Category: Insights

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.

So, if you tell someone that you work at an advertising agency, they will have a pretty good idea of what you do – you work at a place that makes adverts, either on TV and radio, in newspapers and mags, or on posters or online. But talk to them about media agencies, and the chances are you’ll get a blank look. An explanation of what a media agency is, and what it does, will almost certainly be required. Tell them that it’s about deciding where, and when, ads should be placed, and in which channel and medium, and they’ll start to get it. Tell them it is a vast, multibillion pound industry that employs many thousands of people and they’ll be surprised, but they’ll accept that it’s obviously a big deal. And so it is. Media has provided much of the fuel for the big holding companies’ growth. But now media, once the poster child of marcomms, is facing something of a perfect storm, a series of events and trends coalescing that threatens the discipline’s very existence. To consider why, we need to go back in time a little. Back in the 1950s and 60s, the golden age of print advertising and the birth of TV campaigns, the Mad Men ruled. Media was just an adjunct of creative. The Don Drapers came up with the genius ad, the suits sold it to the client, and the media department put it on TV or in the papers. They got a commission that covered all of this and everyone was happy. But as the media landscape got more complex, more diverse through the 1970s and 80s, some bright sparks realised that media buying and planning could be a separate discipline, as wealth-generating and as glamorous as creative. In the late 1980s media houses began to spring up, offering clients a bespoke service. What clients particularly liked was the fact that the bigger the media agency, the better the discount they could negotiate from media owners (the TV businesses, publishers, poster site owners etc). And so the media agencies were born. Hugely cash-generative and offering margins of 20% or more, they helped establish the holding-group-dominated marcomms landscape we see today. WPP, Publicis, IPG, Omnicom and Dentsu Aegis Network would not be the colossi they are today without the scale that their media offerings bring. But in recent times, things have started to change. People have been asking questions – and it’s not the lay people, it’s the clients. I know – and I know others who know – people from the client community who’ve started to question just what it is their media agencies do. This is partly because everyone’s looking for accountability and transparency these days, some evidence of a return on their investment; but also because its getting harder and harder for people to understand what’s going on. There’s no shame in this. Because of technology, media has become advertising’s Wild West, a lawless land where the usual rules don’t apply; where nobody knows what’s waiting for them in the next valley, or who the good guys are (the baddies don’t always wear black hats). The rise in the noughties of mobile and digital got everyone excited – clever algorithms could serve advertising to just the right people at the right time, transparency would reign supreme, automation would cut cost and complexity, and ROI would be available at the touch of a button. So far, so good. But things didn’t work out quite as planned. Four or five years ago, clever CMOs started to wonder whether something was up. Nobody could quite put their finger on it, but something just didn’t feel right. Then a series of investigations by the press, the Association of National Advertising in the US and others started to crystalise things. Reputable brands’ messages were turning up in all manner of inappropriate places – next to pornography, or Isis extremist videos, for example. A number of blue-chips began a (fairly short lived) boycott of YouTube, with Google forced to promise to clean up its act and intervene more in the automated ad process. Next, it emerged that the media supply chain was far more complex than anyone had thought, with layers of intermediaries all taking a cut, meaning that everyone (not just clients) ends up paying more than they perhaps ought to. Last month, the world’s biggest advertiser, Procter & Gamble, said it was planning to cut its agency roster by (another) 50% as it looks to “reinvent” its relationship with agencies and automate and in-house more media planning, buying and distribution. P&G has already in recent years cut the number of agencies it works with by 60%, from 6,000 to 2,500, a move it says has saved it $750m in agency and production costs. It is now targeting another $400m in savings. Chief finance officer Jon Mueller has been widely quoted, saying that while P&G is “prepared to pay” for creative talent, there are other areas that it is not prepared to pay for and it will be looking to “new models” to improve local relevance, speed, quality and lower costs. “We need the contribution of creative talent and are prepared to pay for that. We’ll automate more media planning, buying and distribution, bringing more of it in-house,” he said during a results call last month. Observers say that P&G’s suggestion that it may take some media work in-house and have its agencies work more flexibly (perhaps on a project basis, rather than on retainers) won’t do much to boost the confidence of the big holding groups, which are struggling for growth amid a focus on costs at some of their biggest clients and competition from the tech giants and consulting firms. Where P&G treads, others usually follow. Unilever, for example, is also looking to make cost savings of €2bn in overheads and brand and marketing investment. And the likes of Mars, Nestlé and Wal-Mart are reviewing their relationships with agencies and looking to consolidate. Moeller has said that P&G’s focus on media transparency is paying off. “There is more opportunity to eliminate waste by reducing excess frequency within and across channels, eliminating non-viewable ads, and stopping ads served to bots or adjacent to inappropriate content,” he said during that results call. Perhaps most worrying for the big media agencies, P&G has said it has eliminated waste while also increasing reach by 10%. Last year, P&G said it had cut $140m in digital ad spend with no detrimental impact on sales. P&G plans to improve ad efficiency still further through more “private marketplace deals” with media owners “directly” and “precision media buying” fuelled by data and technology. And here’s the biggie – once they’ve dealt with digital, clients will start looking at “traditional” media, like TV. Why not deal with Sky, NBC, ITV and the rest direct, and cut out the middleman? In a now-infamous speech in January 2017, P&G’s chief brand officer Marc Pritchard said he’d discovered that one of its media agencies was buying digital media with P&G money in