For decades, the advertising industry has been dominated by three main players — the agency networks: WPP, Omnicom, and Publicis.

However, David Jones, the former CEO of French advertising conglomerate Havas (another of the big players, but outside the top three) thinks the dominance of the old guard may come to an end in as little as 10 years.

He has a motive to say so. Jones resigned from Havas in January last year to form what he calls the "world's first brand tech group," You & Mr Jones.

While he does not describe You & Mr Jones as a direct rival to the likes of his former employer, the company essentially will be competing with ad agencies for business from brand marketers. Jones told Business Insider he wants to eventually help brands "with every single part of the marketing process: creating, producing, distributing, targeting, measuring — all better, faster, and cheaper using technology."

You & Mr Jones has raised $350 million in funding, and has already made investments in crowd-sourcing company Mofilm, content marketing platform Pixlee, and viral news site Mashable.

Jones told Business Insider that clients are "frustrated" with the service they are getting from their ad agencies. It's not just Jones saying this, a qualitative study released earlier this month commissioned by UK advertiser trade body the Institute of Practitioners in Advertisers entitled "Mad Men to Sad Men" found evidence of a "widespread breakdown in between agency and client communications." The report (which will be published on the IPA website later this week) continues: "Many of the conversations were highly charged, expressing frustration and emotion. Both sides tended to point the finger of blame at each other."

Jones thinks there will be a shift away from the traditional agency model.

"[Publicis CEO] Maurice Lévy and [WPP CEO Sir] Martin Sorrell have done amazing jobs in the last 30 years, and they've built phenomenal companies of the time. But I just think that 10 years from now the opportunity is there to build a totally different type of company in this space because the world has changed," Jones said.

"20 years ago, brands ran completely different advertising in different parts of the world. And you needed a different ad agency for each different part — big global brands needed 300 ad agencies, there was no global media agency. And the process of creating and producing that content was an incredibly analog experience. Today it's incredibly digital. Pretty much every brand runs the same work globally, and anything you put on YouTube or Snapchat is global. That whole model of having 120,000 employees is no longer needed," he added.

Jones admits that companies like WPP and Publicis could just pivot to offer similar services as You & Mr Jones. But he says it won't be easy with their vast legacy businesses to protect: "Most existing technologies undermine their hours-based legacy model ... even the most advanced of the big holding companies has more than 65% or 70% of their revenue coming from the traditional industries ... and many services they want to sell at a premium because they have that legacy business to protect. The most exciting new companies and tech talent don't want to be sold into large networks — and that's where the old-world standards have a disadvantage."

There has recently been an unprecedented wave of brands calling media agency reviews— some $25 billion in brand ad spending is currently up for grabs. Jones doesn't think all that money will be returned back to the big holding companies.

"Will they keep the same slice of the pie? No, I don't think they will. I think the pie will get split elsewhere. You see it happening with many of the world's biggest advertisers already. What they've cut back on is that wonderful expression they use: 'non-working media'," Jones said.

Evidence of that is already plain to see: Procter & Gamble, the biggest advertiser in the US, for example, announced in April it is looking to cut $500 million in agency fees.

Jones thinks that gives nimbler organizations like his a leg up. They can charge cheaper rates and don't have the operating costs of bigger businesses.

He added: "If you look at [the networks'] senior management focus, their company life stage, if you're WPP and Publicis, you've done it. You won that race. But there's a new race that's starting, that will finish in 10 years. It's like when the Olympic gold medal winner runs a couple of Olympics and then says 'I am retiring.' Someone will win the next Olympics."

SEE ALSO: Here's an interesting theory on how Facebook could be more valuable than Google in just three years

SEE ALSO: The advertising industry admits it has a major transparency problem and it's about to find out just how big an issue it is

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Global ad spend in 2014 rose 3.9% to $513 billion, according to GroupM — and ad agency bosses saw their compensation soar last year too.

Like previous years, our ranking of the richest people in advertising is predominantly made up of white men.

One of them is even subject to an SEC investigation into his income.

There's just one woman on the list.

Methodology: Our ranking looked at SEC filings, taking account of total annual 2014 compensation, including salary, stock awards, option awards, and other incentives. That's an obvious flaw because a lot of people on this list hold a lot of their net worth in stock they have accumulated over previous years, and through other assets and investments.

This list is by no means extensive: We chose to look at public companies only. We also only looked at pure-play advertising agencies: Otherwise advertising execs at tech companies like Google and Facebook, or brand marketers would surely make the list too. Our rankings also begin with those who earn $2 million and above (there are plenty of execs in advertising who earn over $1 million.)

SEE ALSO: The 20 richest people in ad tech, ranked by income

17. Andrew Bonzani, Interpublic general counsel and secretary

Compensation: $2,295,124

Notes: Bonzani's pay rose 51% year-on-year. The bulk of his pay last year was made up of stock awards and non-equity incentive plan compensation.

16. Kevin Roberts, executive chairman of Saatchi & Saatchi

Compensation: ($2,299,314) €2,083,118

Notes: In addition to his salary, Roberts also received €23,516 in "benefits in kind" in 2014.

15. Lori Senecal, global CEO of Crispin Porter + Bogusky

Compensation: $2,345,781

Notes: Senecal was president and CEO of the MDC Partner Network when she received this total compensation for 2014. She moved over to her new role in March of this year.

Her total compensation included a huge $159,034 automobile allowance.

The former president of Omnicom ad agency RAPP USA, Greg Andersen, has filed a lawsuit against his former employer that claims complaints he made about his former boss's "harassment" of employees were a "substantial motivating factor" in the termination of his employment.

The suit, filed on Monday in a Los Angeles court claims CEO Alexei Orlov, who became global CEO of RAPP in 2014, "was immediately a destructive force within the company."  (Adweek spotted the lawsuit earlier.) Orlov was not named as a defendant in the suit, which targeted only the company.*

• UPDATE:  The case was ultimately dismissed with prejudice by the court in June 2017*.

Read the suit in full here (PDF.)

"He also demonstrated through his comments and actions that he harbored discriminatory animus against women and various racial and ethnic groups," the suit reads.

RAPP sent Business Insider this statement:

RAPP is aware that Greg Andersen has filed a complaint and denies that any unlawful conduct occurred. Mr. Andersen's position with RAPP was eliminated and we are not able to comment further. RAPP has, and enforces, policies prohibiting discrimination and retaliation on the basis of gender, race, age, disability, sexual orientation or any other legally protected status.

What the suit claims

On one occasion, Andersen was told Orlov "pressured" a young female employee who worked on the Pfizer account to obtain Viagra for him directly from the pharmaceutical company, the suit says. Orlov told the women he needed the male potency medicine because "he has a young wife," according to the suit.

The suit also claims Orlov refused the promotion of a female employee to managing director because she was "too pretty" and "no one would take her seriously," or words to that effect.

On another occasion, the suit claims Orlov dismissed a complaint made by Andersen about a "drunk" male employee — who is still with the company — who said loudly and publicly that he believed a female employee "was not wearing underwear." Orlov responded to Andersen's emailed complaint: "I find it hard to fully align all this [. . . ] I do not want to see this man’s demise," the suit claims.

The suit also claims that Orlov told a Jewish employee "he was miserly with money because he was Jewish," according to the suit.

Andersen made "several" complaints against Orlov to the ad agency's global head of human resources, Carolyn Doud, and an in-house attorney at RAPP's parent company Omnicom, the suit says. He also encouraged other staff members to file complaints about Orlov's actions.

When Orlov heard about the complaints, he sent Andersen this text message, according to the suit:

“Greg[,] [a] number of my team have come to me as it relates to conversations you are having around / about me [. . . . ] When do you think I might have the courtesy of a direct call from you?”

Less than a month after receiving the text from Orlov, Andersen returned back from a short vacation and was immediately given notice of his termination, which he believes came about after he made his complaints, the suit claims.

The suit claims it was "well-known that Mr. Orlov was vindictive," referring to a meeting in front of 70 people in Dallas when he allegedly said: "Mess with my brand or my direction and I will break off your finger and shove it up your a--."

Andersen left RAPP after three years at the agency in April, AgencySpy reported.

Andersen is seeking damages related to retaliation in violation of the California Fair Employment and Housing Act (FEHA), discrimination in violation of FEHA, failure to prevent discrimination and retaliation, retaliation in violation of the California Labor Code, and wrongful termination in violation of public policy.

The suit was filed just over two months after another high-profile ad agency discrimination lawsuit was lodged in the US courts. The former global CEO of J. Walter Thompson, Gustavo Martinez, is accused of making "constant racist and sexual slurs" by the company's chief communications officer. Martinez, who has now resigned from JWT, denies the charges. The case continues.

