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Q2/2015
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R3 is a leader in global, regional and
local consulting on improving the
effectiveness and efficiency of marketers and their agencies. We work with
nine of the world’s top twenty marketers
including Coca-Cola, Unilever, AB InBev,
MasterCard, Mercedes Benz, Johnson &
Johnson, Samsung and Kimberly Clark.
Welcome to the R3 Q2 2015 Update, our regular quarterly report on the marketing communications industry. In this issue,
we look at the big stories in the industry, the initial quarterly
earnings of the holding companies, along with recent pitches,
M&A’s and New Business Results.
The Biggest Stories
By far the biggest story in marketing this quarter was the so called
“Media-palooza” – the 21 global advertisers who have called reviews for
their global and US media agencies. You can see the full list by category
here and read more of R3’s analysis of the issue here.
There’s little doubt that the combination of the need to invest more in
digital media, coupled with the challenges for transparency over both programmatic buying and media rebates is fueling a large number of these
reviews. R3 has been retained for some of these pitches, and the biggest
challenge we see is actually the existing clients who are not pitching their
media. The natural stress on media agencies in terms of top talent for
these reviews is compounded by the fact that there are only so many media owner commitments and opportunities to go around.
This is going to make it increasingly difficult for the agencies to maintain
service standards and media rates on current clients. While a number of
the holding group leaders have made it clear that the total revenue on
some of these clients in review is less than 5% of their total business –
the fact remains that these are the prestigious leading FMCG, Financial
and Auto marketers that are still the cornerstones of any successful global
media operation.
NEW YORK
4th floor 57 W 57th Street,
New York, NY
T +1 646 416 8088
Taleah Mona Lusky – Senior Consultant
[email protected]
Mike Goodnough – Senior Consultant
[email protected]
Talia Tay – Consultant
[email protected]
SHANGHAI
Room 4203, United Plaza,
1468 NanJing Road West
T +86 21 6212 2310
Greg Paull - Principal
[email protected]
Erin Singleton - Consultant
[email protected]
Trace Qu - Researcher
[email protected]
BEIJING
A 1801, Chaowai SOHO, No.6 B Chaowai
Street, Chaoyang District, Beijing
T +86 10 5900 4733
Sabrina Lee - Managing Director
[email protected]
Lisa He - Consultant
[email protected]
SINGAPORE
69A Tras Street, Singapore 079008
T +65 6221 1245
ShuFen Goh - Principal
[email protected]
Seema Punwani - Principal Consultant
[email protected]
Herbert Ho - Regional Business Director
[email protected]
1
LONDON
77 Beak Street London, W1F9DB
T +44 20 7993 6009
Jeremy Nathan - Senior Consultant
[email protected]
SAO PAOLO
Rua Jerônimo da Veiga, 428 – conjunto
21 São Paulo, Brazil
SOUTH AFRICA
Rykie Brink – Senior Consultant
[email protected]
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 twitter.com/R3WW
 weibo.com/r3china
www.rthree.com
www.r3integration40.com
www.r3social40.com
Q2 revenues of the holding groups in this report also are showing a slowdown for growth. With the “new normal” in China, the toughening economy
in Brazil and the crumbling ruble and transparency issues in Russia, this
has been a tough period for developing market growth and the various
diversified agency models and revenue streams that come along with this.
These issues also shed a light on the increasing role of the CFO in these
marketing relationships. To this end, R3 conducted two roundtables in Q2
involving 20 CMO’s from some of the world’s leading marketers - Financial
heads from P&G, Coca-Cola, JNJ, Ferrero, AirBnB, Fonterra and others met
to discuss common issues regarding marketing investment and ROI. From
the very foundation of the right Advertising to Sales ratios – with Apple
re-investing as little as 1.5% through to L’Oreal at more than 30% - to the
influx of e-commerce, social and analytics into the marketing suite, these
financial leaders are asking one main thing of their marketing counterparts – “Show me the ROI.” You can read more about these roundtables
here and here.
We hope you enjoy this quarterly report on the marketing communications
industry. A final note, you can read more specialist reports on Social Media
at www.R3Social40.com and on the challenges of delivering on integrated
marketing at www.R3integration40.com.
