Some views on the industry from WPP AUNZ Chief Executive Officer Mike Connaghan

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As CEO of listed communications group WPP AUNZ, Mike Connaghan is in a unique position to see developments occurring across the broader industry. The group has more than 80 companies under its umbrella covering advertising, media, research, digital, design, data and PR. In Perth, those companies include The Brand Agency and J Walter Thompson agencies. 

Campaign Brief WA caught up with Connaghan on his most recent visit west.

Your role with WPP means you have to take a much more overall view of the industry compared to most people, who operate within and see things from the more narrow view of their own agency or business.

In this part of the world, making WPP much more a parent and an enabler for those 81 companies is a key part of the strategy, 'Horizontality' is our idea behind that.  We're in a mature market in Australia and New Zealand; there's no organic growth and the economies are tough. But at the same time, we're the fifth biggest market in the world for WPP, so it's important.
We're a bit of an experiment but having very strong local oversight of the business is, I think, a way of the future for the big holding companies. 75% of our business is local; twenty years ago, it was probably 50/50. So the big agency brands of rise and fall with the talent that's running those businesses locally.

It's interesting what you said to begin with, that people have a narrow view of the market and what they do. We need all of our companies to lift their eyes above the screen and understand that our strategy is to serve 100% of our clients' customer journey needs. Whatever they're working on is part of a journey; it might be at the very beginning or it might be toward the end, or it could be in the middle, but it's come from somewhere and it's going somewhere. If they can think about that, there's a real opportunity to have more control of that journey to make it a better experience for everybody and provide some growth for our business.

More money is being spent on marketing today than ever before, but it's being spent in so many different channels that it's very fragmented. A lot of clients are coming to us at the WPP level and saying, "It's got too difficult. It's too complicated. We want you to sort this out for us", and we've got the scale and the ability to do that.

In STW's 2015 Annual Report, the mantra was "Fewer. Bigger. Better." and the number of companies in the Group was reduced from 80+ to 50+ over that year. And then in the 2016 Annual Report, you've gone back up to 80+ companies. Would you like to reduce that number again?

That's been a function of putting STW and WPP together and we want to optimise the portfolio. I don't say 'consolidate' because we're only going to do it where 2+2=5. For example, Grey Advertising is a business that came to us with WPP. They're small in Australia but a powerhouse globally. They were on their own in Sydney, and when I first met with them they said, "We really need to acquire a digital agency."  We also had an agency called The White Agency, a very successful digital agency, whose biggest problem was that they were stuck in the digital world, so we put them together - White and Grey - and it's a great story of a digital technology company coming together with a traditional agency.  

We've done the same in healthcare. That was a category we were never in as STW but at WPP there's a number of brands like Sudler & Hennessey, Grey Health Care and Common Health, so we've created one practice - WPP Health and Wellness - for that growing part of the market. 

We've got a lot of production resources across the Group. We want to create one big go-to-market production business, and that's underway.

So we'll definitely reduce the number but [WPP Group plc Chairman] Martin Sorrell told me many years ago that he's seen a lot of value destroyed for the sake of 'organisational neatness'. Some simplification of our business is on the cards, but only where it makes sense.

You said big agencies rise and fall with the talent that's running those businesses. Are people still attracted to the advertising industry like they once were?  Or do they want to go and work for Google and Facebook?

I'm sure that there's a whole cart load of people who'd be attracted to Google and Facebook and why wouldn't you be? You get free chocolate bars and stuff like that, but I know quite a few ex-Googlers and it's not quite what it's cracked up to be. You get to 'drink the Kool-Aid' for a while but it can get old pretty quickly. 

It's tough - particularly in the technology and digital world. There's a lot of competition for that talent, but we can offer them interesting projects and an interesting environment.

It's critical that people see a higher purpose to what they're doing and they're having fun.
I think a Group like ours is really powerful in that sense and the notion that there is a career beyond the business that they're working in. We're very much about trying to create fluidity around the Group. If you want to move from the business you're in, we've got another business to go to.  

Of course, a lot of our people leave to travel overseas. We're hopeful that we've given them some good experience that they can take and use overseas to get a job, and then when they come back they think first of coming to us and bring that extra experience with them.  

