Buying Into Digital: A Look at the Holding Companies

Publicis Groupe's $1.3 billion bet on digital-marketing-services agency Digitas bought the world's fourth-largest marketing organization a top player in a fast-growing industry sector. It also sent a crystal-clear message to the marketplace that Chairman-CEO Maurice Levy is serious about making the Paris-based holding company into a digital communications leader.

"It is always a matter of strategy," he said of the reason for the acquisition. "[The purchase] has created a profound change in the mind-set of our people. ... What we decided to do was to transform Publicis."

Better backbone
The key architect of change is Digitas Chairman David Kenney, who, with the deal's close in January, took the lead in developing Publicis Groupe's interactive and digital strategy. His remit: "I've got to transform the company, to rethink it as having one kitchen with multiple restaurants. ... The future of advertising is going to have a more operational and technical backbone to it," he said. "The chief investment officer will become as crucial a client as the chief marketing officer." To serve that constituency, agencies have to offer new services.

"From a client's perspective, the ability to target multiple demographic groups is great, but it is also expensive and complicated," Mr. Kenney said. A client such as General Motors will want to run dozens of spots to reach different segments, each distributed through multiple media channels and each with changing media placements over time as viewer traffic is analyzed.

"What we've learned in the digital area is that there is a real need to build the internet at scale," Mr. Kenney said. Since January, he's been meeting with clients and as Publicis Groupe agency executives, and over the months a theme has emerged: There must be a way to gain competitive advantages in information technology -- just like in media buying.

Consolidation
Producing creative for digital platforms by consolidating the work is Publicis Groupe's solution. The creation of a stand-alone production company, dubbed Prodigious, was announced May 1. Though Prodigious is still in its infancy, plans call for it to serve the production needs of all Publicis Groupe agencies as well as their competitors'. General Motors, whose agency roster includes Publicis-owned Leo Burnett and Starcom MediaVest Group, as well as independent Modernista and numerous Interpublic agencies, such as Deutsch and Campbell-Ewald, is its initial client partner.

"We need to make creative and store it in a more cost-effective way," Mr. Kenney said, adding that Digitas management was wrestling with the issue even before the Publicis Groupe deal. Prodigious, he said, will be able to produce faster, cheaper and better, with new production tools and quality assurance processes. It will also outsource jobs outside of high labor-cost geographies.

"It is better to do this at the center than to have each agency do it on their own," he said. Eventually Leo Burnett's production will move to Prodigious, as will Saatchi & Saatchi's and that of all other Publicis Groupe companies.