The announcement last week by the CEO of Publicis Groupe, Arthur Sadoun, that the holding company would be taking a year out from Award Shows and other industry marketing events has had the impact I am sure he was hoping for.
Of course this made industry news world-wide, and with my career including 15 years as a copywriter and creative director and president of the Melbourne Advertising & Design Club for two years I was asked by Mumbrella Asia to make a comment.
My comment is that this reflects the worsening economics of the agency business and it has come to a head at Cannes this year, because in the past year, holding company growth has virtually stagnated. All this at a time when the owners of the Cannes Lions Festival of Creativity made a very public display of the value of the awards through their IPO valuing them at £800 million.
But the implications are not for the Cannes Awards, who like the US banks are too big to be allowed to fail, but it potentially has a huge impact for the plethora of industry awards around the world. Let me explain.
The timing of the announcement
Mr Sadoun could have made his announcement to withdraw from award shows and other industry events for a year, to fund the development of the AI transformation of the agency, but he made the announcement during the Cannes Festival Week. The reason can only be to have maximum impact at a time when the global industry and mainstream media is focused on the industry.
After all he is not the first agency network or holding company to question the cost or the ROI of these creative award shows. At the start of 2016 Amir Kassaei, Chief Creative Officer of DDB Worldwide announced that DDB would be investing less in entering creative awards for the reasons he provided here.
Then a few months prior to the awards, the Wall Street Journal ran a story that reported that WPP, along with some of their competitors, would cut spend this year by 25%, in the face of declining revenue growth.
Yet, neither of these reports received the reaction that Mr Sadoun’s had. Certainly he did up the anti from simply making cuts in investment to a one year ‘ban’. But his reaction has had maximum impact with others openly questioning the value of creative awards and regarding Cannes in particular, Sir Martin Sorrell called for the Festival to be relocated, and the Festival organiser convened an advisory committee of marketers to shape the future of the Awards to meet industry needs.
Holding Company Financial Performance
Holding Company financial performance is under pressure with Pivotal Research reporting revenues for the five largest globally diversified companies showing organic growth for the 1Q17 around the world of around +1.7% and for the US / North America the comparable figure is closer to -0.3%.
The economics of this situation is well covered in Michael Farmer’s award winning book “Madison Avenue Manslaughter” which tracks the downward pressure on agency revenue and the implications for agencies and their clients.
The downward pressure on agency fees has been impacted further by a number of industry trends including advertisers taking more services in-house, increased competition from consulting firms and technology companies and declining marketing budgets due to the increased used of zero based budgeting, especially by the global consumer packaged goods companies.
Ironically the parties responsible for this increasing pressure on holding company revenues, advertisers, technology companies and consulting firms, are also increasingly bigger players at Cannes Lions and other Award Shows as they make in-roads into the core creative advertising business. Perhaps this is why Sir Martin Sorrell is feeling people are being ripped off by the Cannes Lions?
Cannes Lions Festival of Creativity owner IPO
Traditionally, ad industry awards were run by not-for-profit organisations for the industry like the D&AD Awards or One Show or the ADC Awards or the ADDYs.
These organisations, like many other regional or local industry bodies, run award shows to recognise and encourage creative excellence in the advertising industry. Profits from these award shows are returned to fund championing creativity in the industry through the clubs, associations and foundations. Therefore participation in the awards was not just about recognition, but also about supporting creativity.
For many the Cannes Lions Festival of Creativity was amongst these other global award shows, until February 2016, when Ascential, the company behind the annual Cannes Lions Festival took the step of an initial public offering (IPO) that valued the company at £800m. Suddenly it was very public that the Cannes Lions were not just about promoting creativity, but about delivering shareholder value.
“According to the prospectus at the time, the Cannes Lions generated £41 million in revenues in 2014, which accounted for 13% of the group’s total revenue and 30% of the revenues it generated from events that year. Last year Cannes Lions attracted over 9,500 paying delegates to its week-long content programme and had more than 40,000 entries from approximately 90 countries.”
The success of the Cannes Lions is due to the years of on-going support by the advertising industry and specifically the agencies. The evidence of this is that during the week when the news emerged of Publicis placing a one-year ban on awards, the Ascential share price dipped. So now it is clear that the Cannes Lions are not just about championing creativity, but also in a way that returns a profit to shareholders and not back to the industry that supports it.
The industry should be happy that the festival to celebrate ad campaigns for creativity is financially successful, in the same way that advertisers are happy every time they read headlines about record revenue performances by their agency holding companies.
