Online Exclusive: Letters to The Editor

DEBATING THE EFFECTIVENESS OF ADVERTISING HOLDING COMPANIES

AdAge.com Readers Battle Over the 'Behemoth' Issue

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NEW YORK (AdAge.com) -- Last week AdAge.com polled its readers about the holding companies that now dominate the advertising business. For years, many industry veterans have grumbled that work within publicly held holding companies is hampered by a crippling focus on quarterly profits and the whims of Wall Street; and that the ad business has become a dull bean counter's trade rather than a craft
Have ad holding companies gotten too large?
grounded in the often ethereal magic of creative genius. Others have argued the sprawling size and complexity of holding company ad networks have made them too ponderous to respond quickly enough to sweeping change throughout the markets, media formats and audience behaviors on which their own fortunes ultimately depend. The recent moves by some large marketers away from agency-of-record partnerships and toward the use of multiple boutique shops exclusively focused on ad creative has fueled this debate further. And the waves of negative news out of Interpublic Group of Cos. have also underscored the potential problems of holding companies. In one of the most lopsided results we've had in an online poll, 84% of last week's respondents voted that holding companies have become too large to be effective. Surprising numbers wrote letters that vigorously defended or condemned those corporate giants. Below is a selection of those letters.

-- Hoag Levins, editor, Adage.com
Losing the Best and the Brightest
Your editor's remarks say it very succinctly -- advertising has become a dull bean counter's trade. And, because it has, the industry is not attracting the best and the brightest people anymore.

Denise Paull
Midwest Manager
Time Inc., Southern Accents Magazine
Chicago
~ ~ ~

Jay Chiat Said It Best
My former boss Jay Chiat said it best when he asked aloud in the '80s: "I wonder how big we can get before we get bad."

Michael Schedlich
Managing Partner
Schedlich and Partners
Toronto, Canada
~ ~ ~

Whose Stock Price?
It's not about being too big -- size can provide strength and momentum -- rather, it's about whose stock price is more important: the holding company's or the client's.

Joe Hartnett
Integration Coach
The Phelps Group
Santa Monica, Calif.
~ ~ ~

Of Course They're too Big
Of course they're too big now. There's a constant pattern in advertising: Small, innovative shops become bigger and bigger and bigger and then finally collapse of their own weight, helped along by competition from new small, innovative shops.

N. Charles Henss, Jr.
Freelance copywriter
Chicago, Ill.
~ ~ ~

Size Not the Issue
The size is not the issue, the culture is. Acquisition without integration may serve the financial interests, but the demand for multiple marketing channels by clients demands a more sophisticated level of "horizontal management." The finance function needs to support the core business, not the other way around.

Bill Sharon
Senior Partner
Strategic Operational Risk Management Services
New York
~ ~ ~

In Favor of the Holding Company Model
Properly managed, the multiple resources offered by a "holding company" (we prefer the term network) offers a vast array of possible customized solutions to the ever-complex challenges faced by today's marketing companies. The speedy acquisition of the right combination of services and people from a committed network has proven to be extremely beneficial to our organization.

Robert A. (Bob) Girondi
Senior Director, Agency Network Relations & Media Planning
AstraZeneca
Wilmington, Del.
~ ~ ~

Bureaucracy Breeds Mediocrity
Advertising behemoths theoretically can achieve efficiencies in terms of massive media buys or tactical execution across global markets. In many cases, that's probably true. But behemoths also breed mediocrity as a result of their bureaucracy. They also develop a "full-service" culture fostering a bias toward directing all client services inward at the expense of the best capabilities, which may be external.

Max Kalehoff
Consultant
New York
~ ~ ~

What Holding Companies Do Best
Holding companies allow diversity within the groups and all of the merged properties have different strengths. They can always use the right shop for the account. They do remain competitive within the group. It is not as though they are puppets. Holding companies are at their best putting the best of the best together much like what New York Yankees owner George Steinbrenner did -- ergo the Yankees' success -- for a long time.

Shari Greers
Account Executive
Total Traffic Networks
Houston
~ ~ ~

Rudderless Operating Units
The holding companies with some notable exceptions lack executive management with the experience or ability to steer their portfolio of services in a cohesive manner. They talk about integration, but because line managers lack experience and motivation to collaborate, they operate as self-serving individuals. The lack of holding company direction and a sole focus on margin leaves the operating units rudderless. This allows unmotivated second-tier executives with responsibility for managing client relationships to fail in their attempts to produce truly creative, business-driving marketing solutions. This situation presents a marvelous opportunity for the midsize and small organizations to prosper.

John R Clark
Senior Vice President, Integrated Strategic Solutions
GSW
New York
~ ~ ~

The 'Big Is Good' Myth
Holding companies have become so big that they now must perpetuate the myth that big is good. The fact is, they are too internally complicated to run efficiently. They prevent their agencies from being responsive and from using common sense to service clients. Advertising, after all, is a sport whose most important element is best described in Nike's tagline: Just Do It. But holding company agency employees can't. They are hampered by suffocating layers of politics, excess administration, crisis management procedures and financial and billing systems that thwart the timely doing of what is actually best for the client. Account managers can't make quick, sound decisions based on their understanding of the marketer's needs or fast-moving external cultural events. Instead, they must run an often mind-numbing gauntlet of bureaucratic tangles and conflicting directions. Through all of this, the client waits as the market moves.

