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Lots of news to get through from the past two weeks, so we'll keep the Ads of the Week preamble brief. Rocking our socks this week were... the spot by Wieden & Kennedy London for Nokia's navigation-enabled 6220 handset; the fantastic promo for the BBC Olympics coverage by Red Bee Media and RKC&R/Y&R with Gorillaz and Tank Girl animator Jamie Hewlett; a brilliantly conceived ad for New Zealand's National Foundation for the Deaf by DDB NZ; and the latest hyper-surreal ad for Cadbury's Trident Gum by JWT London.

In the news this past two weeks: takeovers

There were further developments in the big three contested takeovers which have been occupying the industry, so once again we'll tackle them all upfront.

First, InBev vs Anheuser-Busch. An increase in InBev's offer price to $70 per share was enough to win over the Anheuser board. With its price tag boosted to a whopping $52bn, the US giant agreed to start discussing terms and conditions to create the undisputed #1 in the global beer business, and despite the tension which had entered the takeover battle prior to Anheuser's surrender, the first meeting between the two sides was said to have been "gracious and positive". The merged company will adopt the rather less gracious name of Anheuser-Busch InBev, and its board will include two representatives from Anheuser, one of whom is likely to be current A-B chief August Busch IV. InBev's Carlos Brito will be CEO. The main point still to be resolved is what will happen to Grupo Modelo of Mexico, in which Anheuser has a near-50% stake. That company is demanding a significant role in the merger negotiations, which could lead either to its assimilation into an even larger whole, or its spin-out as an entirely separate company.

The on-again, off-again Microsoft vs Yahoo struggle also appears to have finally run its course, but with what is arguably a rather less satisfying conclusion (for anyone other than Yahoo CEO Jerry Yang, that is). After several weeks of talks, Yahoo was able to placate Carl Icahn, the activist investor who had been expected to call for the dismissal of the Yahoo board at tomorrow's annual meeting. The success of Icahn's motion was seen as central to a renewed bid by Microsoft, which had earlier proposed yet another plan under which it would buy out Yahoo's search business and leave the rest of the company under Icahn's control. No one seemed very excited by that suggestion, and instead Icahn made do with three seats on the Yahoo board. In return he withdrew his dismissal motion. At the same time, Yahoo reported generally solid 2Q results which at least demonstrated that the company is holding steady in the current difficult environment. Yahoo's future however remains as uncertain as ever. It will be interesting to see what transpires at the annual meeting.

Signaling that he was drawing a line under the whole affair, Microsoft CEO Steve Ballmer told analysts: "It didn't work out. Fine. We're done. We can move on."  Instead the company announced plans to enhance its existing alliance with Facebook (in which it has a 5% shareholding) by introducing web search and associated ads on the US pages of the social networking portal before the end of the year. The effective termination of the takeover battle led to a shake-up at Microsoft, including the departure of Kevin Johnson, the executive who had led the Yahoo bid and was also responsible for the launch of the Windows upgrade Vista. Johnson is leaving to become CEO of infrastructure company Juniper Networks. As a result, Microsoft announced plans to split the Platforms & Services division headed by Johnson in two. It will now operate as Windows/Windows Live and Online Services.

In a coda to the whole saga, Yahoo chairman Roy Bostock went on the record to draw an unfavourable comparison between Microsoft's protracted and ultimately futile pursuit of his company with the near-surgical precision of InBev's assault on Anheuser-Busch, which was done and dusted in a matter of weeks. Bostock accused Microsoft's Ballmer of lacking the commitment and nerve required to pull off the Yahoo takeover.

There was some movement in WPP's takeover battle for TNS. As had been expected, rival buyer Gfk confirmed that it had recruited the wealthy Herz family of Germany to help fund its own offer, which will need to top WPP's near-£1.1bn bid. Other funding partners are still being sought. UK private equity fund Cinven was also said to be in talks to add its support.

In the news this past two weeks: Advertisers

In the US, the crisis in the banking and home loans sector continued to grow, and the government was forced to provide emergency funding to mortgage giants Fannie Mae and Freddie Mac, the country's two biggest home lenders, after their share prices plunged in the wake of falling investor confidence. The Congressional Budget Office estimated that the cost of bailing out Fannie and Freddie could rise as high as $25bn. Californian savings & loan IndyMac was not so lucky, becoming the biggest lender to fail in the US in two decades, despite $32bn of assets. That collapse prompted warnings from analysts that many more small and midsize American banks could follow suit. It was suggested that as many as 150 out of the country's 7,500 banks could fail before the end of 2009. In the mean time, the big banks began unveiling their latest quarterly figures, in another roll-call of multi-billion-dollar write-offs and huge quarterly losses. 

