Convergence masterstroke, or Freudian slip?

It was not so much the news that DFGW was being sold that surprised the advertising industry but rather the identity of the buyer. PR company Freud Communications’ admission it is in talks to acquire the ailing agency (MW last week) has divided opinion.

Some claim it is a “ridiculous” decision with little rationale to support it, while others say the deal, which is expected to be completed “imminently”, illustrates the growing strength of the PR industry, which can no longer be seen as advertising’s poor relation.

Freud says the takeover offers practical synergies and a “one-stop shop” solution. DFGW will operate as an autonomous agency but will be housed under the same roof. Only planning operations are likely to be pooled.

Television campaign
For DFGW, the deal looks good news. After illustrious beginnings – it launched as Duckworth Finn Grubb Waters in 1989 with a television campaign to promote itself – it has lost its way, its place on the BBC roster and the Toshiba account.

Its latest Companies House filings show a loss after tax of £418,416 in the year to September 30, 2005. Just 12 months earlier, DFGW recorded a profit of £191,573. Being part of Freud – itself 51% owned by Publicis Groupe – gives it security and will reassure clients anxious about its future.

But some question what is in it for Freud. The PR agency made its reputation in the 1990s with a succession of high-profile celebrity accounts and the ruthless ambition of founder, now chairman, Matthew Freud, who is married to Rupert Murdoch’s daughter, Elisabeth.

Freud sold a majority stake to Publicis in 2005, ending a previous association with the advertising industry in the form of Freud Inside, a joint venture with Clemmow Hornby Inge.

One industry source says of the DFGW deal: “It is a ridiculous idea. Freud is broadening its canvas, but why would a PR company want to be involved with advertising?”

The source suggests that for Freud, value comes from acquiring an agency on the cheap, thereby adding to the “confusion and complexity” of its share price upon selling a further tranche of the company to Publicis.

Marketing services analyst Bob Willott argues that it makes little sense for a Publicis-owned PR company to buy its own small ad agency. He says: “It only makes sense if they have a common niche specialism, such as healthcare – but they don’t”.

Obvious synergies
That is not a fair assessment, according to Lord Tim Bell, founder and chairman of PR and advertising company Chime Communications. Bell, a former mentor of Matthew Freud, says: “The synergies are obvious because the media business is rapidly becoming channel-neutral. It may seem an odd move, but Matthew [Freud] often does interesting things and they often seem to work.”

PR specialist Julian Henry, founder of Henry’s House, and communications director for Simon Fuller’s 19 Entertainment, agrees. “PR and advertising agencies have long been involved in the battle for budget and marketing directors’ strategies.” He adds that although advertising has been firmly in the front seat, this may soon change.

Add to that Freud’s ambition and probable desire to own his own ad resource and his reasoning becomes much clearer.

“Perhaps this is Freud trying to turn into an integrated marketing solutions company,” adds Henry.

And perhaps it is further evidence that convergence – in all its forms – is gaining ground.

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