a deal that saw the agency receive extra advertising inventory that could then be sold on to other clients at a profit. Also last year, Debbie Morrison, director of ISBA (which represents the interests of advertising clients) said she no longer believed media agencies “have got the best interests of their clients at heart”; ISBA subsequently created a new framework agreement to guide how clients should contract media services. There’s not a lot of trust or confidence out there right now, and the situation seems to be getting worse. Also, in a market where much work is commoditised, it’s difficult to put your rates up. The old practices of charging “surcommissions” and “kickbacks” are no longer deemed acceptable (if indeed they ever were). So, what can the Mindshares and Zeniths, and their holding companies, do? What place is there for them in the second decade of the 21st century and beyond? One thing is for sure – they aren’t dug into a bunker doing nothing. These are some of the most successful and significant marcomms operators for a reason. And as we all know, where there is challenge, there is also opportunity. In our view, there has to be an emphasis on transparency – real transparency, not the slightly opaque kind. In order to trust an agency, the client has to be able to see the processes involved in getting their ad onto a screen or poster; not only see, but understand. They need to know where every penny is being spent, and why. Trust in media agencies has been undermined, but it hasn’t been entirely eliminated – yet. Complexity needs to be opened up. Complexity suited certain unscrupulous players, and was intentional. There has be a back to basics approach, especially on the matters of ethics and accountability. In this regard the big boys perhaps have much to learn from the independent media shops. Take December 19, a media planning and buying agency, that has from the outset adopted a “wholeheartedly honest and customer-focused approach” with the “vision of a company with integrity and transparency”. Dan Pimm, a co-Founder of December 19, said: “It may seem obvious but creating a business with a client-first philosophy was groundbreaking when we started, while much of our competition focused on making profits. We’ve created a transparent remuneration system for our customers providing them with a clear understanding of how we are making our money, which also allows us to trade correctly with media owners and ensures there are no compromises to our neutral media planning and buying decisions”. Such indies have carved a niche for themselves with a certain kind of client – one that’s big enough to want to do a decent amount of advertising but too small to take its media function in house. Perhaps now is their time and the niche spreads more generally. As well as a commitment to transparency, the new indies have positioned themselves as creatively-minded problem solvers for clients. Solving people’s problems for them is a nice high-margin business, a better space to be in than high volume/low margin semi-automated commodity trading. And if you solve someone’s problem for them, you’ve got their trust and loyalty. And what of that all-encompassing word ‘content’? For some time now media agencies have grappled with the potential opportunity of not only providing the pipes for delivering content, but actually generating the content that flows through those pipes. Arguably their heritage of processing volumes, integrating systems and managing the detail means that the media agencies began from a strong position to embrace and leverage tech and data – but it’s the ones that win on the content front that will lead this sector into the future. There is one other issue that falls out of all of this – returning the media agency world back to one that is an attractive place to work, that lures the next generation of bright grads away from the tech, consultancy, banking and startup alternatives. This is a big issue across marcomms generally and one that we’ll be looking at in a future blog. I am sure Sir Martin and co are a step ahead of me in their transformations, but it is certainly going to be fascinating viewing to see who sails calmly out of the storm…

To investigate this further, Tony Walford, Barry Dudley and Andrew Moss from media and marketing mergers and acquisitions (M&A) advisers Green Square, which specialises in agency sale and acquisition, held a roundtable discussion at The Ivy to hear from the agency owners that have experienced it first-hand. Jon Wilkins, chairman of Karmarama, part of Accenture Interactive, Richard Armstrong, chief executive officer (CEO) and founder of Kameleon, Ollie Bishop, founder of Roast and creative agency Kitty (previously founder of Steak), Jennie Talman, co-founder of Just:: Health, now part of Havas, Jamie Allan and Steve Sowden, joint CEO’s of Intermarketing and Jon Priest, CEO of Future Thinking, shared their stories. What motivated your decision to sell in the first place? Jon Priest says that for him growth was the most important factor: “Looking back on it, it was more about changing our capital structure so we could grow. We also wanted to take some money off the table as part of this process, and in the end private equity (PE) acquired 60% and management retained 40%. “We were a single site with 80 people and, without investment, we couldn’t build strategically to grow it any further at that time. The choices were to run it as a lifestyle business, sell it or do a PE deal to grow through acquisition, which is what we have been doing. It was principally about capitalising and getting the funding to grow – we couldn’t grow any more ourselves so we needed some assistance.” Future Thinking became PE backed, but what about the businesses that already were? Jon Wilkins from Karmarama, part of Accenture Interactive, explains: “Before I joined, Karmarama wanted to be more digitally centred and had ambitious growth plans. The thinking was that PE was great because you get an injection of capital and can hire more people. The market was moving quickly and the plan was to scale up the parts of the business that were of interest, such as mobile and data, to really substantiate the offer. Without PE, I don’t think we could have done it.” “That’s exactly what we originally said,” Sowden agrees, referring to Intermarketing’s change of view on PE backed entities for its exit. “We originally decided there wasn’t a chance of going into it, but then as we went through the process we said OK, let’s have a look at PE backed acquirers because we knew it was a very real choice. “Our fundamental learning from PE was that you need to be clear on what you need the investment for and be quite tight on what purposes it serves,” Wilkins continues. “As long as you maintain an open dialogue with your PE backers, and everyone is clear on what the goal is, you stand more chance of success.” Jon Priest describes PE