New Year; Old Deals

30 January 2015

The public manoeuvrings of the largest media agencies rarely disappoint. It is extraordinary how many times they become embroiled in spats on buying issues, whilst in the next breath promoting what they tend to describe as their unrivalled strategic planning skills.

The latest gift to the toiling blogger comes from GroupM. The other week the long-running contest for the newly merged Dixons Carphone Warehouse business was concluded. The Dixons incumbent, Walker Media, now part of the Zenith Optimedia network, and thus part of Publicis (do keep up!) won, thus adding the Carphone Warehouse business to its Dixons relationship.

GroupM lost and rather as when they lost the Crown Commercial Services business recently Sir Martin Sorrell immediately called foul. As far as I know he’s not yet gone quite as far as dragging Dixons through the courts, as he’s doing with the Government’s decision (after all Dixons isn’t tax-payer funded) but Arif Durrani in ‘Campaign’ lost no time in publishing the following, in quotes:

“Walker has been awarded the business after tabling desperate rates that are unsustainable and can only be met if Publicis takes value from its other clients.”

The GroupM positioning is clear. They are the biggest media buyers in town so it’s just impossible for anyone to beat them on price. Thus, if someone does beat them, it’s clearly through some sort of dubious tactic. There is though at least one rather glaring hole in this argument.

Yes, on a table based on published ad spends GroupM is indeed the very biggest. But not every one of its clients has to buy into its group-dealing mentality. Some clients hold back from being included in the pool negotiations, presumably on the argument that they would rather their budgets were used 100% for their benefit, and not as a part of any deal that at least in part benefits GroupM and its other clients.

This is murky territory. Clients are coy (unsurprisingly) when it comes to their media negotiation strategies but I would be very surprised indeed if 100% of GroupM’s published billings are included in group deals. So who is to say if their group deals are based on the largest volume anyway?

Look again at the Durrani quote. Remind you of anything? Those close to the Government decision say that GroupM’s case rests on it doing exactly this – using its total muscle to offer the Government ‘unbeatable’ rates. Except that Aegis beat them. And an independent auditor confirmed the wisdom of that decision.

Then there’s the ongoing saga of Omnicom versus Channel 5. Omnicom (for those with short memories you can relive all the excitement here), pulled all of its clients off C5 last June in order, it was widely rumoured to make up a shortfall in the revenue the agency had committed to ITV, although why Omnicom did what they did is rather less important than the fact that they did it.

Now, according to a story in ‘The Financial Times’, C5 has written directly to Omnicom’s clients suggesting they take the advice of an independent auditor before making up their minds whether such an exit from the channel was in their (the brands’) best interests. The implication being (and this is supported by an auditor quoted in the story) that it was not.

These are of course the same agencies who are quick to remind us of their planning skills, their creativity and their strategic strength, all excellent qualities built on objectivity. The GroupM agency Mindshare is, in the words of one of their most senior executives, ‘the new McKinsey’. Omnicom Media Group company OMD’s website states upfront that “OMD is recognized for its global footprint, strategic integration and creative innovation.”

Indeed. And yet it’s hard to marry delivering objective, strategic advice with group deals. The old line – that every client receives its fair share of the benefits of any group deal and that the agency is simply there to negotiate these benefits – is generally greeted by those in the know with mocking laughter. Even some of the annual reports admit to making money on the back of these volume deals, as I said here last week.

There is also an unpleasant arrogance behind the GroupM stance. After all if volume was really all that counted and if media value really was directly related to volume then GroupM would win every pitch, by definition.

But they don’t because sometimes thinking and planning count for something. Many of the GroupM agencies are very good at that bit too. It does them no favours to read that their bosses believe that every decision is down to deals. Because if they think that when they lose, they presumably also think that when they win.

As so often, this week especially the Greeks have a word for it. Hubris.