As the traditional holding company model declines, new models are rising as competition.
While the “big six” – WPP, Publicis Groupe, IPG, Dentsu Aegis, Havas and Omnicom – still rule, legacy structures and poor financial performance are causing their dominance to wane.
In March, WPP lost $2.6 billion from its market cap. Omnicom has been shedding non-core assets to improve profitability after a year of flat growth. Publicis Groupe wrote down its digital agency group, Publicis.Sapient, by $1.5 billion because it was dragging down the business. And on Friday, The Wall Street Journal reported MDC Partners is exploring a sale for the second time in two years after its CEO Scott Kauffman stepped down earlier this month.
“It’s not a great time to be a conventional holding company,” said Andrew Bailey, US CEO of The&Partnership, an independent agency minority-owned by WPP.
Holding companies are losing leverage as clients favor consultative agencies that can work quickly over those with scale and big idea campaigns. Even ex-WPP CEO Martin Sorrell, who often downplayed the importance of consultancies, is singing a different tune with his new network, S4. In a prospectus, S4 said it is seeking agencies that are “agile, efficient, and of premium creative quality: in other words, faster, better and cheaper.”
New upstarts – like The&Partnership, Engine Group, Stagwell Group and Local Planet – are working off the same playbook. Rather than focusing on scale, these networks are built to facilitate collaboration, flexibility and agility across disciplines.
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