firms as investors, not owners: “You go into it with your eyes open. From day one they are looking for exit scenarios, and any investment in growth is supported as long as there is an exit. We got through some structural and other things which we didn’t think were important at the time, but of course they are.” Sowden explains: “We were a second-generation management buyout. The business is 30 years’ old and we bought it six years ago but used bank debt rather than PE investment. The agency hadn’t dipped in its predecessor’s hands, but it also hadn’t thrived, so when we took it on we wanted to do the things we always thought that other businesses should do. We got some advice and structured the agency to run more efficiently and part of that business was to look at who the next MBO team were going to be. ‘Pass it on’ was continually in our heads. As the business grew we built a great team including two candidates that would have been part of a third MBO. The issue was the valuation we were reaching meant doing another MBO would have put too much pressure on the business and wouldn’t allow us to continue our plan to grow into new geographies. Jamie Allan from Intermarketing, elaborates: “We got to the point where we had opened in Amsterdam and Sydney and were looking at the American market. We needed an acquirer with experience in the US. We also had a plan B in our back pocket. If we didn’t find the right acquirer that could give us what we wanted we would start to build our own network of agencies in order to deliver what our clients needed. That was a good negotiation point because we weren’t in a position where we had to sell, plus we had access to funding.” “The British culture always has an element of ‘you build it to sell it’,” says Ollie Bishop, about PE backed digital agency, Steak. “From a moral perspective that may be a bit dubious, but for a lot of people that build agencies at the start, that is the motivation. What was important to me when I sold Steak was that there were a good 20 people in the agency that at least made six figures out of the sale of our company. Up to this point many of them couldn’t afford to buy a house in London, so this was a great opportunity for them.” Jennie Talman from Just:: Health, now part of Havas, says: “For us, it was two things that determined the time to sell. Our clients are all in the pharmaceutical industry and it was shortly after we founded the agency when we first started talking to Green Square. When we started out there was a real appetite for clients to work with the boutique, independent agencies as boutique agencies are more creative, so it was a great time to launch the company. “But the way the pharmaceutical industry is going now, you have to be global and now 80% of our company is global work. Although most of it we do with our teams based in London, a key requirement for a client is the agency they deal with must have a global footprint. When we go in to pitch we have to demonstrate this capability, so the primary decision to sell was geographical for us.” Talman continues: “The second reason was that it just felt a bit lonely. My business partner and I wanted to work with other senior people, to carry on learning and be challenged. That’s been the real benefit for us. We’re now working in the new Havas King’s Cross building and there are 18 marketing services agencies located there. Collaboration between agencies is strongly encouraged and as a result the thinking and the ideas we are bringing to our clients are truly differentiated. And professionally I feel challenged and energised.” Richard Armstrong explains that the reason Kameleon sold was to do with growing capabilities: “We wanted to create further value, which we couldn’t do unless we further developed our offer. Our positioning needed to evolve, and we were missing some skillsets, so our key acquirer criteria was one that could bring us the complimentary capabilities we didn’t have, such as data, media, analytics and search. We figured if we could access these, we could then expand our client operations and subsequently step towards different geographies. By following this strategy we could increase growth, realise proper value and do the things we want to do. So we went hunting for the stuff we didn’t have enough knowledge in to grow organically – and found all of that and more in Be Heard Group, our acquirer.” “The weird thing is you do all of this selling for a reason, and then two months down the line, you find there are other benefits you’d never thought of,” Sowden concludes. What is the most positive thing the acquirers have bought to your business? Sowden instigates the discussion by highlighting the importance of autonomy: “Intermarketing’s acquirer, Advantage Smollan, stayed true to its word and left us alone. For the first six months post-sale it’s really important not to change the company. This is a fear when going through the process – everyone was asking ‘are our jobs safe?’ and people need to settle in. You then start to think ‘Ahh, maybe it’s not just about all the things that we think are good about our business’, there are new avenues to explore.” Allen from Intermarketing adds: “While we will need permission to do certain things, our acquirer is looking to us to build the strategy for European growth – organically and via acquisition – and assist our move into the US. Asia will follow. We couldn’t have done this so quickly or as easily on our own. They have an infrastructure we can leverage and their promise of support was key to our choice.” “Having a PE owner has been a good thing,” notes Priest. “They professionalised us, they gave us a lot of knowledge (particularly around finance) and they gave us access to debt equity and capital market finance. However, PE can be bad at respecting the way agencies operate and corporate culture – they will walk all over it if things go badly. The deal is nearly always structured in such a way that they have the majority of voting rights, but they don’t really know what the impact of exercising those rights on an agency will be unless they get better at communication. Just stomping in and making unpopular decisions is not the way to deal with agency folk. I welcome them taking an interest and taking in knowledge. Even though we have lots of products, we still need people to demonstrate excellent service before the client will purchase.” “When engaging with PE you need a partner who is seasoned in people businesses,” revealed Wilkins. “We found that getting impartial advice to support you and the investor to say, ‘this is the market dynamic’ or, ‘it doesn’t really work like that’, through non-executive or consultancy help, was vital. Prior to our sale to Accenture, Green Square did a brilliant job of explaining the ecosystem of Karmarama to our PE backers. The good thing that came out of that process was they started to ask our opinion because they then