Bigger, Better, Ummm

08 August 2013

One of the more frequently claimed benefits to clients of the Publicis Omnicom merger is that the new merged business will be able to compete better both with traditional media giants and with the likes of Google and Facebook. This simply doesn’t hold water.

For a long time, it’s been accepted that bigger agencies or bigger holding companies are somehow essential to deliver ever better prices to clients. Bigger must mean cheaper, surely? Whilst this assumption might once have held a grain of truth, those with a vested interest in saying it was so (holding company CEO’s, analysts thirsting for the next mega-merger) have turned it into absolute truth by repetition and by convincing journalists who really should have questioned it more closely.

Are we to assume that the likes of GroupM, now reduced to a ‘mere’ challenger brand are suddenly going to find themselves paying more for digital space, or indeed for regular traditional space than a larger competitor? That a large broadcaster is about to turn round and say, in effect we have to give the bigger guy better rates?

Scale is significant in media pricing – but only up to a point. And we’ve gone way beyond that point. Today, as long as you’re in the top division it makes no difference.

Then there’s the shadowy world of unofficial income. Here there may be a benefit in being at least amongst the very biggest – but the benefit is for the holding company, not its clients.  This is an area future Cog Blogs will cover.

Scale does allow an agency to buy the best talent, leading to the best results. After all, if you’re an ambitious buyer, working on huge brand budgets is both interesting and good for the CV. Is there a queue of talented people waiting to leave WPP for the new merged entity purely because the newcomer is bigger? If accountancy firm A overtakes accountancy firm B in terms of overall revenue does the talent migrate from B to A? Of course not.

Scale helps, up to a point. Once we’re beyond that point, pure scale and the inevitable need for short-terms results, added to the debilitating effect that comes with layers of bureaucracy can lead to a reverse effect. Which is why one unintended consequence of the Publicis Omnicom merger could very well be a growth in small, independent, creatively-driven agencies.

What about technology and data analytics? Surely here scale is needed to compete with Google and Facebook?

But the agencies don’t own any primary data. Data is owned either by clients, by publishers or by those who have invested in persuading consumers to trust them with their individual information. It may be that many consumers don’t realise they’ve vested that responsibility with the likes of Facebook; the fact is that Google, FB and the like own or at least are leased primary data.

The more we learn about this merger the more shadowy the benefits become – unless of course your name is Levy or Wren.