And General Motors finally confirmed it, announcing late in the day today (March 14) it was consolidating Chevrolet’s global account at IPG’s McCann Worldwide. Strangely, GM distributed the statement, which was attributed to McCann.

Whatever.

The bottom line is this: Omnicom’s Goodby, Silverstein & Partners is out.

Goodby won the Chevy account in 2010 without a review shortly after the arrival of Joel Ewanick as CMO. Ewanick had worked with Goodby during his years heading Porsche marketing and also for a while at Hyundai.

Shortly before Ewanick was forced out last year, GM pushed Goodby into that silly 50-50 venture with McCann to handle Chevy, called Commonwealth. I predicted it was a bad idea to try to get 2 holding companies to work together.

http://autoadopolis.wordpress.com/2012/03/28/is-chevys-global-creative-solution-a-good-idea/

GM should have known better since it had tried it before on the media side… and it flopped.

Most AutoAdOpolis readers know I have not been a big fan of most of Goodby’s work. I don’t put all the blame on the agency because it has done some great work for other clients.

The smoke signals for Goodby’s demise really started billowing late last year when GM’s Alan Batey, interim CMO, (pictured below) moved oversight of the crucial Chevy Silverado launch to Publicis’ Leo Burnett.

Burnett  also has GMC and Buick and one could certainly argue that work for those two brands hasn’t exactly been setting the world on fire.

So one has to wonder why Batey chose to only fiddle with the agencies for only 2 of 4 GM US vehicle brands, essentially giving Burnett a free pass.

But even more curious is Batey’s timing.

After all, Tim Mahoney will start April 1 as GM’s newly-hired global CMO for Chevrolet. Mahoney, on vacation this month after leaving VW of America, will also be global GM marketing operations leader, indicating he’ll also oversee other car brands. He’ll report to Batey.

GM has been mum on whether Batey, also VP of sales and service in the US, will remain interim global CMO. So Mahoney could well be Batey’s successor. So, if Batey wanted to make some big moves and undo most of what Ewanick did, he knew he had to hurry.

But why not wait until Mahoney arrives?

Batey’s marketing power plays would have had to have been okayed from the top, since Batey reports to GM Chairman-CEO Dan Akerson.

This entire mess doesn’t portray GM in a very positive light.

What the hell are you guys thinking?

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Follow me, Jean Halliday, on LinkedIn, Forbes.com and Facebook

On Twitter @jhal2001

I’m being polite.  The real point of this article is “Advertisers Beware.”  After serving as an agency account director and client-side marketing executive, I thought I had heard it all. However, after becoming involved in marketing accountability consulting my eyes were opened… or so I thought.  

Recently, a post by an agency media professional on a social media group to which I belong caught my attention.  The two-part question had to do with: 1) Whether or not an agency buyer should request unspent monies back from the media; and 2) If so, was the agency entitled to keep those funds.  What was surprising was not the question per se but some of the responses from group members, largely media buyers and sellers, suggesting it was appropriate for either or both of those parties to retain an advertiser’s unspent funds.     

Either the advertising industry has lost its moral compass or there is an urgent need for training and education in and around agency and media stakeholders’ fiduciary responsibilities to the advertiser.  As British philosopher and social critic Bertrand Russell once said: 

“We have two kinds of morality side by side: one which we preach but do not practice and another which we practice but seldom preach.” 

In our agency contract compliance auditing practice the need for education and a greater level of financial controls on the part of the advertiser is played out on a regular basis.  It is not uncommon to identify aged media credits that are extremely old or to learn that prompt payment discounts, volume discounts or AVB’s that have been earned by the advertiser have not yet been “processed.”  

For too many years the advertiser community has turned a blind eye toward many of the industry’s practices regarding agency and media use of advertiser funds.  These include items such as the interest income earned on float and the retention of compensatory media weight.  However, if there are stakeholders within various facets of the media purchasing cycle that are unclear about the need to return budgeted, but unspent funds to the advertiser than we should all take heed.  

