What giant mergers say about the future of agencies

Should such mergers become the order of the day or is it easier said than done? 

e4m by Misbaah Mansuri
Updated: Dec 5, 2018 8:29 AM

Last week, WPP merged two large agencies with different strengths to better navigate the demands of modern advertising. And if industry leaders are to be believed, this might not be the last. After all, in an increasingly volatile landscape, culling and consolidating agency brands under one roof could sure be of essence. By harnessing data and embracing artistry, brands can drive beautiful, high-performance and targeted marketing campaigns. So should such mergers become the order of the day or is it easier said than done? Which is the way to go and the approach to adopt for navigating through this turbulent advertising landscape? We delve into this debate...

Data reigns supreme

It’s often said that the future will be about marrying creativity and data, which means that agencies need to have staff on-board to dissect data in creative ways. Rajiv Sabnis, Executive Director, DDB Mudra Group, reveals that increasingly, digital capabilities are being seen as an overall part of the brand stewardship that creative AoRs are mandated with. “Hence, the recent trend of integrating digital capabilities within the creative agency seems to be the order of the day. Clients are looking for a scenario where there is minimal duplication of effort and input. As such, this scenario will lead to some convergence of client-facing resources like business management, creative ideation and brand strategy talent,” he says.

Dentsu Webchutney’s Harsh Shah calls this a part of the basic ‘radical evolution’ as promised by WPP CEO Mark Read. To him, this is a necessity arising out of a basic business expectation from digital. “Digital is and will continue to drive top line growth and partners working with them will be responsible to drive this growth,” signals Shah.

Read recently spoken about how traditional, brand-led creative is becoming less important to some advertisers who are thinking about broader customer experience and adjacent areas such as e-commerce. "It’s a more fundamental question. Clients say, ‘I’m doing something for 10 (pounds or dollars), how can I do it for six? Because I’m going to spend 20 per cent less on TV advertising and I’m going to do a third fewer ads, so therefore why wouldn’t I spend a third less money with you?’ – I think it’s (clients) thinking like that,” Read had said.

Subhash Kamath, CEO and Managing Partner, BBH India, thinks that the idea to merge traditional creative storytelling with tech and data is a good one. He acknowledges that clients today are seeking a more integrated offering and are tired of saying that ‘My digital agency doesn't understand my brand and my creative agency doesn't understand data’. “So it’s a bold, future-facing move, in my opinion. I've always maintained that you don't need a digital arm, you need a digital soul,” adds Kamath.

WPP also recently merged VML and Y&R into a single global agency network called VMLY&R which created a 7,000-person agency with offices around the world, combining the digital chops of VML (founded in 1992) with the creative legacy of Y&R (founded in 1923). WPP acquired VML in 2001, and Y&R a year earlier.

Shrenik Gandhi, Chief Executive Officer and Co-Founder, White Rivers Media, sees many more such mergers lined up in 2019.

“Creative and digital obviously have to work hand in hand. We need to understand that the customers are evolving and the agencies also have to relocate their business models. If they only consider themselves a creative /media /digital or marketing agency, they would not survive in the long run. So in the end of it, everything has to work in sync and this is one of the first few such mergers,” maintains Gandhi.

Raghu Bhat, Founder, Scarecrow M&C Saatchi, comments that the communication agency is mutating into a new organism, guided by Darwin's theory of natural selection. “It's doing so by acquiring new traits that'll help it compete and survive. One of which is 'digital capability'. Every agency, be it creative, media or digital, is thinking how can they add another revenue stream? No wonder, creative agencies are eyeing digital, digital agencies are eyeing creative guys and media agencies are eyeing everyone.”

Pricing-points and return on outcomes

The fact that programmatic media buying and robust targeting technologies have created rich data signals that marketers can use to ensure that every impression reaches the right people at the right price is not unknown. However, this deep focus on data has left a gap in the attention spent on the creatives served through these channels, causing them to become conversion oriented while lacking the engaging elements that grab consumers’ attention.

Sabnis suggests that the digital creative output should become more entrenched in what the brand stands for and should lead from the brand idea. According to him, the “shiny-new-toy” syndrome for the digital marketers will now become more focussed on delivering business results and building the brand in the longer term. “More traditional brand thinkers will start becoming digitally savvy over time and effectiveness even from digital marketing campaigns will become key. The era of tactical digital ideas that don’t add back to the brand seems to be waning. Technology is infrastructure and not an idea. As long as communication partners realise this, we would be able to engage with the digital natives,” he shares.

