“Germany Is Experiencing an Unprecedented Marketing Crisis,” Says TeamBBDO CEO

“I didn’t see it coming,” says the chief executive officer, Christian Rätsch. “I predicted a storm, but this is a tsunami.” The leader of the TeamBBDO agency group joins via video call from abroad. He is on a family trip, but still takes time to speak about the status quo of the German marketing industry.

The picture he paints is bleak -- his tone refreshingly frank and honest. “Germany is experiencing an unprecedented marketing crisis,” he says.

Well, the numbers speak for themselves. The German agency landscape has been paved by a series of bankruptcies of well-known agencies this year. “I'm not talking about niche players, I'm talking about players we all know,” says Christian. Only at the start of this month, the well-regarded agency David + Martin from Munich had to apply for insolvency.

What About Piggy in the Middle?

Another sign of panic is “smaller agencies… asking if they can join the networks”, according to Christian’s observations. Big holding companies can work as a “safe ship” in this storm. Christian says, “Networks currently have a superior advantage. And I also believe that the pendulum among pitch participants is swinging toward networks because there's more continuity, more personnel security, more stability.”

A further advantage that holding companies often have is a whole set of disciplines under one umbrella. Companies like Publicis Groupe or Omnicom offer strategy, as well as data-led intelligence, planning and creativity -- giving them a big leg up. For Christian, this is a sign of the pendulum swinging back from the industry’s “self-absorbed” attitude where “we've focused a little too much on ideation and creativity”. He adds: “What's really nice is that we're seeing a renaissance of planning.”

Interestingly there is an opposing parallel trend to this -- creatives who start their own start-ups to have creative control and a niche they can have an advantage in. The CEO welcomes competition since “we all need creativity,” but voices concern for those in between.

“But the very small ones survive, the very large ones survive, and the... medium-sized agencies in Germany are all under pressure, and we will see a lot of changes here,” he says.

AI is another one of the many factors playing into the current “crisis”. Christian says, “The use of AI is now everywhere.” He appreciates the help the tool of artificial intelligence provides, especially through OmniAI, Omnicom’s personalised AI platform. However, smaller companies “don't have the money to deal with AI the way Omnicom does,” which unevens the playing field.

Double Double, Toil and Trouble – The Shakespearian Tragedy of German Economy

Europe’s largest economy, the third biggest economy in the world, is in trouble. Germany’s gross domestic product (GDP) stagnated by -0.2% last year, according to the Federal Statistical Office (Destatis). While key indicators have recently stabilised and expectations have brightened somewhat in light of anticipated additional government spending, an upswing is not yet underway, according to one of the nation’s leading economic institutions in Germany, the Kiel Institute.

All the while, Germany’s driving source, the automotive industry, is looking into the eye of the storm. Car-making accounts for about a fifth of the country's manufacturing output and generates 6% of GDP, according to Capital Economics -- but sales are diving nose down. Volkswagen, BMW, and Mercedes-Benz warned their investors about lower forecasts than the previous year and saw a decline by about a third in the first nine months of last year.

Unsurprisingly, this trickles down to marketing budgets. Christian says, “When Mercedes, Porsche, BMW, Volkswagen, Audi, and so on, reduce their budgets, the market simply notices, because we all work for some automotive company. And that's a fundamental problem.”

So, there is no question about if this turmoil in the car industry is impacting agencies, the question is more about how much. “In that respect, it depends a bit on the portfolio.”

With a strong mothership called Omnicom and stable agencies under it like the design agency Peter Schmidt Group, the marketing consultancy Batten & Company and the digital agency Interone, Christian knows that “we are the lucky ones”.

Amidst a national whirlwind, TeamBBDO is dealing with its own wind of change. With the pending merger of Ominicom with Interpublic Group (IPG), that would make it part of the largest marketing holding company in the world. In September, the UK watchdog Federal Trade Commission (FTC) cleared the $13.3 billion deal.

Into the Unknown

Christian says that he can’t comment on the current developments but expects a shake-up in the agency. He remains confident about his own agency, and feels positive about the rise of competition in the German industry.

With financial institutions predicting a slow recovery of the German economy, there are silver linings on the horizon, says Christian. Germany has “good design”, “a good understanding of technology” and one of the most important sectors -- even through hardship – remains the automotive industry. What the future drivers of Germany's industry will be remain to be seen.

When he joined TeamBBDO as a CEO after a long career as chief marketing officer, he expected a lot, as someone who is “inherently sceptical”. But not this. “I predicted a storm, but this is a tsunami… The difference between a storm and a tsunami is the unpredictability.”