Why GroupM is Merging MEC and Maxus and Elevating Essence

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If there were any doubt as to the digital and data pointing the way for media in the future, GroupM quashed that today with the news that it will merge two of its traditional buying networks, Maxus and MEC, into a yet-unnamed global network while beefing up digital agency Essence.

Kelly Clark, GroupM's Global CEO.
Kelly Clark, GroupM's Global CEO. Credit: GroupM

The merger should help GroupM, the world's largest media buyer, cut costs that it can reinvest in Essence, which serves as Google's global agency of record for digital media. The new combined Maxus-MEC agency will be led by Tim Castree, who was named CEO of MEC in November.

"We're making a pivot to the future growth areas of our business," GroupM global CEO Kelly Clark said. "We've had four global agency networks for quite a few years now — Maxus, MEC, Mindshare and MediaCom. We now will have four, but with a very different focus and balance," he said, noting those will include the merged MEC and Maxus along with a "significantly ramped-up Essence."

Essence, a high-growth shop known for its digital capabilities and transparent buying model, will build traditional media capabilities into its business, but come at it "from a very different perspective," Clark said. He said the agency will be able to use sophisticated data and insights to attack traditional media in a new way.

Clark said the company had no short-term plans for staff reductions, but noted the combined company will likely see potential cost savings in real estate, IT costs and back office services.

According to the Ad Age Datacenter, MEC notched $1.01 billion in worldwide revenue in 2016, up 3%, while Maxus grew 10.8% in worldwide revenue to $515.1 million. Essence Digital saw worldwide revenue jump 22.7%, but on much smaller base. Datacenter puts its 2016 global revenue at $113.2 million.

"Efficiencies that we create will in part go to fund the investments in Essence, but we're going to be investing in all of our agencies … as well as the rollout of our global mPlatform strategy," he said, referring to the tech suite of media planning applications, digital and data analytics GroupM rolled out late last year.

The changes come two weeks after GroupM tapped Maxus Global CEO Lindsay Pattison as Chief Transformation Officer, which the company said would entail offering agile, customized work for its clients that is collaborative across GroupM agencies and WPP.

Brian Wieser, a senior analyst at Pivotal Research Group, wrote in a report Thursday morning the changes reflect a need for scale to drive ongoing margin improvements, and differentiation. He said Maxus and MEC had different and mostly successful histories, but "ultimately similar businesses."

The merger, he told Ad Age, should have the effect of improving margins relative to what they would have been for that division. He added that with continued investment, Essence should be able to establish itself as a competitive alternative in increasing numbers of regional global media pitches.

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