The alliance between Omnicom and Interpublic Group of Companies (IPG) on Commonwealth, the new agency created to oversee creative duties for General Motors‘ Chevrolet division, was being touted earlier this week as “historic.” Many in the industry wonder if it isn’t more akin to an arranged marriage between reluctant partners.
And they may soon be wondering what becomes of individual agencies when big advertisers can break down holding company barriers to hand-pick a brand team on their own?
Based out of Detroit, Commonwealth will pool the creative talents of Omnicom’s Goodby Silverstein & Partners and IPG’s McCann Erickson Worldwide, both of which previously worked on the Chevrolet business. It will house approximately 280 employees, led by Goodby Silverstein & Partners principal Jeff Goodby and McCann creative leaders Linus Karlsson, Prasoon Joshi and Washington Olivetto.
The new entity is a 50-50 merger between Omnicom and IPG, although profits will be distributed on a geographical basis.
In a conference call announcing the new venture Tuesday, GM’s vice-president and chief marketing officer Joel Ewanick said that the decision – which capped what he called an “exhaustive search” for a global creative agency that began in October – accomplishes the automotive giant’s primary objectives of finding operating efficiencies and elevating the overall quality of marketing communications for the Chevrolet brand globally.
“We’re in a very competitive marketplace, up against some very strong competitors… and we need to find ways to have a more clear, concise and consistent message as we try to attain our long-term goals,” said Ewanick. “This is a great collaboration, one that at first seemed like it wasn’t going to happen. There were so many complexities in putting a deal like this together – it’s a very unique situation and it really comes down to people.”
While all parties were offering up phrases like “historic” and “dream team” to describe the new venture, one Canadian senior agency executive (speaking on condition of anonymity) suggests that both Omnicom (whose Goodby held the Chevrolet account in the U.S.) and IPG (whose McCann network held the account in several global markets including Canada) were forced into a potentially untenable relationship by a powerful client looking to cut costs.
“I can’t imagine [Omnicom and IPG executives] woke up the morning this happened and thought it was actually better than winning the whole account,” said the executive. “They’re making the best of the situation and putting the best light on it. Maybe they’ll capture lightning in a bottle and find a way to turn this into some kind of powerhouse creative unit that will suddenly do great Chevy advertising.”
Ultimately, however, this appears to be a decision motivated by dollars as much as the creative product. According to Ewanick, the consolidation of its advertising business – a process that began earlier this year when it consolidated global media business with Aegis Media’s Carat network – will produce an estimated US$2 billion in savings for the automotive giant over the next five years.
Some 70 agencies had previously handled the Chevrolet business around the world. In Canada, the account is currently serviced by IPG’s MacLaren McCann and Vision 7’s Cossette, which provides French-language support. Both agencies declined requests for interviews.
While it is still unclear exactly what the implications are for Chevrolet’s Canadian agencies, remarks made by McCann Worldgroup chair and CEO Nick Brien suggest a significantly reduced role in the months ahead.
Brien told the conference call that Commonwealth will employ a “hub and spoke” model, with regional spokes such as Canada charged with providing insights and ideas to the Detroit hub.
“[Canada] is not going to be a creative development hub, but it’s certainly going to be an… important resource to have thinking and insights and particulars of the Canadian market [contributed] to the overall process,” he said.
In a series of e-mail exchanges with GM communication team members, there was no ambiguity around the fact that Commonwealth is now the “global agency for Chevrolet, including Quebec.” MacLaren will work on the “dealer network, Cadillac, Buick, GMC and Goodwrench business outside of Quebec, sponsorship and events and website platform architecture.” Cossette will do the same in Quebec minus the web work.
Our anonymous agency executive said that the fallout from the decision could be particularly harmful for MacLaren in term of the financial repercussions. “Forget about roles and responsibilities. How much [Chevrolet] revenue does MacLaren lose in the deal?… I doubt it’s going to be much less than half of it.
“When you lose a big client, you lose the ability to underwrite a lot of smaller clients. They’re going to have to reduce staff, they’re going to have to find a way to charge more.”
If Commonwealth ultimately proves successful, it could have significant ramifications for the colossal holding companies that control the bulk of all global advertising. Clients are already scrutinizing costs that go towards overseas offices and the specific advertising disciplines that comprise a WPP or IPG. Commonwealth could point the way forward for clients with similar clout.
“Larger companies like General Motors, along with the McDonald’s and the Procter & Gambles and Unilevers are all going to seek this kind of model,” the executive theorizes. “[Ewanick] is talking about a handful of people around the world who he believes can be custodians of the Chevy brand.
“He wants to cut through all of the layers of bureaucracy and management that the holding company model represents and forces on him, to get the handful of people into the room that he needs to make the key decisions. The best way to do that is say ‘Screw the holding companies and all the divisions and just give me my own agency.’ You’ve got to ask yourself, what happens to the legacy [agency] brands as more and more multinational clients pull out and ask for something that is a pared down version.”
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