This is obviously a serious issue and importantly one where there should be no debate.  The only answer to the aforementioned question is that media agencies and media owners have a fiduciary responsibility to their clients.  Any unused funds, media credits, compensatory media weight for underdelivery, prompt pay discounts and or rebates should go back to the advertiser, plain and simple.  Let’s remember, it is the advertisers’ money being invested, not the agency’s and not the media properties. 

Further, on the topic of AVBs, policy action is required by the ANA and 4A’s as it relates to the growing use of volume rebates both globally and within the U.S.  Advertisers should be reassured that their agencies are planning and deploying their media budgets in an optimal manner based upon sound, fact-based analysis tied to maximizing the advertiser’s return on media investment.  The faintest specter of allocation decisions being skewed by the presence of an AVB offered by the media to an agency holding company is simply inappropriate. 

However, as we all know, education and the enactment of industry policy takes time.  Consequently, in the short-term the best way for an advertiser to monitor their marketing investment may be through the use of independent contract compliance auditing.  

A good approach would be to begin with upgrading agency contract language to provide the requisite legal and financial safeguards to protect the advertiser’s interest on these topics and to incent all parties to conduct themselves in an appropriate manner.  This would be followed by some combination of contract compliance monitoring, performance assessments, billing reconciliations and time-of-staff/ fee reconciliation reviews.  In the end, this type of accountability program will both protect an advertiser’s interests and clearly communicate its expectations regarding “appropriate” behavior among its agents and 3^rd party vendors when it comes to their financial obligations.  

Interested in learning more about the benefits of compliance auditing as a means of improving transparency into your marketing investment and control over the stewardship of those funds?  Contact Cliff Campeau, Principal at Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation on the topic.

According to a new report from Marketing Services Financial Intelligence, agency holding company profits for 2011 were up almost 30% on an 8% revenue increase.  The firm tracks publicly traded holding companies such as WPP, Omnicom, Interpublic, Havas, Publicis and Aegis along with some smaller organizations.  Of note, it was reported profit margins also rose for the group, “averaging 15%.”

Clearly, in spite of what has been a tough global economic climate, the agency holding companies continue to perform well from a financial perspective.  In addition, they have continued to expand their footprint via a robust level of merger and acquisition activity as well.

So what can we make of the stellar results?  Certainly, life is good for the holding companies.  Perhaps more intriguing is to ponder how a collective of holding companies managed to achieve a 4X multiple on profit growth vis-à-vis topline revenue.  On the surface it’s easy to understand, control expenses and boost the margin yield on incremental revenue.  However, the agency business falls into the “professional services” category.  Their primary expense is direct labor.  So as revenue increases, so do direct labor costs.  Right?  If not, how do you add business without expanding staffing coverage at the same rate?  Wouldn’t this negatively impact client service levels or the caliber of the work?

So if agency staffs are growing commensurate with revenues, what is the source of the extraordinary profit?  While the answer may be complex and varied there are certainly aspects of the agency holding company model that likely have contributed to this growth:

• Increased utilization of agency owned resources/affiliates on existing client business ranging from in-house studios to trading desks, barter firms and production companies.
• Improved employee utilization rates, whether in the form of associates working longer or devoting a higher percentage of their time to billable activity.
• Non-transparent revenue growth on existing client business including but not limited to interest income associated with float, growth in agency volume bonification (AVB) revenues along with other vendor discounts and credits.

Let’s be clear.  There is nothing wrong with an agency holding company making money.  Further, there is nothing wrong with the aforementioned practices as a means of driving profitability.  The issue that advertisers should more clearly understand relates setting transparency standards and clear financial rules between themselves and the agency.

As a first step, to understand the current state of affairs and use it as a basis for improvement going forward, it is a best industry practice for the any advertiser to implement a detailed contract compliance audit.  This initial review boosts the advertiser’s understanding of the agency’s billing practices, and their basis, to assess time value of money treatment, fees vs. agency time-of-staff investments, AVB calculation methodology, adequacy of financial terms, manual vs. system treatment and the like.  The advertiser can then answer the questions – “where are my financial risks?” and “how do we mitigate them?”

Once accomplished, then perhaps the advertiser won’t have to “ponder” agency holding company profit growth rates and can join their agency partners in celebrating their hard earned financial success.

