Big Interview: Jaimes Leggett On Why M&C Saatchi Won’t Buy Businesses, The “F*cked” Industry Model & The Holding Group “Death Spiral”

Big Interview: Jaimes Leggett On Why M&C Saatchi Won’t Buy Businesses, The “F*cked” Industry Model & The Holding Group “Death Spiral”
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What best describes you?

There’s no denying M&C Saatchi’s CEO Jaimes Leggett has had an impressive advertising career.

Starting at Designworks in New Zealand before moving abroad to the United Kingdom to work at LBi London, Grand Union and Ogilvy & Mather, Leggett knows the industry inside and out. And for the past six and a half years, the somewhat media-shy boss has led the charge at M&C Saatchi Australia, which is owned by UK-based M&C Saatchi Group.

Leggett joined B&T‘s latest industry podcast to discuss his thoughts on the current state of the industry, including adland’s ferocity, the holding company “death spiral”, personalised content versus max reach, the CMO churn and why M&C Saatchi won’t buy businesses. He also shared his honest thoughts about the backlash from Tourism Australia’s new $38 million global campaign. Below are the key takeaways from the podcast interview, which you can listen to in full here.

A ferocious industry 

Anonymous trolling has recently made its way back into the industry conversation after ex-WPP interim CEO John Steadman slammed media outlets that publish vicious, anonymous reader comments in the hope of garnering more clicks while adding nothing constructive to the industry discourse.

Leggett agrees with Steadman’s criticism, suggesting anonymous trolling is an easy platform for people predisposed to potshots.

He says, “If you look at the commentary, there’s very little value in it, other than the entertainment of it. It gives the illusion of being a proxy for popular conventional wisdom, but it’s not.”

Leggett says in an era of Trump-ism and fake news, these sorts of anonymous comments don’t help the industry, but rather have a very negative impact and might deter young talent from entering the sector.

“We need and want the best talent in our businesses and [young grads] have lots of options available to them. They can either go and follow entrepreneurial endeavours or they can go and work in consultancies, they can go work at banks. They are educated and they are informed and they have access. And I think they will read the trade press and think ‘fuck, why would I put myself through that?’ We aren’t helping ourselves and we need to solve it, and we need to solve it really quickly.”

So what is the solution? Blocking commentary on trade press articles all together? Leggett doesn’t think so. He says the important word here is ‘anonymous’. “I think commentary is amazing. It’s fantastic. I think people are entitled to their own opinions but if you’re going to have an opinion, own it,” he says.

“[Anonymous trolling] has an impact.  I think it’s very easy to kind of sit there and make some anonymous comments and not really take responsibility for that behaviour. You just fire off and you forget about it. But actually the impact on that person [being written about] will be far more significant than you ever anticipated it to be.”

That Aussie ‘philausophy’ ad 

M&C Saatchi recently unveiled its newest work for Tourism Australia – a global campaign to the tune of $38 million. However, the ad received plenty of backlash from consumers. Comments like: “If I was in the meeting where Tourism Australia’s ‘philausophy’ line was spawned, I would have jumped out the window!” and “$38 million? And they came up with ‘philausophy ?’ FFS…,” were rife across social media.

In one word, Leggett says the response has been “disappointing” because in actual fact, we’re yet to actually see the ad.

He says, “I think the ad is amazing. But you guys haven’t seen it yet. What what was released a couple of weeks ago was for an industry trade event. It was talking to partners. What it showed was a piece of content designed to reflect the partners in the room, showing them what the new proposition was going to be. And then it showed some posters with a line that had no context and nothing around it to explain it.”

Leggett says when launching a new piece of work or proposition, it should come with “colour” and “meat on the bones”. He lamented that on this occasion, the philausophy campaign made itself out to the world without all the trimmings or the bits that explain what it is.

“Philausophy as a thought, I think is really strong. But the work hasn’t yet been shown to the world. So personally I am quite disappointed because it’s work that I love and I’m fiercely proud of, but it’s not work that has been seen yet. So a lot of the commentary is based on a very small snippet of something that people haven’t gotten context of.”

Leggett says his instinct is that people will respond well to the campaign, once the eventually see all of it, while also calling out “keyboard warriors” who take pleasure in attacking agencies’ work, calling it “juvenile and unfortunate.”

