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Two ad giants falling. Will either get up again?

The different approaches at WPP and Publicis are examined in an FT article today. While both companies have endured falling share prices for the past few years, there are signs that WPP may be beginning to recover. Meanwhile, Publicis is talking a good game, but the markets are impatient for them to deliver better results.

Mr Sadoun [CEO of Publicis] is attempting to survive a revolution with Publicis’ margins — the highest in the sector — intact. It is investing in its own data and technology to help brands “take back control” of their customer relationship, a service it believes clients will prize more highly. Mr Read, meanwhile, is trying to steady a listing ship, paying down debt, selling data assets and trying to bring closer the traditional and digital wings of the WPP empire.

The FT says that digital disruption has hit European advertising groups especially hard because they invested heavily in media agencies. Automation, declining media viewing, and better targeting have made digital ads more attractive and CPG / FMCG clients have “slashed their marketing spend” accordingly.

Publicis is taking a “bold and strong” approach to transforming the company, while WPP is:

managing expectations, tidying up the corporate structure and repairing its balance sheet, in large part by raising $3.1bn from the sale of a majority stake in Kantar, its data and research business. WPP returned to quarterly growth for the first time in a year, albeit with slimmer margins; the 0.7 per cent rate was even a touch ahead of the Big Four’s average.

The future for neither company is certain, however.

“What worries me,” said one gloomy veteran of the industry, “is that both of them may be wrong”.

The are complexities in this sector that may be hidden from the view of market analysts. Agency groups are good tackling tame problems, where the solution is known and just needs expertise and competence to manage the system, but marketing in the age of digital disruption does not have a set of challenges in a steady state. What’s required is rapid experimentation and learning, something that favours in-house marketing organsiations working with partners to speed up planning and execution. Media agencies are being hollowed out with talent migrating to jobs with platforms like Google and Facebook while many media agency jobs are being replaced by algorithms. Meanwhile, clients are deepening their digital capability and their relationships with the big ad platforms.

Marc Pritchard, CMO at P&G, is right when he says that the challenge is to reinvent the whole marketing ecosystem. That doesn’t mean a more technologically adept media agency, it means a re-framing of what the challenge is for marketers and a new system of technology, processes and partners to get brands the results they need.