At a time when many agencies keep cutting back on rosters, it doesn’t seem like they are willing to cough the dough. No wonder, the larger agencies are trying to cost down for clients while going through such mergers.

On the compensation stand-point, Bhat argues that while adding capabilities is necessary, it's important to get the pricing right. “Otherwise, it'll lead to another round of commoditisation. Success of a merger will also be based on whether agencies can deliver a seamless integrated client experience, without compromising on quality,” he makes a point.

Gandhi acknowledges that in terms of pricing, there will be additional cost incurred but there will be effective upselling. “So essentially, at the end of the day, if it is helping the brand serve their customers better, obviously the brand should not be worried about the pricing going a bit higher. And also, I'm sure the clients would also like a one-stop shop for everything. They would want to focus on the business and getting more creative output. The quantum of agencies does not matter.”

Shah says that optimisation is the answer to all the three parameters pertaining to pricing, creative output and clients. “Output will be optimised to consumer’s need, basis the data and insights that digital brings along. Output will have to not only limited to a brand idea but also how this brand idea can be taken forward and confluences to be UX or the design of the website or tonality of its customer support online. Pricing will have a direct correlation to a business objective. Plain and simple. A brand idea with its digital design will not be limited to a CMO or a CEO, but will also be a point of interest for an investor.”

The creative solution?

Thought leaders unanimously point out towards creative excellence infused with data as being the keystone, with agencies doing everything under one roof succeeding. Anish Varghese, National Creative Director, Isobar India, is of the opinion that in this scenario, going back to the client with an integrated creative solution with digital as a nucleus is a need. “Yes it’s going to impact the creative. Creative needs to be a creative solution, which can solve complex business challenges. The experience needs to be designed differently so that the eagerness and user behaviour is taken care of. A lot of clients are in a transformation phase, in which digital creative solutions plays an integral part,” shares Varghese.

One thing seems certain: agencies will have to break down fragmentation because it hurts brands and silos create communication challenges. Sabnis remarks that recent client feedback indicates that large brands want convergence of brand accountability with fewer partners. “The brand idea continues to remain centre-stage and clients expect the teams that create and steer the brand ideas to have minimum duplication and maximum accountability. So it is increasingly an expectation that digital communication stays true to the brand idea and while it builds short-term sales, these initiatives should also build long-term value.”

He says that even tactical digital will no longer be measured in terms of impressions but as a means to deeper engagement that adds back to the brand value.

Gandhi highlights that with the digital-creative mergers, the creative output will become better because there will be more custodians with similar ideologies working on the same brand. “There is no way it will be impacted negatively.”

Survival of the fittest…

Shah suggests that clients will be responsible to identify a clear business objective and be acceptable to ideas and thoughts that can stem out of a cultural as well as a platform or a behavioural insight. “Brands will have to up their appetite for ideas that have a calculated risk taken in order to keep the consumer at the core and not the brand.”

Rohit Ohri, Group Chairman and CEO, FCB India, however warns that it could be a tricky situation. “Two individual companies have their own cultures and ways of working and it doesn’t mean they will be best suited to work together. It might be difficult to achieve the desired result and it has to be a marriage of culture not just capabilities or it could end up being a “failed arrange marriage.”

Kamath, who has led a few mergers himself, shares that the merger period is fraught with vulnerabilities, insecurities and cultural incompatibilities. “Companies tend to lose a lot of good talent during that period, simply because there are no immediate answers for them. From the senior most people down to the youngsters, everyone'd be asking the same questions, "Is my job safe?" "Will my objectives be different?" "Will I now have to report to a peer?" Most people inherently don't like change. It's the very few who get excited by it. So, managing this change in a smooth way without losing your best talent is quite a task. Usually, it takes at least 6-12 months of turmoil before things start settling down. The leaders, obviously, have a huge role to play in constantly communicating and inspiring the ranks with the new ambition. And they better have a strong HR task force in place too,” he says.

Neeraj Bassi, Managing Partner & Chief Strategy Officer, Publicis India, says that merger of creative and digital agencies is an interesting trend. “I would be definitely watching this space. Conceptually, it is a great move, as there needs to be a strong synergy between these silos. But making it happen on ground is not going to be easy. Each agency has its own culture, way of operation and costing, and the merged entity would need to figure a way to find a common ground. It takes time and concerted effort. The output should get better in the long run, but initial hiccups would be difficult to avoid. What if they both handle competing brands in the same category?”

The bottom-line is that there is a need for agencies to be more adaptive and reflective to the client’s needs. Only the ones who can adapt will survive…

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