On Tuesday, London-based WPP took the industry by surprise as it announced the merger of Wunderman Thompson and VMLY&R to create “VML”. VML is expected to be the largest creative agency in the world with 30,000 employees across 64 markets.
Interestingly, the twin creative agencies were themselves the products of momentous mergers by WPP in 2018. On Wednesday, their websites displayed the integration update.
Wunderman Thompson (WT) – or what was J Walter Thompson (JWT) – first set up its India office in a room at the Taj Mahal Hotel in Mumbai about 90 years ago. Considered one of the oldest in the world, JWT catered to top brands like General Motors, Colgate-Palmolive, Dell, Ford, Microsoft and Coca-Cola.
In 2018, WPP merged creative shop Young & Rubicam with digital ad firm VML to form VMLY&R. The same year, WPP also combined J. Walter Thompson with digital agency Wunderman to create Wunderman Thompson.
Consolidation is the norm
The merger has come at a time when advertisers are trying to cut ad dollars by all means amidst challenging economic conditions. This has created pressure on the creative advertising ecosystem globally. Entry of generative AI, which creates scores of campaigns, images and videos in seconds, has made it harder for creative agencies.
Nevertheless, mergers are not new to the advertising world. WPP itself has been at the forefront of mergers and acquisitions in the last decade. As per Statica, between 2016 and 2020, Dentsu was the leader in M&A deals, having made 98, followed by WPP with 68 and Accenture with 40 deals.
“The agency seems to have resumed its rationalization of agency brands,” said an industry expert.
Other big networks are also undergoing a churn. For instance, Japan-based Dentsu International merged its agencies such as DentsuMB, 360i and Isobar a year ago to launch a new global creative network- Dentsu Creative.
“Publicis and IPG Mediabrands have also brought most of their agencies under one roof over the last few years. In some cases, one person is leading several agencies. For instance, Dheeraj Sinha, who quit Publicis Group a month ago, was heading five agencies - Leo Burnett, BBH India, Publicis Business, Publicis Health and Leo Burnett Orchard,” a senior executive pointed out.
Even as some of the biggest integration efforts have not yielded the expected results, industry experts feel that consolidation and integration is the key to moving forward.
“Expect more such integrations and mergers in the coming year as the macroeconomic situation continues to be uncertain due to multiple factors including Israel-Palestine and Russia-Ukraine wars and inflation,” an industry veteran said.
As per a report from GroupM, the media arm of WPP, India’s ad revenue is expected to grow by a subdued 12% to $17.3 billion in 2023 against the initial projection of 16.8%.
Diversification of creative work
The work of advertising agencies has been increasingly expanding and diversifying over the last few years. They are not just making television, print or radio commercials anymore.
Digital advertising has grown exponentially over the years, currently accounting for nearly 45 percent of advertising spend in India. With the evolution of social media, eCommerce, OTT and other new media platforms, digital emerged as the biggest disruptor in 2020, followed by generative AI that came in 2022.
Manish Bhatt, Founder Director, Scarecrow M&C Saatchi, shared, “Historically, the core of the creative agency was the idea. The media was there to support that idea. Now, there is too much fragmentation in the media, and the frequency of media consumption has gone up over the past few years. Demand for Data and technology has surged like never before. Marketers are anxious and the average period of communication between a marketer and creative agency has been reduced from a few months to a few days, sometimes just one day.”
WPP has been trying to include technology, e-commerce and data consulting as its way forward. The company hopes to make it easier for marketers to access such different services by putting them under the same roof.
As for Ambi Parameswaran, an independent brand strategist, WPP’s move is symptomatic of the serious disruptions in the MarCom space. “Accenture is a serious player on the one end. At the other end are the nimble small start-up MarCom agencies. And the tech majors who want to have the cake and eat it. Exciting times indeed.”
Meanwhile, the news of the merger came as a shock to some experts in the industry.
Ashish Khazanchi, Managing Partner at Enormous, said, “I do feel sad about the loss of a brand name that used to have the biggest presence in the country. People wanted to go and work for such large organizations with a lot of rigour in terms of brand building.”
Amer Jaleel, Founder of Curativity, echoed the sentiments, “I was really saddened and heart-broken to hear of the extinguishing of the WT brand. I’m sure the bosses at WPP have thought long and hard and surely have taken what is called a future-facing decision.”
WPP leaders in India remained tight-lipped over the development.
Indian leadership
While Jon Cook has been appointed VML's Global CEO, the agency has not yet announced its leadership in India. Wunderman Thomspon is currently being headed by Shamsuddin Jasani, CEO South Asia, and VMLY&R by Saurabh Saksena, CEO-India.
