These are tense times for GroupM, the world's largest media buyer.
With the departure of Kirk MacDonald, CEO of North America and perhaps one of our most prominent senior executives, after three years, we will not only have to find a permanent replacement for him, but also Pressure is on to make up for hundreds of millions in lost media revenue. Client desertion.
What's worse for the WPP-owned global media agency group is that these problems are just the tip of the iceberg. There are challenges on several fronts, including economic uncertainty, intense competition, talent retention concerns, structural weaknesses, and evolving data privacy regulations.
Indeed, these challenges are a natural part of the media buying business, and Group M has historically thrived despite them. An internal source, who spoke on condition of anonymity, pointed out that the group has achieved a total growth of 23% in four years. From 2019.
However, these days it turns out that the demands are even more demanding. In the third quarter of this year, Group M recorded modest revenue growth of just 1.6%, in contrast to the “high single digit” growth achieved by Publicis. Year-to-date, Group M's revenue has grown at a healthy 4.6%, roughly in line with other holdcos, according to its latest earnings report. And executives privately believe they will hit a net profit well before the third-quarter drop.
So why the slowdown? This is due to a combination of factors, including losses in North America, spending cuts by tech advertisers, and even a bribery investigation in China involving GroupM. .
Group M executives declined to speak on the record for this article.
At first glance, the final months of the year appear likely to exacerbate rather than alleviate these problems. WPP has revised down its 2023 full-year forecast to a growth rate of 0.5% to 1%, but the outlook for the media agency's holiday season does not necessarily look promising, especially considering that it accounts for nearly 40% of the holding company group's revenue. It cannot be called a color painting.
Rise and fall of accounts
Perhaps the pill would have been easier for WPP executives to swallow if they hadn't lost so many accounts. One former GroupM executive said the company's performance in the U.S. was “terrible.”
According to Convergence data, Group M is down $155 million globally (not including retention, which is a $1.2 billion increase in media spend). This is due in part to the loss of major customers such as Pfizer and Shell. That said, GroupM insiders pointed to recent wins for PayPal globally, Nestlé in EMEA, and the retention of some Unilever operations and Uber in APAC.
The situation was even worse in North America, where losses from Uber, Walgreens and L'Oréal led to a $495 million decline in media spending, including retention. These numbers do not include the most recent losses of General Mills, which has $800 million in global accounts ($500 million in the U.S. alone).
To be fair, Jay Patisal, vice president and chief agency analyst at Forrester, said this type of account nadir could happen at any major holding company. But he also said that throughout the year, “Group M in particular had the worst performance in new business. They lost relatively many customers and didn't replace them quickly.”
Unsurprisingly, GroupM has a different take on the situation. A GroupM representative said, “While circumstances are always different in each market, we are fully satisfied with the current state of our business.'' “GroupM led the industry in continuing business in the first half of this year, and our agency has been recognized as the leading network for new business in the same period, this year's Cannes Lions Media Network of the Year, and the media Awards include Best Agency Network Overall. We have the highest employee satisfaction score ever, and the depth of talent and innovation coming from GroupM Nexus and Choreograph has led us to We are well-positioned to continue leading the industry in quality and performance for many years to come.”
Bulk is not what it used to be
Clearly, Group M's proven strategy of relying on bulk buying power is no longer as attractive to marketers as it once was. — That's why we're making so many changes. Sure, it's still important for getting a good deal on media buys, but it's no longer at the top of every marketer's list. These days, media agencies are looking for more value. That could mean expertise in data analysis, advanced analytics, strategic insights, or guidance to navigate digital transformation.
“We distanced ourselves from Group M for a while because we felt that its main advantage was purchasing power and that had become a basic requirement,” said one industry source.
This was in 2019, and the fact that it's still true four years later says a lot about the challenges GroupM faces.
Since then, GroupM has rebuilt its data services multiple times, using a data orchestration unit created two years ago. Choreograph is the latest iteration. One insider described the force as “a mess.” This is not the most constructive explanation for the problem and shows that the atmosphere within the company is not positive at all.
A source inside GroupM said new leaders Evan Hanlon and Rich Astley were “definitely going through a confusing transition period”. The source describes Hanlon and Astley as “two of the most successful product builders within the group with Essence, Xaxis and Finecast. We have tremendous confidence in what they are building.” I have a.”
Is morale up or down?
Other sources within GroupM say morale is rumored to be at its lowest level since pre-pandemic, with one insider citing the fact that many customer decisions are more finance-driven than marketing-driven. He said the mood was “depressed.”
An inside source says, “Most recent global employee surveys strongly contradict this. Most recently, 88-89% of employees believe that customer satisfaction is their company's top priority.'' He said he is doing so. [operating company]Understand how their work contributes to our goals and objectives and that they trust and respect the people they work with. ”
To our credit, GroupM has been tackling these challenges head-on for many years. In fact, the company has become pretty good at creating special teams tailored to each client's needs and bringing in the best executives to make it all happen. Only time will tell if Hanlon and Astley represent that.
GroupM's Wavemaker division became the world's top media agency network in new business wins in the first half of this year, with total new business exceeding $1.2 billion, according to Convergence. (In fact, the broader GroupM network ranked third in the same period, behind Publicis Media and IPG's Mediabrands.) But things are different in the third quarter.
Similarly, Mindshare won Media Network of the Year at Cannes Lions, and EssenceMediacom led the year's WARC Media 100.
When will things start to turn around?
This means that while GroupM may be moving in the right direction in certain areas, it is not fully realizing the same proposition across the group. To be fair, cohesion has always been a pain point for GroupM.
“The North American business was always an island within GroupM,” said a former executive who left the company several years ago. “It was a separate organization, even though it was collegial. I hardly spoke to my colleagues in that department while I was there.”
Now, while some changes may have occurred since the executive's resignation, it is debatable whether they have been substantial enough. If that were the case, GroupM's problems wouldn't be so pressing, and WPP CEO Mark Read wouldn't be stressing the need for further simplification and efficiency across the network. (There have been complaints across the industry about the removal of some once-legendary names, including J.Walter Thompson, Young & Rubicam, and Wonder Man.)
And just because McDonald's is about to leave doesn't necessarily mean that what's ailing the company will be resolved. As Forrester's Pattisall reminded him, “Kirk MacDonald was not the architect of strategy within Group M. It was done on a global level.” [under GroupM’s global CEO Christian Juhl]. So replacing North American leadership might help them solve some of the implementation considerations, but I don't think it would completely solve the problem. ”
That's the problem with companies like GroupM. In some ways, the company is a victim of its own success. Juhl is said to be envisioning a transformation that mirrors his innovative Essence agency, a business built on a foundation of data and technology. If he succeeds, GroupM could become an agency that can smoothly handle global campaigns in many markets simultaneously while maintaining quality.
However, there is still debate as to whether this is the exact fix needed to get the business back on track. As one senior marketer who has worked with GroupM for years says: That is the legacy that companies like Group M leave on the market. ”