HSBC brief signals that network pitches loom

Lee Moran, connections manager, Vizeum

Across London – and, no doubt, New York as well – brows are being furrowed, sweat is being mopped and very large egos are being dented. When HSBC called in its global marketing communications accounts last month, it invited the heads of the biggest global full-service advertising networks to pitch for the business. The financial giant’s plan is to consolidate all its accounts under the banner of one global network.

News that the likes of Interpublic CEO David Bell, WPP’s Sir Martin Sorrell, Omnicom’s president John D Wren, and Maurice Lévy, chairman and CEO of Publicis, would be rubbing shoulders in the reception area at HSBC’s Canary Wharf HQ invited wild gossip in the agency world.

Dare we contemplate the thought of ad guru Sorrell fiddling with video outputs on his laptop as he struggles to find the Powerpoint document he’d worked up the night before? It would seem so, although all Sorrell would say on the issue was: “Aah, HSBC!”.

Word of the account review surfaced in late January when HSBC Holdings, the financial services company best known in the UK for its chain of high street banks, began a worldwide review of its advertising creative, media planning and buying, direct marketing and other communications accounts. These are currently divided among several agencies. The principal aim of the move is to consolidate the accounts and cut costs. Total spending is estimated at more than £600m.

“Because its expenditure on marketing communications is substantial, HSBC has a duty to its shareholders to deploy its resources as effectively as possible,” HSBC spokesman Adrian Russell said.

Despite the vastness of the account and the unusual step of getting four of the holding companies behind the major advertising agency networks to pitch, a decision could come relatively quickly – as soon as May.

Limited invitation

In a statement, HSBC said: “Because [the review] is worldwide and covers all marketing disciplines, only a small number of organisations with global reach and a full suite of services have been invited to participate.”

At present, Publicis Groupe’s ZenithOptimedia handles most of HSBC’s media globally, while Omnicom’s PHD deals with planning and buying in the UK.

However, it is known that, on Omnicom’s side, Proximity, the direct marketing sibling of PHD, is leading the pitch.

The review has been, in part, triggered by WPP’s acquisition of Cordiant Communications Group last year. This led to WPP folding most of Bates, which was on HSBC’s roster of agencies, into other WPP networks. This split Bates’ share of the HSBC business among several agencies – not a situation that was likely to last for long. Peter Stringhorn, HSBC group marketing director, intends to sort out the mess.

With big money at stake, no matter which network HSBC goes for, the move will have profound ramifications, in particular for any of the networks that are ailing in some way.

One agency insider said: “The heads of the agency networks have never had to pitch their assets quite like this before. They could well start to notice gaps in their portfolio which, in turn, could lead to big structural changes inside the agency networks.”

The most exposed of the agency giants in all this is Interpublic. In particular, the company is being weighed down by it’s Lowe & Partners Worldwide creative agency, which faces questions about its ability to continue to survive.

Interpublic has been facing difficulties in its finances and operations – difficulties which could further be aggravated if Lowe loses more high-profile clients such as HSBC. Indeed, in the United States, Lowe was recently described as having “a pulse, but not a strong one.”

Lowe, which is the thirdlargest of the four global Interpublic agency networks, has had a sword of Damocles hanging over it since last January when three of its biggest clients announced major reviews. Along with HSBC, these were the Braun division of Gillette and Verizon Wireless, the big US mobile network that is a joint venture of telecom company Verizon Communications and Vodafone.

Verizon recently said it was “not completely satisfied” with the creative ideas from Lowe and McCann-Erickson and said it planned to widen the review to agencies not owned by Interpublic.

Braun ended up awarding its global creative, worth $50m, to Omnicom Group’s BBDO without hearing pitches. The combined value of these Lowe accounts tops $500m in billings, out of an estimated total of $5.5bn.

In fact, there is speculation that the combination of the three reviews at Lowe and other difficulties facing Interpublic may now force another merger of its agencies, combining Lowe with Draft, its sister direct marketing agency in the US.

As a result, the HSBC move has more at stake to it than simple win or loss for one agency.

The decision it takes could well lead to a wider shake-up or even a bout of consolidation among the global full service networks – across creative and media agencies alike.

The pitch will also throw into relief conflicts of interest at the nteworks. WPP’s O&M already handles American Express, for instance.

Consolidation of accounts

Consolidation of advertising accounts is a growing theme – especially among the larger companies with worldwide operations.

Last October, ZenithOptimedia was appointed sole European media agency for Electrolux after the home appliance maker reviewed its networks, an account worth up to £5m in the UK.

The move united all of Electrolux’s planning and buying networks across Europe, allowing it to focus on Electrolux as its main brand, as opposed to its others, including AEG, Zanussi, Frigidaire and Eureka.

In June, Microsoft moved its £2m online planning and buying account out of incumbent Media Contacts, MPG’s online division, and into Universal McCann Interactive. This followed the global consolidation of Microsoft’s offline media and creative accounts into Universal McCann and creative sibling McCann-Erikson in 2001.

The stakes in the HSBC pitch are, to put it mildly, high.

So high, in fact, that Media Week was hard-pressed to get anyone from the agency world to pass comment on this gargantuan pitch – outside of nervous sniggers about what the various CEOs would say to each other as they passed in HSBC’s lobby.

One thing is certain. The HSBC review is indicative of the increasing pressures large networks are facing as clients continually demand more effectiveness, return on investment and efficiency in their efforts to reach consumers.

And of the growing difficulties independent agencies will experience in winning business from global clients.

Modern clients – especially global companies – are now looking for active partnerships with agencies, rather than simply bankrolling the creative and media ideas that come out of agencies. With media and brand image such a core part of the modern enterprise, big firms now want the way they present themselves to be a core component of their business model.

Given that background, it is, perhaps, not so surprising that HSBC is holding the review at the parent company level rather than the agency level.

In the meantime, agencies across London and New York work feverishly on a pitch which could, come May, have farreaching implications for the winner – but even more so for agencyland .

The Pitchers

David Bell

Chairman and chief executive, Interpublic

Joined Interpublic in July 2001 as vice-chairman.

Previously: chairman and chief executive of True North Communications; CEO of Bozell Worldwide; two-time chairman of the American Advertising Federation. On the board of directors of Primedia Inc. Interpublic’s most recent financial results showed a net loss of $327m in the third quarter of 2003.

Sir Martin Sorrell

Group chief executive, WPP

Joined WPP in 1986 as a director, becoming group chief executive in the same year. A non-executive director of Colefax & Fowler Group and a member of the NASDAQ board. WPP was rocked by senior executive departures in the US and the loss of the lead on the Burger King account by Young & Rubicam.

John D Wren

President and chief executive, Omnicom Group

Based in New York. Chief executive since September 1997. Prior to 1997, he served as president of Omnicom.

Listed in Forbes’ America’s Most Powerful People.

Aiming to build a wide agency network involving promotion, PR, direct marketing, media and branding. Omnicom’s revenues and income good.

Maurice Lévy

Chairman and chief executive, Publicis

Born in Morocco, trained as a computer scientist and hired by Publicis as an IT specialist. Survived acrimonious and doomed partnership with US group True North to acquire Saatchi & Saatchi Worldwide.

Holds the Officier de la Légion d’Honneur. Publicis recently announced revenue rise of 32% in 2003, boosting its stock price.

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