Month: March 2018

The group’s execution plan includes targets for up to €1.5bn in bolt-on acquisitions, €450m in cost savings and adding thousands of people to its so-called “technology execution centres” by 2020. “The future is bringing together data, content and technology in a connected way,” said chairman and CEO Arthur Sadoun in an interview. “Our shift is from being a communications partner to helping clients transform their marketing model to face digital disruption and the threat of new entrants.” The marcomms industry is under pressure as clients slash marketing budgets and rethink their relationship with external agencies, from whom they are demanding greater transparency and simplicity. ‘Big Data’, once seen as a saviour of the holding groups, is under intense scrutiny following the Facebook and Cambridge Analytica scandals; and over the past couple of years, the effectiveness of programmatic ad placements, which have driven the digital marketing industry has been called into question. Some clients, including the world’s two biggest advertisers, Proctor & Gamble and Unilever, have started saying that they want more accountability and better value for their money, and are murmuring about taking marketing in-house. And with Google and even troubled Facebook (as well as consultancies like Deloitte and Accenture) threatening to gobble up still more of the agencies’ share of marketing spend, it’s no wonder that the big groups’ shares have taken a battering. Many shareholders and clients have been arguing in recent years that it’s time for a change, for the old guard to move on. Legends like WPP’s Sir Martin Sorrell, IPG’s Michael Roth and John Wren of Ominicom are still leading their groups. But Publicis went through a generational changing of the guard when Sadoun took over at the helm last June from the charismatic and long-standing Maurice Lévy, and its share price has held up better than those of its rivals. Back in 2015, while Lévy was still at the helm, and shortly after buying Sapient for an eye-watering $3.7bn in cash, he and Sadoun began restructuring “its business model and its organisational structure to put its clients at the center”, called Power of One. Power of One was intended to make it easier for clients to access the group’s different services by putting everything under one of four “solution hubs” – advertising, digital, media and healthcare. Under the new organisational structure clients can have a single profit and loss account across the group. Like its rivals, Publicis has a lot of global blue-chip clients and, since the start of the initiative, it has appointed 35 global client leaders who between them represent one-third of the group’s revenues. Last week Publicis said it wanted 100 client leaders – representing 50% of revenues – by 2020. It also flagged €300m to €500m per year between 2018 and 2020 to be invested in organic acquisitions in data and what it calls “dynamic creativity and digital transformation” (these are said to represent 16% of revenue with the group’s top 100 clients, but by 2020 it wants this to be 30%). Furthermore, it plans to increase by about half its headcount in its “execution and production centres” in India, Colombia, Costa Rica and Mauritius, expanding it from 8,700 to 13,000 – again in just two years’ time. These are ambitious targets. But as the old song goes, when the going gets tough, the tough get going. Hard times and uncertainty require steely resolve and concerted action. And in an era that calls for transparency, simplicity and accountability, starting up Power of One three years ago increasingly looks like a canny move. When I’ve spoken with agency clients, some have expressed frustration that when they deal with agencies, they end up talking to huge numbers of people, and often end up schlepping from shop-within-a-shop to shop-within-a-shop. “If I hire a big global agency, I expect to be able to draw on all the talents and resources within that agency, but to deal with as few people as possible” appears to be a mantra. I think that’s the need that Publicis is looking to satisfy. And it seems to be working. Yesterday Publicis’ luxury arm 133 scooped the Swarovski account. Insiders say that Power of One played a key part in the win. The agency aims to build an internal team of experts for Swarovski across its key markets, by pooling together talent from across the network including 133, SapientRazorfish and MSL in Paris and Shanghai. And earlier in the month it won Campbell’s Soup, with Sapient’s data capacity and Power of One apparently winning admiration from the Campbell’s marketing chiefs. And let’s not forget the Mercedes European account win either. Maybe $3.7bn for Sapient wasn’t so much to pay after all, so some humble pie for me there given my comments on value at the time. Sadoun is doing something right. And what he’s doing right is something rather simple – he’s putting the needs of clients first. Someone within the group has obviously asked the right question (which is: “Why, in this day and age should someone hire us over our rivals? Or hire an agency at all”?) Publicis’ move a couple of years ago to bring creative and media back under one roof was exactly what certain clients had been asking for for years. Separate media networks suited