Industry Update Volume 32

Executive Summary – Monthly Recap:

As we approach the end of year holiday season, Seattle-based Amazon hit $1,000,000,000,000 in value. Following Apple, Amazon’s value has surpassed a trillion dollars and is now one of just two American companies to reach that status. It seems to be an unstoppable force: Amazon generates $178 billion in annual revenue, capturing half of every ecommerce dollar in the US. It greatly matters to us marketers as Amazon Advertising is growing fast and furiously, allowing brands and Amazon-specialized agencies to collaborate and tap into the giant’s vast ecosystem. As dollars shift, the media landscape and clients’ expectations continue to evolve. Finding the right agency partner becomes critical for advertisers, and the numbers are staggering. Per COMvergence, 66 major (spend >$10M) media pitches—or moves without a review—took place during the first half of 2018, totaling $5.7B or 30%+ YOY, indicating that it’s increasingly challenging for incumbent media agencies to defend and retain an existing account. In Q3 2018, agency reviews added up to $1.3B including those from Hilton, LVMH, Lenovo/Motorola, Mars, Northwestern Mutual, Papa John’s, and Shell.
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Newsworthy reports and recent developments:

At AMS, we approach the agency management discipline as four distinct but complementary practice areas – Talent, Work, Financials, and Performance and Value— which is how we categorize the following developments:

TALENT: securing the right talent and resources

WPP’s CEO appointment and the future of the holding company has not failed to create much buzz and speculation across the industry. If you have an opinion about what the holding company should do to address its revenue and margin pressure, feel free to share it with Mark Read, the new CEO. Mark is all ears. Read the trade press and you will soon realize that there have already been countless opinions offered. Given WPP’s weak financial results, expect bold moves to drive costs down and streamline operations (consolidation, assets being sold, fewer brands, more focus on higher margin businesses, etc.) as recently announced with the merger of Y&R and VML.

  • WPP finally appointed its new CEO, Mark Read, a familiar face to the holding company and an industry veteran. Read served as co-chief operating officer since the departure of former CEO Martin Sorrell. The excitement was tempered. Just 24 hours after the announcement, WPP’s shares dropped 8.6% as its earnings and outlook disappointed investors. Restructuring is likely in many areas of the WPP business with lower margin services, especially in the US.
  • WPP formed VMLY&R, merging two iconic shops Y&R and VML, to offer a streamlined, “contemporary, fully integrated digital and creative offering to clients on a global scale.” The new entity, strong of 7,000 employees, will merge capabilities ranging from creative, technology, and data services. VMLY&R will not have a single headquarters, but will have major offices in key geos.
  • WPP’s digital agency Wunderman acquired ecommerce consulting agency 2Sales, a “one-stop Amazon solution” that deploys automated processes to optimize content generation, sales and promotions across Amazon platforms. The unit will be aligned with Wunderman Commerce, which includes Salmon, Possible Commerce, and Marketplace Ignition.
  • Amazon rebranded its offering under the name Amazon Advertising to simplify, which includes Amazon Media Group, Amazon Marketing Services, and Amazon Ad Platform.
  • Adobe acquired marketing platform provider Marketo for $4.75 billion to more aggressively compete in marketing services against Salesforce, Microsoft, Oracle, SAP, Google, Facebook, and others. It hopes to offer one-stop, cloud-based services that connect consumer interactions though channels such as search, social media, email, and video.
  • Salesforce’s Dreamforce, described as “the Cannes for marketing technology people” welcomed over 170,000 individuals this year, announced a strategic partnership with Apple empowering “every business to build powerful apps and customer experiences possible only on iOS.” The CRM leader also announced a partnership with Amazon Web Services, Inc. (AWS) to introduce new product integrations to dramatically simplify how customers can securely share and synchronize data across AWS and Salesforce services.
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