Optimedia announced last week that it was creating a second media company in the UK, ostensibly to get around client problems that tend to restrict the growth of agencies. Will it work? Do second-string agencies dilute the main brand? Can they really benefit from the negotiating clout of the main agency?
There’s one major stumbling block with the ‘big is beautiful’ theory in
advertising - client conflict. In most business sectors, the market
leader usually commands a substantial chunk of the market and the top
five companies will probably take a share of more than 90 per cent.
Not so in the advertising business as a whole, nor in media planning and
buying in particular. The top five media buyers have combined billings
of around pounds 2.2 billion - just over 30 per cent of the market as a
whole.
The problem, of course, is that once you start working for one major
multinational fmcg advertiser, it can be difficult to win business from
others. And as for directly competitive brands, you can forget it. So,
once you have an account in all the major market sectors, growth
potential tends to dry up.
Unless you set up a second-string agency. Last week, Publicis-owned
Optimedia announced it was planning to do just that. The new operation,
which will be able to tap into Optimedia’s media research resource and
the clout that comes from its media volume, will give Publicis two
fronts on which to chase new media business as well as allowing for the
management of potentially conflicting accounts.
John Taylor, currently the managing director of Optimedia in the UK, is
soon to become the network’s director of European operations. He will
oversee the launch of the second-string UK company - which will probably
be called More Media.
But isn’t he worried that the main Optimedia brand will be diluted? Will
more mean less? Taylor thinks not and believes that the new unit will
complement the existing one by offering specialised services.
‘Generally speaking, that’s definitely the route to go,’ he insists.
‘Other companies, when they have looked at launching new operations,
have tended to focus on areas such as regional media or direct
marketing. One of the things we have looked at is something on the
interactive side. We would want to offer specific added value to
clients.
He also points out that the Publicis Group runs two media companies in
other markets, such as Germany, where the sister operation, called More
Media, was created largely to deal with conflict issues. However, the
operations complement each other and are respected in their own rights.
‘The success of a new operation will depend on how successful you are in
developing specific services,’ he says. ‘You need to put a lot of time
and investment into it before you even think of going ahead. It must be
a credible operation, not just a name. No advertiser in their right mind
is going to accept the idea that they can’t come into the so-called main
agency. That’s not what this is about. It is a case of offering services
that meet their specific needs, separate from the main agency.’
Can credible media brands be spun off from big buying companies? Can
they benefit from the market position of the main agency? And if so, are
we going to see the market fragment into smaller units, all owned by big
groups?
Simon Mathews, the chief executive of Equinox Media, knows his way
around these arguments. Equinox is a spin-off from the UK’s biggest
media brand, Zenith Media. He believes that if you set up a company
merely as a dumping ground for conflict business, you are not going to
succeed.
‘If it is a facade company, clients will see through it and it will be
almost impossible to attract top-calibre staff,’ he says. ‘It takes a
great deal of commitment, determination and resource to make a media
buying operation work and you have to set out with the ideal of creating
a company that is clearly differentiated from the mother company.’
But Mathews maintains that, if done properly, having two brands can help
the group increase market share by offering choice to clients. ‘The
service industries are continuing to reflect the amount of brand
fragmentation there is out there,’ he argues.
Ray Kelly, the chief executive of Carat UK, believes that second string
means second fiddle. ‘What we have in the UK is a series of operating
companies, each of which has a strong selling point,’ he says. ‘There
may be some overlap - that’s inevitable in the whole scheme of things -
but none of them is ever seen as second string.
‘It’s the strength of the brand that is the important factor. For
instance, both J. Walter Thompson and Ogilvy and Mather are owned by
WPP, but who could say which is the first and which is the second
network? They are both strong brands.
‘However, recent attempts to create new media brands haven’t been
successful, especially when they are created purely to handle
conflicting business. My advice would be that it should develop one
company to its full potential before launching a second.’
But if spin-offs work, will it mean the end of the creation of truly big
buying companies? Interpublic and Omnicom have been looking at merging
their agencies’ media for many years now. Is the tide moving the other
way?
Ken New, the vice-chairman of the Omnicom agency, Abbott Mead Vickers
BBDO, refuses to be drawn. But he does agree with the WPP analogy. ‘This
concept is not a new one,’ he points out. ‘I wouldn’t describe them as
second-string agencies, however - it’s better to call them parallel
agencies. It can and will work. In fact, I think all the big players are
looking at parallel operations because it can help deal with conflict.
And the broad principles about scale still apply - parallel media brands
can act autonomously while still getting greater negotiating leverage by
taking into account their combined power in the marketplace and, at the
same time, benefiting from greater group resources such as systems and
research.
‘When a company sets up a parallel operation there’s usually a firm
reason for doing it - an existing or potential client that is keen on
the idea. But whatever the reason for setting up a new operation, in the
end it will stand or fall on whether it can deliver. That’s the main
issue.’
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