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Watch out, creative and media agencies – the accountants are coming for you

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By Barry Dudley, Partner

March 21, 2014 | 6 min read

It’s commonly thought that the biggest threat to the established international ad networks like JWT, McCanns and TBWA will come from a funky upstart digital start-up plotting world domination from a garage outside San Francisco; or one of the tech giants like Google or Apple.

Certainly, the ambitious upstart and the empire-building tech colossus have both the ability and the motive to play havoc with the profitability and status of the likes of O&M, Saatchi & Saatchi and DDB. But there is a much bigger threat, one that comes from an unexpected source – the exciting world of accountancy, as was proved earlier this month (more of that in a minute, but first, some background).

For some while now, the so-called 'Big Four' accountancy (or rather audit, advisory and consultancy) firms – PwC, Deloitte, KPMG and Ernst & Young – have been quietly moving into areas once the preserve of marcomms agencies.

Many agencies' roles now involve consultancy, particularly with the rise of things such as data-driven CRM and that term ‘digital’. Unilever or British Airways, for example, require more than just TV or print ads – they require insights into their brands and the way people interact with them; they want strategic advice as much as posters and 30-second TV spots. The role of, say, O&M with Dove (a relationship that goes back almost 60 years) is as much a strategic partner as it is a creative agency.

This role as a strategic partner is highly profitable, value-added work that provides high margins. In many ways, the traditional role of a creative agency has become increasingly commoditised; production, execution and lower-level account management can be outsourced (although of course the best creative can, and will always be able to, charge a premium).

So it’s no surprise that the audit firms, whose own role has morphed over the past 30 years or so, have been marching into the marcomms world for some time. After all, insights, consultancy and strategic planning have long been in their DNA.

Indeed, KPMG has formed KPMG Capital, a wholly owned global investment fund that will invest primarily in data and analytics businesses via strategic acquisitions, technology partnerships and other data and analytics capabilities. Deloitte has talked of a similar strategy through Deloitte Digital.

And Grant Thornton UK LLP, part of the Grant Thornton International group, the world’s sixth-biggest audit and advisory firm, has acquired the analytics firm Local Futures Group.

Established in 1997, Local Futures is a London-based research and strategy consultancy that provides what the company information describes as “a geographical perspective on economic, social and environmental change”. It’s essentially a very sophisticated qualitative market research business that provides data-driven geographical perspectives on the interplay between economic, social and environmental factors. A government, local authority or big corporate like P&G with scores of brands in different countries would kill for that kind of information.

The kind of context and perspective the group is able to offer has been much in demand from both the corporate and public sectors, here in the UK and abroad, because it can help formulate public policy and corporate strategies, and help clients understand people and places, and the ways they interact, better.

Local Futures provides research and consultancy services, but also offers a range of online services. These include the bespoke Local Knowledge and Customer Knowledge subscription services, together with computer-generated Place Profiles – reports that tell a “story of place”. The insights these services produce would be extremely valuable – it’s one of the reasons why the big marcomms groups have spent a fortune in the past few years on bolstering their market research and analytics offerings.

The deal – which sees Local Futures Group's team joining the Grant Thornton family at the latter’s Euston offices with immediate effect – will bolster the GT analytics offering.

The acquisition is the clearest indication yet of Grant Thornton's strategic shift to what it calls “holistic business advice for private and public sector clients”. Local Futures will form part of the Grant Thornton's growing analytics services – indeed, GT has just set up a Place Analytics offering.

This media statement by Phillip Woolley, partner, Grant Thornton UK, reveals much: "For organisations in both the private and public sectors, the ability to make informed decisions based on robust and comprehensive data-driven insights has never been more important. The analytics expertise which the Local Futures Group brings truly complements our solutions-driven approach to working with clients, and our major growth programmes such as GrowthAccelerator.

"Local Futures Group's work in economic development and growth, in particular, sparked our interest in exploiting the synergy between our growth products. As organisations pursue strategies for growth, tools such as Place Analytics, which can offer a comprehensive picture of the socio-economic drivers in a location, can go a long way in helping organisations frame their strategy, products and services to customers."

For brands, companies and public bodies, the issue isn't just about accessing data, but in analysing and presenting that data in a form that demonstrates the interrelationship – at a local level – between economic, social and environmental conditions.

So where does this deal – which is likely to be replicated on larger scales by the other global auditors and consultancies – leave the established order? Well, established market researchers like Nielsen and WPP’s Kantar group will need to up their game; as will the international ad networks with big global clients on their books. Some of them have already established, with varying degrees of success, consultancy, advisory and analytics offerings.

In 20 years’ time, it is likely that the Leo Burnetts and Mindshares (this shift affects the media agencies as much as, if not more than, the creative ones) of this world will resemble a Grant Thornton, McKinsey, KPMG or Accenture more than they do the swashbuckling DDB’s or CDP’s of the 1960s and 70s.

Many will mourn this change, as the large in-house “suit” and creative departments at global agencies shrinks or even disappears. But if these agencies are to survive into the 2020s, 30s and beyond, they will have to change. It’s a fascinating subject, and one which I suspect we will return to in the coming months.

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

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