Sorrell spurs rise of the holding company

This year, WPP has won global briefs from HSBC and Samsung – yet it is a holding company, not a network. Lucy Barrett looks at how the marketing services giant is redefining traditional roles

Last week, WPP Group bagged the &£400m Samsung global integrated communication account (MW last week). The appointment marks the second time this year that the marketing services holding company has been appointed to a global piece of integrated communications business: HSBC appointed WPP to its &£350m business in May (MW May 13).

Although it is not for lack of effort on the part of rivals, WPP seems to be the only holding company to have been able to pull off this type of deal in recent years, raising questions about these entities’ role in pitches.

It is well documented that WPP boss Sir Martin Sorrell adds the personal touch, and it appears he is prepared to go that bit further than the chiefs of rival holding companies to secure deals by seeking close relationships at the highest levels.

Sorrell’s personal intervention on pitches is not limited to global integrated communication briefs: earlier this year he pursued, and won, Nestlé’s &£800m global media business. He swiftly followed this up by scooping the &£680m European media brief for Unilever earlier this month. Both accounts will be serviced through MindShare.

But it is not just Sorrell’s networking skills that attract clients to his door. Insiders say it is his ability to tailor the perfect network of agencies, allowing clients to tap into WPP’s best resources in every market. “Team Samsung”, for instance, will be made up of various agencies in WPP’s portfolio. J Walter Thompson will take the bulk of the advertising, its sister network Red Cell the remainder.

“Sorrell is a phenomenal new business machine,” says J Walter Thompson UK business development director Peter Cowie. “He has access to the top levels and understands their business concerns. We then create dream teams across the network and put in the right people in the right places.”

Some insiders claim WPP’s success in winning integrated global briefs is down to Sorrell’s enforcement of collaboration between competing WPP agencies, even if those agencies do not like it.

Cowie claims that the agencies are happy to collaborate, adding: “We actually know each other. Unlike other similar networks, it is not a struggle getting people to work together.”

But one senior advertising boss believes that the Samsung deal will result in a “turf war” within WPP, adding: “These agencies are competitors; they just happen to be owned by the same holding company.”

The HSBC and Samsung accounts are not the first big integrated deals to have been secured by WPP, nor are such deals without their problems. Sorrell hit the UK headlines with a deal to supply Boots with all its marketing services needs. But the deal came unstuck when new chief executive Richard Baker came on board and, after a pitch, awarded the business to a number of other agencies, working together to deliver an integrated solution, which were not all owned by the same holding company.

WPP’s Ford deal has also hit a few snags. After Sir Nick Scheele, former head of Jaguar and marketing supremo at Ford of Europe, who was later promoted to global chief operating officer of the Ford Motor Company, handed the advertising for all the manufacturer’s brands to WPP the move was questioned in a leaked Ford memo, produced during an internal investigation into purchasing procedures at the car company. The same memo also put Scheele’s personal friendship with Sorrell under the spotlight.

The deal that was later signed between Ford and WPP in July 2003 did not award the marketing services group the favourable “single-source-supplier status” initially proposed. Ford-owned Jaguar, which is now reviewing its advertising (currently held by WPP owned Young & Rubicam), has decided to take advantage of this and has said the review will not be restricted to WPP agencies.

Even the HSBC deal appears to have encountered teething problems. As part of the deal, it had been expected that First Direct’s advertising would move from WCRS to HHCL/Red Cell. However, it is believed that the online bank, under commercial director Peter Simpson, has been fighting a fierce rearguard action to retain WCRS – with what looks like some success. HSBC declined to comment on the matter.

It has also been reported that this same issue of internal client politics has stopped Sorrell from achieving total control of all Samsung’s business, although this has been dismissed by WPP executives.

For the final stage of the Samsung pitch, WPP competed against Interpublic Group’s (IPG) FCB network and holding company Publicis Groupe. It is understood that incumbent FCB was seen as lacking the resources to take the brand further, particularly in emerging markets such as India and China; and regional and service weaknesses dented Publicis’ hopes.

Observers say they cannot understand why IPG allowed FCB to try to fight off two giant holding companies alone, questioning why it did not manage the pitch itself or put up McCann Erickson instead.

In order to compete with WPP in future, insiders say IPG is going to have to sort out its network capability beyond FCB. According to a report from Fintellect, published in the newsletter Marketing Services Financial Intelligence IPG suffered a $600m (&£323m) loss for the first nine months of 2004, in part owing to a $310m (&£167m) write-off, some of which was linked to the poor performance of Lowe Worldwide.

Memories of McCann Erickson’s financial problems, unearthed two years ago, have also yet to die down.

However, McCann UK chairman Rupert Howell denies that these issues are affecting the efforts of the multi-disciplinary McCann World Group, which is ready to pick up large pieces of global integrated business, as it is “strong in every market”.

Another rival, Omicom, is the largest marketing services group in the world but according to insiders its head John Wren is content to work through the group’s agencies, rather than chasing business at a holding-group level.

Back at WPP, Sorrell shows no signs of slowing down and it may become a fact of life that more deals are done at holding-company level. This sends shivers down the spines of some in advertising and marketing.

Agency Assessments International chairman David Wethey is not impressed. “I do not welcome it at all,” he says. “It might be advantageous to clients in certain circumstances, but the purpose of a holding company is not to pitch for new business. It is not in the interest of WPP’s agencies, it is in the interest of WPP and its shareholders.”

Any trend towards deals being put together at holding-company level raises the question of potential client conflict. But this seems to be becoming less of an issue for some advertisers, as proven by WPP’s acquisition of Procter & Gamble agency Grey: WPP counts Unilever as a major client.

If you happened to be a global marketing chief with a presence in almost every market, you might just be looking for an advertising agency network that matched your footprint. In which case you would probably give WPP’s Sorrell a call. However, if he is true to his reputation, Sorrell is more likely to phone you first.

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