the holding groups, and fuelled their growth in the ‘90s and early 2000’s. So while the networks enjoyed fat profits, the clients increasingly felt that they were dealing with an opaque system. For all the talk about “blowing up silos”, the big groups have got more complex. And while Sir Martin insisted earlier this month that the industry’s troubles were cyclical, many – including some within the all-important client community – have argued that they are structural, and that a bold, brave and new approach is needed. There is clearly going to be a lot of devil in the detail – how does the accounting for one P&L for a client sit with the P&L(s) of the agency business units themselves and how will this next wave of Publicis acquisitions be structured, given the tension between an acquired asset having to deliver for its own ‘earn-out’ as well as doing the right thing for the group. Perhaps the subject for another blog! But what I like most is that Publicis isn’t just shuffling management chairs around, or merging a few shops, it’s putting resources where its mouth is. Power of One is emblazoned across the Services page of the group website, but I suspect it will be some time before we see ‘horizontality’ in a similar place at WPP (although I would not underestimate Lindsay Pattison who, as chief transformation officer, is charged with driving horizontality across WPP’s top 50 clients so expect a lot more here). Publicis has been working on a platform called Marcel to connect its employees, which it plans to unveil in June. It will invest €300m – much of it coming from the awards budget, apparently – in hiring, training and development of staff over the next three years. Sadoun is spending serious money on getting its employees to talk to each other, and to think and act as one. Power of One seems to be not just another vacuous corporate restructuring exercise, rather a genuine attempt to create a new model that will see the whole group face its clients in a very different way going forward. Read More

The question is; what is driving this demand as other sectors ready themselves for Brexit? The over-arching driver has to be the digital transformation that is affecting how we do business and how we interact with clients, delegates and consumers. Twenty years ago video conferencing was said to be a threat – it actually made us travel more. And digital is having the same kind of effect on the events market; the immediacy of reaching people at virtually zero cost through online platforms is being echoed by bringing these tribes and groups together to experience the brand or product. The ramifications are far and wide; brands are creating events that will draw in their target audiences, consumers are posting and boasting about their lives, venues and organisers are seeing huge opportunities to capitalise on bringing likeminded people together. Immersive, experiential, brand activations may be the buzz words, but drawing audiences together to interact is the age old premise of the event industry. Not only is the sector seeing a new type of audience and increased demand from the brands, the traditional event agency model has evolved from solely venue finding to becoming a full service organiser providing creative, logistics and fulfilment solutions. Events are ingrained as part of today’s marketing mix and as such the more progressive and full service events agencies are becoming acquisition targets for the global marketing networks and companies. This is ratified by Tony Walford, partner at corporate finance advisors for the international marketing, media and technology sectors, Green Square. He says: “The world of marcomms M&A has been very focused on martech in recent years and for good reason – agencies that can prove the value they bring to their clients by being able to directly track and measure the results of their campaigns will always be of interest. “However, the corollary is that in focusing on ROI metrics, brands have started to lose that personal and direct touch with their audiences, and hence we have seen brands focus a lot more on social media interaction, open feedback, and reviews. “However, where the real opportunity exists is reconnecting with consumers in a more human way. We seem to be talking more often with acquirers about experiential and event agencies which can bring the ability for brands to directly interact with their audiences in a more physical manner – be it bringing awareness of product benefits via an experiential installation, launching new products at a major event or simply giving the opportunity to sample products at a festival. “As people, we love to be entertained and an immersive, personal experience with a brand’s involvement in a relevant way is a great way of building brand saliency, awareness and ambassadors.” For some years the event sector has struggled to find a voice, however, being increasingly recognised as being part of the marketing mix can only drive dividends both for the industry and the numerous private event agencies that exist in the sector. Disruptive technologies and the digital economy are driving demand for face-to-face and with companies like Green Square homing in on the sector, we are set to see a raft of interesting new allegiances; boom time for the event sector.

