EUROPEAN AGENCIES: Safety in numbers

Many networks have got even bigger this year due to seemingly endless consolidation. Ian Darby comments on the new pecking order in Europe's media networks.

It was always going to be a tough year for the major European media networks. External pressures struck repeatedly at both advertiser confidence and agency bottom lines. The collapse in technology stocks, followed by 11 September and the war on terror, had already taken their toll, when a series of corporate accountancy scandals, or "Enronitis", further shook belief in an imminent media recovery.

While senior executives at media agencies have undoubtedly spent time over the past few months agonising over rationalisation and cost-cutting measures, while still delivering high levels of service to increasingly expectant clients, there has been a surprising number of developments. Increased investment in research, continued consolidation by the major networks and, in Omnicom's case, the re-engineering of its major network OMD all created talking points. And the differing situations faced by Aegis, the owner of the largest European network Carat, and Havas, the owner of Media Planning Group, also became more intriguing.

Turning to the numbers, Carat maintains its leadership of European networks, having claimed to have grown its billings by close to one billion euros.

The biggest novelty in the top five is the arrival of Mediaedge:cia, the network born from the merger of Tempus' CIA and WPP's Media Edge. While the merger may have been a reluctant one on the CIA founder Chris Ingram's part, there is no denying that the marriage has brought scale, creating a top-five network in Europe for WPP, getting in ahead of MindShare.

Last year, CIA was fifth in the rankings and Media Edge number 12. But, despite the increased scale of the network, it is too early to judge its true potential as its culture continues to bed down.

The agencies at numbers two and three, OMD and Initiative, have had interesting years. Omnicom's belated process of bringing its European OMD agencies into one coherent brand was begun in earnest by Colin Gottlieb, its European chief executive.

Gottlieb assembled a senior team and in doing so, he made an investment in research with the hiring of Mary Stewart-Hunter from the strategic consultancy SIU. Omnicom's decision to start its construction of a "proper" global media network from Europe - with the learning from the process to be imported into the US at a later date - may have much to do with the reluctance of its US creative agencies to take media seriously. But it is also a sign of confidence in its European expertise.

Initiative , which climbed from fourth place to third in figures from the French media research institute, Recma, had a relatively stable period in Europe. But the appointment of Alec Gerster as its global chief executive signals a new era for the network, as its US and European operations seek to work more closely together. Marie-Jose Forissier, Initiative's chairman, is working hard with Gerster on importing and exporting methodology and research tools across markets. Initiative's realisation that its US activities were becoming isolated may eventually benefit its European operations.

The creation of Zenith Optimedia Group (ZOG) from the merger of Zenith and Optimedia also created a new top-five agency. In some markets, notably France, the agencies merged immediately. In others, such as the UK, ZOG is keeping the agency brands separate but looking at possible areas for collaboration such as joint negotiation and buying. The merger of Publicis and Bcom3, which runs Starcom MediaVest Group, will create a potentially massive media negotiation hub if Publicis decides to go down that route. However, for the time being, ZOG and Starcom MediaVest are operating separately. The creation of an equivalent to Interpublic Group's negotiation point Magna seems some way off.

MediaCom has suffered in the rankings because of such merger activity and has slipped from third last year to sixth. Its reliance on Germany, where it picks up 45 per cent of its billings, may also be a factor. It needs to grow in other markets through acquisition, if it is to hold its place at the top table.

Other agencies that have not grown through consolidation have hit the acquisition trail. MPG, the jilted bride in the Tempus affair, is attempting to build a strong presence in Germany with the acquisition of Schmitter Media Agentur, a top-ten player in its market. Aegis has signalled its intention to continue to build a strong research offering with the acquisition of the Spanish agency Inner Strategic Research.

Despite the tough times, there was plenty of new business up for grabs. The high number of sizeable pan-European pitches was notable, although the length of many of the pitch processes and the cost savings clients expect as a result may not bode well for the winning agencies. In the past few months alone, Sony, Gillette, Siemens, Vodafone and Masterfoods have all reviewed. The hard-fought nature of these pitches suggest agencies are having to work harder to pull in business, while clients are reaping the rewards.

Above all, media agencies have survived difficult times while media owners have fallen by the wayside. Vivendi, the French media giant, is struggling and the German Kirch empire was brought to its knees by the failure of its pay-TV outfit. The changing nature of media ownership and broadcast structures across Europe is likely to continue to challenge agencies.

EUROPEAN MEDIA NETWORKS: RANKED BY RECMA BILLINGS FIGURES

RANK NETWORK 2001 2000 Biggest market

(holding company) network's network's (% of European

figure figure billings)

euros (m) euros (m)

1 Carat (Aegis) 11,685 (11,365) 10,686 (10,828) France (28%)

2 OMD (Omnicom) 7,760 (7,880) 7,475 (7,792) Germany (27%)

3 Initiative Media

(Interpublic) 7,600 (8,200) 6,180 (7,190) Germany (23%)

4 Mediaedge:cia (WPP) 7,467 (8,283) 7,624 (8,203) Germany (26%)

5 ZOG (Publicis) 6,918 (7,272) 6,489 (7,281) Germany (23%)

6 MediaCom (Grey) 6,684 (6,698) 5,800 (5,934) Germany (45%)

7 MindShare (WPP) 5,641 (6,265) 4,615 (4,980) Germany (34%)

8 Universal McCann

(Interpublic) 5,546 (7,702) 5,264 (7,261) Germany (20%)

9 Media Planning Group

(Havas) 5,359 (6,377) 4,272 (4,743) France (26%)

10 Starcom MediaVest

(Bcom3) 4,907 (4,896) 3,974 (4,229) UK (25%)

Source: Campaign and Recma.

Topics