GLOBAL MEDIA REVIEWS
Agency
Key contracts under risk
WPP
Unilever, Volkswagen, Sony, Citi, Daimler, Visa,
SC Johnson
7.0
210
132
1.2%
Publicis
P&G, Mondelez, 21st Century Fox, General Mills,
L’Oreal, Coty, Coca-Cola
5.5
165
145
1.5%
Havas
Sears
0.2
5
4
0.2%
Omnicom
Unilever, J&J, Mondelez, Coty, Visa
2.9
88
88
0.6%
Interpublic
Unilever, J&J, Sony, L’Oreal, BMW
3.3
99
99
1.3%
Dentsu
P&G, Mondelez, 21st Century Fox
3.9
116
14,281
1.6%
Total
*Source: Jefferies Equity
rthree.com
Billings at
risk (US$bn)
22.7
Impact on top line assuming 3% In local curagency fees (US $m)
rency (m)
Impact on
revenues
Holding Company Earnings
Omnicom Group Inc. (NYSE: OMC) Q2 results increased in comparison to Q1
performance (total revenue $3,462.9m); however, it is an overall decrease
in total revenue compared to same quarter last year. Upon closer look at
the components of change in revenue, Omnicom reported organic growth of
5.3% in addition to 0.1% inorganic growth (increase in revenue from acquisitions), but their holistic performance was impacted by the -7.1% negative
impact of foreign exchange rates. In Q2, Omnicom experienced regional
organic growth in Asia Pacific and Africa/Middle East of +7.6% and +11.9%
respectively, but slowed down in terms of inorganic expansion when compared to Q2 2014. We speculate that the group third and fourth quarter
results will reflect an increase in M&A.
Omnicom Financial Statement ($m)
Consolidated Statements of Income
2015 Q2
2014 Q2
Change %
Revenue
3,805.3
3,870.9
-1.69%
Operating Expenses
3,239.6
3296.7
-1.73%
Operating Income
538.6
548.4
-1.79%
Net Income
342.7
358.4
-4.38%
Stock Price
$69.49
$71.22
-4.38%
3
Omnicom By Region (% of Total Revenue)
Three months ended in
June 30
Three months ended in 2015 Q2 vs
June 30
2014 Q2
North America
56.78%
56.5%
-1.11%
Latin America
2.47%
2.90%
-16.61%
Europe
28.40%
28.6%
-2.51%
Middle East and Africa
1.74%
1.60%
4.89%
ASIA PACIFIC
10.61%
10.40%
0.59%
AMERICAS
EMEA
Publicis Groupe (PUB: PA) has announced their Q2 financial results and the
organic revenue growth or 1.4% falls well below competitors’ results, including Omnicom and Interpublic. Despite falling behind in organic growth,
Publicis experienced very positive impact on foreign exchange and total revenue, due in part to its purchase of Sapient. Among their acquisitions is the
US digital agency Domani, a specialist media strategy agency in Australia
(Match Media) as well as the purchase of a French press agency (Relaxnews). We expect to see Publicis to get aggressive on M&A in the second
half of 2015, much like it did in H2 2014.
Publicis Groupe Financial Statement (Euros m)
2015 Q2
2014 Q2
Change %
Revenue
2,439
1,761
38.5%
Stock Price
€66.32
€61.94
7.1%
Publicis Groupe by Region (% of Total Revenue)
Three months ended in
June 30, 2015
Three months ended in
June 30, 2014
2015 Q2 vs 2014 Q2
Change %
Europe
27.92%
31.35%
23.37%
North America
54.24%
47.81%
57.13%
Asia Pacific
10.87%
11.75%
28.02%
Latin America
4.14%
5.85%
-1.94%
Middle East Africa
2.83%
3.24%
21.05%
Total
100.00%
100.00%
38.50%
rthree.com
US based Interpublic Group reports a strong second quater with an overall
organic growth of 6.7%, consisting of 7.7% growth in the U.S. and 5.3%
growth internationally. Much like 2014, IPG has had a slow quarter for acquisitions, with only one investment in Samba TV, an emerging leader in
TV analytics, data, and attribution in the US. The impact of net acquisitions
was an increase of 0.3% on total revenue.
