themes The topics that need to be discussed Industry
He and his client were shocked with the figures the agencies gave. Strong clients can still emerge winners, but the small to mid-sized clients on an agency’s existing roster might not be so lucky. Agencies are likely to be working in overdrive to meet the demands of their headline- grabbing clients
at their expense. “I am certain that the smaller clients will suffer,” says Tom Denford, founding partner
of independent ID Comms.
“If you are a smaller client with a big agency right now you need to ensure that you are getting what you have been promised. The agencies are going to be occupied with making sure they meet the needs of the big clients.”
LOOKING FOR BEST VALUE It is not only smaller clients at risk but also those that did not jump on the reviewing bandwagon, reveals one senior agency head: “I’m concerned for the ones that don’t review their business and look for best value. If you are a big stable advertiser that sticks around, you are just not being offered the best value. It is the advertisers who review that are being fought over tooth and nail.” The pressure on agencies to
guarantee prices from last year will undoubtedly be pushed on to media owners. “You can’t squeeze more out of media owners,” argues EMM International’s Stephen White. “Why should they help the agencies?”
2009 in numbers
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44 M&M Q2 2010
33% The percentage by which media deals across Europe fell 1.4bn Havas’ 2009 revenue, down 8.5% -15.3% Omnicom’s year-on-year decline in net income in Q4 €82 Bertlesman’s net loss, the first time it did not make a profit in 30 years -5.3% Interpublic Group’s revenue dip
But media owners are in a quandary.
If they say no they risk losing business, but a yes could mean the difference between going bust and staying afloat. The media owners that benefit from the scale of the agency deals have a vested interest in the agencies’ survival, and there have already been anecdotes of agencies threatening to pull all their business from a media owner if they do not negotiate better deals. The turmoil in the Spanish market is a case in point, where limited choice and artificially high prices in TV are by no means the medium’s saviour (see p.52). Instead, the situation is directing more spend – some would say at long last – into digital. “Heavy discounting is a dangerous
road to go down,” explains Ben Hughes, global commercial director and deputy chief executive, Financial Times. “There was plenty of crazy discounting going on and you have to make a choice [as a media owner] about how you value your business. You would have to ask those who do it what affect it has on their business. I suspect it is not a good one.” Those that did cut their prices
drastically last year have a huge task ahead of them to raise them again.
M&M VIEWPOINT
Setting a due date to dance off into prosperity is a dangerous animal. The global economy may be showing signs of recovery but the foundations are still weak. The precarious state of many countries’ economies has come to the fore. And as the industry has seen,
it is one of the biggest losers when the financial world’s house is not in order. Only by taking a collaborative approach and looking at the bigger picture can the industry recover. There’s truth behind the cliché that you’re most vulnerable when you’re on your way back up.
Some clients will view last year’s positions as the new norm, arguing that their eyes have been opened to the relative costs of TV. Traditional players might only have averted disaster because potential replacements, such as online video, don’t have enough metrics or a firmer business model to warrant the risk just yet. Media owners are likely to be more
aggressive in approaching clients direct. “Media agencies threatening to pull spend from a media owner will only make more of them open to doing more direct client deals, which clients want as they will have a more transparent process,” argues Denford. But it doesn’t come without risk. Pan-regional players such as Greece, Macedonia, Kosovo and, potentially, Portugal face financial woes and media is not going to be top of the creditors’ lists (see p.9). When there are budget targets to be
met, commissions to earn and clients to win, it’s all to easy to offer more than you can afford. But right now the industry is playing
with fire. There is an arrogance – or at least dogged hope – that everything will turn out alright, and companies will disappear if they take a risk too far. ○
2010 in numbers
2,500 Number of job shed by AOL $441m Havas’ Q1 revenue, up 1.5% 0.7% Drop in net income for Omnicom for Q1 $60m IPG’s continued loss, despite fortunes improving 60% Percentage of marketers who are looking to invest in social media
AGENCY HEAD COUNTS 2009 VERSUS 2010
2009
1. Omnicom Group 68,000 2. Havas
14,700
3. Interpublic Group 43,000 4. WPP 5. Aegis
6. Publicis 2010
63,000 14,000 40,000
100,001 109,750 16,000 44,000
15,200 42,200
Source: M&M Global Agency Map, trading statements
www.mandmglobal.com
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