Date posted: September 18, 2012
by Herman Manson (@marklives) WPP Chief Executive Martin Sorrell caused something of an outcry in Australia recently when he told a trade publication there that it will become “increasingly hard for independent agencies to survive or thrive.”
“Clients are looking for efficiencies rather than effectiveness so in tough economic conditions in slow growth markets it is very difficult and smaller sized agencies are finding it more difficult,” Sorrell told Adnews. There is a natural consolidation of share among the bigger agencies in tough economic conditions.”
It’s a particularly ironic statement coming as it does in the wake of the WPP group cutting its revenue forecast for 2012. According to the Wall Street Journal WPP expects “annual like-for-like revenue, which strips out exchange-rate movements and acquisitions, to increase close to 3.5% this year, down from more than 4% previously.” WPP owns global networks such as Grey, Y&R and Ogilvy. In South Africa it also holds a stake in The Jupiter Drawing Room.
Independent agencies were quick to dismiss Sorrell’s views. “I’m not surprised he said those things,” one executive told Adnews. “It supports his business model, he is touting bigger is better. But people select an agency for more reasons than procurement.”
Locally the stars of independent agencies such as King James, FoxP2, Machine, Quirk, Joe Public (its founders bought back their shares from FCB in 2009) and others have been rising steadily. Joe Public recently doubled its revenue over a nine month period and grew its number of staff by 60%. At King James annual revenue broke through the R110 million mark in 2011. Machine, which launched in May, employs 80 and has around R45 million in revenue. They have all ascribed their success to being owner-managed and people focussed.
James Barty, Chief Executive at King James, maybe said it best when he told MarkLives earlier this year that he believes centralised control of global marketing will no longer be the natural model of choice as global companies search out local solutions. Barty argued that independent agencies can be attractive to big clients and retain their maverick personalities while affiliated agencies can get it wrong as easily as anyone else. “A network doesn’t protect you from producing mediocre work,” said Barty.
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