With big data pitch, French ad giant wins over Disney

Tiffany Hsu, The New York Times

Posted at Oct 16 2019 08:48 AM

General view during Triple Force Friday and Frozen Fan Fest on Oct. 04, 2019 at Disney Store Times Square in New York City. Noam Galai, Getty Images for Disney via AFP

Publicis Groupe needed a big win.

The French company, the third largest advertising group in the world, released a dismal earnings report last week. Pressured by budget cuts from clients amid competition with Facebook and Google, Publicis said it was in a “painful situation.”

The ad giant behind marketing campaigns and media placement for corporations like Coca-Cola, Procter & Gamble and L’Oréal, Publicis slashed its sales forecast for the year. Its stock price sank. Arthur Sadoun, the company’s chief executive, sounded less than thrilled on a call with investors, saying that Publicis has “dug deep” to understand “the challenges we are facing.”

On Monday, Sadoun sent a memo to employees. Its tone was elated. After an “intense” four-month pitch, he wrote, Publicis had reached a deal with one of the largest and most coveted clients in advertising: The Walt Disney Co.

As part of its effort to persuade Disney, Publicis trotted out its new subsidiary, Epsilon Data Management, which claims on its website to have information “on virtually every US consumer.”

Advertising pitches have come a long way since the 1960s, when creative teams tried to impress potential clients with snappy slogans, catchy jingles and arresting visuals while pledging to attract the housewife segment or the businessman demographic.

These days, big companies look to ad companies for their data smarts as much as their marketing expertise. The agencies with the most persuasive pitches are those that have increasingly personalized data on the patterns and preferences of a broad range of consumers.

Publicis bought Epsilon for nearly $4 billion in July with all that in mind. Since the acquisition, Epsilon has played a role in helping Publicis land accounts with the Swiss pharmaceutical colossus Novartis (NoDoz, Gas-X, Ritalin) and the snack behemoth Mondelez (Belvita, Cadbury, Chips Ahoy).

Disney already has plenty of data on its customers. But the prospect of precisely targeting potential moviegoers, theme-park visitors, hotel guests and subscribers for its coming Disney Plus streaming service appealed to the company, according to two people familiar with the pitch process.

While the Disney-Publicis deal may benefit both companies, some worry that it may put consumer privacy at risk.

“This is in essence creating a data broker division to Disney, expanding what Disney already knows, which is a lot,” said Jeffrey Chester, the executive director of the Center for Digital Democracy, a nonprofit consumer advocacy group. “You’re telling your entire life history to Mickey Mouse.”

Disney’s kingdom expanded this year as the conglomerate closed its $71.3 billion acquisition of 21st Century Fox assets. It opened a new area at Disneyland called Star Wars: Galaxy’s Edge that was the largest expansion in the park’s history, although attendance was disappointing.

On Nov. 12, the company will start its challenger to Netflix, Disney Plus. On Monday, a Twitter account for the streaming service spent nearly three hours posting a mega-thread of the titles that will be available on the streaming service, as varied as the beloved “Snow White and the Seven Dwarfs” and the more obscure “Zenon: The Zequel.” Earlier this month, Disney banned advertising from Netflix on its entertainment television networks ABC and Freeform.

In May, Disney freshened its strategy for deciding where and when to place its marketing and whom to target with it. The company spends more than $1.5 billion a year on media, according to the advertising research firm COMvergence. Disney’s media business up for bid was worth more than $2 billion.

Disney had been working with the ad groups Omnicom, Dentsu Aegis Network and Horizon when it put the contracts up for grabs. The pitch process was managed by the media consulting firm MediaLink and involved a flurry of presentations over a two-week period in Hong Kong; Dubai, United Arab Emirates; Mumbai, India; London; and Buenos Aires, Argentina, according to two people familiar with the meetings. For Publicis, it was “the most important pitch of the year,” Sadoun said in his memo.

Publicis walked away with Disney’s media business for most of the world outside North America. In North America, Publicis will take charge of media strategy for the Disney Plus streaming service as well as Disney resorts and amusement parks.

Epsilon was a major draw because of the extremely detailed data it has compiled. The company may very well know if you are lactose intolerant or are in the market for a pickup truck with 60,000 miles on it. If you are into astrology or have taken out a home-equity loan, it may know that too.

Epsilon could, for example, beam a Disney Plus ad to parents who have bought a Lion King costume for their toddler, according to Jay Pattisall, an analyst with Forrester.

“They have the capacity to really understand who is a likely prospect for the streaming service and where that person resides online, and they can send messages in the appropriate media to that individual,” he said.

Publicis’ larger rival Omnicom won the contract for Disney channels like ABC and FX in the United States, as well as the North American account for studios like Marvel and Pixar. Omnicom also retained its regional contract for the recent Disney acquisitions 20th Century Fox, Fox Searchlight and Fox Entertainment Group.

On Tuesday, Omnicom reported healthier financial results than Publicis did in its recent quarterly report. John D. Wren, Omnicom’s chief executive, told analysts in a conference call that he was “a little bit shocked” to see weakness in Publicis’ media business. He also said that “the Disney win is very important, but part of that win was business we already had.”

As part of its bid, Publicis proposed the creation of a new agency, Publicis Imagine, that will handle its Disney business. Omnicom also pitched a specialty agency, OMG23, a reference to the creation of Disney in 1923.

The Disney contract is a boost to Publicis. The company’s recent financial report was “alarming,” wrote Michael Nathanson, an analyst with the MoffettNathanson research firm, in a note to clients last week.

But most of the advertising industry is struggling to compete against Facebook and Google, analysts said. The platforms dominate the business of buying and selling digital ads, leaving the agencies little room to negotiate. Facebook and Google have also started working directly with many advertising clients, luring them away from traditional ad companies.

In leaning on data to improve its fortunes, Publicis is part of a larger industry trend. Dentsu bought a majority stake in the data marketing firm Merkle Group in 2016, and Interpublic Group bought the data marketing firm Acxiom in 2018.

Chester, of the Center for Digital Democracy, said that regulators had overlooked a “huge consolidation” within advertising that has allowed huge holding companies to gobble up agencies and data companies that are increasingly looking for ways to advertise using personal data.

He said that viewership data from the ad-free Disney Plus, including details involving children, could be passed on to Epsilon, which could use the information to target consumers with marketing for other Disney offerings.

“It’s Madison Avenue bringing you Silicon Valley,” he said.

2019 The New York Times Company