GroupM’s new media agency ‘Newco,’ a combo of MEC and Maxus (do you get the impression this has been organised slightly hastily?) is scrapping a whole layer of regional management with individual offices across the world reporting to New York, London and agencies in Canada, Germany and Italy. Asia Pacific, chiefly Australia, China and India, will report directly to New York.
CEO Tim Castree (from MEC, left) says this is to concentrate resources on client-centric activities and GroupM’s new suite of “customer journey” products but such a spectacular level of delayering looks like a cost-saving measure too.
Merging MEC and Maxus in the first place is clearly aimed at saving costs and GroupM owner WPP recently merged the substantial [email protected] into Mindshare (substantial in terms of people anyway). It is, though, investing in new digital media agency Essence where senior Maxus UK staff are headed.
WPP boss Sir Martin Sorrell recently predicted “fundamental” changes to his and other holding companies’ media agency line-ups. With media agencies being squeezed by suspicious clients on the one hand and the surging tide of automation on the other we can expect a lot more of this.
WPP media executives will be waiting anxiously for more news from Sorrell when he delivers WPP’s half-year numbers on August 23.
PS We’re promised a name for ‘Newco’ at the end of August – but it won’t begin with a ‘M’. Which rules out Minor, Minus…
Is WPP moving in the right direction?
The idea that digital media is going to save a bloated behemoth like WPP doesn’t hold water. Substituting pennies for dollars- digital for print, radio and TV- is a rapid downward slide even if Facebook and Google weren’t the dominating forces in the industry.
Some may espouse the idea that WPP has some sort of grip on digital media due to its acquisitions but history would suggest that WPP does not do a very good job managing its acquisitions. If I were WPP I’d worry about the innovative, disruptive businesses poised to be the next Facebook.
Furthermore, WPPs supposed 2% organic growth is pretty much accomplished through downsizing rather than revenue growth. Check the agency consolidations within WPP and you’ll see a company racing to right-size itself to a shrinking business.
Then there’s the controversy regarding rebates and other non-transparent business practices. The Association of National Advertisers report finds them “pervasive” and WPP is at the center of it all. Clients are not happy.
Lastly and perhaps most importantly, there’s the issue of leadership. Who will steer the ship through these rough waters? CEO Martin Sorrell is a financial manager who has done a stellar job building WPP (aka, Wire and Plastic Products) by buying profitable companies and adding them to the holding company.
But Sorrell has never worked on the media side. He is drawn to the spreadsheet and lacks the vision required to transform WPP into a modern player in a fiercely competitive and rapidly evolving industry. Compare leadership at WPP with the leaders of Facebook and Google.
When Facebook first announced its IPO, Sorrell commented that he “doesn’t see how Facebook will commercialize itself.” Facebook had a growing membership of 2 billion users and the CEO of the largest media company in the world couldn’t envision how they would commercialize themselves. That says it all.