understood we were the only ones that knew how the company worked.” He adds: “The reality, for everyone around this table, is that we’re entrepreneurial. The deal we did with Accenture obviously changed a bunch of things, but we also applied our tactical spirit to make sure it works for everyone. I think Accenture sees that entrepreneurial side to us, which is invaluable to its business, because we come up with different ideas and see routes around problems.” Future Thinking’s Priest reiterates that PE owners are exit strategy focused: “They want to make money. We don’t know all the answers and if we need answers then we will ask them for their view, but they are in a business that works in a different way.” Jennie Talman shifts the focus to the benefit of relationships: “For us, being part of something larger and being able to walk into pitches with the comfort of knowing we had global delivery capability was key. As pharma companies procurement teams continue to consolidate their rosters with the networks, being an independent healthcare agency is no longer really an option unless you do something very unique. Suddenly, we could get to the top table and Havas has brought us work. It took a while for this to properly get going, but being part of the group has been incredibly beneficial. Plus, of course, having different operational and delivery expertise available to us within Havas has been very helpful.” “We often see the promise of work being brought by an acquirer, but in reality you still have to make your own luck,” points out Green Square’s Tony Walford. “One thing we always tell our clients is to infiltrate the group you have joined as soon as the deal is closed. Look at the clients they have, understand where your services can be sold in and find the person that can kick that door open for you. This has worked across a number of deals we have done and to great effect in maximising earn-out payments”. Picking up on acquirers bringing work, Kameleon’s Richard Armstrong discloses that As Be Heard, acquirer of Kameleon’s acquirer, brought them those missing capabilities. He explains: “The hope was that we would actually be able to sell joined-up services alongside sister-agencies within the group. And that is now starting to happen – probably the biggest successes being two significant recent wins for Coca-Cola and Dreams, both pitched and converted with the collaboration with sister businesses. Working with peers within a larger organisation has been a real motivator for me, but at the same time the relatively small, start-up nature of the Be Heard group still leaves a very strong sense of entrepreneurialism – which I guess is further helped by having equity in the listed holding company – you want everyone to collaborate and succeed.” To which Ollie Bishop responds: “Steak was Dentsu’s first sizable acquisition in the UK. This meant we had a pretty clear run at clients as there was no-one else around to hoover them up. However, once the Aegis deal happened, our world changed quite a bit and we no longer had a clear playing field. Dentsu also paid us less attention. That said, we just got on with it. We worked out what we needed to do to maximise our earn-out and went about doing just that. “Interestingly for us was how the corporate structure of Steak needed to change as Dentsu’s global offering developed – they wanted to roll Steak USA into their 360i agency during the earn-out period, which they couldn’t do without our consent as part of the deal. Green Square helped us restructure the deal which meant we could lock down the US earn-out element leaving us to focus on the UK. Basically, you just have to be ready for all eventualities.” “I’m often asked how Accenture’s culture has impacted Karmarama and the question is quite irrelevant,” Wilkins replies. “Aside from PE owners, most acquirers will let the agency get on with it and it’s down to the agency to allow cultural shift to happen when it’s for the better. With Accenture there really is a culture of cultures, like a group of different villages, each with their own culture and it’s working for us.” “We’re still getting to grips with the cultural side but are very positive,” Allan clarifies, commenting on Intermarketing’s ethos. “We’ve traveled an awful lot since closing the deal only a few months ago – not only to our own offices, but also getting to know people across the US and in South Africa. It’s been pretty enlightening and we’ve started to build strong links with other agencies in the group.” How did you find the process, and is there anything you would have done differently when informing your team of the change? Jennie Talman admits that the process was a lot more intense than Just:: Health ever thought it would be: “We met a number of interested parties and, as a US footprint was critical to us, Green Square took us to New York to meet with a PE backed acquirer as well as some senior network agency heads over there. Once we decided which acquirer we wanted to go with, there was then a lot of negotiation around points and the structure of the deal that were very important and we hadn’t even thought about. Whilst Green Square dealt with all this for us, they obviously made sure that the final decision on key issues was ours. I don’t think people realise just how much is involved in a sale process. “If I did this again I would do a better job at communicating with our senior team about the benefits of the acquisition. It’s not just about financial reward. It’s important to think about what the acquisition will mean for each individual and how it fits with their professional values and goals.” “My brief to Green Square was I wanted a trade buyer under which I could do an earnout and leave after around three years. I felt that I was done with doing what I was doing and wanted a new challenge,” discloses Jon Priest. When a PE acquirer was put to us during the process that already had a research agency that could be merged into us with me and my team managing the enlarged business, retaining some equity and going on a buy and build strategy, this was that new challenge. So my expectations were completely changed and it’s been a very interesting journey. The process is the process – laborious and you need to ensure you make time to understand everything your advisers are telling you whist not getting distracted from the day to day.” Intermarketing’s Sowden highlights that the intricacies of the deal were key: “We had a specific issue in having a client that was key to our agency and our deal needed to be structured to accommodate this. The most stressful time came at the eleventh hour. Last minute questions and due diligence delayed closing the deal by six weeks. Having gone through so much to suddenly have this happen was a frustration, but we got it done with Green Square providing guidance, reassurance and confidence. That said, we always had a Plan B!” Read more.