David Levine
Managing Partner
Creativ & Company
New York
~ ~ ~

A New Golden Age of Advertising
The holding companies are not too big to be effective. After all, look at the work we see everyday on TV and in print. Even better, look at the work we see on the Super Bowl. Clearly, we're living in a new golden age of advertising. It's innovative, it's charming, it's working hard to build a client's business. And it's a bargain, too, because competition, the hallmark of the free market, is keeping costs down and making the holding companies provide added value to differentiate themselves from the three or four other large competitors. And the holding companies have also been effective for shareholders. The evidence is there in the stock pages and annual reports for all to see. And there's still some profit margin that can be squeezed out of these behemoths' financial statements, primarily by squeezing out a few more old, experienced, but expensive executives. What's wrong with younger, less experienced, less expensive staff? They may not have as many ideas, but they are a lot more willing to do what the client wants.

Michael Mesic
President
Strategy & Beyond
Chicago
~ ~ ~

Teams of Inexperienced Young People
It's sad that the giant ad agencies now act like lawyers. It's all about billings. So they nab good clients with award-winning, experienced senior managers, then they form teams of inexperienced, young people right out of college to service the accounts. And people wonder why the turnover in agencies is so high?

Irma Calderon Woodruff
Director Business Development
Web Head Group
San Antonios
~ ~ ~

Negative Talent Pool Impact
As executive recruiters, we view the behemoths in terms of the negative impact they have on their own talent pool. The holding companies will not allow the individual agencies to use outside recruiters if the employee is coming from one of their other agencies. Nor do they allow one of their agencies to approach any employee of another agency in their group.

Rather, the holding companies insist that the individual employee "raise their hand" if they wish to seek a transfer. Who would be foolish enough to jeopardize their current situation by openly approaching an affiliate agency? The answer is no one.

This forces the best talent to actually leave the holding company if they are not happy in their current agency.

Consequently, in an attempt to save on expenses, the mega holding companies are actually forcing the loss of their most precious asset to their own competitors.

Karen Tripi
President
Karen Tripi Associates
New York
~ ~ ~

The Talent Drain
I've noted in the recent major creative award shows that the behemoth agency brands in the behemoth holding companies seem to have really pumped up their work while the work of some of the best creative shops acquired by the behemoths has taken a dive in the other direction. So, does this mean the best talent is being sucked up by the mother ship or is the talent leaving because emphasis is now on the numbers rather than the work?

Probably both.

Frank Compton
Sawyer Riley Compton
Atlanta
~ ~ ~

Consumer-Controlled Media Consumption
Consumers' accelerating control of media consumption appears to be evolving faster than the holding companies' ability to adapt to, much less embrace, the changes. And the bigger the holding companies, and the more dominant and isolated the traditional business units are within them, the more difficult true evolution and innovation becomes for them. More walls have to come down faster. Incentives to cross-pollinate practices and services must increase, and risk has to be embraced wholesale, not just within small rebel corners of the empires, to assure the large groups' relevance and success in the fast-changing world of consumer-controlled, consumer-generated media.

Tom Cotton
President
Conductor
Santa Monica, Calif.
~ ~ ~

Short-term Shareholder Concerns
A new and infinitely more complex marketing communications environment requires ad agencies to provide clients with a deep holistic understanding of their business. As has been clearly voiced by many leading marketers, to be relevant the agency business model of the future needs to be built around total business solutions.

While it would seem that the holding company structure would be able to prosper on such a challenge, this is not happening because of managements driven by short-term shareholder equity concerns rather than a focus on marketing clients' actually needs. This problem is further compounded by organizational complexity. Unaware of holding company services, many senior client managers aren't even familiar with the tools at their disposal.

The bottom line of the holding company concept: good idea, poor execution.

Jon Kramer
Principal
(marketing)3
Ridgefield, Conn.
~ ~ ~

Too Distant, Too Fat
The current state of Big Advertising is a mirror image of the current state of Big Media. Both have become too distant to be sensitive to what their audiences need and too fat to deliver it. Media has lost credibility; advertising has lost creativity. Both sacrifices were made at the altar of profitability, to the applause of shortsighted shareholders.

Robert Young
Young/CDMC
Grand Rapids, Mich.
~ ~ ~

Nobody Wants to Rock the Boat
My experience at multinational agencies is that when you have one working for a client on a global or near-global basis, the perceived "stability" of the relationship becomes more important to front office than the boldness and cut-through of the work. Nobody wants to rock the boat by challenging the status quo. But that's exactly what most brands need to stay fresh. So now the best work is coming out of small and midsize shops that are in touch with the local market and have the courage to shake things up.

Such smaller shops are better prepared to innovate in media, integrating elements like digital, SMS and street tactics into mass-media campaigns. Socially, attitudinally, financially and biologically, the world has changed shape. Clients know it. My kids know it. But the world of holding companies either hasn't woken up, or has buried its head in a pillow, praying to wake up back in the '70s.

Jerry Beale
Partner & Creative Director
Radical Alice
Auckland, New Zealand
~ ~ ~

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