldgroup Latin America chairman and chief creative officer, Linus Karlsson, the McCann New York and London chairman, and chief creative officer and Prasoon Joshi, the chairman of McCann Worldgroup India. A hat-tip to Goodby’s creative eminence, but note McCann’s dominance on the board.

Now, before muttering “sacks” and “cats”, let’s all take a deep breath and peer long and carefully into the glass half-full. There certainly is a rational case for Commonwealth, or something very like it. And part of it is saving an estimated $2bn in production and management costs over 5 years.

What’s more, we can expect some unwonted co-operative zeal from the two rival agencies. Both will be hugely relieved they have landed the business.

Goodby started as early favourite, not least because it was hand-picked for the US business by Ewanick himself. But  the work has disappointed. And, despite the pleasing publicity surrounding the Ford-knocking Silverado spots at this year’s Super Bowl, there have been gnawing doubts at the Goodby office about the agency’s ability to retain the account.

McCann, on the other hand, desperately needed a coup of any kind to stabilise its faltering performance. True, this is not the outright win that leaves it the undisputed global agency of record earlier rumoured. But it’s a fairly decent outcome, which consolidates McCann’s already strong position in high-growth emerging markets.

But once the novelty has worn off, what then? Will the creative dream-team pull together to make Chevrolet’s global message more consistent, or will the nightmare of agency politics take over? It’s anyone guess. For that very reason Ewanick should be taken at his word in describing Commonwealth as “historic”. We’ll find out soon enough how deep Chevy really runs.

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Wren bags $22m in Omnicom stock sale. Roth to sell $4m IPG shares

March 20, 2012

Omnicom president and CEO John Wren has just sold a lot of shares in his own company. Interpublic Group chairman and CEO Michael Roth is about to do the same.

What is it that they know, and we don’t?

First, some background. Wren sold 258,110 Omnicom shares, worth $12, 549,308 on March 9, according to an SEC filing – leaving him with a total of 1,127,721 shares. The sale represents about 19% of his total holding. In fact, that’s not the full picture, because he also exercised some stock options. The full amount realised appears to be nearer $22m.

Roth’s transaction, which will be executed on April 2, is slightly more modest. He’s selling a mere 324,341 shares which, at today’s prices, would net him about $3.85m.

It’s important to note that director share sales (or “insider trading” as it’s misleadingly called in the USA) are not always what they appear to be. CEOs of publicly listed companies have to act with extreme care when liquidating any of their company portfolio, partly to achieve tax efficiency, and partly to avoid spooking the stock exchange (not to mention shareholders) by seeming to offload too many shares at once.

Roth, for example, normally rebalances his IPG holding every year by buying as well as selling stock. That said, I do not see any evidence of him purchasing stock in 2012 – thus far. Indeed, he currently appears to hold the minimum IPG portfolio permitted to him under company rules. That is, shares valued at five times his basic salary.

So, it would appear he is cutting down at a time when IPG’s share price is nearing a high of about $12. Last September, it was in an all-time pit of $7.93, but IPG has been buoyed by a good trading performance of late.

With Wren, the telegraphy seems much clearer. He’s selling a lot of his stake in the company at one time, no two ways about it. Nor has he bought any Omnicom shares over the last year. In fact, no one insider has. Well, almost no one: a mere 500 shares for a total of $20,583 have been acquired.

If I were a securities house analyst, I might cynically conclude we have a “sell” signal here. Though I hope I am wrong about that.

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Record WPP financial results fuel confidence in sustainable recovery

March 1, 2012

Chief executive Sir Martin Sorrell was in feisty form as he reported the best set of financial performance figures in years at the world’s largest marketing services company by revenue.

The WPP growth engine is, apparently, firing on all six cylinders: billings, revenue, earnings per share, pre-tax profit, organic growth (or like-for-like as it is often known) and operating margins all showed evidence of substantial improvement. Perhaps the key highlights were pre-tax profit, up 19%, at over £1bn for the first time; and strong evidence of Quarter 4 growth, indicating the spurt is not some first-half fluke that will fade in the current year.

Doubtless WPP euphoria will subside once media focus moves on to the inevitable corollary of record financial performance – an equally record performance bonus handed to its chief executive. But, hey, that’s for then.

For now WPP’s results form a welcome bookend to a series of exceptionally good annual numbers from all the global marketing services giants – Interpublic’s particularly so – suggesting an ad recovery is on the way.

But is it sustainable? Sorrell  – revered as something of an economic sage these days – has indicated that WPP January figures are strong – even in the UK, on which he has been bearish for some time. And he has wheeled out his favourite prop on these occasions, the so-called Quadrennial Effect, to underline his contention that growth will be sustained throughout the year. Put into simple English, that means macro-events which occur every four years – such as the Olympics, the UEFA football championship and the US presidential elections – will stimulate global growth by at least 1%.

Nor was he pessimistic about what, to most of us, might seem a blot on the economic landscape. A number of the world’s biggest brand owners, among them Procter & Gamble, Coca-Cola and PepsiCo, have recently announced cuts to their workforce. Sorrell chooses to take comfort from the fact that all of these companies have guaranteed existing or even increased levels of marketing expenditure.

The Sage of Farm Street is less optimistic about 2013, though – foreseeing gridlock on Capitol Hill, with a re-elected Obama beleaguered by hostile Republicans in Congress. We’ll see.

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