Woe the Digital Sale: Consolidation -- What's In It For Me?

Question from a digital media salesperson: “So now that Dentsu is buying Aegis, that leaves five companies controlling the majority of all media spend in the world.  Should we be changing how we sell advertising, since the buying side is now so concentrated?

Amy says: Consolidation in the agency business is an ongoing trend, as holding companies acquire agencies one by one all the time.  This holding company buying holding company thing is more interesting.  Global advertisers demand agencies with global capabilities; it’s hard for agencies to be competitive without that infrastructure.  Dentsu has historically been strong in Asia,  and this represents a huge move for them. 

Media selling at the holding company level can help you sell on a day-to-day basis, but I’m not sure it works the other way around.  If you are generating a large chunk of business with a particular agency, you could potentially help your property grow across the media agencies within a single holding company.  More often though, media sellers with scale look for new ways to partner with holding companies to add value beyond just media insertions, and that additional benefit story can become a key component of your pitch to your agency buyers. Preferential rates, first looks, and dedicated customer service teams are just a few ways that media companies connect at the holding company level.

I think it's more important to contextualize the life cycles of agencies and holding companies with the client relationships they hold.  Even outside of holding companies, there are a limited number of enterprise advertisers who control the media marketplace.  Building direct client relationships can help, as advertisers and agencies are together for shorter periods of time;  regular agency reviews, driven mostly by procurement departments, are becoming more common. (Also becoming more common: local city government dictating health policies to its citizens. But I digress.)

Of course any agency person reading this hates me for suggesting going directly to clients, so I’m going to share another point of view.  The concentration of buying at the holding company level has always put sellers at a disadvantage because of clout.  However, the fragmentation within the media marketplace is making clout harder to gain.  Also, each advertiser’s need is different. So if you have a buyer who is looking out for their client, you will still have opportunity to make your offering matter, no matter what point of view the holding company may want to promote.

Jason, how do you work with holding companies?

Jason says: I love consolidation when it makes sense, which is why I am upset that I may soon have to buy five sodas when I go to the movies in New York instead of one. It will take time to get used to. More consolidation in the agency business, however, is not a dramatic change, nor does it require a drastic change in strategy. In fact, we touched on this topic last year regarding corporate buying mandates. This is not the exact same situation, but there are parallels. 

Consolidation typically happens for three reasons: 1) To gain a presence in markets you do not currently serve. 2) To acquire capabilities you do not presently have. Or,  3) To take advantage of economic efficiencies in buying or selling of goods and/or services. The recent acquisition of Aegis falls mostly into bucket #1 and a bit into bucket #3. (Now, I'm thinking of getting a large bucket of popcorn with my five sodas). If we were selling television advertising, I would say #3 is the most important. But in the digital world today, this doesn't hold true. As it stands, it is very rare that even the biggest digital media sales companies put together deals at the holding company level. Why not? There is opportunity here.

Capitalizing on the potential grouping of accounts for pricing efficiencies is standard practice in most sales businesses. However, it has been lacking in our industry. Agencies have been more preoccupied with building a trading desk designed to take the operating margin for themselves than with negotiating a better deal with media organizations.
To change things, have your sales teams gather all the revenue for a particular holding company at the macro level. Look at the accounts. Is there any commonality among them? What about the value proposition of your site(s) or network(s)? Is there anything that matches across several of them? Analyze the deals you have done with those advertisers. Is there any similarity to what they buy, like shared sites, targeting practices, etc.? If you can find the similarities, you may find the opportunity. Once you have the makings of a pattern in the buys you have, bring the operating agency a sweetheart deal if the holding company increases its total spend with you by 25% (show them the strategic thinking behind your proposed increase). 

Will it work? No. The agency will tell you that they have no input into what their sister agencies within the holding company spend. Smile, say "thank you," and tell them you are going to speak to their client about it. Now you’ll have yet another reason to go to the client and talk strategy. After you explain the great deal you offered them, they will wonder why their great big agency didn't take it, and why that agency isn't using its big agency clout to get their client a better deal. Now, on to the next problem: How to sneak five sodas into the movie theater.



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