“Our market intelligence would indicate that 2018 will be an extremely busy and congested pitch market,” says David Indo, ID Comms’ chief executive. The current cavalcade of reviews is being likened to the events of 2015, a year dubbed ‘Mediapalooza’ on account of the vast amount of business that was put out to pitch. Back then Coca-Cola, DHL, General Mills, Honda, L’Oreal, Mondelez and P&G all moved accounts to new agencies while the likes of Coty, GSK, Reckitt Benckiser and Unilever ran pitches before opting to retain their incumbents. But according to Indo, marketers’ motivations are “decidedly different” this time around compared to their hunger for “immediate and bankable savings” in 2015. Then, “the desire to secure improved prices overshadowed everything else,” he says. Now advertisers are challenging their agencies to illustrate what measures they have in place to mitigate against ad fraud and enforce brand safety, marketing’s hottest topics. “Many brands have spent the last 18 months seriously considering their media agency requirements and getting their ‘own house’ in order prior to going to market,” he says. “If 2015 was a race to the bottom, 2018 has the makings of a year where the challenge for the agencies will be who is best equipped to race to the top.” Agencies can’t say they weren’t warned. Clients have been challenging them on their efficacy ever since P&G’s chief marketing officer Marc Pritchard set the tone almost exactly a year ago with a landmark speech demanding the industry face up to the concerns around its “murky at best, fraudulent at worst” media supply chain. And marketers, at least, appear to have heeded his call – reviewing not just their media business but increasingly large swathes of their creative and communications needs too. “The communications marketplace is evolving at an ever-faster pace and many advertisers are quite naturally questioning how they can best operate in this environment and whether they have the right shape and skills internally and externally,” says Debbie Morrison, a director at the advertisers’ trade body, ISBA. “The status quo no longer delivers the results that these organisations need.” Such a frank assessment from the organisation that styles itself as the Voice of British Advertisers will do little to reassure anxious agency bosses. But the onus is on them to better allay clients’ concerns and in turn their own, according to marketing procurement consultant Tina Fegent. “Agencies have not been proactive in talking to clients about the issues,” she says. “I appreciate it’s a hard call to make but I haven’t seen any proactive discussions with clients. This affects trust.” One thing the major marcomms groups have been doing is working hard to remould their agencies into the image they believe clients now crave. The Havas Group developed a new tool to give its clients a complete view of a programmatic buy, from where ads are going to how much they are spending. Called the ‘Client Trading Solution (CTS)’, it’s not a way to trade programmatically but is being pitched as a “client facing, fully transparent control tower displaying all programmatic trading”. Publicis has focused on simplifying its services and made much of its ‘Power of One’ model which brings to bear for clients all of the group’s operations from creative, to media to digital under one roof and one chief executive. It will be pressure tested by the Asda review. WPP, meanwhile, has focused its efforts on consolidation of an even more permanent kind with the merger of its media agencies MEC and Maxus into “media, content and technology agency” Wavemaker, which launched this month. It’s easy to see why agencies are doubling down on consolidation and simplification. Published last year, the second Media2020 report by Media Sense, ISBA and IPSOS Connect – which surveyed 250 senior British marketers – recorded an uptick in respondents stating that they will use fewer agencies in the future compared with the first survey, conducted in 2015. In fact, 62% of marketers agreed they will use fewer second-parties, up 4% in two years. But Paul Frampton, who was the chief executive of Havas Media Group UK & Ireland until November last year, questions whether marcomms groups – generally – have moved quickly enough to respond to clients’ ever-changing needs. “The winds of change for agency holding groups have been predicted for some time but the volume of big business being reviewed so early on combined with the simultaneous aggressive challenge from management consultancies was unexpected and will create nervousness from analysts,” he says. “Brands are demanding both a new strategic model and genuine transparency, but the bigger holding groups seem slow to provide either.” Those who might fill the gap include smaller independents who could compete on price but might not have the capacity the biggest advertisers require and the management consultancies who, as Frampton hints, have bullishly parked their tanks on the lawn of the marketing industry in recent years. But despite hoovering up advertising and digital agencies in recent months, and increasingly touting their creative credentials, the likes of Accenture and Deloitte have shown little appetite thus far to compete at scale in the media buying business. A third possibility, and one that marketers are increasingly exploring, is the option of bringing more of their marcomms requirements in-house. Internal creative agencies are already relatively common, and the setup has proved successful for Specsavers, Channel 4 and the BBC who have drawn plaudits for the quality of their output. In-house media trading desks remain lesser spotted but that may change with P&G’s newly revealed plans to “automate more planning, buying and execution and bring it in-house”. Alex Tait, a former Unilever marketer who now runs the consultancy Entropy, says he’s been speaking to “a lot of brands” who have been mulling over the best way to structure their marketing efforts. He does not, however, think a wholesale shift to in-house media buying at the expense of agencies is imminent. “The fact is that maximising ROI with modern media and marketing communications involves getting the right model across internal and external teams, platforms etc,” he says. “Full outsourcing isn’t a very sophisticated approach but there are a lot of levels in between. You’d have to be very confident with your capability to bring all media buying in house which I don’t see many brands doing in reality.” So the outlook may not be as gloomy for agencies as the spate of recent reviews and restructures would suggest, but testing times await as 2018’s answer to Mediapalooza gets underway. The best thing the likes of WPP can do now is to remind advertisers – and their investors – of the qualities they possess that can’t be so easily replicated by startups, consultancies or even clients themselves. “WPP has some great creatives sitting within its various agencies. It needs to push these to the forefront,” says Tony Walford, partner of corporate finance advisory Green Square. “There are huge pressures on driving down costs within agency groups, but one thing that cannot be commoditised is creativity. Most clients would be prepared to pay a premium for great work and WPP should be both pushing its creative credentials and letting shareholders and the City know that creativity is largely immune to downward pressures.” Whatever tactic agencies adopt in the pitch warfare that’s to come, there are literally billions riding on them getting it right.  Read more

