CAMPAIGN DIRECT: ISSUE - GLOBAL NEWCOMERS. New global players burst out from below the line. Some of the latest emerging stars are following a different game plan to reach the top, Ken Gofton writes

By KEN GOFTON, campaignlive.co.uk, Friday, 03 December 1999 12:00AM

The agency world is a kind of Las Vegas, and everyone knows who the big players are. The likes of Interpublic, Omnicom and WPP have been playing a consistent game for years. Regular as clockwork, they sweep into town, put their chips on the table and ride off with the kitty.

The agency world is a kind of Las Vegas, and everyone knows who the

big players are. The likes of Interpublic, Omnicom and WPP have been

playing a consistent game for years. Regular as clockwork, they sweep

into town, put their chips on the table and ride off with the kitty.



Except, suddenly, there are some new faces at the tables, following a

different game plan to scoop the below-the-line prizes, and with the

money to back their fancies. At first, no-one really noticed. But now,

as they start to amass their chips, the whispers are starting. Just who

are these newcomers, where have they sprung from, and do they have

staying power?



The three that hog the spotlight the most are Snyder Communications and

Lighthouse Global Network of the US, and Mosaic Group of Canada.



They’ve made a string of international acquisitions over the past two to

three years (in the case of Lighthouse, in the past 12 months) and show

no signs of letting up. They are assembling some plum names.



In the UK, Snyder has bought the leading direct marketing agency, Brann;

one of the top three field marketing agencies, Ellert (renamed Brann

Ellert); and the advertising agency, Partners BDDH. Mosaic’s haul

includes the field marketers, FMCG and EMSChiara, and the direct

marketing/sales promotion agencies, ZGC and Stretch the Horizon.



The design consultancy, Fitch; the corporate PR specialist, Financial

Dynamics; and the direct marketing/sales promotion agency, Communicator,

have all been snapped up by Lighthouse.



Strategies differ, but what all three have in common are their roots in

below-the-line marketing services. Lighthouse and Mosaic are emphatic

that this is where they intend to stay. Announcing just over a year ago

that Lighthouse was assembling a dollars 400 million kitty, its

chairman, Terence Graunke, said that ’diversified marketing services’

were growing nearly twice as fast as advertising and were more

recession-proof.



’Our vision is to remain below the line,’ says Mike Cottman, the joint

founder of FMCG and now the chief operating officer of Mosaic. ’We’re

not planning to go into advertising, as long as we control our own

destiny.’



’Believe me, they have to be right, concentrating below the line,’

Andrew Melsom, founder of the specialist UK consultancy, Agency Insight,

says.



’Ad agencies face enormous pressures. They’ve lost media buying, they’re

losing production as more clients take print in-house, and they face

competition from a host of new types of consultancy on brand

strategy.’



Snyder, the largest of these three holding companies, begs to

differ.



In a major strategic rethink, it has set about building its own

advertising network.



The change of direction began with last year’s acquisition of the top 30

US agency, Arnold Communications. It has won numerous creative awards,

including the Grand Prix at Cannes for its campaign to launch the new VW

Beetle. And it has clinched, with an alliance of other agencies, what’s

claimed to be the biggest US pitch of 1999, the American Legacy

Foundation’s anti-smoking drive, costing between pounds 100 million to

pounds 140 million.



’The future for Snyder lies in eliminating the traditional line,’ its

chief operating officer, Michele Snyder, says. ’What we want to do is

provide the best solutions for our clients, whatever they may be. We go

from A to Z, from targeting to customer loyalty and retention. In terms

of world-class advertising, we are the best, bar none.’



She concedes, however, that though the creative quality may be world

class, it can’t yet be delivered worldwide. Watch for a name change at

Partners BDDH in London, as the Arnold brand goes international, and for

ad agency acquisitions in France and Germany, where Snyder is ’quite

seriously’ investigating opportunities.



Snyder has pulled out of the ’detailing’ sector - which is what the

pharmaceutical world calls field marketing to doctors - in which it was

a major player.



Mosaic’s Cottman claims this suggests his competitor has lost its

way.



Snyder replies that the healthcare operation ’was a phenomenal business,

but a different business, and we wanted to focus on our core

skills’.



The rival groups appear to share a knack of getting their subsidiaries

to work together. Brann’s telemarketing arm and Brann Ellert were soon

sharing Fiat as a client. All of Mosaic’s UK subsidiaries work for

Prudential.



What’s more, ZGC’s continental offices are finding floor space for

Mosaic’s field marketing companies and vice-versa.



’I think it is to do with our acquisition approach, and the

shareholding,’ Cottman says. ’It’s fundamental that the managers have a

shareholding in Mosaic so that they understand they are working for the

group. There’s a huge willingness to do well.’



Lighthouse is developing a similar philosophy. Backed by two private

equity companies in Chicago - Frontenac and GTCR Golder Rauner - it is

concentrating on consultancy in design, corporate communications and

promotional marketing.



’There’s a commitment to remain focused on the three areas in which we

are building a presence - not to get too big and to make sure all the

portfolio companies can work together on the behalf of clients,’ Julian

Hanson-Smith, the chief operat-ing officer and co-founder of Financial

Dynamics, says.



