OMG has been making no secret of its plans to expand Hearts & Science in Asia, to form a third major agency. Formed from OMG’s data-analytics arm, Annalect, Hearts has turned a lot of heads after picking up the bulk of P&G’s US business and then AT&T—jumping from zero to more than 800 staff in just over a year.
The new agency already entered Asia earlier this year after P&G awarded a chunk of its Japanese media business to OMG in partnership with Hakuhodo. Hearts now employs around 50 people in Japan and also runs a couple of data-processing centers in India. But it’s now on hunt for more work to grow its regional footprint, with China and Australia as the most likely contenders given Annalects’s existing market presence.
“It’s not really timeframe-driven. We’re looking for the right foundational client to bring us into the market,” Hearts & Science CEO Scott Hagedorn told Campaign Asia-Pacific on a call from Sydney. “Something probably in telecommunications, data communications, entertainment or tech, something that would agree to our footprint, also interested in CRM-informed data-driven marketing by mass media.”
“It makes sense,” said Greg Paull, principal at R3. “They have built a strong foundation and reputation in the US. It's only logical they would want to go global.”
Expand or contract?
OMG’s expansion runs in sharp contrast to competitor GroupM’s announcement earlier this month that it’s consolidating its strength, forming three large global agencies out of four by combining mid-sized players MEC and Maxus (except in India).
“Two different strategies,” OMG’s APAC CEO Cheuk Chiang noted. “And there’s an argument to say that both strategies are right.”
Indeed, despite the inevitable talk of layoffs, the GroupM news has been generally received favourably by the industry as a move that will bring global scale lacking at Maxus and MEC to a new combined agency while streamling operations and delivering savings—even GroupM competitors have agreed it also makes sense.
For OMG, however, bringing Hearts to Asia represents not just growth, but a new kind of offering. “Our brands operate in very clear swim lanes,” Chiang argued, with OMD focused on creativity and big brands, PHD on challenger brands and now Hearts and Science as a data-driven marketing operation.
It’s the rookie in swim lane number three, though, that might pose the biggest long-term threat. “Competitors should be nervous,” adds Paull, calling Hearts’ recent noise "smart timing" following the GroupM move.
“Hearts & Science is a very different proposition to the other media offerings inside OMG and to most other agencies,” said consultant Darren Woolley, CEO of TrinityP3. “Customer data-driven engagement through addressable media is not a core offering of any of the major agency groups. They may all say they can offer it or do offer it, but talking and walking are very different skills.”
GroupM, it should be noted, has it's own recently-acquired innovative digital-first agency in Essence, which it plans to expand as part of its reorganisation while opening it up to traditional media services. GroupM also plans to invest in its [m]PLATFORM data capabilities.
Hagedorn likes to point out that Hearts isn’t burdened by legacy media operations like most agencies.
"Our starting point was an era where programmatic and data-driven marketing and DMPs all existed," he said. "We aren’t retrofitting an agency or trying to retrofit departments around the past.” Data and marketing science work much more closely with the company's strategy team, he noted. “We’re doing it a lot more progressively versus regressively, so a lot more work on audience creation and syndication instead of just using our data science resources for regressive mixed-media modeling efforts.”
Challenges: talent and clients
Such a model requires a changing skill set, one that may be hard to find.
“Omnicom's biggest challenge in Asia is going to be talent,” Paull says. The smartest media people are going to Tencent, Alibaba, Facebook and Google as first stops before considering the holding groups. Finding the smartest people in the room to form a new agency is easy to say, hard to do.”
Here, Hagedorn argues that the company has enough staff in specialty areas pre-assembled with Annalect in the region that it can tap when it’s time to craft the agency, much like it did in the US. But scaling fast for a significant client is never easy.
Finding the right Asia-based clients in the first place is the other main challenge observers identify. In the US, it took a restless giant like P&G that was fed up with its digital media arrangements to roll the dice on something new.
“There will be some advertisers that are interested but do not have either the strategy or the resources to engage,” agreed Woolley. “Others may mistakenly pass it off as a fad. Advertisers with customer data and a desire to increase engagement…should see this as an opportunity worth investigating.”
While Hagedorn eyes opportunities in tech and telecom, Woolley suggests the big Asian financials like HSBC or DBS might best fit the bill, but it’s still unclear whether they’re ready to tap their data riches to have media perform at that targeted level.
But globally, the desire for more media transparency has raised the appetite for new performance-driven alternatives with a larger degree of client control. The direction is one Hagedorn is aligned with, with a client (P&G's Marc Pritchard) who has become the poster child for transparency.
“My personal point of view is that clients should own their own ad tech stack contracts and that they should let the agencies operate their ad technology on their behalf so that way they feel better about the level of transparency,” Hagedorn said. “It gets rid of the opacity in the system by doing it that way. Client-owned, agency operated, fully transparent is my belief.”
He's not alone, though and one can only expect to see more flexibility from incumbent media agencies should clients be tempted to look elsewhere. Like the saying goes in retail, it's six times harder to win new customers than hang onto existing ones. But OMG appears intent on making the effort.