To compete, agency holding groups borrow from consultancies’ playbook

Consulting firms still cast a long shadow over agency holding groups.

Two years ago the ad industry shrugged off the threat of consultancies. Today it’s a different story. The CEOs of the three largest holding groups are now trying to make their businesses more like them. WPP’s Mark Read, Omnicom’s John Wren and Publicis Group’s Arthur Sadoun repeatedly referenced consulting firms — particularly Accenture — during their earnings calls for the first three months of 2019, as analysts and investors pressed them on how exposed they are to the threat.

Mark Read acknowledged the threat the likes of Accenture and Deloitte now pose his business on 26. April, during the group’s earnings call. “Increasingly we will compete with the consulting firms. It remains more at the margin than at the heart of our business and there will be many times when we win and some times when they win,” said Read.

He positioned WPP as a competitive force in the data management and analytics businesses — the kind that has long been considered the backbone of Accenture Interactive, PwC Digital Services, IBM iX and Deloitte Digital. While WPP is in the process of selling off parts of its Kantar business, it still harbors dreams of owning its own first-party customer data. Whereas Kantar-owned data is taken from panels and surveys, the data being amassed in Wunderman Data is permission-based data linked to individual names at a granular, census-based level.

Services like this accounted for 15.6% of the company’s net sales in the first three months of the year. WPP’s challenge is to make those capabilities more widely available across the group — a process started by its current attempt to migrate its customer data management platform to the cloud.

“We have data on around 250 million households in the U.S. and around 3,000 datasets, ranging from demographics to purchases at SKU level and we have the ability to integrate that data to other sources,” said Read on the call.

Many global advertisers are at a loss for how to use both owned and third-party data to spot new audience segments and analyze media investments. So, understanding how that data can inform CRM and loyalty schemes could create new revenue opportunities for WPP.

It’s a move straight from the consulting firm playbook. Both Accenture Interactive and Deloitte Digital have previously highlighted the upside of pitching their own talent to senior marketers that need help on-boarding DMPs, then advise on how to structure the data they feed in. Advertising isn’t regarded as a high-margin product for consultancies, so they typically bundle it alongside more profitable packages like data analytics.

Omnicom has gone a different route: investing in consulting firms. Last year the group acquired management and technology consultants Credara and a majority stake in marketing services and tech firm Levo Digital last year. It’s on the hunt for similar buys. On Omnicom’s earnings call on April 16, Wren outlined how those businesses would enable the group to encroach on the consultancies’ turf. “As these practices develop, we expect to have more opportunities to offer our clients tip-of-the-spear solutions that tackle business firms,” Wren said.

It won’t lead to big deals like Publicis’ $3.7 billion (£2.9 billion) buyout of Sapient in 2014. Those are in the past, said Wren, who told analysts that the group would continue to look at a smaller business like Credara, which had 300 employees and generated around $80 million (£619 billion) in annual revenue when it was acquired.

Commerce is another area the holding groups hope to gain ground on consultancies. It won’t, however, be by going head-to-head with them. With more sales happening online, shopper marketing budgets are now up for grabs for agencies — an area previously off limits, courtesy of Amazon. Advertisers, particularly in the CPG space like PepsiCo, are rethinking how they spend media dollars to drive online sales.

It’s why Publicis CEO Sadoun repeatedly referenced CPG advertisers earlier this month when analysts questioned its plans to buy Epsilon, which consists of an affiliate marketing network, a third-party data marketplace, a retail data co-op and an ad tech platform. Being able to dip into that well of data Publicis execs can start to create services around analytics and measurement that are usually the domain of the consulting firms.

“First-party data is becoming increasingly important for the CPG world,” Sadoun told analysts. “CPG clients have told us that having a business like Epsilon would be a game changer in our ability to help them connect with the consumer. This is why the transaction data is so important.”

GroupM is reporting to even more drastic measures to counter the perceived conflict of interests consultancies pose. The media buying arm no longer shares a portion of its media pricing data with Accenture to audit for fear it could be used by Accenture Interactive to undercut its prices. In the Netherlands, Accenture’s acquisition of Storm in March has already ruffled a few agencies. C.C. Hage, co-owner of Mediaplain, issued a public letter that warned against the consulting firm competitively positioning itself against agencies, while simultaneously auditing their numbers.

“If Accenture decides to become an agency, stop matching, checking or evaluating agencies,” Hage wrote in the letter. “Or, and that might be a better idea, let an independent party examine Accenture Digital’s customer-office relationships where necessary.”

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