WSJ: McDonald's puts $2B global media buying business under review

Dive Brief:

McDonald's is putting its massive $2 billion global media buying business under review in a bid to more efficiently spend its advertising dollars, The Wall Street Journal said in a report citing an unnamed source. The media review is the first from the fast food giant in around 14 years.
Currently, Omnicom Group's OMD agency handles McDonald's ad buying in the U.S. and in most countries globally. McDonald's told the Journal that its relationship remains strong with OMD and that the agency will be taking part in the review in an effort to keep that business. Bob Rupczynski, the brand's vice president of global media and customer relationship management, said the goal of the review isn't to drive down agency fees, but instead search out the most efficient way to reach the consumer and "ensure best in class media services and capabilities" globally. McDonald's consolidated its creative ad business with Omnicom Group last year.
The Journal report pointed to a number of ways McDonald's has been changing its marketing strategy lately, including increasing digital marketing and technology offerings such as mobile ordering and payments and adding a loyalty program. In June, it also announced it was ending a decades-long and costly sponsorship of the Olympic Games early.

Dive Insight:

McDonald's business has been struggling in recent years, especially with young consumers who are often looking to healthier and more natural eating options. An internal memo that surfaced last fall found that only one-fifth of millennials had ever tried the chain's signature Big Mac burger, which spurred the fast food giant, once seemingly ubiquitous among U.S. consumers, to beef up its social media staff. Continued business struggles well into 2017 have led to serious churn — CMO Deborah Wahl was replaced in April amid a larger exec shakeup — with the OMD news just the latest sign that the brand is aiming to considerably realgin both its budgetary priorities and overall marketing strategy.

News of a media buying review also follows a third-quarter earnings report Tuesday where executives emphasized the brand's growing focus on mobile technology. This initiative has manifested most notably in recent months through a "McDelivery" partnership with UberEats, which has quickly expanded to cover thousands of restaurant locations around the U.S and become a central part of McDonald's growth strategy going forward.

"We're really at this point focused on getting the operations right," Chris Kempczinski, McDonald's U.S. president, told investors on the call about the brand's mobile strategy. "Getting, for example, the crew to understand when a curbside order comes up, how do they take that order, how do they go out and bring the food to the customer. We're spending a lot of time on mobile order and pay."

Attempts at digital transformation have extended to in-restaurant offerings such as introducing more digital kiosks as well, which are coupled with new mobile ordering and paying options and a new mobile app. To help accelerate these changes, McDonald's recently partnered with technology consultancy Capgemini and agency Publicis.Sapient, along with IPG's Huge agency for design and user experience elements.

As is the case with digital transformation, McDonald's is a couple of years late on the agency review front. In 2015, when a record dollar amount of brand/agency partnerships went under review through the second half of the year, the industry dubbed the event "reviewageddon." At the time, brands were looking to become more efficient with their agency partnerships through consolidations and better contract terms.