Size Isn’t Everything, But Media Agencies Give the Impression It Is
NEW YORK–The arrival of WPP Group’s MindShare in the U.S. this month gives the $16 billion entity top-dog status in a marketplace where competitors have been working overtime to bulk up on billings and clients.
With new CEO Irwin Gotlieb, MindShare will pool the media interests of Ogilvy & Mather and J. Walter Thompson into a single entity. Driving the consolidation, presumably, is a desire to pare overhead and gain more buying clout for clients such as IBM, American Express and Kodak.
But the big question remains: Does consolidation truly benefit clients? Some people say, emphatically, “No.”
“The reason for [these consolidations] has little or nothing to do with what clients need or don’t need, if you cut through the bullshit that goes on,” said a veteran media consultant, who requested anonymity. “Global this, mega-universe that, one suit fits all. It’s almost a pyramid club from that standpoint.”
“The question, at the end of the day,” continues this consultant, is, “are there any benefits for the client, the guys who pay the bills?”
With the MindShare consolidation, all signs point to WPP CEO Martin Sorrell’s agenda. “Every element of his empire is being looked at to improve margins or squeeze the profitability and he’s not about to take no for an answer,” said the consultant.
The margins that Sorrell and his rivals worry over are so paper thin that companies have little choice but to add volume–and hope to gain efficiencies that are not passed back to the client–or find new ways distinguish themselves.
“None of these players feels they’re big enough and [so] they’re all talking to each other,” said an industry observer, who predicted that only a half-dozen media giants will remain when all the deals are done.
One argument in favor of consolidation, however, is focus. “It’s my view that when a company has a clear and single focus on media excellence, it does better,” said Gotlieb. “It attracts and retains better people, it uses its resources more wisely, and ultimately delivers a better product.”
Of course, extra leverage always helps. “You can [buy media] intelligently. You can amortize costs that smaller organizations cannot. And those things ultimately provide a better product to your client. Now the fact that you have a little more money at the negotiating table, that doesn’t hurt either,” said Gotlieb, who earned his stripes as a savvy dealer of broadcast time.
Other media giants are marching to the same tune. Take The Media Edge, Starcom Worldwide and Optimum Media Direction, for example: TME, which claims $10 billion in worldwide billings, has seen growth fueled chiefly by its clients’ desire to
consolidate media duties under one roof (Campbell’s, Glaxo-Welcome, Tricon, et al) plus new accounts. A global player for just one year, TME is currently pursuing a handful of acquisition opportunities worldwide, sources said.
Leo Burnett’s Starcom ($7 billion worldwide) last month formed StarLink in an effort to add media management business from small and mid-sized agencies.
Omnicom Group’s Optimum Media Direction, which counts $8 billion in billings in business outside the U.S., is expected to join MindShare here next year, gradually consolidating most of Omnicom’s media functions.
While the final form of OMD is still being determined, Stephen Grubbs, BBDO’s executive vice president, director of national TV buying, said certain functions will operate independently of OMD “where it makes sense.”
Midsize players have been mimicking their larger cousins on the acquisition trail. CIA Medianetwork, for example, will add CPM in Chicago this week in a deal worth $5-10 million.
But some observers say the bigger-is-better formula just does not apply in the U.S. “It’s more of a factor overseas,” said Alan Gottesman, a principal at West End Consulting. “There are more markets. They’ve got all the media that we have here, cable, network, etc., but you add on to that the 20 or so countries in Europe where you have to work out deals and they have their work cut out for them.” The large, specialized media company is better able to handle the volume, he said. Here, one buy covers the entire country.
So as the global networks and their units combine, disengage, reform and shuffle, clients might be forgiven for wondering whether their agencies are more occupied with themselves or with their accounts. — with staff reports
LAND OF THE MEDIA GIANTS
Company (owner) – Total Billings (in billions)
MindShare (WPP) – $16
McCann-Erickson Worldwide (IPG) – $14
The Media Edge (Young & Rubicam) – $10
Western Initiative Media Worldwide (IPG) – $10
Carat (Aegis Group) – $8.5
Optimum Media Direction* (Omnicom) – $8
MediaVest (MacManus Group) – $8
MediaCom (Grey Advertising) – $8
Starcom Worldwide (Leo Burnett) – $7
Zenith Media (Saatchi/Bates) – $6
Source: Company reports (*operates outside US)