Agency Change Accelerates as Brands Move to Other Media

Earlier this week, two giants of the advertising world (Publicis Groupe and Omnicom) merged to create the number two ($22.7 billion) player in the advertising game (Google leads, $50 billion). Analysts have not been kind to the advertising industry in general and have noted that a re-factoring of the industry was in progress. New models are expected to become widespread as brands turn away from 'Agency of Record' (AOR) contracts to focus on in-house or licensed digital media capabilities.

“Our industry is not limited to a handful of people. There are new people coming over the line to what was traditional advertising every single day.” (John Wren, Chief Executive of Omnicom, NYTimes)

“We see the lines have been blurred between the various functions and the various players" (Maurice Levy, Chief Executive of Publicis, NYTimes)

This merger seems to be focused on aggregating brand advertising dollars and budgets. However, the shift to preserve competitive advantage has actually been underway for sometime. Meredith Corporation's acquisition of TV/print channels and Nestle's acquisition of PetFinder are two other examples. Meredith is an example of another agency response - vertically integrating to exclusively touch millions of women across North America. Nestle is an example of acquiring the largest adoption channel in North America to preserve a point of market entry POME (the largest channel of adopted animals) for its Purina brand.

The PetLynx utility is exploring a fourth option. Like the Weather Company in its sector, Petlynx has gathered up the largest number of urban animal owners as well as the largest data base of urban animal information and purchasing habits in Canada. Like others using this model, PetLynx gathers these consumers with Service Portals. PetLynx licenses agencies and large brands to access these consumers on an opt-in basis. Since there are many brands and agencies in the Urban Animal Industry unable to acquire or manage their own digital channels PetLynx becomes a useful alternative.

David Kenny, a former Publicis executive who now runs the Weather Company, which includes The Weather Channel and weather.com, said that platforms like his are now working directly with companies to develop advertising campaigns, especially on mobile devices, essentially bypassing ad agencies. (quoted from NYTimes)

Which model will dominate the future? It seems they will all exist initially, but a bet on the PetLynx/Weather Company model long term should be safe. This model should always have the lowest cost of acquisition and the highest level of support from consumers because it is an opt-in service.

For consumers, the merger is another signal that the business of marketing is becoming more personalized, often based on information that consumers may not even be aware they are sharing, including Web habits, social media activity and credit card histories. (Quoted from NYTimes)

New York Times Article

Branducation:

1. In your opinion, which of the models identified is likely to be successful in your industry sector?
2. One model uses an 'opt-in' approach, one model consolidates advertising buys, one model owns consumer channels and another preserves a point of market entry. Briefly discuss the differences you see and advantages or disadvantages you would expect.