Q&A with Havas Worldwide bosses Juan Rocamora and Levent Guenes: The big agency engines of APAC are faltering

Juan Rocamora and Levent Guenes, APAC chairman and Southeast Asia CEO, respectively, of ad agency Havas Worldwide, were in Subic yesterday for Ad Summit Pilinas, the Philippines’ top advertising conference.

In this Q&A with Mumbrella Asia’s editor Robin Hicks, the two executives were asked about the dramatic upheaval the advertising industry is currently going through, why Havas is well positioned to weather it, and how the disruption in adland is likely to play out come the end of the year.

2016 – lots is happening in adland right now. How optimistic are you about the rest of the year?

Levent Guenes and Juan Rocamora

Levent Guenes and Juan Rocamora

Rocamora: It’s going to be a difficult year. All the tell-tale signs were there last year, and now you can see that in this region the big engines [Rocamora was referring to the big agency networks] are faltering, and we’re seeing a slowdown in China. It’s clear that it’s not the wild ride we’ve enjoyed over the course of the previous decade.

Yes, there’s a question mark over the economic environment. But in that context I’m quite happy. This has a lot to do with our size. Since we are not the largest, we can still grow even if the market trend is not as favourable as it used to be.

The disruption in the advertising industry seems to be reaching something of a crescendo. What do you make of it?

Guenes: When I look at the number of pitches we’re working on at the moment, that number is higher than at anytime in the last five years.

I do get the sense from these alarm bells ringing at the moment that we never came out of the last crisis. I haven’t noticed marketing budgets recover [since 2008/9], or clients say they want to spend twice as much now as they did last year.

The big change that is happening is a major shift in channels [in which clients are spending].

So, what about at Havas? How are you coping with market conditions?

We need to be good at what we do. I’m rather optimistic, to be honest. I’m not panicking. We’re not preparing for an impending disaster, which I see is unfolding right now in other parts of the industry.

Yes, there is a bit of caution in terms of investment, which won’t be as aggressive. But the one and only thing for us is growth. We need to grow and we will grow. We need to be careful of course, so we’re picky about who we work with, and who we bring in to work with us. But there is no reason to panic.

Rocamora: 24 months ago we had four markets in Southeast Asia, and one of them – Indonesia – was not in good shape.

Now, what has been visible, is that we lost NTUC Fairprice in Singapore. I can’t say that that was irrelevant, because money is money, and a big client is a big client. But Singapore is a small market with only five million consumers. From a communications and commercial perspective, Philippines is important, Indonesia is important, Vietnam is important, but Singapore less so.

To me, what’s important is that now we have a strong majority equity presence with strong local management in nine out of 11 ASEAN economies. We have to confess that we’re not present in Brunei or East Timor yet…

Two days ago, we had a Southeast Asia executive committee meeting. You can tell me that the economy is in trouble, but I cannot avoid having a big smile on my face, because I know where we are at the moment.

There’s another factor at play. The global clients that we handle in APAC or in Southeast Asia make up no more than 10 per cent of revenue. We have been complaining about this bitterly for years, about how our competitors have more big global clients. But now I look at it and say, we have a presence built on local roots, everywhere. If our people leave we have a problem. We have to find other people. But if one of our big global clients leaves, we can laugh. Our destiny is more in our own hands [by having more local than international clients]. Twenty-four months ago, we could only dream of where we are today.

Guenes: I think we’re the best ‘local’ agency of all the networks. We all know that there’s a massive trend from global to local, and the regional layer in agencies is being removed.

Interesting point. We’re seeing that happen right now at other groups. What do you make of what’s happening at Publicis Groupe now (earlier this week, the holding company announced reducing the number of media agency brands, while in Singapore in January there have been major leadership changes on the creative agency side)? 

Rocamora: When I took this job in 2010 we had an HQ in Hong Kong where we had 25 people. We had a full-time CEO and CFO [Guenes was regional financial controller at that time] and in Singapore, Matthew Fanshawe was APAC MD [of what was then known as Euro RSCG, and was later rebranded to Havas Worldwide]. We had a head of digital, head of marketing, head of communications, etc. We had the usual shabang of regional HQ overhead, while at the same time we didn’t have the right resource in the agencies to service our clients. To me now, that’s sheer madness.

