Publicis skips the CMO and goes straight to the CEO

0:05Host:MBA Training, CMO edition. We get into Publicis skips the CMO and goes straight to the CEO. So the most talked-about pitch of the month is one that never happened.

0:17Expert:And the person who normally runs it wasn't even in the room.

0:21Host:Set it up. What did Sadoun actually say?

0:24Expert:Last Tuesday, on Publicis's quarterly call with analysts, Arthur Sadoun, who runs the whole group, said "We are increasingly seeing CEOs involved in what we do." Digiday gave it a blunter headline: Publicis is skipping the CMO, the chief marketing officer, and pitching the chief executive directly.

0:46Host:Wait, he said that out loud? To analysts? On a recorded call?

0:50Expert:On a recorded call. His reasoning is that CEOs are passionate about AI, artificial intelligence, and if they want to keep running their companies they have to understand it. "This has to start from the top," he said.

1:05Host:And somewhere a CMO is reading the transcript on their phone in the back of a taxi.

1:10Expert:Copied in on their own agency relationship.

1:13Host:Cc'd on your own account. That's going on a mug.

1:17Expert:Put it next to "per my last email."

1:20Host:Okay, is this real, or is it earnings-call perfume?

1:24Expert:There's a real deal behind it. Last month PepsiCo moved its media business to Publicis with no formal review. Digiday says that pulled it away from Omnicom, which had run it for three decades.

1:38Host:Ouch.

1:38Expert:Then PepsiCo's own chief executive, Laguarta, went on his earnings call and called the switch "an important capability for us."

1:47Host:Oh, come on. The CEO talking up a media agency to Wall Street?

1:52Expert:Digiday made the same point. Fortune 500 CEOs rarely praise an agency to investors. That job usually falls to the CMO.

2:02Host:So the CEO read out the CMO's lines, about the CMO's own account.

2:06Expert:That's pretty much the whole story in one sentence.

2:10Host:How big is the account?

2:11Expert:COMvergence, a firm that tracks agency billings, puts PepsiCo's media spend at about one point nine billion dollars a year.

2:20Host:And Omnicom loses that after all those years without even getting to...

2:25Expert:...defend it. No pitch, no final presentation. It just goes.

2:30Host:That one lands for me. Somewhere there's an account team that gave years to that business and never got the chance to fight for it.

2:38Expert:Yeah. That's the part nobody puts in a press release.

2:41Host:Right. Back to it. How do you win without a pitch? Explain the pitch for anyone lucky enough never to have done one.

2:49Expert:A pitch is the competitive review: several agencies, months of decks, chemistry meetings, procurement squeezing the fee. AdNews says PepsiCo called its process a media capabilities review. The client doesn't judge presentations. It audits the agency's data, measurement and technology.

3:10Host:To be fair, that sounds more sensible than a talent show with sandwiches.

3:14Expert:It is more sensible. I'll give him that.

3:17Host:So why does it make me itchy?

3:19Expert:Because "skip the pitch" and "skip the CMO" came out in the same breath.

3:24Host:Let me be the unpleasant one. Maybe CMOs earned this. Short tenures, no seat at the real table, talking brand while the CEO wants growth.

3:34Expert:You're quoting Digiday back at me. Their briefing says few CMOs carry much weight with the rest of the C-suite, meaning the top executive table, and most don't stay long enough for an agency relationship to outlive the retainer.

3:50Host:So I'm right.

3:51Expert:You're half right, which in this business counts as a promotion.

3:55Host:I'll take it.

3:57Expert:The other half matters, though. Holdcos, the holding companies that own whole networks of agencies, have been chasing CEOs for years. Martin Sorrell built a lot of his reputation at WPP on CEO access. Maurice Lévy worked the same circuit for Publicis, and John Wren did it at Omnicom. Digiday's point is that those relationships grew out of the CMO relationship. They sat on top of it, they didn't replace it.

4:27Host:Until now.

4:28Expert:That's what Sadoun says. And it's a claim. Nobody has measured it.

4:33Host:Why now, then?

4:34Expert:Fear, first. AdExchanger, citing Digiday, points to a Harris Poll where four in five chief executives think their job is at risk if their AI projects fail.

