Media battles for world domination

The race for dominance of the European media market is all but over and the combatants have moved on to the rest of the world.

Initiative Media’s creation last week of a board to oversee the worldwide roll-out of the Initiative brand illustrates European media specialists’ determination to colonise the world .

The race for Europe is now all but complete. It started in the mid-Eighties when the media specialists which launched nearly ten years earlier – CIA, Carat and Initiative – realised that pan-European client re-alignments were coming and they needed to set up a network. As businesses they also needed to grow.

Now the rest of the world beckons. Carat bought Media Buying Services International in New York in September for 3m and opened a Hong Kong office in March. CIA has had an office in Hong Kong for three years and Initiative now has a small presence in Africa, Asia and South America.

There is a widespread belief that the European media buying industry is more developed than the rest of the world and has something to teach other markets.

In Asia, although there are massively diverse political and business cultures, the approach to media has been largely homogeneous. Historically, newspapers and TV have been state controlled, leading to fixed patterns of buying and selling. This, in turn, meant that there was little room for the extra value a specialist media operation can bring.

Rapid economic development across the Asia Pacific region over the past eight years has gone hand in hand with a loosening of government control of the media. The region has also seen the entry of Western media owners bearing satellite television.

The growing economies and media deregulation have attracted CIA, Carat and Zenith to Hong Kong; Initiative has been lured by Thailand, India, Indonesia and has plans for the rest of the region. Both Carat and CIA have advanced designs for more Asian operations next year.

None of this should be surprising, as it is forecast that Asia will overtake Europe as an advertising market next year.

In South America, where agencies still dominate, the problem for media specialists is rooted in a slightly different media culture. There the media has been in private hands, but largely monopolistic ones.

It suits these monopolies to have their advertisers fragmented among many different agencies with little power to negotiate. Stories abound of favours and bribes, which ensure the agencies make a margin as long as they are in cahoots with the media owner and prevent media specialists from concentrating buying clout.

Again, competition is entering these markets and Initiative is planning to open operations in Mexico and Argentina next year.

“The privatisation of TV and the creation of new licences is a worldwide trend,” says Chris Ingram, chairman of CIA Group. “Thatcherism is going around the world.”

As Zenith has found, the US is a hard nut to crack. The market is so huge that full-service agencies have plenty of volume, even when they don’t use it particularly skilfully. They also have media de partments that are very close to media owners, who don’t want to see European-style negotiations take over.

In all of these cases media specialists – both dependents and independents – believe they will succeed because a specialist is better than a generalist and the time is now right. “More media competition, more media choice and more data are the ideal conditions for the media specialist,” says Ingram.

The question now is what form of media operation is destined to succeed, worldwide.

Initiative believes it can move faster because of its ownership by Interpublic. In different markets, it can vary the model operation it sets up. Where there is a McCann-Erickson, a Lowe Howard-Spink or an Ammirati Puris Lintas there can be either a partnership or at least a source for the market knowledge needed to start up in a country.

“You can go somewhere where they know the market, the politics and the people,” says Marie José Forissier, worldwide chairman of Initiative. “And building up a network with local entrepreneurs means they remain focused locally.”

Where there are no Interpublic offices, Initiative plans to make acquisitions or create joint ventures.

For media independents, the plans have to be different. In Europe, Carat expanded its network by acquisition, funded by its pre-Loi Sapin profits. Those have dried up, slowing down the potential for worldwide growth through acquisition.

“We see the US as the number one priority,” say Ray Kelly, chief executive of Carat UK. “Asia is priority number two and then comes Latin America. We are not going to spend, spend, spend. We will take a relatively cautious approach.”

CIA has also been careful about growth by acquisition. It sets up trading partnerships for a number of years before forming a joint venture or making an acquisition. However, Ingram says: “That process may have to be condensed in Asia, because the market moves faster.”

Ingram and Kelly believe that what they lack in speed, they make up for in commitment to media and lack of political infighting.

“Agency networks have other fish to fry,” says Kelly. “Media is not key to them, so they are less likely to be investing effectively than a fully fledged independent.”

Forissier maintains that Martin Puris, chairman and chief executive of Ammirati Puris Lintas, the Initiative parent, has studied her network since taking over APL last year and has given her a free hand to build up a network.

She also points out that independents – without the support of a network – are more vulnerable when business is aligned internationally and the buyer’s margins are eroded. “If you are appointed across Europe or the world you take the business on a lower average margin and you have to be much more transparent. Both cut into a buyer’s profits.”

International expansion in advertising is driven by customer demand. And if what Forissier says is true, the customer will be the real winner in the race to cover the globe with media specialists.

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