These days, it’s all about acquiring capabilities – to beef up an offer, perhaps, or to expand into new channels. Interestingly, most of the deals during May link into the field of channel marketing. We’ve looked at this before in The Drum of course, but as so many deals were done in May I thought it would be appropriate to revisit it. For those who don’t know, channel marketing is the use of partnership to allow a brand or service to reach a wider audience, rather than just trying to sell one thing in one place. In effect it’s a kind of B2B marketing that has been used for ages by tech companies (eg Microsoft or Sandisk working with vendor or retailer partners) and by the grocery industry (eg Heinz working with the supermarkets) to reach end users or consumers. Another example might be a jeweler selling on QVC rather than via a few specialist jewellers; or selling beer at music festivals and football games rather than just through pubs and shops. As a channel – or perhaps more accurately, discipline – the lines of what defines channel marketing have become increasingly blurred, and it increasingly overlaps with other forms of B2B marketing, shopper marketing, events, experiential and even performance and affiliate marketing. One of the longest, but most effective channels, is the impulse/convenience retail chain. In the latter, a manufacturer would typically supply, say, crisps to a wholesaler, who would then supply a corner shop, whose owner/staff would then pass on to the crisps to the consumer. At each stage, marketing is involved: manufacturer to wholesaler; wholesaler to retailer; and finally retailer to consumer. Sometimes there will be marketing from the manufacturer directly to the consumer – in the form of a TV advertising campaign for instance – but for this (expensive) investment to succeed, everyone in the chain or channel has to have bought in to the idea and to stock and pass on the product: no good advertising something that can’t be bought anywhere. For channel marketing to be effective, relationships and support networks have to be built. Specialist agencies are often used for this purpose. An example of this would be 3ree, an agency based in Singapore, which was last week acquired by Always Marketing Services, China’s leading field and shopper marketing company (which is majority-owned by WPP network JWT). Founded in 2010 by Tan Li Li and Isabel Cheong, 3ree offers event management, sourcing and production of marketing premiums, project management for exhibitions and activations, and design and creative services, as well as digital marketing; so it’s a classic channel marketing agency. Always offers trade marketing, including merchandiser management and retail audit; retail marketing, including promoter management, in-store activation and retail environment designs; as well as shopper marketing, including point of sale design, events and road shows, as well as premium design and production. The two businesses complement each other very well (and 3ree fits in nicely with WPP’s long-term strategy of making acquisitions in growing territories or channels) and the acquired agency has business in key Asian markets, including Malaysia, Indonesia, Vietnam, India, Japan, Korea and Australia. Clients include Microsoft, Mitsubishi Electronic, Seagate and StarHub. We’ve written before that the big audit and management consultancies – EY, KPMG, PWC, Deloitte, McKinsey and so on – with their ability to offer strategic insights, represent one of the biggest challenges to the established agency networks, so it was no surprise to see KPMG snapping up Nunwood, an independent consultancy specialising in customer experience management and feedback technology a fortnight ago. Founded in 1996, Nunwood has offices in Leeds and London. Advising companies across the retail, telecoms, financial and leisure industries, its acquisition enables KPMG to offer a full-service customer management programme to its clients, from mapping the customer journey to measuring ongoing feedback. Nunwood’s ‘Fizz: Experience Management’ technology is used by organisations like British Airways and Nationwide to provide customer information to hundreds of managers, often in real time. Commenting on the transaction, Richard Fleming, head of advisory at KPMG, told the media: “This deal is strategically very important to KPMG as it will enable us to provide clients with the tools they require to be truly customer-centric. Nunwood’s understanding of the issues driving customer behaviour, and the way they focus on improving customers’ experiences mirrors our approach of putting technology at the heart of everything we do. “By combining forces we will be able to help clients take action, so that each decision they make is based on real-time customer feedback. At a time when companies are worrying about their market share, the combination of KPMG’s Customer and Growth capability with Nunwood’s expertise in managing the customer experience will create an advisory business ideally placed to help our clients as they grapple with the realities of a fluid customer-base that is increasingly selecting services on the basis of their experiences.” Again, from those remarks there appears to be an intent to sew up the channel experience. On a smaller scale, another recent channel marketing deal that caught my eye this month was digital agency Stickyeyes’ acquisition of Peterborough and London-based content marketing agency Zazzle Media. Content marketing is a discipline which has an increasingly close relationship, and overlap with, channel marketing. So it’s another astute buy: the joining of the two companies represents a very good fit of digital and content marketing expertise. Both brands will remain independent, but will work in an integrated fashion: Stickyeyes will continue to provide SEO, paid search, social media, PR and digital consultancy Zazzle the content marketing. And there have been more – Publicis’ media network ZenithOptimedia’s acquisition of the Czech and Slovak performance marketing agency B2B Group; UK outfit Periscopix being bought by the giant US Merkle group; or Candy Crush tycoon Mel Morris’ investment in Derby-based channel specialist BriefYourMarket.com (which specialises in intelligent, preference-based newsletters and e-mails). As a side note, it’s worth pointing out that BriefYourMarket.com achieved growth of 3,821% in the space of just 12 months, making it one of the UK’s fastest-growing companies. There was also the April merger between Pink Gorilla Marketing and Hairy Lemon Events in Leeds, creating a company (the somewhat inelegantly named Pink Gorilla Hairy Lemon) that will on fashion shows, bar and restaurant launches, sample sales and corporate events. Given that Leeds is starting to boom again after the recession, and has a comparatively young population, it’s not hard to see PGHL picking up clients pretty quickly. Even last month’s £190m buyout of price comparison firm uSwitch by property site Zoopla, which looks on the surface to be one internet company buying another, demonstrates the importance of channel marketing in today’s increasingly blurred marketing landscape.

