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
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
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
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
‘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
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
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
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
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
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.’