Early last week, a snazzy black-and-silver invite made its way to the mailboxes of ad types, requesting their presence at a celebration: the launch of Project Worldwide, a nascent marketing holding company based in Auburn Hills, Detroit.
The bash (scheduled for April 20 and promising a performance by Train, responsible for the most overused song in advertising, "Hey, Soul Sister") marks the arrival of yet another new player on the holding company scene.
Adland's Big Four holding companies -- WPP, Omnicom Group, Interpublic Group of Cos. and Publicis Groupe -- have long dominated the marketplace, and though they remain the largest, a number of burgeoning players are rising up.
It's an interesting post-recession development: new-school holding firms spending millions to swallow up indie shops and build out mini-empires, each attempting to put its own spin on a concept pioneered nearly 60 years ago by Marion Harper. They include Project, London-based Engine and Korea's Cheil. There are also slightly more senior firms, such as MDC Partners and Dentsu, which are both acquisition hungry.
Industry observers say there's room in the marketplace for new players but what isn't clear is who will benefit the most from more agency networks -- the umbrella organizations themselves, the shops selling to them or clients.
Project Worldwide, formed last October, is home to George P. Johnson, Juxt Interactive, G7 Entertainment Marketing and Partners & Napier, which Project acquired this month. All told, Project has 1,100 employees, 25 offices and 2011 projected billings of more than $830 million. That's relatively tiny by comparison to the Big Four, but Project is promising to ramp up fast.
Chairman-CEO Bob Vallee told Ad Age that Project wants to be home to shops that didn't "grow up" on Madison Avenue; that it's in talks with 50 different agencies; and that, by fall, it will ink two or three more deals.
Many independent shops seem in a selling mood. In addition to Partners & Napier, deals in the past six months include Taxi's sale to WPP, Dentsu's acquisition of Firstborn, and MDC Partners' buy of 72andSunny and Anomaly.
"We're talking with agencies about M&A -- so we know that many of them are starting to get the itch," said Ken Robinson, principal at Ark Advisors, New York.
As both the established and new holding companies continue to expand, the question of whether the model is a sound one for the future of the ad business is nagging many minds in the industry. Need proof? Here's a query recently posted to the online community Quora: "Is the holding company structure detrimental to the evolution of agencies?"
Replied Ben Kunz, director of strategic planning at Mediassociates, an agency in Connecticut: "Not detrimental, just a maturation that slows ideas, in my view. ... The trouble with holding companies that I see is they attract agencies at the mature end of the spectrum who may be furthest away from the innovation fueling new media results. They also have higher cost structures (in my view) since they must draw profits out of the organizations in their tanks."
Mr. Kunz's argument -- that holding company agencies don't foster as much innovation as independent shops -- is why even some executives who built their careers (and filled their coffers) on the model are now souring on it.
"The structure of the holding company is outdated," adman Jon Bond told Forbes a few months ago. "It's inappropriate for today. Today a structure has to appeal to three disparate groups. It has to appeal to agency entrepreneurs. It has to appeal to clients. And it has to appeal to the financial community. The old model just had to appeal to the financial community. It doesn't appeal to agency entrepreneurs. It doesn't appeal to clients because agencies are competing with each other…Structurally, it's flawed."
Mr. Bond sold his agency, Kirshenbaum Bond Senecal & Partners to the Toronto-based holding company MDC Partners, now the 10th largest holding company -- and one that distances itself from the term. Ask CEO Miles Nadal and he'll say the company he founded 30 years ago is a "partner, not a parent" and the distinction is not only one of semantics.
"Implicit in a holding company is something that is passive, that is controlling, that implies a parent company relationship with offspring and its completely counter to what we believe in," Mr. Nadal said. "We are a provider of resources and capital that allows our partner firms to take their companies to the next level. ... We are there to help them seven days a week." He added of his competitors: "Culturally, they are not as entrepreneurial as we are." MDC expects to spend some $60 million to $80 million more in acquisitions this year.
"There will always be agencies that want to sell and have cash infusion," said Ark's Mr. Robinson. "And the more holding companies suitors the better. But when it comes to clients, it's extremely rare that clients will ask or care whether or not an agency is part of a holding company. Clients will choose best in class over potential efficiencies from staying in network."
Investors like the concept, said Matt Chesler, an analyst at Deutsche Bank. "What investors like is that they're buying the diversification of risk and stability. There isn't a limited amount of dollars. It's not as though the Big Four plus others have exhausted the funds that are available to invest; media investors are constantly reallocating."
For Mr. Vallee's part, an IPO is not something Project is considering right now. But he's sure about his view that Project has a rightful place in the market. "Us, Engine, MDC Partners ... there is a place for small- to medium-sized holding companies who stay focused."
In the meantime, larger, more established competitors are focused on evolving. Omnicom CEO John Wren at the 4A's in Austin earlier this month put it best: "Our ability to survive and prosper depends on our ability to adapt."