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Business News/ Opinion / Don Draper’s new nemesis prefers spreadsheets to martinis
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Don Draper’s new nemesis prefers spreadsheets to martinis

As ad dollars move from old media to the Web and companies try to modernize to avoid being disrupted, the distinction between marketing and technology has blurred

Accenture employs about 20,000 people in its digital marketing division and says the business grew 25% to reach $3 billion last year. That’s already a respectable 10% of its overall business. Photo: Ramesh Pathania/MintPremium
Accenture employs about 20,000 people in its digital marketing division and says the business grew 25% to reach $3 billion last year. That’s already a respectable 10% of its overall business. Photo: Ramesh Pathania/Mint

Paris: Ad agencies have had to endure the rise of the geeks as Google and Facebook emerged as mighty marketing machines. The next challenge is spreadsheet-wielding nerds.

Consulting firms such as Accenture, Deloitte and IBM, better known for their offshore outsourcing armies, have been quietly building scale in digital marketing. In so doing, they’re exposing a weakness among the Madison Avenue types at WPP, Publicis, and Omnicom: their lack of the tech wizardry crucial to many new publicity campaigns.

The Excel-jockeys won’t be designing Super Bowl ads anytime soon (agencies still have a creative edge). But they’re very good at online marketing, building apps and e-commerce, the stuff that advertisers from McDonald’s to Procter & Gamble care about more and more in a world in thrall to the smartphone.

So while everyone was worrying about Larry Page and Mark Zuckerberg, this new threat has been under-appreciated. And like Facebook and Google, its provenance is the Internet. As ad dollars move from old media to the Web and companies try to modernize to avoid being disrupted, the distinction between marketing and technology has blurred.

Before, the IT consultants handled the software to manage sales forces, customer relationships and human resources, while the ad guys and girls took care of branding by crafting TV, radio, print and online ads. Those two worlds are colliding.

For example, a bank knows it has more chance of attracting young customers to its brand if it designs a sharp online banking app. Or Wal-Mart might be able to target the perfect special offer if it fully understands shoppers’ online habits. With big data, advertisers need PhDs to mine for customers.

This all tends to favour the nerds, and the Don Drapers will have to adapt. Exane estimates global marketing is worth $1 trillion a year, while IT and consulting is worth $3.6 trillion. It guesses that the overlap (where the ad guys compete with the consultants) will be about $50 billion by 2020.

For the agencies, this will probably put more pressure on prices, especially if the consultants champion pay-for-performance. Accenture brags about a carmaker contract, where it’s paid on cars sold.

So the agencies are going to have to compete with everyone else for tech talent and up their game in software and analytics. They risk being outgunned if the consultancies really go after them.

Accenture alone employs about 20,000 people in its digital marketing division and says the business grew 25% to reach $3 billion last year. That’s already a respectable 10% of its overall business. It’s bigger than Havas, the sixth-biggest advertising agency.

Publicis CEO Maurice Levy has been boldest in trying to respond. He paid a 44% premium to buy digital agency Sapient for $3.7 billion last year, casting the move as a way to expand onto the IT consultants’ turf. One attraction was Sapient’s 8,500 Indian developers, who build everything from mobile apps to websites. Publicis is yet to prove, however, that the deal can help reverse market share losses.

WPP’s Martin Sorrell, who’s invested more gradually in this area, acknowledges the threat but says the consultancies “still don’t get branding." If Accenture carries on expanding at its current clip, it won’t be long before they do. Bloomberg

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Published: 05 May 2016, 02:47 PM IST
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