The Annual 2006: That was the year that was - Adland's 2006

The past 12 months have seen digital grow into a mature discipline, customer relationship marketing take greater prominence and creativity continue to flourish, John Tylee writes.

It was the year that may well be remembered as the one in which digital marketing transformed itself from a geeky adolescent into a mature discipline demanding to be taken seriously. But not as the time when Britain's agencies rushed headlong to embrace it.

On the face of it, such reluctance seems curious. Not only did 2006 provide yet more evidence of how spiralling staff costs and the relentless rise of client procurement specialists are eating into agency budgets, but adspends were shown to be growing more slowly than at any time in the past four years.

Never had the pressure on agencies to tap into new revenue streams been greater. And never had online looked better placed to provide such a stream.

Fuelled by client demands for lower- cost and more accountable advertising, online adspend is predicted to pass the £2 billion mark soon. WPP's GroupM estimated that global internet ad revenue would overtake national newspaper ad revenue by the end of 2007.

The trend was supported by AAR research published this summer, which reported a phenomenal 245 per cent increase in digital pitches.

No wonder the soaring online spend remained a constant topic of conversation, with the debate moving to how well the big media owners, such as Google and Yahoo!, could support brand awareness activity on top of direct response. Google continued to launch numerous products, while Yahoo! faced some criticism from analysts for missing the user-generated content bandwagon launched by the likes of YouTube.

Far from going with the flow, however, 2006 saw agencies more concerned about stemming the tide. A survey by the Haystack Group found that 65 per cent of clients believed their agencies were not delivering when it came to digital. "Every ad agency claims it can do digital, but clients are saying it is all talk," the report declared.

For agencies, however, the year saw them still firmly stuck between a rock and a hard place when it came to digital. Some believe it became such a distraction, that creative standards as a whole suffered. However, The Gunn Report belied this notion by revealing that the UK won more creative awards than any other country in 2006.

While digital became cool, agencies remained sceptical about its profitability. Rick Bendel quit as the Publicis Worldwide chief operating officer in the autumn to become Asda's marketing chief. "The problem is that the level of interest in digital by clients isn't reflected by the income," he said before he left. "The groups don't know how to make money from it."

The dilemma was equally acute within the newspaper and magazine industries, which continued to be preoccupied with the threat, or opportunity, of online. But there was a welcome break from the navel-gazing with the battle for London newspaper readers that saw News International's thelondonpaper and Associated Newspapers' London Lite launch.

Meanwhile, the difficulty of sustaining viable businesses in the face of the perpetual assault on margins was a permanent worry for agency chiefs during the year. Although IPA Census figures showed that the number of people working in agencies (15,751) was at a 30-year high, it was evident that this was a legacy of a buoyant 2004 rather than optimistic 2006.

Then there was TUPE, the employment laws intended to safeguard the rights of public sector workers, but which now threatens to saddle pitch-winning agencies with costs running into thousands of pounds.

Unsurprisingly, one of the hottest industry tickets of the year was for a teach-in staged by the major trade bodies in February to launch a best practice guide on agency remuneration. David Pattison, the IPA president, captured the mood of the agencies at the session by pointing out a correlation between the rise of procurement people and the damage being done to agency margins. Many fee negotiations had been transformed into "gladiatorial experiences", he declared.

Pattison's words underlined the insecurity that seemed to bedevil the industry throughout the year. How poignantly ironic that it should have begun with the death of John Webster.

The one-time Boase Massimi Pollitt executive creative director left a legacy of iconic advertising characters from the Smash Martians to the Honey Monster. And his work during the 70s and 80s personified the industry's swaggering self-confidence and TV's then unrivalled power as a mass medium.

In the year of his passing, adland looked a very different place to the one he joined more than three decades ago. The TV market was struggling, with media agencies predicting a 6 per cent downturn in TV adspend and ITV down by as much as 14 per cent. The figures add up to a difficult job for Michael Grade, ITV's new executive chairman.

Meanwhile, UK agencies performed solidly at Cannes. Not only did 29 of them pick up honours, but the Guinness "noitulove" spot from Abbott Mead Vickers BBDO pipped Fallon's "balls" for Sony to the film Grand Prix.

However, much was changing. Client preoccupation with mass-media was replaced by customer loyalty. Direct marketing agencies, in particular, demonstrated how digital could be used as a communications tool.