4:46Host:So the CEO is scared, and Publicis turns up as the private tutor.

4:51Expert:Digiday's line was that it doesn't take much to work out who Sadoun has in mind for the tutoring.

4:57Host:A tutor who also sells you the textbook, sets the exam and owns the school.

5:02Expert:And sends the invoice to the parents.

5:05Host:What's the second thing?

5:07Expert:Consolidation. Omnicom bought Interpublic, so there are now three global holdcos. AdNews spells out what that means: PepsiCo was never likely to go to WPP, because WPP is Coca-Cola's main agency. Fewer doors means fewer contests.

5:26Host:So Omnicom does a giant merger to get stronger, and the guy across the street benefits most. That's like building a bridge and watching your rival collect the toll.

5:36Expert:Pretty much. Sadoun told Adweek, as AdExchanger reported, that clients understand big groups can work with competitors. "That's not a problem," he said.

5:47Host:And Coca-Cola?

5:48Expert:Publicis pulled out of the Coke media pitch after landing PepsiCo. AdExchanger says Sadoun declined to explain why.

5:56Host:Declined to explain. Pretty cagey for a man who says conflicts are no problem.

6:01Expert:Maybe some conflicts are easier to manage than others.

6:06Host:Okay, give me the strongest case that this is all bravado.

6:10Expert:Brian Wieser at Madison and Wall says Publicis's revenue comes mostly from its core business and from principal media, where the agency buys ad space itself and resells it to clients at a margin. He doesn't see much of it coming from a wave of AI spending. His line was "The only real driver of increased spend is when you get a change in competitive intensity in a category."

6:36Host:Translation: AI is the icing, and the cake is media trading.

6:41Expert:That's his reading. Digiday also says plenty of people aren't buying it. The doubters ask how many chief executives decide their business needs transforming and ring an ad holding company first. A few go further and call it bravado covering pitches that went nowhere.

7:00Host:Ooh. Shots fired.

7:02Expert:Their shots. I'm just reading them out.

7:05Host:Here's where I land. If the CEO owns the AI bet, the CEO should own the agency decision. A CMO running a months-long beauty contest is theatre.

7:16Expert:No, that's where I get off. The CEO can own the bet, but someone has to own the work on Monday morning. Picture the meeting where the CMO inherits an agency the CEO chose over dinner and gets told to hit the numbers.

7:31Host:That's called being an executive.

7:33Expert:It's called being accountable for something you didn't get to choose. Then add Wieser's point. The same group that coaches your CEO on AI also makes money reselling you media. Somebody in the building ought to be asking awkward questions about that.

7:49Host:I still think a CMO who can't get into the CEO's office has a bigger problem than Publicis.

7:55Expert:And I think a CEO buying AI advice from the people who buy his media should want that CMO in the room. We're not going to settle this.

8:05Host:Nope. Not today.

8:06Expert:Here's the part I find bold, though. Darren Woolley, the pitch consultant at TrinityP3, told AdNews that Publicis spent years doing the hard yards on PepsiCo across Asia before it asked for the global keys. He called it "the classic land and expand playbook."

8:25Host:So the no-pitch win was really the longest pitch in history.

8:29Expert:Exactly. They just never called it a pitch.

8:32Host:Which is a lesson for agencies, and an awkward one for CMOs, because the pitch was the one moment the CMO controlled.

8:40Expert:And the CMOs who come out of this well will probably be the ones who already sit with the CEO on AI. They won't be waiting outside the door with a procurement scorecard.

8:50Host:So what are we watching?

8:52Expert:Who wins Coca-Cola. Whether Omnicom or WPP answer with their own pitch to chief executives. And earnings season. Digiday flagged that Laguarta's comments set up something to watch: CEOs talking about marketing on calls where the CMO used to have the topic to themselves.

9:13Host:And whether the CMO is still on the cc line.

9:16Expert:Or quietly moved to bcc.

9:18Host:Which leaves the question AdExchanger asked: when the CEO signs the deal and the CMO runs it, who exactly is the agency working for? Sources: Digiday, AdNews and AdExchanger. Every link is in the show notes. That's the episode. If you want the structured version, the CMO track is at mba-training.com.