While everyone else is wallowing in the increasingly viscous mire of economic despondency, WPP has found several reasons to be cheerful. And they’re all called Dell.
This, quite simply, has been a colossal win for the global marketing services group. Dell, despite being under pressure from Hewlett-Packard and elsewhere, is still the world’s second largest personal computer maker, and has awarded WPP the equivalent of $4.5bn (£2.2bn) billings over the next three years.
More importantly, in income terms, this is the biggest account that WPP, or conceivably anyone else, has ever won upfront. At about $150m (£73m) a year, it weighs in comfortably ahead of WPP’s other recent big win (AT&T in the US) and that notorious global benchmark, Samsung (which WPP hung on to only briefly). It also exceeds IBM at the beginning of the relationship with Ogilvy.
The news will be a huge relief to a company which has seen its share price fall 18% in the past six months – considerably underperforming what has been a generally lacklustre equity market. Then again, WPP will take some private delight from having seen off McCann, which had an inside track on Dell, and also kneeing in the groin, strategically speaking, Havas. Euro will now find life in the vital emerging markets of Asia quite difficult having lost Intel, Dell and LG.
The underlying significance of the Dell win is only tangentially related to these things, however. And it is this. In the now rapidly changing world of marketing communications, the rationale for the global services conglomerate exemplified by WPP has increasingly come into question. If the shark stops gobbling up the lesser fish (as now, with the credit crunch), what happens then?One thing is for sure: more attention will be focused on the organic capability of the conglomerate business model. Successful economies of scale have been more apparent on the media side than the creative. Indeed, although the creative brands were often the raison d’etre for large-scale consolidation, in the first place many now feel their status has been diminished over time.
WPP’s solution to this dilemma (not unique among conglomerates, but best executed so far) has been to show that the bits which make up the organisation can work together efficiently on a massive scale. In short, the team WPP concept.
In truth, it’s been a mixed bag. The global success of HSBC has been tempered by the failure of Samsung, while at a more local level there was the laboratory-stage disaster of United (especially in relationship to the Sky account). Which is why the Dell win must come as such a triumphant vindication of the model (though it will not be ‘Team’ anything; a name has yet to be devised).
Of course winning is the easy part, relatively speaking. WPP must now demonstrate that the model actually works and, in consolidating and bettering the effort of 800 marketing services shops across the globe, it will have its work cut out.
A lot more than immediate revenue will be riding on success. WPP must have a care for not only what its immediate competitors are up to, but for the increasingly unbridled ambitions of Google – “the next battleground”, as WPP chief executive Sir Martin Sorrell puts it.