What’s Next for the Holding Company?

Does anybody active in or around the advertising business (aside of course from some of those working for them) genuinely think that holding companies within the marketing services sector currently deliver better work than independent agencies? As the intended Publicis Omnicom merger has received what might at best be described as a lukewarm reception this seems a good time to explore what exactly these organisations are for.

Do they improve creativity? I’ve never heard a single creative voice singing their praises; in fact I’ve heard very many creative voices doing the exact opposite. Certainly Omnicom agencies win a great deal at Cannes but is that anything to do with the agencies concerned being part of Omnicom?

Do they encourage collaboration between member operating companies from different disciplines within the same organisation, thus helping to deliver the holy grail of integration?

Anyone who has experienced any attempt to collaborate between a Kantar company and a GroupM unit would know the answer to this one. As would anyone looking for examples of any form of genuine collaboration between Zenith and Starcom, or even OMD and PHD.

Meantime Omnicom and WPP had a most unseemly row about who could claim the most Cannes Lions, with creative agencies adding media agencies to the list of contributors to winning entries only after the event, apparently when driven to do so by their holding companies. Collaboration indeed.

How about research services? There must be a reason why the only holding company to have entered this field whole-heartedly is WPP (Omnicom and Hall and Partners isn’t on the same scale), and even its closest admirers wouldn’t claim Kantar as an overwhelming success when it comes to inter-company collaboration. Ask most in the research world (including clients) if TNS is a better company under Kantar and you wouldn’t find many saying it is.

Below-the line? I suspect most creative or media agency operating units would far rather tackle pretty well any BTL issue themselves (however poorly equipped they may be to do so) ahead of bringing in a sibling to help (and share revenue).

Clients? The one-stop shop notion is in theory a good one. It should make sense for a client to have ‘one throat to choke’, one person or team responsible for delivery across all participating entities within the holding company.

But in reality it very rarely works. The reasons are many. First many clients instinctively baulk against putting all their eggs in one basket. Many client structures are silos – and the issue of individual sovereignty is an important one. Having (say) a PR agency foisted on you as the Head of PR purely because someone above you has done a deal with a holding company tends not to be popular unless the holding company brings a tangible benefit through integrating (let’s say) PR and research.

Then there’s the issue of talent. No holding company has a monopoly on the best people – and as a client it must be preferable to have the most talented individuals on your business across all disciplines, regardless of who they ultimately work for.

Their own staff? Internal politics flourish within holding companies. Many operating units overlap in the services they offer – look at the number of WPP entities offering econometrics as one example (I can count four sets of analysts, and there may well be more). When individual operating companies are under pressure to deliver financially, internal battles break out as to who does (and can charge) for what. And that’s before you get into the battles over who is the client’s truly trusted strategic lead partner.

What about providing better media services to clients? The Cog Blog has commented before on the myth that bigger equals cheaper prices in media buying. Once you’re in the Premier League it really makes no difference who is biggest.

Digital and technology? Certainly some of the major holding companies, like Publicis and WPP have snapped up a raft of digital and technology businesses. But do these businesses really offer a better service to clients just because they’re part of a larger organisation? Do the other companies within the holding company welcome them, and work with them? Are there any examples of these businesses growing faster than they would otherwise have done as a result of investment from the holding company that owns them? And anyway are clients really going to find them more appealing under the aegis of a WPP or a Publicis as opposed to them remaining independent?

Do the holding companies need ever-bigger scale to allow them to ‘compete’ with the likes of Google and Facebook? Aside from the point we’ve made before on data ownership (agencies don’t own primary data) this is an issue that primarily exists in the heads of analysts. It makes no difference once you’re at a certain scale.

The fact is that clients buy people, first and foremost. And the history shows that post-earn-out many of these talented people leave front-line work for clients and either vanish into the holding company hierarchy or leave.

Holding companies have done many good things over many years, amongst them elevating the advertising business from something close to a series of local cottage industries to a respected and acknowledged driver of business success, globally. They’ve encouraged the notion that ‘advertising’ is something that goes beyond creative output to encompass many activities that enhance and build on original ideas and thinking. They’ve allowed certain centralised functions to be offered across all operating units at a scale out of reach to individual units. They’ve made many people a great deal of money.

But maybe they need to be reformed. Their purpose has to go beyond a search for scale for scale’s sake, towards working smarter and more collaboratively within their organisations. Certainly scale brings some benefits, it’s just that scale for scale’s sake beyond a certain point becomes pointless. The challenge for holding companies is to use their resources to focus their people on what they do best: to collaborate in order to provide better solutions for clients.

Because, underneath it all the truth is that holding companies’ biggest supporters are those who know little and care less about advertising output, including financial analysts and (sadly) many client Boards, to whom the offer of a neat and tidy solution is compelling, at least until those on the front-line demonstrate that neatness doesn’t necessarily equal the sort of creativity and flexibility in thinking that leads to success.

The Publicis Omnicom intended merger has indeed received a lukewarm reception. It may very well turn out to be an industry game changer – just not in the way that Messrs Levy and Wren envisage.

 

|
|
|
|