Omnicom Boosts Profile in China, Muscles in on WPP

Enters Alliance With Rival's Onetime Partner CITIC Group

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BEIJNG (AdAge.com) -- In a long-awaited move by Omnicom Group President-CEO John Wren, the holding company will significantly increase its profile in China by announcing a strategic partnership with one of China's largest state-owned companies, CITIC Group, tomorrow in Beijing.
The alliance will double the size of Omnicom's DDB Worldwide network in China by revenue and staff numbers overnight. The alliance also came as a surprise to Omnicom's global rival WPP Group; until today, CITIC has been the Chinese joint-venture partner of WPP's Grey Global Group. CITIC stunned Grey this morning by unexpectedly announcing its intention to end its partnership that began in 1992 with no explanation, even though their contract does not end until next year.

Integral player in open-door policy
Created in 1978 by China's leader Deng Xiaoping, CITIC's investments range from telecommunications and cable TV to airlines and manufacturing. CITIC has played an integral role in China's open-door policy and has become one of the most influential business conglomerates in China, with assets worth about $90 billion.

"This is an incredibly exciting time for Omnicom in China, which is one of the key strategic markets for us globally," said Mr. Wren, who had just landed in Beijing for the launch.

The first phase of the partnership between Omnicom and CITIC subsidiary CITIC Guoan is the formation of DDB Guoan Communications Beijing Co., created by merging DDB China and one of China's top 10 local agencies by revenue, Beijing Guoan Advertising Corp. The financial details were not disclosed, but Omnicom will own a majority stake in DDB Guoan.

Executive leadership
Yan Gang, CITIC Guoan Group's executive vice chairman and a well-known industry figure who is also a director of the China Advertising Association, will become the Beijing-based chairman of DDB Guoan. Dick van Motman, who relocated to Shanghai six months ago as DDB's president-CEO, China, will be CEO of DDB Guoan. The agency will be headquartered in Beijing, with offices in Shanghai and Guangzhou.

Grey said the move won't have a big effect on its business in China. "As with many joint ventures, Guoan has been a relatively silent partner, so there will be little change in our day-to-day business," said Mike Amour, Grey's chairman-CEO, Asia/Pacific, based in Singapore. "They are bringing the [expiration] date forward. The joint venture allows for either party to withdraw with a certain notice period."

Mr. Amour said he suspects Grey will begin operating in China without any local partner, a status that became legally possible for multinational agencies for the first time starting in January. Stand-alone status may become a new model for some multinational agencies in China. Bartle Bogle Hegarty, for instance, timed its China entry so the agency could open in Shanghai without being required to take a local partner.

Struggled to find footing
Although Omnicom is the world's largest advertising group with worldwide revenue of $10.5 billion in 2005 and its networks have a strong creative reputation, Omnicom has struggled to find its footing in China on a scale expected of some of the world's largest agency brands.

To give the agencies a guiding hand in key Asian markets such as China and India and raise Omnicom's own profile in Asia, Mr. Wren dispatched Michael Birkin to Asia as chairman-CEO, Asia/Pacific, early last year. He was previously the New York-based worldwide president of Diversified Agency Services, Omnicom's group of marketing agencies.

Mr. Birkin immediately tackled China, where the holding company's largest revenue earner was public-relations business Fleishman-Hillard. TBWA, although the smallest of Omnicom's three global creative agencies, was bigger than BBDO Worldwide and DDB Worldwide in China.

Changes at DDB, BBDO
Senior management changed quickly after Mr. Birkin's arrival. Mr. van Motman took control of DDB in China, while BBDO recruited Carol Potter, who was running JWT's global Unilever account out of London, to move to Shanghai as CEO-China for BBDO.

The CITIC partnership will help Omnicom address two other weak areas, a low profile in Beijing, where none of its creative agencies has a sizable presence, and the need for greater local expertise.

"This is a big story for us, we're making great progress," said Mr. Birkin. "We believe very strongly that the future of our business is working with local partners and local brands and this will give us a footprint to participate in that development, rather than focus on international brands in China."
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