Why greater competition is more likely than acquisition for media agencies

Nick Baughan

Since the recent Accenture acquisitions of Karmarama and SinnerSchrader there has been much speculation as to whether a similar deal might be struck in the media agency sector. After all, media agencies at first glance might seem closer bedfellows to management consultancies than creative agencies; both agency disciplines start from a foundation of insight but like consultancies, media agencies tend to focus more on their product in technology, systems and hard data.

So why have we yet to see a major acquisition in the media space and is one just round the corner?

It’s not a stretch to say there’s never been a more exciting time to be in media. The last 10 years have seen the media agenda sky rocket in importance and with greater importance comes a greater variety of competition. It is not unusual for us now to work alongside or indeed compete with the likes of Accenture, McKinsey and BCG in the normal course of work with our clients. Whereas these firms used to focus more exclusively on corporate development and technology deployment, a mixture of pressure on margins and a burgeoning media sector has resulted in their creeping into areas previously held exclusively by the agency community.

We should absolutely welcome this competition; new expertise, new points of view and processes drive us all to evolve, but I believe it will remain a media market driven by competition not acquisition.

There are of course structural reasons why this should be so. The table stakes in terms of technology investment required to start up a scaled media agency even at a local level in today’s market are extremely significant. This means that we do not have the same number of startups or independents operating in the market compared with the creative agency category and therefore a smaller universe of potential acquisitions in the vein of a Karmarama. This volume issue doesn’t preclude an acquisition in media in itself, it just reduces the odds.

There are, however, strategic reasons why buying a media agency today may be a more stretching proposition to the consultancy industry. Foremost amongst these is the media agency role of consultant and practitioner. While consultants can fundamentally relate to the bipartite nature of the client-creative agency relationship, the tri-partite relationship between client, agency and media partner is more complex. Our role in actually buying media in the current dual economy of linear and precision relies on a strong activation muscle that is largely absent in the consultancy world. On the converse side, many media agencies now offer extremely sophisticated technology consultancy which allows for a full-service offering from advisory to execution.

Lastly, there would be the gauntlet of agility to throw down to any potential consultancy looking to acquire a media agency. Consultants often celebrate the triumph of process over agility and this is anathema to an industry that moves as fast as ours does. Media agencies are in a process of constant evolution due to the ever-shifting sands of consumers; if we do not reinvent we die. The willingness and ability to adapt and evolve is a crucial part of our DNA and one that would be challenging to port to a more rigid environment.

While I believe therefore our future with consultancies lies in competition not acquisition, let’s take a moment to celebrate this new competition and the increasing importance of the media agenda. What had once been a sub-division of a broader industry has grown up in its own right and there can be no doubt that in the value we bring to clients, the media agency can stand toe-to-toe with all comers.

Nick Baughan is chief executive of Maxus and a member of the IPA's Media Futures Group

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Nick Baughan

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