The combined OMG and IPG would create the largest media agency group in Australia. The merger, with US$750 million in targeted cost savings, is a direct challenge to the hundreds of indie agencies that have sprung up in this market in the past five years, argues Cake.Shop’s Luke Hills.
The merged entity aims to crush smaller agencies and compete with Publicis and Dentsu for lucrative global contracts. The 2023 combined media billings of OMG and IPG in 2023 would create a media buying behemoth that handles A$2.2 billion in billings, which is well above the next largest GroupM, with A$1.41 billion, according to COMvergence data, as reported by B&T last week.
If the merger proceeds, we can expect to see major agencies smashed together in the name of expense reduction, and talent bailing out to create their own digital shops.
The Australian marketing industry, despite servicing a population of just 26 million—a fraction of the size of markets like the United States or the United Kingdom – has cultivated a remarkably robust and innovative independent agency sector. Current estimates suggest more than three hundred independent agencies operate within this compact yet vibrant market, defying traditional expectations of scale and capability.
What makes this ecosystem truly remarkable is its growth trajectory. While global holding companies have long dominated the marketing and media landscape, Australian independent agencies are not just surviving—they’re thriving. Recent industry reports indicate that these nimble, locally-owned businesses are experiencing growth rates that significantly outpace their multinational counterparts.
For years, independent agencies have viewed partnerships with parent companies and holding groups as an essential strategy for survival. The rationale seemed straightforward: by aligning with larger entities, these agencies could access advanced technologies, sophisticated data capabilities, and more complex media buying platforms.
However, this approach represents a fundamental misunderstanding of true independence. What appears to be a strategic shortcut is, in reality, a Faustian bargain that compromises the very essence of what makes independent agencies unique and valuable. Furthermore, there are hidden costs to this dependence. The reliance on intermediaries introduces a multitude of challenges that can potentially undermine an agency’s core strengths:
Holding groups often create labyrinthine structures that obscure true value creation. Multiple layers of management, complex billing arrangements, and convoluted reporting mechanisms make it difficult for agencies to demonstrate genuine value to their clients.
There is also the handbrake of technological compromise. While the promise of access to advanced technologies seems appealing, the reality is often disappointing. Standardised technological solutions provided by managed service advertising technologies are typically one-size-fits-all, lacking the nuance and specificity required by individual agencies and their unique client bases.
The technological ecosystem has undergone a radical transformation in the past decade. Cloud-based platforms, AI-driven analytics, and scalable infrastructure have democratised access to sophisticated marketing tools. This technological revolution means that independent agencies no longer need to rely on holding groups or intermediaries to access cutting-edge capabilities. Mergers between the big agencies is a sure sign that AI and other advanced algorithmic services are eating away at their revenue base.
From a pure economic perspective, the traditional holding group model is becoming increasingly unsustainable. The overhead costs associated with these complex structures are substantial, and these expenses are ultimately passed down to independent agencies and their clients.
This is the case for sales-led technologies that have no main infrastructure on shore – as profit is driven by VC and PE companies offshore. The interest of local agencies is often put to one side as the pursuit of profit takes priority. This creates an inherent lack of trust resulting in a sales smoke screen that obfuscates the value of local marketing efforts.
The future of marketing and media belongs to agencies that can rapidly adapt, innovate and deliver exceptional value directly to their clients. To the independent agencies of Australia: your moment is now. Break free from the constraints of traditional models. Invest in your people, embrace technology, and create a future defined by your own terms.
Luke Hills is the founder of programmatic ad buying start-up Cake.Shop.
