Analysis: Entrepreneurial ad executives bring a fickle element to boardroom procedures
One of the world’s biggest advertising companies, Omnicom Group, is known for the work it does for Pepsi, while its French contemporary, Publicis Groupe, has been an important advisor to Coca-Cola. Just like those two fervent soda competitors, the two ad companies simply cannot get along.
After pitching a deal last July that would have created a global advertising conglomerate that produced $2 billion in profit, Omnicom of the U.S. and Publicis of France have called off their affair. In doing so, they shine a spotlight on one of the more nettlesome challenges of the advertising business: Personalities can often derail the biggest corporate maneuvers.
“The root cause was almost certainly managerial and organizational matters rather than taxes or anti-trust issues,:” said Brian Wieser, an advertising-industry analyst with Pivotal Research, in a Friday note.
In a conference call Friday, Omnicom Group CEO John D. Wren said the two companies faced such differences in corporate culture in bringing the two conglomerates together that “there was no clear finish line in sight.” Speaking on a different call, Publicis Groupe leader Maurice Levy hinted that Omnicom was trying to dominate the executive ranks of the merged concern.
Omnicom and Publicis had initially suggested they would be merged by the end of 2013 or early 2014, despite the daunting tasks of gaining approval from several different nations and having to shape a management team out of two different companies with many strong players.
The deal would have married such big Omnciom ad agencies as BBDO Worldwide and TBWA Worldwide with storied Publicis operations as Leo Burnett and Saatchi & Saatchi. It would also have stitched a media-buying monster out of agencies like Starcom MediaVest Group and Omnicom Media Group, which place billions of dollars worth of advertising across TV, radio, print and digital. The two sides billed the tie-up as a way to gain scale and leverage against a host of digital players who were building increasing sway over the price and placement of advertising – namely, companies like Google, Facebook and others.
No matter how big these ad-holding companies get, however, they are often at the mercy of the personalities who run them. Ad agencies are built by entrepreneurs who offer dynamic visions on how to curry consumer favor and gain public interest in pitches for laundry detergent or a new car. As time moves on, these executives often sell their business to large holding companies seeking to add new clients or new business from existing clients to their roster. The culture of the holding companies often hinges on outsize personalities who press for their way of thinking over those of others.
To be sure, Wren and Levy aren’t known for being mercurial. Wren is a former consultant for Arthur Andersen, who worked his way up through the Omnicom ranks. Levy’s history with Publicis is built on history and passion, In a story well-known among advertising executives, he rushed back into Publicis headquarters in the 1970s to save the company’s files after a fire broke out.
Even so, the culture of the ad business is one in which a little personality goes a long way. Entrepreneurs who move up in the ranks after being assimilated often find it difficult to reach consensus.
Consider the case of Andy Berlin, widely seen as one of the ad industry’s creative geniuses.. Berlin first came to attention in the 1980s and 1990s at San Francisco ad agency Goodby Berlin & Silverstein, which was eventually sold to Omnicom. He moved to a big Omnicom holding,DDB, and managed to have a smaller unit spun off under his aegis so he could work with Volkwsagen. But Volkswagen eventually left the relationship, and Berlin created a new independent shop, Fallon McElligott Berlin, with another strong ad-industry personality, Pat Fallon. The two broke up the agency after the two partners could not chart a similar path for the business. Berlin would move to British ad giant WPP in 1997 and gain some success with Coca-Cola. In all, he started four different agencies over the course of 14 years.
Other lines of business would probably have less tolerance for such a fickle executive. In the world of advertising, however, it is more often than not the norm.
The breakup of Omnicom and Publicis does not mean pressure on the world’s major ad companies to bulk up has eased. Among analysts, both Interpublic Group of the U.S. and Havas SA of France are seen as being in need of more scale. Dentsu of Japan has made obvious moves in recent years to gain a stronger foothold outside of its home country. The ad firm acquired Aegis Group, which owns the Carat buying agency, in 2013.
Only WPP, controlled by another maverick executive, Sir Martin Sorrell, is seen as being relatively stable, according to Pivotal’s Wieser. In recent years, WPP has placed more emphasis on acquiring marketing firms that can analyze data and spending as well as companies that specialize in digital advertising and the placement of same.
Omnicom executives said they would likely look at potential acquisitions, but nothing as seismic as another merger, at least not in the near future. “I think it would be a very long time before I try to do a merger of equals again,” he said.