*This story was updated on June 6, 2018, to reflect that Orlov was not named as a defendant in the case, which targeted only RAPP. The case against RAPP was dismissed in June 2017. 

SEE ALSO: Lawsuit alleges top ad agency boss joked about raping colleagues and called black people 'monkeys' — read the full complaint here

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"Bahdabababa. #imlovinit"

That was DDB North America CEO Wendy Clark's jubilant caption on her Instagram photo posted earlier this week to announce the ad agency had won McDonald's creative account after a grueling 18-week pitch process.

When Clark and her team visited McDonald's headquarters in Illinois that Monday, they thought it was simply for another commercial terms discussion.

Far from it. Out came McDonald's US Chief Marketing Officer Deborah Wahl and a man dressed as Ronald McDonald, clutching a bunch of flowers and a bottle of Champagne.

The appointment of DDB — or, technically, of a new, as-yet-unnamed agency with 200 staff members under Clark's remit, which will take input and support from other agencies within the Omnicom network — prompted a fair amount of chatter within the ad industry. And not just because it's a huge account and the deal ends McDonald's 35-year relationship with Leo Burnett.

The new agency's pay is tied into how its work improves McDonald's business performance

McDonald's factored in a rare "pay-for-performance" aspect into the contract, as AdAge first reported.

The fast-food chain had reportedly asked agencies to operate at cost — meaning they would only be compensated for their variable costs, but would be prevented from making a profit from this base pay. Instead, all the agency's profit would come from rewards tied to McDonald's business and brand performance.

Sources told Agency Spy it was one of the reasons the world's largest advertising agency holding group, WPP, balked and bowed out of the review in the spring.

Some people argue this kind of model is a good thing because it incentivizes agencies to create work that has an actual effect on their client's business.

Others say it can be difficult to directly correlate advertising with a brand's performance — as brand campaigns can take years to truly take effect, which could possibly see agencies shift from wanting to produce the big, sexy branding work to more performance-led, direct-response campaigns, which are designed to boost short-term sales.

And all this comes at a time when agency fees are being squeezed more than ever, as big advertisers look to cut costs.

Wahl has denied that the company is asking DDB to work at cost. But Clark confirmed to Business Insider there will be a performance aspect to the agency's compensation, and that she's perfectly happy with it.

She wouldn't go into detail about which data the agency's performance would be measured against, but said it would include both short-term and long-term aspects.

"There is a [key performance indicator] that we have agreed on as part of the process. We would not ever work for a client that didn't thoroughly compensate and remunerate our time," she said. "I would say I think the industry has been talking about, for a long time, is a notion of pay-for-performance and having upside when our ideas and our work builds a client's business."

"We feel positively about the potential to be measured in a way that's more correlated with the impact we will create," she said.

'Cortex' is key

The new agency will be centered on data — literally.

Clark's team pitched McDonald's in the agency's unfinished building in Chicago. The team mapped out on the concrete floor what the agency would look like, as bare lighting hung from the ceiling, and placed a "Cortex" unit at the center of the open-plan space.

The Cortex unit will take in all of McDonald's data — including from its stores, mobile app, and social media conversations about the brand — and blend that with "human behavioral" data and "cultural foresight" from the Omnicom data units Sparks and Honey and Analect.

"A lot is written about the notion that somehow data stands in the way of creativity," Clark said. "I'd say I don't think there is any creative out there that wouldn't agree that a more intelligent brief would yield better work. It's where you input data and intelligence in the process that is the key to unlocking creativity — intelligence upfront and capturing impact on the back end."

'I'm Lovin' It' is here to stay

So what was the brief? Clark can't say — "it's secret stuff."

What she can tell us is that the plan is to build the 13-year-old "I'm Lovin' It" brand platform.

Incidentally, the "I'm Lovin' It" slogan was created by the DDB Network. German agency Heye & Partner came up with the "Ich Liebe Es" slogan in September 2003, and the English element — featuring vocals from Justin Timberlake — rolled out worldwide later that month.

"We feel we are going to be able to translate it into a lot of the plans and initiatives McDonald's has in an interesting, share-worthy, exciting way," Clark said.

McDonald's has made a big point in its recent marketing to repair its junk-food reputation by highlighting its efforts to remove artificial colors, flavors, and preservatives and introduce healthier ingredients.

That hasn't been without its criticism. Earlier this month, for example, Panera Bread's CEO, Ron Shaich, slammed McDonald's for its new "preservative-free" McNuggets commercial. He felt it was misleading because people could "generalize" that the entire menu is free of preservatives.

We asked how Clark's agency plans to tread this tricky balance when it reveals its first work for the brand in January, but she batted off the question.

"I can't talk about that. It's material to McDonald's plans," Clark said.

'McDonald's is for everybody. It's not exclusionary.'

What Clark can talk about is what draws her to the McDonald's brand, which could hint at the advertising vision.

She draws parallels between the McDonald's brand and Coca-Cola, the company she worked at for seven years before joining DDB in late 2015. Clark was one of Coke's top senior execs, working her way up to become its president of sparkling brands and strategic marketing.

McDonald's "is one of the most democratic and inclusive brands in the world," said Clark, who even worked at McDonald's as a shift manager before she embarked on her advertising career.

"McDonald's is for everybody. It's not exclusionary," she said. "It has a broad expanse around the world, availability, value, affordability — you have the ability to have good food at a reasonable price around the corner from you. The brand doesn't distinguish and hold itself just for small groups. That's something I love about the brand. They are very clear on what their brand is, and it's a wonderful thing to have a brand that has that legacy."

As we're chatting, I notice out of the corner of my eye that another of Kanye West's tweets is going viral. Clark and her PR assistant immediately look it up:

Clark clearly isn't the only one with a lot of admiration for the McDonald's brand. But with the chain's most recent quarterly US same-store sales growth falling short of estimates, Clark and her team have a big task in their hands to ensure more Americans start feeling the love for the brand, too.

SEE ALSO: Why one of Coke's star female execs gave it up after 7 years to join an ad agency

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Alexei Orlov, the former global CEO of Omnicom ad agency RAPP who resigned from his post this summer after he was named in a discrimination lawsuit brought against the company, has blogged about his experience.

Orlov resigned in June, a month after RAPP USA president Greg Anderson filed a lawsuit that claimed RAPP subjected  him to "harassment", wrongful termination, and "discriminatory animus against women and various racial and ethnic groups." 

Orlov was not named as a defendant in the case.*

RAPP's lawyers denied the "outrageous" allegations, saying the accusations about Orlov's behavior were "gross mischaracterizations." 

• UPDATE: The case was later dismissed with prejudice by the court.*

Orlov has been writing about his experience on his website and blog, which was spotted by AgencySpy. The website positions itself as "Thoughts of the life of business and the business of life."

In one September blog entry, titled "Think fast, but respond carefully," Orlov appears to reflect on the lawsuit and his departure from RAPP:

"Some of you who know me well are waiting and have been waiting for me to react to certain things that have happened in my life in the last punishing few months. But I have chosen instead to reflect and at the right moment to respond in a way that is both considered, thoughtful and responsible."

Orlov now serves as an advisor to the global CEO at Omnicom's DAS group of companies. Marco Scognamiglio replaced Orlov as RAPP global chief executive.

*This story was updated on June 6, 2018, to reflect that Orlov was not named as a defendant in the case, which targeted only RAPP. The case against RAPP was dismissed with prejudice in June 2017. 

SEE ALSO: Lawsuit claims ad agency CEO 'pressured' female employee to get him free Viagra

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Four of the big five advertising holding companies – Interpublic, Omnicom, Publicis, and WPP– have been subpoenaed by the US Justice Department in a probe into potential price fixing in video advertising production services, The Wall Street Journal reports.

These agencies are under investigation for manipulating the video ad production market. The Justice Department is determining whether these agencies have been involved in bid rigging, influencing independent production companies to raise prices in order to steer contracts to agencies’ in-house production units. The production and postproduction of commercials – which involves services like directing, sound editing, special effects and color correction – is an estimated $5 billion business, says the Wall Street Journal.

This investigation could have dramatic follow-on effects for the advertising industry. The Justice Department attorney leading this investigation, Rebecca Meiklejohn, has convicted ad executives for engaging in uncompetitive practices before, as explained by Business Insider. Further, the DoJ has subpoenaed K2 Intelligence, which released a damning report on nontransparent practices in the advertising industry earlier this year. The report K2’s report alleged that such practices were pervasive in the industry, but focused largely on the transfer of unethical, undisclosed media rebates. There are suggestions that the DoJ could extend its probe into this area too.

