Strands of Genius: Existential Dread, Staying Power, The Decline of Romance
Plus: the civilized way to call it a day
WRITING FROM | Chattanooga, TN
WORKING ON | writing, house stuff
LOOKING AHEAD
Nov 5 - Dec 21 | Chattanooga, TN
Dec 21 - Jan 2 | Isla Mujeres, MX
:: WHAT’S NEW & WEEKLY GRATITUDE ::
Seasons greetings fam!
The year draws to a close and winter is here, cold and raining. This is a difficult season for many, for many reasons. Christmas brings its own financial considerations and the end of the financial year in the current economic climate suggests large agencies will be making layoffs to make their numbers - at the worst possible time for people and their families.
“’Tis the season to ... lay people off?
If you work at any of the big networks or holding companies, you’ll know that late in the fourth quarter is the time when agency CFOs are under pressure to make sure all margins are met by year’s end…
And to be clear, we’re talking about layoffs, not firings.”
To add to this we have just got news that Omnicom is attempting to buy IPG.
The deal has been approved by shareholders. There is some likelihood of regulatory review but based on their assessment of the climate under the incoming administration they clearly think it won’t be a problem.
The logic of this is classic holding company strategy.
IPG has been struggling to compete with the other big 4. At some point it decided its best shot was to sell itself so it begin divesting under performing assets, selling off Hill Holiday and DeutschNY in January. When they announced their most recent results they made clear that RGA and Huge were almost sold - the Huge sale to a private equity was just made public. RGA is apparently being sold, likely to Tata, whose consultancy division alone has about $30bn in global revenues. This makes sense in a Droga5 / Accenture sort of way - a cool creative face/way in to a global systems integration giant - but the sale might get delayed or stopped as part of this larger transaction. Hard to say if Flywheel needs RGA or not.
Anyway, Omnicom makes better revenue per employee than the other holding companies for…reasons(probably principal media trading)…but it’s not growing, which shareholders don’t like. When companies aren’t growing they have to shore up profitability for shareholders, which is why freelance, training, etc budgets from holdingco agencies have vanished.
“From 2016 to 2023, Omnicom employment headcount dropped from 78,500 to 75,900 (-3.3%), and sales declined from $15.4 billion to $14.7 billion (-4.7%).”
However, “Omnicom has generally enjoyed a higher Price / Earnings (P/E) ratio than its competitors”
This allows the transaction to make sense to shareholders immediately since it would in theory pull IPG growing revenue into Omni’s stock price at a better valuation. This is, in essence, the underlying business model of the holding companies. WPP masterminded this approach that functions in two ways. First you remove competition from the marketplace when new specialisms emerge to challenge marketing budgets by absorbing growing agencies at some appealing multiple of existing revenue - say 5x on average. By buying a new source of revenue you then magically arbitrage growth for your share price because as a public company it trades at a higher p/e.
Omnicom’s stock price to earnings ratio [p/e] is 15, IPG’s is 11. Magic.
However, to make the actual merger work you have to demonstrate ‘synergy’ to quote Jack Donaghy: “The transaction is expected to generate $750 million in annual cost synergies”. So inevitably backend integration, significant duplication and thus elimination of support and senior talent, AI running through everything, more data, more buying scale, less people, likely to be less agencies, less competition in the marketplace generally. Consolidation is managing decline, and the sector that holding companies represent is in structural decline. You can see this pretty clearly here:
So whereas historically new agencies were simply added into the portfolios, now they are likely to be consolidated into a simplified architecture to compete with Publicis and the power of one / marcelAI narrative. This is why some are seeing it as the last gasp of the holding company model - absorbing another holding company is the logical end point of the business model in some ways.
The industry continues to reshuffle and its cold out there and things remain uncertain as the USA gears up for a new era of corporate capture, deregulation and bitcoin bros running the government. 88% of Americans have less than $2000 in their checking account, so I don’t think they are seeing much upside in the stock market/BTC rally. There is a very limited amount of blood in stones. Advertising in this environment is really tough. Interesting times and a lot more advertising people are going to be worried about their jobs and their futures this Christmas. Take care, be kind, especially to yourself. This too shall pass.
This week, we’re especially thankful for:
Erin&Eric, Maddie&Paulie, Stephanie, Alex, Dustin & Matt, Ren (get well soon), Andor, Slow Horses, playing with clay, the slab roller, studio glazes, Kiwi Underglazes, a working hot tub, indoor plants, friends that check in, and you!
Thanks for reading. If you didn’t, well, you won’t see this, but we love ya anyway.
:: THE LINKS ::
EXISTENTIAL DREAD, LOST HOPE AND THE ABSENCE OF ACCOUNTABILITY
Like many of us it would seem, I’m still mostly avoiding discourse on the election but this piece is much deeper. “We need a different way of thinking. We can’t just get into the usual debates because the usual debates led us here. They are the issue.” What follows is a structural analysis of the current state of the USA, living with the reality of climate change, the obvious “lack of accountability we had witnessed now for decades for the rich and powerful” and the failure of popular movements to achieve anything. “All of which then taught many Americans that power can’t be challenged, participation was pointless, the rich would stay rich, and that the climate would keep dying. When people feel like this, many get under the covers and they watch Netflix.” (Substack)
STAYING POWER
It seems odd to include this article amidst so may layoffs, but it was interesting because it’s a perspective that stands out… I’m guilty of jumping jobs, and telling others to jump jobs, because there’s often no other way to increase your pay to market standard. Most Millennials are with me — they leave after less than 3 years. But, while acknowledging some of the more remarked upon benefits of leaving, this author reflects on all that he’s gained from staying at one company, for nearly a decade. (Slate)
THE SLOW DEMISE OF ROMANCE
While this article in The Atlantic calls out the decline of ‘American Romance’ in particular, it feels like something that isn’t just unique to our friends living in the US. It’s wild to know so many attractive, badass women who desire partners and yet are confronted with men who just don’t seem to care? They lack education and ambition, and asking women on dates seems to be the only question they know how to ask (the number of stories we hear about men that ask zero questions on dates?! omg!!). It turns out it’s not just me that’s been thinking about this conundrum, and it’s not unique to our friends. From The Atlantic, “Starting in the 1970s, the share of bachelor’s degrees awarded to men began to drop; more recently, the number of women enrolling in and completing college has surpassed the number of men to a significant extent. Many college-educated women look for partners who feel equal to them in terms of education or career ambitions—and simply can’t find them.
Marcia C. Inhorn, a Yale anthropologist, told me, mainstream cultural tradition has encouraged women to engage in hypergamy: “marrying up to a slightly older man, somebody who’s more career advanced, makes more money.” Men, meanwhile, have tended toward hypogamy, marrying someone younger, less well off, and less academically accomplished.
When so many men feel under-appreciated and so many women feel mistreated, it creates a vicious cycle of resentment.” (The Atlantic)
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faris & rosie | your friends over at geniussteals.co
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It's called Genius Steals because we believe ideas are new combinations and that nothing can come from nothing. But copying is lazy. We believe the best way to innovate is to look at the best of that which came before and combine those elements into new solutions.
Co-Founders Faris & Rosie are award-winning strategists and creative directors, writers, consultants and public speakers who have been living on the road/runway since March 2013, working with companies all over the world. We have a distributed team ourselves, an accounting team is based in Tennessee where our company is registered, our admin extraordinaire is based in Playa del Carmen, and our collaborators are all over the world. Being nomadic allows us to go wherever clients need us to be, and to be inspired by the world in between.
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