First, you should invest in the front line where you’re servicing your clients – and then you can brag about it. But having an HQ with very senior people getting paid a lot of money for saying how good we are… tends to overpromise a lot. Clients don’t find the resource within the agency itself. But now, if we’re looking to remove a regional structure at Havas, what would we do?

We could remove me, but that’s about it. If we were to remove the CFO, we would also have to remove the group CFO. He’s the same guy [working across all of Havas brands].

Todd Martin

Todd Martin

There is another person with a regional remit – Todd Martin [who joined from Edelman at the start of the year as regional digital director]. But he’s also running Havas Drive [the network’s innovation group], which is actually a ‘making’ unit, not a super structure.

When you tell me, the others guys are doing this [stripping out regional structures] well, they have to. It’s not affordable anymore.

The way the remuneration model has evolved has meant that the only things you can afford are the things that produce results, that produce work for clients.

But yes, I understand that we have the advantage of being smaller and not having that legacy. We have come to market later, and that has meant that we have nothing [fewer regional structures] to dismantle.

The issues that Publicis Groupe and others are facing are not just a result of legacy issues specific to those agency groups. They’re structural issues the industry is facing as a whole, such as clients not spending as much on traditional advertising, don’t you think?

Rocamora: I remember Simon Clift [the former global CMO of Unilever] bragging about managing to get BBH – so his boutique-type agency – to open offices in key locations, and he had managed to get Lowe to reduce their presence around the world. And I think that’s a philosophy that big advertisers are following. So it’s not just a case of procurement fighting you to pay you half of what the client used to. They’re saying no, I’m not going to pay you in 40 locations, because there are the likes of Hogarth and Tag who are offering ‘transcreation‘ [adapting advertising messages from one language into another] services.

So, what would you think if, say, WPP acquired Havas tomorrow? What would happen to the Havas model and approach? How would it change?

Rocamora: So, if WPP bought me back tomorrow [Rocamora worked for J. Walter Thompson for 17 years]… I was there when [Sir] Martin [Sorrell, WPP’s boss] bought us in 1987… so probably if that happened my days are numbered, not because I have any issue with Martin but because I’m closer to the end of my career than to the beginning. I wouldn’t want to start again.

Guenes: If Havas gets bought, people would look at the model and simply decide, yes, it’s a viable, future-facing model, it’s competitive in the market and clients like it. Or it’s a model that doesn’t fit our own culture, and it doesn’t work. Frankly, would you eat something that you cannot digest?

Rocamora: In the past we might have had that colouring [as an acquisition target]. Then came the change of guard following the arrival of the Bolloré Group [which completed the acquisition of Havas in January last year], then the change two years ago [with Yannick Bolloré taking over as CEO of Havas]. Up to that point, there was a question about Havas being bought. But we haven’t thought about that as a possibility for the last two years. It no longer worries me. It doesn’t taint any decision we make.

So what do you think is going to happen over the next 12 months? Further consolidation? 

Rocamora: I have the feeling that WPP will do more of the same. I don’t see any signs in a change in strategy from Martin [Sorrell]. I think Publicis Groupe is in complete disarray. When I read that Maurice Lévy would retire in 2017 I laughed. I’ve been reading that headline for the last 10 years.

Now, I see all this massive restructuring and I can’t imagine the pain internally at Publicis – with no clear direction of how it’s going to turn out in the end.

And I see Omnicom keeping absolutely silent. As a holding company I don’t hear anything. You say that there’s a lot happening, but I see only really the Publicis turmoil, and that probably stems from the failed merger with Omnicom [the proposed $35 billion-deal collapsed in 2014]. We’re still seeing the ripples of that. The rest I see as fairly stable.

But of course there are the trends we’ve been seeing in the last five years that continue to play out – the concentration of clients in fewer locations, procurement pressure, the change in the economic structure of the business, and the fact that digital in all its forms that was the future is now clearly the present.

Digital didn’t come with a remuneration model that was better than the one we have used for traditional advertising. On the contrary. It now coexists with the economic models of Facebook and Google. Advertising is not in trouble. There is more money in the business than ever. It’s just that a lot of it is now with Google and Facebook.

We still have to find a way to make our value recognised by clients. How do we monetise our services? For me, that’s the largest question the industry faces. The old model remuneration is broken. But no one has come up with a new one that is acceptable for everyone.


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