The resulting turmoil is providing rich pickings for stronger financial institutions. French bank Credit Mutuel took its first significant steps outside its home market with the acquisition for at least E4.9bn of the German consumer finance and retail banking business of US giant Citigroup. Citi is selling off what it considers to be non-core assets to rebuild its balance sheet. It will retain its investment banking operations in Germany. Currently Credit Mutuel is France's #4 bank by assets, but is keen to diversify beyond the intensely competitive domestic market. The deal is expected to close before the end of the year. 

Meanwhile in the UK, Alliance & Leicester, one of the country's leading mortgage lenders, agreed to accept a £1.3bn takeover by Santander of Spain, which already owns larger UK lender Abbey. The deal represents a significant comedown for the British company: it is believed to have turned down a previous offer from Santander a year ago worth twice as much. A&L shareholders initially hoped that a higher bid might emerge from another British bank, but no such offer has materialised. If the deal goes ahead, A&L will be absorbed into Abbey. Santander's chairman Emilio Botin is rapidly gaining a reputation as one of the smartest figures in the industry, not least because his company has been left virtually unscathed  by the current credit crisis. In a video lecture at an awards ceremony which took place the night before the A&L bid, he offered some tongue-in-cheek advice to other members of the international banking community: “If you don’t fully understand an instrument, don’t buy it. If you would not buy a specific product for yourself, don’t try to sell it. If you do not know your customers very well, don’t lend them any money. If you do these three things, you will be a better banker, my son.”

In another possible Anglo-Spanish tie-up, merger talks between British Airways and Iberia of Spain gathered pace. The two airlines have been marketing partners since the late 1990s. If a deal is completed, the airlines are expected to maintain their existing separate identities under the umbrella of an umbrella holding group, in a similar fashion to Air France-KLM.

Also in the UK, there was further consolidation in the supermarket sector with the purchase of Somerfield supermarkets by The Co-operative Group for a little under £1.6bn. The deal had been expected. It strengthens the Co-op's position as the UK's #5 food retailer, more than doubling store numbers to around 3,000 outlets. Annual sales will be around £8bn, and the enlarged group will have around 8% share of the market, behind Morrisons' 11%. The Somerfield brand will be phased out. The Co-operative Group is already the UK’s largest mutual retailer. In addition to its supermarket business, it runs the country's third largest retail pharmacy chain, the number one provider of funeral services and the largest independent travel business.

Meanwhile Tesco announced plans to diversify into a full range of banking services. It signed off on a deal to acquire the 50% share held by partner Royal Bank of Scotland in Tesco Financial Services for £950m, and said it would begin offering current accounts as well as savings and insurance products. 

Unilever signed off on two significant disposals. As anticipated, it agreed to sell its range of Bertolli olive oils. The buyer is Grupo SOS of Spain, which already owns rival oil Carbonell. However Unilever will retain control of the Bertolli name for its expanding range of Mediterranean food products, such as spreads, pasta sauces and frozen meals. The price tag for the oil business was quoted as £500m. An even more significant deal was the agreement to sell its North American laundry detergent business. As expected, this is being acquired by private label manufacturer Huish, which is in turn controlled by investment fund Vestar Capital Partners. Huish's existing detergent operations will be combined with the Unilever brands to form a new company, Sun Products. The price tag on the deal is a cash payment of almost $1.1bn, plus preference shares in the new entity worth around $375m. Meanwhile the group also began moves to find successor to group CEO Patrick Cescau, who is expected to step down next year.

General Electric said it was considering the disposal of other units within its consumer & industrial division in addition to the appliances business already marked for sale. The key additional unit which could come onto the market would be GE Lighting, which served as the original core of the group following Thomas Edison's development and commercialisation of incandescent light bulbs.

