How a Big Agency Merger Could Benefit Local Ad Sellers

It’s like a scene straight out of Mad Men: bigger means more clout in the advertising industry, so why not combine resources with your competitor? No doubt this was a big part of the thinking behind the huge merger announced this week between advertising arch-rivals, Omnicom Group and Publicis Groupe. According to the New York Times, the deal creates “the world’s biggest family of agencies, with a stock market value of $35.1 billion and more than 130,000 employees.” But Mad Men is fiction set in a different era, and this merger is real and today — a desperate reaction to crippling change in the industry. In the long run, it’s dangerously old-fashioned, and the beneficiaries will be those who cling to more personal contact: local sellers of advertising.

The Times article is telling. Maurice Lévy of Publicis cites “technological advancements in advertising and the rise of so-called Big Data — the ability to amass larger volumes of consumer information and make money from it in various ways — as reasons for the merger.” He’s talking about Google:

“The communication and marketing landscape has undergone dramatic changes in recent years including the exponential development of new media giants, the explosion of Big Data, blurring of the roles of all players and profound changes in consumer behavior,” he said. “This evolution has created both great challenges and tremendous opportunities for clients. John and I have conceived this merger to benefit our clients by bringing together the most comprehensive offering of analog and digital services.”

Mr. Wren (John D. Wren of Omnicom) also stressed the importance of digital technology to advertising’s future. “Everything three years from now is going to be digital,” he said. “Everything that we do, even billboards nowadays are digital or become digital.”

The Times also quoted David Jones, the chief executive of Havas, a competing advertising holding company, who took a shot at the deal calling it “an industrial (age) merger in the digital age.” In a statement to the paper, Jones rightly noted that “Clients today want us to be faster, more agile, more nimble and more entrepreneurial — not bigger and more bureaucratic and more complex.”

Tim Hanlon, founder and CEO of consulting firm Vertere Group and a long-time ad industry executive and observer, declared this week that the “holding company model is dead” and agreed with Mr. Jones.

In essence you have well over 120,000 people combined who are born out of a history of people-driven, creative, marketing and communication services. By definition, it is inefficient and does not neatly fit into machinery, computers or electronic engineering.

What you have now is the starting gun of a new race. That race is to combine technology and creativity at reasonable and workable scale that solves marketer’s problems in a modern, real-time way.

Hanlon is absolutely correct in noting the inefficiencies of bigger, and that is exactly the enemy that technology is here to destroy. Hanlon believes that in Publicis CEO Maurice Lévy’s mind, the fastest way for the agency model to catch up (to the disruptors) is to scale. “It remains to be seen however,” he wrote, “if scale is the only path to modern marketing ‘goodness.'” At the end of the day, he added “the enlightened marketer will determine how much of the agency holding company model will work for them.”

Tech guru and writer Om Malik makes yet another argument for why Madison Avenue is in trouble. “(The) Internet,” he wrote, “often brings measurability, targeting and interactivity — which leads to a sort of deflationary pressure on industries that have traditionally benefited from ambiguity.” He’s speaking about the very heartbeat of Madison Avenue, the old Wanamaker concept that “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” Mass marketing was the best we could do for a long time, but technology is disrupting that.

In an email to Street Fight about how the move will impact local advertising, Hanlon was straightforward in noting the inevitable conflict:

“This will have significant impact at national and international levels for sure, but I think media owners have to be especially wary of the outsized influence such a tie-up will have in smaller markets and at various local levels in both the U.S. and globally.

“It’s clearly one key area — perhaps the biggest — that will capture the attention of all of the local regulators who will be evaluating this deal. The media buying impact may be perceived as significant at the national and global levels – but could be construed as disproportionately outsized when viewed from the local level.”

And that means opportunity for those who have maintained the ground-level contacts with people who buy local advertising. In the wake of this big merger, media guru Jeff Jarvis advises us to “get into the relationship business,” and I couldn’t agree more. And while I certainly believe that big data is our future, nuance at the local level is a part of accuracy when it comes to the providing of filters. This is an advantage that we have in local media, and we should not be shy about making that known to small and medium-sized businesses in the communities we serve.

Smarter is what we can be, and that view is shared by Kip Cassino of Borrell Associates, who sees synchronicity between this merger and what’s happening with the TV networks. “In both cases,” he told me via email, “the consolidations are reflections of fear and inability: fear that somehow the world they are used to and comfortable with is passing; inability to see a way to make the new media world work for them.”

The big agencies have never gotten a good grip on the digital space. Their share is regularly reported in Ad Age, and it is not enormous. Smaller, quicker, more knowledgeable players have run rings around them, and the big agency buyers have never gotten a firm grip on exactly how to monetize a digital buy. Until just a few years ago that didn’t matter much. Broadcast TV was still the only real branding medium. Now, strong and growing evidence shows that’s no longer the case. The breathtaking climb of video, the growing amount of good research on the impact of social and mobile on buyer intent — all have taken their toll. So the answer — for some — is to circle the wagons, get bigger instead of smarter. It’s a strategy that may work for a while, but long-term it’s got no legs.

The advantage goes to those who have the personal connections, know digital marketing like the backs of their hands, and think smarter than the biggest and best of Madison Avenue. Parochialism has advantages. It honestly does, but only for those who realize it.

In 2004, Rishad Tobaccowala, the advertising and marketing genius (and current employee of Publicis Groupe), said these important words about the future: “The secret to success — and maybe even survival — will be staying nimble, fleet of foot, adaptive, flexible, and perhaps most important, open-minded.”

That’s the place where we all need to be, especially now.

Terry Heaton is President of Reinvent21, a consulting company specializing in business reinvention for the 21st Century. He’s an internationally-recognized creative expert on all things web-related, especially as they relate to local media.