Why M&C Saatchi won’t buy businesses  

As acquisitions and mergers become more commonplace across the sector, Leggett says it’s not something on M&C Saatchi’s radar. Of course, in 2017 the agency acquired independent media agency Bohemia in a move positioning the creative agency as full service agency with both media and creative under one roof.

Leggett says Bohemia was an important acquisition for the agency and has been incredibly successful, revealing the media agency is now three times the size that it was when M&C Saatchi bought it. However, Leggett says this acquisition was an exception and not the rule.

“Our strategy is a simple one, which is growing through new business. But our business hasn’t grown through acquisition, it’s largely grown through seeing opportunities in the marketplace. Our belief is that brands are built based on the consumer experience. It’s not so much what you say as a brand that defines you, rather it’s what you do.

M&C Saatchi currently has 11 different businesses within the group, all of which have “different superpowers” and are “designed to manage an experience at each point that a consumer encounters a brand”.

“The net net of all of that,” continues Leggett, “is that we can be vertically integrated with client business. If you are a client, we have the ability to provide all of the marketing services that you need, or some of the marketing services that you need.”

On what’s next for M&C Saatchi and how Leggett intends to continue growing the business, he says he has his eye on the digital space.

“I’m really interested in middleware and the digital space, like madtech or marketing and advertising technology. A lot of our bigger clients have done their digital stack integration work already. They’ve moved to Adobe or Google 360 and have spent millions of dollars on bringing the technology in but aren’t necessarily leveraging it to the degree that they could, but there’s a lot more power in those stacks and there’s more that they can do.

“As a business leveraging that technology and helping them get more out of it would be really interesting. This world of data and technology and creativity surrounding the customer and how you can better mine insights and then deliver communication at a more personalised, hyper personalised basis, is something which is really interesting.”

The holding group “death spiral”

One of the reasons M&C Saatchi isn’t in the business of buying businesses is due to what Leggett calls a holding group “death spiral”.

“You spend a shit tonne of money to buy a business. You lock in a management team, a very good management team because you wouldn’t be buying that business if you didn’t think there was a good team, and you lock in a good team for a period of time. They’re incentivized to continue to grow the business. Then, at a point in time, they exit the business.

“And then you’re left with something. History would suggest the something that you’re left with, once management goes, is less potent than the something you had with those good people. So you have to keep on topping up the funnel you have to keep on buying new businesses to deliver growth. And invariably, buying new businesses, you can either fund it in one of two ways. You can fund it from your bank balance, or you can fund it through debt. And most of these networks are funded through debt.”

Leggett says this creates an unbalanced debt to equity ratio that becomes difficult to manage before it gets to a point where it simply tips over.

“You’ve got too much debt, you can’t buy more businesses and the businesses that you bought are less valuable than when you bought them.

“It’s very difficult to change and because you haven’t got a lot of powder left, you get these death spirals and we’re seeing those death spirals in all the big holding groups.”

While Leggett commended WPP global CEO Mark Read on being a “very good business leader”, he said the agency boss is trying to manage a business at a time when the WPP network is in a death spiral of debt. His advice to Read? “Bite the bullet, cut the costs, do the write-offs and cut back as far as you can and consolidate.”

On ex-WPP founder Sorrell’s S4 agency, Leggett says the advertising mogul “is laughing all the way to the bank, because he gets to start again.”

While Leggett surmises S4 will “probably make all the same mistakes again”, the good news for Sorrell is he won’t be around to see it.

“When you look at S4 and their approach to acquisitions, while they might be buying different types of business, they are still paying over the odds. The amount of money they paid for Media Monks is extraordinary. But [Sorrell] is not going to be around when that business gets the place where WPP is now. He’s going to make a whole bunch of money in the next 10 years and then it’s going to be another problem for someone else to solve.”

Leggett says M&C Saatchi has made not just its business in Australia but as a global network based on very different types of decisions. He says the agency doesn’t have debt because it doesn’t acquire business for the most part, but rather invests in people and opportunities.

The CMO churn – a self-fulfilling prophecy?

CMO tenures are getting shorter and shorter, yet Leggett says this is not a reflection on marketing bosses but rather the economy as a whole and incremental trading periods.

“We have numbers of senior clients who have been in those roles for some period of time and have a meaningful impact on those businesses. I do worry though about incremental trading periods and reporting periods. If you are running a business and you’re judged on impact over three years, you make a very different set of decisions to if you’re running a business that is judged every year on performance, and you may have very different decisions if you’re running a business that’s judged every quarter.

