New Sapient: no longer just an anagram of ‘panties’

Has Maurice Lévy, CEO, Publicis, made the right investment?

After Publicis coughed up an eye-watering $3.7bn for Sapient last week, Dominic Mills examines what it says about the industry, and where it leaves the other holding companies.

Trivial observation #1. Until a week ago, about the most interesting thing I knew about Sapient was that it’s an anagram of ‘panties’, that it built complicated back-end tech stuff for big clients, and that it owned an agency called Sapient Nitro that never really seemed to know quite what it was.

Now, Publicis’ hefty offer of $3.7bn to acquire it last week, means that it will form part of what Maurice Levy calls a ‘digital platform’ including DigitasLBi and Razorfish.

Hmm. Well, based on its closing share price just before the deal was announced, Sapient had a market value of $2.4bn. So Levy has paid $1.3bn – a 44% premium – to take Sapient off the market. He will be hoping his ‘digital platform’ doesn’t turn out to be pants.

Trivial observation #2. Dear old Sir Martin Sorrell, as usual, contributed greatly to the theatre surrounding the deal by describing Maurice as behaving like a ‘jilted lover’, rebounding straight into the arms of another after Omnicom dumped him at the altar.

My own interpretation of this ongoing duel of words between SMS and Levy is that the more SMS affects insouciant flippancy, the keener his hurt or disappointment. It’s only human: faced with rejection, we all display an apparent sang-froid and have a little dig.

Conclusion: he would have liked to buy Sapient himself, but wasn’t prepared to pay the eye-watering premium Levy was. Campaign’s Claire Beale certainly thinks this was the case.

However, the real issue is what this deal means for Publicis, what it says about the industry, and where it leaves the other holding companies. Let’s start with the Wall St analysts, who aren’t too impressed and, among other things, call it a ‘panic buy’.

The general consensus is that Publicis has hugely overpaid, and Sapient doesn’t necessarily bring the strategic advantages Levy thinks he is getting. Brian Wieser of Pivotal, who seems to be some kind of Wall St guru, is particularly miffed, claiming that this means Levy no longer has the readies to buy IPG, the implication being that it therefore has one less potential suitor.

For his part, if you look at the deal on a macro scale, Levy claims that Sapient does two things: one, takes Publicis’s digital revenue over the 50% mark, a long-stated ambition of his; two, increases the group’s business in the US which, given the current slow-down in emerging markets and the sclerotic mess that is the Eurozone, is no bad thing.

But the key is the kind of digital revenue that Sapient brings. If you can cut through the jargon on Sapient’s website, it’s clear that what it does is big, enterprise-wide IT and tech projects – the digital pipes, applications and software stuff that clients hope transforms their business (whether it does or not is another matter). It’s big bucks, and it engages the client’s C-suite in a way that marketing/advertising issues do not.

Another way to judge this is by Sapient’s peer set: IBM, Accenture, Infosys and so on. The likes of WPP, Omnicom, Publicis and IPG have long envied the IBMs of this world for their ability to reach into the very heart and summit of clients. Publicis will hope that Sapient can do this for it.

But Sapient is a slightly different kind of beast because it comes with an agency, SapientNitro. On the face of it, this has a certain logic. Once you’ve gone in and given the client a digital transformation, it’s but a short jump to say ‘hey, we can give you a digital marketing strategy and execute it too.’

Only it has never quite worked that way. People close to the organisation say the concept of SapientNitro was built on tech-geek arrogance – launched on the basis of ‘how difficult can it be to do this advertising stuff?’ – and clients never took it seriously. And it may be that this arrogance, or hubris, contributed to a culture where, some say, creativity was undervalued and ideas squashed.

Certainly, if you look closely into the work SapientNitro lists for clients, it seems to have had a credibility problem. Can anyone name a single, defining, piece of work SapientNitro has produced for a client?

Yes, it bigs up the likes of Audi, Coca-Cola, Unilever and Target – but all the work is small beer. A few apps for Audi; a vending machine for Coca-Cola – (for the Beijing Olympics, so it’s not even contemporary); and a video service for Target.

And let’s not even talk about its website/e-commerce rebuild for Marks and Spencer, widely held to be a monumental screw-up.

Maybe this doesn’t matter. What Publicis needs is a high-class tech offering, and a ho-hum agency like SapientNitro that doesn’t match its existing digital agencies, DigitasLBi and Razorfish, is an extra that just gets chucked into the mix.

What I understand from talking to people in the tech/adtech space, is that Sapient will add an extra dimension to Publicis – when it comes to tech and its applications, Publicis is miles behind Sapient’s capabilities, so I’m told.

Which could be great. But given the money Levy has paid, he’s got to make the synergies work. In other words, he’s got to use the relationships Sapient has with clients to make them want to use his agencies – the big cross-sell.

But, if it didn’t work for Sapient and SapientNitro, why will it work this time around inside a larger, more diffuse, arguably less cohesive organisation? Will the Sapient team, in deep with Target or FootLocker, be taken seriously when they push agencies like Razorfish or even Leo Burnett? It doesn’t seem likely.

Equally, will the client listen when Saatchi or BBH says “by the way, we’ve got this really ace tech outfit called Sapient that can reboot your whole corporation”? Well, it may, especially if we are talking about Brazilian or Chinese clients of Publicis that are eyeing up the US or global markets.

Nevertheless, you can imagine that Publicis’ rivals, especially WPP and Omnicom, may feel that Levy has stolen a march on them, even if it’s at an extortionate price. Natixis analyst Jerome Bodin posits Publicis as the new Accenture.

If he is correct, and if you think of the digital explosion in the ad business as a high-stakes game of musical chairs, Publicis’s peers will be desperate not to be the last one left standing.