2023 wasn’t a very good growth year for the holding companies, according to Madison & Wall’s Brian Wieser, who issued a note this week estimating that five of the six major holding companies (WPP, Omnicom, Publicis, Interpublic and Havas) will average about 3% growth this year. Throw a “challenged” Dentsu into the mix and the average is lower. 

The biggest drag on growth is not surprising as the holding companies themselves have been calling it out all year — sharp spending cuts in the tech sector during what Wieser refers to as a “year of efficiency” for much of Silicon Valley. 

And next year will present major challenges to holding company growth as well, Wieser asserts. While the WFA issued a report earlier this week on in-house agencies, Wieser says that’s the least of the holding companies’ worries.  

“Even if there has been a significant amount of growth in in-housing and even if there is likely to be more in years to come, it’s unlikely that any spending shifts have accounted for much more than tenths of percentage points of growth in any one year,” he says.  

The bigger threats, he says, are a growing mid-sized agency sector, IT services firms and ecommerce growth of “digital endemic” marketers. 

“Mid-sized agencies have been a real issue over the past decade, as this group of businesses has seemingly outpaced the holdcos over that time,” he said. “Earlier this year I estimated that in the United States in the years leading up to the pandemic, the overall industry grew by mid-single digit levels while the biggest holdcos were flat with all of the growth accruing to their smaller competitors.” 

While mid-sized agency growth slowed significantly this year, “to the extent they continue to invest more intensively in growth opportunities relative to the holding companies, they could outperform again in the future.” 

As for IT services firms, Wieser pointed to Accenture’s digital agency unit Accenture Song, which posted double-digit growth in its fiscal-year 2023 as well as in its first fiscal quarter of 2024 that ended Nov. 30.  

“Most importantly,” said Wieser, “I think that anywhere there is e-commerce-related marketing is likely an area that is under-weighted activity for the largest agency groups and a source of under-performance vs. the broader media industry.” Many companies around the world are primarily dependent on Amazon or Alibaba for marketing their wares and “consequently don’t really need services traditional agencies offer.”  

And if the holding companies want to compete effectively, they must continue to evolve their services “to better meet the market’s future needs,” Weiser stated.  

They appear to be doing this, as evidenced by Omnicom’s proposed acquisition of ecommerce specialist Flywheel Digital. “They’ll also need to continue to push harder on bundling principal-based media with services, as we’re seeing at Publicis and Omnicom,” as well more development of data-focused products.   

“At the same time,” he added, “if agencies can continually focus on the ways they can they help marketers drive costs out of their businesses while supporting the pursuit of outcomes (however marketers choose to measure them), they will be well-positioned to see growth that comes closer to total media spending increases in years ahead.”