MEDIA: FORUM; Is a second-string agency the best way to grow?

By ALASDAIR REID, campaignlive.co.uk, Friday, 01 December 1995 12:00AM

Optimedia announced last week that it was creating a second media company in the UK, ostensibly to get around client problems that tend to restrict the growth of agencies. Will it work? Do second-string agencies dilute the main brand? Can they really benefit from the negotiating clout of the main agency?

Optimedia announced last week that it was creating a second media company in the UK, ostensibly to get around client problems that tend to restrict the growth of agencies. Will it work? Do second-string agencies dilute the main brand? Can they really benefit from the negotiating clout of the main agency?



There’s one major stumbling block with the ‘big is beautiful’ theory in

advertising - client conflict. In most business sectors, the market

leader usually commands a substantial chunk of the market and the top

five companies will probably take a share of more than 90 per cent.



Not so in the advertising business as a whole, nor in media planning and

buying in particular. The top five media buyers have combined billings

of around pounds 2.2 billion - just over 30 per cent of the market as a

whole.



The problem, of course, is that once you start working for one major

multinational fmcg advertiser, it can be difficult to win business from

others. And as for directly competitive brands, you can forget it. So,

once you have an account in all the major market sectors, growth

potential tends to dry up.



Unless you set up a second-string agency. Last week, Publicis-owned

Optimedia announced it was planning to do just that. The new operation,

which will be able to tap into Optimedia’s media research resource and

the clout that comes from its media volume, will give Publicis two

fronts on which to chase new media business as well as allowing for the

management of potentially conflicting accounts.



John Taylor, currently the managing director of Optimedia in the UK, is

soon to become the network’s director of European operations. He will

oversee the launch of the second-string UK company - which will probably

be called More Media.


But isn’t he worried that the main Optimedia brand will be diluted? Will

more mean less? Taylor thinks not and believes that the new unit will

complement the existing one by offering specialised services.



‘Generally speaking, that’s definitely the route to go,’ he insists.

‘Other companies, when they have looked at launching new operations,

have tended to focus on areas such as regional media or direct

marketing. One of the things we have looked at is something on the

interactive side. We would want to offer specific added value to

clients.



He also points out that the Publicis Group runs two media companies in

other markets, such as Germany, where the sister operation, called More

Media, was created largely to deal with conflict issues. However, the

operations complement each other and are respected in their own rights.



‘The success of a new operation will depend on how successful you are in

developing specific services,’ he says. ‘You need to put a lot of time

and investment into it before you even think of going ahead. It must be

a credible operation, not just a name. No advertiser in their right mind

is going to accept the idea that they can’t come into the so-called main

agency. That’s not what this is about. It is a case of offering services

that meet their specific needs, separate from the main agency.’



Can credible media brands be spun off from big buying companies? Can

they benefit from the market position of the main agency? And if so, are

we going to see the market fragment into smaller units, all owned by big

groups?



Simon Mathews, the chief executive of Equinox Media, knows his way

around these arguments. Equinox is a spin-off from the UK’s biggest

media brand, Zenith Media. He believes that if you set up a company

merely as a dumping ground for conflict business, you are not going to

succeed.



‘If it is a facade company, clients will see through it and it will be

almost impossible to attract top-calibre staff,’ he says. ‘It takes a

great deal of commitment, determination and resource to make a media

buying operation work and you have to set out with the ideal of creating

a company that is clearly differentiated from the mother company.’



But Mathews maintains that, if done properly, having two brands can help

the group increase market share by offering choice to clients. ‘The

service industries are continuing to reflect the amount of brand

fragmentation there is out there,’ he argues.



Ray Kelly, the chief executive of Carat UK, believes that second string

means second fiddle. ‘What we have in the UK is a series of operating

companies, each of which has a strong selling point,’ he says. ‘There

may be some overlap - that’s inevitable in the whole scheme of things -

but none of them is ever seen as second string.



‘It’s the strength of the brand that is the important factor. For

instance, both J. Walter Thompson and Ogilvy and Mather are owned by

WPP, but who could say which is the first and which is the second

network? They are both strong brands.



‘However, recent attempts to create new media brands haven’t been

successful, especially when they are created purely to handle

conflicting business. My advice would be that it should develop one

company to its full potential before launching a second.’



But if spin-offs work, will it mean the end of the creation of truly big

buying companies? Interpublic and Omnicom have been looking at merging

their agencies’ media for many years now. Is the tide moving the other

way?



Ken New, the vice-chairman of the Omnicom agency, Abbott Mead Vickers

BBDO, refuses to be drawn. But he does agree with the WPP analogy. ‘This

concept is not a new one,’ he points out. ‘I wouldn’t describe them as

second-string agencies, however - it’s better to call them parallel

agencies. It can and will work. In fact, I think all the big players are

looking at parallel operations because it can help deal with conflict.

And the broad principles about scale still apply - parallel media brands

can act autonomously while still getting greater negotiating leverage by

taking into account their combined power in the marketplace and, at the

same time, benefiting from greater group resources such as systems and

research.



‘When a company sets up a parallel operation there’s usually a firm

reason for doing it - an existing or potential client that is keen on

the idea. But whatever the reason for setting up a new operation, in the

end it will stand or fall on whether it can deliver. That’s the main

issue.’



This article was first published on campaignlive.co.uk

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