The global advertising industry is increasingly dominated by a handful of holding company giants which continue to gobble up more smaller agencies and networks. Have they become too big to be effective? What are the advantages and disadvantages for an agency to be part of one of these big groups? And does the size and public listing of many of these companies hinder real creativity?
Ken Hudson
CEO, The Idea Centre
From my work in marketing I have found that the pluses and minuses of having a big holding company depends on the degree to which it has influence. If they are at arm’s length then they tend to be harmless, but if they interfere with creativity that is a problem.
When it comes to the holding company working for a competitor, that would be an issue to raise with the advertising agency to ensure they act independently and there is no sharing of information. I would want them to develop a campaign which is independent from their other interests.
I think a good example of this is The Campaign Palace, which always competed voraciously with George Patterson Partners even though they were part of the same group.
Paul Williams
Partner, BWM
The rise of the mega corporations and mega groups is merely a reflection of other industries and other sectors. In some categories, the benefits can be passed onto clients in terms of cost, through greater back-end rationalisation or supposedly bulk-buying capabilities.
In the case of the agency game, much of the cost of the business remains in people, not expensive plant, equipment and other capital items. Consequently, it remains to be seen whether the real benefit from these mega-deals is for the benefit of the shareholders and the agency rather than the client.
Basically the agency business remains about highly talented, highly intelligent, highly passionate people developing sharp insights and high-level creative solutions to clients’problems.
Those people will continue to exist in large corporate structures or smaller specialist boutiques—maybe the middle man will fall out.
I’ve yet to see that type of business flourish under a totally cost-driven environment, but the jury’s still out.
Chris WaltonCEO, Mindshare
I believe the rationalisation that we have seen in the industry has been a good thing and has allowed us to significantly raise the quality of the services we can deliver to clients. The fact that much of this development has been in response to and in anticipation of clients’ needs, and that our business has grown incredibly strongly as a result, shows that clients have recognised the value in what we can do—i.e we are not good because we are big. It is the other way around.
Our size has allowed us to invest in many areas and allows us to continue to develop our business to deliver on clients’ needs. Our fastest-growing areas of business are not what some may call ‘traditional’. In Australia, our growth rates in the areas of insights (MCI) and modelling (ATG) have been tremendous. This year we launched Performance (Sports and Entertainment Consultancy) and MindShare Entertainment (Branded Content), and the interest these have generated in current and potential clients is incredibly strong.
The end result is a scope of service that delivers on what clients are needing, and this has to be a good thing. As our service offering now ranges from events and promotions to sports sponsorships, content and concerts as well as traditional media, this means we have the ability to answer our clients’ communication needs, whatever they may be, while not overwhelming the very same client by requiring them to establish relationships with dozens of agency partners.
Carrick RobinsonGeneral manager, Marketforce
I don’t agree that large companies pose a problem because what they bring to the industry is the opportunity to provide greater access to a wide variety of businesses by providing specialist communication services and tools that you would not ordinarily be able to access if you were a stand-alone shop.
A good multi-national, particularly in the Australian market, that encourages access to all companies it has an interest in can only be beneficial, introducing a collective of services.
That’s been the experience we’ve had with Clemenger—we’ve seen and been able to utilise tools we would have missed out on if we didn’t have a relationship with the group, particularly in a smaller market like Perth.
A network of businesses you can form to work like a family can only be good for the business, clients and ultimately staff.
Quite possibly the shift among some marketers [to boutique shops] could be because the agencies themselves have not responded to their clients’ needs.
There would be an issue of hierarchical process and systems that slow things down, causing clients to have slower access to senior staff and creatives, but this is nothing more than a management problem, causing businesses to lose clients to boutiques.
In these cases they would need to review their management hierarchy because they probably have too much of a layered approach, which clients are baring the brunt of.
But to blame holding-firm structure would be short-sighted and ignores the situation of the individual businesses.
Some marketers could be moving away because of international client conflicts, which has a ripple effect into smaller markets like Australia.
This could be one potential downside for large holding companies. For example if it picks up a global brand in New York, that brand may want to ensure that the agency network doesn’t have any conflicting business [internationally], but this would be a big decision a holding company would need to make and is an altogether different issue from what’s being discussed here.
