• by Kal Liebowitz , March 23, 2012

Under the traditional advertising agency model of the 1950s and '60s, media was viewed as a cost center and often “given away” as part of a full-service relationship with clients.  When independent media agencies first surfaced in the 1970s, it was considered heresy by full-service advertising agencies.  However, clients began to understand that unbundling media from creative could optimize both areas of their advertising efforts. 

With the explosion of new media channels, clients are once again reevaluating their agency relationships, with many inviting independents to take a seat at the table.  If done right, planning and buying services could become profitable when unbundled from creative services and still provide substantial cost savings to clients, as opposed to big holding companies that saw media as a cost center that needed to cut their expenses.

The boom of cable and syndicated TV in the 1980s changed media buying forever, as did the Internet, satellite radio, and social media and mobile advertising.  The complexity of today's media marketplace, with content streamed across multiple devices, underscores the need for specialists who understand how to reach across platforms to target hard-to-reach audiences. 

The ability to reach a specific target in one broad stroke has become substantially diminished. Thus, the value of independent media specialists has increased.  It’s no surprise that independent media shops have been successfully landing big accounts in the past year.  Horizon Media landed Capital One and Weight Watchers, while KSL has landed several clients from holding company agencies, including Toshiba, Bacardi and PetSmart.

Bigger Doesn’t Always Mean Better

Independents offer a big advantage over large holding companies, namely the reinvestment in talent and sophistication rather than answering to wall street investors.  Independents frequently wrangle better deals from media vendors and provide more bang for the buck, including opportunities of which larger competitors are not aware or motivated to pursue. Their smaller size makes them nimble, giving them the ability to quickly identify, assess and seize new opportunities -- often before holding company agencies can write a POV. 

In an attempt to mimic the success of independents, holding companies have acquired independent media shops and consolidated the in-house media-buying services of their creative subsidiaries into “independent” units.  What they actually did was create bloated buying cartels that resulted in higher prices and less customization and begat the problem of having separate profit centers that compete for the client’s budget. 

SFM was purchased by Havas and became MPG.  IPG picked up Western, which become a U.S. version of Initiative.  Even KSL was sold to True North, until it realized the negatives of being part of a large holding company far outweighed the promised benefits.  When IPG acquired True North, KSL’s management used the acquisition as an opportunity to buy back the agency and return to its independent roots.

There is a misconception that being bigger translates to better media rates for clients.  In fact, according to a two-year study by MPMA, the U.S. arm of Billets, advertisers often pay vastly different prices from big agencies and small agencies for the same inventory.  The study also found:

• Big advertisers often pay premiums, while smaller agencies received discounts.

• Economies of scale benefit big agencies more than their clients. 

• The most savvy and senior staff usually obtains the best rates.

Holding company media agencies commonly share rate information with each other. Consequently, media vendors know they risk exposure by offering aggressive rates to them and typically hold firm on minimum rates.  Vendors fear that if they offer better rates to one of the partner agencies, they may be forced to offer them across an organization. We refer to this phenomena as “reverse clout."

The trend away from “bigger” has resulted in some agency holding companies to launch smaller units to handle mid-market clients.  These include Maxus from WPP, Spark Communications from Starcom, and Prometheus from Omnicom.  While they are positioned as small and nimble, there is one important difference: they still report to their parent companies instead of their clients.

Media Is Marketing’s Biggest Expenditure

Media spending is generally the biggest part the marketing budget, so it seems fair to ask why it often takes a back seat to creative.  Indeed, media and consumer insight must drive the creative strategy, not follow it. If creative is considered in isolation, without regard to target audience media habits, purchase preferences and cost, then every creative execution would be a 30-second Super Bowl commercial spot costing over $3 million.  The ability to produce great TV spots is not a rationale for using TV. 

Critics argue that when media services are unbundled, clients lose a unified vision of their advertising strategy.  They maintain that creative and media companies frequently don’t communicate, diminishing synergy and resulting in diluted brand messages. 

Rather, media professionals with a strong client focus and access to millions of dollars in syndicated research are in a better position to determine how, when and where to reach the target audience most effectively. Independent creative agencies that partner with independent media agencies rely on media research when developing their creative strategies.

Bottom line, independent agency professionals’ client-centric and data-driven outlook provides a leaner efficiency model.  They’re winning big accounts because they offer more of what clients should be getting from their media agency partner:  precise targeting tools and analytics, unbiased media strategy, lower rates and better stewardship of the planning/buying process.  As the media landscape continues to expand, the value of media independents will only increase.