Mergers and acquisitions

Partners at Green Square, Corporate Finance Advisors to the media and marketing sector, cast their eyes over the latest industry deals and look ahead to the next tranche of acquisitions.

4 July 2014 - 4:12pm | posted by | 0 comments

Are the big agency groups really that evil?

Ad legend Joe Pytka bemoaned agency groups at Cannes LionsAd legend Joe Pytka bemoaned agency groups at Cannes Lions

This week I wanted to talk about groups: the WPPs, Omnicoms and Cheils of this world.

As someone who works in the M&A space, holding groups are of particular interest to me, because they are the ones who do most of the acquiring – only two days ago, for example, Publicis announced its latest acquisition, the UK-based PR firm Salterbaxter.

And as a reader of The Drum, it’s quite likely that you’ll be interested in groups as well, because they now pretty much run the marcomms industry.

The crucial question, of course (and it’s one that may never be resolved), is whether or not this is A Good Thing. There are many who pine for the Mad Men era of the 1960s, or the 'golden age' of British advertising creativity of the 1970s, or the big budget, high gloss 1980s.

The acclaimed director Joe Pytka, who made famous TV ads for Nike and Pepsi, reignited this age-old debate recently when he was awarded the Lion of St Mark (the ad industry’s equivalent of a lifetime achievement Oscar) at the end of the Cannes Festival.

In his speech, he bemoaned a lack of independent and entrepreneurial agencies, and said how this shortfall was killing creativity in the advertising world. His comments were gleefully reported by the media, as you’d expect.

He said: "In advertising, I think the 1980s was the last age of creativity."

He continued: "One of the problems we’re having with advertising is lack of entrepreneurship. A lot of agencies are part of big corporations, and this could get me in trouble, but advertising is becoming commoditised and that is intrinsically evil – a form of slavery.

"When I met the best ad people in that period of time [the ‘80s] they were all entrepreneurs, and all willing to sacrifice their relationship with clients they were not happy with.

"Now you have the blending of advertising agencies with large corporations, that doesn’t exist anymore, because of the only thing of value is profit.

"There’s a certain integrity to these creative people, like [the fêted art director] George Lois. He would jump out a window before he’d accede to a client’s wishes.

"He would say, ‘I’m the expert, I’m the one who knows what he’s doing, you have no idea. If you don’t do it my way, go to the highway.’"

According to reports, Pytka then went on to explain that creative people “needed courage to do their work” and that having to justify themselves to accountants who were worried about how they bill their time (ad agencies now charge clients for their time, as opposed to making money on media commissions or charging flat fees) was a distraction.

"Making good creative work is an overwhelming task," said Pytka. "It takes everything in your power to do something unusual, honest, special."

I – and, I suspect, many readers of this august journal – will have some sympathy with this viewpoint; but my sympathy is by no means unqualified – in fact, I rather disagree with Pytka’s reasoning. It will be manna from heaven (just what they want to hear) for a certain audience, but It’s a romanticised view of history, seen through very rose-tinted specs.

The problem is that advertising is actually a craft, not an art, and it’s a business. It’s always been a business. The notion of telling clients to get stuffed all the time is amusing, but it’s clients who pay the bills.

And I doubt whether holding groups have caused the changes Pytka so laments. Sir Martin Sorrell, Maurice Levy, John Wren, Michael Roth and the rest have just done what most business people do – they follow the money and respond to demand. Holding groups began to emerge in the 1980s not because evil businessmen sat in their underground lairs plotting to make creative types unhappy, but because that was where the clients (the bill payers, remember) were going.

As clients consolidated and brands became more global – the P&Gs, Unilevers, Cokes, Nestlés and Fords, the ones who spend billions every year on marketing – they demanded more global, unified solutions to their marketing problems. This needed a new kind of agency – the local genius dreaming up fantastically creative campaigns a la Bernbach, Gossage or Ogilvy for local clients was no longer up to scratch. In a globalised world of globalised brands, the big picture was what was needed. And, like it or not, clients now want to see what they’re getting for their money. That’s not the “fault” of Martin Sorrell, it’s just the way the world is now.

And this is why I think Pytka’s laments, while understandable, are futile. The world has moved on. The 1970s, and the great days of CDP are gone; and they’re gone forever. In some ways the complaints about how things were better for ad creative back in the 1980s mirror music fans’ laments about how the charts were better in their day. (And it’s interesting isn’t it, that on the whole it’s not today’s young creatives who are bemoaning the industry, but those who prospered 20, 30 or even 40 years ago.)

Great work continues to be made, both from within holding groups (witness some of the great recent work done by WPP’s O&M and Grey, for example) and by enterprising independents. And look at the UK’s most acclaimed agency of recent years, Adam & Eve, whose work (for John Lewis particularly) has continued to win plaudits from the marketing community and affection from the public. Adam & Eve, started up by some ex-holding group employees, was swallowed by a group (Omnicom) two years ago. It seems to have made very little difference to the quality of the work, or indeed its effectiveness.

Creativity, great ideas, great work, will always, in the end, win out. And the entrepreneurial spirit from within our industry will also continue to flourish.

And in the final analysis, let’s remember one important fact: as soon as one indie hotshop is snapped up by a big multinational group, another start-up appears in its place. The cycle remains unbroken. And that’s good.

Andrew Moss is a partner at Green Square, corporate finance advisors to the media and marketing sector.

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