Ogilvy restructures into four units – spruce up or sell up?

Ogilvy has always been something of an empire within an empire at WPP, spawning dozens of agencies under the Ogilvy umbrella.

Now CEO John Seifert, who took over from Miles Young a year or so ago (Young went off to be master of an Oxford college) appears to be trying to rationalise things by placing the network’s multifarious activities under four new headings Talent, Growth, Delivery (an expanded production unit) and ‘Marketing, Communications and Change.’ The latter rather suggests that the big Ogilvy brains were stumped by this one. It seems to mean ‘advertising.’

Phrases like “rearranging the deckchairs” and dancing on a pin-head” always come to mind in these instances – one wonders what bemused clients make of them.

Delivery is probably the most interesting. All the big marcoms companies are trying to bring production back in-house from the various specialists (most notably Tag) who’ve built their businesses on the back of doing the heavy lifting for agencies. Sometimes it produces controversy as in the current US Department of Justice investigation into whether agencies (including representatives of WPP, Omnicom, Interpublic and Publicis Groupe) have solicited false bids from external commercials production and post-production companies so they can undercut them in an auction.

To some extent this latest Ogilvy manoeuvre looks like the big re-organisation at Publicis Groupe into Communications (advertising and PR), Media, Healthcare and consultancy business Sapient.Nitro although it’s clearly on a smaller scale and Ogilvy has no media operation.

It also, maybe, makes it easier to put Ogilvy in the shop window should owner WPP ever decide to sell. There’s no reason to believe that Ogilvy isn’t performing for Sir Martin Sorrell and his shareholders but times have moved on since he built WPP mainly by acquiring big creative agency networks at premium prices. Ogilvy cost nearly $900m thirty or so years ago while the last big one, Y&R, cost $4.7bn in 2000. Doubt it would fetch that now.

The big management consultancies are sniffing around agencies now – Accenture Interactive has dipped a toe in the water by buying London creative shop Karmarama and Cap Gemini is reported to be talking to infinitely larger Publicis Groupe. Some such consultancies don’t actually want media agencies because they already advise their clients on media strategy and value through activities like auditing. It won’t be lost on them that their activities are one factor in the seemingly never-ending round of big media reviews. Being paid for advice is much less stressful.

Marcoms is a contrarian business as, for the big companies anyway, they always get bigger. None of them has divested a big business stream as many of the world’s other big companies have over the years, even the mighty GE in the US. On the face of it WPP’s Sorrell looks the least likely person ever to do so. But you never know..

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About Stephen Foster

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Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.