The World: Digital networks evolve to meet client demand

As the global market takes shape, will there be a place for micro networks or will they feel the squeeze?

Procter & Gamble's recent decision to consolidate its hefty European digital advertising budget into three agencies of record gave LBi, Agency.com and Saatchi & Saatchi Interactive something in common.

But the three digital heavyweights don't just share a client. They now have extensive global networks at their disposal to cater for brands on an international scale.

Crucially, a sturdy European presence was a deciding factor in the pitch for the P&G business, which makes sense given the fact that the web is such a global force.

To date, there have been few digital agencies able to boast a worldwide reach. Could this be set to change?

Nigel Morris, the global chief executive of Isobar, thinks so. The Aegis-owned digital group now has more than 1,600 staff around the world in 68 offices and Morris says that he is seeing a trend for more regional and global business pitches. "We have at least six global clients for whom we develop central global strategies and then execute locally," he says.

Isobar is not alone. The Omnicom-owned group Agency.com currently operates out of nine bricks-and-mortar offices around the world. It is planning to expand its network - a move which is driven by client demand, according to the Agency.com global chief executive, David Eastman.

The network has just opened an Italian office in Milan, and an Asian office is in the pipeline over the next three months.

"We need to be able to work for global clients and there aren't many interactive agencies that can genuinely say they're able to service global brands," Eastman explains.

"If we were having this conversation in a year's time, it would be the norm (for global brands to have one global agency). It's not efficient for them to have four or five different agencies across the globe."

LBi is a similar case in point. The group, which has 26 offices around the world, was formed through the merger of the LBi-owned Wheel with FramFab, formerly a separate network which concentrated on Northern Europe and Scandinavia.

The group is currently participating in eight global agency of record pitches, all of which require a robust European presence. For some of the pitches this was part of the qualification criteria.

Luke Taylor, the global chief executive at LBi, argues that digital pitches are increasingly taking this form. "Clients want to take advantage of localised rate-cards in all the different markets. We might centralise content into a market where it's a lot cheaper to produce and do all the strategy over here in London," he says.

For many agency networks, global expansion was straightforward: Isobar feeds off a combination of the existing Aegis network and through acquisitions, and Agency.com has its existing Omnicom agencies around the world to work out of.

For smaller, full-service digital players, such as AKQA and Modem, it's a different story. Expansion is more costly. AKQA has a micro-network of five offices around the world - one in London, three in the US and one in Singapore. Singapore services the whole of Asia, and London serves as the hub for Europe.

The AKQA chairman, Ajaz Ahmed, doesn't intend to build a physical presence in every market.

"Clients are subsidising the lack of efficiency and the slow reactions of the mega-networks. So the clients are paying more and getting less," he says.

"Clients that come to us want great ideas. They don't care about how many offices we have, or how many staff we employ."

Just keeping the lights on in offices in every country is expensive and the huge cost of infrastructure is the main weakness of having and maintaining a global network. Some groups can end up doing the bulk of the work in a few agencies, while keeping many more offices going. And that inefficiency, argue critics of the global model, is then passed on to the client.

"We don't believe it's necessary to have an office in every single country," Norm Johnston, the European managing director of Modem Media, says.

"In many cases, the old network model is outdated and forces the bigger networks to propose costly team structures to pay for all of the bodies and overheads they've acquired in each country," he adds.

Whether it's possible to handle global business within the micro-network model will become increasingly clear over the coming months. The good news for agencies not spreading themselves as widely as networks, such as Isobar and LBi, is that there are always going to be major local clients who don't need global services.

Nevertheless, the top 100 clients in the market are looking for global solutions, Morris says. Agencies which don't have an international network could be ruling themselves out of the running in global pitches right from the start.

It's hard to talk about internet campaigns without considering the medium's global reach. Building digital experiences online for clients is rarely just a local job, and the move towards clients having fewer agencies of record in the above-the-line world is starting to rub off on the digital industry.

Morris doesn't think that the micro-network approach will stand the test of time.

"I don't think that's good enough for the market of the future," he says.