Are Google and Facebook good for the industry, or do they threaten it?

I think, hopefully, sense will prevail. We are big supporters of the local publishers.  Clearly, we have a massive relationship with Google and a massive relationship with Facebook globally, and we would be their biggest customer. Google's also a very big client of ours. But equally, on a personal level - and this is Mike Connaghan as opposed to WPP AUNZ - I find it a bit distasteful what happens with their tax regime. When you think about the amount of money that they're taking out of the market and they do not pay their way, I find it difficult to reconcile.

Ritson's been vociferous in his criticism of them and I think it's fair enough because a lot of clients are starting to work out that a lot of it doesn't work very well, particularly what are they actually paying for, who's clicking, what are they seeing and so on.

Sir Martin Sorrell himself has been critical of Facebook's lack of transparency and its self-measurement model. But are clients really concerned? They're still pouring money into it; they're not walking away.

I don't think you can at the moment because there's not a great alternative.  That said, I think clients are becoming pickier. There's another notion because Google and Facebook go direct to our clients, just as Seven West Media and Channel 9 and all the rest of them do. The best clients know that after that conversation they should talk to their agency, who is going to give them an unbiased view.

As Martin [Sorrell] again said very cleverly, "Would a client - any client - walk into Rupert Murdoch's office, give him their marketing budget and say, "come back and let me know what I should do"? They would not. So why would they be going to Google and Facebook and doing that?  

But they have an unprecedented position in the market.

Well, I would hope that in Australia there's an opportunity for the local media, online, to actually come together and provide a viable third force, because they do have it. If you aggregate all the publishers together, it's there. And I know that certain conversations are going on between the local publishers to actually 'muscle up'.

In The Australian recently, Mark Ritson wrote a critique of the media agency revenue model and that their margins are virtually non-existent.  Is that model broken? 
Not for us. We recently resigned the CUB business in Melbourne for that very reason. We were being told "this is the deal" but there was zero chance of us making any money out of it so we walked away. We are a publicly listed company that has to pay dividends to its shareholders. We are very proud of the fact that we provide a service, and a very good service, and there's a value exchange there. If some clients don't want to pay a fair rate, then the clients that are willing to pay a fair rate are being disadvantaged, and we're just not going to do that.  

Our best clients understand the value of what we create together that actually drives their business forward. They're not going to be able to cut their way to future glory.

Is data a fad or the future of communications?

I think data is all-present but data in itself is historical; it's happened.  Now, some will argue that data can also be predictive of what's going to happen, but you've got to have creativity to take that forward. So we love the notion of data, but I would also say that consumers don't buy data, they don't eat data, they don't drive data; they're people and the data needs to be turned into an idea, a notion, a dream, a desire, and that's where we come in.

So what do clients want from data and analytics?

To target more accurately, and they should be able to drive insights out of it. But there's also a danger that if clients get too consumed by their own data, they end up talking to themselves and their next customer isn't in that data set. So you need some very smart people, humans, in the middle of the data conversation in order to make something of it. 

Will Creative ever be important again?

I think it's important today; it's more important than ever. Previously, you used TV, radio, print and if you had some budget left over you bought some outdoor posters and maybe some cinema. The creative went into those channels and hitting the mark was like finding a needle in a haystack. People don't want to see advertising - they never have - but when you got that cut-through and when you resonated, you could really make a difference.

The internet has created a much bigger haystack. It's even harder to find that needle in there. So the creative is critical. Yes, the data and the targeting and all those things can help but if you're hitting the target precisely at the right moment at the right time with the wrong message, it's not going to turn them into a fan, or into a purchaser, or stir an emotion in them. So creativity is more important than ever. There is too much dross sent out on the internet because it's cheap and easy and you just serve it.  

The latest (2016) WPP AUNZ Annual Report has key executives talking about strategy, media, data, technology, PR, diversity, wellbeing, but nobody championing creativity.

It's interesting you point that out.  We had a bit of tragedy that set us back with the death of Neil Lawrence in 2014. He would have been that voice and we haven't really replaced that role.  He was an irreplaceable kind of guy, I guess. But it's a good challenge that you put up. Hopefully, there was enough creativity in the strategic and digital and technology pieces to make you believe that that's absolutely the core of all those things.

