Mumbai: UK-based marketing and communications holding company WPP Group Plc., with global billings of £18.742 billion (Rs1.47 trillion), plans to merge its out-of-home media specialist firms Kinetic and Ogilvy Landscapes in the Indian market under the Kinetic banner.
The recent departure of some senior executives from Landscapes and a quest for deeper business synergies is paving the way for the union, which has been resisted until now, according to two Ogilvy and Mather Pvt. Ltd executives closely associated with Ogilvy Landscapes.
The merger is likely to take place by January, they said.
Kinetic was formed globally in 2005 by merging WPP’s out-of-home agencies Portland and Poster Publicity. Out-of-home, or outdoor advertising, refers to advertising such as billboards aimed at the consumer when he or she is on the move or in transit.
Ogilvy Landscapes is a local unit which does planning and buying for outdoor advertising and is housed under brand activation agency OgilvyAction, which is part of WPP ad agency Ogilvy and Mather. It handles clients such as mobile-phone service provider Vodafone Essar Ltd, direct-to-home television firm Tata Sky and the local arm of UK-based bank HSBC Holdings Plc.
Kinetic is part of WPP’s global media planning and buying specialist GroupM. It is equally owned by the Kinetic management team and WPP globally and operates across 23 markets worldwide.
One of the executives quoted above said that several Kinetic officials are already visiting the Ogilvy and Mather office in Mumbai and are collaborating on advertising pitches and new projects, and that discussions are under way on what percentage of Kinetic revenues would go to Ogilvy and Mather after a merger.
WPP country head Ranjan Kapur and Vikram Sakhuja, chief executive (South Asia), GroupM India, declined to comment when asked about the merger plan. Piyush Pandey, chairman, Ogilvy and Mather Pvt. Ltd, denied the development and said Ogilvy Landscapes will continue to be part of Ogilvy and Mather.
OgilvyAction president Nabendu Bhattacharyya recently put in his papers and is starting an out-of-home agency called Milestone Media.
He has recruited key hands from within Ogilvy Landscapes for his new company and may be drawing much of its business to his agency, said one of the two executives.
Pandey said Ogilvy has already addressed the problem and recruited new people in place of those that are leaving. Bhattacharyya declined to comment.
The consolidation of WPP’s outdoor brands under Kinetic was long overdue in the Indian market. The WPP Group had announced in 2006 that it was bringing the Kinetic brand to India, which would herald the consolidation of WPP’s out-of-home resources.
Ogilvy and Mather resisted the merger because Landscapes contributes a quarter of the ad agency’s overall revenue, said the chief of a rival outdoor specialist firm who didn’t want to be named.
The time is more opportune now for a merger to leverage cost efficiencies because Ogilvy Landscapes recently lost Hindustan Unilever Ltd’s substantial out-of-home business to GroupM’s Kinetic and Aaren Initiative Outdoor Advertising Pvt Ltd, an arm of the Lintas Group.
Out-of-home media has grown at a compounded annual growth rate of 17.3% over the past three years and touched Rs 1,600 crore in 2008, according to a Ficci-KPMG industry report for 2009.
“As per our internal estimates, the numbers are slightly more, maybe towards Rs1,800 crore,” said Amit Goyal, business head, Prime Market Reach Pvt. Ltd.
Major firms in outdoor (organized) media are Ogilvy and Mather, MOMS (outdoor unit of the Madison Group), Kinetic, Aaren Initiative and Prime Market Research.
Sanjay Shah, chief executive of Navia India, Starcom MediaVest Group, says that the planned merger would definitely make Kinetic a bigger force in the out-of-home space. “But a lot of the Ogilvy team has changed and they’ve also lost business,“ Shah said. “Had they done the merger earlier, it would have packed more punch.”