SUPPLEMENT: TOP EUROPEAN AGENCIES; Top 20 European networks

With geographical expansion coming to all but an end, agency networks are concentrating on media buying and technology to try to improve the quality of their service, Alasdair Reid says

With geographical expansion coming to all but an end, agency networks

are concentrating on media buying and technology to try to improve the

quality of their service, Alasdair Reid says



Although most of the big European agency networks had a comfortable 1995

- many did very well compared with the previous two or three years - the

majority of bosses needed crib-sheets to remind them of the accounts

they had won.



In terms of the movement of large multinational accounts, 1995 was not a

year to set pulses racing. Increases in network billings came largely

from ‘organic growth’ - existing international clients spending more -

and local account wins. That was even true of networks such as Young and

Rubicam Europe, which didn’t do at all badly on an international level.



As everyone has been predicting for years, big regional or global

accounts are moving less and less frequently. It is even rarer for them

to move outside of the family of chosen roster agencies.



Of the handful of international clients on the move last year, two of

them, Mars (which was at Bates Europe) and British Airways (once a

Saatchi and Saatchi Advertising Worldwide mainstay), moved because of

exceptional circumstances.



Michael Bray, the managing director of DDB International Division,

Europe, comments: ‘There has been a tendency for clients to consolidate

their business into a small group of club agencies. Of course, you can

benefit from that approach too, but it is getting more and more

difficult for agencies outside the club to get the business. Even on the

very rare occasions that the client makes a total switch to outside the

club, it is almost impossible to prospect for that sort of business.

There are usually very few opportunities for discussion.’



Nor has economic growth eased pressures on margins. Fernan Montero, the

chairman of Y&R Europe, says that’s no bad thing: ‘The financial

discipline that the industry gained in the early 90s can never be

forgotten. Margin control is essential in any business. You have to know

when to invest in your clients’ business, of course, but constraints are

good for the system. Clients will continue to ask agencies to do more

with less.’



But many agencies disagree. Some complain that they are having to spend

an increasing amount of time - and therefore resources - trying to prove

to clients how efficient they are at managing their resources. Others

are alarmed that, having slimmed down during the recession, they are

effectively being asked to slim down even further now that better times

are on the horizon.



Bates Europe’s chairman, Jean d’Yturbe, thinks that the balance has

shifted too far: ‘In the 70s, most companies were driven by engineers.

In the 80s it was the turn of marketing people. In the 90s, they are now

driven by buyers, and that has had a massive impact on the way they want

to pay agencies. We’re still seeing a lot of them wanting to renegotiate

their terms and some accounts are being offered for incredibly low

commission rates. Some clients are even threatening to withhold

payments. It’s one of the reasons why we are seeing the concentration of

clients’ accounts into one net-work - for them it is often about getting

a better deal - all we can hope for is that this doesn’t have an impact

on the quality of creative work. We are certainly working very hard to

make sure that doesn’t happen.’



Euro RSCG Worldwide has maintained its position at number one in the

network rankings, with Publicis FCB Communication retaining the number-

two slot. Ogilvy and Mather remains third, while Y&R Europe continues to

put the nightmare of the early 90s behind it in fourth place. As for the

rest, it is pretty much ‘as you were’.



The big question the networks all face, especially as margins continue

to be tight, is where an increase in revenue is going to come from.

Geographical expansion is all but at an end. Last year, many were

talking about the Middle East’s potential, but the change of government

in Israel has thrown that into doubt once more. South Africa is still an

exciting prospect, while most of the networks have refocused on eastern

Europe to ensure that they are getting the very best out of their

investments in the region.



However, most agency networks are continuing to look internally to

improve the quality of the service they offer multinational advertisers,

while making individual agencies as attractive as possible to national

clients.



Integration is still a hot topic, but last year’s evangelical zeal has

moderated. ‘Of course, it’s still an issue,’ Salim Sammam, the chief

executive of BBDO Europe, says. ‘Growth will continue to come from

traditional media advertising, but complementary areas will continue to

expand vigorously - from 25 per cent of our business as it is now, to a

far larger share of total income. I’m talking about things such as

direct marketing and public relations, obviously, but also things like

sponsorship and events marketing - and even new technologies such as the

Internet.



‘Our agencies across Europe are already talking to each other across

these disciplines. But clients have to want to do it - not just say it,

but really want it. We are ready.’



