What the MediaMonks Bidding War Revealed About the Evolution of the Holding Company Model

Earlier this month, Martin Sorrell officially outbid his former holding company, WPP, to acquire digital production company MediaMonks for an estimated $350 million. In a statement, Sorrell hinted at his future strategy by saying the acquisition "represents a significant step in building a new age, new era, digital agency platform for clients." Within the global production community, a consensus seems to have emerged that the acquisition is part of a larger trend of clients seeking to work more closely with production shops. The MediaMonks moment Stink Group CEO James Morris told Adweek the acquisition "marks a point in time when production has been more strategically placed at the center of advertising," something he attributes to a "search for a more agile system." "I think the S4C model is a new model," he added. "Martin’s moving away from the challenges that he faced at a holding company. He talked for many years about horizontality," something that proved difficult under the existing WPP structure. [kickout id="3"] Morris anticipates Sorrell building S4C around a single operational structure, bringing in capabilities complimentary to MediaMonk's offering. "It’s smart for Martin Sorrell to acquire a company like MediaMonks because he recognizes what a production company like that can bring to the table," Humble founder and president Eric Berkowitz told Adweek. "We know that agencies are building their own in-house production and post-production capabilities, and agencies also know that brands are starting to reach out to production and post companies directly," he added. "In a certain sense, we’re both starting to eat each other’s lunch." "[The acquisition is] Sorrell’s way of saying that it's actually stronger if production companies and agencies partner with each other, and that this collaboration is in the clients' best interests. Rather than agencies investing in new capabilities and trying to build a new culture, it makes sense for production companies to bridge the gap, bringing in the resources, processes and infrastructure needed to make high-quality work." The evolving face of the production company Tool of North America managing partner Dustin Callif explained that, had WPP acquired Media Monks, it would have had to navigate potential conflicts of interest with WPP clients. That fact that WPP pursued the acquisition anyway seems to reveal the extent to which holding companies see the value in production services. As clients continue to move toward more project-based relationships, such conflicts may become less of a concern. [kickout id="1"] "Over and over again it seems that what we hear from brands—and this has gone on for years—is they want to get rid of the middleman and work more directly with the makers," Callif told Adweek. On that note, production companies have been expanding into creative strategy and ideation. "Particularly when it comes to innovation, it's an open brief," Callif said. "They're coming to us and they're looking to us to be inspired about not just coming up with an executable idea" but one that is "on-strategy" and delivers business results. He called the shift "a natural evolution." The gig economy The wealth of creatives working as freelancers has provided a steady talent pool to draw on for collaborators or new hires. "We have access to some of the same talent that was previously at ad agencies. It becomes somewhat easy to plug them into the system," Calif said. Berkowitz reiterated the opportunities created by the freelance pool, explaining that "top-level creative talent" in the industry is "now available in ways that they were never available before." "We're all in the advertising business ... and the project work is mostly tied to 'Let's make something.' That's the sweet spot of production companies," Callif added, stating that Tool has "the flexibility to work with any brand." One thing getting lost in the transition away from the traditional agency model, however, concerns brands trying to "skip over valuing or paying [for] creative strategy," he said. Looking forward After the MediaMonks acquisition, Berkowitz said that similar deals are "absolutely going to happen." "It makes sense to have an interest in production. Agencies need to stay way ahead of the client ask," Deutsch North America chairman and CEO Mike Sheldon told Adweek, adding that last year Deutsch opened a 50,000 square foot 130-person production company called Steelhead Studios which currently employs a team of 130, including directors, producers, editors, animators and coders. [kickout id="2"] "Our clients were asking for data-inspired, high-quality content that could be produced quickly and at less cost," he said. "Steelhead is more and more becoming a key offering as the typical full service integrated agency model just doesn’t deliver for modern brands." MDC Partners has also invested in internal production capabilities. In May, the holding company spun 72andSunny's Hecho En 72 into its own company, called Hecho. But Berkowitz noted that internal production studios may come with restrictions. "When you're in an agency, they're only offering their clients who they have on retainer and it's not generally offering the specialists," he claimed. In the near future, one key question will be whether holding companies can build up their own capabilities to meet client demand or whether they will have to rely on outside acquisitions. We know where Martin Sorrell has placed his $350 million bet.

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What the MediaMonks Bidding War Revealed About the Evolution of the Holding Company Model

Clients look to cut out the agency middleman

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Erik Oster

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Erik Oster