Why Merge Agencies Maxus And MEC?
On this episode of #MediaSnack we start with news that GroupM, the world’s largest media buyer and ‘parent’ to four of the world’s leading media agency networks is going to merge two of them, creating a group of three agencies and making room for recent digital agency acquisition Essence to become a more focused part of GroupM service offering to advertisers.
We continue our countdown to the one year anniversary of the ANA’s Media Transparency Report , this week looking at Media Trading, that is the buying and paying for media inventory and we consider how that has evolved and what, if anything, might be as a result of the ANA media reports and guidelines.
So, firstly, what has actually changed in the world of media buying? The ANA report was really largely about media buying and they drew attention specifically to the WAY media is bought in the US. The ANA report highlights that in some places, agencies might be making additional undisclosed income from vendor side, which was steering media buying decisions. A lot of the issues highlighted pointed to the need to clearly define whether the media agency acted as Principal or Agent under the contract.
And we know, a few companies now have made public statements in this area, notably P&G revealing that they are changing all media agency contracts to ensure the agency always acts as agent not principal. Chief Brand Officer Marc Pritchard admitted even P&G been surprised when they found out income places the agency was acting as principal. This is probably the biggest impact to the way media is bought, directly attributable to the findings of the ANA Media Transparency Report. We are seeing that more and more advertisers are firstly aware of the distinction of agent versus principal and the implications of both, then making clear decisions which approach suits them best. We are observing clearer language in contracts with media agencies to determines principal or agent status.
In the last 12 months since the ANA report was published we’ve also observed clearer differences in how advertisers view the resources they need to buy media in traditional (old world legacy) media and digital (future) media, (with some blurring of boundaries taking place with regard to those "digitising channels" such as Digital OOH). What we observe is that advertisers big and small are starting to make strategic plans for the longer term future of media buying. Nothing is certain but increasingly advertisers are seeing that their requirements for media buying services will be met from a number of different sources, some a network media agency, some might be a programmatic specialist for example, some might be activated internally via better self service tools, some might be negotiated direct with vendor. Whatever the right model for you, its a sure bet that media buying is about to become more open, fragmented and more automated, so hence advertisers are investing time and resources to plan for that future and create a model which gives them the flexibility to adjust over time.
Still, there are some pitches which are still attracting negative headlines for appearing to be focused largely on reducing the cost of media. One example from this week is the coverage US TelCo 'Sprint Mobile’ attracted after their recent media pitch. The AdWeek headline “To Cut Costs, Sprint Picks Horizon Media to Handle $700m Media Business”
So, to the big news, that WPP’s Media Buying unit GroupM have announced a merger of two of their media networks, MEC and Maxus. Tom and David discuss some of the drivers behind the move and note that this merger comes on the back of a Q1 earnings report for the advertising agency sector which is one of the most negative in recent memory. The six big holding companies posted negative growth in Q1 for the first time ever and we anticipated this might lead to some consolidation amongst agencies. There are clearly efficiencies to be gained by blending the Maxus and MEC networks and using some of that to fuel the growth of the Essence network.
Next week we will be marking the one year anniversary of the ANA report, looking at another major area of #MediaChange.