The fact is that the Cannes Lion Festival of Creativity is a product of the advertising industry. But just as the industry is changing, the Festival is changing too with an increased focus on technology and advertisers with a generous splash of Hollywood and the music industry.
The Ascential IPO simply reminds the advertising industry that they are significantly funding the shareholder value of this company for a Festival of Creativity where they are increasingly marginalised. In fact Mr Sadoun is reported to point out the SnapChat wheel at the festival as a “symbol of the agency world’s woes”, and that it “symbolises the fact that the holding companies, have lost their thought leadership in Cannes.”
What is the role of creative awards
It has certainly raised questions around the role and value of the multitude of industry award shows. Twenty years ago as president of the MADC we had a flourishing award show attracting almost 1000 people to the Award night in Melbourne. Today it is no longer. Yet there are more award shows today than ever before. But it is interesting to read the responses of advertisers to the Publicis announcement.
Mostly the comments from the global advertisers interviewed by Ad Age here talked about the inconvenience of not having all of the holding companies and their agencies represented at the major events like Cannes and CES.
The fact is that in almost two decades of managing agency search and selection projects, I have never known an advertiser to choose an agency because of a creative award they have won. Of course a high profile award-winning campaign or a succession of award winning work will help put an agency on the consideration list, just as any positive public relations would.
But the fact is there is quite a lot of cynicism amongst advertisers when it comes to agency awards, not just creative, but also ‘agency of the year’ and even effectiveness awards.
This is because often agencies present their award track record in the best possible light, if not always the most honest. I remember three agencies saying during a day of chemistry they were “the most awarded for effectiveness awards” which totally confused the client.
It was only later reading the credentials documents that they had cut the results over different years and different categories to justify the statement, but by then the impact was lost.
But marketers’ view on agency awards is summed up beautifully in this tweet from Shann Biglione, Chief Strategy Officer at Publicis Media Greater China.
Schrodinger’s marketer: awards are both completely superflous posturing and a huge mistake to not participate in.
— Shann Biglione (@LeShann) June 24, 2017
Of course marketers are happy when their agencies are recognised for doing great work, but they do not want their agencies to be distracted by winning awards rather then doing great work for their business. But reports of the efforts some agencies go to to create award winners is a major concern. Scam advertising undermines the value of creative awards and reinforces advertisers belief that agencies are more focused on winning awards than doing great work.
For agencies, awards have been essential to attracting and retaining great talent. Jeff Goodby was one of the few agency leaders who was willing to comment on the record that he was concerned Publicis could have recruitment issues with this announcement.
But creative awards have been the way talent in the industry gets acknowledgement of their skills and leads to promotions and job opportunities. While advertisers are happy their agencies get this recognition, it is not as important from a business perspective as the award show owners and the trade media would wish us to believe.
The implications for the industry
As I said earlier, I do not believe this is the end of Creative Award Shows like Cannes Lions. The owners have already convened an internal advisory committee to define the future of the Festival. Interestingly it appears to be composed of marketers and not the agencies who contribute the significant entry fees and attendance fees that deliver the significant profits to the publicly listed company.
It will be important for the owners to manage the expectations of the agency holding companies as they manage the continuing transition from an advertising festival for agencies to a broader audience that includes advertisers, tech companies and consulting firms. Yes, advertising agencies will become more and more marginalised as the industry becomes more diversified.
Jose Papa, Managing Director of Cannes Lions stated last week “Creativity is the core value of the Festival. Our mission is the campaign for creativity, because we know it’s a positive force for business, change and good in the world, and the proof for this gets stronger all the time”.
While he is right, creativity is central to marketing and ultimately business performance, the source of that creativity is not necessarily only available from agencies and their holding companies. If you follow the money, marketers are spending less on advertising and less with agencies and more with other suppliers who are perceived to be delivering better value – technology companies, consulting firm and bringing more of these services in-house.
Beyond the Cannes Lions Festival, the question will be what does this mean for the multitude of other award shows the industry holds? Adspur reports there are 700 awards shows on a global, regional and local basis. In some markets there are as many as three or four award shows all awarding an Agency of the Year, Campaign of the Year and the like. In fact like the Cannes Lions Festival, companies associated with the industry such as event and media companies run these awards for profit.
How long will it be before the same focus on award value that has come to a head at Cannes last week is applied to the multitude of award shows? When will the agencies start to no longer support these award shows with their dwindling revenue? It is a question that only time will answer, but lets just say the writing is on the wall.
My only advice would be to not consider an IPO because publicly showing off your profits can really annoy your customers.
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