Why aren’t agencies queuing up to win the greatest pitch on earth?

With the London 2012 Olympics account up for tender, all but a handful of agencies are showing great reluctance to bid for the business

Stuart%20SmithWe’ve reached the second leg of the programme – the pitch for the big one, through to 2012 – and the only names said to be on the list are Publicis Groupe, WPP and ChimeSo why, apparently, is there such reluctance to bid for the business? We’ve reached the second leg of the programme – the pitch for the big one, through to 2012 – and the only names said to be on the list are Publicis Groupe, WPP and Chime.

The scale of the undertaking has frightened off many would-be contenders. After all, not everyone can provide a gamut of marketing services that includes creative, media, digital, sponsorship, public relations, research, content creation, events and CRM. And even if they could, would they want to, in view of the distortion to their business and inconvenience inflicted on their other clients over the next three years? Some would argue that the nature of the demands – which could mean repurposing material for markets as diverse as Brazil, China, Russia and India – effectively excludes all but the biggest holding companies.

In that case, why is Chime in the running, but not Omnicom, Interpublic or Havas? Chime may have international connections, but it can hardly be deemed a global company. It does, however, hold an important trump card as the incumbent on the one-year, lower-key, integrated campaign that comprises the first part of the Olympics communication programme. And, to offset any criticism about its scale or the diversity of its services, it has teamed up with Aegis, the media-buying behemoth.

Will this be enough to turn the trick? I don’t think so, and here’s why: who wins comes down to money, or rather a lack of it. Despite wielding a large overall budget, Locog seems extraordinarily reluctant to spend money on service suppliers. Instead, it has come up with the ingenious idea (which also applies by the way to its accountants Deloitte, and its lawyers, Freshfields) of getting the suppliers to pay for the services themselves.

This is how the scheme works. The winner, in effect, hands Locog a cheque for 10m and in return receives Tier Three sponsorship rights, which are not nearly as good as Tier One or Tier Two. Of course it’s a little more enticing than that. The 10m is in reality an in-kind deal. That means the agency supplies goods and services – for instance account management, production services, media airtime or content – up to that value. The gamble is that Locog spends more than 10m over the period, in which case the incumbent agency will be quids in, because it will be paid for the balance. At the same time, it will be encouraged to develop relationships with other Tier Three sponsors, to its own commercial advantage. The possible downside is that Locog spends less than 10m, in which case the agency will be financially responsible for the difference.

The flaw in this remuneration scheme is evident. As one disgruntled contender put it: “There’s nothing in it for a holding company like ours. We spend all that time on the account, when we should be servicing clients who pay real money. And what do we get at the end of it? A few logos sprinkled here and there that you need a periscope to see. We’d rather be helping our existing clients with their own Olympic sponsorships.”

But then, his company is not WPP. Chief executive Sir Martin Sorrell has personal reasons for coveting the prize. He was more deeply involved in the 2012 bid than almost anyone else in the marketing services industry – David Magliano and Sir Keith Mills excepted. And there is also a certain logic in juxtaposing WPP – a uniquely British success story as the world’s largest marketing services group – with another British triumph. Furthermore, if he really wants it that much, he can probably trounce both Chime and Publicis with a bigger bid in the envelope.

However, the Committee should not be too confident of Sir Martin writing a bigger cheque just because he can. There is a danger that WPP winning the account will be portrayed as an ego trip rather than a hard-headed business decision. Sitting in the hospitality box on the day would no doubt be a very gratifying experience. But his clients (not to mention institutional shareholders and journalists) might ask a very awkward question: how come you can afford to do this after the very public statements you have made about cutting your workforce by thousands? In short, it’s a PR blunder in the making, if not for Britain then certainly for WPP.

Faced with an evident lack of enthusiasm as the deadline looms, the Committee has expressed a willingness to compromise. In truth, it probably doesn’t know how to: commercial director Chris Townsend aside, it is staffed by people who don’t specialise in the workings of the marketing services industry. It seems those who don’t remember the lessons of government involvement in the Millennium Dome project could be compelled to relearn them.

I have a very modest proposal for a solution to this impasse. Chime is part-owned by WPP; it has already demonstrated it is on top of the project, but it is underpowered for stage two. Perhaps they should work together? That way, everyone (well, not Publicis admittedly) is a winner.

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