Media: All about ... Agency group trading operations

Why has Publicis now set up a group structure in the UK, Ian Darby asks.

Last week Publicis joined the ranks of its rival media holding companies in setting up a group trading structure in the UK. Havas aside, it is the last of the international ad groups to do so. It is expected that it will have a pooled buying operation, following discussions between Starcom MediaVest and ZenithOptimedia, in place before the next trading season.

Though Publicis launched a global media holding company structure in late 2005, with the creation of Publicis Groupe Media, it has previously resisted creating any significant UK group media structure, citing lack of client benefit for this. And there has been some sense in maintaining agency-specific trading activity given that the two UK agencies trade differently (ZO agreeing agency deals while SMG trades client by client).

However, it pledged to create a Publicis structure to work specifically on the BT business after landing the consolidated account in January. Discussions on extending this across other clients have been an extension of this.

Publicis media sources indicate that although discussions are ongoing, the newly formed trading unit will be secondary to the agency brands in the UK and won't be some sort of media parent super structure like WPP's Group M.

In terms of its management structure, sources say nothing has been decided. Chris Locke, the group trading director at SMG, has been touted as a possible leader of the new operation, but Chris Hayward, ZO's head of investment, should also be expected to play a key role.

1. Publicis Groupe Media was launched in October 2005 to consolidate the reporting lines of its two media networks. Jack Klues, previously the chief executive of SMG, was appointed PGM chief executive. The implications would differ on a market-by-market basis with some seeing more impact than others. By mid-2006, it was decided that the UK did not need a visible PGM structure or trading unit. However, this has now been reconsidered and pooled negotiations in the UK will bring together £1.2 billion of media billings (SMG is the slightly larger UK agency with £658 million in billings, next to ZO's £565 million).

2. Interpublic was the first holding company to launch a UK group trading operation with Magna in 2001. Magna was (and still is) headed by Universal McCann's broadcast specialist Mick Perry as chairman. It continues to function by bringing together ad hoc teams of top buyers from Initiative and Universal McCann to handle negotiations when required. Roy Jeans, the chief executive of the IPM outdoor operation, heads non-broadcast activity. However, the proposition could be said to be weaker than when it launched in 2001 (Universal and Initiative's combined billings were £679 million at the start of 2001 compared with £504 million now).

3. WPP's Group M was launched as a media negotiations unit in April 2003, covering MindShare, Mediaedge:cia and BJK&E deals. However, the nature of Group M changed following WPP's acquisition of MediaCom in 2005. It evolved into a media holding company with its own distinct management (headed by the former MediaCom chief executive Stephen Allan) to which individual agency heads report. In addition to heading negotiations for WPP agencies, it is also responsible for investing in areas such as research and content.

4. Aegis Media, also created in 2003, was formed as a media holding company for the group's diverse media interests. Like Group M, its remit extends far beyond deal negotiations, but the Aegis trading director, Steve Platt, heads teams from constituent agencies (including Carat, Vizeum and Feather Brooksbank). In this sense, it operates like a larger version of IPG's Magna.

5. OPera, the Omnicom joint trading operation, was launched in May 2004. The unit is led by the joint managing directors, John Overend and Marc Bignell. Overend was previously the broadcast director at PHD and Bignell held the same position at OMD UK, demonstrating how Omnicom has attempted to balance the interests of its agencies in the management team of OPera. Since launch, however, the Omnicom corporate structure has grown more complex with the creation of Omnicom Media Group in the UK with Philippa Brown as its chief executive. OPera is now part of this wider structure.

WHAT IT MEANS FOR ...

PUBLICIS

- Publicis may be a little late into the game and is arguably playing catch-up on this but, it would counter, it can learn from the mistakes made by its rivals.

- Increased buying clout is still an issue in the market and extra muscle could help Publicis agencies achieve better deals for itself and its clients.

- Publicis insists that joint trading will only happen in cases where clients are in favour. In a rather tortuous press release, Iain Jacob, the chief executive, EMEA, of SMG, hammers this point home: "We always put our clients at the heart of this process and are committed to developments where and when we can show our clients clear benefits."

- That said, pooled buying is often more renowned for generating cost efficiencies for the agencies involved, especially in terms of tools and systems.

- Group trading could bring benefits beyond traditional media. It could prove a way of bringing Publicis' UK digital assets into line on trading with the larger online operators such as Google. Though this hasn't always proved the case with rival holding companies.

MEDIA OWNERS

- The creation of a PGM unit is unlikely to shock or worry major media owners as the majority of the UK market is already negotiated by pooled buying operations. That said, greater pressure may be exerted by Publicis' pooled team during negotiation rounds.

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