Jessica Smith, research analyst at BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on mobile marketing that takes a close look at the different tactics being used today, spanning legacy mobile technologies like SMS to emerging capabilities like beacon-aided location-based marketing. The report also identifies some of the most useful mobile marketing technologies that mobile marketers are putting to good use as parts of larger strategies.

Here are some key takeaways from the report:

• As consumers spend more time on their mobile devices, marketing campaigns are following suit. Mobile ad spend continues to lag mobile time spent, providing an opportunity for creative marketers.
• Marketers should leverage different mobile tactics depending on the size and demographics of the audience they want to reach and the type of message they want to send. With all tactics, marketers need to respect the personal nature of the mobile device and pay attention to the potential for communication overload.
• Mobile messaging — particularly SMS and email — has the broadest reach and highest adoption among mobile users. Messaging apps, relative newcomers but gaining fast in popularity, offer more innovative and engaging outreach options.
• Emerging technology, such as dynamic creative optimization, is breathing new life into mobile browser-based ad campaigns, but marketers should keep an eye on consumer adoption of mobile ad blockers.
• In-app advertising can generate high engagement rates, especially with video. Location-based apps and beacons offer additional data that can enhance targeting capabilities.

In full, the report:

• Identifies the major mobile technologies being used to reach consumers.
• Sizes up the potential reach and potential of each of these mobile technologies.
• Presents an example of a company or brand that has successfully leveraged that mobile technology to reach consumers.
• Assesses the efficacy of each approach.
• Examines the potential pitfalls and other shortcomings of each mobile technology.

To get your copy of this invaluable guide to the world of mobile marketing, choose one of these options:

1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of how mobile marketing is rapidly evolving.

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Omnicom CEO John Wren downplayed the size of Amazon's advertising business in his company's first quarter earnings call.

This is in contrast to the thoughts of WPP CEO Sir Martin Sorrell, who is already preparing for Amazon's push into advertising and said the online retailer was what kept him up at night.

During WPP's full year earnings call in March, Sorrell said: "The answer to the question, 'What worries you when you go to bed at night and wake up in the morning?' isn't a 3-month-old child. It's Amazon — which is a child but not three months." He also said WPP had already set up an agency in Seattle, Amazon's headquarters, to deal with the online retailer.

Wren said Google's ad business would continue to dominate in the near term, especially in search advertising. A large chunk of Amazon's advertising business comes from sponsored product ads, which places it head to head against Google's search ads.

"It's an important alternative and I would never underestimate over the longer run, what Amazon is capable of doing. If you are looking at 2017 or the more immediate future I'd only list it as an important alternative to Google, and that's who I anticipate is going to take most of the market share in the short run," Wren said on the earnings call.

According to investment bank Morgan Stanley, Amazon's advertising business was forecast to grow by 37% between 2016 and 2018 to reach $5 billion in revenue. This still puts it significantly behind Google's search advertising business, which generated $28 billion in revenue in 2017 just in the US, according to an eMarketer report.

Omnicom reported revenue growth of 2.5% to $3.59 billion in the first quarter of 2017. Wren remained cautious about the effects political changes would have on his business in 2017, though:

"While our revenue growth exceeded our internal targets for the quarter, we remained cautious as numerous geopolitical and macroeconomic events remain unresolved," Wren said in reference to upcoming elections in France, Germany, and the UK, the legislative changes in the United States, and the situation in Syria and North Korea.

The agency holding group has been getting a lot of attention from new client gains. Its newly created media agency Hearts & Science won two of the biggest brands, AT&T and Procter & Gamble, as clients and it beat WPP in a pitch for Volkswagen's media buying budget.

SEE ALSO: WPP CEO Sir Martin Sorrell may have played a role in the failed Kraft/Unilever takeover bid

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Advertising is still an industry dominated by men. Women hold just 30% of leadership positions in the ad world, according to data from the Institute of Practitioners in Advertising.

Initiatives like The 3% Conference and SheSays have helped to highlight and perhaps partially remedy the problem, but there's still no doubt that women are under-represented.

That's why each year we put out a call for entries for our annual rankings for the most creative women in Adland.

From these nominations, paired with our own research, we selected 30 of the most impressive women in advertising followed by an example of their recent work.

Factors we considered included recognition within the industry, seniority in their respective agencies, size of the shop, and standout creative work that's garnered attention outside of the advertising world.

Our list is by no means complete. But it does feature some of the fiercest talents in the business. Congratulations to everyone who made the list.

30. Margaret Johnson, chief creative officer & partner at Goodby Silverstein & Partners

Margaret Johnson leads the creative department at Goodby Silverstein & Partners. She was named a partner at the agency in 2012 and became the chief creative officer in 2016. At GS&P she has helped turn the agency into one of the industry's most innovative through smart use of new platforms and technology.

Under her leadership, GS&P has brought a humanitarian edge to the work it produces, such as the unacceptable college acceptance letters campaign to combat sexual assault on college campuses and Tostito's "Party Safe" breathalyzer chips bag.

Johnson also serves on the boards of the One Show and Facebook's Creative Council and is a founding member of The 3% Conference. She has won a number of awards and has been part of juries at the ANDYs, CLIOs, and Cannes Lions.

Twitter: @maggiejca

One of the latest campaigns Johnson worked on, for restaurant chain Sonic, was a first for Instagram:

Youtube Embed:
http://www.youtube.com/embed/yKOvXtBeSSM?ecver=2
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Height: 450px

29. Danielle Whalen, EVP/managing director CP+B Boulder

After serving as the EVP and group account director on Applebee's and Fruit of the Loom, Whalen was named MD of the CP+B Boulder. In her time at the agency she's won more than 300 awards, including a Cannes Titanium Grand Prix. 

She's now responsible for driving the agency forward and maintaining the creative standard the CP+B name has become known for.

One of her recent works was bringing back the Captain Obvious character for hotels.com campaigns, and it became one of the main traffic drivers for the website.

Twitter: @danimiami

• Ad agencies are under pressure to differentiate their services with more data-based offerings that dig into analytics and consumer insight.
• Omnicom unveiled Omni, a central tool available to all of its agencies that pulls in data from companies like Salesforce, LiveRamp and The Trade Desk.
• The move comes a week after Interpublic Group acquired Acxiom Marketing Services for $2.3 billion, showing how the battle for data is heating up among ad holding companies.

The battle for advertising agencies to get their hands on consumer data and use it in intriguing ways continues. On Thursday, ad giant Omnicom Group revealed Omni, a data platform that allows the company's shops — which include BBDO, OMD Worldwide and DDB — to access gobs of third-party data.

The tool allows any of its agencies to search for creative images, create audiences for ad targeting, buy media, and track campaign results. According to Jonathan Nelson, CEO of Omnicom Digital, the tool has been in the works for several years and was developed by Annalect, Omnicom's data marketing group.

"This is the first time that we've stitched it all together," he said. "Think of it as being audience-first [with] insights going out to two primary audiences — one is media and the other is creative."

About 100 vendors that Omnicom works with are part of Omni, he added. The identity sources include LiveRamp, Neustar and Experian. Adobe, Salesforce and The Trade Desk integrate data and a feature using Google data allows advertisers to see how many people search for a brand after viewing a TV commercial.

Agencies are under increasing pressure to beef up their data capabilities and expertise as more advertisers demand results and face new competition from consultancies like Accenture Interactive and Deloitte. Last week, Interpublic Group announced plans to acquire Acxiom's data-marketing group for $2.3 billion in cash while Dentsu owns Merkle. And WPP assembled an initiative called mPlatform in 2016.

With GDPR and new regulation looming, Omnicom is keeping its distance from owning data

Unlike IPG's decision to go all-in on data through the acquisition of Acxiom, Omnicom's strategy is to build expertise in-house and set up deals with multiple vendors. Those relationships keep Omnicom a neutral player for agencies, according to Nelson.

"We don't make investments at all in our data providers — we think it de-risks our business," he said. "If a technology isn't working, we swap it out. There's no conflict there."

Up until now, Omnicom clients have either leaned on its Precision Marketing Group — the agency's digital and CRM arm — or Annalect to handle such work, Nelson said.

Omni is designed to be an "open architecture" that can supply many types of data that clients want to use. And with new privacy regulations like Europe's General Data Protection Regulation (GDPR) going into place, Nelson said that third parties are responsible for supplying it with clean data.

"We're trying to understand what it is and how to comply," he said. "We try to figure out where the 'fuzzy' line ends and then back up a few steps."

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• Omnicom, Publicis, WPP, MDC Partners, and Interpublic Group are no longer under investigation by the Department of Justice.
• According to reports and SEC filings, the companies were notified that they had been cleared in a two-year investigation into practices like rebates and media production.

After a two-year investigation from the Department of Justice into the production processes of advertising agencies, five of the world's biggest holding companies have reportedly been cleared.

