"Very Thought Provoking!" - What Do Marketers Think About Agency Consolidation?

by Cory Treffiletti, Wednesday, July 31, 2013 11:06 AM

This is not really a column about the Publicis-Omnicom merger -- you’ve already read enough about that.  This is a column about what marketers are already doing that a consolidation like this is hoping to emulate and surpass.

Agencies are in a state of change, but so are marketers.  Agencies tend to consolidate and merge, or spin out new companies to take advantage of trends and new opportunities for growth.  Marketers are more status quo -- they can’t necessarily launch a new product to take advantage of every change in the landscape.  They have a fixed portfolio to work with, but they can respond to those changes by refining marketing strategy for their products.  Data is currently driving that refinement.

One of the key reasons stated for the merger is the explosion of big data, analytics and insights -- and the need to create infrastructure to respond to that trend.  Call me presumptuous, but data, analytics and insights have been around for years. Were they not paying close enough attention already?

Marketers have been paying attention to data, analytics and insights for a long time, and agencies have traditionally been the execution arm for those insights.  I was an agency guy for many years, so I know that, try as we might to develop new insights, it typically came back to information that the client already had.  We would spend lots of time being analytical, but it was primarily in service of the execution -- how we would refine media buys, etc. 

Unfortunately for many, the execution side of the business has become a race to the bottom in terms of pricing, so the merger of these two companies can help to create a more scalable suite of solutions, with them working their way up the food chain back into insights, with less focus on execution.

Marketers will pay close attention to this development because it gives them another viable option for the utilization of data through their partners –or else they will continue to figure it out for themselves.  Marketers have been learning about big data and data management over the last two years and many have become quite sophisticated in their approaches, though some are still finding their way. I’ve personally seen marketers over the last 6 months become more knowledgeable and ask better, deeper, more informed questions.

 Most marketers view their data as an owned asset, allowing their agencies to use and manipulate it, but not control it. If that trend continues, how far up the food chain can agencies aspire to make themselves more ingrained in their clients’ business?  How much access will marketers provide to their partners?

That’s the question I’m thinking through when I look at the merger.  In the simplest of explanations, this merger is about being able to acquire media and data at a lower cost and maximize ROI for both the agencies themselves as well as their clients. At a deeper level, it’s about infrastructure and scale as it pertains to data and analytics. If agencies start to gain access, and if they start to own their own data, can they become significant stand-alone players in the data space?  Can an agency holding company shift from an execution partner to a more consultative partner, competing with companies like Accenture or even Acxiom?  That’s the scuttlebutt -- that this deal expands the competitive set for the agencies underneath Publicis and Omnicom.

So marketers are paying close attention – especially those marketers who work with these agencies.  They have two decisions to make. The first will have to do with competitive conflict. If the consolidated company works on your largest competitor as well as your business, will the separation within the holding company be enough for you? Second, will you give your agency more access to your proprietary information than you would have just a few months ago because they may have a stronger infrastructure, or will you seek to control more of your data than even before?

It remains to be seen how this will work out, but I have strong hopes for the agency business.  I think they can figure it out and make this work, and I think it’s a wake-up call to the agencies not part of this merger, seeing opportunity for them to get more involved in data as well.

For marketers, I see status quo for at least another year as they continue to dive deeper into data activation.  After all, they’ve been thinking this way for years.

2 comments on "What Do Marketers Think About Agency Consolidation?". 

Mike Einstein from the Brothers Einstein commented on: July 31, 2013 at 11:33 a.m.

The problem is, the odds just don't favor enough creative thinking to make things better by making them bigger. That's why none of these mega agencies have anyone's name on the door. Question: If it's all about Big Data, why can't a machine run the whole thing? P.S. Cory, it's OK to include the word "advertising" from time to time lest we completely forget what commercial media is all about.

Paula Lynn from Who Else Unlimited commented on: July 31, 2013 at 12:32 p.m.

It's about people shuffling, too. And that creative thinking Mike mentions....it's not just creative in the commercial form that the megas are missing. The megas are about the top levels playing a game to gather more gilt and gelt for themselves with no guilt. The megas with their mega clients with mega data have built major spy agencies about consumers with no controls.

Read more: http://www.mediapost.com/publications/article/205763/what-do-marketers-think-about-agency-consolidation.html?print#ixzz2aeKw1JoX

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