The advertising sector has long been a series of Russian nesting dolls all neatly placed within each other and ultimately housed by the frame of the big babushka.
WPP, IPG, Publicis and Omnicom have long made up the big-four babushkas – or holding companies – housing the vast majority of the major advertising brands throughout the world.
The uncomfortable truth in the business is that while advertising stalwarts like Colenso BBDO, DDB, Clemenger BBDO and TBWA might appear on the same pitch list for New Zealand’s biggest accounts, they all feed into the same holding company: Omnicom, in this case.
If anything, the global mega-merger between IPG and Omnicom has served as a timely reminder of the enormous concentration of market power controlled by a small group of companies all based abroad. If approved, this single move will make the combined entity the largest of the big four (now three). Only a week or so ago, Publicis was publicly staking a claim for that crown, through a nifty video message involving Snoop Dogg. Those hopes are now all but dashed.
The complex holding company structure in (and around) the advertising industry is something quite often taken for granted or even ignored, but it’s hard to do that when the reality of the system is laid bare in media reports.
In corporate public relations, we often remind executives that when their words appear in the media they’re in fact talking to a number of audiences at the same time. The news of this merger will reverberate across the industry, impacting ad agency employees, marketing managers who decide where to put their money, government procurement departments as well as the average Kiwi who may not be aware of the machinations of the advertising sector.
It’s worth pointing out that these holding companies have over decades played an integral role in shepherding local creative talent and helping to showcase it on the global stage. The Cannes Lions Awards and D&AD Pencils (the most prestigious accolades in creative advertising) won by New Zealanders in recent decades are largely a credit to incredible work that has been developed in agencies owned by large holding companies, in turn allowing our small country to stand out as one of the top performers on a global level. These companies are also big employers across Aotearoa and have given many creative Kiwis stellar career opportunities.
The concern now is whether the merger happening in the boardrooms of New York will have any impact on the work being done at a local level.
The jury is still out on that question, but a remark that struck me in the coverage of this corporate amalgamation is the suggestion from Omnicom executives that this could lead to US$750 million (NZ$1.3 billion) in annual cost savings.
In a people-based business, whispers of cost savings (or efficiencies) that large will always lead to nervous energy among the staff working within those organisations. And having worked within a large holding company for seven years earlier in my career, I can add that the decision-makers in London or New York aren’t often overly perturbed about how their corporate moves reverberate across the world, less so at the edge of the earth.
We’ve also seen that these giant holding companies aren’t afraid to kill their babies. In 2023, holding company WPP killed off JWT, Y&R and Wunderman, punctuating and ending more than 100 years of advertising history in a single move. Many Kiwis played pivotal roles in helping to build those brands locally. It’s saddening to think people who have invested large chunks of their professional capital inside these impacted ad agencies could end up being wiped out with the swoosh of a pen.
Having seen that kind of consolidation first-hand, it’s little surprise that WPP-affiliated advertising legend Sir Martin Sorrell described the merger as “a circling of the wagons; two people huddling in the cold”.
It may take some time for any dramatic changes to waft all the way down here, but major companies don’t merge to keep doing things exactly the same way. They’re generally looking for competitive advantages or the efficiencies offered by scale. Changes will eventually arrive, 100 per cent.
At a time when there’s an important discussion happening about the market power of Google and Meta, and industry organisations like IMANZ are rapidly gaining in popularity, there’s also an opportunity here to think about how much marketing money is being spent on organisations that ultimately send the vast majority of their profits to shareholders in New York.
The risk in this move is that it will make it even more difficult for local agencies to compete with the might of the big holding companies. But herein also exists a glimmer of an opportunity for the community of independent agencies vying for a cut of money spent on marketing in New Zealand.
What we’re seeing is a rare moment when decision-makers are being confronted in no uncertain terms with exactly how much market power is concentrated with a small collection of international giants. This further consolidation of power only strengthens the justifications a marketer or government procurement team might have in keeping their spend as local as possible.
There will come a time when we could see a pitch list featuring the names DDB, FCB, Colenso BBDO, TBWA and Clemenger BBDO – all presented as separate organisations, despite the fact that they will feed into the same overarching business. Surely, this should raise at least a few eyebrows among the decision-makers in government procurement departments.
The Russian nesting dolls in this industry have been carefully constructed over decades of strategic acquisitions – and that shows little sign of abating any time soon. The only difference now is that the grand babushka is about to become bigger and more dominant than anything we’ve ever seen before.
Kelly Bennett is the founder and managing director of independent corporate communications agency One Plus One.
The piece first ran on BusinessDesk.
