Holding company CEOs evolving their agencies in changing times

As the world continues to be in political and economic flux, the top marketing services network CEOs discuss how it's affecting their agencies.

Martin Sorrell, Founder and CEO, WPP

How did PR perform in 2016? Where does its performance stand in relation to other disciplines within WPP?
It was another strong year for our PR and public affairs business, which grew reported revenue by 16.4% or 5% on a constant currency basis. It more than pulled its weight alongside the other disciplines within the group. All of our agencies contributed, but Cohn & Wolfe performed particularly well, and Ogilvy and Hill+Knowlton Strategies improved.

What impact did the new U.S. presidency and global geopolitical, economic, and social uncertainty have on marketing services in 2016? How will this play out in 2017?
Ever since the collapse of Lehman Brothers, corporate animal spirits have dimmed. The global economy seems to be trapped in a world of perpetually sluggish growth, businesses have lowered their horizons, and both boards and investors are shy of taking risks. Short-term fixes such as cost-cutting are prioritized over long-term investment, and geopolitical issues only add to the uncertainty.

Power has shifted from marketing departments to finance and procurement, which has implications for marketing services companies. And while WPP had another record year in 2016, it will continue to be a tough environment in which to do business.

Meanwhile, companies that defy the unfavorable economic environment and maintain investment in their brands have a habit of outperforming their rivals. The strongest innovators and brands generate the strongest total shareholder returns.

Over the medium- to long-term, it remains to be seen what impact the Trump presidency will have economically.

In the short term, his reforms in relation to tax, infrastructure spending, and regulation, and a generally more business-friendly administration may result in a Keynesian or Trumpian boost, with higher inflation.

Given its size, what is good for the American economy is good for the global economy, but this assumption must be balanced against the broader trend: growing protectionism and nationalism, which has not historically been a recipe for long-term growth.

With the continual drive toward more holding company pitches and horizontality, as evidenced by developments at Ogilvy and WPP Health & Wellness, how soon will it be before single discipline agencies become redundant?
It’s true marketing services firms are becoming more closely integrated. But I don’t see the specialisms becoming redundant — just working together more closely and more effectively than they have before. Our recent success in winning the Walgreens Boots Alliance global business with a cross-group solution is a good example of that. The horizontal "team" model prizes their specialist expertise and pairs it with all our other disciplines.

  

John Wren, President and CEO, Omnicom Group

How did PR perform in 2016? Where does its performance stand in relation to other disciplines within Omnicom?
We are very pleased with the performance of Omnicom PR Group around the globe. Omnicom achieved revenue of $1.4 billion in 2016 and 2.8% organic growth.

Our agencies brought in great wins in 2016 with brands including Anheuser-Busch InBev, Bose, FICO, General Mills, GM, Huawei, Merck, Pfizer, and Western Union. And we were pleased to see several wins come in as a result of collaboration across agencies.

What impact did the new U.S. presidency and global geopolitical, economic, and social uncertainty have on marketing services in 2016? How will this play out in 2017?
We have not seen any meaningful impact on our operations to date. Our industry has adapted to "change" or "uncertainty" since the beginning of time. Today, we are hearing questions such as, "What do we do if the president tweets about us?" Our agencies have expert counselors at the ready who are helping clients work through these scenarios and, as importantly, anticipate what’s coming next.

We have the best PR agencies in the business that thrive on these challenges and we’re working hand in hand with clients to achieve their business goals within the context of this shifting environment.

With the continual drive toward more holding company pitches and horizontality, as evidenced by developments such as Omnicom PR Group, how soon will it be before single discipline agencies become redundant?
There have been many benefits in creating a vertical structure for our PR firms in order to facilitate better collaboration and bring the very best talent to our client teams. But each of the PR brands remains strong and we have no intention of changing that.

Within Omnicom, we are able to determine when is the right time for our agencies to come together as an integrated team or when it makes sense for agencies to pursue opportunities as a one-agency solution. It’s all about what is right for the client. We take the same approach with our holding company pitches — for each, we determine which agencies to engage based on the client’s business challenges and the best talent to meet their needs.

Yannick Bolloré, Chairman and CEO, Havas

How did PR perform in 2016? Where does its performance stand in relation to other disciplines within Havas?
As with our performance overall, our PR agencies had a very strong year. They added clients and new services and are excelling at both earned and owned media, as well as integrating paid into their offers for consumer and corporate brands. Our consultancy-focused PR practices also grew — in part because transactions in and around capital markets have been active.

A major factor here, too, is our Global Collective’s implementation of an agile toolbox that allows it to pivot quickly and respond immediately in the service of effective and compelling brand messaging.

