Is Bigger Better?
But, says Beals, as the big get bigger, the prices these behemoths can negotiate aren’t necessarily getting any lower. "As a few big media players have emerged, there’s only so far you can go in saying, ‘We can get you a good buy,’" he says. In a word, he says, media services’ players, big and small, will succeed or fail on talent, just as they always have.
The problem with clout for clout’s sake, argues Arthur A. Anderson, managing principal of Morgan Anderson Consulting in New York, "is that media buying has become a commodity business." And selling a commodity is never easy — just ask the guys who sell soap for a living.
Recently, Anderson attempted to measure the impact of media clout by submitting buying specs to some very large media agency competitors, while keeping the media mix and timing the same. "The variants between the best buyer and the worst buyer in a particular day part or market was around 45 percent," he says. "Some of it was driven by their client base, and some of it was driven by their talent and their relationships with a particular medium or group of media."
What didn’t matter was size.
"If someone has twice the buying capability as another, it doesn’t mean they’re going to buy better," Anderson says. Indeed, Anderson says his research found that over a certain billings level, even another 50% or 100% in buying volume is irrelevant under most circumstances. David Verklin, CEO of Aegis Group’s Carat North America in New York, which ranks fifth with $4.3 billion in billings, agreed. "I think even the biggest guy will tell you that the prices are pretty much the same," he says. "I think if you talk to any of the high-level people in the business, they’re not going to say you can buy a spot on 60 Minutes cheaper if you have [Bcom3’s] Starcom do it versus [Grey Global Group’s] Mediacom. We’re all too huge."
These 800-lb. media-buying gorillas are so new that sometimes even they don’t know how they’d like to throw their weight around. Verklin, for one, pegs the media services revolution at about 36 months old. "Right now, we would be the largest buyer of media time and space in the U.S. five years ago," he says. "That’s how fast the business has consolidated."
But now, he adds, "to compete with a company like us, you really need to invest." Carat spends $48 million annually on media research alone, both syndicated and proprietary.
However, at Mediaedge:CIA North America, the newly named unit resulting from the recent merger of WPP and Tempus Group, CEO Steve Lanzano argues that clout can play more than just a cost-savings role. Lanzano says size has only become more important among media agencies as the media companies themselves have gotten larger.
"As the marketplace gets tighter and tighter, being a big player gets you the attention you need. It also gets you the pricing you’re looking for and gets you the added value," says Lanzano, whose company claims $16 billion in billings. "I think the opportunity in pricing is if you’re able to link together different media that [media companies] want to move... If you’re a small player, you really just can’t play in that game anymore."
You Can’t Tell the Giants Without a Scorecard And yet, while the advertising holding companies have continued to get larger and larger, their media agency brands have continued to multiply. The vision — if ever there was one — that agency holding companies might consolidate all of their media into one unit has instead given way to a structure that often mirrors that of the holding company. So now, just as holding companies oversee several autonomous ad agencies, they also tend to oversee several individual media buying groups rather than one soup-to-nuts clout-devouring entity that incorporates all of the holding company’s media assignments.
Just take a look at a few of March’s management moves: First, Omnicom reorganized its existing OMD and PHD units. OMD, which launched in 2000 as the broadcast buying unit for siblings DDB Worldwide, TBWA/Chiat/Day, and BBDO Worldwide, now handles all media planning and buying for the three separate ad agencies; it also incorporates buying and planning from myriad direct and interactive units, including RappMedia and BBDO’s Atmosphere, into subunits named OMD Direct and OMD Digital. OMD now manages more than $18 billion in media billings, and going forward, its execs will be slotted to serve specific media conglomerates, such as News Corp., The Walt Disney Co., and AOL Time Warner.
Then there’s OMD’s London-based sister PHD, which includes Advanswers, Creative Media, and, beginning last month, PentaCom, which was originally created to handle DaimlerChrysler’s $1.6 billion media spend. Like each of the units that make up PHD, PentaCom will now gain its parent’s moniker, as in PHD Detroit, as part the recent changes.
And finally, few experts expect Paris-based Publicis’s acquisition of Bcom3 last month to result in a loss of autonomy among the four media units involved. That’s because the current setup allows Publicis to serve not only Toyota through Zenith, but BMW through Optimedia and General Motors through Starcom. And that’s just the automotive category. Of course, there is some back-office cost sharing on the corporate level, with Zenith (in which Cordiant Communications Group has a 25% stake) and Optimedia being run by The Zenith Optimedia Group and Starcom being combined with sister shop Mediavest at a higher level as well.
