For some agencies, they're the perfect solution to conflicting clients.
For others, they provide a useful barometer of the changing needs of existing clients and a hook to encourage others to come on board. And for others, they act as a way of keeping talented staff on the payroll. All should add billings and profitability in uncertain times. They're the subsidiary agencies - smaller, leaner subsets, usually with specific remits - and they're creeping further into adland's consciousness as serious competition.
Take PHD's Rocket, an agency set up in 1996 to explore ways in which media strategy and creativity could work more closely together. The agency has won a string of accounts, including a place on the BT roster. Its smaller clients include the restaurant chain Nando's and the condom brand Mates, and although less significant in billings terms, they have enabled the agency's trademark strategy of combining creative and media to shine, according to Rocket's managing director, Mark Holden. "With their budgets, those clients would have found it hard to make an impact in a traditional way," he says. "Our offering makes it more cost effective for them."
So smaller-budget clients who can't afford a top-20 agency find their subsidiaries more attractive. The clients get access to more senior people than they might if they were with a bigger-billing shop.
The specialisation of those subsidiaries is also a strong lure to clients, according to the AAR's owner, Martin Jones. "Clients are increasingly looking to agencies that specialise in understanding their target audience," he says.
As well as acknowledging the considerable benefits of being a small agency within a bigger one, Holden says the parent agency does well from the deal too. "Rocket fits in with the ambitions of PHD, enabling it to span all markets."
PHD's chairman, Jonathan Durden, agrees that the spin-off agency offers opportunities not only to clients, but also to the parent. "Putting Rocket (a regional specialist) alongside PHD and Compass means we have all approaches to media covered, which means we can accommodate more clients and their needs," he says.
Durden also believes subsidiary shops help bigger agencies recognise the career needs of their staff, adding: "Having a smaller agency with the feel of a start-up means that entrepreneurial and thrusting staff, who have new ideas, are more likely to stay within the group." That said, one of Rocket's key executives, John Harlow, did just the opposite when he left to start up Naked in 2000.
The creative director of Leo Burnett's subsidiary, Made, Joakim Jonason, famed for his work on Diesel, was attracted by the start-up atmosphere.
Following a stint at Euro RSCG Wnek Gosper, where he headed creative on the Citroen account, Jonason started Made following a discussion with the then global creative director of Leo Burnett, Michael Conrad. This turned out to be a useful way of combining the resource of an experienced creative and the spirit of a new venture. Made's founding client was the Italian fashion chain Stefanel, but it will need more clients to prove itself a worthwhile venture.
J. Walter Thompson's managing director, Ros King, says: "Setting up a specialist agency isn't just a good way to encourage new clients, it's a brilliant way to nurture talent. We need to get smarter when it comes to managing people's talent and careers, precisely to stop them leaving."
While managing conflict remains the holy grail for agencies, and subsidiaries a useful way of hiving off equally important, but similar clients, King denies Label was also devised as part of a strategy to manage both the Rimmel and Boots brands within the agency group. "We don't consider them to be in conflict with each other - Boots is Rimmel's largest distributor in the UK, so they have a symbiotic relationship."
The venture did, however, satisfy the ambitions of its managing partner, Nicola Dicketts, who was in the running to become JWT's managing director before King was appointed.
Parent company: Leo Burnett
Run by: creative director, Joakim Jonason, and managing director, Emma
Staff: ten, including six creatives and two account handlers
Clients: Stefanel, Bjorn Borg
Positioning: small, above-the-line agency specialising in international
Billings in 2002: £3 million
Leo Burnett launched Made in 2001. It was part of the then newly appointed group chief executive Bruce Haines' group vision.
To date, the agency has had a limited impact, however, although it claims it is on the cusp of signing up clients in the tourism, food and media sectors, as well as further fashion brands. It is currently pitching branding ideas to Channel 4.
Operating within Burnett's London office is not a barrier to picking up international business, according to Jonason. "We have good international capabilities, and the agency would function in the same way if it was in Tokyo or Geneva instead of London," he says.
Made operates separately from Burnett, although it reports financially to Haines, and it can call staff in to work on projects.
Parent company: J. Walter Thompson
Run by: managing partner, Nicola Dicketts
Staff: ten, including a creative team and six account handlers
Clients: Rimmel, Warehouse, Glamour
Positioning: creative and strategic agency for fashion, beauty and
Billings in 2002: undisclosed
Dicketts believes the power of Label lies in its ability to bring in business that would not necessarily come knocking on the door of its JWT parent.
"Just as the main agency has a specific model and way of working, Label does too - we are specialists in the fashion, beauty and luxury sectors, helping clients communicate with consumers in ways that don't always involve advertising," she explains.
Her team uses freelancers for specific projects, including people from the main agency, and also hawks out their individual talents in the marketplace for a fee.
"We have a depth of expertise in that sector that would be diluted if we were part of the main agency. The boundaries of what media sector we fall into are blurred too, as we undertake so many different kinds of activity," Dicketts claims.
The fact that the agency recently pitched, although unsuccessfully, against DFGW and Vallance Carruthers Coleman Priest for Hachette Filipacchi's Red magazine account demonstrates that it is competing against established creative agencies.
Parent company: PHD Media
Run by: managing and creative director, Mark Holden
Staff: ten, including three account directors and six strategists
Clients: BT, COI, Nandos
Positioning: creative media strategists
Billings in 2002: £31 million
Rocket was founded in 1996 specifically to align media planning with the creative side of advertising. Holden, who runs the division with a staff of nine, says the agency functions as a standalone entity from its parent, PHD Media, although its finances are packaged with PHD's, reporting into Omnicom.
He claims the agency attracts clients who want to take a different route from PHD's more traditional, buttoned-down approach to planning. "Our clients understand how effective media can be, and want that to be tied in with the creative," he says.
The structure of the company, and its reciprocal relationship with its parent (Holden can "borrow" specialists as and when they are needed), means it can be kept small and lean.