Picking a holding company, not an agency, is now a trend

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There is an ongoing story in the ad business not directly connected with the events of Sept. 11, or even the recession. It's one that makes many in the industry uncomfortable (for reasons that shall become obvious): Clients are beginning to appoint holding companies, not agencies.

This development is related to account conflicts, discussed by Scott Donaton elsewhere on this page. Conflict is very much a public issue; it's intensely political and the arguments that rage around it are based increasingly on emotion rather than reason. It elicits strong, and public, views.

The holding company story is different. No one wants to admit to the trend because it creates as many headaches for its beneficiaries as it does upsides for their bottom lines. The politics take place internally-because to discuss the subject is to admit it exists.

So I did not call to question John Wren, John Dooner and Martin Sorrell ahead of writing this. But I know what they would have replied. "Nonsense," Wren, the Omnicom CEO, would have said, because that's what he thundered when asked about the subject before; "Bullshit," Interpublic Group of Cos. CEO Dooner would respond, because he is a blunt-speaking man; "Rubbish" would be WPP boss Sorrell's response because, when all is said and done, Sir Martin is still a Brit. (Of the three, he has made more of the "value" of having WPP at the center.)

When Mr. Donaton discussed this subject in previous columns (AA, Nov. 13, 2000, and March 29, 1999), he wrote that "you can't yet call it a trend" because there was at the time only one example of a holding company appointment-DaimlerChrysler naming Omnicom. Now, there has been a spate of them, most notably the recent PepsiCo and Coca-Cola Co. account shifts. But they are not the first.

Mr. Sorrell has long tried to accommodate the Shell account and one or another conflicting oil company client by switching around between his Ogilvy & Mather and J. Walter Thompson agencies. Different parts of the huge global Ford account are moved between WPP agencies, just as Coke and General Motors long have done at Interpublic.

The trouble with denying any such trend is that clients don't always go along with the subterfuge. DaimlerChrysler is not the only example. When PepsiCo made it clear it was punishing True North Communications (parent of PepsiCo agency Foote, Cone & Belding Worldwide) for having sold itself to Coca-Cola agency holding company Interpublic, its statement was about appointing Omnicom. Whether that meant Omnicom's BBDO, DDB or TBWA, or even creating a new Omnicom agency, appeared secondary to that fact. This is an inevitable consequence of trying to set up an integrated holding company offering for clients. What's more, the arrival of independent media-buying subsidiaries only hastens the trend.

Why does this matter? It's simple: people. There are many holding company employees that do not consider themselves holding company employees, but staffers at Ogilvy or Lowe or DDB. They have bought into that agency's philosophy or culture, not the holding company's.

Agency employees would presumably wish to be part of a strong holding company, not a weak one. However, the flip side of this is that decisions can be taken out of the agency network's hands. The issue then becomes one of motivating talent, and the danger of that talent drifting away to smaller, more independent boutiques-or out of the industry altogether.

The holding company CEOs are in a fascinating bind here. They need to make the right noises to appease their agency staff, but they are also only too aware that it is the Interpublic, WPP and Omnicom names that are on the S&P 500 or FTSE-100 indexes. They need the holding company brand (whisper it) associated with their good news, and they will subtly try to palm off bad news on the agency networks.

It may not be advertising as we have known it, but it's a genuine trend, and one that is here to stay so long as these holding company monoliths are publicly held stocks.

Stefano Hatfield is editorial director of Ad Age Global and Creativity.

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