But while the holding company giants tout their units’ ability to remain separate while still sharing certain costs, especially research, some major clients are still trying to figure out how they feel about all of the quick changes that have been rocking the field. At the least, observers say, clients are expected to begin reconsidering their media accounts as soon as the dust settles.
"It's a very confusing picture," says Beals, whose firm manages account reviews for clients. "It’s happening so fast that I don’t even know to what degree these organizations are actually working — where there are conflicts, where there are not conflicts... There have been reports of these guys’ combining to go after bigger clients, as in they combine all their clout. And yet they sometimes treat themselves as different [entities] as well. Where does the truth lie?"
According to Beals, clients are listening to the holding companies talk about the "firewalls" erected between each of their units with a dose of skepticism. "Clients are looking at these big conglomerations [asking], What am I really getting? Am I really getting true, conflict-free independence? What is the quality of media buying versus my competitor, if there are multiple competitors in different parts of a holding company?"
At Mediaedge:CIA, Lanzano said he doesn’t think his clients mind when his unit shares certain information with its WPP sibling Mindshare. "You share information where you can," he says. "Knowledge is still power, so being able to swap [marketplace] intelligence is great. We will go to [clients] if we think there’s an opportunity to move dollars together. We have not yet, but that would have to be done on a client-by-client basis."
Carat’s Verklin says he might even consider creating a separate branded unit someday as a way to bring in more clients to the three-year-old agency. "Now we’re starting to get big enough that conflict is an issue," he says. "So yes, I think you could actually see Carat create a second brand."
Respect Yourself So if size doesn’t matter as much, what does? To Beals, it’s the planning side of the business. "The bigger companies have dialed up their planning and media research capabilities quite significantly over the years," he says. "Philosophically, I think that’s where all the players are going, trying to offer a combination of really sharp and insightful research and the corresponding sharp and thoughtful planning that goes along with it."
Marc Goldstein, the just-appointed CEO at WPP’s Mindshare, touts his unit’s analytic approach to consumer research mixed with a strong management team, noting that the combination just won the agency new business from Novartis, a global assignment estimated at $250 million. Overall, Goldstein says he expects "modest revenue growth" this year. "We’d like to see a strengthening economy that leads to increases in marketing spending," he says. "If we see that, and we think that we will, it will be a slow and gradual and moderate trend line."
The bottom line, says Lanzano, is to provide insights that allow client brands to break through. That requires research, which is why Mediaedge:CIA has developed its own proprietary tools to divine what consumers are thinking and doing. "I think the real kicker is econometric modeling, to begin to be able to show accountability," he says. "You make an investment here, here’s a return on that investment."
Middle Management But what about the smaller or mid-sized clients who can’t afford to subsidize such high-end econometric modeling? Not surprisingly, each of the executives MEDIA talked to insisted that smaller clients will always have a place on their growing rosters. "We work very hard in making sure that everybody gets the attention of experienced individuals and has access to the resources," says Goldstein. "Everyone has access to the brainpower of what Mindshare has to offer."
Lanzano, too, says mid-level clients are served well by the bigger agencies. "The opportunity for them is that they’re getting the knowledge base that they wouldn’t get at a company without that sort of clout, so there’s huge benefit for them," he says. "When you wield that sort of hammer, you can get all types of things for that client in terms of added value."
And Verklin says he likes to think of his shop as "the choice for the underdog," especially since it was a variety of smaller accounts that helped Carat build its business initially. "I don’t think we’re unique in our ability to handle small and mid-sized clients," he adds. "Most of the good companies have built up their services to handle all sorts of clients... It’s like saying, does Merrill Lynch only work with the large investor? And I would say no."
Beals isn’t so certain. "There’s a generic concern that [mid-sized clients] might get lost in the shuffle. It all depends on whether you’re working with a good team from the media agency, and do they get support from upper management," he says. "But it’s clearly a question mark. Each case is different."
In the meantime, mid-sized media agencies will continue to be gobbled up by the big holding companies. (Observers have long pointed to Havas Advertising and Grey Global Group as potential acquisition targets.) Says Beals, "You’re left with these giant holding companies on the one side and a lot of smaller, independent agencies on the other."
Just don’t be fooled by the way the major holding companies choose to sell their latest merger, cautions Anderson. For in the end, what clients of all sizes want most is service and strategy. Says Anderson, "If someone smaller can do it — which is often the case, because the smaller [agency] may have better relationships with the media they’re buying from — then they can do it."