MANAGING THE NEW REALITY OF CONSOLIDATION

Ad Industry Panelists Detail Benefits and Dangers

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NEW YORK (AdAge.com) -- While industry consolidation is neither poison nor panacea, it is changing the way marketing is handled, with more emphasis on cost control
David Bell noted that larger clients are using their procurement departments to pressure ad agencies for cost reductions.
and efficiencies of scale, according to speakers at the Adwatch: Outlook 2003 conference.

Procurement pressure
"Leveraging size for efficiency is not going to go away," David Bell, chairman-CEO of Interpublic Group of Cos., said during the session "Consolidation: Is Bigger Better?" Larger clients are increasingly exerting pressure through their procurement departments on their advertising agencies to reduce marketing expenses, he said.

Consolidation has brought about benefits for some media companies, said panelist Lisa McCarthy, executive vice president of Viacom Plus, the unit handling cross-platform deals at Viacom. She noted that in spite of apprehension in some quarters, Viacom has exacted efficiencies in its back-office operations, as well as improvements in programming production since its June 2000 merger with CBS.

But some on the panel argued size alone is no guarantee of success in marketing. Even large media buyers lost out in this year's fervid network "upfront" marketplace, said Jonathan Mandel, co-CEO and chief negotiating officer of Grey Global Group's MediaCom, a media services agency.

Too large to do business
"You can't beat the market if you are the market," Mr. Mandel said. Though a media agency needs to be big enough to amortize the cost of its research in order to do its work, he said, some media buyers have become too large to do business effectively in smaller markets.

On the agency side, there is still a variety of agencies for marketers to choose from within the holding companies, said Andy Berlin, chairman of WPP Group's Berlin Cameron/Red Cell, New York, and co-CEO of Red Cell Network. That big agencies do bad work is a misconception, he said.

"There's bad big and bad small and there's good big and good small," Mr. Bell said. "But ugly is not being good enough for your set."

The panelists agreed that, while size matters, it is how that size is handled that determines success.

The sweet spot
"It's not about finding the biggest stick possible. It's about finding the sweet spot," said J. Patrick Kelly, president for U.S. pharmaceuticals at Pfizer.

It's all in how the media companies and the agencies maneuver in this environment, said Jessica Reif Cohen, first vice president and managing director at Merrill Lynch & Co.

"At the end of the day, it comes down to one point, and it's execution," she said.

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