BARCELONA (Reuters) - Traditional advertising groups hope that their creative flair will prevail against the technological clout of consultancies encroaching on their business, but there are signs the two sides of the divide are moving closer together.
The major advertising holding groups — WPP (WPP.L), Publicis (PUBP.PA), Interpublic (IPG.N) and Omnicom (OMC.N) — have responded by building up their own consulting services. But they are under pressure from advertisers that are bolstering their own capabilities and cutting back on big brand campaigns.
“I don’t believe that our industry is a dying industry,” Interpublic Chief Executive Michael Roth told the Morgan Stanley Technology, Media and Telecoms conference in Barcelona this week.
“If you get the data analytics, if you get the tools and resources and have the creative capabilities that we have, we are more necessary than ever.”
Publicis CEO Arthur Sadoun, however, told the same conference it was only a matter of time before one of the big four would merge with a consultancy.
“My prediction is that you will see a holding company get together with a systems integrator,” he said.
Tentative steps have already been taken by some to partner consultants, notably Publicis working with Capgemini to win a McDonald’s (MCD.N) contract.
WPP, meanwhile, has tied up with PwC on a couple of pitches, finance chief Paul Richardson told the conference.
He said WPP is used to dealing with Capgemini, Deloitte and Accenture - competing in databases and marketing technology but working in partnership in areas such as programme management for big government contracts.
But Richardson says the consultancies cannot compete when it comes to the creative side of advertising.
“I would stress creativity and storytelling are the two things clients want us to provide in a pitch,” he said, adding that WPP’s revenues were challenged by weakness in North America, tough consumer goods markets and management issues in parts of its business.
“It’s nothing to do, in my opinion, with the consultancies eating our lunch,” he said.
But the advertising groups are also beefing up their own capabilities in data analytics to serve clients spending more on Facebook (FB.O) and Google (GOOGL.O), where metrics such as engagement have been hard to measure.
Interpublic agreed in July to buy data-mining business Acxiom’s marketing solutions arm for $2.3 billion.
“Without data analytics and the insights that come with them, it’s hard to reach the right consumer with the right offering,” Roth said. “And you need creative capability to reach those consumers in the right way.”
Publicis’s Sadoun said the French group had already built up its capability with its $3.7 billion acquisition of tech company Sapient in 2014. However, he acknowledged that its integration into a group home for several creative agencies had been “painful”.
Interpublic may be able to avoid such problems, Roth said, citing his push to change the group’s culture over the past 13 years and subdue some powerful egos.
“We had to refocus all of our brands to collaboration and we had to incentivise them to working well and playing with others,” he said.
“My first meeting with the heads of all these networks, I thought I was in a street fight. They wouldn’t talk to each other, it was ridiculous.”
The consultants could learn from this strategy of breaking down silos, Roth says.
“I’ve looked at buying some consultants and frankly their silos make our silos look like kids’ stuff,” he said.
Additional reporting by Mathiue Rosemain and Doug Busvine; Editing by David Goodman