If you would like to gain the benefit of what we’ve learned first-hand through our agency contract compliance auditing practice and would like to schedule a complimentary consultation on “Transparency in Action,” please contact Don Parsons, Principal at Advertising Audit & Risk Management at dparsons@aarmusa.com.

With the rise in digital advertising budgets and the dramatic expansion in the level of inventory available from publishers, advertising agency holding companies have developed a viable alternative to ad exchanges for securing a portion of their clients’ digital media inventory needs.  This is being done through the use of agency trading desks.

Simply put, a trading desk is a separate holding company service entity that integrates a demand-side platform with other technology and a wealth of consumer data to deliver targeted audiences at scale.  While primarily focused on display advertising, this dynamic method for purchasing media on a real-time basis is expanding to the buying of online video, search, mobile and social media.   This approach leverages an auction based model to buy unsold publisher inventory at efficient rates relative to pre-procured media.

The benefits to the advertiser can be significant when it comes to audience buying and ad impression optimization relative to content/ context based digital media buys or purchasing packaged buys through an ad network.   Given the relative newness of this approach combined with the complexity of the service offering and the limited understanding of trading desks among advertisers there remain concerns about the approach tied primarily to what is perceived as a lack of transparency.  This in turn has resulted in questions ranging from how agencies are compensated for this service (“Are advertisers  double paying their agency partners?”) to the potential for an agency’s objectivity to be compromised as they become both a buyer and seller of inventory (buy from publisher at one price, resell to clients often at a premium).

There are a number of ways for advertisers to enhance transparency into the trading desk operations of their agency partners.  The first is to check your agency letter-of-agreement to determine if there is language related to the agency’s trading desk operation.  If not, check to determine if a separate agreement with the trading desk operation was executed and read through the agreement carefully.  Secondly, engage your agency in dialogue about whether or not they are currently using buying digital media on your behalf through their trading desks and if so, what percentage of your overall digital buy is being channeled through the trading desk.  If the agency is not utilizing their trading desk for your digital media buying, ask whether or not it would be appropriate for your business model and what percent of your digital media buy would be a candidate for this approach.

With the answers to these questions in hand, it is time to discuss how the agency expects to be compensated for this service.  Compensation could include any or all of the following; commission on executed media buys, fee for service, incentive compensation tied to performance (i.e. cost per action, cost per lead, cost per acquisition) and mark-up on the media purchased by the trading desk and sold to the advertiser.  Further, inquire whether or not the trading desks earns rebates or discounts from publishers or technology partners tied to volume and if so, how is your pro-rata share calculated and passed through to you.

It is important to note that the trading desk model employed and the approach taken will vary by agency, so asking questions and establishing guidelines on how to evaluate both the efficacy and efficiency of this approach is critical before allocating a portion of your digital media budget to this channel.   While questions remain with regard to this emerging agency service, the level of risk represented is no more than that represented by ad networks.  Having direct conversations with your agency about the approach, costs, reporting and performance metrics will go a long way to ensuring that you have a sound understanding of how your investment is being handled.

Finally, incorporate a “Right to Audit” clause into the agreement which you execute with the trading desk operation to contractually insure your organization access to the date required to support your desire for full transparency. If you would like to learn more about this area and or how AARM can assist you in assessing the relevance of this approach or analyzing the performance of your agency’s trading desk, contact Cliff Campeau, Principal at ccampeau@aarmusa.com for a complimentary consultation on the topic.

http://autoadopolis.wordpress.com/2012/01/19/gms-global-gambits/

Omnicom Group’s Goodby, Silverstein and Partners in San Francisco and IPG’s McCann Erickson in New York formed a new 50-50 joint venture called Commonwealth to shepherd creative for GM’s biggest brand. GM was crowing that this is” the first of its kind” global venture and indeed it is. Hmmm- could there be some reason no other marketer has tried this before?

Let’s be clear on one thing: the account is not truly global, since it doesn’t include China, India or Uzbekistan, which are among the world’s biggest and fastest-growing car markets. GM CMO Joel Ewanick said in the phone press conference this week that China and India, both handled by McCann, “are investigating whether or nor they want to come along” under the Commonwealth tent.

