ANALYSIS: Media - Global networks step closer to super status. Size matters, but not to the exclusion of everything else, as Alfred Hille reports

<p>Havas Advertising's proposed acquisition of the Tempus Group and </p><p>the consolidation of Publicis' Optimedia and Zenith Media into one </p><p>agency offer further evidence that the global marketing communications </p><p>industry will likely be dominated by a handful of super networks in the </p><p>not too distant future. </p><p><BR><BR> </p><p>While the recent rash of mergers and acquisitions in the sector has been </p><p>in the advertising side of the business - Publicis snaring Saatchi & </p><p>Saatchi and Interpublic Group (IPG) swallowing up True North - Havas, </p><p>Publicis and IPG have brought attention right back to where it </p><p>increasingly matters - media. </p><p><BR><BR> </p><p>That it's all happening in a slowing economy isn't a surprise, </p><p>especially with advertisers looking to stretch budgets amid the </p><p>proverbial belt-tightening. </p><p><BR><BR> </p><p>And size will obviously matter in delivering the kind of bargaining </p><p>clout that clients are looking for in their media agencies. </p><p><BR><BR> </p><p>Which is probably what's driving IPG's quest to get bigger faster, with </p><p>its plan to set up Magna Global. The new entity is expected to drive </p><p>media time and space purchase negotiations with media owners to "new </p><p>levels of sophistication", to deliver what IPG believes will be the </p><p>greatest added-value benefits to clients. </p><p><BR><BR> </p><p>It will act on behalf of all IPG media planning and buying operations - </p><p>including Universal McCann and Initiative Media - on an aggregated </p><p>basis. This means that at some stage in the future, Magna could be </p><p>looking after billings in excess of US$40 billion. </p><p><BR><BR> </p><p>A week after IPG's announcement, Havas unveiled plans to purchase Tempus </p><p>Group, including media independent CIA, for £425 million (about </p><p>US$609 million) to create a new network called CIA Media </p><p>Planning, which will handle media spend of US$14.5 billion. </p><p><BR><BR> </p><p>The deal has yet to be approved by shareholders, one of whom is the </p><p>rival WPP Group, which has a 22 per cent stake in Tempus. A decision is </p><p>likely by the end of the month. </p><p><BR><BR> </p><p>On the same day that Havas unveiled its bid, Cordiant Communications and </p><p>Publicis announced that they had finally reached agreement on what to do </p><p>with Zenith. This comes a year after Publicis bought out Saatchi & </p><p>Saatchi, which has a 50 per cent stake in Zenith, from Cordiant. Under </p><p>the terms of the deal, Publicis' Optimedia would merge with Zenith to </p><p>form a new company called NewCo, with a combined media-buying volume of </p><p>US$20 billion. </p><p><BR><BR> </p><p>Zenith's Asia-Pacific chief executive officer Antony Young described the </p><p>mega-media developments as "a further continuation of what we all expect </p><p>will lead to a big five or big three" group of global network </p><p>agencies. </p><p><BR><BR> </p><p>However, Young and others said the continuing merger and acquisition </p><p>trend was not simply about gaining bargaining power over media operators </p><p>through size. Added to media clout, agencies have to deliver on a number </p><p>of other areas: research, and effective strategic and tactical </p><p>recommendations. </p><p><BR><BR> </p><p>Two recent events have accelerated the M&A process: the sagging global </p><p>economy and the US$600 million Philips worldwide media review, </p><p>which was recently won by Carat after it spent the last two years </p><p>building up its presence in North America and Asia on top of Europe. </p><p><BR><BR> </p><p>In a depressed economic climate, clients are increasingly looking for </p><p>discounts, or added value at least. For most, that means consolidating </p><p>with one agency. As MindShare Asia-Pacific CEO, Kelly Clark, puts it: </p><p>"Many marketers right now are looking for consolidation because it's </p><p>less expensive to work through a single point of contact. I think we'll </p><p>see more of that in the coming year." </p><p><BR><BR> </p><p>With size being one of the critical success factors, MindShare plans to </p><p>continue "looking for selective acquisitions in key markets" as well as </p><p>"creative alliances" to maintain its leadership role in Asia-Pacific, </p><p>according to Clark. </p><p><BR><BR> </p><p>The Philips review appears to have prodded the global communications </p><p>holding companies to speed up development of their media operations </p><p>because the Dutch consumer electronics giant made it clear it wanted a </p><p>"single point of contact". This required agencies to have a presence in </p><p>almost all of the major markets. </p><p><BR><BR> </p><p>Havas' Media Planning Group, for example, is strong in Latin America and </p><p>the US, with some presence in Europe. Which makes the tie-up with </p><p>Tempus' CIA especially appealing because of CIA's Europe and </p><p>Asia-Pacific strengths. For the merged entity, this means instant global </p><p>coverage. </p><p><BR><BR> </p><p>OMD Asia director of communication insights, Peter Allen, said such a </p><p>client strategy does have its potential downside. "A global AOR gives </p><p>the client consistency and one way of working. But that has to outweigh </p><p>the fact that in some markets the agency isn't going to be the </p><p>strongest." </p><p><BR><BR> </p>