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.’
