The New York Times Advertising Columnist Stuart Elliott wrote a report titled, “Uncertainty on Wall Street, Big Deals on Madison Avenue,” spotlighting the business maneuvers taking place in the industry. Pointing to recent acquisitions and mergers, Elliott concludes, “Madison Avenue is, by and large, in better shape than many of the industries for which it creates ads.” It’s an optimistic perspective, likely reached after reading too many puffery-filled press releases from the holding companies and agencies. As a public service—and because it’s a slow news day—MultiCultClassics will offer a rambling, glass-half-empty counterpoint.
Can’t help but think that the acquisitions and mergers are mostly a sign of desperation. In lieu of creating a new or even enhanced business model for the traditional advertising practices, the wonks running holding companies and agencies are simply acquiring digital and below-the-line enterprises. Then they are probably cooking the books to create an illusion of profitability, when it’s actually just a matter of the cheaper disciplines subsidizing the dinosaurs.
As MultiCultClassics has noted in past posts, experts have consistently shown that organic growth is far more successful than growth by acquisition and merger. Hell, WPP Overlord Sir Martin Sorrell
pretty much admitted it a few years ago. Can anyone identify successful combinations orchestrated in the last decade? The winners are definitely outnumbered by the total disasters.
The digital acquisitions and mergers are nothing more than reruns of the greedy mistakes of the 1980s and 1990s. Can anyone show how, say, Digitas and Razorfish have improved Publicis Groupe? Plus, have Digitas and Razorfish flourished in the network? Integrating interactive capabilities with traditional advertising is an illusion, as the two operate off of entirely distinct business models, with entirely distinct P&Ls. Agencies like Draftfcb have never honestly made good on the notion of a “new model of holistic communications expertise offered under one P&L,” and there’s no reason to believe things will be better when introducing digital to the big agency picture via acquisition or merger.
A story in the Fall Edition Digital Issue of Advertising Age featured a quote that sums up the truth:
“I love the promise of [the integrated agency]. I love the idea in theory,” said Shiv Singh, global director of digital for PepsiCo beverages and former Razorfish exec. But, he added, “I don’t think anyone is truly there in reality.”
Hey, no one is truly there is fantasyland either.
Other factors possibly fueling the misperception that our industry is “in better shape than many of the industries for which it creates ads” involve the side deals and schemes hatched by the holding companies. For example, IPG was able to semi-offset Draftfcb’s catastrophic loss of the SC Johnson business by selling some Facebook shares. Other networks and agencies quietly profit from real estate ventures and renting out office space no longer used by shuttered shops. Indeed, there are lots of non-advertising-related ways to generate revenue. Let’s face it, the typical Mad Man would engage in human trafficking of blood relatives to meet quarterly earning figures.
The biggest indicator of the state of affairs on Madison Avenue can be scanned via the classifieds and job sites. Most places are seeking digital workers—primarily designers—for bargain-basement wages. Few advertising agencies are hiring. Plus, so many shops seem to have a revolving door for senior-level creative leadership. Digital shops seek people with conceptual skills to supplement interactive expertise. Advertising agencies seek people with interactive skills to supplement conceptual expertise. Yet the overall quality of the work doesn’t seem to be moving forward.
Of course, the dialogue surrounding mergers and acquisitions is devoid of diversity. When you add a predominately White place with another predominately White place, well, do the multicultural math.
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