S4 Capital’s Sir Martin Sorrell (below) has been confiding to Digiday about his plans to buy a “first party data” company, averring that Dentsu’s Merkle is the kind of company he’s looking for, that Acxiom (just bought by Interpublic) and Epsilon (by Publicis) are not because they don’t actually own their data.
Interesting enough but right at the end he says, in answer to the question are you on the lookout for a traditional media agency: “No. There’s no growth there because of the procurement pressure. It’s a space where brawn rather than brains is going to win.”
Which just about sums up the current travails of the big agency holding companies: media has been where most of the recent growth has come from but client pressure on costs has put paid to that.
Media revenue has become relatively more important as client/creative agency arrangements are much more likely now to be on a project rather than agency of record basis (AOR) so it’s much more difficult to forecast revenue. The client may make a big TV campaign or may choose not to: in which case there’s no money for the creative agency, unlike the good/bad old days.
Media is much more of a continual process but only if the media agency gets a fair share. Clients are in-housing programatic and digital, where the smart media agency traders used to make much of their money.
Currently such agencies still employ thousands of people worldwide, many working on menial tasks like filling in endless spreadsheets.
Sorrell may be right to think he’s now in a better place than WPP is. But it’s still hard to see how S4C (which owns MediaMonks and programmatic outfit MightyHive) is going to get the firepower to grow seriously big. Even if its business is growing at 40 per cent a year, as Sorrell says.
Dear Stephen,
Client pressure on costs exists, of course, because clients have not figured out how to rekindle their brand growth rates. Their “growth problem” remains unsolved. So profits are generated through reductions in costs. What other choice exists?
The management consulting firms are ready, willing and able to take a crack at the growth problem, and they have the requisite media and creative capabilities to follow through.
Should holding companies and their agencies simply throw in the towel, as Sorrell suggests, because cost-reduction rules the day?
Or should they commit to help their clients grow again, bringing consulting-like strategic and business analyses to the problem?
Cost reduction is a temporary strategy required to fill a void. Once clients figure out how to market with a richer media mix to Millennials and Generation Z’ers, there is every prospect of reinvestment in marketing and less pressure on reducing marketing costs.
But first, the growth problem needs to be solved.
This is within the capabilities of media and creative agencies if they put their minds to it and are led by ambitious and sophisticated leaders.