Toyota's worldwide vehicle sales for the first half of 2008 were well ahead of General Motors', confirming expectations that the Japanese company will finally become the global #1 for the first time for 2008. Toyota’s first-half unit sales rose 2.2% to 4.82m vehicles; GM's slipped by 3% to 4.54m. However, even Toyota is feeling the strain in the North American market where sales of its own pick-up trucks and SUVs have plunged alongside locally produced vehicles. The company cut its full-year forecast to 9.5m vehicles, up just 1.5% on last year, compared to the 5% increase it had originally projected.

Apple came under pressure after rumours began to circulate regarding the health of CEO Steve Jobs. At a developer conference last month, he shocked delegates with his gaunt appearance. Famously, Jobs had a near-brush with death in 2004 when he was diagnosed with pancreatic cancer. Luckily for Jobs, it turned out to be one of the very few forms of pancreatic cancer which is not terminal and he was declared cured after an operation. What concerned investors, however, was that Apple kept Jobs' illness a secret until after he was given a clean bill of health. His recent appearance sparked concerns over a return of the illness, and these worries were exacerbated when an Apple spokesman refused to answer analysts' questions with anything more than what was effectively "no comment". Jobs' continuing presence at Apple is seen as crucial to the company's future, and the threat of his possible absence caused its share price to plunge. After several days of wild speculation, Jobs himself gave an off-the-record interview to New York Times columnist Joe Nocera to calm the markets. Although Nocera respected Jobs' privacy about the precise nature of the illness, he did state that it is not cancer and is not considered life-threatening.

Bertelsmann agreed to sell its US direct-to-consumer sales arm to privately owned investment fund Najafi Companies for an undisclosed sum. The business includes the mail order DVD and music retailer Columbia House and a number of book clubs including Book-of-the-Month.

eBay scored a significant victory in the ongoing controversy over the sale of counterfeit goods, following the ruling by a US judge against a suit from luxury jeweller Tiffany which argues that the internet company should be held liable for the sale of fakes on its site. The judge said that the current systems employed by eBay to guard against the sale of fakes were adequate. Instead, he said, it was up to luxury companies such as Tiffany to police their trademarks themselves. Two weeks ago, in a similar suit brought in France by LVMH, a French court found against eBay and fined the company almost E40m in damages and compensation.

In another court case, toymaker Mattel won an important victory in its battle to defend Barbie against streetwise competitor Bratz. The latter dolls were in fact designed by a former employee of Mattel, Carter Bryant. Mattel has issued a number of lawsuits against both Bryant and Bratz owner MGA Entertainment, claiming that Bryant's original designs for Bratz dolls were made when he was still a Mattel employee and therefore belong to the company. Last week, a US court ruled in favour of Mattel. The court has yet to decide whether or not the Bratz dolls themselves infringe Mattel's copyright, in which case substantial damages could be payable. Mattel is seeking an injunction to suspend the sale of Bratz altogether. 

Jim Stengel, arguably the world's most powerful client in his role as chief marketing officer at P&G, is to step down next month in preparation for early retirement at the end of October after 25 years at the company. His replacement is Marc Pritchard, currently P&G's president of strategy, and a former head of the cosmetics and personal care division. It's not yet known what Stengel, still in his early 50s, intends to do next. According to a P&G spokesman he has indicated that he wishes to pursue "a personal passion to influence other marketers and promote marketing as a positive force in the world". The #2 marketer at US phone giant AT&T is also stepping down. SVP advertising & sponsorship Wendy Clark is to leave the company in advance of the relocation of its corporate HQ from San Antonio to Dallas. A replacement has yet to be named. 

There was a different sort of high profile defection at UK music group EMI, currently struggling to regain market share under private equity buyer Guy Hands. In a move that had been anticipated for some months, the company's best-known artists, the Rolling Stones, confirmed plans to quit the label for industry leader Universal Music. The new contract with Universal will cover three new albums as well as the group's back catalogue since 1971.

In the news this past two weeks: Agencies

There were several significant personnel changes in the agency world. Long-serving O&M chairman-CEO Shelly Lazarus announced plans for her succession. She will step down as global CEO in January 2009, to be replaced by Miles Young, currently chairman of Ogilvy Asia Pacific. Lazarus will remain worldwide chairman of the network. Also, Bartle Bogle Hegarty executive creative director John O'Keefe resigned from the agency after 18 years to take up a new role as worldwide creative director at WPP, overseeing output from all that group's subsidiary agencies. He was replaced at BBH by Nick Gill, previously creative director. Rosie Arnold steps up to become deputy creative director. 

