Holding company woes represent good news for PR

Brian Wieser from Pivotal Research reduced price targets on agency holding companies in light of difficult trading conditions - but these structural and temporal difficulties will bring PR more central to the marketing mix.

Clients are forcing holding companies to envisage a very different future structure.
Clients are forcing holding companies to envisage a very different future structure.

A leading analyst in the advertising, media, and internet space this week reduced price targets on the whole marketing services sector following Exane BNP Paribas’ double downgrade of WPP shares seven days ago.

Pivotal’s Brian Wieser, a respected figure in the industry who has become a go-to source of comment on marketing issues in national media, noted impacts on agency fees caused by transparency issues, media fragmentation, a slowdown in underlying growth at clients, and a feeling the traditional ad agency market has fundamentally changed.

Wieser, who was in Cannes this year, including at an FT lunch with WPP CEO Martin Sorrell I also attended, highlighted zero-based budgeting at many clients, which Sorrell mentioned at that event and in my follow-up video interview with him. Wieser also pointed to wider-scale "in-housing" of programmatic ad buying and competitive threats from IT services firms and consultants.

Separately, Exane analyst Charles Bedouelle authored a report alongside an adjustment of WPP stock from "outperform" to "underperform." He said the challenges faced by WPP and fellow holding company Publicis could be "bigger and more protracted than many believe" and that they need to evolve much faster than previously thought.

Analyst evaluations should not be taken as gospel, and they have certainly been wrong about the marketing services sector before, but these were definite wake-up calls for the holding companies alongside other travails such as WPP’s high-profile recent cyberattack, from which it is only now fully recovering.

Then there is the specter of AI around the corner, which threatens to remove the human component from many agency disciplines and automate once-lucrative services in the same way programmatic has done for broadcast and display advertising.

I believe the analysts’ concerns have substance. But I also believe these concerns put the PR sector in a much stronger position.

None of the issues causing concern relate directly to the holding companies’ PR firms. In fact, the rest of the disciplines – advertising, media, digital – are moving in PR’s direction and finally acquiring a fuller understanding of the power of offerings centered on earned media.

That’s why Ogilvy’s John Seifert says PR is driving "new-age marketing" and that you need PR people at the core of integrated offerings and to recognize that brands and PR are now inseparable.

I’ve long wondered how long the holding companies can maintain separate revenue lines and P&Ls for multiple disciplines such as advertising, media, direct, and digital in this fast-converging agency services environment – and it seems the groups are finally acting to modernize their structure and reduce their number of individual agency brands.

WPP recently merged digital agency Possible Worldwide with direct specialist Wunderman. It folded media agency Maxus into its MEC sibling and media agency and performance marketing network Neo@Ogilvy into media firm Mindshare. PRWeek has written extensively about Ogilvy collapsing all its disparate discipline-specific brands, including Ogilvy PR, under the stem Ogilvy banner.

With WPP Health & Wellness, the Sorrell-helmed holding company brought together four specialist agencies - Ogilvy CommonHealth Worldwide, Sudler & Hennessey, ghg | greyhealth group, and CMI/Compas – under a new healthcare unit led by Mike Hudnall.

The bottom line is the holding companies have become too unwieldy and clients are fed up of interfacing with multiple people from multiple agencies at every meeting. They want a simplified – and cheaper – structure that fits better with the new age of cost reduction and austerity they are facing internally.

There weren’t many 30-second ad spots awarded Lions at Cannes this year. But there were many winning campaigns with earned media at the center, including the most high-profile winner of the week: State Street’s Fearless Girl.

That’s no doubt why Interpublic Group’s MullenLowe this week acquired PR firm Salt, with the ad shop’s global CEO Alex Lekikh noting the move reflected the need for creative advertising and PR to be "smashed together" as clients require a more integrated offering. It’s also why another IPG firm, the Aaron Shapiro-helmed Huge, brought on Jason Schlossberg to build out a PR function.

And it’s why holding companies such as Publicis and Omnicom are going to market with integrated offerings that routinely include the PR firms in their ranks as a central part of then proposition. More and more, the advertising executives that have long dominated the holding companies are waking up to the special sauce PR brings to the table.

While it doesn’t really matter to the client what the agency is called and how the services are defined within the holding company structure, from a purely proprietary point of view it would be nice to see those who self-identify as PR agencies and PR professionals prospering from this new realization.

But, however the holding company restructures shake out, and believe me there is plenty more to come on this one, earned media is going to be at the center of what remains – which has to be good news for what we currently call PR and what PRWeek writes about.

* An earlier version of this article mistakenly said Brian Wieser downgraded the agency sector in his analyst note, rather he reduced price targets, but maintained hold ratings on each of the four holding companies.

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Already registered?
Sign in