• by Joe Mandese  @mp_joemandese, September 14, 2004

WPP Group's $1.5 billion acquisition of Grey Worldwide positions the agency holding company in a neck-and-neck race with Omnicom, but the deal firmly establishes WPP's media buying units as the clear market leaders. And if Irwin Gotlieb, chairman of WPP's Group M division has any say, the number of media networks he manages will grow, along with their dominance of the media-buying marketplace.

Based on current estimates, Group M (MindShare, Mediaedge:cia, Maxus and MediaCom [pending]) will emerge with a 29 percent share of the market among the Big 6 agency holding companies (see table below), according to revised projections released Monday by RECMA.

Publicis (Starcom MediaVest Group and ZenithOptimedia Group) will have a 21 percent share of market, followed by Interpublic's (Initiative and Universal McCann) 17 percent.

Despite its position as the largest overall advertising and marketing services holding company, RECMA pegs Omnicom at only fourth place in media-buying market share, with 15 percent of worldwide market clout, barely ahead of a rapidly growing Aegis Group's (Carat and Vizeum) 12 percent share.

The deal also further diminishes the market position of Havas' MPG unit, which has hoped to bolster its base via an acquisition of Grey and its MediaCom unit. Based on RECMA's new estimates, MPG will have only a 5 percent share of the worldwide media networks marketplace.

In their update, RECMA's analysts speculated that Group M's burgeoning Maxus unit, which primarily operates in the Asia-Pacific region, would be a "perfect fit" with Grey's MediaCom unit. "Hence, a merger between the two brands (Maxus and MediaCom) is likely," predicted the RECMA report, noting, "Group M would then operate three networks of a similar size, after transferring to Maxus some accounts handled by MindShare and Mediaedge:cia."

On Monday, MediaDailyNews reported on the speculation by some observers that MediaCom would be a logical fit with Group M's Mediaedge:cia unit, but Group M's Gotlieb said it is possible that neither scenario may occur and that it is very possible - and maybe even quiet logical - that WPP would continue to operate MediaCom as a distinct media network within a Group M portfolio. In theory, he told MDN, Group M could operate with an unlimited number of distinct media networks and that there might be no need to further consolidate buying units.

"Reducing the number of networks isn't even in the realm of our strategy," said Gotlieb. "Leverage comes form the scale of Group M in total. The last thing we would do is take two strong brands and combine them."

While that's not unprecedented in WPP's past - it combined Ogilvy & Mather's and J. Walter Thompson's media departments to form MindShare, and The Media Edge and CIA to form Mediaedge:cia - Gotlieb said those mergers made sense, because they combined complementary resources, increased market clout and, perhaps most importantly, did so without any significant client conflicts.

When WPP formed Mediaedge:cia as a separate network, Gotlieb said it was done in part to manage potential client conflicts. That could well be the case for MediaCom, which has ties to Procter & Gamble, a client that would seem to have conflicts with Unilever, a major WPP client.

However, Gotlieb said it still is premature to discuss how MediaCom ultimately would be integrated into Group M and that the management team hasn't even begun to address that.

"We haven't done that work yet," said Gotlieb. "The due diligence on this deal was done at such a top-line level and this deal isn't even going to close until the end of the year or until the beginning of next year."

Asked how many media networks Group M ultimately could operate, Gotlieb said, "I think the answer is that you can manage as many as your clients want."

Media Buying Market Shares

             Media Networks                     Market Share 
WPP          MindShare, Mediaedge:cia, Maxus             29% 
Publicis     Starcom MediaVest, ZenithOptimedia          21%

Interpublic  Initiative, Universal McCann                17% 
Omnicom      OMD, PHD                                    15% 
Aegis        Carat, Vizeum                               12%

Havas        MPG                                          5% 

Source: RECMA's Worldwide Media Agency Networks rankings, updated September 2004