Federal prosecutors were specifically looking into "non-transparent" practices like receiving rebates from media outlets. Five holding companies had received subpoenas as part of the investigation: WPP, Omnicom, Publicis, Interpublic Group, and MDC Partners.

According to reports from Adweek and AdAge, all five holding companies have been cleared in the investigation.

Omnicom and MDC Partners each put out SEC filings today with information to investors about updates to the investigation.

"As previously reported by Omnicom Group Inc. (the 'company'), two of the company's subsidiaries received subpoenas in December 2016 from the Antitrust Division of the U.S. Department of Justice (the 'division') concerning its investigation of video production and post-production practices in the advertising industry," Omnicom's filing says."The company received confirmation from the division that its investigation of the company's subsidiaries has been closed without any action taken against the company, its subsidiaries or employees."

Over the past two years, the practice of non-transparent media buying has ballooned into a massive issue for the advertising industry after a 2016 bombshell report from the Association of National Advertisers revealed that such practices were "pervasive" in the US but didn't name specific agencies.

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The ad industry is in the midst of a major shakeup, and Wendy Clark — DDB's first female global CEO — is an industry veteran breathing new life into dated models.

She started her career in an entry-level receptionist role at an agency and worked her way through the ranks, with stints on the agency and brand side.

In 2015, Clark left her client-side post at Coca-Cola North America to join Omnicom Group's DDB North America. She now leads more than 2,000 people as the company's global president and CEO.

Clark has used her unique perspective from time spent on the brand side to rethink how to approach client relationships.

She launched DDB Flex, a new operating model that creates integrated, cross-agency teams based on client needs, and led a critical McDonald’s pitch to build out a dedicated agency for the fast-food giant, which resulted in DDB winning part of the business from Publicis Groupe.

"The days of clients force-fitting into fixed agency models are gone,"she has said.

Her industry-transforming work hasn't gone unnoticed. She was named Ad Age's Executive of the Year in 2017.

Hear from Clark at IGNITION, where she'll share her unique point of view of where the tumultuous industry is heading — and explore the agency of the future.

REGISTER now.

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• VaynerMedia started 10 years ago as a scrappy social-media agency and has grown into a holding company, VaynerX, that's more than 800 people strong.
• Led by the divisive Gary Vaynerchuk, the holding company, VaynerX, houses six businesses including analytics, consulting, and digital media, and it has blue-chip clients like GE and Chase.
• VaynerMedia says it racked up $131 million in revenue in 2018, projects 15% growth this year, and is profitable.
• At a time when agency holding companies are under attack, VaynerX boasts it's truly differentiated from industry giants like WPP and Omnicom and is winning business from some of the industry's titans.
• Detractors and even fans say the agency has come a long way but has to grow its international presence, creative chops, and talent to truly compete.
• Click here for more BI Prime stories.

As the advertising establishment heads to Cannes for the annual, rosé-soaked ritual of making deals and collecting awards on the French Riviera, Gary Vaynerchuk wants the marketing world to know there's a new type of agency holding company in town.

Vaynerchuk and his brother, AJ, started VaynerMedia with a scrappy social-media agency operating out of borrowed space. It's since grown into an 800-plus-person sprawling holding company, VaynerX, with six businesses including analytics (Tracer), consulting (The Sasha Group), and digital media (Gallery Media Group). It boasts blue-chip clients including GE, Mondelez, and JPMorgan Chase.

Read more:Oreo maker Mondelez's CEO is rejecting ad agencies' normal pricing and pushing for them to have some skin in the game

The list of criticisms of Vaynerchuk is long and well-chronicled: He's a flagrant self-promoter whose social-media showmanship serves him more than his clients, his stakes in social-media platforms present conflicts of interest (VaynerX has said it discloses those relationships), he runs a sweatshop, he's a one-man show, and all he's selling is hustle. (A 2014 Fortune headline asked, "Is Gary Vaynerchuk for real?")

But as VaynerMedia marks its 10th year, Vaynerchuk, the agency's CEO, argues that VaynerX is the antithesis of traditional holding companies like WPP and Omnicom and is vastly underestimated in its ability to disrupt the industry's giants.

"We're in massive growth mode," he told Business Insider in a wide-ranging interview. "I genuinely do believe over the next decade that people are going to realize how historically correct we are with our strategy, creative, and media, and that there won't be a significant second choice. I do not believe that holding companies will be able to reform their companies to get to this religion. And I don't see any independent shops that are close enough to become a meaningful competitor. So I'm feeling quite confident. I do not believe the industry understands how big we are still."

WPP and Omnicom haven't responded to a request for comment.

Vaynerchuk says his agency is faster, more productive, and more accountable than the holding companies

The traditional agencies are at peak vulnerability. The Association of National Advertisers exposed them in a scathing 2016 report for ripping off clients; marketers are demanding more accountability of them; and new competitors are coming in the form of consulting companies, publishing houses, agency alternatives like Sir Martin Sorrell's S4 Capital and You & Mr. Jones, and marketers themselves who are doing more of their advertising work themselves.

But what exactly does Vaynerchuk bring to the table that's different?

He lists a few things:

• Speed. Vaynerchuk built a personal brand around hustle, which extends to the agency. "We win a piece of business and go into immediate content creation, not into six weeks of strategy to make a 30-second spot," he said.
• Volume. Vaynerchuk believes most brands are screwing up their digital advertising by not doing enough testing. His way involves creating messages at high volume, then optimizing to what takes hold. "We're taking over some brands that would make two videos for digital and like 15 to 50 assets in banners or preroll for the year, and we're producing 50 tweets on day one," he said.
• Sales results. Vaynerchuk said VaynerMedia existed not to win awards but to help clients sell more stuff while growing their brands (expertise he actually hopes to use to buy and resurrect distressed consumer brands some day). He said his approach of producing a ton of social campaigns had produced significant retail sales increases for clients. While traditional agencies are just starting to change their compensation structure based on clients' demands, Vaynerchuk said he actively sought to be compensated based on his ability to help clients' sales.
• Independence. VaynerX doesn't have the quarterly pressure of the public holding companies, which he argued let him invest in and serve his clients better than an agency beholden to Wall Street.

Scrappy success story

There's no doubt Vaynerchuk's story is one of a scrappy success. A Belarus-born entrepreneur who parlayed his family's wine store into an online wine business, he's proud of his outsider status — and professes to know little about the agency landscape. He started a social agency out of a conference room when no one was doing social and impressed clients with his own extravagant social-media presence. He's a reliable provocateur who, from the stage at an ANA event, once challenged agencies to let brands out of burdensome contracts, saying, "Change your f---ing contracts, d---s."

VaynerX the holding company has grown more than 800 people all in without taking outside funding except for a small investment from Stephen Ross' RSE Ventures. VaynerMedia the agency took in $131 million in revenue in 2018, projects 15% growth this year, and has been profitable more than six years, according to a representative. (The top holding companies WPP and Omnicom had worldwide revenue of $19 billion and $15 billion in 2018, for comparison.)

VaynerMedia has come a long way from its conference-room roots, with 25th-floor offices in a Hudson Yards skyscraper overlooking the Hudson River. In addition to New York, it has offices in London, Los Angeles, and Chattanooga, Tennessee. It's opening an office in Singapore this summer, and Vaynerchuk says South America and Central America are on his mind for future expansion.

But beyond hustle, is VaynerMedia really reinventing advertising? With clients, speed and social-media expertise are often first to come up in talking about the agency's selling points.

"I used to live across the street, so I'd go over there," said Jon Halvorson, the vice president of global media for Mondelez, who's known Vaynerchuk 10 years and competed with him when he was on the agency side. "Watch. People are constantly moving."

GE recently moved a "significant" amount of its digital media budget to Vayner from Decoded, a 4-year-old creative agency, adding to the social and community-management work Vayner was doing, said Sam Olstein, the executive director of corporate marketing at GE. Vayner creates social campaigns for GE that tend to be about inserting the brand in culture.

"When we need to act with speed and purpose and humanize our company, Vayner's the first call we make," Olstein said. A campaign to insert GE in the solar eclipse event last year was done in about two weeks, "probably about half the time of a normal agency."

Clients say VaynerMedia's produced results

Some clients said Vayner's benefits go beyond speed.

In 2018, Mondelez moved its North American media business to Vayner from Carat (part of the No. 6 holding company, Dentsu), which Halvorson said was a watershed moment in showing Vayner had grown from just being a social-media agency. He said Vayner coproduced Mondelez's personalization-at-scale approach to marketing, which he called "huge," and which has produced sales results for the snack company.

