Ad Agency Re-integration :Will it work?

There has been a wave of announcements in the ad industry lately about how they are consolidating their balance sheets. Integration is something that communication groups all over the world have been challenged with since the turn of the century. When advertising agency bosses saw the writing on the wall, of declining margins in advertising and client's spends moving to beyond advertising, the smarter ones diversified to other communication channels like activation, event marketing, PR, direct marketing and finally digital. In a sense they were most unprepared for the digital age, forcing them to move into the field by acquisition rather than by organic expansion. Acquisition also hastened their inclusion into the digital age because to build in-house capabilities might have meant losing out completely on where the world was finally headed. The less clever ones of course plodded along with advertising, hoping for the best. When you have been doing the same thing for a 100 years or more, it is difficult to do anything else. But they were fortunately saved by being acquired by large groups around the world that were already diversifying beyond advertising and seeing themselves as communication groups.

360, a word perhaps first invented by Ogilvy, but quickly usurped by the rest of the industry shamelessly as their own, has been bandied around since the turn of the new millennium. It was a way for agencies to say ' We are not just an advertising agency' anymore. Of course their actual performance on the ground often belied their promise of being 360. Also the mushrooming of different capabilities in the industry, often meant that these companies were creating different silos, each of them a separate profit centre. It was not long before everyone realised that the silos were not talking to each other, were competitive and hardly ever worked together. In addition, cross-referrals didn't really work because there was nothing in it for them. To take an example, if the PR arm of a communication group referred their client to the ad agency arm of the same group there was no benefit for the PR profit centre head. In addition the PR arm ran the risk that the ad agency could sour up the client relationship and eventually the client could be lost to both of them.

In the meantime, clients were hesitant to put all their eggs in one basket, and were slowly diversifying their portfolios to specialists in PR, Event Management, Digital and the rest. But the world's communication groups carried on regardless, with their 360 offering and were happy to get even a morsel beyond advertising, or PR or direct marketing or events. Moguls of the communication industry like Sir Martin Sorrell were in the meantime deriding the advertising part of their business, their bread and butter until now, by saying things like Don Draper wouldn't recognise the business if he were in it today. He described the current shift in the advertising business as 'Mad Men to Math Men' referring to the popular television series, depicting life at the fictional Sterling Cooper advertising agency on Madison Avenue in New York in the 1960s. That must have already sent a shiver down the spine of the traditional advertising man.

Now it looks like the failure of integration has finally dawned on the communication groups. The Publicis Groupe was perhaps the first to announce integration of their various entities, Leo Burnett, Saatchi, BBH, MSL, Sapient etc collapsing into one entity called Publicis Communications with a consolidated balance sheet. Sorrell quickly likened the move to the French Revolution with his usual wit. Of course many in Britain were inspired by the French Revolution. ‘Bliss was it in that dawn to be alive’, wrote William Wordsworth in his ‘Prelude’ of 1805, recalling the storming of the Bastille.

Ogilvy, perhaps the most diversified in the WPP group, has been quick to follow suit and announce that they would also move to a consolidated balance sheet. Earlier this week, one of WPP Group’s brands Ogilvy, announced that the global array of Ogilvy brands is consolidating into "a single, branded, integrated operating company". That means standalone brands like Ogilvy & Mather, Ogilvy One and Ogilvy PR will disappear in favour of a single, unified brand presence.

Sir Martin had earlier referred to this move for re-integration famously as 'the toothpaste is out of the tube'. But the new move from agencies might be riddled with complexities. For one, no one really still knows if clients want to put all their eggs in one basket. For global companies to break their current alignments and promise their entire portfolios to one communication group might be considered foolhardy. On the other hand, one still doesn't know how integration will really work. Unfortunately the communication business is filled with specialists. The advertising executive knows little about digital ; for him digital is the freedom of making 5 minute films for youtube instead of 30 second TV spots. The experiental marketing executive is notably bad at understanding advertising and branding. The digital marketing executive would need to take a course on positioning and brand personality. In the process perhaps, rendering this whole brave new move towards integration quite useless. So unless the industry is able to grow a new breed of generalists who are acceptable and respected by the specialist, the entire move may fail.

So putting the toothpaste back into the tube, might just be another flawed aphorism. We all know from our early morning rituals that squeezing toothpaste out of the tube is easy, but putting it back, is nigh impossible. As someone said, there is no point in re-arranging the deck chairs on the Titanic.

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