What's your view on the big accountancy-based consultancy firms moving into the creativity space traditionally occupied by agencies, like Accenture  buying The Monkeys?

I don't understand it as a strategy. Why not come and hire us to be that partner? For a fraction of the cost we could be that creative arm of their conversation. I know better than anybody in this country about the ups and downs of acquiring businesses, of managing talent and keeping those people and those clients.  It's hard enough in our environment, and we're a creative business.  
So how are they going to go?  I'm not sure. At least with The Monkeys, Accenture have bought A grade. When I look at the others, and what they're doing, it's not A grade, to my knowledge. So I don't get it and I don't understand why they wouldn't come and hire us to be that partner. 

It seems ironic that at a time when our industry is investing heavily in data and analytics, they're buying creativity.

And hopefully we're investing in data and analytics in the creative sense of the word, because I'd be horrified to think that we're going to get heavily into what the Deloittes and PWC's do, which is auditing and accounting. We wouldn't be good at that and I don't think they're going to be good at what we do.  

Have clients lost faith in 'capital A' advertising? A lot of them seem to be looking for alternatives.

No, I don't think so but I think it's got to be part of the mix. KFC's a great example. Again, 52 weeks a year on TV, flyers in the letterbox, coupons in papers but equally being on social. We just held the Horizontality Award for the best example of a number of our companies coming together on a brief and delivering. The team that won it was the KFC guys, for "Bringing the bird to Birdsville".  

They created this big music festival in Birdsville, where the nearest KFC is a 14-hour drive away. Then they built a food truck, red and white with the Colonel on the front, and drove it up there. They built out a restaurant with a playground, a movie cinema, and a massive kitchen, and served 15,000 pieces of chicken over the three days. 

The amount of content that they drove out of that event with people enjoying the chicken - some of them eating it for the first time ever - was brilliant. So the opportunities for creativity in our business are just outstanding.  

You mentioned content. That's the other thing that clients seem to be in love with currently.

There's a voracious appetite for it but again it's got to be good. If it's a shit idea, it's a shit idea.  
I was with a client here this morning who was bemoaning the fact that he's newly arrived in this company where there's a whole squadron of people making content. And he's asking, "How much is this costing us? How long does each piece of content take to produce? Why are we doing this?" No one knows. It's not measured. There's no notion of return on investment. Crazy.

Which goes back to the question about clients losing faith in Advertising and seeing more value in content.

I'm sure there's some like that but there's many, many more - and we've got the big, serious, proper clients - who still absolutely believe in Advertising. Now, there's no doubt finding big audiences is more difficult nowadays but just pumping content out there into the ether, hell, good luck!  

I was with WPP last week. The fastest growing clients that they have - and are now in the top 20 clients WPP has globally - are Google, Facebook and Apple. They are the fastest growing mainstream advertisers on the planet, investment-wise.

What's your impression of the WA market currently?

I've been coming here for twenty years since I worked on Swan Brewery at Singletons. It's a good market. I'm no expert on the Perth economy; I know what's happening with property and the reason we're sitting in this new building was because it suddenly became very affordable, but there's quite a lot of building going on around here so there's something cooking. Perth has obviously gone through an amazing boom and The Brand Agency was a stalwart through that, but Australia is tight currently and WA is like a microcosm of it.

There's a lot of apex predators in our industry and there's just less prey out there. So it's tough.

WPP AUNZ has two advertising agencies in Perth. Are you satisfied with the way they are going?

Yes. The Brand Agency is clearly number one in this market and I'm really hoping that very soon, JWT might be number two. 

I think JWT has grown to be seen in the A grade here. They've obviously got to scale-up and keep winning some business, but they're on the right track.

When I look at the scene here, The Brand Agency has remained strong but you would have to think that a couple of the other agencies that are 'names' around town might have some challenges ahead. JWT's got global credentials, it's got WPP AUNZ behind it, and it's got some good people there, so why not?

The interview with Mike Connaghan appeared in Campaign Brief WA magazine's November issue. Our thanks to The Brand Agency's Steve Harris and Courtney Larson for organising the opportunity.


Mark said:

Interesting article and great to hear some insight from the ringleader of the circus.

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