Publicis and Omnicom, call it all off.

Publicis and Omnicom call it off. The 50:50 mega-merger of 35 billion us dollars announced 9 months ago, is being eh, 'de-coupled'.

The Agencies, which own a large number of established brands in the market, had difficulties in completing transactions in a timely manner (according to an Omnicom statement) and Omnicom have spent circa 48 million usd in the merger thus far. Reading between the lines, they're putting the blame on Publicis.

It also seems that the announcement was communicated initially via Twitter (or it 'leaked') and Clients were not formally informed per se. Rumours abound of rows about key positions (typical merger nonsense) but one wonders why these sorts of issues weren't dealt with pre-merger? Seemingly the CFO position (who'd oversee the merger) was a big issue.

Clearly, knowing both Agencies well, there was always going to be a French Versus American way of doing things and trust me, both are very, very different. The launch photocall (above) with The Eiffel Tower in the background, was the start of the "I am in control here" piece.

Financially too, with savings of "$500 million" touted as a reason from the outset to do the merger, hardly seemed a good enough reason.

It also puts WPP back to top of the heap without the new entity.
And it damages the reputation of both Publicis and Omnicom in not being able to complete this.

At least those "$500 million" in savings won't happen and so those job losses (the savings) are now safer. Apart from that, pretty pathetic.

Publicis + Omnicom merge Sunday. One response to the ongoing march of digital?

The merger announced yesterday of the 2nd and 3rd largest Ad Agencies, Publicis and Omnicom, is indicative of the threat of digital.

You'll note the PR Merger photo above of both CEO's had the recognisable Arc de Triomphe as a backdrop.....lest anyone be confused who's in charge here. Publicis are a very proud French Group (I worked with them).

Whilst creating the world's biggest Agency Group (leap-frogging WPP's 17 billion), they will have combined revenues of circa 23 billion usd. That's a long way short of Google's 50 billion usd and importantly, both agencies have been able to show little organic growth in a depressed, changing, Ad Agency landscape.

They are established, mature, traditional Ad businesses who are suffering from losses of revenues to digital Agencies and consequently have been showing only single digit growth. Omnicom grew by 2% in the first half whereas Publicis by 1.3% and after suffering a 6%+ decline in Europe.

Their new combined market cap is 35 billion usd whilst Google? 295 billion.

Traditional Ad spending is slowing globally and even in new markets such as Asia and China, only showing 5-7% growth as Clients move away from the traditional Ad and Ad Agency, model. 

From a client viewpoint, the merger does bring more media muscle - bad news for already hard pressed media owners. However, conflict of clients will always be a problem here.

Good creative has nothing to do with size except, a larger Agency will have more creative resources. 

The key to this is the merger savings (estimated at 500 million usd) in an attempt at helping profitability......but that's a lot of pain, a lot of job losses.

Mergers like this, whilst improving shareholders income (both shareholder sets will be 50:50) through cost-savings, does not deal with the core issue - the traditional Agency model is wrong.

Agencies give away their ideas in the hope to profit off the creation and implementation of the work itself. And they continually pooh-pooh digital which clients want, rather than jumping on board.

We will see what happens but in order to achieve those "merger efficiencies" as they say, expect changes at a local country level. Which will mean mergers of local Agencies and redundancies.

But fundamentally it's a response globally to one thing - the ongoing "threat" of digital to Ad Agency revenue. 

A case of, rather merge, than deal with the big issue.....

(Pretty good insight here too from Business Insider http://www.businessinsider.com/heres-the-big-downside-to-the-publicis-omnicom-merger-2013-7)

Starbucks, Amazon, Google, Microsoft, WPP all in the news about tax avoidance through Ireland. And now they know it.

The British Government is to explore an internationally co-ordinated new tax designed to capture the earnings of companies like Amazon, Google but also Starbucks, according to The Telegraph. The particular focus is to force online companies pay more tax on sales they generate in the UK. Some use a variety of legitimate, but certainly questionable, ways of avoiding tax. In the case of Starbucks, for example, they apply fees from their Dutch parent to minimise their local UK tax.

And it's causing an outrage against the brand. 
And rightly so.