JPMorgan Chase last year appointed Vayner as its agency of record for the burgeoning area of voice. JPMorgan Chase's chief marketing officer, Kristin Lemkau, said social campaigns Vayner had done had "performed very well." Lemkau called Vayner one of Chase's "top three" agencies in the US handling its planning and buying, alongside Zenith and the famed creative agency Droga5. Chase also has an in-house agency.

When asked about Vayner's limitations, though, clients said Vayner was just getting off the ground internationally, which holds it back in getting global assignments. It also still has a reputation for being too tied to Vaynerchuk the person and isn't especially known for creative talent or longform video. (Steve Babcock, Vayner's first chief creative officer, left earlier this year after three years, as did Justine Bloome, its chief strategy officer, after about two years.)

"Being able to enhance their creative chops into the emotional storytelling and more longer-form narrative creative would be helpful," Olstein said. "I also think if they did some more work with publishers like custom partnership, where you're pairing a brand with a media owner that brings an authentic voice, and being able to weave those together, would also really help." As an example, he cited GE's recent sponsorship of a special audio issue of The New York Times Magazine, for which it used the agency Giant Spoon.

Vaynerchuk as a one-man agency

When asked to name Vayner's weakness, Lemkau echoed a point others have made: "There's only one Gary and he's got a really, really full plate. That's what makes him great. They've got some talented people, but it's still a very Gary-driven business. Because of the size of his personality, that's a hard thing to scale."

Vayner's strength in social media also makes it especially vulnerable to the in-housing trend, said Greg Paull, a cofounder of R3, a consulting firm to marketers, which named VaynerMedia a top social-media marketing firm in 2017. "A chunk of what they do, marketers are looking to, 'How can I do this directly?'" he said.

Vaynerchuk argued his outsize role helped the agency win business early on when rivals thought his agency was just him and a bunch of interns.

But Vaynerchuk's point was that he's since hired a bunch of senior talent, including Jeff Nicholson, chief media officer, formerly a vice president of advertising at SocialCode; Andrea Sullivan, the chief marketing officer, from Interbrand; and Claude Silver, the chief heart officer (Vayner-speak for HR head), from Publicis. The company just did its first Super Bowl ad, for Planter's. He said the company was looking to fill chief strategy and chief creative officer vacancies.

As for in-housing, Vaynerchuk said that he's confident he'd get enough new business from rivals to offset any negative from brands taking work in-house and that once there's an economic downturn, brands would let those people go to cut headcount, sending more business back to the agencies.

Vaynerchuk did acknowledge that staying fast and nimble was a challenge as VaynerMedia grows. The solution, however, he said, comes back to Vaynerchuk.

"You've got a strategic undertone to this creative product, which inherently sometimes makes people want to slow it down," he said. "People are by nature cautious, defensive, insecure. Clients by nature are risk averse. It's the CEO's job to dictate the tone and what's most important. And I think I beat the drum of speed and this volume concept at scale."

Vaynerchuk is in something of a Catch-22 position. He says he likes being underestimated. But at the same time, asked what the next significant win meant for him, he sounded like someone yearning for confirmation and insider status.

"I would love to get the full media and full creative, 1975-Leo Burnett-like business for a top-50 brand," he said. "Where, after a year, it became obvious to everybody that our product and services are the way to go because the business for that brand exploded or had a meaningful shift in the right direction."

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NOW WATCH: The top CMOs in the world share the campaigns they wish they had thought of

As the advertising establishment settles in for a week of hob-nobbing in Cannes for the annual, rosé-soaked ritual of making deals and collecting awards on the French Riviera, Gary Vaynerchuk has some bad news for them.

Vaynerchuk started his ad agency 10 years ago as a scrappy social-media agency. It's grown into VaynerX, which houses six businesses including analytics, consulting, and digital media, and it has blue-chip clients like GE and Chase, and employs more than 800 people, and is profitable.

At a time when agency holding companies are under attack, VaynerX boasts it's truly differentiated from industry giants like Omnicom and WPP and is winning business from some of the industry's titans.

In a rare, wide-ranging interview about VaynerX, Vaynerchuk shared numbers for the first time about the company's financials and detailed how his company is different from the agency giants.

"We're in massive growth mode," he told Business Insider.

Vaynerchuk is nothing if not a self-promoter, though, and detractors and even fans say the agency has come a long way but that it has to grow its international presence, creative chops, and talent to truly compete, though.

SUBSCRIBE TO READ OUR STORY: VaynerMedia CEO Gary Vaynerchuk says his bootstrapped digital media company is generating more than $130 million and is coming for WPP and Omnicom — with no 'meaningful competitor' in sight

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NOW WATCH: The top CMOs in the world share the campaigns they wish they had thought of

• Big agencies are under pressure to cut costs while facing regulation concerns, leading the holding companies Publicis and Interpublic Group to acquire the marketing firms Epsilon and Acxiom.
• Some of their rivals like Omnicom, WPP, and Havas see the acquisitions as vulnerable to conflicts of interest.
• They also expressed concern that those holding companies would have greater pricing power and that advertisers would have access to fewer data companies.
• Publicis and IPG for their part argue that agencies owning data will help advertiser clients avoid regulation concerns and compete with direct-to-consumer brands.
• Click here for more BI Prime stories.

When Publicis Group purchased the marketing-tech firm Epsilon for $4.4 billion earlier this year, observers gawked over the high price but also questioned whether the acquisition would lead to conflicts of interest with competing holding companies and marketers that don't work with Publicis.

Publicis isn't alone. As more marketers ask for proof that digital ads drive sales and as the push for regulations gains momentum, large holding companies are cutting the number of advertising and marketing tech companies they're working with. In the case of Publicis and Interpublic Group, they've bought the marketing-tech firms Epsilon and Acxiom to safeguard themselves against regulation. Back in 2016, Dentsu Aegis Network acquired Merkle's first-party database.

Read more:Big ad agencies are slashing the number of ad-tech companies they work with — and tech firms are racing to stay a step ahead

Marketers are snapping up data companies

According to research from the consulting company R3 Worldwide, marketers spent $7.2 billion on mar-tech acquisitions during the first half of 2019, equivalent to a 97% year-over-year growth.

"It's a move to help the agencies better contend with the technology walled gardens that are somewhat protective of their own data," said Jay Pattisall, the principal analyst at Forrester Research. "They're trying to add some much-needed data insights to their campaigns. It's been a criticism for a number of years that marketers aren't fully utilizing all the data that's at their disposal."

Critics, including some of these holding companies' rivals, however, say holding companies that own data could make it the de facto option for advertisers rather than providing them with options.

During Omnicom's quarterly earnings call on Wednesday, CEO John Wren said the company looked at buying Epsilon and Acxiom but decided they wouldn't meet clients' needs and suggested that IPG and Publicis' acquisitions created bias for marketers. Omnicom instead has its own tool, called Omni, that pulls together data for clients.

"There's risk when you do a transaction like that," he told investors on the earnings call. "Our systems have always been open and unbiased."

Publicis and IPG make the case for acquiring data companies

Arthur Sadoun, the CEO of Publicis, disagreed that Publicis would push Epsilon's data over rival data firms' or increase fees and said Epsilon would continue to work with non-Publicis clients.

In fact, he said, the Epsilon acquisition would help e-commerce and retail clients compete with direct-to-consumer brands that are growing fast thanks to all the data they have on their customers. For example, Epsilon can help Walmart wrangle its e-commerce, CRM, and in-store data to build profiles of consumers using Epsilon's own data on 250 million Americans, including phone numbers, addresses, and emails.

"We believe that we're going to live in an opt-in world where you will need permission to use consumer data," he said. "The technology to make sure that you can build individual IDs is the only way to be efficient in an opt-in world."

IPG's chief data and technology officer, Arun Kumar, for his part, said in addition to selling data to marketers, agencies could also use these data companies to help marketers build products and practices to capture first-party data.

"We're trying to make advertising more accountable for the business outcomes it should be generating and thereby giving clients an idea of what the ROI on multiple channels is," Kumar said. "If you look at certain channels like email and direct marketing, there's a fair amount of robust data that exists."

Owning data could lead to tough conversations with clients

But Bret Leece, the global chief data and innovation officer at Havas Group, compared Publicis' and IPG's moves to an agency owning a publisher. In theory, if an agency owned a media company, it would have an incentive to steer its clients to buy ads from that media company over others, regardless of whether that media company was the best fit for the client.

"If an agency were to buy Condé Nast, clients would be up in arms — you're supposed to be at arm's length," he said.

Read more: 'It is this phenomenal game of hot potato': Marketers are poring over legal documents to make sure they don't screw up using data on Facebook

Forrester Research's Pattisall made the point that all the holding companies would end up using data from the same sources. One concern is that the agencies that own data businesses, including IPG, Publicis, and Dentsu, might give preferential treatment to their own advertising clients and cut off access to non-clients.

