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CHINA - Yann Lombard-Platet interviewed in China Tech News.com

What's The Effect Of Interactive Advertising Consolidation On Clients In China?

The advertising industry is entering into another period of consolidation, both in China and around the world. Big deals are being signed in the U.S. and Europe with key American players, some venturing for the first time into Europe and Asia.

There are a lot of acquisitions going around, with huge organizations buying up small to medium-sized ones across Asia and in China. In just the recent months WPP has acquired Blue Interactive and Agenda in Asia, both with a fairly recent presence in China. Publicis has bought Communication Central Group (CCG) and we expect more deals to come. (Omnicom, where are you?)

With this kind of consolidation happening, the only question that should come up to mind is "How and when will this work for the benefit of the clients?" It's a tough question but to us it is the central one.

Did we say Consolidation?
Can we actually call what is happening, a consolidation? Unlike in the past whereby an advertising company bought another one to acquire a new client as a clear external growth strategy, this is not what is happening in our industry now.

What is really happening (shall we say, again!) is companies buying into a skill to enter into a segment of our industry that they used to turn their backs on just less that 10 years ago. Remember the major write-offs they had to take while attempting the same strategy? They are once again trying to catch up with a striving industry by buying companies and talents.

What is strange to me is how do you suddenly create or manage synergies between companies that have nothing in common. Let's say you have an advertising agency which serves P&G around the world, and then buys an interactive agency in China which has Unilever as the main client. What is the strategy behind this? The fear of being left behind in this industry? A numbers game? How do clients benefit from these kind of moves? Most of the agencies who are now major interactive players around the world were started by individual entrepreneurs with a vision, by people who were dedicated to serve their customers to the best of their abilities. And in most cases, clients chose to stay with them for a long time.

Almost 10 years ago when we started China Interactive, the following two years saw a craze of acquisitions. Internet agencies of all shapes and forms were being acquired or received investment. We chose to stay independent. Now, not even one of these companies is still around, or if they are, their business scope and client portfolio has drastically changed. You can blame a lot of this on the Internet bubble but what we really believe went wrong was the way people approached China and Interactivity.

Now it seems to be happening again, so one may ask, "Should an agency like Nurun China be worried?" Our answer right now is clearly and definitely NO. Why? It's the same two reasons: culture clash and culture shock.

Culture Clash
Advertising agencies are working on a model of what I would call "safe" advertising solutions. To be fair to them, some of their clients may in fact be asking for that safety but the fact remains that this culture of developing safe solutions became their modus operandi. This "safe" way ensured them in meeting bottom line targets and is probably why very few of them embraced the Internet on their own dime. OK, nobody can blame them for delivering financial results! However, what we see now are those same "safe-mode" agencies buying into risk-loving and innovative interactive agencies and this is where it gets interesting, this is where the culture clash starts.

New "family" members are being "integrated" under the traditional agency, usually in the below-the-line family. We see traditional Creative Directors or ECDs taking over creative departments in the interactive businesses; we have yet to witness the opposite. In many cases now, these innovative agencies are being dictated the strategies of their campaigns and the execution of the online part, thought out by traditional "safe-mode" agency people. The company is also asked to grow faster than they have ever grown, to improve their bottom line. These pressures or diktats only add instability and generate long periods of doubts. Not only will stress and pressure on the existing teams go up, but so will prices and these go up particularly fast!

In less than 12 months after some of these companies have been acquired, we often see either the founding members and management team leave or clients moving on. This doesn't happen simply because the company founders have made money and now want to enjoy it or because clients are uncommitted. We have seen most of our competitors suffer tremendous turnover in staff as a result of an acquisition or the development from scratch of an interactive department linked to a traditional agency. These are the results of a traditional culture trying to impose its "old" ways onto what is now clearly the future of communication. The strategic lead stays on the side of traditional thinking...

Two years ago as China Interactive, we realized the importance of aligning with a global player and then took a conscious decision to do a deal with a pure digital player, Nurun. Now as Nurun China, we haven't lost a single client; 80% of our top management and middle management are still here. Since then we have acquired two major clients and managed to grow 50 % every year, just a little bit faster than what we used to achieve on our own. This means that our clients saw a seamless integration with Nurun. In fact, we grew into an even more strategic agency and the time we used to spend chasing for payments turned into a time spent thinking about new ideas, new strategies. We also sleep better! Most relationships with our clients in China have lasted more than 4 years and that is the one we should be really proud of.

Culture Shock
The other vital point is that China is not anything like what these traditional advertising agencies or international interactive agencies are used to dealing with when it comes to Interactivity. There is no safe solution or recipe when it comes to China. Let us not forget that the No. 1 search engine in China is NOT Google, the No. 1 auction site is NOT e-Bay and the No. 1 social network site is NOT Facebook. It takes an entrepreneurial mind, a very open mind to understand that.

I strongly believe that to succeed in Interactive Marketing in China, we have to forget almost everything that we have heard or been exposed to in western markets and consider only one thing: the Internet is becoming the first media of choice for Chinese audiences. Actually it already is in some segments of the population (teenagers) and in some industries like automotive and travel!

So why is that? Chinese audiences interact very differently from others around the world. Internet not only changed their lives but for a lot of them, it opened up and boosted their lives, allowing them to be much more than who they were before; to be more legitimate as individuals. It is as if when pressing "ON" on their PC they were projected into a universe light years away from the traditional Chinese society they live in. This new universe quickly became the main centre of their aspirations, both the PC being and mobile phone being the very first electronic device they switch on. It is only once you understand this that you can leverage the full power of Interactivity in China to Chinese audiences.

We come back to the question of how clients can benefit from these major moves into China. Until these new players understand the culture clash and culture shock, it is going to be tough. A company that used to focus on its clients, on trying to keep up-to-date with an ever-changing new media landscape and new audiences, a company that was driven by true creativity and quality is suddenly driven solely by financial results and ego wars. This drastically changes the way this business operates with its clients and I believe it is dangerous for both of them. The Client must come back as the center of attention.

Read the article on ChinaTechNews.com