Interpublic Financial Statement ($ m)
Three months ended in
June 30
Three months ended in
June 30
Change %
Revenue
1876.1
1851.4
1.3%
Operating Expenses
1660.3
1656.6
-0.3%
Operating Income
215.8
195.8
10.2%
Net Income
123.8
103.7
19.8%
Stock Price
$19.27
$19.51
-1.2%
Interpublic by Region (% of Total Revenue)
Three months ended in
June 30
Three months ended in
June 30
Change %
Consolidated
100%
100%
-
Domestic
59.28%
55.68%
7.9%
International
40.72%
44.32%
-6.9%
MDC partners delivered strong results in the second quarter reporting an
exceptional organic growth of 8%, with their total revenue increasing 12.4%,
from $299.4 million to $336.6 million. MDC’s Net New Business wins totaled $27.3 million in the second quarter; but acquisitions have slowed,
having only one, the Canadian CRM agency (Kenna), in Q2.
MDC Financial Statement ($ m)
Three months ended in
June 30, 2015
Three months ended in
June 30, 2014
Change %
Revenue
336.6
299.4
12.4%
Operating Expenses
292.1
270.2
8.1%
Operating Income
44.5
29.2
52.7%
7.4
7.6
-2.6%
37.1
21.6
71.8%
Net Income
32.4
18.2
78.0%
Stock Price
$19.70
$21.92
-10.1%
Total (expenses) and
other income
Income before
income tax
5
90 days of M&A
The M&A wave in the second quarter saw WPP and Denstu leading the way.
WPP lead the league with the acquisition of six independent companies and
one strategic investment, continuing their M&A trend from quarter one of
focusing on the US and APAC, while also expanding their target search into
Europe. Although no one can compete with WPP’s Q2 numbers, LEO group
also caught our attention with the most expensive deal of the second quarter, acquiring a Chinese digital agency for $341 million.
2015 HOLDING COMPANY M&A LEAGUE
Global / June 2015
Rank This Rank Last Holding Group
month
Month
Recent Acquisitions
Total Sales
Value (US$m) No. of deals
1
1
LEO Group
Wan Sheng Wei Ye China, Mi Age China
480
2
2
2
WPP
Hirschen Germany, Chemistry Media New Zealand, Greenhouse Group B.V Netherland, SET
Creative US
471
14
3
4
Providence Equity
Clarion Events UK
336
1
4
3
Dentsu
eCommera UK, John Brown Media UK, Marketing
Wizards Poland
308
12
5
5
Publicis Groupe
Domani US, Match Media Australia, Relaxnews
France
145
7
6
8
Montgomery Group
AidEx UK
84
1
7
6
BlueFocus
Domob China, Madhouse China , Jianfei Tech
China
64
3
8
7
Havas
Just:: Health Communications UK, EGC & Associes France, Plastic Mobile Canada
62
3
9
9
Tarsus
PAINWeek US
28
1
10
10
DC Thomson
ShortList Media UK
27
1
11
11
Liantronics
Airmedia China
25
1
12
12
R2integrated
Make Me Social US
25
1
13
13
Omnicom
TLGG Germany
21
1
14
14
HCB
Topin & Associates US
21
1
15
15
Interpublic
Samba TV US
18
1
2,114
rthree.com
50
New Business League
Wieden + Kennedy won AB-InBev’s brands Bud Light (America’s largest
beer brand) and Corona Extra, continuing their lead among the creative
agencies. PHD won SC Johnson’s media buying business in May after getting its media planning duties in January, reaching top rank amongst all
media agencies.
2015 CREATIVE AGENCIES NEW BUSINESS LEAGUE
Global/June 2015
Rank This
month
Rank Last
Month
AGENCY
Recent WINS
Estimated YTD win
revenue (Usd $ m)
Recent Losses
ESTIMATED YTD WIN Number of
REVENUE (USD $ m)
wins
1
1
Wieden & Kennedy
Yoplait US, Milka Global, Sprite US, Johnnie Walker
Brazil
111.1
Tesco UK
77.7
10
2
6
R/GA
E*Trade(TV) US, Mcdonald's UK, Simple US.
