Media

Leila Abboud is a Bloomberg Gadfly columnist covering technology. She previously worked for Reuters and the Wall Street Journal.

When accounting giants start telling you that "brands are no longer built through advertising," you know something's up on Madison Avenue.

As I've written before, the nerds and spreadsheet jockeys at big consulting groups such as Accenture Plc, IBM Corp and PricewaterhouseCoopers LLP have been enjoying a moment in the marketing industry sun as brand-building is changed by the internet.

While they don't do traditional creative work like making TV spots, the consultants are good at technology projects such as building mobile apps or improving online sales. This stuff may lack TV's glamour, but it's become a must-have for companies from Coca-Cola Company to Ford Motor Co. as they try to reach consumers increasingly switched off from traditional advertising.

Tech Mavens
Consultancies now top the rankings of digital advertising agencies, according to 2016 revenues
Source: Advertising Age Datacenter

So these well-resourced upstarts won't be going away. Indeed, their business is accelerating at a pace that must alarm the big agencies run by WPP Plc, Publicis Groupe SA and others.

Take Accenture. After a spate of acquisitions, its interactive marketing unit is on track to reach $6 billion in sales for the financial year ending in August, according to the company. If that happens, it means the division's revenue will have doubled in two years -- and account for about 15 percent of Accenture's overall sales.

That's a serious business. With 18,000 employees, Accenture Interactive is the biggest digital agency in the world by revenue, and the sixth-biggest advertising company overall: 

New Order
Consultancies now account for four of the top ten biggest providers of advertising services
Source: Advertising Age Datacenter

Accenture has broader ambitions too. In November it bought London agency Karmarama, a surprise given that the target was known for its creative and design smarts, not its tech focus. So the supposedly geeky consultants know that creativity, even beauty, needs to be built into their technology projects.

PwC is also making rapid inroads into digital marketing, as previously undisclosed figures show. It had about 12,700 employees in this area at the end of 2016, three-quarters more than two years ago. Tom Puthiyamadam, PwC's global digital leader, says the firm needed more branding know-how to serve its big corporate clients. 

Consult This
PwC grew its digital services business by 60 percent last year, putting it in more direct competition with advertising agencies

Of course, much of what PwC or Accenture does isn't traditional advertising work, so the old school agencies don't face them on every pitch. Some ad groups are expanding into consulting to meet the challenge head on. Publicis bought digital agency Sapient in part for its army of 8,500 coders in India.  

But this is an area in which the consulting firm's battalions have a built-in advantage. In the age of the smartphone, the slickness of a consumer app or the speed at which companies respond to online complaints will do more to form views of the brand than a 30-second TV spot. E-commerce means those with sharper targeting and "stickiness" techniques win out. 

All this favors the consultants since traditional agencies aren't as strong on tech and software. Investors have cottoned on. Several advertising CEOs were grilled about the rise of the consultants at recent quarterly results.

Not only are the new rivals competing for contracts, they're vying for staff and acquisitions, which can push up the cost of both. This may take a toll on the agencies' growth, or their returns on capital if they overpay for deals. The consulting firms have deep pockets and often no public shareholders to answer to.

Michael Roth, Interpublic Group's CEO, has floated the idea of partnering with them one day rather than competing. Madison Avenue isn't populated by shrinking violets, but if its big beasts can put their egos to one side, that may be the smart move.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. At least according to Brian Whipple, head of Accenture Interactive.

To contact the author of this story:
Leila Abboud in Paris at labboud@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net