“What we’re finding is a general rule across the board of businesses being judged on quarterly reporting cycles rather than annual reporting cycles,” with Leggett suggesting this is a big contributing factor to the high CMO churn rate.

He also says the industry where the CMO has come from is having an effect.

“I saw a statistic the other day about the number of CEOs in Australia compared and contrasted to the UK and US. More CEOs in the UK and US have come through sales and marketing than in Australia, and more CEOs in Australia have come through the route of finance than in the UK and US.

“It really shows the impact of marketing. It’s at senior levels in business and in the boardroom.”

Leggett says this has an impact because it affects the entire mindset of the business.

“If you’re a business that’s run by an ex-marketing CEO, I would argue that business has a growth mindset around marketing, so marketing is fuel to drive future growth for the business.

“However, I can imagine a hypothetical world where some CEOs might see marketing as a cost to the business and in those worlds, when the environment is more recessionary than not and you have to remove costs from your business, marketing is an easy one to cut. This then might lead to a place where you have increased churn of marketing staff because if people are seeing the bus slowing, they think ‘shit, we can’t spend more money because we don’t have more money to spend, are we gonna have to change it up in marketing?’ And so maybe it becomes a self-fulfilling prophecy.”

Hyper-personalisation vs max reach

In a world where consumers are expecting more personalisaion yet brands are struggling to reach mass audiences in a crowded space, what’s the smartest advertising tactic? Perhaps unsurprisingly, Leggett says it’s a balance.

“At the end of the day, you need to be a brand for people like me so that I have a predisposition to act in some way with you. But then technology and this notion of hyper-personalisation is incredible, and there’s so much more to be gained from that. So being really brilliant at targeting people and converting people that are predisposed, I think is hugely important but there’s more bandwidth. There’s more space in that.”

Leggett says the risk and the job for agencies as custodians of brands and market is to find that line between the two.

“Hyper-personalisation at the cost of the brand will provide diminishing returns over time. Only focusing on brand and not leveraging the tools and technology at our disposal means you’ve just going to be more efficient at talking to people that you need to talk to. So finding the line between the two is utopia.”

The future of M&C Saatchi 

According to Leggett, there’s never been a more exciting time to be working in the industry.

“Every business and every market everywhere has been disrupted, so every CEO in town has a duality of tasks of trying to the day to day of a business but also position it for the future.”

For this very reason, Leggett says agencies are more needed than ever before.

“If creativity is our stock and trade, and if we bring that creativity to drive change or to solve business problems, we actually become a really important partner to those CEOs.”

He says, however, that the traditional business model of the industry is fundamentally flawed.

“The industry’s business model is fucked. The only way we scale historically has been through having more people working longer hours, and it’s fundamentally flawed. There’s a diseconomy of scale because now you have more people-related challenges.

Leggett says M&C Saatchi has reconstructed its business to a very different model, different means of getting paid and a different cost structure.

“If businesses make those changes if they recognise the value it brings and they have a model which is sustainable, there is an opportunity to produce some really amazing and powerful work that will fundamentally change businesses in Australia.”

 

 

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    Latest comments
  • Tim Liu 3 weeks ago

    Great article, I also quite enjoyed the Gruen Transfer grilling on this ad as well.

    I think sometimes marketers get too involved in themselves. I often challenge the brands I work with to generate content that people other than the brand marketing managers would actually not cringe at saying.

    Apple calling their new slow motion selfies “slowfies” may be cringe, but that’s not such a crime given how excellent the new iPhone 11’s are. However, when the crux of your campaign is on a word no one is sure how to pronounce, as well as cringe inducing subtle-as-a-hammer pun, you can see why the outrage happens.

    Still curious to see how the final ads are, also am wondering how much additional editing had to be done following the backlash.

  • Ally Burnie 3 weeks ago

    Thanks for your comments, Tim! Time will tell what the new ads look like but I agree, would be interesting to know how much – if any – editing will be done to the next installment of ads in light of the backlash.

  • Gilles Merry 2 weeks ago

    Great article and insights. Well said James, this is just the type of honesty and genuine leadership the industry deserves. Thanks for sharing your insights and knowledge, this is the just the right approach and insights to inspire the next generation of industry talent and genuine market evolution. Thanks B&T and James cheers Gilles

Jaimes Leggett M&C Saatchi

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