With its announcement, Interpublic is essentially turning the third-oldest agency and its 100-plus office global network, built on the sweat of icon-extraordinaire Mr. Peanut and the celeb-drenched glitz of Diet Coke spots, into an international springboard for Draft, the kind of shop whose direct-mail and DRTV spots were not too long ago regarded as the fanny pack of the marketing world: Not pretty, and sort of embarrassing, but really functional.
So what's changed? Gradually, Madison Avenue's lords have come to realize the power of pushing front-and-center people, ideas and organizational schemes to cultivate marketing solutions that don't begin and end with advertising.
Witness Omnicom Group President-CEO John Wren's appointment of Chuck Brymer, best known in the brand-identity arena, to head of the legendary ad network DDB. Or what about Shelly Lazarus' frequent nods to the fact that nontraditional work makes up more than half of Ogilvy & Mather's revenues, not to mention Ogilvy North America's recent flattening of its reporting structure to a single profit and loss for all its different disciplines?
New kind of agency
The DraftFCB Group, as the combined unit will be known, will have annual revenue of around $900 million, making it the sixth-largest network in the world. It is being presented as a new kind of agency, one that marries brand-building capabilities with the behavior-based insights and programs that are easy to measure, especially compared to big branding campaigns. As a concept, it descends from Ogilvy and McCann Worldgroup, behemoths built on the belief that one organization can offer a full suite of marketing capabilities: TV ads, CRM, promotions, direct mail and PR.
What's different about Interpublic's new network is that it's being founded with a single profit-and-loss statement and management team. That structure is designed to provide channel- and discipline-agnostic ideas and create a one-stop shop for marketers.
"A client told me that now, when I launch a product, I don't have to call an army of agencies," said Howard Draft, who takes over as chairman-CEO of the unit, as FCB CEO Steve Blamer eventually leaves the company. "I can have one company that is great in all areas and drive my business from an ROI standpoint with highly creative solutions. Consumers are forcing us into this, and so are clients."
Mr. Draft's denials
Mr. Draft denies that the combination is about "helping a sick puppy" in FCB. The marketplace, however, might beg to differ. While FCB is known to be well-run agency from a financial perspective, its brand has gone stale as attempts to modernize it haven't really taken off. "FCB just doesn't stand for much," said one Interpublic insider.
Of course, Draft does benefit in this move, largely by using FCB's network to jumpstart its international presence, but also in the digital arena where it can take advantage of FCBi, which remains a stand-alone entity.
The move is not without risks, especially given Interpublic's trouble with past agency mergers. And Interpublic doesn't have a lot of wiggle room with this one. The success of the new venture is crucial to the No. 3 ad agency holding company's future as it tries to pull out of a slew of financial and operational difficulties. That means it will have to avoid client fallout -- conflicts like Nokia and Motorola, and Qwest and Verizon loom --and personality clashes that often dominate mergers.
"Although we see the strategic rationale of approaching clients with a more complete, data-driven offering, there have been more failed than successful examples of agency mergers historically," wrote Merrill Lynch analyst Lauren Rich Fine in a report. "It is too soon to judge the FCB-Draft merger, but execution is clearly key in how [Interpublic] managed client conflicts and agency cultural differences."