'Rebirth of creativity in a new form': Ad industry execs sound off on WPP's agencies J. Walter Thompson and Wunderman merging

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• Ad holding giant WPP is merging creative agency J. Walter Thompson with its global digital network Wunderman, the company announced today.
• The merger is the most recent illustration of WPP chief Mark Read's quest to simplify WPP's various networks; integrate creative, digital and media functions; and revive growth.
• Such moves are necessary to meet clients' changing demands and bolster growth in a declining agency model.

Ad holding giant WPP is merging J. Walter Thompson, one of the world's oldest ad agencies, with its global digital network Wunderman, the company announced today.

The new organization will be known as Wunderman Thompson and will led by Wunderman global CEO Mel Edwards, while Tamara Ingram, CEO of J. Walter Thompson, will become chairman.

The latest merger comes on the heels of a similar union in September, where WPP brought together agencies VML and Young & Rubicam, creating a new entity called VMLY&R.

It is the most recent illustration of WPP chief Mark Read's quest to simplify WPP's various networks; better integrate creative, digital and media functions; and revive growth.

"It shows that there are no sacred cows, which is a good sign for WPP," said David Jones, former Havas chief and current founder of brand-tech company You & Mr. Jones.

WPP has been in the midst of an overhaul

Things weren't exactly looking up for the world's biggest advertising company in the first half of 2018. Its former chief executive Sir Martin Sorrell abruptly resigned following allegations of improper personal behavior and misuse of company assets.

It was also struggling to grow as clients such as Unilever and Procter & Gamble cut ad spending and Facebook and Google's dominated digital advertising. Plus, its organizational structure, where individual ad agencies competed against each other, needed a revamp.

WPP was ripe for disruption, Forrester analysts Jay Pattisall and Ted Schadler wrote in a note in August - and that's exactly what Read seems to have on the top of his agenda.

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"This as an example of WPP simplifying its go-to-market strategy and strengthening its creative and digital capabilities by combining them," said Pattisall. "It is a bold move on Mark Read's behalf in the right direction."

For Jones, the move is also an attempt to try to give the flailing agency business a new lease on life.

"This is a sign of how tough it's become for the traditional legacy businesses," he said. "The new norm is that it's now a zero-growth industry and that's what investors have demonstrated by their flight away from these stocks."

Ultimately, the tie-up is also what clients are demanding, pointed out Michael Kassan, Chairman and CEO of MediaLink.

"The merger also brings technology and data in closer proximity to creative storytelling - something marketers are clamoring for," he said.

And traditional creative agencies are getting a reboot

Creative agencies in particular have hit a wall in recent years. In the first half of the year, for instance, WPP's North American like-for-like sales slipped 0.7%, and Read himself acknowledged during a second-quarter earnings call that he was "not happy with the state of our creative agencies in North America." The media side, on the other hand, was on the rise.

Read has also said that he believes he can jumpstart revenue growth at WPP's creative shops in part by getting them to work together more closely with their sibling digital agencies, and that's what he seems to be following through on.

"Traditional creative agency networks have struggled to provide comprehensively integrated offerings that balance creative ideation and production for brands with digital experiences, and I don't think JWT has been any exception in this regard," said Pivotal senior analyst Brian Wieser.

"In that context, driving costs out is probably a rationale, but then so is building on its capabilities by adding what Wunderman does."

Founded in 1864 as Carlton & Smith, J. Walter Thompson is one of the oldest agencies in the world. It was acquired by WPP in 1987. Wunderman was founded in 1958 as Wunderman, Ricotta & Kline and acquired by Y&R in 1973, which ultimately joined WPP.

Overall, WPP's creative shops are in the midst of transitioning out of founder-led models and cultures to more integrated models spanning multiple capabilities.

"It's not the death of the creative agency, it's the rebirth of creativity in a new form," said Forrester's Pattisall. "The future of the agency business is the combination of data, tech, creativity and ultimately, media."