Activist Group, 'UKUncut' has announced a day of action (Saturday Dec 8) against Starbucks and these protests are aimed at bringing Starbucks to their senses or to put them out of business. One way or the other. 

The UK Government wants to close the loop that allows web companies avoid millions of pounds on tax and in fact, repatriate a lot of it to Ireland, the lowest corporation tax economy in Europe (12.5%), to avoid paying it locally. 

There can be little doubt at all now, that the heralded Irish Government investment plan is little more than a sham, based purely on tax incentives for multi-nationals locating here. In fact, it could be said that it's based on facilitating widespread tax avoidance across Europe, technically legal as that might be. But this is why Ireland's 12.5% tax rate is under European pressure.

Up to 50% of Irish corporate tax revenue may relate to taxes paid on income earned by US multinationals outside Ireland.

I once looked after The Industrial Development Authority (IDA) Advertising so I have a good understanding of their level of expertise.....and although, applauded by Government, the truth is beginning to come out. It's all about tax.

It has been often thought as bizarre, that for a country the size of Greater Manchester, Ireland is the European HQ for Google, Facebook, LinkedIn and others. It is becoming more clearer that when companies locate here, it facilitates their tax avoidance elsewhere, such as in the UK. Tax avoidance is of course, not illegal.

Indeed, even the very British Ad Group, Martin Sorrells's WPP (part owners of Dublin Ad Agency DDFH&B and Group M), had based itself in Ireland for tax reasons and shockingly, the company is now discovered to be actually Jersey registered. One wonders why it needs to registered in a small, tiny island like Jersey known really only for its "special" tax facilitation? Good reasons, no doubt.

Amazon is also shockingly, actually registered in Luxembourg, another famed principality for its tax shelters and discreet facilities. Amazon? THE American retail success? It had used Luxembourg VAT laws to its own competitive advantage for example, charging only 3% on an ebook sold in Britain whereas other booksellers had to charge 20%. That loop is now being closed and I've been a fan of Amazon, but it's just worn thin.

Google, with a staff in the UK of 1,300 books most of its revenue to surprise, surprise, Ireland. So it earns money in the UK but funnels it through Ireland. That's Ireland's great tax regime I mean that attracts companies like these in the first place.

Actually Google's "Irish" revenue is recorded as 12.4 billion. How ridiculous is that? Gross profit in Ireland in 2011 was recorded at 9 billion!! It's truly ridiculous. 

The whole tax avoidance is unravelling and more and more are beginning to understand the tax avoidance which Ireland has been facilitating against its European partners, and most notably, our biggest trading partner, The UK. So much of these investment decisions have been PR spun as being based on attracting business to what is said, a better educated workforce in Ireland, when in fact, they are simply decisions based on tax "incentives".

And the UK are not happy about it.

For example, Amazon, last year in the UK, earned 3 billion sterling in sales. But only declared 207 million of those as being from the UK and consequently, over the last three years has only paid UK tax of 2.3 million on total sales of 7.1 billion. Shocking undoubtedly, but it's being called immoral by many, albeit utilising legal tax manoeuvres.

Microsoft in 2005 were commented on in The WSJ for routing profits from Germany into Ireland. I mean it's actually funny that one Microsoft subsidiary called 'Round Island One Ltd', is actually based in a solicitors office and turns out to be one of Ireland's greatest companies. It has 9 billion in profits in 2004 and no staff. Not bad eh? And nobody has ever heard of it.

Google, paid UK tax of a tiny 6 million on UK revenues last year of 2.5 billion. Wow.

Ireland is helping them do that through "phantom" services.
Ireland is Europe's biggest Tax haven, followed by Switzerland.
And Ireland's tax schemes are now coming under the spotlight as it starts its European presidency from January 1st.

But more importantly, it's making the lie told by successive Irish Governments that Ireland was somehow an attractive base because of its workforce, its green fields, its beautiful scenery.

And it's wrong.
And we need to say it's wrong even if it's to our own detriment.

BBH new British Airways commercial for the Olympics. Work like this only comes along every 20 years. Magnificent.

