Wednesday 23 January 2019

M&A deals for iconic agencies will snowball in streamlined adland

Core CEO Alan Cox. Photo: Steve Humphreys
Core CEO Alan Cox. Photo: Steve Humphreys

John McGee

In the space of just three weeks towards the end of November and early December, the Irish advertising industry was turned on its head.

In case you missed it, the future of Ireland's top two creative agencies - Rothco and DDFH&B - were sealed as the former took the decision to sell out to Accenture. Meanwhile the latter decided to pull the shutters down on its iconic agency brand by merging with its sister agency Target McConnells in a move that will also bring an end to the McConnells brand, which dates back to 1916.

Up until recently, DDFH&B was Ireland's biggest and most profitable creative agency, striding the advertising world like a colossus and garnering numerous awards along the way.

Over the last couple of years, however, that mantle was gradually ceded to Rothco, a plucky creative shop that has seen its star in the advertising firmament ascend to heavenly heights on the back of a number of significant account wins, sometimes at the expense of DDFH&B.

In adland, accounts come and go all the time and one agency's gain is another agency's loss. It's always been a case of swings and roundabouts.

This time around, however, the chilly winds of change have been blowing fiercely through the advertising industry for some time as it has become increasingly apparent that the old agency model was no longer fit for purpose in a highly-fragmented media landscape that has been disrupted, not only by technology, but by sweeping changes in consumer behaviours and expectations.

Indeed, one of the great ironies of modern-day marketing is that even though there has been a proliferation in the number of touchpoints and platforms on which consumers can be targeted, sometimes to within an inch of their lives, it has never been harder for brands to genuinely reach and engage with them in a meaningful way.

As Jim Donnelly, DDFH&B's co-founder and executive chairman recently put it: "The agency model has fundamentally changed around the world. We are responding to our clients' desire to have a nimble, effective - yet well-resourced - collection of talents. By merging DDFH&B and Target McConnells we are creating the scale and commercial robustness required to compete for the next five years."

In the case of Rothco, its decision to sell to Accenture Interactive was perhaps the most surprising development in adland in recent years. But then again, Accenture has been buying up agencies all around the world as it builds out its creative, media and technology capabilities to offer its clients.

Since it was formed in 2009, it has acquired 23 agencies across the creative, design, ecommerce and digital sectors around the world. It has also been linked with a possible acquisition of one of the big global agency networks at some stage in the future.

As the marketing and advertising worlds continue to change and evolve, Accenture believes that one of the big battlegrounds will revolve around experience as companies look to create human-centred brand experiences by joining all the dots of a consumer's interaction with a brand across every single touchpoint.

This can be achieved, according to Accenture, by bringing together business consulting, creative services and technology to help its clients. Rothco and DDFH&B, however, are by no means the only Irish agencies to look to the future. Core (formerly Core Media) has also implemented some sweeping changes to its structure by retiring some of its non-media agency brands to create a one-stop shop for its clients with collaboration front and centre.

Core CEO Alan Cox said: "For many years, agencies have produced a set of disassembled outputs, which clients would then re-assemble to form an integrated marketing plan. Although the cracks in this model were clearly visible, it worked - to some degree - because times were simpler and the delineation of agency responsibilities was clear.

"However, demarcation lines are now blurred, leading to confusion as to who does what. Clients are increasingly having to manage multiple agencies, leading to wasted time, a lack of integration and under-performance.

"Meanwhile, agency groups continue to operate multiple operating companies and a siloed service model, which confuses the market and dilutes a potentially powerful proposition," he said.

The siloed service model Cox refers to is fairly widespread, particularly within the large multinational agency networks. Some of them recognise the many challenges that exist and have already started down a path of rationalisation and simplification.

But it won't be easy and there may be casualties along the way. It's also highly likely that merger and acquisition activity within the advertising industry will continue to gather momentum as agency holding companies try to recalibrate and reinvent themselves.

What that agency of the future might look like is anybody's guess. But one thing is certain: it won't look anything like it does now.

Sunday Indo Business

Also in Business