That evening proved to be a turning point. Having spent seven years single-handedly growing The Eventa Group to the point where it had ten employees, Mr Hill realised that if it was to expand any further, then he needed to create a proper management structure to help him to manage his employees and his business better. He immediately brought in Nick Shuff, a director and business partner, and between them they developed a management team, including a marketing manager, an HR manager and a finance director. The impact was dramatic. Turnover went from £1.7 million to £10.1 million in four years and the number of employees jumped from ten to seventy-five. “It turbo-charged growth, it was just phenomenal. All of a sudden we were one of the top 100 fastest-growing companies and I was winning entrepreneur of the year awards. “I don’t think we would have got that level of growth if I had not made those decisions then, to invest in that management team and get that level of expertise in.” It’s a challenge that many entrepreneurs will recognise. One of the biggest hurdles for owner-managers is learning how to manage, and delegate to, employees. For an entrepreneur with a clear vision of what they want to achieve, it can be particularly hard to learn how to delegate, trust and motivate workers. Cracking the issue is often the key to success. According to the latest ECI Partners survey of high-growth companies, 54 per cent of respondents said that investment in staff would be a growth driver for their business over the following year. Lara Morgan had to learn on the job about managing employees. Having started her toiletries business, Pacific Direct, on her own with nothing but a fax machine, she eventually built and managed a team of 467 employees before selling the business for £20 million in 2008. She now invests in small companies through her business, Functionality, including activbod, a skincare range, and Gate8, a luggage company. “Managing people can be emotionally stressful,” she says. “Humans are not infallible and the huge amount of mistakes they make through the poor management of people can be the breaking of any business. In my mind, the greatest and continual challenge of any growing enterprise is that of managing people.” One of the key things Ms Morgan did at Pacific Direct was to make sure that she continually engaged with and rewarded staff. She would come back from work trips with photocopied pages of business books that she had read, to share with them, and occasionally would surprise them by giving them bouquets of flowers and taping £50 notes under their chairs for them to find. She even once took the entire workforce, then 26 people, on an all-expenses paid holiday to Barbados to reward them for hitting a profit target. “I have made many mistakes along the way, but I still stick to the belief that most people want to do a good job and a great job. When people are treated with respect and given fair rules, and are included in the conversation to deliver the best service, then your chances of successful retention skyrocket. “Compared with other company growth challenges, the people piece will always be my greatest trial. Nevertheless, the reward of loyalty, laughter and work enjoyment far outweighs the turmoil.” Tony Walford, a partner at Green Square, says that managing employees in a fast-growing business is particularly tricky because of the speed at which change takes place. “When the business employs five or six people, you are one big happy family, but as it gets bigger, that’s when the problems start because somebody has to become the boss. You can’t have 50 people sitting round the table at lunch having a nice chat; you have to decide who is going to take leadership roles.” He argues that there are two key challenges to managing employees well in growth companies. First, you need to make sure that you are constantly monitoring the needs of the business. “As the business develops, everything changes — you will find the roles that need filling will change, and new roles that weren’t needed before popping up, and you suddenly find someone sitting there doing a job which they shouldn’t be doing. You need to be constantly on top of that.” Second, you need to make sure you are constantly monitoring the needs of the employees. “If you can give them career progression and training and enhancement, they are more likely to stay with you.” There has rarely been a better time to get it right, as companies face the prospect of a talent shortage for the most-skilled workers as the economy picks up. According to the same survey from ECI Partners, 82 per cent of growth businesses in Britain said that they were experiencing a skills shortage, with 13 per cent describing it as a “significant issue”. If it’s getting easier for skilled employees to move on, it makes even more sense to find ways to convince them to stay put. Six keys to success Lara Morgan’s tips for managing staff in a growing company 1 Set clear “key performance indicators” from a carefully considered role description 2 Work to understand what makes each person tick and how they like to be treated 3 Put communication at the top of your management style. Inclusiveness, limiting hierarchies, fairness, consistency of standards and treating others well all go a long way 4 Look for ways to celebrate progress and outstanding performance. Reward people with the things they want, not what you guess they would like. Do not make the mistake of taking people out for lunch to celebrate great work when they could take their partner out at your expense instead 5 As the business grows, make sure that people find new challenges and are given training and that you continually invest in your team members, including external professional supporting qualifications 6 Be firm but fair, never forceful, bad-mannered, moody or inconsistent. Management must be fair and even-handed or else managers rapidly lose the respect of those they lead

