How agency consolidation reveals the future of the advertising industry

Agency holding companies have been on a shopping spree—snapping up social capabilities, tech and talent to make themselves more attractive to brand advertisers and their partners. The acquisitions reveal big future bets that will shape our industry in 2024 and beyond. An October study from the World Federation of Advertisers found that 79% of brands planned an agency transformation process while 53% sought to centralize agency services. Related News: Agency consolidation—one in four top advertisers plan to centralize partnerships The consolidation frenzy has revealed three growing marketing trends—AI and tech, simplified financials, and influencer and social capabilities. Here is what each trend means for agencies, advertisers and talent that staffs the industry. AI and tech Despite knowing almost everything to know about generative AI, content creation remains a creative testing novelty. Meanwhile, the major tech acquisitions this year focus on measurement and insights. Super Bowl commercials Tracking the latest brand and agency plans Enter here Advertisers have long demanded more robust measurement, analytics and insights to validate their campaigns’ effectiveness. Large agency holding companies have listened, acquiring any company that can increase their measurement tech stack offerings. In October, Omnicom bought digital commerce company Flywheel for $835 million. FlyWheel supplies e-commerce solutions, commerce operations, media execution and market intelligence to 4,500 brands. These capabilities are supported by a cloud platform to provide insights to online sales. Two weeks earlier, Stagwell bought agency Left Field Labs, which specializes in providing digital solutions and implementing AI to clients. Stagwell CEO Mark Penn said the acquisition would be instrumental in “helping us lead AI-based digital transformation in marketing.” In June, Brandtech group acquired Jellyfish, a digital media and marketing group with a suite of technologies for creative, media, data and commerce. Those technologies are designed to audit and plan media as well as track and visualize data from those campaigns. In March, Dentsu made a similar acquisition with Tag, folding in its toolset of digital, tech and marketing analytics. David Kassler, CEO of Tag, noted that the market required a broader need for integrated, combined and tech-forward service offering. See our Year in Review stories here Recent tech and AI acquisitions point to advertisers’ future demand for more detailed reporting and campaign measurement. Despite generative AI headlines, the buying history of both agencies and brands seem to place a higher value on insights, measurement and analysis. Influencer and social marketing Every major holding company has acquired influencer and social marketing shops. The market for influencers has doubled since 2019, approaching a total market size of $21.1 billion, while social media spend accounts for almost a third of ad spend at $207 billion worldwide. A social and influencer arm has become table stakes for any major campaign push. That has prompted advertising holding companies to acquire independent influencer and social shops, either through wholesale acquisition of specialty agencies or merging indie agencies with established brands. In the acquisition camp, a holding company sees the influencer specialization as a benefit to the group, letting the shop retain their brand name and more autonomy. In June, WPP acquired influencer marketing agency Goat, which will become WPP’s standalone influencer offering. In November, Stagwell acquired Movers+Shakers, a social-creative shop that specializes in TikTok campaigns. Stagwell opted to keep the agency leadership team and the brand, incorporating it into its Constellation network of agencies. Check out the latest Ad Age events and award programs Other holding groups have bought emerging influencer/social agencies and merged them into legacy agency brands. IPG acquired the influencer shop ITB, eventually rolling it into McCann, launching McCann Content Studios. McCann’s CEO says the merged agencies will provide clients with “a way to participate in the creator economy and co-create with them without losing their brand’s unique perspective.” Consolidated financials and full-service models Ninety-two percent of brand advertisers demand streamlined, integrated models, according to the study by the WFA. That has led to a spate of recent agency mergers to appease client asks for simpler structures. The idea here is that a single larger agency offering will be easier for large clients to grasp, and more importantly, make them easier buys for procurement teams. The largest of recent mergers occurred when WPP combined VML, Y&R and Wunderman Thompson into VML in October, sparking an industry debate over which heritage advertising brands deserve to be consumed by their peers. According to WPP CEO Mark Read, “Scale matters in today’s world as AI and technology transform marketing and global clients look to simplify their relationships.”WPP isn’t alone in this thinking. M&C Saatchi announced a restructure last month that will combine five U.K. subsidiaries under the umbrella M&C Saatchi Sport & Entertainment group. Incoming CEO Carlo Noseda cited the same considerations and an increased focus on creating a collaborative operating model better positioned to win clients. This new reality raises interesting questions about how creative and media, split in the 90s, are inching back together under new consolidated models. Havas recently purchased UK studio Uncommon, signaling a move to support its media offering with improved creative services. The agency will retain its brand, noting a combined media and creative offering at the core of the merger. Dentsu recently formed Dentsu Creative by merging several media, analytics and creative agencies. It calls the strategy “radical collaboration” which replaces the siloed agency model with a single brand under a single P&L. These moves have attempted to respond to brand needs. Procurement teams no longer want to negotiate with several agencies to service their marketing departments. Marketers are demanding better measurement and analysis. Social has become an inescapable part of the marketing mix. Change can be painful. The seismic shifts have displaced talent, erased heritage brands and reshuffled entire companies. By embracing new AI and measurement tech, social-led campaigns and consolidated organizational structures, ad executives hope to address their clients’ needs faster and beat back competition. Change remains inevitable in our crazy advertising world. The trick has always been to stay ahead of it. See our 2023 Marketers of the Year here

How agency consolidation reveals the future of the advertising industry

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