By Marcus Honesta.
Having demonstrated that they can’t make enough money out of their core business to survive; (because of their flawed business model) Advertising Agency networks have turned to production to prop up their languishing fortunes.
As background, WPP (Wire and Plastic Products the original holding company) is a public company that at last count owned 405 companies. The British multinational advertising and public relations company who owns a number of advertising, public relations, media and market research networks worldwide. They include IMRB Millward Brown, Grey, Burson-Marsteller, Hill & Knowlton, JWT, Olgilvy & Mather, TNS, Young & Rubicam, GroupM, and Cohn & Wolfe and Hogarth (their new production iteration) to name a few.
If this is not the ultimate conflict of interest then I don’t know just what is. They are not even trying to hide it anymore. Perhaps they are working on the concept that the best place to hide a book is in a library, in other works put it in in plain sight and no one will feel it is suspicious or a potential problem.
They must think clients are stupid. In a major announcement this week they announced “Ogilvy Announces New Global Partnership With WPP-Backed Production Company Hogarth. Holding group looks to handle more of clients’ production needs”
Ogilvy further tied its fortunes to Hogarth, parent company WPP’s group of in-house production companies.
Worldwide chairman & CEO John Seifert announced that the two networks would form a new “global partnership” by consolidating their respective services into “a new studio ecosystem” that combines Hogarth’s production capabilities with Ogilvy’s creative and client services teams around the world.
This changes involves dropping the H&O brand and naming a new leadership team: former H&O global CEO Tony Grigg will run the operation while simultaneously reporting to Hogarth CEO Richard Glasson and Ogilvy chief delivery officer Gunther Schumacher.
Moving forward, the entity once again known as Hogarth will provide these services in 13 markets, including Argentina (Buenos Aires), Brazil, China (Beijing, Shanghai, Hong Kong), Indonesia, Japan, Mexico, Romania, Singapore, South Africa (Cape Town), Thailand, the UK and the US. In other markets, it will go by the name Ogilvy Production Studios.
But how will this help clients? Surly it represents a massive conflict in interests. Eager to reap the profits from production this move will do only one thing; destroy the local industry and put thousands of independent production companies out of business.
By its very nature it will mean at the very least two individual mark ups on all production services.
Let’s just examine how this model might really work. If Hogarth wants to fain independence, it would seek to provide three individual arms length competitive quotes. One from them and two from outside independent producers, but here in lies the problem. The independents, in the unlikely event they win the bid, will have to bill the production costs through Hogarth. In turn Hogarth will bill the agency and manage the project. The agency will then bill the client with their fee on top. Naturally they will do this for free? “Move on nothing to see here” – are they kidding?
Marc Pritchard the CMO of Proctor and Gamble (the world’s largest advertiser) has already flagged and is insisting on more transparency and to eradicate the layers within creative and media agencies that disrupt flow for brands.
The P&G CMO told a crowd at the ANA Media Conference in Orlando, Florida on the first of March this year that: “we need fewer project managers and more brand entrepreneurs.“ He also stressed the need for reuniting media and creative. I can’t image how this initiative will meet P&G’s demands and expectations.
In their effort to maximise revenue, one has to question how the independent bids really will be recommended.
However the agency networks are clearly just not listening. In a statement clearly designed to hose down any conflict of interests allegations, Ogilvy chief delivery officer Gunther Schumacher said: “Internally, the previous partnership was really an improvement on an existing system of internal studios. This one is about moving management control toward Hogarth,” said Schumacher, adding that the goal is to “give clients back control over their production spend … without losing any of the creative fidelity.” (Production can encompass up to 10 precent of a given client’s total marketing budget.)
Glasson called the arrangement “new and different in terms of breadth and depth of partnerships,” noting that it came about due to growing interest from clients who feel the need to produce more content across platforms while operating “under a certain amount of price pressure.”
As production increasingly becomes a more important and profitable component in the creative advertising equation, WPP wants to come as close as possible to providing everything for its clients—with Hogarth serving as the proverbial kitchen sink for both Ogilvy and Grey.
Schumacher said: “What we are doing here is about more transparency for clients, not quietly moving money around in a back room,” he added, “The bidding process for Ogilvy and Grey client’s work will remain the same. We want them to ask, ‘How do I spend my money wisely and strategically?’”
The entire flaw in their thinking is that clients will be happy to sign over without question 100% of their entire marketing spend to them. This is never going to happen, nor should it. There is already a breakdown in the trust relationship between the two parties; this will only serve to cause further friction and suspicion.
A “new studio ecosystem”, more likely it will be viewed as another layer of deceit and manipulation. It will most likely be perceived as a brazen cash grab by a desperate and flawed industry model. My prediction is that it will only serve to accelerate the de-coupling process.
But they do say “a drowning man will clutch at a straw”.