One of the issues that BBDO Europe and its sister network, DDB Needham

Worldwide, faced during 1995, and increasingly this year too, relates to

media buying. Last year, the big multinational groups - which are full-

service by tradition and instinct - realised that they were being left

behind. They admitted it was time for them to consider launching

specialist media operations - or, at the very least, thought about

rebranding their existing media departments.



Y&R Europe, for instance, is throwing its lot in with Euro RSCG in a

joint venture called Mediapolis. And Omnicom has decided that it wants

to have a single-group media brand across Europe. Forcing that through

on a local basis - as WPP and Interpublic have discovered - may be an

uphill struggle. So senior network bosses will be spending an

unprecedented amount of time looking at media issues this year.



Technology is, of course, extremely fashionable at present. And not just

in terms of advertising opportunities on the Internet - many networks

are looking at how to use hi-tech equipment more effectively internally.



Derek Bowden, the European chief executive of Saatchi and Saatchi, says

that information technology is becoming an increasingly competitive

tool. ‘It increases our business efficiency and it helps in the winning

and keeping of clients,’ he says. ‘If you have efficient communications

links with a client, especially on a global basis, it can really cement

your relationship. We are continuing to develop our IT strategy.’



In fact, the networks as a whole are in pretty good shape. It wasn’t a

bad year. Which makes it all the more surprising to find their bosses so

subdued. Do they know something that we don’t?



Perhaps some networks are finding it difficult to rediscover the fizz

and optimism that they had in abundance five or six years ago. The most

damaging effect of the recession may be that - as in many other

businesses - the advertising sector is having problems replacing the

generation of middle-management talent that it began to lay-off five

years ago.



As the head of one agency network explains: ‘I would like to be able to

do all sorts of new things - offer integrated communications solutions

to clients on a network basis, for instance. However, I can’t do it.

It’s difficult to find the people who can manage that. In the 80s it was

easy to recruit people. In the early 90s we stopped almost altogether.

Now we are finding out that we can’t just turn on the tap again.



‘Advertising used to be an exciting prospect for someone in their early

20s. Now, if I told a bright prospect that they could be on a salary of

pounds 80,000 in three years time, I would be lying. They are now

looking elsewhere.’



Young & Rubicam Europe



According to Fernan Montero, the chairman of Young and Rubicam Europe,

the network’s offices in all of the major European markets had a record

new-business year in 1995.



On top of that, the network won major new international assignments from

Danone, Kraft Jacobs Suchard and Colgate, and picked up the dollars 70

million Swissair and dollars 15 million Novell software accounts.



Add that to the fact that existing clients - especially the

multinationals - started to spend a lot more money last year and it is

not difficult to see how the network put on dollars 1 billion in

billings year on year - which is easily the best performance in this

year’s table.



The network has continued a strive to improve creative standards but has

also done a lot to rethink its international new-business efforts.



‘We have rebuilt a strong central capacity that can give back-up to

local offices and see the bigger international picture,’ Montero

explains. ‘Previously, we responded tactically, but now we go out

fishing for new business too. I know that maybe only ten big

international accounts break lose each year these days, but I disagree

with the view that you can’t anticipate them.



‘Accounts will only move to the agencies that the advertiser knows and

has had conversations with. We have been thinking more aggressively.



We have been making sure that we have those conversations.’



Ammirati Puris Lintas Europe



The restructuring of the Lintas network began in 1994 when talks between

Ammirati and Puris were in their infancy, but 1995 will be seen as a

watershed.



The senior management team has been stripped from top to bottom and

Martin Puris has announced an ambitious five-year plan to put the agency

in the top five in each of its markets and dispel - for good - the

network’s reputation for lacklustre creative work.



‘Martin provides the leadership for that and we will ensure that

creative excellence permeates through the whole organisation,’ says

Terry Rosenquist, chief executive of Ammirati Puris Lintas Europe and

Africa.



There were some major shake-ups in Germany, the Netherlands and Italy,

and last year the London agency acquired the Rover shop, KMM. But it

wasn’t the most exciting of years in terms of new business. APL Europe

is still stuck outside the top ten. ‘There will be growth from the

existing client base,’ Rosenquist says, ‘but we can’t rely entirely on

that. We will continue to diversify from our dependence on fmcg, though

obviously not at the expense of existing fmcg clients. We’re obviously

going to develop the experience we have in automotive through Rover. But

these things do not happen overnight.’



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