Changes to the structure of Publicis Groupe Media have led to conjecture that it is set to follow the lead of other big advertising organisations and create an umbrella organisation to oversee a combined media buying operation.
Following the appointment of Jack Klues, former chief executive of Starcom MediaVest Group, as chairman of Publicis Groupe, and with Ian Jacob set to become head of Starcom MediaVest’s Europe, Middle East and Africa group (MW last week), some observers suggest Publicis will ape rival holding companies by merging the Zenith Optimedia and Starcom groups.
WPP’s agencies MediaCom, MindShare, Mediaedge:CIA and BJK&E – with UK billings totalling almost £2bn – are united under the Group M banner, while Omnicom’s Opera group combines the £900m spend of OMD, PHD and Manning Gottlieb OMD. Interpublic’s agencies, including Initiative and Universal McCann, are united under Magna.
Zenith’s recent L’Oréal win may also have tipped the balance in favour of a unified approach, according to some. But Anthony Young from Zenith says Publicis neither wants nor needs to combine the two businesses, although he hints there may be some collaboration in European markets. "The Publicis strategy in the UK has been to have two independent media businesses competing in the market," he says.
Yet the benefits of combining the powers of several buying agencies are a lure – the added financial clout allows the negotiators to get a better price across a medium. The "precedent" – the starting point for price negotiations with a media owner – can be reduced if several agencies go in together. Pooling research and other costs such as information systems also cuts costs.
However, some observers feel that the creation of larger groups sometimes leads to an overemphasis on cost and can alienate clients. Colin Mills, of recently formed media agency the7stars, says massive deals create "an internal market so that the client is negotiating with the agency rather than the media owner". That can prevent the client from forging a relationship with the media owner, he says, and adds that bigger deals do not benefit everyone. "The big agency deals benefit the really big advertisers and the really small ones, but they don’t benefit those in the middle because someone has to balance the books," he explains.
Other industry sources say combined buying operations raise issues of client confidentiality while large advertisers may not be happy to see their buying clout being used to leverage better prices for competitors.
Another source at a Publicis-owned agency points out that pooling resources within a group helps the smaller agencies, which benefit from having bigger players around them. But he adds that Zenith and Starcom are both big enough to be able to use their size on their own.
Another issue that advertising groups have to address is the actual role of the umbrella body. Group M is seen as a hands-on organisation that takes an active role in overseeing WPP’s planning and buying agencies, although at least one observer believes that Opera and Magna are less involved in supervising the agencies.
Whatever Publicis Groupe chooses to do with its agencies – and despite the fact that pooled buying may be experiencing a few teething problems at present – it seems that in the value-obsessed world of media buying, size does matter.