61.0
Ameriprise US
57.0
3
3
5
McCann WorldGroup
Chevy Silverado US, Ameriprise US, EBS Korea
51.7
True Visionl
Thailand
50.4
116
4
2
72andSunny
Axe / Lynx Global, Adidas US
40.0
40.0
2
5
7
JWT
AskMe.com India,, Ribena US, KPMG US, La
Redoute UK
50.7
VLCC India
39.2
89
6
10
DDB
Pirelli Global, Sony Cameras Germany, American
Cancer Society US
39.5
PepsiCo brands
Indonesia
37.1
88
7
4
BBDO
Barbie Global, Telstra Australia, Spritzer China
29.8
Major League
Baseball US
24.5
24
8
3
Saatchi & Saatchi
SFR Numericable France, Acer Global, HomeAway.
com Global
24.3
FMCG Client
24.2
8
9
8
Grey Group
Heineken Group Germany, Tequila Herradura Global,
General Mills UK
22.7
Dermatix Korea
20.1
18
10
9
Bartle Bogle Hegarty
Tesco UK
18.4
18.4
1
11
-
RPA
Apartments.com US, Tempur Sealy US
15.6
15.6
2
12=
11=
Hirschen Group
MediaMarkt Germany
14.5
14.5
1
12=
11=
TLGG
MediaMarkt Germany
14.5
14.5
1
14
-
Kolle Rebbe
Krombacher beer Germany, Netflix Germany
10.7
10.7
2
15=
14=
AKQA
Delta Airlines(Digital) US
10.0
10.0
1
15=
14=
Rosapark
SFR Numericable France
10.0
10.0
1
17
13
Publicis
Tencent Game China Project, Barclays South Africa,
Mead Johnson Singapore Project
14.8
9.3
95
18
18
Santy
Delta Air Line US, China Mist Iced Tea(Digital) US
8.2
8.2
2
19
-
VCCP
Nationwide Bldg Society UK, Bild Germany, Fitness
First Australia
7.6
7.6
3
20
-
The Richards Group
Schwab Trading Services US, Alfa Romeo US
Projectww
7.0
7.0
2
496
469
Escorts India
7
2015 MEDIA AGENCIES NEW BUSINESS LEAGUE
Global/June 2015
ESTIMATED
overall YTD
REVENUE
(USD $ m)
Number of
Wins
Red Bull Philippines
81.7
77
49.8
QBE Insurance Australia
46.3
296
Virgin Trains East Coast UK, Ferrero
Taiwan
80.0
Coty N.America &
Europe
40.7
120
ZenithOptimedia
Coty N.America & Europe, Uniqlo UK,
Sanofi Korea
43.4
Pernod Ricard Spain
28.4
50
4
Havas Media
Ubisoft UK, SingTel Singapore, QBE
Insurance Australia
41.8
Warner Music France
28.3
85
6
5
Mediacom
Tempur UK, Pernod Ricard Spain,
Demirören Holding Turkey
38.2
Etihad Airways Partners Global
15.8
136
7
11
Vizeum
VF Corporation Europe, Weetabix UK,
Warner Music France
18.8
Jet Airways India
13.2
109
8
7=
Universal McCann
General Mills Spain, Sobeys Canada
Project, Lenovo Russia Project
30.6
Tempur UK
12.3
242
9
6
Horizon Media
Lindt US, STX Entertainment US,
Snyder’s-Lance US
11.8
11.8
6
10
10
Dentsu Media
Japanese Govt Project, FAW- Volkswagen Magotan China Project, Suzuki
India
12.7
Sands(Digital) China
11.7
133
11
-
Starcom MediaVest
Etihad Airways Partners Global, ABI
Korea, Unilab Philippines
20.4
Converse North
America
11.5
28
12
12
Initiative
Soriana Mexico, Bose Canada, Go
Daddy Canada
28.7
Nippon Paint Thailand
10.8
104
13
7=
MEC
Microsoft Store China, Uber Taxi India, Global Consumer Products India
14.3
Singtel Singapore
10.5
65
14
9
BPN
Samsung Life Insurance Thailand,
Tyson US, Emblem US
9.9
9.9
12
15
13
Arena
CIC France
5.4
5.4
1
16
14
360i
Spotify Digital
3.3
3.3
2
17
15
GDAD
Dongfeng Yueda Kia China
2.5
2.5
1
18
17
Resolution Media
3M US, Texas Instruments US
2.1
2.1
2
19=
18=
Doner
Highmark Health US
1.5
1.5
1
19=
18=
CrossMedia
GNC US
1.5
1.5
1
349.1
1,471
Rank
This
month
Rank
Last
Month
1
1
PHD
SC Johnson(buying) Global, Ferrero
Emerging markets, Bacardi China
84.3
2
3
Carat
Medibank Australia, Lefdal Norway,
EMC Global
3
2
OMD
4
-
5
rthree.com
Agency
Recent wins
Estimated YTD
win revenue
(Usd $ m)
Recent Losses
People Movement
This quarter saw a lot of movement amongst senior Holding Company and
Agency Leaders. For the full results of changes, see below.
