Ad Agency Holding Companies Should Follow The Example Set By P&G
Several weeks ago Procter & Gamble announced that it would be divesting itself of its weaker brands. That is a smart move. The ad agency holding companies should do the same.
One of the reasons why some ad agencies are under-performing is because they have a millstone around their neck. That weight is the holding company that owns them. The holding company model has been moderately successful. But their success has often been achieved through mergers or heavy handed management which has caused previously successful agency brands to languish and often disappear. I have written about the mergers and the fact that one plus one often equals far less than two.
Several agency CEO’s and Presidents have privately confessed to me that if they were able, they would buy themselves back. There have been a few cases of that over the years. And in most of those cases, the results of the buy-back has been successful for both companies.
The problem is that previously successful agencies have become homogenized by their owners, especially after being merged with unlike firms. Successful owners (creative directors and presidents often have left as soon as their contracts are over). Everyone knows that the Lowe merger with Deutsch was a disaster and unraveled in just a few short years. Their cultures just didn't mesh (this is not a negative comment about either agency). Lowe, now merged with and part of Campbell Ewald, makes more sense and my guess is that he new agency will be far more successful.
I wish I could name other names, but everyone knows who they are. One situation I can write about happened a while ago. I remember a wonderful man by the name of David McCall. David was a disciple of David Ogilvy. His agency, McCaffrey & McCall, was highly successful and profitable. M & M was purchased by the Saatchi’s during the early days of the agency purchase mania, perhaps as early as 1986 or 1987. At the time, during a lunch, David confessed that he was dumbfounded by the rules. His agency was always profitable and well run. But he was demoralized because he couldn’t even hire an executive secretary to work for himself because she was too expensive and had to be approved by the Saatchi’s (In those days, Sir Martin Sorrell). Worse, he couldn’t hire the president he needed for the same reason. Ultimately, David just gave up and retired prematurely. His wonderful agency was merged and simply disappeared shortly after that.
I know that there are many agencies who would love to become independent again. There is no sense in owning a reluctant asset. A little pruning by the holding companies would be healthy and profitable for all concerned.