Holding companies vs. independent agencies: who beat who in 2023?

By Michael Bürgi • December 20, 2023 •

This editorial series examines industry trends across the media, media buying and marketing sectors as 2023 closes and the new year begins. More from the series →

In the never-ending struggle between the holding company model and the independent’s way of the agency business, it appears the independent side came out just slightly ahead this year, thanks to the ability to stay nimble and not be bogged down by large amounts of debt. But a still-uncertain economy leading into 2024 could hurt independents as much or more than their larger competitors.

That said, some holding companies appear to be faring a bit better than others, with Publicis growing its stock price over the year, Omnicom holding its own, while others like Dentsu, IPG and WPP are all suffering stock drops as they continue to reinvent their business structures and various operating units in search of better results. Then there’s the newer holdcos — Stagwell saw it stock drop a bit while S4 Capital’s slide was far more egregious.

Havas, meantime, could find itself cut loose from its ownership strings under Vivendi and set adrift to find its own stock value. What that means for the company remains to be seen, but based on the above results, it’s hard to be too optimistic.

Holding company reinvention

The holdcos certainly are trying to reinvent themselves, with both IPG and Dentsu executing significant restructures to operate at a better efficiency, while also trying to upgrade their executive ranks.

“While the entire agency services category is weathering headwinds like reduced marketing spend, stalled [digital] transformation projects and commoditized content/creative offerings, Dentsu’s performance illustrates executional shortcomings and is not an indictment of the company’s strategy,” noted Jay Pattisall, vp and agency analyst at Forrester. “The moves to consolidate brands and services, strengthen the creative offering, invest in technology and production via the TAG acquisition and integration with Content Symphony are strong strategic moves to deliver their end-to-end transformation and marketing solutions. The shortfall is in the execution, which explains what can only be characterized as cleaning house at the global level. Dentsu made a significant upgrade in the appointment of Michael Komasinski as U.S. CEO.”

Komasinski did his own house cleaning recently, hiring several top executives under him to help run Dentsu Americas. He’s also knee-deep in the process of transforming the Americas region under his purview.

Meanwhile, Omnicom Media Group is doing its best to find that nimbleness absent in most holdco models, with its stated aim to transform into “agency as a platform,” as described by Omnicom Media Group’s global CEO, Florian Adamski. Publicis likewise is said to have aligned its resources in such a way that it is benefitting from size matched with agility.

But the detractors are out there. “Agencies are incapable of integrating,” said one veteran media exec with a history of time at a few holding companies. “It’s not their fault, it’s a byproduct of how the agency ecosystem, and client engagement with resources has eroded to a point of incredible inefficiency.”

It doesn’t help that throughout the second half of the year, technology-driven clients pulled back spending — negatively affecting all agencies dependent on them, including the bigger independents.

“This slowdown can be attributed to difficult comparables [over 2022]… but I suspect the same factors causing a slowdown for some larger agencies are at play as well: falling spending from technology firms,” noted independent media analyst Brian Wieser in his Madison and Wall newsletter.

Independents

While Wieser sees a tougher road ahead for independent agencies, he also believes their appeal to mid-market advertisers has helped them stave off tougher times. “Heightened competition from this set of agencies presumably would impact S4, Stagwell and Dentsu more than WPP, Publicis, Omnicom, IPG and Havas, given the typical sizes of each company’s client bases,” he wrote in another newsletter.

Ironically, the increasing affordability of technology — of which generative AI is only the latest example — offers a boost to independents in their ability to match the holdcos in offering more advanced services. That can be in programmatic investment, data analysis, creative production or even marketing mix modeling.

“While much of 2023 was dedicated to periods of exploration and experimentation, 2024 will deliver more rigor into testing roadmaps and integrating generative AI technologies across three core areas of enterprise-level marketing programs: art and creativity, insights and measurement, and media performance and personalization,” wrote independent giant PMG in its analysis of 2024 media trends.

There’s also been a shift toward safety in numbers among indies — whether it’s more agencies signing onto Worldwide Partners (the holding company in reverse) or acquisitions like PMG’s recent purchase of Rocket Mill in the U.K. just two weeks ago. Independents are also joining forces in strategic partnerships that bring together media and creative strengths, such as Crossmedia and Joan’s linkup to pitch together.

What’s the future?

To wrap it up, what will 2024 herald for all media agencies, indie and holdco alike? For one, the need to figure out how to incorporate the newer potential of AI (beyond machine learning) will be essential and a differentiator among them.

For another, they will all need to be ready to help clients with navigating looming privacy issues and the actual disappearance of cookies. And lastly, they all continue to build out expertise in the growing world of retail media networks and commerce media.

“Partnerships between media and tech partners build on each other’s innovation and audience insights, helping to make data more actionable for advertisers,” wrote PMG. “Media investments into retail media and these combined partnerships also offer advertisers a degree of future-proofing amid third-party cookie deprecation and fast-evolving privacy regulations across the media landscape.”

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