Meanwhile, Joe McCarthy, Johnson & Johnson's VP, worldwide advertising, is crossing the client/agency line to take up a new role as CEO of Publicis New York. It's not the first such change for McCarthy. He has crossed back and forth between agency and advertiser throughout his career. Starting as an ad man (at Saatchi & Saatchi), he later joined Nike as head of global advertising. In 2001 he was back into the agency world to co-found Boston agency McCarthy Mambro Bertino, before joining J&J in 2005. McCarthy is taking over the Publicis NY role from Gill Duff who is expected to stay with the group in another as yet unspecified role. Shortly afterwards, Publicis Groupe also announced the resignation of John Farrell, president & CEO of the group's Specialised Agencies & Marketing Services (SAMS) division. That unit oversees the group's niche units in areas such as healthcare, shopper marketing, PR and corporate communications.

BBDO strengthened its relationship with Procter & Gamble, whose roster it joined following P&G's acquisition of Gillette, by snapping up Cincinnati-based creative agency Barefoot Advertising. That company, founded by former P&G marketer Doug Worple, works on a number of P&G brands, mostly below-the-line. The unit is being absorbed into BBDO's direct & digital marketing arm Proximity Worldwide. In a separate deal, Interpublic acquired New York digital agency HUGE.

Although no decisions have yet been made about future advertising assignments, DDB Chicago was reported by Ad Age to be steeling itself for significant cuts in marketing budget in the wake of InBev's takeover of key client Anheuser-Busch. Separately this week, Interpublic's Deutsch agency was added to the A-B roster for an as yet undisclosed account. Ad Age also reported that Johnson & Johnson is to launch a creative and media review for its mammoth pharmaceuticals portfolio. Campaign in the UK reported that Heineken is prepping a review of its global creative account, held mainly by The Red Brick Road.

In other account assignments, Home Depot called a review of its entire marketing roster, worth around $600m a year in billings. Richards Group currently holds creative; Initiative has media. Kohler placed media for its faucets and other kitchen hardware with Carat; and Diageo moved creative for Jose Cuervo tequila into JWT New York. In Europe, Danone moved creative for its recently acquired infant formula brands Milupa and Cow & Gate from Leo Burnett to Euro RSCG; Wrangler placed European media with MPG, who also won UK airline BMI; Conde Nast appointed DDB Paris to manage pan-Euro creative for Glamour magazine. In the UK, News International launched a review of creative for The Sun newspaper; and Boots called a review of UK media, out of Mediacom. For all other appointments, subscribers can access the full Adbrands Account Assignments database here.

In the news this past two weeks: Media

Google and Viacom agreed a compromise on the terms of a court order issued two weeks ago that the search giant, which owns video service YouTube, hand over personal details of everyone who has ever watched a video on the site. Viacom's legal team want to use the data to show how often unauthorised Viacom material was viewed on the site. However, in the wake of protests from privacy groups, all personal information will be now stripped out of the user logs before they are released to Viacom, so that specific individual users are not identified. Also this past week, Google was hit by two new lawsuits over copyright infringement, from Italian mediaowner Mediaset and its Spanish affiliate Telecinco. Mediaset is seeking damages of around $800m for illegally uploaded clips.

In the UK, the media regulator Ofcom handed the BBC a record fine of £400,000 for rigging phone-ins on TV and radio shows. The fine relates to a long-running controversy over shows where the audience is encouraged to call-in, either to participate in a competition or to vote to select winners. In these cases, said Ofcom, "the BBC deceived its audience by faking winners of competitions and deliberately conducting competitions unfairly. The investigations found that in some cases, the production team had taken premeditated decisions to broadcast competitions and encourage listeners to enter in the full knowledge that the audience stood no chance of winning." In other cases, programme makers made up the names of winners because technical problems had prevented them from selecting a genuine caller. Although the BBC received no direct financial benefits from the phone-ins, Ofcom said the rigging constituted a breach of public trust. Earlier this year, commercial broadcaster ITV was fined £6m for its abuse of premium-rate telephone lines. However, in the US, the $550,000 fine imposed by the FCC on what was then Viacom in connection with the Janet Jackson/Justin Timberlake "Nipple-gate" incident was over-turned on appeal.

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Simon Tesler
Publisher, Adbrands

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