Next to ad blocking, the biggest conversation I hear these days from senior marketing folks is around the scalability of agencies and the merits (or otherwise) of the “holding company model.”
Some Fortune 500 CMOs want to pick a mix of the best agencies they can find in certain disciplines, particularly the emerging or highly specialized marketing sectors. There are CMOs who are attracted to agencies that have brand-name cachet, while others prefer the obscure start-up agencies often launched by agency personnel from previous incarnations. The “bespoke model” promised via holding company agencies is also promising “dream teams” of talent from across their portfolios of many best-in-class agencies.
Additionally, there are still a number of large independent agencies that remain solid creative powerhouses holding their own, with their distinct advantages.
It is important to consider the history of holding company models. The holding companies all emerged around the same time (late ’80s and early ’90s), with Omnicom, WPP and Interpublic (IPG). This happened to serve several co-existing needs: advertising was an undervalued sector; entrepreneurs who were looking for an exit had limited options; clients were interested in scale (mainly geographical); and the nature of the industry—relatively small, creatively-led groups—could be better managed financially and therefore margins could be improved by introducing some fairly basic organization and financial discipline.
And the model has grown, for a number of reasons (which requires a whole separate post). The Big 3 have been joined by Publicis, Dentsu, Hakuhodo, Havas and others. So now it’s hard to find an agency that isn’t part of some larger umbrella group. And the ambition of start-up and splinter groups seems to be to start an agency, be acquired and then repeat the cycle. It’s hard to think of a privately held agency, apart from Edelman and The Richards Group, that has grown in size and reputation and NOT cashed out in this manner. Well, there is one other that comes to mind….
So, for clients, it’s become a conundrum—many talented and “hot” agencies grow and flare like comets across the sky and are then acquired and corporatized by a holding company. The nature of the holding company model demands that the acquired agency stays in its “swim lane” so as not to add too much conflict to the other agencies in the group; many times this is the exact opposite behavior that led to entrepreneurial growth in the first place.
The successful independent, privately-held marketing agency tends to remain in its niche, providing some diversity in services while remaining true to its core (and often best-in-class competency). There is a perception that these independent agencies can’t necessarily bring scale and wider thinking to clients who demand a broader footprint of talent, time and expertise across a wider array of services. This may be true in some cases, but independent agencies can attract award-winning, outcome-oriented team members who want and relish the independent experience. In this regard, I do see Edelman as a great exception to the holding company model. When you are a strong independent with a great track record, confident in your position and passionate about your clients’ successes, you attract talent and can operate smartly—and you can, with the right ownership, make longer-term investments for the future. Being independent and confident in your specialty also leads to “playing well with others,” as we have found at our company and to our clients’ benefit.
We aspire to make Pace the “Edelman Exception” in our own area of expertise: all things related to content. We believe content will be the cornerstone of integrated marketing and corporate communications in the years to come. What clients want from their agency partners are collaboration, thought leadership, brilliant ideas and great execution, regardless of their ownership structure.
As one of the largest independents serving some of the largest companies in North America, we have found that talent is attracted to our model and our position, as it affords an environment that is nimble, flexible and gets very close to customers and results. We chalk that up to more than just an independent opinion too. It is what we are hearing from many in the marketing community.
Written by Craig Waller