Commentary

Tearing Down The Walls (But Not The One That Matters)

I typically do not have any difficulty finding motivation or inspiration to write something. But the current U.S. political environment is really getting me down. The kinds of changes and challenges that are tearing at the very fabric of society kind of make everything else seem like minor league stuff. But this is not a political blog, so we must concentrate on industry news and issues.

And there was kind of a big bang last week from Ogilvy & Mather, which announced it was reintegrating the manifold O&M USA subsidiaries into one company — with, surprisingly, one P&L. That last bit is really important, because it will potentially set the company apart apart from other agency groups that have not quite gone there. Others are selling themselves as “integrated,” yet they try to do so while still managing separate P&Ls for each brand name under the umbrella.

So O&M is tearing down the financial walls that separate the different operating groups within it, starting in the U.S., with a promise that all other markets will follow over the course of the year.

As far as I can tell from the confusing O&M corporate website, today there are more than ten brands under the O&M label. So kudos to Ogilvy & Mather Worldwide Chairman & CEO John Seifert for trying to do something different.

Having said all that, I fear it doesn’t solve the real problems that marketers want solutions to — or perhaps, solves them only to a degree.

In my day job, I get to speak to many CEOs and CMOs. I think it is fair to say that realigning various creative agency hubs and spokes is probably only a minor solution for a fraction of the real issues.

The marriage between touch points and the message is where the magic happens, and this coming together is becoming more and more data- and insight-driven. This is where marketers are actively seeking smarter solutions (which some are beginning to take in-house).

However, despite O&M’s one-P&L world, it has not integrated any of the contact decision-making. That happens at Group M, which has eight global brands plus a bewildering number of regional and local brands of its own. So that is eight global P&L’ most likely driven by what Group M might find financially attractive for its bottom line, not O&M’s integrated P&L.

And that is assuming that a marketer actually uses all agencies from within the WPP family — for example, O&M plus a Group M media agency/data agency/digital media agency/sports marketing agency. In my experience, that is often not the case.

And here we see the biggest challenge for the global agency holding companies. Media P&Ls are by far the most profitable part of the empire, especially since the digital media explosion. And despite the fact that these profits are coming down a little, they are much, much higher than generated by any other part of the empire. And that is why none of the global agency networks have managed to integrate content and contact into one P&L (like the industry had until the early 1990’s!).

Which probably means that for the foreseeable future, agency holding companies will pander to integration only in word, not in true structure. Because no matter how inspired the vision, in the end it’s money that talks.

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