The merger of MediaCom and Essence will be the hot topic of conversation in Austin, Texas, where the bosses of WPP’s media agencies from around the world are meeting this week for the first face-to-face leadership meeting of Group M, the company’s media-buying division, since the pandemic.
The announcement at the end of April that the two agencies were coming together to create a new, 10,000-person agency, EssenceMediacom, which will unite the new and old worlds of media planning and buying, has the potential to be one of the most significant moves in the media agency sector in five years and probably much longer.
Bridging the disciplines of brand and performance under one roof – one of the stated strategic aims of the EssenceMediacom merger when it completes in January 2023 – is an over-riding priority for many clients at a time of increasing media fragmentation, complexity, speed, volume and inflation.
As one Essence client says, welcoming the merger: “Getting the right balance between ‘sales for today and brand for tomorrow’ is one of the biggest questions that my board repeatedly asks me.”
Some agency rivals are also impressed by the EssenceMediacom merger. A senior media agency figure, who has worked at one of MediaCom’s biggest competitors, says: “It’s bold and clever – I think it will really resonate with clients.”
Previously, “we could compete with Essence because they didn’t have scale and we could compete with MediaCom because we could say they were bland and big”, this person says. “If I was Starcom or OMD, I would be worried.”
If MediaCom (founded in Germany in 1986 but a British-led outfit for many years) and Essence (founded in the UK in 2005) can combine successfully, it could be a blueprint for the modern media agency.
It is not a merger of equals: MediaCom has 8,000 staff and Essence 2,000, with the first global appointments made by Nick Lawson, the MediaCom stalwart who will head EssenceMediaCom, reflecting that. Eight out of the 11 leaders, including Josh Krichefski, who will be the chief operating officer, come from MediaCom.
But Lawson is smart enough to know it makes sense to talk about creating a new agency, not a takeover, and told staff on the day of the merger announcement: “I want to stress that EssenceMediacom is a merger of two equally successful agencies.”
He likes using the full name, EssenceMediacom, for the same reason. (Some people internally already refer to the new agency as just “EM” while outsiders joke it should be called “Messence”.)
Reasons for the merger to succeed
There are several elements, beyond industrial logic, that could help EssenceMediacom succeed.
Importantly, the two agencies already have three shared clients (Google, Mars and NBCUniversal) and have shown they can collaborate. MediaCom won Google’s offline media to add to Essence’s digital scope last year, while Essence previously supported MediaCom and WPP on the Walgreens Boots Alliance retention.
MediaCom and Essence are also coming together from positions of relative strength, at a time when the market has been growing – unlike in 2017 when MEC and Maxus were struggling and Group M merged them to create Wavemaker.
North America will be the market to watch, because both MediaCom and Essence lack scale – particularly compared with the UK, where they are respectively the biggest and the fourth biggest media agencies (the Essence UK operation will be kept separate to address client conflicts such as Tesco-Sainsbury’s and Sky-BT). Lawson and Krichefski are both expected to spend as much as half their time in the US in the coming year to drive the business.
Another advantage for Group M, the world’s biggest advertising buyer, and EssenceMediacom is that they have two long-serving leaders who ought to have the internal clout and force of personality to bring the agencies together, sell it to staff and mesh each of their distinctive cultures.
Christian Juhl, the global chief executive of Group M since 2019, was previously the chief executive of Essence and oversaw its sale to WPP in 2015, while Lawson has worked at MediaCom since 1991 and became global CEO in 2020.
Lawson has experience of working through two previous mergers – The Media Business Group’s sale to Grey Group’s MediaCom in 1998 to create MediaCom/TMBG in the UK, and the subsequent sale of Grey Group to WPP in 2005, when MediaCom became part of Group M.
One of Lawson’s first moves after the EssenceMediacom plan was confirmed was to meet up with Andrew Shebbeare, the co-founder and former chairman of Essence until 2020, to start the process of winning hearts and minds.
Lawson has emphasised how he believes the merger will be good for people at both agencies in terms of learning and being able to “develop your talents and skills sets”. He has told staff: “The biggest effect of the merger will be more opportunities.”
That could be a genuine benefit by increasing the size of the talent pool and reducing employee churn, according to the Essence client, who has talked to Group M about the merger and has previously had “an issue” with staff turnover at another one of its media agencies.
EssenceMediacom also has internal support from above at WPP. Its chief executive, Mark Read, has overseen three major mergers of creative and digital agencies since 2018: VMLY&R, Wunderman Thompson and, most recently at the end of 2020, AKQA Group (AKQA and Grey). Arguably, a media merger has more compelling logic because media involves scale and volume in a way that creative does not always.
Indeed, a merger between MediaCom and Essence has been discussed internally at the highest levels for a number of years, dating back to before the pandemic, even though Group M was known for internal rivalries at the time.
The two agencies began working on NBCU as far back as 2016 and multiple sources say Stephen Allan, who led MediaCom for many years until 2020, was keen on the idea of uniting Essence despite his reputation as a fierce defender of MediaCom’s commercial culture.
Juhl’s promotion to run Group M in 2019 signalled Essence’s digitally savvy approach was in the ascendancy, yet he made clear in a Campaign interview at the end of 2020 that he felt his old agency was “amazing but not scaled – it’s definitely subscale” – a signal that a merger might be on the cards.
Sister media agencies Mindshare, which has about 9,000 staff, and Wavemaker, with 11,000, were unlikely merger candidates for Essence because they had virtually no shared clients.
The challenges ahead
Both MediaCom and Essence have some weaknesses that the merger could address.
Observers say MediaCom has taken time to build its digital capabilities and struggled to hang on to some digital talent while Essence has a strong technology offer but relatively few significant clients, a much smaller global footprint and less bench strength at a leadership level. MediaCom has more “superstars” who can win pitches and wow clients, according to one person who has seen the agencies in action.
Industry sources also have questions about how the two cultures will gel, because they are organised differently around clients and disciplines. They also wonder whether EssenceMediacom will overshadow Mindshare and Wavemaker and how it will work with Nexus, the new unit that houses programmatic arm Xaxis and addressable TV business Finecast and drives a lot of trading for Group M.
There are other issues to watch out for: macro-economic conditions are difficult, with inflation rising rapidly and clients under pressure. Creating a bigger agency comes with other risks because it could become unwieldy, although plenty of clients have larger workforces. The 10,000-strong business will be only the third largest global media network behind OMD on 12,000 and Wavemaker’s 11,000.
The prize for EssenceMediacom is to create a “unique” agency in Lawson’s words.
In one fell swoop, this network will combine brand and performance – rather than having to build it from scratch (as Omnicom has tried with mixed results at Hearts & Science) or carry out a frenzy of internal mergers (as Dentsu has done since 2020) or make many small acquisitions (as some of the new breed of performance agencies and “disruptor” groups are doing with investor backing).
Incidentally, those marketing gurus who don’t like talk about brand advertising and performance advertising should look at the stock market filings of major companies such as Google and Airbnb, because that is exactly how they describe the split of their marketing spend to investors.
The key for EssenceMediacom, as is always the case, will be to win clients who buy the new proposition. Volkswagen Group’s global media review, which is set to take place later this year, could be an early test if the new agency pitches for it.
Six years ago, when MediaCom lost Volkswagen Group to PHD, the agency launched “Project Fightback” to replace the missing business.
If the new agency can combine MediaCom’s street-fighting skills with Essence’s tech brains, it could be a formidable competitor.