Owning data also puts the holding companies in direct competition with the digital heavyweights Facebook and Google, which already have a huge advantage in this area.

Other agency giants like WPP are avoiding owning data

Evan Hanlon, the chief strategy officer of GroupM US, said that he saw the role of the agency as working as an agent to provide clients options to multiple streams of data and that data ultimately belonged to the client.

Similar to Havas and Omnicom, GroupM's parent company, WPP, is increasingly favoring working with data vendors instead of owning them outright. Last week, WPP sold 60% of its market-research firm Kantar to the private-equity firm Bain Capital in a larger effort to simplify its offerings.

Read more:The CEO of $4 billion Kantar explains why it plans to acquire e-commerce and other data companies after being spun off from the ad giant WPP

"A big challenge in the past year or so has been a lot of conflation about what it is that people are actually buying," Hanlon said. "The only people who really own data are the sources. Increasingly, our focus is on data science and being agnostic."

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NOW WATCH: This Facebook exec cofounded and then got fired from Pets.com. Here's why she is no longer hiding from this failure.

• PR agencies are worried about consulting companies eating their lunch, just as they've been doing with ad agencies.
• PR firms traditionally relied on inaccurate measurement, so now they're adding data services to show their work actually delivers.
• Omnicom's FleishmanHillard is announcing a partnership with data marketplace Memo to provide clients with data like how many people read an article and for how long.
• Another PR giant, Edelman, is announcing a deal with software company Cision to apply digital ad-like measurement to earned media.
• Click here for more BI Prime stories.

Similar to ad agencies, PR agencies are threatened by consulting companies, so they're fighting back by stepping up their efforts to measure their work.

FleishmanHillard, which is part of the ad holding company giant Omnicom, today is announcing a partnership with data marketplace Memo to measure how earned media performs for clients.

Memo gets article-specific data directly from prestige publishers like The Washington Post and Condé Nast that show how many people viewed an article and how long they spent with it. Memo says it's in contract with other major PR agencies to provide this data.

Read more:Huge consulting firms are coming after the ad agency business — here's how agencies are fighting back

Another PR giant, Edelman, is announcing today a deal with software company Cision to boost its performance-focused services. Dustin Johnson, head of US transformation and innovation at Edelman, said clients will get access to data using a tool called Cision Impact to see how many actual people read an article and what their demographic makeup is — the same kind of data an advertiser would get if they ran a paid ad campaign. 

The PR landscape is about to get more competitive

Behind these two announcements is a realization that life is getting more competitive for traditional PR agencies, and it's about to get tougher for their core business, earned media. Some of the key reasons:

• The PR industry has grown as companies face intensified pressure to take a stance on social issues and with the rise of digital media outlets giving companies new outlets for exposure. 
• At the same time, the rise of new entrants and advertising agencies trying to diversify their services by acquiring PR, marketing and creative firms have turned up the competition for traditional PR firms, according to a report on the industry by IBISWorld.
• Consulting firms like Deloitte and Accenture are encroaching on the advertising business, and some insiders believe a move into PR's bread and butter, earned media, can't be far behind.  
• Traditionally, marketers have measure earned media, or articles that mentioned them, based on their potential audience rather than their actual reach. But the potential audience data is widely acknowledged to be highly inaccurate, which makes it hard for marketers to justify the expense of PR services to their CFOs.
• Marketers have social monitoring tools that measure the reach of earned media on social platforms like Facebook. But as Facebook's traffic to publishers has declined, those tools are telling less and less of the audience story, said Eddie Kim, the founder and CEO of Memo. "We're seeing Facebook traffic tank and search becoming more meaningful," Kim said. "Less than 10% of an article's views come from social media."
• Companies like Casper and Warby Parker that built themselves on social media by selling directly to consumers are entirely optimized around sales, so to get their business, PR agencies need to show their services can help lead to business outcomes.

PR agencies are betting on data to stay ahead

The hope for PR agencies is that bringing more transparency to their work will help them stay ahead of the curve.

"The hypothesis is, earned media and audiences connected to them are high, high value," Johnson said of Edelman's deal with Cision. "Marketers and salespeople care deeply about these audiences. The competitive set is the marketing services, the agencies, the consulting companies. That's where this elevates us, where earned media is much more connected to sales."

Ephraim Cohen, general manager of FleishmanHillard in New York, said he's seeing more clients ask for earned media in requests for proposals and evaluate firms based on their earned media capabilities.

"Memo presents an opportunity to say, you've known for a while that the earned campaigns are some of the most valuable you can do; now you know exactly how valuable," he said. "Because you know the impact and true cost, you know how to invest in it. That's a business and game-changer. It's going to scare the hell out of a lot of people. We're an industry that's never had this level of accurate media measurement before."

It's unknown how greater transparency will impact PR budgets

In theory, the ability to get better performance data for earned media will lead marketers to spend more on PR, where spending growth has lagged that of marketing, Johnson said. "The hypothesis is, proving the value of media will unlock more spend," he said. 

It's possible, of course, that the new data show that earned media in fact reaches a smaller audience than marketers previously thought. The hope for PR firms is that their clients always knew that but at least now they can keep spending on earned media with confidence that they know what it'll get them.

Kim's bet is that by using Memo's data, clients will be impressed by how much time people spend reading articles compared to their fly-by behavior on social media feeds.

"There's a risk it isn't as much as you wanted," Kim said. "But that's what's missing right now. The data will give substantially more credit to content than it currently gets. The downside is nominal compared to the upside."

SEE ALSO: NBCUniversal and CBS are building teams to go after direct-to-consumer dollars, but startups still think TV is too expensive

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NOW WATCH: The top CMOs in the world share the campaigns they wish they had thought of

• Invisalign has dominated the rapidly-growing clear braces market, with 2018 revenues up 29.4% to $1.7 billion, but it faces competition from DTC rivals like SmileDirectClub.
• SmileDirect went public this week at a valuation of $8.9 billion.
• To maintain its status in the market, Invisalign plans to boost ad spend across platforms to target an audience beyond orthodontists and parents of teenagers.
• The company recently conducted a global ad agency review that pitted the three largest holding companies against one another.
• Click here for more BI Prime stories.

Adults of a certain age who know the pain of wearing braces understand why clear plastic aligners that provide a less invasive and unsightly alternative make up a rapidly growing industry. 

Invisalign pioneered the technology more than 20 years ago, but now it finds itself facing fresh competition from direct-to-consumer challengers. Parent company Align Technology's stock price has dropped by more than 50% in the past year as competitors encroach on its market share.

That competition has come from companies like SmileDirectClub, a five-year-old Nashville-based startup that allows customers to skip the doctor's office and buy aligners straight from its own website or nearly 400 retail locations, which this week went public at a valuation of $8.9 billion. The stock dropped 28% on the first day of trading, but cofounders Jordan Katzman and Alex Fenkell still became two of America's youngest billionaires overnight, as Business Insider reported.

Invisalign previously invested in SmileDirectClub, but now it's looking to hold off the rise of that brand and other challengers like Candid Co. by expanding its advertising efforts. 

Publicis beat out WPP and Omnicom to win a three-way holding company pitch.

One source with knowledge of Invisalign's strategy said the company, which has primarily advertised to orthodontists and parents of teenagers in the past, wants to build on consistent growth in the category by increasing its ad spend to target new audiences on more platforms. International consultancy Comvergence estimated that Align Technology spent about $10 million advertising the brand in the US last year. 

A spokesperson said the company does not comment on its advertising business.

Read more: Buzzy healthcare startup SmileDirectClub just went public. Here are the execs and investors who stand to benefit the most.

Several sources with direct knowledge of the matter said Align Technology recently consolidated the Invisalign brand's creative, digital, and media buying business with Publicis Groupe after conducting a global review that pitted the world's three largest ad agency holding companies — WPP, Omnicom, and Publicis — against one another.

These parties told Business Insider that a multi-agency Publicis team beat out its bigger competitors to win the business this week. Spokespeople for all three companies declined to comment.

Prior to the review, WPP's Wavemaker and MDC Partners' Colle and McVoy handled ad buying and creative duties for Invisalign, respectively. The latter agency was not involved in the review and will end its four-year relationship with the brand by the end of the year.

SmileDirectClub follows the ad industry's in-housing trend, hiring top agency talent to build its own team.

This strategic shift follows the dissolution of a financial partnership between the company and its most prominent competitor. Align purchased a 19% stake in SmileDirectClub before approximately 40 of its own key patents expired in 2017, but earlier this year an arbitrator found that it had violated a non-compete clause by copying SDC's store concept, forcing the closure of its 12 retail locations and the return of its ownership stake. 