Ewanick touted savings of more than $2 billion over the  next five years as a result of this creative consolidation from 70 shops PLUS GM’s recent global media consolidation to Carat, which is part of yet a third big holding company Aegis (More on that later).

Has the scope of the work really changed here for Chevrolet creative? Even if the same creative idea is used in several different markets around the globe, the ads will have to be reworked in other languages and GM’s legal beagles will have to be more involved. Commonwealth bring complexity, not simplicity, to the mix.

There was lots of happy talk during GM’s phone press conference from the involved agency partners. McCann Worldgroup Chairman Nick Brien, chairman and CEO, McCann Worldgroup, called the new Detroit-based shop “a unique opportunity… that will make sure Chevrolet has a global voice.”

Jeff Goodby,co-chairman and creative chief at Chevrolet’s USA agency, dubbed it “a great collaboration.” Goodby, whose shop was hand-picked by Ewanick for Chevy’s US creative account , admitted during the call that the interests of the top brass of the holding companies can “kind of be at odds with each other.” But, he added , that doesn’t extend down the corporate rank and since he knows all the McCann creatives who will be involved personally, “the egos will be checked at the door.”

Easier said than done. Anyone who has worked for an agency creative chief knows how they can be. It’s great these creatives from different agencies know one another. But that’s personal and this is business we’re talking about. I do think these guys will play well together – for a while at least anyway – for the sake of the client and the account.  But how long will it last if one agency’s work keeps winning? Will the egos stay at the door? Let’s be realistic I think not.

GM has tried this dual-company approach in the past, when it had its massive USA media planning and buying split between IPG and Publicis. At the time, GM’s brass said the holding companies’ two agencies would work well together. But in the end, to the surprise of no one but GM apparently, they didn’t play nice with each other at all. The automaker ended up consolidating its media business at Publicis, which just lost its US account to Aegis’ Carat after a global review.

GM’s dual media agency set up all happened before Ewanick arrived. Still, isn’t history there to teach us lessons, especially when things go wrong? It’s the old “live-and-learn” adage, which really just means we have to learn the hard way.

Adding Carat on media into the mix globally to work with Chevy’s hybrid creative agency owned by two other holding companies certainly has the potential to complicate things further. What are the best mediums to use in each country? And will the creatives and media folks agree? Who’s the referee here? If the bottom line determines the buys, will the creatives be happy?

I AM impressed with the creative firepower Commonwealth has assembled. Jeff Goodby is one of four creatives on the new agency’s board and will serve as Commonwealth’s creative chairman.

The other three are:

–Washington Olivetto, chairman of WMcCann and chief creative officer of McCann Worldgroup across Latin America and the Caribbean. Olivetto has won more than 50 Lions at Cannes in just the film category, elected  Advertising Man of the Century by the Latin American Advertising Agencies and in 2009 was inducted into the FIAP’s Hall of Fame of FIAP (Ibero-American Advertising Festival).

- Swede Linus Karlsson, who joined McCann earlier this year as chairman and chief creative officer of its Manhattan and London offices. Karlsson moved to the US in 1996 to work at Fallon in Minneapolis on brands like BMW and Miller Lite before co-founding the successful, indie New York shop Mother.

-Indian-born Prasoon Joshi, who, since late 2006 has been executive chairman for McCann Worldgroup India along with regional creative director-Asia Pacific. He started his ad career as a copywriter, but is also a Bollywood film songwriter, poet and screenwriter. In 2007 and 2008, he won the Filmfare Best Lyricist Award.

Here’s the foursome

(Left to Right: Olivetto; Goodby; Joshi; Karlsson)

Meanwhile, an interesting duo to watch will be the co-managing directors of Commonwealth in Detroit: Joe Garcia, president of McCann Midwest in suburban Detroit and Todd Grantham, Goodby’s account chief in San Fran, who will relocate to the Motor City.

Believe it or not I am rooting for this whole thing to work. I’d like to see Chevrolet get its act together and do well around the world. But the biggest challenge I see in this whole set is : It up simply flies in the face of human nature.

-Jean Halliday-

Follow me on Facebook, LinkedIn and Forbes.com

On Twitter: @jhal2001