The question is whether these groups will carve out a long-term,

independent future and establish an alternative to the dominant,

advertising-led groups. With adequate funds, growth is easy in the early

years. It’s harder to keep up as groups mature.



Snyder’s shares took a knock this summer when it was restructuring,

demonstrating that quoted companies are vulnerable if they don’t carry

their shareholders with them.



’In three to five years’ time, organisations such as WPP will take over

groups rather than agencies,’ Melsom says. ’They will be vulnerable to

acquisition then. After all, isn’t that the plan?’





WAITING IN THE WINGS



Although Snyder, Mosaic and Lighthouse have been setting the pace with

their aggressive takeover strategies, there are other ambitious holding

companies with below-the-line origins, many focusing on the UK.



Incepta, for instance, is the publicly quoted company that owns the

financial PR specialist, Citigate Dewe Rogerson, as well as the direct

marketing and sales promotion agency, Team LGM. It failed recently to

buy the marketing services group, Lopex, but managed to make money on

the deal. Now Team LGM’s managing director, Susie Vivian, is moving to a

group role, targeting acquisition prospects.



Chime Communications, a close rival, took a major step away from its

dependence on PR when it bought HHCL & Partners last year. Chime’s group

chairman, Lord Bell, has said that he’s interested in further extending

the range of marketing services offered.



South African Primedia’s venture into the UK is a little different. Its

offshoot, Primecom - founded on the lettershop and telemarketing group,

Mailcom, but now also including database consultancy through DunnHumby,

and new media - has largely avoided the creative end of the

business.



And with 30 per cent of its revenue coming via agencies, it plans to

stay that way.



Meanwhile, Tempus has offered yet another vision of the way the industry

may be heading. One could hardly label Tempus as below the line, when

its main operating company is the media independent, CIA. Last month,

however, it bought the brand strategy consultancy, the Added Value

Group, to create what it terms ’the agency of the future’.



Added Value’s chairman, Chris Ingram, says it reflects the massive

changes in the sector.



As media has fragmented, media planning has become more and more

important.



’We have started to get into econometric modelling, and the weights of

advertising that are necessary, by country and by brand,’ he notes.



’You are then into brand portfolio planning, which is right at the heart

of the marketing function. What we are offering is an alternative to the

traditional agency model.’





THE NEW PLAYERS

                         SNYDER COMMUNICATIONS

Founded                  1984, went public 1996

1999 revenue forecast    pounds 360 million

Main agency brands       Brann Worldwide, Arnold

                         Communications, Partners BDDH,

                         Bounty SCA Worldwide,

                         circle.com

Principal activities     Direct marketing, field marketing,

                         advertising, PR, new media

Major clients            Volkswagen, IBM, BMW, Peugeot, BT,

                         Guinness, American Legacy Foundation,

                         Procter & Gamble, Johnson & Johnson,

                         Sky Digital, Bass

Ambition quotient        High. ’The first organisation to effectively

                         conquer the divide between traditional

                         and non-traditional forms of marketing,

                         and establish the foundation necessary to

                         become the industry’s premier provider of

                         integrated worldwide marketing solutions’

                         Dan Snyder, chairman and CEO


                         MOSAIC GROUP

Founded                  1995, went public 1996

1999 revenue forecast    pounds 175 million

Main agency brands       S&MG, TMG, Field Services Inc.,

                         NR Consulting, McGill Multimedia,

                         FMCG, EMSChiara, ZGC,

                         Stretch the Horizon

Principal activities     Field marketing, direct marketing,

                         sales promotion, training, new media

Major clients            Microsoft, Hewlett-Packard, Compaq,

                         Labatt, Renault, General Motors, Ford,

                         Prudential Assurance, Birds Eye Wall’s,

                         Cadbury, Coca-Cola, Renault

Ambition quotient        High. ’Three or four years ago, Mosaic

                         setout to build this world-class

                         organisation.Our vision is to remain

                         below the line,but not just that - to be

                         world leadersin sales services’

                         Mike Cottman,chief operating officer


                         LIGHTHOUSE GLOBAL NETWORK

Founded                  1999, privately owned

1999 revenue forecast    pounds 62.5 million-plus

Main agency brands       Fitch, Financial Dynamics, The Leonhardt

                         Group, Peclers Paris, Primo Angeli,

                         Communicator,Davidson Marketing,

                         Fantastic Sports, Intl Sports Marketing

Principal activities     Branding, design, corporate

                         communications, sales promotion,

                         sports marketing, event management,

                         interactive media

Major clients            Microsoft, Glaxo Wellcome, Mars,

                         Colgate-Palmolive, Procter & Gamble,

                         Shell

Ambition quotient        High. ’We are focused on acquiring and

                         growing a cohesive service platform

                         with a menu of related and complementary

                         marketing communications offerings’

                         Terrence M. Graunke, chairman





Edited by Eleanor Trickett



Tel: 0181-267 4901



E-mail: trickett@haynet.com.



This article was first published on campaignlive.co.uk

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