Pitch activity has gotten off to a unusually strong start this year and Pivotal Research analyst Brian Wieser is taking it as a sign that 2018 will be another “Mediapalooza,” the moniker industry types used to define all the review activity that took place in 2016.
Back then, the activity was attributed, in part, to media agency transparency issues, as highlighted in a report issued by the Association of National Advertisers. But other reasons were cited as well, including the fast pace of change in media, which motivated some clients to review just to make sure their agencies were keeping up.
Wieser notes the big reviews announced so far this year for media and/or creative: Shell, HSBC, Mars, DISH Network, Quicken Loans and Asda. By his calculation, between $3 billion and $5 billion in measured media spending is currently up for grabs.
“While many pitches occur without any announcement and others are announced well after they have begun, a large volume this early reinforces prior views that 2018 will be a busy year, perhaps surpassing the “Mediapalooza” of 2015-16,” Wieser wrote in a note to clients.
"In general, reviews lead to reduced fees for like-for-like work, with agencies looking to make up the difference with new services, tempering conditions that might otherwise be deflationary,” Wieser added. And they can affect a holding company’s organic growth rate if enough reviews don’t go its way.
Wieser also pointed out another interesting development this week—Procter & Gamble’s efforts to cut its advertising and agency fees. That’ll put a crimp in the HCs’ bottom lines if enough big marketers follow suit.
On its quarterly earnings call earlier this week, P&G reported saving $70 million just in the fourth quarter of last year from reduced overhead, agency fees and ad production costs. In total, the firm has trimmed its agency roster globally from 6,000 to 2,500 agencies, saving some $750 million. Trimmed. That’s probably the wrong word. A crew cut is probably the better analogy.
And there’s more to come—the packaged-goods giant wants to save another $400 million by cutting the current roster by another 50% and implementing new agency business models, including bringing more activity in-house.
Yikes, that’s quite a shave and haircut for Adland shops doing business with P&G. What’s next, a bikini wax?
Wieser states: “While the news is not positive for agencies, relative to P&G’s previous efforts to reduce costs or extend payment terms, any impact should be minor. In-housing may be another issue to monitor if they successfully and sustainably reduce their reliance on agency-like services for media planning and buying, although we’re doubtful that most large marketers will follow suit because of the challenges in doing so.”
As to that very last point, Adlanders must be thinking “from your to lips to God’s ears,” Mr. Wieser.
But I do wonder: If P&G can pull it off successfully, why wouldn’t other marketers with deep pockets follow suit? After all, P&G is a thought leader and a trend setter in the marketing business.