It’s this skill, or a perceived lack of it, that gets a certain kind of Mad Man all wistful for the 1960s, 70s and 80s, when beautifully-crafted messages (either on TV, in print or on billboards) ruled the roost. Everyone with an interest in marcomms looks back fondly to the days of O&M, DDB and CDP, and great campaigns for the likes of Volkswagen, Hovis, Guinness, Rolls-Royce and Heineken. Now, by fairly common consent there is a greater emphasis on delivery, meeting budgets and driving costs down, basically getting things done as quickly and cheaply as possible. The dazzling speed of technological change and disruption and the increasing realism and interconnectedness of both gaming and virtual reality, has shifted the marcomms industry’s focus onto technology and channels. This isn’t all that surprising – after all, there are almost unlimited possibilities for getting messages out there, and gaining consumers’ attention and engagement; but I wonder if the time might not be ripe for a reinvigorated focus on content. Now, content is a word that has been bandied about for some time, but not always that convincingly. Some of the bigger agencies with their quite understandable interest in data, digital and mobile media and strategic, consultative partnerships and ROI have been a bit behind the curve. Because at the end of the day, this business is all about moving people – to rage, to tears, to laughter; because the message won’t get through unless you entertain, inform, educate or benefit people. This was borne out by a law firm conference I attended the other week, in which an audience poll revealed that when asked the question ‘What’s more important? Digital advertising or content?’ over 90 per cent plumped for content. What does this mean? It means that people don’t like advertising (especially annoying banners and roll-overs that disrupt one’s web browsing), but they will watch stuff they find funny, or interesting, or useful. In fact they’re happy to do so. They want stories, not advertising. Over the past couple of years there have been some interesting stirrings, particularly in the startup sector: agencies specifically geared towards creating content have been springing up. An interesting example I came across was Kameleon, a London-based startup founded in 2008 by two guys from media giant Mindshare. The company now employs over 35 people and has done some impressive work for the likes of BA, Chivas, Sony and Volvic. Kameleon does most of the things you’d expect a full-service agency to do: strategy, creative, media, distribution and – this is crucial, because not many people are doing it that well at the moment – evaluation. Content and storytelling is at the heart of everything they do, and is usually based around online video – which is not only the fastest-growing marcomms channel, but also the most effective. And it works just as well for B2B as it does for B2C. Others, like London’s HubTV are moving from pure video production into creative and strategy, offering clients something akin to what the old full-service agencies used to offer. It’s a fascinating area, which will grow as content marketing becomes more important – and I’m sure it won’t be long before the big boys start sniffing round many of these such companies. None of this is actually new – content marketing is as old as advertising itself. As long ago as 1892, Dr August Oetker, he of baking powder fame, used to push his products by printing recipes on the back of the packaging. In 1900 French tyre firm Michelin wanted people to use cars as much as possible (so they’d sell more tyres) and developed a travel guide that offered tips, maps and articles on places to visit, eat and stay while on the journey. Given away free, it was a sensation, and remains perhaps the most effective and famous piece of content marketing ever. Nowadays big retailers like M&S, John Lewis/Waitrose, Sainsbury’s and ASOS all create customer magazines (effectively content marketing) with production values, editorial quality and readerships equal to, or greater than, traditional news-stand titles. Then there are what the Americans call ‘infomercials’ – perhaps most familiar here from the likes of QVC or those long-form demonstration/benefit films made by gadget firm JML and shown on late-night and daytime TV. But by far the fastest-growing, and most important, vehicle for content marketing is online. It started off a bit dull – white papers or e-books that you could download. But over the past decade, with ever-increasing broadband speeds and the growth of video-capable mobile devices, video has exploded. Content can be accessed any time, almost any place. Even more important, thanks to increasingly sophisticated analytics, advertisers can learn more about who’s watching their content, where, for how long, and how often. This allows the content marketing agency to improve, tweak and refine their content to make it even more effective. Although YouTube has by far the biggest each of any video channel, it’s not that great for lead generation, because YouTube’s real job is to generate ad click revenue for its owner Google. But specialist platforms like Wistia are more focused on real analytics and measuring ROI. All the great past masters of advertising – Bill Bernbach, David Ogilvy, Howard Gossage – knew that without great content, marketing could not be effective, nor (in Ogilvy’s case) did it deserve to exist. There’s an old school of thought, dating from more than half a century ago, which held that if you were going to interrupt a person’s day with advertising, you had to do it with wit and elegance or else give them something they found useful or entertaining. It’s a pity that this attitude has now largely died out, because today there is far too much advertising, and far too much of it is bad. Achieving ‘cut through’ is becoming increasingly difficult, especially as consumers and busy executives are now increasingly cynical and dismissive of marketing messages. As I alluded earlier, people don’t want to see advertising, but they will engage with good stuff. What is best about great content is that it just works. Everywhere. In PR, mobile, customer publishing, long-form advertising, DM… any discipline or channel would benefit from an injection of content-creation skill. And for forward-thinking creatives, this offers the opportunity to put their craft at the very forefront of the industry once again; there is no reason for a would-be Bernbach to feel marginalised by suits, planners and data geeks ever again. And that can only be good for the whole industry. Trawling round the net these past couple of weeks, I’ve actually been really heartened by some of the good work being done by the likes of Kameleon, Seven, Velocity, Videojug and others. What the nascent industry (there’s even a Content Marketing Association, whose website is worth a look) now has to do is to really make sure that it gets its measurement and evaluation nailed down. The case for content marketing will then become un-ignorable and the big clients and later, the big agencies, keen to get involved in the action, will come knocking. There is a good deal more I want to say on this subject so we’ll be returning to content in a fortnight or so’s time.