Ofcom on trend of agency consolidation: ‘switch to get a better deal, use auditors, tender accounts’

ISBA Conference 2014: Ofcom CEO Ed Richards has advised marketers to make use of auditors, put accounts out to tender and be prepared to switch agencies in order to get the best deal in light of the recent trend of supplier consolidation, such as the recent merger announced between Omnicom and Publicis Groupe.

Ed Richards
Ed Richards, Ofcom CEO, outlines regulator’s priorities for 2014 and advice for marketers on handling the recent trend of agency consolidation.

Speaking at the ISBA Conference in London today (12 March), Richards explained how just four media buyers account for 85 per cent of TV ad purchasing in the UK and that the merger between Omincom and Publicis Groupe would see one third of TV ad buying go through that entity.

The £22.8bn merger between Publicis and Omnicom to create the world’s largest advertising agency group was approved by the European Union’s antitrust body in January this year without condition. 

Richards said marketers must make sure they are “active and engaged” customers of such agencies to ensure they are getting the best deal – pitching out to new suppliers if necessary. Later on in the same conference, IAB chairman Richard Eyre said he “profoundly disagreed” with the suggestion that marketers should change suppliers as much as possible, although he did not elaborate further.

Richards also used his presentation at the event to outline four key advertising priorities for Ofcom in 2014: alcohol, payday loans, gambling and e-cigarettes.

The number of alcohol ads shown to children on TV per week increased from 2.7 in 2007 to 3.2 in 2011, according to Ofcom research. Richards said part of the reason behind this was that children are staying up watching TV later, but he added that new guidelines and Ofcom support are helping to ensure this number stabilises and does not increase going forward.

An advertising sector on a sharper increase in terms of volume is payday loans. The number of payday loan ads shown on TV increased from 17,000 in 2008 to 397,000 in 2012 – with payday loan brands accounting for more than 90 per cent of ads for personal loans broadcast, according to Ofcom research.

This level of growth “raises some questions”, Richards said, as to whether such advertising is harmful to children and whether it matters that two-thirds of payday loan ads are broadcast during the day. He said Ofcom has written to the financial regulator, the FCA, to gain its expert view on the impact of payday loans and is awaiting a response.

Elsewhere, the number of gambling TV ads has increased from the 537,000 shown in 2008 to 1.4 million in 2012. However, Richards said that so-called “problem gambling” was found to actually decrease during this period, although he added that Ofcom continues to work with Gambling Concern and the government to evaluate the effect of gambling ads on consumers.

Richards was most pointed when it came to discussing the nascent e-cigarettes advertising sector. The percentage of smokers that are said to have tried an e-cigarette has increased from 9 per cent in 2010, to 22 per cent in 2012 and e-cigarette ads are now more commonplace on TV than ever before, according to Ofcom research.

Richards said it is important to ensure advertising does not serve to “re-glamourise smoking” and that the recent BCAP consultation into the sector was “very welcome”.

More generally, Richards also spoke about the challenges areas such as native advertising, social, data collection and programmatic place on advertising regulation – although he did not go into detail on how the regulator looks to tackle such concerns.

Away from the advertising sector, Richards also used his presentation to reveal Ofcom research that claims the UK provide’s the “best broadband” of the five major European nations, leading on coverage, choice, take-up and “performing well on price”.