"Invisalign treatment is the most advanced clear aligner system in the world and backed by more than 22 years and over $1 billion investment in technology and R&D," read a statement from an Align Technology representative who said the company no longer holds any interest in its rival.

Meanwhile, SmileDirectClub has taken a very different approach to its own marketing efforts by bringing all of that work in-house.

At the beginning of the year the company hired Bruce Henderson, formerly chief creative officer at IPG events agency Jack Morton, to run its 125-strong internal team, and in May it blanketed New York's Times Square with an out of home campaign including digital billboards and ads in nearby taxis and subway stations as it prepared to go public.

SmileDirectClub CEO David Katzman rang the Nasdaq opening bell along with cofounders Alex Fenkell and Jordan Katzman on September 12, the day the company's stock began trading. A representative did not respond to a request for comment on this story.

SEE ALSO: Meet the 30-year-old cofounders of SmileDirectClub, Jordan Katzman and Alex Fenkell, who just became 2 of the youngest billionaires in the US

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NOW WATCH: General Mills chief brand officer says marketers should not focus on creating advertising, but creating markets

• In a major strategic shift, McDonald's hired the independent agency Wieden and Kennedy to run its US creative advertising as the fast-food chain tries to keep up with its buzzier rival Burger King.
• Wieden and Kennedy is best known as the lead agency for Nike, Bud Light, Old Spice, and Delta.
• In an internal memo at Wieden and Kennedy, agency leadership positioned the win as a victory for creativity over pure data, in a dig at bigger rivals.
• We Are Unlimited, an entity launched by the holding company Omnicom in 2016 to handle the McDonald's business, did not pitch for the business.
• In another first, McDonald's will also allow Wieden and Kennedy to continue serving as the agency of record for its rival KFC.
• Click here for more BI Prime stories.

McDonald's took a 180-degree strategic turn this month by choosing the independent agency Wieden and Kennedy to lead its creative-advertising business in the US after an extended review. 

According to an internal memo that Wieden leadership sent out to all staff when the news went live on Friday afternoon, the win marked a repudiation of the biggest industry trend in recent years, in which agencies hyped their ability to use consumer data as the key factor in creating and targeting ads.

Read more: McDonald's bought an AI speech company to take the human interaction out of drive-thrus

In the memo, Colleen DeCourcy and Tom Blessington, the agency's copresidents, positioned the win as a victory for "the power of creativity," arguing that the quality of their team's creative concepts, in combination with "insight" and "intelligence" drawn from internal market research, beat out the numbers and algorithms presented by the Big Four holding company Omnicom.

McDonald's is the largest fast-food chain by revenue, but its marketing efforts have not earned the industry plaudits of rivals like Burger King, which scored the top prize at this summer's Cannes Lions Festival of Creativity for the "Whopper Detour" campaign that let customers buy a Whopper for one penny — but only if they visited a nearby McDonald's first.

Omnicom's stock price has fallen by about 3% since news of the loss went live on Friday.

McDonald's picked Nike's longtime agency in a pivot toward more focus on creative excellence

The Portland, Oregon-based Wieden and Kennedy is best-known as the agency behind Nike's ubiquitous 30-year-old "Just Do It" campaign, Old Spice's "The Man Your Man Could Smell Like," and, more recently, Bud Light's "Dilly Dilly."

Wieden and Kennedy defeated the Omnicom-owned competitors TBWA\Chiat\Day New York and Adam&eveDDB in a nine-month review that began as a pitch for a single project but evolved into a race to lead McDonald's ad business in the biggest fast-food market.

A sign of the significance of Wieden and Kennedy's win is that incumbent We Are Unlimited, a Chicago-based entity that Omnicom created to service the McDonald's account in 2016 after beating out its rival Publicis, was not involved in the pitch at all. We Are Unlimited is part of Omnicom's DDB Worldwide network, and DDB Worldwide CEO Wendy Clark and former McDonald's Chief Marketing Officer Deborah Wahl described it at its launch as the"agency of the future." We Are Unlimited promoted itself as having "digital and data at the heart" and included "embedded teams" from companies like Facebook, Google, Twitter, and Adobe working alongside its own employees.

In an uncharacteristically sharp rebuke to the competition, Wieden and Kennedy's memo said that We Are Unlimited has now been "relegated to an operational role" on the McDonald's business, though it will retain a small portion of the work it previously handled for the client.

Subsequently, Wieden and Kennedy provided a statement emphasizing the partnership between the two agencies. "We Are Unlimited is an important partner that brings deep expertise about the brand to the table, and we look forward to working closely with them," it read. "McDonalds' renewed commitment to the power of creativity is a testament to where the brand is headed. Being successful today requires a marriage between the human ways that creativity is able to evoke feelings and bring out the soul of a brand and the insights that lead to the brand's voice creativity will always be rooted in data and strategy."

"We remain a proud partner with McDonald's and are working closely across both the McDonald's and We Are Unlimited teams to ensure we remain focused on our shared goals and priorities," said a statement that a We Are Unlimited representative provided to Business Insider in response to the Wieden and Kennedy memo.

In a press release announcing the change, Morgan Flatley, McDonald's chief marketing officer and a former PepsiCo executive, thanked the team "for their work over the last three years supporting key moments in our transformation and operational excellence."

The chain also abandoned past policies in agreeing to share an agency partner with its rival KFC

According to sources with direct knowledge of the business, the final section of the memo, which is cut off in the version obtained by Business Insider, discussed how Wieden and Kennedy would manage an apparent conflict between McDonald's and another longtime fast-food client, KFC.

These sources said both companies agreed to allow Wieden and Kennedy to participate in the review — a significant strategic shift among fast-food brands. Traditionally, such companies forbade their agencies from working with direct competitors. To avoid overlap, one source said the two accounts would be strictly separated in different offices, with Wieden and Kennedy Portland handling KFC and Wieden and Kennedy New York working on McDonald's. Unspecified "IT safeguards" will also ensure that the brands' accounts do not conflict with one another.

McDonald's declined to comment beyond its own press release, and representatives for KFC and its parent company, Yum Brands, did not immediately respond to a request for comment.

According to the data-insights company Kantar Media, McDonald's spent $765 million on advertising in the US last year.

See the memo below.

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• Ad agencies have had a trust problem since a 2016 study by the Association of National Advertisers revealed illegal agency rebates and other misuse of clients' money.
• A new global survey from consulting firm ID Comms that involved all major holding companies found that trust in them continues to drop.
• Trust among brands, agencies, and publishers is also dropping.
• The only group that has a more favorable view of advertising is marketers' procurement departments.
• The decline in trust could mean agencies' services lose value over time.
• Click here for more BI Prime stories.

Ad agencies face growing pressure from clients and publishers alike as Facebook, Google, and emerging platforms gobble up an increasing share of digital ad spend. And according to a new survey, trust in agencies has never been lower.

Trust is also declining among agencies, brands, and publishers, but for the agencies, the decline threatens to undermine their main revenue source. It also comes at a time when their model is under threat from new competitors like consulting companies.

Management consultancy ID Comms, which has recently overseen global agency reviews and audits for brands like Mars, GlaxoSmithKline, and Puma, spoke to 177 clients responsible for more than $20 billion in annual spending. 

Business Insider reported earlier this week that nearly 70% of marketers have updated their media buying contracts since a bombshell 2016 Association of National Advertisers report confirmed the widespread use of illegal rebates and other dubious financial practices among agencies. Yet most respondents to the ID Comms survey still see paid advertising as a "complex headache" rather than a key investment.

Read more: 'An apocalyptical onslaught to their models and profit margins': Why media agencies are on their death bed

ID Comms consultant and survey author Paul Stringer said, "At a time when the challenge of media has never been greater, it is disappointing to see that so many marketing and media professionals are struggling to implement media strategies or forge relationships that deliver long-term growth."

The only group whose opinion of advertising improved is marketers' procurement departments. They were historically tasked with acquiring commodities like phones, laptops, and building materials but are increasingly overseeing marketing contracts as well, and many industry insiders see them as the primary factor behind the value of such services dwindling over time.

Media companies don't trust agencies, agencies don't trust marketers, and marketers don't trust themselves

"Overall, procurement is making marketing feel like the new IT," Omnicom Media Group CEO Scott Hagedorn, who leads the world's second-largest ad buying network, told Business Insider. "It's about cost containment versus strategic growth."

Brands gave agencies an average score of 2.4 out of 5 for providing "neutral and objective" recommendations regarding ad strategy. As one anonymous marketing executive put it, "Media agencies are factories for account management and provide no innovative or added value thinking or strategy and implementation."

