ANNUAL AGENCY RANKING;GLOBAL INDIE NETWORKS ON GROWTH PATH:CONFEDERATIONS OF AGENCIES ADAPTING TO REGIONALIZATION, NEW MEDIA

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Partners in the Pacific, the Pacific Rim's first independent network when it was launched in early '95, was hardly a blip on the indie agency network screen before it dissolved this year into Affiliated Advertising Agencies International (3AI), forming Worldwide Partners.

The resulting pact is changing, at least structurally, the landscape for the loosely affiliated independent agency networks, by creating multiple holding companies owned by the 84 agency members.

The 23 indie networks in this Advertising Age International survey-representing 1,010 independent shops worldwide, 614 in the U.S., with worldwide gross income of $2.88 billion on billings of $17.4 billion-basically are confederations of autonomous agencies. The groups are sustained by annual dues.

CENTRAL CONTROL

At their hub is usually a secretariat that coordinates systemwide discount services such as market research, media buying and computerware. Secretariats may coordinate new-business development programs and even pitch accounts systemwide.

More recent tasks by these central authorities have included establishing e-mail and Internet access for the system.

"Practically every communications plan we prepare now includes an Internet dimension," said Jaakko Alanko, chairman of Dialogue, a business-to-business network.

Indies have grown in numbers this decade as agencies have networked to keep pace with clients entering new markets internationally. Political stability in Eastern Europe, dissolution of many national barriers in the European Union and burgeoning business opportunities in the Pacific and Southern and Southeast Asia are abetting marketers' desire to expand.

The EU has facilitated networking among independent agencies by allowing the creation of European Economic Interest Groups that offer tax advantages in doing business across national borders. Through incentives, the EU encourages EEIGs to evolve into single pan-European companies. EEIGs in this survey include Alto, ELAN, ICP and IN, all formed in this decade.

Worldwide Partners is looking more like its J. Walter Thompson Co. or DDB Needham Worldwide multinational brethren by grouping into four regional companies: Europe, Asia/Pacific, Latin America and North America.

Participating agencies in Worldwide Partners collectively own a substantial minority of their regional holding company. A fifth holding company serves a central media-buying operation. It is linked financially to Cincinnati media-buying service, Media That Works.

REGIONAL FOCUS

The structure of Worldwide Partners reflects a philosophical bent that global marketing and advertising is more typically regional in nature.

"As trade barriers have come down, cultural barriers have gone up," said WP President Patricia Fiske, formerly head of 3AI. The group surveyed ad campaigns of the top 100 global brands last year and found 80% of them were regional and/or local.

Hardly surprising, the survey found that autos, fast-food, transportation and cosmetics were categories of high ad regionalization. This is evident in the '95 growth in the shared brands among the indies: Piaget and Baume & Mercier watches and the new Mercedes-Benz van are now carried on a pan-Europe basis at IN agencies; Dr. Scholl footwear and Seita cigarettes, in three countries at Alto; Case agricultural equipment, in five countries, and 3M Post-Its, in 14 countries at IFAA; AEG white goods and Weight Watchers products throughout Europe at Interpartners; expansion of Kleenex products from seven to 11 European countries at ELAN; BMW autos in all of Latin America and Oshkosh B'Gosh in three countries at Worldwide Partners; and Peugeot cars in three countries, Glenfiddich Malt Whisky in five at InterDirect.

THE REAL BACKBONE

As important as they are, the multinational clients aren't the backbone of these networks. The networks cater more to the smaller, entrepreneurial companies that have multiplied and expanded with the relaxation of trade restrictions globally.

The need for regionally based indie networks to move globally has promoted a number of network mergers, Worldwide Partners being only the latest.

In May 1995, the 11-member European group, NEAA, merged with AMIN, Cleveland. Access to the U.S. and Canadian market was essential for the European agencies to grow, particularly those in the big markets, says Ferdy A. Pino of Continental Advertising, AMIN's agency in the Hague, Netherlands. Following the linkup, two U.S.-based clients soon landed at NEAA-turned-AMIN agencies in Europe: Crayola in the U.K. and Germany and Boston Tourism Authority in the U.K. and Italy.

More typical expansion is shop-by-shop procurement in nations or regions without network roots. This pits indie networks against themselves and multinationals. IN's Hautefeuille & Collette, Paris, was bought by Publicis Communication in '95, forcing IN to replace it with Les Ateliers ABC, Paris; media-oriented L.I.A.N. lost member Ally & Gargano, New York, when it folded in '95, but stole Avrett, Free & Ginsberg from the AMIN network. Continuity was maintained at the personal level as Dawn Sibley, L.I.A.N. media point person at Ally, formed Media Partnership Corp. (a media management company owned by Interpublic Group of Cos.), which handles a sizable portion of Avrett's media business.

As any network can attest, the loss of a lead agency can wreak havoc on the network. Roose & Partners, London, founding partner and seat of the secretariat for Group '92, left last year to become a non-equity affiliate with multinational network Testa International, Milan.

"We didn't get that much business from Group '92, anyway," said Ted Roose, managing director of the 17-year-old shop. The remaining agencies apparently felt the same and dissolved Group '92. Contributing to their decision was the loss of the group's U.S. affiliation with L.I.A.N. That 11-member media network moved with Roose over to Testa as well, also on a non-equity basis.

HOW TO EXPAND

The striking of non-equity deals, the way indie networks gather recruits, has become the modus operandi for expansion among multinational agencies. Advertising Age reported in the Agency Report (Advertising Age, April 15) about the agency grab taking place in Eastern Europe and South America among multinationals cutting non-equity deals.

Among the hypotheses for expansion in this way: A small minority stake in agencies by an outside "parent" doesn't buy loyalty anymore. A majority investment obviously requires more money, putting capital at risk in countries where political turmoil and currency fluctuations may undermine future returns.

Another hypothesis: The independent network modus operandi in pulling in affiliates (non-equity members) is being copied by the multinationals to such a degree that strong unaffiliated local shops are becoming a scarce commodity now that multinational and independent networks are plowing the same ground.

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