Recent events such as the bankruptcy of independent shop KSL and the merger between giant agency holding companies Publicis Groupe and Omnicom Group have raised questions about whether indie media shops can compete. But from the marketing industry's perspective, there's no question: They must continue to co-exist. Holding companies often are the best solution for clients that require global scale, but independent media agencies are structured to service clients wanting more custom, niche scale.
As the news goes, KSL's demise seems due to circumstances specific to that agency. The fact that its problems afflicted an independent media agency is purely coincidental.
Provided they have the specific team and abilities required for various tasks, independents often offer more flexibility to adapt media plans as conditions change. They offer a more focused level of service and customization than large shops can provide.
But there are further reasons that independents must, and will, survive. If the Omnicom and Publicis merger is approved, the combined billings will represent more than 42% of total global media billings, according to the Research Company Evaluating the Media Agency Industry. When an organization controls almost half of the world's media spending, there is incredible pressure on media partners to cut rates further to keep business.
But the TV networks can't increase their volume discounts endlessly, not if they want to remain healthy. And the largest buyers need so much ad inventory that they can't exactly walk away from everyone who eventually draws a line.
Even once the deals are cut, there's another issue for brands. When giant holding company agencies commit to a TV network, they must honor this commitment through their clients, whether or not it's the right strategy or best placement for each individual brand. An independent media agency can react to the market and understand pricing based on each client's goals, without being held to broader client commitments on their agency roster.
Independent agencies answer to ourselves, not a larger company or shareholders. We are not held to earnouts or specific profitability metrics handed down from above. Nor are we at the mercy of the overall success of the agencies around us. Our focus is on our clients and their success while earning a fair profit.
We consistently read about holding companies diversifying their services through acquisition -- from trading desks and barter solutions to research companies. These companies are purchased with the promise of receiving new revenue from other agencies in the network. Mandates are often given that agencies must stay "in network" for the best solution or even funnel a percentage of dollars to the network. Having this restriction or expectation is never the best solution for clients. Independent agencies pick the best solution for the client, regardless of who provides it or their affiliation. It's our job to be agnostic not only in our media selection, but also in our partner selection.
Independent agencies know their limitations. Our clients are "right" for us. We can never over-represent our size. In most cases, the business we manage is in the $10 million to $50 million billing range. This size of client is typically top-tier for us and gets the attention and the best-in-class work they deserve.
No client wants to be a small fish in a big pond. And smaller clients can get lost at the holding-company level. In many cases, clients like to pick the well-known agency as the "safe choice." But that's not always going to end well.
It's better if there is an agency out there for everyone. Clients should always determine where they fall when choosing an agency and set expectations for their level of service.
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