Publishing executives were even less forgiving, scoring agencies 2.45 and 2.12, respectively, on their ability to share data-based insights and integrate owned, earned, and paid media. 

"We are trying to solve new challenges with old processes, and the results are underwhelming," said Joy Robins, chief revenue officer at The Washington Post. She said publishers sometimes see agencies as "RFP dispensers" while agencies view media partners as "commodified idea factories."

Robins added, "Figuring out what is best left automated is an important step, but there has to be a recognition of the value exchanged when advertisers, agencies and publishers share a collaborative relationship."

The survey wasn't just an exercise in finger-pointing. Clients also rated their own media management abilities poorly, with an average score of 2.56. And all numbers in the ID Comms Global Media Thinking Report 2019 are down from the firm's previous report of two years ago.

The trend shows no sign of stopping as cost drives everything

These results reflect a tension in the advertising model as big brands try to do more with less by treating marketing like any other commodity and judge it by its ability to meet budget goals.

Hagedorn suggested the main reason procurement sees advertising agencies positively is that desperate agencies are increasingly willing to work for less — even if it makes their own long-term profitability more tenuous. Clients simultaneously write contracts that pay agencies every 120, 150, or 180 days instead of monthly or bi-monthly. These sorts of agreements make it harder for media buyers to properly compensate their publishing partners, and many media executives simply refuse to play ball.

Hagedorn said distrust will persist as long as key players keep fighting over smaller and smaller pieces of the industry pie.

"I hope that marketers snap out of it and get back to thinking about value creation," Hagedorn said. "Otherwise, why are we doing this?"

SEE ALSO: Big ad agencies are slashing the number of ad-tech companies they work with — and tech firms are racing to stay a step ahead

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• Holding company Omnicom will fold We Are Unlimited, a standalone ad agency created to service McDonald's, into parent company DDB, sources confirmed to Business Insider.
• The news follows Omnicom's loss of much of McDonald's business to agency Wieden and Kennedy.
• The development casts some doubt on the future of the dedicated, single-client agency model.
• Internal documents obtained by Business Insider show the structure used to successfully pitch the "agency of the future," which consisted of talent from not just Omnicom but other agencies and Google and Facebook.
• Click here for more BI Prime stories.

We Are Unlimited, the dedicated agency launched by holding company Omnicom in 2016 to manage the McDonald's account in the US, will fold into its parent company DDB Worldwide as of January, according to multiple sources with direct knowledge of the matter who spoke to Business Insider on condition of anonymity.

A DDB spokesperson declined to comment, and McDonald's did not respond to a request for comment.

The development comes less than one week after the fast-food chain moved lead creative duties on its US advertising business to independent agency Wieden and Kennedy in a major strategic shift. An internal memo that Wieden leadership sent to all staff on Friday called the win "a huge coup" and implied that it went against industry trends in which marketers value data over creativity.

Read more: Internal memo from McDonald's new ad agency reveals why the world's biggest fast-food chain bucked industry trends to reshape its marketing strategy

In recent years, holding companies, whose model has been under increasing pressure, have developed custom, integrated units that are dedicated exclusively to clients, in response to demand from marketers including McDonald's, HP, Ford, and Johnson & Johnson. DDB later used the We Are Unlimited approach to create a similar unit for longtime client State Farm.

This trend also reflects advertisers' efforts to rein in the spending of decades past by cutting the number of agencies and holding companies they use.

Some of those dedicated shops have since been dismantled or restructured. Most notable among them is Ford's GTB, which consisted entirely of WPP employees before Wieden and Kennedy and Omnicom's BBDO won lead creative and brand strategy work for the automaker in a late 2018 review.

It is unclear whether other advertisers will follow McDonald's lead in moving away from their custom agency models.

The formerly dedicated agency will become a division of DDB Chicago with a shared P&L

We Are Unlimited will retain its name but no longer operate as a standalone company with a separate profit and loss statement; it will instead become a division of DDB Chicago, the network's largest office. The two entities have shared an address since 2018, when DDB moved into the Illinois Center complex at 225 North Michigan Avenue as part of Omnicom's effort to consolidate all agency operations in the Windy City and reduce overhead costs.

The formerly dedicated team in Chicago will continue working on several key aspects of McDonald's marketing business, including its popular Happy Meal promos, its website and its mobile app. OMD, which handles ad-buying work for the brand in most regions of the world and functioned as part of the dedicated agency, was not affected by the review.

But the decision still marks a major loss for Omnicom, which positioned the We Are Unlimited model as a new way of working that would help it stand out in an industry where Google and Facebook dominate digital spend and lucrative agency of record contracts grow rarer by the day.

Sources told Business Insider that no other changes to the We Are Unlimited team are planned at this time, though AgencySpy reported earlier this month that a small number of employees at the agency had been laid off and a few more transferred to DDB Chicago as the McDonald's review wound down.

Internal documents reveal how Omnicom won McDonald's business

An internal pie chart and positioning document obtained by Business Insider reveals how Omnicom won the McDonald's business and promoted its We Are Unlimited offering. The model was an industry-first, the holding company claimed, because it combined the services of not only every Chicago-area Omnicom entity but also several direct competitors as well as full-time or "embedded" teams from Google, Facebook, and Twitter.

A former We Are Unlimited executive who spoke to Business Insider on condition of anonymity disputed this characterization, stating that Google employees were "occasionally in the office" but describing the word "embedded" as a misnomer.

We Are Unlimited's exclusive contract with McDonald's ended in January 2019, but it is unclear whether the agency is working for any other brands.

"We are transforming every aspect of our business, and now took the opportunity to ensure that we have the right agency partners in place to accelerate our growth," read a statement from McDonald's CMO Morgan Flatley announcing the Wieden and Kennedy win last week.

When its internal memo leaked, a Wieden representative said the agency looked forward to working with the Omnicom team.

SEE ALSO: Big marketers like McDonald's, HP and State Farm are changing the ad agency model as we know it

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• McDonald's recently moved its US creative business away from dedicated Omnicom agency We Are Unlimited.
• The main reason for the change was to put a new focus on creative excellence, said McDonald's CMO Morgan Flatley.
• Sources familiar with the business pointed to a proposed "bacon record" project as a key example of the disagreements between agency and client that led to Omnicom losing much of the account.
• McDonald's executives declined to fund the idea to make a fully functional LP entirely of bacon to promote a "free bacon" initiative.
• Click here for more BI Prime stories.

McDonald's recently made big waves in the ad industry by switching from Omnicom as its lead creative agency to Wieden and Kennedy.

According to McDonald's CMO Morgan Flatley and sources close to the company, the primary reason for McDonald's change was a desire for more memorable ad campaigns. An internal memo from Wieden and Kennedy leadership, first reported by Business Insider, supported that theory.

Read more: McDonald's demanded that Omnicom create an ad agency dedicated to its business. Now that unit will fold.

Sources say the "bacon record" pitch was a key example of the difficulties that led to Omnicom losing much of McDonald's business

Many marketers turn to viral stunts and try to piggyback on pop culture to get noticed. Yet McDonald's often hesitated to take risks, according to several parties who worked on the account. One failed effort involved two seemingly win-win elements: Pop music and bacon.

Earlier this year, the chain offered a "bacon hour" deal that let consumers get free bacon with any item for 60 minutes each day. Three sources familiar with the project told Business Insider that the creative team at We Are Unlimited, the dedicated agency that Omnicom created to service McDonald's, proposed promoting the deal by creating a fully-functioning LP made of bacon.

That's right...this pork album would work in any record player. One party described it as "a playable, edible record made out of bacon."

The episode provides an inside look into how agency-client relationships play out every day in the ad industry

Two people familiar with the business said the plan was to produce several copies of the same record, send them to media outlets, and create a making-of video to push on digital platforms. Trouble started when vendors said the project would be difficult to pull off because, according to one party, the greasy product would "ruin record presses."

McDonald's marketing team — and much of agency leadership — ultimately balked at the idea due to its challenging execution and research and development costs, estimated at about $15,000, according to the two sources close to the business.

All three people who spoke to Business Insider about the bacon project said it showed why the relationship between McDonald's and We Are Unlimited ultimately broke down. It also shows the back-and-forth debates that agencies and clients go through every day.

As a result of losing the business, We Are Unlimited folded into its parent network, DDB, Business Insider first reported.

Several current and former We Are Unlimited employees emphasized that, despite failed ideas like the bacon record, the agency consists of hard-working teams dedicated to the McDonald's business who have tried to find new placements for colleagues that recently lost their jobs.

Spokespeople for McDonald's and DDB declined to comment.

SEE ALSO: Internal memo from McDonald's new ad agency reveals why the world's biggest fast-food chain bucked industry trends to reshape its marketing strategy

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