What Will Happen to Banks' Ad Spending Now?

On Friday, just hours after I blogged about Wachovia (WB) giving its nearly $150 million advertising and marketing business to Ogilvy & Mather, news started to leak out that Citigroup (C) is buying the majority of Wachovia's assets, which threw a wrench into the advertising deal, to say the least. With its acquisition pending, Wachovia held off on finalizing its contract with Ogilvy.

Bank acquisitions like this one don't just mean upheaval for the financial landscape, they're also changing the advertising environment.

It's a bad thing for Ogilvy & Mather (owned by WPP Group (WPPGY)) to lose this nearly $150 million in annual business just before this deal — which seemed like a sure thing — closed. And it's not the only acquired bank whose ad spend is up in the air: WaMu spent north of $170 million on advertising last year, a big client for TBWA/Chiat/Day. What will happen to that brand and its ad spend now?

Lehman and and Bear Stearns were just small advertisers, with Merrill Lynch (MER) representing more advertising spend. But it's these consumer-facing brands like Wachovia and WaMu whose disappearance could deal a huge blow to advertising agencies.

Comments

[posgood:]

1. I thought the news reported that Wachovia would be operated as a separate retail brand by Citi.

2. Somebody's loss is someone else's gain. Both JPMC and Citi will be moving into new markets with these acquisitions. They are not likely to go dark.

2008 Oct 01 02:12 PM

[HighHeat:]

An oligopoly controlled by three companies (think back to the US auto industry in the 60s and 70s) makes for some fierce ad battles. The media money won't be spread among so many different companies, but it'll still be out there.

2008 Oct 01 03:08 PM

[banker27520:]

I don't really see how they can keep the Wachovia brand name because Wachovia still exists as another company with the brokerage and insurance arm. That would be extremely confusing, just best to change it to the Citi name....

2008 Oct 01 03:47 PM

[Ishortyou:]

Wachovia got rid off the prior toxic risky wasted bank subsidiaries and kept the good ones. Now it can start from scratch to build a new banking subsidiary with safe practice together with its remaining good outstanding subsidiaries. The current subsidiaries of Wachovia make it look like “Merrill Lynch without the toxic risky waste”, good job from management it separated the good bank from the bad bank overnight, plus its CEO Bob Steel is one of the top rated mutual fund managers. Wachovia will keep the valuable human resources and the talent that have expirience in the banking business saving them for the new banking subsidiary. Buying the municipal bonds or the auction rate securities will give the inflow of cash as long as its hold even to maturity. Some investors are taking money away from Hedge Funds going wild and putting that money into accounts manage by people that know what they are doing, Bob Steel is one of those people that know what they are doing, dont be surprise some of this money will go to Wachovia subsidiaries. Earnings will be adjusted accordingly, like simple arithmetics they will manage its expenses vs its earnings to come ahead in capital and start piling up cash (saving cash a hard job for most of us that live on debt), this new cash will give them the jump start of a new banking subsidiary without even thinking about to sell its remaining subsidiaries.Forgot to mention that Wachovia owns a hudge Insurance subsidiary which is making money and has sound book of business. Lehman debt is bonds most of them senior, as bankrupt as Lehman is those bonds get paid. ARS are Municipal Bonds as bonds they get paid, hold into maturity they get paid in principal, those ARS are cash flow. Preferred dividends will get paid accordingly because the holding company does not own the banking subsidiaries anymore so modification are going to be made. Getting rid off the toxic waste risky bank related subsidiaries is a good strategy and converting the remaining broker one to a new bank subsidiary with clean sheets is a good one too.

2008 Oct 01 04:03 PM