Now this brought a tear to my eye as it should for ever self-respecting adman. It's a long time since I saw a budget spent on a brand like this since the last big BA "face" commercial, "the world's favourite airline" in 1989. And what I mean by that, is a refreshing commitment to building brands by British Airways and putting their money where their mouth is.


The 1989 "face" commercial did wonders for Saatchis at the time and of course, Director Hugh Hudson and it's at the end of this blog (90" version). This will do the same for BBH - not that they need the applause - because they've proved themselves so many times over. But just for the pride.


What a terrific piece of work this is.

Firstly, it's ideal for the London Olympics and as every brand tries to capture the passion of the event, none will do it as well as this. None. It's the perfect commercial for the perfect brand at the perfect time. Great opportunity with timing.


Secondly, could you ever write a better headline than "London Calling" for BA? Ever? It's a superb line that has heritage. 


Apart from the great Clash (a true, die hard working class punk London Band), it was the title of their third album which Rolling Stone declared as the best album of the 1980's. A Joe Strummer and Mick Jones signature song and it's hard to believe that Joe (real name John Mellor, born in Turkey - swear to god) is dead 10 years.


The track will also remind some Brits of "Germany Calling" the infamous Lord Haw Haw nazi propaganda broadcasts in WW2 from 1939-45.


Those Brits that do remember will make the connection and realise the entendre (it's actually how the song was inspired) thereby, further playing on great days in Britain. So it works across the generations.


But I guarantee you, because of the commercial, "London Calling" will become the anthem of the London Olympics meaning every time it's played, BA will be remembered.


Trust me too, this is not my post rationalisation, this has all been thought of and worked out by the Agency.


(By the way, people still think Lord Haw Haw was Irish. He wasn't. He was American but lived in Ireland and was hung for treason by Britain. Which has been argued as a great miscarriage because you can't commit treason against a country you weren't born in. Anyway, hardly a great loss)


Thirdly, look at the strapline. "Don't fly". Ever see that on an airline commercial? Imagine what bravery it took to get that through. Imagine standing in front of the client and arguing that "don't fly" should be on a British Airways Commercial? Even the suit who did that, deserves mention here. 


What it actually means when you get over the contradiction, is, stay at home to support the British Olympic Team which engenders pride..... But, if ever you're thinking of flying, well, BA is here. Magnificent.


Lastly, look at the pics. Bring planes onto landmark streets (Big Ben) and show how much a part of the fabric BA is. And how convenient, easy it is. Look at the turbulence seat belt gag as the plane follows a London Black Taxi over a road speed bump. And then think how that will work on outdoor, print - a plane on your own street. Great idea.


And by the way, this commercial was premiered on Facebook and not terrestrial TV. Just after WPP's highly paid 67 year old Shorty Sorrell questioned the role of Social Media for brands last week. Wouldn't you think an Adman, albeit an Accountant, would eventually stop this nonsense? 


And why was the commercial launched on Social Media? Because it would be passed around instantly - which it was. Hard to get that free viral reaction on TV Mr. Sorrell without passing around TV's. Don't you think? And don't you think the people who work in your Agencies Mr. Sorrell get that? And want to hear their Accountant owner supporting Social Media since they all now claim to? 


It possibly comes as no surprise that the commercial was created by John Hegarty's BBH whom I've met many times and this certainly is a reflection of their glory days (Levis, Audi). I mean that with affection - they are the stunning UK agency of the last 20 years (started in 1982 and I visited those small offices when they did) who took the "legends" mantle from Agencies like CDP, Saatchis and ABM. I truly hope they get every inch of credit they deserve for this. BBH’s creative directors Justin Moore and Hamish Pinnell worked on the ad with producer Natalie Parish according to Campaign.


ZenithOptimedia handled the media planning and buying, while OgilvyOne and 12th Floor handled digital activity. 


And the client at BA, an airline run by Irishman Willie Walsh, deserves every bit too, for being brave enough to go with it. I hope their planes are full forever.


If ever I wanted to be involved in a piece of work, and I've been involved in a few, this would be it. Without doubt.


Lastly, I can't leave it without the other great BA Commercial from Hudson and Saatchis. Probably never to be overshadowed because of its magic.


But I'd think even Hugh Hudson would hold his hands up and say, "you know what, maybe it just has". Maybe it just has.