Legacy ad groups are looking small in a digital world

The best rumour at Cannes Lions was that Accenture and WPP have been talking about a merger.

“No, you’re way off,” Sir Martin Sorrell, the WPP chief executive, said when I put that to him.

As for suggestions that Sorrell made an approach to Accenture, he replied: “Rubbish.”

But the fact that there is even gossip about a possible tie-up or partnership says a lot about how rapidly the media and advertising landscape is changing.

All the big six ad groups – WPP is the largest – suddenly look small in a rapidly evolving global marketplace. Some of the consulting and software giants that are entering marketing services are double or treble the size of a WPP, Omnicom or Publicis Groupe. And Google owner Alphabet, Facebook and Amazon are ten to 20 times bigger.

A merger or sale could look attractive for an ad group in a sector that faces intense structural pressures as brands grapple with technological disruption, demand greater transparency, take data and digital services in-house, and deal directly with digital media owners. In this context, Havas’ merger with Vivendi could be seen as much as a sign of weakness as a sweet deal for the Bolloré family.

Sorrell is candid enough to admit that WPP, a holding company created by him, must change.

In two recent conversations with Campaign, he had a clear message: the market is changing quickly, marketers want simplification and integration, and WPP needs to move to “one organisation” when dealing with clients: “The only question is how quickly you do it and how you do it.”

He looks admiringly at Goldman Sachs and Mckinsey and thinks WPP can learn from their simpler proposition for clients.

However, it is easier said than done. In a telling admission at the WPP annual general meeting, finance director Paul Richardson said in a response to a question from a shareholder that it is difficult to publish WPP’S annual accounts earlier in the year because the group has hundreds of subsidiaries.

The ad holding groups have been built on acquisitions. Culling some of the agency brands makes financial sense and might not bother some clients. Omnicom, Publicis Groupe and Havas have been doing something similar by pruning the number of agencies they operate. However, the danger is that undermining the individual agency brands will alienate staff and dilute the culture of these businesses.

No wonder the mood at Cannes was anxious. Running a holding company just got tougher.

“Sorrell looks admiringly at Goldman Sachs and Mckinsey and thinks WPP can learn from their simpler proposition”