The advantage a blockchain has is that it’s very secure, and that records cannot be altered retrospectively without all the other records being similarly altered. And the longer the chain runs, the more secure it becomes. The blockchain organisation Ethereum allows almost anyone to contribute their computer to the network, simply by installing some software. Distribution helps to reduce tampering, fraud and cyber crime. With so many computers taking part, systems are also very hard to “take down” via traditional brute force network attacks (eg DDS – Distributed Denial of Service – attacks). So, blockchain seems to be one of the wonders of the cyber-age, and has almost limitless practical and useful applications. Some advocates have predicted that it will transform the way we all do business – and it might well. Certainly it’s got plenty of people in the marcomms industry very excited. Last week one of the world’s most powerful marketers, Unilever’s Keith Weed, announced that he’d enlisted IBM iX, (IBM’s business strategy arm) to create a blockchain solution to simplify the Unilver digital ad supply chain and provide more transparency and, consequently, build more trust – and Weed sees trust as a key issue not just for the industry, but for consumers too. As many observers have pointed out, the problem with digital advertising is that it’s become less transparent – and in the eyes of many clients – increasingly untrustworthy; the very opposite of what was supposed to happen. As fraud (I don’t think that’s too strong a word) and automation increased, more and more middlemen were introduced into the advertising supply chain in order to fix the problems. Great stuff. But here’s the contrarian’s view based on some inherent flaws. The first problem is that blockchain is by its very nature a space-hungry technology. Because transactions and changes are recorded everywhere the chain exists (these places are called “nodes”), the blocks can become very unwieldy very quickly – hundreds of gigabytes big. The chains are getting bigger, faster and storage capacity is not keeping pace; in addition, you might have to waste valuable time waiting for all that built-up data to download every time you made a transaction – not what you need when seeking to serve a programmatic ad. And let’s not forget – blockchains are immutable, so they can’t get smaller, only bigger. A related issue is one of sustainability. Blockchains use tremendous amounts of energy. According to Digiconomist’s Bitcoin Energy Consumption Index, cryptocurrency Bitcoin’s current estimated annual electricity consumption stands at 29.05TWh, which represents 0.13% of total global electricity consumption. That means Bitcoin mining is now using more electricity than 159 individual countries! This consumption isn’t just bad for the environment, it costs a lot of money. Microsoft has been exploring the possibility of underwater data centers to deal with the heat generated – watch out Mr Polar Bear. And what of security? Enthusiasts for blockchain often say it’s 100% safe, but that’s not entirely true. Blockchain is currently mostly used for cryptocurrencies, and in the past decade or so, a fifth of all Bitcoins have been stolen, hacked or scammed – more than $2bn worth. Although the tech has thus far proven robust, that doesn’t mean that this will always be the case. Then there’s the lack of standards and regulation in the blockchain space – and of course, a lack of standards and proper regulation is what got digital advertising into its present pickle. Salon Media Group, an online publisher, is offering its readers a choice – allow it to display ads, or instead lend it your computer’s processing power so it can mine cryptocurrencies. Make of that what you will. Ultimately, nobody knows what’s possible. We’re in the wild west again, just as we were 25 years ago. Babs Rangaiah, another senior Unilever marketer (and a big advocate of the use of blockchain in advertising) says: “It’s like 1992 for the internet when we had no idea what was possible and when. We had an idea of what it could do, but not how soon we’d get there. That’s where we’re at with blockchain.” Moving into uncharted territory is always exhilarating, but presents challenges. There will be outlaws and con-men, as well as prospectors and fearless pioneers. Blockchain might be a (or even the) solution but we need to keep our eyes and ears wide open.