The merger of Portland Outdoor and Poster Publicity Limited, first announced back in July 2004, was confirmed last week. Subject to approval from the competition authorities, the new (as yet unnamed) company will be fully operational within weeks.
Headed by its chief executive, Eric Newnham, it will be a global outdoor media planning and buying specialist, employing 300 people across 35 countries, with global billings of around £350 million.
Although technically a 50:50 joint venture, this is, in cultural terms, a takeover (Newnham was formerly the boss of PPL), and PPL philosophy - not to mention senior staffers - will probably prevail.
While Portland has developed many innovative techniques on the planning and market intelligence side, critics argue that these were inconsistently applied and that buying performance was weak. It has also found it hard to make its voice heard at WPP Group level. The new company will surely exhibit more aggression externally and robustness within the group.
Senior sources at the new company say that the big story here is the creation of a global network to rival Aegis' Posterscope, and they maintain there will be few short-term implications for the UK outdoor market in trading terms.
But media owners and rival outdoor specialists are not sure they buy that. Crudely put, they expect the new operation to start squeezing more discount out of media owners on behalf of former Portland clients - and there has already been speculation that outdoor media owners outside of the big three (Viacom, JCDecaux and Clear Channel) will be targeted with offers they can't refuse.
Longer-term, the deal could trigger further structural upheaval in the specialist market. Not all PPL's clients are unreserved WPP fans, and the other big holding companies, Publicis in particular, could move to acquire or create outdoor divisions as powerful as WPP's. If the big groups seek to "tidy up" their outdoor capability, that could raise questions about whether the industry needs this unique medium-specific specialism.
1. Outdoor has a unique com-mercial structure, partly be- cause agencies historically considered it an unglamorous backwater and partly because its users in the post-war era maintained long-term "holding" relationships with poster contractors.
2. Between 1950 and 1980, the big outdoor advertisers (the brewers and the tobacco companies) reserved sites in perpetuity, managed by specialist companies. When outdoor went mainstream in the 80s, agency media departments were daunted by the medium's complexity - just under 300 contractors existed at this point. They opted to retain the services of the specialists and a new remuneration structure was devised, with contractors paying 15 per cent to the ad agency and 5 per cent to the specialist.
3. Although media owners in rival sectors argued that this practice gives outdoor an unfair edge in marginal intra-media decisions, it is enshrined in the ISBA Best Practice Guide.
4. Normal agency roster rules do not apply to outdoor. Now the PPL-Portland merger has gone through, there are three main UK outdoor buying groups: PPL-Portland, Posterscope and Helix.
5. Posterscope, owned by Aegis, buys for the Aegis agencies Carat and Vizeum, plus MediaCom, OMD and ZenithOptimedia. Its clients include Nokia, UIP, KFC, Lloyds TSB, Volkswagen, O2, GlaxoSmithkline, Reckitt Benckiser, Diageo, Virgin, Vauxhall and Kraft.
6. Helix is a joint venture between IPM/Interpublic and Alban, a private company that owns Concord. Its two most important clients are Nestle and Unilever.
7. PPL's clients include Bacardi-Martini, Samsung, Olympus, Coors, Visa, Warner Brothers, Levi's and Philip Morris. Portland's clients include Ford, Sony, Colgate, Scottish Courage, Kellogg, Gillette and HSBC.
8. If, as is widely expected, MediaCom, now owned by WPP, switches its billings out of Posterscope into PPL-Portland, these two specialists will be roughly equal in billings terms, each commanding around 40 per cent of UK outdoor spend. Helix will account for most of the remainder.
WHAT IT MEANS FOR ...
OTHER OUTDOOR SPECIALISTS
- Rivals firmly believe that the new company will take a long time to bed down because of cultural differences.
- Staff may be leaving and the new company will look to poach talent, especially from Posterscope.
- Some clients of the new company may be unsettled, even those that are not uncomfortable with the idea that they've found themselves in the WPP camp. In short, there is theoretically an unprecedented amount of outdoor business up for grabs.
- The undoubted winners in all of this will be the big-spending outdoor advertisers. As the market enters a period of uncertainty, they are going to expect phenomenally good service and delivery.
- Clients of WPP agencies (especially MindShare) that have defected from Portland in the past can expect a visit from Eric Newnham in the near future.