Accenture’s acquisition of Droga5 is an ‘at scale’ threat to creative agencies and marks the end of PR’s brief chance to become a lead brand discipline

Really? Well, not on it’s own maybe and no disrespect to Karmarama, The Monkeys and the others, but this one feels different. It’s different in both size (over $200 million in revenues) and in creative power and because Droga5 is ‘iconic’, so now this is done, nothing is off limits conceptually? Wieden & Kennedy anyone?

And creative really was the last part of the marketing services puzzle for Accenture and the consultancies. Just a reminder of what they collectively already account for: According to Consultancy.uk, the big international consultancies have annual fees of $240 billion of which approximately 20% ($48 billion) are marketing related. That means they already earn the same in fees from CMOs (Chief Marketing Officer or Marketing Director) as WPP, Omnicom and IPG combined. Last year Accenture Interactive was crowned the world’s biggest digital agency by Ad Age at $6.5 billion revenue (all of IPG revenues are $9.7 billion for comparison) . The consultancies accomplish different tasks for sure, so the comparison is a little unfair, but the CMO is now a huge area of growth for them, just like the operations and supply chain were a decade ago.

Oh, and they’ve done all this with creative that struggles to be second rate. Can you remember any? That in itself should give us all some pause for thought.

Accenture build brands through what it calls ‘customer experience’ which; “is a proven driver of competitive advantage and sustained business growth”. If you spend any time on their website or talk to their people, the mantra is all in the language of experience, customer journey, UI and ‘touch-points’ linked back to the enterprise and often through that and into their supply chain; all supported by high level IP and data. “One point increase in CX scores can translate into millions of dollars of revenue;” they say in a slightly scary but compelling way. These assignments are often part of a client-wide digital transformation signed off by the CEO or a complete sales and marketing strategy that can be the single biggest priority of the CMO.

For most of their clients, this is much more important to them than creative advertising or communications, but a great idea, as we know, can knit this stuff together and differentiate it with customers and stakeholders and in the best of cases provides a vision for where it is all going. And hence the ‘data crunchers’ have looked to fill that gap in their capability and get the chance to earn more fees from those enviably strategic relationships with our most senior clients.

They still have a long way to go in this, because even if Droga5 and all the other creative agency acquisitions they have made equate to a $500 million revenue creative capacity, that remains not much more than a flea sat atop the $8 billion Accenture Interactive elephant. Last month Frank Mergenthaler, IPG’s financial director said: “They [the consultancies] have not made the investment in creativity that we believe is necessary to compete. They are buying small agencies in some markets, so they can place a deck that has a capacity {sic}, but we are not seeing them much and we are not seeing them at scale.” Frank Mergenthaler is one of the wisest heads in the industry, but in this his timing was off and he is complacent if he thinks that ‘not seeing them’ means the consultancies are not competing with his agencies.

The scale and the strategic and career defining significance (for the CEO and CMO) of much of the work that is being done by the consultancies means traditional creative agencies are often not even aware it is going on or are picking up the creative and tactical scraps from the feast. The fact we don’t meet the consultancies in the prospect’s lobby on the way in and out of the pitch does not mean they are not in the building doing business.

Many of the feistiest comments on Twitter and in the coverage have been about the impossibility of a consultancy culture integrating a creative culture and pointing to real or imagined turnover at other acquired agencies and not a little hope from some of their competitors that Droga5 suffers the same fate. It is a huge challenge of course, but not insurmountable and the idea that Accenture would do this deal if all the others had been the disasters some commentators are claiming sounds like a forlorn hope. Not for the first time, there appears to be a direct correlation between the creative pretensions of the commentator and the bleakness of their prediction. But quite possibly, this is not about Cannes Lions or pitch wins to Accenture, it is about trying to blend their quantitive skills and insights with Droga5’s qualitative skills and insights to do better work. And for any agency of any kind these days, that’s a defining task.

Happily, and despite all this, there remains a bright future for smart creative agencies not part of a consultancy; in other words, the rest of us. Not every CMO wants a brand or campaign that is part of an enterprise-wide business transformation or an agency that is part of a business bigger than theirs and many won’t want to work with a firm that has a better relationship with their CEO than they do. And Droga5 is only one mid-size US and UK agency and the bulk of the best creative talent lies where it always has, with the groups and the agencies for whom great creative is the main thing and sometimes the only thing that matters. But this acquisition is symbol to me that the consultancies will encroach more into our territory and change the thinking of our clients and so great ideas from ‘traditional’ agencies will more often have to prove they work across multiple ‘touch-points’ as the consultancies inelegantly put it. At the very least, we will have to continue to update and re-tool our planning approach with new data sources and a more profound integration with the client’s enterprise.

But what does this have to do with PR firms who my slightly incendiary headline also called out? It was not many years ago that the heady cocktail of the rise of social media platforms and peer-to-peer influence and the collapsing mainstream media business model gave PR firms a once-in-a-lifetime opportunity of moving up the marketing food chain and emboldened them to talk with increasing confidence about the value of things like ‘earned centric creativity’. Yours truly was one of those in the vanguard of this, spotting an opportunity of getting more of the CMOs budget which famously was 14 to 20 times that of our traditional client the CCO (Chief Communications Officer or head of PR/Corporate Communications).

It worked to some extent and the best PR firms now boast planners, creatives, digital teams and a new found commitment to analytics and ROI, but the better creative agencies were just as fast to integrate back the other way and if that was not tough enough competition, then the arrival of the consultancies at scale on the scene makes the battle doubly hard. It’s like PR firms won the right to take on the boxing world champion from the weight class above them and climbed into the ring only to discover that the MMA champion was in there too and they are now involved in some diabolical three way fight!

PR agencies will continue to do important work for brands and should, for example, be the drivers of strategy in areas like purpose and where real world issues like sustainability, politics and crises intervene and brand lead is still possible for B2B, regulated, cause-led and start-up brands, but for the main part these will be exceptions not the rule. And personally I feel mastering marketing automation is now a better on-ramp into CMO spend for PR agencies than is battling for strategic and creative dominance with two better equipped foes.

Brian Whipple, global CEO, Accenture Interactive and David Droga,
founder & creative chairman, Droga5

A financial observation. Accenture (the whole firm not just Accenture Interactive that bought Droga) has revenues of $41 billion and a market capitalisation of $113 billion. It’s worth 2.7 dollars for every dollar of fee revenue it bills annually. Omnicom has revenues of just under $15.4 billion and a market capitalisation of just under $17 billion. It’s worth only 1.1 dollars for every dollar of fee revenue. Assuming Droga5’s margins are not significantly dilutive to Accenture’s levels, the share value this deal potentially creates for Accenture ($200 million Droga5 revenue x 2.7) does allow them considerable leeway to finance this acquisition generously, which may incentivise the key talent at Droga5 to stick with things longer than many might expect. Given the power of their multiple compared to most marketing services businesses, Accenture and indeed the other consultancies can afford to do many more deals (though the private partnership structure of some of the other consultancies may inhibit this somewhat). I expect they will. Maybe they might even look to a PR firm?

A final personal observation on David Droga. In the late nineties I was a planner at Batey Ads in Singapore, run by the eponymous Iain Batey and creator amongst other things of the ‘Singapore girl’. Batey Ads was the local champion, the bees knees and the dogs bollocks. We did great work and we won all the big pitches (or at least, that’s how I remember it). Then David Droga joined Saatchi & Saatchi Singapore and we lost the next three to them. It still rankles.

‘Geeks’ cartoon by the brilliant @hughcards of @gapingvoid

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this:
search previous next tag category expand menu location phone mail time cart zoom edit close