As advertisers have readjusted spending plans during the pandemic the traditional holding groups are buckling under the strain. The losses of those companies have been the gains of their upstart rivals. In the latest edition of our Confessions series, in which we exchange anonymity for candor, the managing director of one of those businesses explains why its agencies are in rude health.
This interview has been lightly edited and condensed for clarity.
How has the holding group fared in 2020 so far?
Our balance sheet in the first quarter showed a slight decline and the second quarter was tough, but we’ve seen positive signs since May. We can’t be negative given we saw some growth during that quarter, unlike the traditional holding groups. The benefit we have is we don’t have the burden of traditional media. The reality is that while we work with a lot of global advertisers there’s a small amount of marketing and comms budget that sits with us. What that means is it’s easier for us to manage budget cuts. If a client cuts a $10 million budget with us down to $5 million then its a lot easier for us to get that back then it would be if we were Omnicom trying to go from $60 million back to $100 million. We’re also not exposed by being heavily reliant on a handful of clients.
Have there been any other notable factors?
Given we’ve grown as a group through M&A, we’re built on companies that had optimized their P&L accounts. We’re built on businesses that don’t have any fat on their bones so that became a mitigating factor when we had to make our own cost cuts earlier in the year. It’s worth noting that over 50% of our business comes from technology platforms so that’s meant we’ve been able to get carried along in the slipstream of their growth.
What do clients want you to do for them?
We get senior marketers that want us to fill the role of a traditional agency but we don’t want to be seen as a pure media buyer. Often, we will walk away from those opportunities. You look at companies like S4 and You & Mr Jones and very little of what they do is around managed media services. For some clients we’re effectively they’re data agency whereas for others we’re more like consultants helping them in-house parts of their marketing operation.
What type of economic recovery are you anticipating?
Whatever the recovery looks like, it won’t be straightforward or universal. We pay closer attention to how each vertical is recovering. There are certain verticals like CPG where we expect a straightforward recovery whereas others like travel, which represents less than 3% of our business, which will take a while to bounce back. Making those calls is harder given there are companies within the same vertical that are on different ends of the recovery spectrum. We also have to consider to take into account that some markets haven’t handled the crisis well, versus those that have.
Would the imminent mediapalooza of account reviews be good for business?
We have a different proposition that’s less focused solely on media buying so our new business pipeline is less reliant on the pitch market. Also, we don’t really have the resources it takes to go on a six-month pitch process being run by a pitch consultant from a spreadsheet. We’re trying to build a different proposition that doesn’t fit well within that template.
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