Omnicom’s Jonathan Nelson on why cautious optimism is good
Every smart play first gets its basics right. The ‘sexiness’ of technology, the high of acquisition stories, the temptation to take a big risk is not new to the communication and marketing services business, especially when the keyword is digital. For the CEO of Omnicom Digital, Jonathan Nelson, however, none of the customary expectations apply. His nod is perhaps the most important for an acquisition decision, his position is necessary for steering Omnicom in the future direction, and yet Mr Nelson’s principles are as rooted in fundamentals and reality as can be.
‘Cautious optimism’ is Omnicom’s golden phrase in the year. Despite a slip in earning on account of currency fluctuation, Omnicom continued a growth trend reporting an increase of 5.3 per cent in second quarter organic revenue. The holding company is treading cautiously nonetheless according to its Global Chief, a sentiment echoed by Mr Nelson in a conversation with Digital Market Asia.
In his role, Mr Nelson is involved in all Omnicom businesses, across regions and disciplines with a focus on growing new businesses, deepening relationships with existing clients, aligning Omnicom on common denominator technology such as data, the tech-driven media, CRM and partnerships. Essentially, figuring out how to have the most impact on Omnicom and its clients is his key mandate.
That also makes him one of the most important people in the room when it comes to Omnicom’s acquisition strategy.
Investing in people, not businesses
“We are in a people-based business. When we see great entrepreneurs, we want to work with them and invest in that relation but you can always expect us to be very conscious and pragmatic. Parameters such as what the company does, how appropriate it is for our business and for that market are all very important for us,” explained Mr Nelson. However, if one was expecting him to voice similar comments of focussing on technology driven businesses or zoning in all attention on high growth markets, there was a different thing coming.
“We have taken a different approach to technology. We are a services company, focussed on the right people, skillset, geography, market… We are not a systems technology company. Some holding companies are buying businesses competing with suppliers of technology or media companies. We are not going to do that,” explained Mr Nelson, clarifying that at the moment, Omnicom is focussed on the whole suite of its services in any conversation of an acquisition.
“Our business is growing at many levels and our acquisition system echoes that. We are focussed on the whole range of services that we offer to our clients – digital CRM, media, great creative shops, analytics and so on – we look for the same in our acquisitions,” asserted Mr Nelson. Omnicom’s second quarter results show that Mr Nelson’s stance is indeed well placed. In the four fundamental disciplines at Omnicom, advertising grew by 6.4 per cent, CRM by 4.3 per cent, public relations increased 0.3 per cent and specialty communications increased 8 per cent.
Fast growth vs. Fast opportunity to grow
Omnicom’s good year has largely seen growth for the holding company from across its regional markets. The organic revenue in the second quarter of 2015 increased 7.6 per cent in Asia Pacific, 5.9 per cent in North America, 5.4 per cent in the United Kingdom, 3.9 per cent in the Euro Markets and Other Europe, 11.9 per cent in Africa/Middle East, while organic revenue decreased 9.6 per cent in Latin America when compared to the same quarter of 2014.
Fast growth markets have seen commitment from the holding company but they are not a guiding principle for Omnicom’s digital ambition or inorganic growth. “Growth markets are important but it is equally important to identify the right mix of services for our companies. Where there are opportunities to expand strategically, we will put disproportionate attention on it,” Mr Nelson explained.
He is also not in a hurry to generalise market trends especially in a digital economy. He observed, “People and cultures in each market are different and should be embraced irrespective. The clients are different and the outcomes they are trying to achieve are different. For instance, India and China are similar in some ways such as the growth of mobile but they are very different; the use cases are different in each of these countries. Omnicom is creating a bespoke series of interconnecting service businesses that can take advantage of that, both at scale and at individual market level.”
Five questions to John Nelson on partnerships, creative vs tech & implications to marketers
Omnicom has done some of the first partnerships with tech companies. What are your expectations from these companies?
We were in fact the first company to partner Google, AOL, Microsoft, Facebook, Instagram, and in the process leveraged the opportunity of being the first mover. We are betting on technologies that we think are smart. We were also the first to tie up with Google Play, the new audio streaming, which was a very classic partnership for us. Our business is evolving at lightning speed. We are constantly checking in with the likes of Google, Facebook, and younger companies such as Pinterest and Spotify, on some of their growth metrics and how they can partner with us to be able to give incremental advantage and benefits to our clients, and we do so globally.
There is an argument that while technology and media services have grown rapidly, creative is still catching up – so the weapons have become sophisticated but the ammunition has not…
I don’t agree with that. The kind of work we are seeing, for example from BBDO for Lowes, the deployment of dynamic creative for some of our clients – none could have been accomplished if that was the case. It is true that a significant size of our business is still in the 15 or 30 second TV spots, which has its place. But an increasing amount of our business is dynamic creative, different formats, right message to person or the right device. Creative agencies are also evolving rapidly to turn around briefs, sometimes in real time.
What does this then mean for marketers considering ‘Always On’ is now a reality?
Marketing essentially is awareness, consideration and moving people to purchase. The new ways to do it only means you can do all of those things in the same media. Media buying is not divorced from creative. These things start to affect each other and be measured and become accountable with actual consumer behaviour and commerce. It is incumbent on not just creative agencies but the entire industry to work on understanding and integrating in the same way that consumers actually consume media. We have to remember we are not just in the advertising business, but in the communication business.
And can you achieve transformational growth in the business today with a cautious approach?
It has served us well. I co-founded Accuen and Annalect. Accuen employs over 2000 people today without any acquisitions or great gambles. We are one of the few companies that have recorded a very high organic growth. It is a really great time right now for this industry. It is a vibrant business. I have been around too long to believe that it is going to be all rosy, all the time but there is great growth coming.
No doubt driven by technology led companies?
That is where the opportunities are. Technology companies want to work companies like ours to use their services for marketer. In all this evolution and transformation, we have done very well.