John joins one of the strongest networks in Latin America, with 27 Y&R
offices and 18 Wunderman offices , along with an ever gowing VML presence and a huge investment in Y&R’s BAV tool across the region. The
agency ranks as the leader in Brazil , and through Colgate and a number
of other big clients, is a positive presence in the region.
JOHN LYNN
CEO Y&R Latin America
After past experience with MRM and others in London, Lynn has spent
the last eight years leading Grey Spain, and helping them become one of
the top five agencies in the market. He will be based in Miami.
Dentsu Aegis Network has promoted Ted Lim to chief creative officer of
Dentsu Asia Pacific (excluding Japan). Previously Lim led Dentsu’s creative offering for Southeast Asia and now expands his remit to cover all
of Asia Pacific outside of Japan.
TED LIM
CREATIVE OFFICER
DENTSU ASIA PACIFIC
Lim’s previous title was executive creative director and deputy chairman
at Naga DDB Malaysia and chief creative officer at Leo Burnett Singapore before joining Dentsu in 2013. In his first 18 months at Dentsu,
Lim helped win over 20 pitches across the region including Uniqlo, Dulux, Panasonic, Coca-Cola and Yamaha.
Susan Credle is the new global chief creative officer at FCB, replacing
Jonathan Harries, who’s held the post since 2006 and will now become
chairman. The changes take effect on January 1, 2016.
Credle will relocate to New York from Chicago, where she’s been CCO at
Leo Burnett USA.
SUSAN CREDLE
GLOBAL CHIEF CREATIVE FCB
Credle joined the Publicis Groupe agency in 2009, and during her time
there, is credited with new-business wins like Marshall’s, Kraft, Esurance, Sprint and Cincinnati-based regional bank Fifth Third. Credle is
also associated with the agency’s “Mayhem” campaign for Allstate, and
the anti-bullying initiative “Mean Stinks” for Procter & Gamble’s Secret.
9
People Movement
Chris is formerly from South Africa and moves over from TBWA Paris
where he led iconic work for Nissan, Absolut and Playstation. As Global
Creative President, Garbutt will oversee the creative direction for TBWA’s
hallmark global clients including Nissan, McDonalds, Adidas, Pernod Ricard, and more, while also partnering with newly-appointed CEO Rob
Schwartz to helm the network’s flagship New York office in the role of
Chief Creative Officer.
CHRIS GARBUTT
GLOBAL CREATIVE PRESIDENT
TBWA WORLDWIDE
Garbutt will report to Ruhanen and to Worldwide Creative Director, John
Hunt.
New IPG Mediabrands CEO, Henry Tajer, promoted Jim Hytner to global
Chief Operating Officer, Tajer’s previous job. IPG Mediabrands is Interpublic Group’s media division.
JIM HYTNER
CEO NEW IPG MEDIABRANDS
rthree.com
London-based Hytner, who was formerly chief of Mediabrands’ G14
region, assumes his new duties in September. In his last role, he led
Mediabrands’ three global agencies—UM, Initiative and BPN—and was
responsible for global clients based outside the U.S., including Unilever
and BMW. Earlier in his career, he was global marketing director of Barclays and also worked in television, most recently as ITV’s commercial
and marketing director.
About R3
RETURN ON AGENCIES
IMPROVING THE
EFFECTIVENESS
& EFFICIENCY
OF MARKETERS &
THEIR AGENCIES
We help marketers find, pay and keep the
best possible agency relationships – covering Creative, Media, PR, Digital, Social, Performance, Event, Promotions and CRM.
We take the lead in improving the Integration process through proprietary software
and consulting.
RETURN ON MEDIA
We offer professional analysis of the media
process, planning and buying with proprietary benchmarks and tools to set and measure performance.
We conduct financial audits to validate and
benchmark transparency.
RETURN ON INVESTMENT
We renew marketing data, structure and
processes to help benchmark and drive improvement.
We track Digital Engagement in China
through a proprietary study in China called
EnSpire
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