The rise of the independent media-buying business, operating outside the structure of the traditional ad agency media department and the divestiture of those departments from the agency system were two of the more unexpected advertising trends to emerge in the later years of the 20th century.
Traditionally, the media-buying function was among the most basic duties of the full-service ad agency. The first modern agencies of the late 19th century grew out of the space buyer's function, as buyers and sellers of magazine and newspaper space began to offer copy and layout services to clients and, later, research and marketing expertise.
As the independent structure of the ad agency evolved, the media department developed for the purpose of planning the most efficient ways possible of delivering the clients' ad messages. Because agency income was based on commissions from media purchases, the media department became the financial heart of every agency and its costs were absorbed by the agency as part of the general overhead of doing business.
A number of smaller advertising agencies served local clients whose spending never approached the levels necessary for network broadcast buys. Those agencies relied on independent media-buying companies, particularly when it came to placing radio and TV spots.
In the late 1960s, the major ad agencies began to feel challenged by independent media buyers. Several big agencies commissioned studies on the impact of the independents. The first major agency operation to compete in the independent arena was the Interpublic Group of Cos., which set up Communication Counselors Network in 11 cities.
In 1969, Walter Staab, an executive at Ted Bates Co., joined with Robert Frank of CBS and Stanley Moger of Storer Broadcasting to form SFM Media, one of several early independents to operate according to agency-level business standards. It did no bartering, but disclosed all billings and targeted blue-chip clients.
By the late 1980s, media departments that once had competed against each other became siblings within large ad organizations as smaller ad organizations merged. The media-provider landscape was also changing, with Fox becoming the first viable fourth TV broadcast network since the mid-1950s. UPN and the WB networks soon followed, along with many more media options presented by the growth of cable TV. In addition, there was the less understood Internet.
Advertisers and agencies increasingly faced new-media alternatives that required more specialized knowledge than a traditional "below-the-line" media department could provide.
At one agency, N.W. Ayer & Sons, momentum in the 1980s slowed following a period of tremendous growth in the '70s; among the costs to the agency was the loss of DeBeers Consolidated Mines. Despite the high regard DeBeers accorded to the Ayer media operation, when the agency lost the creative portion of the account, it also lost the media assignment. Seeking a way around such double-barreled losses, in 1993 Ayer developed a business plan that called for the shop to "unbundle" media from its menu of agency services. The following year, N.W. Ayer created a unit called the Media Edge within the agency.
In 1996, when Ayer was acquired by the MacManus Group, a major client conflict loomed between Ayer's AT&T Corp. account and the SBC Communications account at MacManus subsidiary D'Arcy Masius Benton & Bowles. To prevent a loss similar to that of DeBeers, MacManus Group sold the Media Edge unit to Young & Rubicam for $3.5 million. At Y&R, the media shop grew into a revenue center serving both Y&R clients and its own.
Over the next five years the trend to unbundling media operations reached critical mass: Leo Burnett Co. launched Starcom as its media unit in 1998. In 2000, with the merger of DMB&B and Burnett, the agencies' two media companies were combined to form Starcom MediaVest Worldwide, the media holding company within the Bcom3 Group. Starcom MediaVest quickly picked up $2.9 billion in consolidated media planning business for General Motors Corp., while the automaker's creative assignments remained within the existing GM agency roster. (Each unit remained separately branded and either competed or cooperated with the other depending on the need.)
In 1997, the WPP Group began the process of melding the media departments of its J. Walter Thompson Co. and Ogilvy & Mather. Their combined resources became the basis of MindShare, which first established operations in Europe, Asia and Latin America. By the time MindShare opened an office in New York in April 2000, it had become the largest media specialist company both in the U.S. and the world, billing $6.5 million and $17 million, respectively.
At the beginning of 2001, nine of the top 10 media-buying organizations in the U.S. were unbundled spin-offs of major agencies. In order of U.S. billings, these were Mindshare; OMD Media from Omnicom (the media arm for DDB, BBDO and TBWA); Initiative Media from Ammirati Puris Lintas Worldwide, a unit of Interpublic; Universal McCann from McCann-Erickson Worldwide, also an Interpublic unit; Starcom Worldwide; TN Media from True North Communications; MediaVest; Media Edge from Y&R; and Optimedia, a part of Publicis. Only No. 9-ranked Zenith Media Services was independent (it was later acquired in a joint ownership arrangement between Cordiant Communications Group and Publicis Groupe).
SFM Media, which had no agency roots in its history, ranked No. 11 after being acquired by Havas and merged in 2000 with Media Planning Group to become SFM Media/ MPG.
The increasing consolidation at the holding company level, however, is likely to narrow the field of major media agencies still further. Since 2000, True North has become part of Interpublic, which in 2001 formed Magna Global, an aggregate negotiation arm across all the Interpublic media buying operations. And in 2002, Bcom3 was acquired by Publicis, a move expected to bring further consolidation to the field of media agencies.
By the end of the 20th century, the media function had substantially separated itself from the top-tier agency lineup, as the parent ad organizations expanded the size and scope of their media shops through acquisitions, consolidations and in some cases spin-offs into such specialties as Internet buying.