MEDIA FORUM: Would pooling IPG negotiations give buying clout? We’ve known for a while that Interpublic Group’s three media brands were reluctant bedfellows. We’ve also known they would eventually be invited to abandon that relucta

The advertising industry is shaped the way it is largely because of client conflict issues. Despite the presence of large groups such as WPP, Omnicom and Interpublic, the advertising business is far more fragmented than comparable professional service industries like accountancy or management consultancy. Conflict is an issue largely because, historically, agencies have always made it one. It’s called insecurity - the desire not to lose looming larger than the desire to win. But for the big groups, this tradition is becoming a tiresome nuisance. It’s one of the biggest factors to be confronted when looking at an acquisition, and it’s also a proverbially hot potato when one of the big groups considers an internal rationalisation.

The advertising industry is shaped the way it is largely because of

client conflict issues. Despite the presence of large groups such as

WPP, Omnicom and Interpublic, the advertising business is far more

fragmented than comparable professional service industries like

accountancy or management consultancy. Conflict is an issue largely

because, historically, agencies have always made it one. It’s called

insecurity - the desire not to lose looming larger than the desire to

win. But for the big groups, this tradition is becoming a tiresome

nuisance. It’s one of the biggest factors to be confronted when looking

at an acquisition, and it’s also a proverbially hot potato when one of

the big groups considers an internal rationalisation.



That seems to have been the case with IPG’s tentative moves towards the

restructure of its media capabilities (Campaign, last week). Basically,

IPG is plotting to centralise at the coal-face - media negotiation, more

importantly, TV negotiation - mooting a pooled negotiating unit for its

Western International Media, Initiative Media and Universal McCann

operations.



It would be the UK’s biggest media operation, though the three brands

will remain separate and distinct.



What, if anything, does such a move deliver? When Zenith Media launched

a decade ago, it was a classic buying-only operation - in recent years,

though, it has learned its lesson and has been falling over backwards to

stress its planning credentials. IPG sources say the proposed structure

gives it the best of both worlds - market clout without compromising

client confidentiality. But isn’t there a strange notion at work here?

The idea that, while planning may be a conflict problem, buying is

purely mechanical.



Can pooled negotiation-only units work? What do they deliver? Is this a

case of more discount, keener prices? Is client conflict really a

non-issue in this field? Mandy Pooler, the chief executive of recently

formed MindShare, obviously has these issues fresh in her mind. She

believes IPG has failed to grasp the nettle.



She states: ’There is no real value for clients in centralising and

isolating just the buying. It may save the agencies some costs but it

divorces clients from their planning and strategic aims. And we must

stop fooling ourselves about how much more discount there is in the

market.



’From our point of view, the only real added value for clients comes

when you are able to offer significant combined resources in areas like

strategic planning and research. IPG obviously had to do something but

it obviously didn’t feel ready to tackle the whole thing. I have far

more admiration for what Leo Burnett and MediaVest are doing. They’ve

acknowledged that you have to go through the pain and you have to do it

on a global basis. And they don’t even have common parentage.’



Pooler does admit, however, that conflict is an issue for the industry

as a whole. ’Clients will have to accept there are going to be five or

six major worldwide buying points and if they want to be a part of that,

they have to stop being hung up about conflict. It comes down to whether

you trust people - as they are prepared to trust lawyers and management

consultants. Structure is irrelevant if you have professional people of

integrity working on your business.’



Christine Walker, the chief executive of Walker Media, agrees that

conflict shouldn’t be an issue - but only because mega buying points are

already becoming outdated. She points out, for instance, that CIA has

just rediscovered a more integrated approach. ’What are you negotiating

in any case?’ she asks. ’And how do you handle the needs of individual

clients? If they behave in a predictable fashion, then it’s fine - but

it never happens that way. They always want to change things to react to

business conditions.



What happens if, as is looking likely, we move towards recession? You

can’t possibly predict how you’d want to react to that.’



Walker asserts that negotiating strength is derived from a detailed

knowledge of the advertiser’s business and an understanding of the

psychology of the client. ’These days, bigness isn’t unique, nor does it

relate to the real world of individual clients and brand groups. Price

isn’t an issue or a differentiator these days so the benefits will be

entirely about cost savings within IPG. When the structure is wrong,

client conflict is a minor issue in comparison.’



Price isn’t a differentiator? Don’t believe a word of it, cautions Tim

Greatrex, the deputy managing director of Zenith Media. ’It’s not just

about size, it’s about the effective and intelligent use of that

size.



All buyers have a chance of delivering spectacular prices over the short

term but the benefit of a large, fully resourced agency is the delivery

of price on a regular basis, time and time again with consistent

control.



The key is obviously clients - do they support it, do they retain their

integrity and does it deliver real benefits for them. Conflict shouldn’t

be an issue as long as you are enhancing the individual client solution

and they have confidence in their individual account teams.’



Will the IPG move impact much on media owners? Mick Desmond, the chief

executive of Granada Media Sales, is not surprised at this

development.



’We’re basically seeing the emergence of several major buying groups -

look at the recent launch of MindShare, the merger of Burnetts and

MediaVest and WPP’s further investment in Tempus last week. US-based

groups have started to wake up to the reality of the growth of worldwide

media brands.



It’s a case of realising there are tanks on their lawns.



’From their perspective, it makes eminent sense - and as long as the

service is as good or better than it was before, clients will be happy.

Smaller clients may question it and that’s why I think we’ll continue to

see the emergence of smaller boutiques as the middle ground continues to

be squeezed. But it is absolutely true that there is no more discount in

the market. There may be better value to be had in all sorts of ways but

that is a different proposition from the blunt instrument of demanding

more discount.’



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Digital marketing executives oversee the online marketing strategy for their organisation. They plan and execute digital (including email) marketing campaigns and design, maintain and supply content for the organisation's website(s).