What impact did the new U.S. presidency and global geopolitical, economic, and social uncertainty have on marketing services in 2016? How will this play out in 2017?
There is no question we have entered a next normal. It is an age where we are bombarded by news, fake news, alternative news and facts, as well as biased spin presented as facts. Yet we have clients selling service and products in categories as diverse as big pharma and tourism, office services and automobiles, and we need to manage their communications in real time, drawing from all of their universes.

This is why the Global Collective’s adoption of agile PR has been important for continued success in delivering consistent and strategic comms — regardless of target audiences, sector, or market conditions.

With the drive toward more holding company pitches and horizontality, how soon will it be before single discipline agencies are redundant?
Rather than predict the demise of single-discipline agencies, I’ve found the most immediate opportunity lies in the synergy between PR companies and our Havas Villages all over the world.

Havas Paris, home to our largest cluster of PR billings, thrives as a fully integrated offer, and our PR operations in Australia are also integrated through our Sydney Village. Further, the Global Collective serves Sodexo, consolidated Kellogg’s cereals and snacks this past summer, and has won awards for our work with Business France and the United Nations Foundation.

This is the new system of amplifying the news, microtargeting who receives it, and measuring the impact of well-crafted messages, and it’s allowing us to provide a richer and deeper offer to clients.

Michael Roth, Chairman and CEO, Interpublic Group

How did PR perform in 2016? Where does its performance stand in relation to other IPG disciplines?
Once again, PR was among the growth leaders in our portfolio, as it has been for the past several years.

Progress at our global PR agencies, including Weber Shandwick, Golin, and DeVries Global, continues to outpace the industry and push out the boundaries of the discipline.  Our organic investments in the digital, social, and content space are driving market share gains. We are also an acquirer in the space.

Our regional and specialist PR firms, including Carmichael Lynch Relate, are also performing well. Overall, our PR businesses grew in headcount year over year to support strong growth across our agencies.

What impact did the new U.S. presidency and global geopolitical, economic, and social uncertainty have on marketing services in 2016? How will this play out in 2017?
We saw good growth in our corporate reputation and public affairs practices in 2016. Companies facing uncertainty often turn to PR firms to develop preparedness strategies, and we anticipate that will continue in 2017.

With the drive toward more holding company pitches and horizontality, how soon will it be before single discipline agencies are redundant?
Not so fast. A rapidly changing consumer and media landscape means it’s increasingly hard for one agency to deliver a big campaign that reaches the right consumers — it requires a series of specialists to deliver.

The problem has been that even generalist agencies are becoming specialists in some areas. Clients look to a holding company solution to sort out turf wars, increase efficiencies, and get the results they need.

Agency brands matter. The DNA or essence of an agency are what attract creative people to our business. An agency’s unique attributes also make them mesh well with certain clients, and not so well with others.

Commoditization lessens the ability to get high-quality people. Agencies need to evolve and modernize, while building on existing specialties.

All of our PR agencies play important roles in integrated, cross-IPG engagements on our top 20 clients.

Maurice Lévy, CEO, Publicis Groupe

How did PR perform in 2016? Where does its performance stand in relation to other disciplines within Publicis?
In 2016, the MSL PR business saw single-digit growth globally and double-digit margins. These results are in line with the results from the other parts of the group. In the U.S., the business was still working its way through our transformation, but made some good headway with client successes, including the Power of One success at USAA.

What impact did the new U.S. presidency and global geo-political, economic, and social uncertainty have on marketing services in 2016? How will this play out in 2017?

So far it’s hard to tell if there has been a significant or measurable impact on the business from the changing political landscape.

We believe the role of PR will continue to rise in light of these political and economic changes as clients will need thoughtful and strategic counsel from our specialized experts. In a world more polarized than ever before, the answer is not less communication, but more.  There is a great opportunity to increase the dialogue in order to close these gaps and PR is central to this solution.

With the continued drive toward more holding company pitches and horizontality, as evidenced by MSL’s closer integration with Publicis’ ad firms, how soon will it be before single discipline agencies become redundant?
What I can tell you is that our largest clients have led us down our own path to transformation. By putting them at the center, we are able to customize how we serve them with the right solution, the right mix of services, and experts working very closely together.

What clients are asking for today is a process for combining things together, and ensuring we bring them not only the best thinking, but also the strongest innovations. We are evolving as a firm and we can use our resources, especially in data and technology, to power how we counsel and communicate. Other agencies, including large independent PR agencies, need to find their own paths to meet their clients’ changing needs.

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