Microsoft Set to Begin Massive Cross-Discipline Agency Review

Bulk of the Business is at WPP and Publicis Shops

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Microsoft is poised to begin a review of its $1.3 billion marketing business in an effort to find a holding-company solution, according to people familiar with the matter. The global pitch will likely encompass disciplines including media, creative and digital, the people said.

A Microsoft spokeswoman declined to comment directly on the plans being described. "We regularly evaluate our agency mix as a business best practice to ensure we retain the services that best fit the needs of our evolving business," she said in an email.

Mark Penn
Mark Penn

Word of the preparations comes six months after Microsoft's Mark Penn and Tami Reller took over a new centralized marketing group, and as the company continues to seek a CEO to succeed Steve Ballmer.

While cost-containment efforts are not solely driving the planned pitch, the procurement group will likely be influential in the process given the company's sizeable marketing expenses. Microsoft, which spent $1.3 billion on U.S. advertising and promotions, is ranked 33rd on the Ad Age DataCenter's list of top spenders in 2012. The company spent $342 million on network TV -- more than any other platform and 50% more than it spent on TV the previous year. Media spending results aren't in for 2013 as a whole yet, but the first nine months of last year saw Microsoft spend $547.7 million on domestic measured media, according to Kantar Media.

The likely players in the review are WPP and Publicis Groupe, which already support the bulk of Microsoft's business. Interpublic Group also supports various elements of Microsoft marketing. Omnicom is likely to steer clear of the pitch due to its close ties with Apple, a major competitor. But pretty soon Omnicom and Publicis will be part of the same family, if their merger is approved around the world, so the powers that be will have to work around the idea of conflict during the pitch.

Publicis Groupe
Publicis' Razorfish has substantially grown its Microsoft business over the last two years and has worked with the company for over ten years. The shop's work spans digital creative, social and some media buying across Windows, Xbox, Surface, Bing, Office, and Microsoft retail. Starcom MediaVest Group has the other large piece of business at Publicis -- media buying and planning. In 2011, Microsoft moved its North America media buying account from IPG's UM.

WPP's Wunderman is another agency with deep ties at Microsoft and more than a decade under its belt. The data and direct marketing giant supports various marketing tasks for the company, including direct marketing, data and analytics across brands like Microsoft, Xbox, Bing and Windows, as well as campaign execution in local global markets. WPP's Y&R recently won creative and digital work, Seattle-based Possible recently won web design work for Surface, and VML also supports Microsoft. JWT has a history with the company but lost most of that business over the years.

Interpublic Group
IPG long counted Microsoft as a top client across a handful of agencies but over the years those shops have either lost most or all of the work. Deutsch had been a major creative shop on the b-to-b business, but Y&R recently picked up some b-to-b assignments. UM lost its North America media account in 2011 but held onto the international work. Reprise supports some search business. R/GA was a digital shop on Windows but lost the Surface work to Razorfish, largely due to a conflict with its new client Samsung. McCann works on Xbox in San Francisco.

Microsoft works with a number of additional shops across brands and disciplines.

MDC's CP&B has been one of the lead creative agencies on Microsoft, handling brands such as Xbox, Windows and the Windows Phone. Los Angeles-based independent Omelet has picked up various pieces of work, including an assignment for the Windows Phone.

According to agency executives familiar with the Microsoft business, some agencies on the Microsoft roster last year had fees and retainers slashed "substantially," and were then told they'd be picking up business on a jump-ball basis moving forward – a move that affected agencies across disciplines on both the B-to-B and consumer accounts. Shops such as CP&B, Deutsch and Y&R competed last fall for a business-to-business slice of work, for example, with Y&R ultimately prevailing. The pitch-per-project setup now appears to have been an interim strategy.

It also appears that Microsoft pared its lengthy agency roster last year, according to the executives, and some of those that remained were likely left wondering about their relationship with the marketer.

Agencies mentioned either declined to comment or didn't immediately respond to requests for comment.

Internal changes
The most recent change at Microsoft is the departure of CEO Steve Ballmer, who said in August that he was leaving. The search for a successor continues. Ford CEO Alan Mulally said last week that he would not leave the automaker for Microsoft, ending widespread speculation to that effect.

But the review is also approaching months after a major reorganization this summer by Mr. Ballmer. The move created One Microsoft, a concept meant to create one strategy across brands and organize the company by functions such as marketing and engineering rather than by brand. "We will see our product line holistically, not as a set of islands," Mr. Ballmer said at the time. The move created one centralized marketing group led by Windows CMO Tami Reller and Microsoft strategist Mark Penn. Mr. Penn, a former adviser to Hillary Clinton, stepped down from his post at WPP PR giant Burson-Marsteller to join Microsoft in a top strategy role in 2012. He'd been leading the WPP agency since 2005. One of WPP's market research firms, Penn Schoen Berland, is co-founded by Mark Penn.

After joining Microsoft, Mr. Penn spearheaded the company's effective "Scroogled" campaign, in which it attacked Google for invasive ads in Gmail, sharing data with app developers and placing paid results on its search page. By October 2013, Microsoft was already on its sixth wave of Scroogled ads, which might explain the heavy Bing spending reported from January through September of this year: Bing spent $52.1 million on measured media just online, according to Kantar Media. That's compared to $47 million across platforms in 2012. In 2012, Microsoft's top spenders of U.S. measured media by brand were Microsoft ($493.5 million), Xbox/Kinect ($64.4 million), Bing ($47 million) and Skype ($10 million).

Mr. Penn is cited as a top decision-maker in the upcoming pitch. Other key decision makers on the pitch will likely include Betsy Webb, general manager of media and agency management, according to people familiar with the matter.

Contributing: Maureen Morrison

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