Scale Is A Big Deal; No It's Not

The proposed Publicom merger has raised the issue:  Does Scale matter anymore in Adland? And you’ll probably be shocked to hear this but those who have more of it say yes and those with less say no.

The fact that the number two and three holding companies, which already have a ton of it, think they can benefit by having even more  is a pretty strong argument for the yes-it-matters side.

Omnicom CEO John Wren told investors on a conference call Monday that he believes that the merged company would be the number one stop for pretty much anyone with media time to unload.  “We will be larger and make larger investments as a result,”  of the merger, said Wren.

Whether media vendors retain their share of expenditures from the combined company remains to be seen, said Wren.  But vendors will do everything in their power to make sure it’s at least the same, if not more. From the Super Bowl, to digital search and display ads and everything in between, Wren added, “I think the first place they will come every single day is to us.”



Of course, that’s exactly how GroupM feels, as the biggest media holding company up to now. And they believe they’ve maximized their clout by having a single executive—Chief Investment Officer Rino Scanzoni—control buying throughout the Group. After the merger was announced Sunday GroupM CEO Dominic Proctor took a playful shot—well, he called it fun anyway—at Publicis and Omnicom for not fully optimizing their marketplace leverage by following the same model. “Media investment management relies heavily on scale, but scale counts for nothing if it continues to be disparate,” Proctor stated.

Meanwhile Interpublic Group chairman Michael Roth issued a memo to the troops Monday saying that scale isn’t all it’s cracked up to be. “Nothing is as important in our business as deep client focus, which has nothing to do with whether an agency is large or small, or how it’s organized, and everything to do with a culture which values and promotes service,” Roth wrote.

On media scale, he continued, “For some time now, we have been competing effectively in the media arena with an offering that was smaller in scale than that of our peers. But our more strategic approach – with strong digital and content capabilities, a more collaborative relationship with the media owner community and an industry-leading pay-for-performance model – has been performing very well for our clients. We expect that to continue.”

Question is, does all that plus added scale make the offering even more attractive? Wall Street believes a number of would-be IPG acquirers are exploring the matter.

Havas CEO David Jones also issued a statement questioning scale as a strategy. "I'm not sure this is in the best interests of their clients or their talent."  He added that "Clients today want us to be faster, more agile, more nimble and more entrepreneurial, not bigger and more bureaucratic and more complex." Of course his boss, Vincent Bollore spent years trying to gain control of Aegis Group—but gave up last year when Dentsu swooped and offered a higher price.

MDC Partners CEO Miles Nadal has frequently questioned the need for scale in a digital world. With a little over $1 billion in revenue, MDC is on the small side for a holding company. But that hasn’t prevented the company from winning its share of new business and reporting record revenues in recent quarters. The fastest growing sector of late—Maxxcom, the media arm it created from acquisitions in early 2012, designed to give the company added scale. 

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