- GroupM sells off ESP Properties and IEG in US and brings rights-holder business under Two Circles brand
- Changes reflect evolution of the sponsorship industry towards a more digital, data-driven model
- Restructure seen as scaling back of WPP’s ambition to create a global sports marketing giant
The restructuring of WPP’s sports marketing assets late last month suggests the world’s largest marketing agency is no closer to achieving its ambition of creating a single, global sports marketing powerhouse.
In June 2015, WPP subsidiary GroupM launched ESP Properties with that objective in mind. A heavyweight management team was put in place, with former ISL, Kirch and Infront executive John Kristick appointed chief executive and former Football Association and Kentaro director Jonathan Hill brought in to run operations in Europe, Africa and the Middle East. WPP’s sponsorship consultancy IEG, acquired in 2006, was folded into the business, as was the newly-acquired data-driven boutique consultancy Two Circles.
A key part of ESP’s armoury was that it would be able to tap into WPP’s constellation of advertising and marketing agencies to deliver brands to properties in a way few other agencies could.
“We have a very clearly positioned ESP Properties group to serve the rights-holder community on a global basis and it will be operated as a centralised business,” Kristick told SportBusiness International at the time. “We’re the new kid on the block”.
Kristick wouldn’t say who ESP’s rivals would be. But he didn’t need to. WPP founder and chief executive Sir Martin Sorrell, who stepped down in April this year, had long made his ambition clear. “Effectively, there’s an IMG within WPP,” the man who started out as an account executive for IMG founder Mark McCormack had said. “If we pulled out everything we had in sport, we would have far more than IMG’s revenues.”
Last month, GroupM sold IEG and the US operations of ESP Properties to Bruin Sports Capital’s Engine Shop agency. The UK activities and few remaining employees of ESP Properties had already been folded into Two Circles last year. Kristick and Hill have been gone for a year and not replaced. GroupM will continue with the ESP Properties brand where there are existing client relationships in Italy and parts of Asia.
One independent sponsorship adviser said that “a very soft” sponsorship market had “put paid to ESP”. He added: “There are a vast number of sponsorship sales agencies out there and most of them are struggling, both for results and for differentiation. But Two Circles emerged when there was a sweet spot around data. It was a very smart business idea.”
Phil Carling, managing director of football at the Octagon agency, owned by WPP’s rival Interpublic, points out that while Two Circles has “the knowledge, the credibility and the clients” to continue growing as a specialist data-driven consultant, it is a very long way from being able to challenge the likes of IMG, Infront, CAA, Wasserman and Octagon. Its turnover is thought to be in the low tens of millions of pounds. The revenues of the majors are measured in the hundreds of millions.
“As long as they are saying, ‘Two Circles are carrying the baton for us’, it means there is a short-term to long-term retreat from having a proper sports marketing player within the WPP portfolio,” he said.
Any interpretation of the restructure which includes notions of failure or retrenchment, however, is not one that the company shares. Dominic Grainger, the chief executive of GroupM EMEA and of the Sports Practice at WPP, sees it as natural evolutionary step.
“At GroupM, it was always our goal to give clients one holistic approach to how we work with sports rights-holders across the board and around the world – which is why we united our rights-holder facing businesses under the ESP Properties umbrella three years ago.
“In today’s data-driven environment we continue, through Two Circles, to help sports rights-holders in the US and Europe drive growth across every area of their business – including sponsorship, where our focus is helping rights-holders ensure they satisfy the demands of brands by delivering access to highly-engaged audiences effectively, and measurably, through rich digital channels.”
Tougher than expected
Michael Payne, the former marketing director of the International Olympic Committee, has been an adviser to WPP for over a decade and helped broker GroupM’s acquisition of Two Circles. Given the rapid growth of Two Circles since 2015 and its increasingly long list of blue-chip clients, Payne echoes Grainger’s view that to see the gradual phasing out of the ESP Properties brand as a failure is to misunderstand the nature of the company. But he does accept that creating a sports marketing monolith has proved tougher for WPP than many had anticipated.
“There is tremendous sporting knowledge and talent within the group but WPP has struggled to present a unified, coherent sports agenda. That’s partly because of the corporate structure, where the different units are competing against each other. People wouldn’t think twice about putting IMG on a shortlist because of their wide experience. But a lot of clients don’t recognise the depth of sporting talent and knowledge within WPP. Part of the original vision of ESP was to be able to build that out. But with each of the agencies operating in their own silos, it proved more difficult than was expected.”
ESP’s struggle to leverage its relationships with other WPP subsidiaries has a precedent: Interpublic and Octagon. Launched by US advertising giant Interpublic in 1997, Octagon is now one of the established industry majors. But its first five to six years were fraught with difficulty. The word ‘synergies’ didn’t exist in those days but the much-vaunted benefits of being part of a constellation of advertising agencies simply didn’t materialise.
Octagon’s Carling explains why. “It all comes back to P&L. There is no way that you will get those big agencies to pay you money or allow you to share in the money that is being paid by a client because it affects their P&L. We found that pretty rapidly we were frozen out. The notion that you will create collaborative ventures always fails when it comes to dividing the money up.”
Some basic differences in how advertising agencies and sponsorship agencies work also became apparent. “The planning and buying model that has been built over the last 100 years is based on media commissions. There are established commission structures in everything from outdoor through to magazines and television. There is not a remote possibility that a planning and buying agency is going to want money coming out of traditional and linear media and going into things like sponsorship, which don’t operate on the same kind of commission basis. It messes up their business model.”
He suggests that the lesson from the Interpublic experience, and from similar issues that WPP has faced, is: “Don’t go there unless you have worked out how everything gets paid for and you can create a collaborative environment in which everyone shares clients and provides the best possible solution for those clients.”
Two Circles is one of the success stories of the industry in recent years, a fact underlined when it was crowned agency of the year at last year’s BT Sport Industry awards. Founded in September 2011 by Matt Rogan and Gareth Balch, it set out to be a new kind of sports marketing agency: digital first and driven by data. It didn’t take long for the company to come across Payne’s radar.
“When I first saw what they were doing, it was the first company I had come across that had begun to properly identify the potential depth of digital mining and how to turn that into tangible products for sports bodies, connecting the dots and helping them to understand what it all means. My advice to WPP was that this is very much the direction the industry is going,” he said.
Expansion in North America will be helped by the launch of a Los Angeles office later this year, to add to the existing New York base. The agency has doubled its staff in London, from 50 to 100, since the takeover. But it is understood that GroupM has no plans to morph the company into a full-service agency by adding new disciplines to those areas where it has identified a successful niche business opportunity.
The new kid on the block turned out to be Two Circles rather than ESP Properties, at least as far as brand identity goes. It will be one of WPP’s multiple sports assets, alongside TSE Consulting, which is owned by WPP subsidiary Burson-Marsteller, and strategic stakes in companies Bruin Sports Capital, CSM Sport & Entertainment and the Mediapro agency.
Multiple, but separate. Sorrell’s dream of creating a new IMG from within WPP remains elusive.