As a result, there was some significant pitching activity in the sector as Unilever overhauled its UK digital and DM rosters and Kraft chose Wunderman to handle its European customer relationship marketing business. At the same time, Abbey awarded its £16.5 million credit-card business to Archibald Ingall Stretton, while Rapier won the £14.5 million PruHealth account and Joshua pulled in M&G Investments. The £25 million Barclays pitch ended with the account being split between the incumbent, EHS Brann, and WWAV Rapp Collins.

The growing vibrancy of DM also manifested itself in some top-level management changes. Nick Moore quit as Tequila\London's executive creative director for New York to be replaced by OgilvyOne's Cordell Burke; Mike Cavers swapped the security of Publicis Dialog for the independent group Chemistry. But the big surprise was the demise of Sharpen Troughton Owens Response, which was merged by its WPP parent into RMG Connect and led to Martin Troughton's departure from the industry.

Elsewhere, old certainties continued to be eroded along with a fragmenting media; the support of old allies could no longer be taken for granted. David Cameron's Conservative Party began questioning the ethics of advertising in a way that would have been unthinkable a few years ago, culminating in party conference backing for curbs on marketing and advertising to children.

Ofcom acknowledged the prevailing mood by ordering a much tougher-than-expected crackdown on junk food ads. They are to be banned during children's TV and adult programmes likely to be watched by disproportionately large numbers of children.

Against that background, it was significant that the Advertising Association looked outside the industry to choose Baroness Peta Buscombe, a Tory shadow minister, former commercial lawyer and expert in media legislation, to succeed the one-time JWT board account director Andrew Brown as its boss.

No surprise that the industry's collective behaviour during the year reflected a siege mentality and the need to hold on to what it had. Interpublic reflected the prevailing climate by merging its Draft and FCB operations globally, hoping that the whole would prove greater than the sum of its parts. Alas, the Daily Mail spoiled the marriage party in London, where it split with FCB after 35 years.

However, the wedding provided an interesting perspective on IPG's media intentions. While its rivals chose to invest in their media interests, IPG decided to disband its group media operation in favour of closer working relationships between its media agencies and the creative networks DraftFCB and McCann Erickson.

In contrast, Omnicom announced a UK investment in its Omnicom Media Group structure and began the search for an executive to run the operation. Nick Manning, OMD's chief executive, stepped down and will be replaced by Steve Williams, the OMD UK managing director.

Given the current environment, it was predictable that there should have been little risk-taking and just one start-up of note when Nick Hurrell, the chairman of M&C Saatchi Europe, and Neil Dawson, the TBWA\London chairman, announced their intention to go into business together. They signalled their multidisciplined approach by hiring the integrated specialist Shaun McIlrath as their creative director.

Instead, a number of leading agencies and networks were prepared to cast their nets wide to find those deemed capable of changing their fortunes. Not least the cash-strapped IPG, which offered Ed Morris, Lowe London's executive creative director, an eye-watering three-year £1 million-plus package as compensation for not following the agency's £50 million Tesco account into The Red Brick Road. Just two months later, Lowe Worldwide was announcing the culling of offices across the world.

Meanwhile, Euro RSCG, virtually rudderless and worryingly low on clients after Ben Langdon's departure last year, hired Mark Cadman and Russ Lidstone to form the core of a new management team. Interestingly, the dynamic duo arrived from JWT, which appointed Alison Burns, the former president of Fallon New York, to help it through a painful reinvention of itself.

It was an uncannily similar situation at DDB London, where the seven-month search for a new chief executive ended with the appointment of Stephen Woodford. The long-serving former WCRS boss was seen as a safe pair of hands. Whether he can modernise the agency is open to question.

At TBWA\London, Steve Henry, the United London chairman, filled the shoes of its departed creative chief Trevor Beattie. At United London, the management void was filled by the "dream team" of Jim Kelly and Robert Campbell. However, with the United network losing the £75 million BSkyB account in December, the dream is not proving a sweet one for the Rainey Kelly Campbell Roalfe founding partners.

Inevitably, though, it was the ongoing Lowe London soap opera that provided the biggest talking point. Steve Gatfield had barely warmed the Lowe Worldwide chief executive's chair before indefinitely suspending Garry Lace, the Lowe London boss.

The veil of secrecy cast over the search for a replacement was almost threadbare by the time Amanda Walsh, United's former European president, was named at the start of September. Walsh, it is said, was in no hurry to accept, while rumours abounded that Lowe's IPG parent might either merge it or close it down.

Just one more uncertainty in a year that was full of them.


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