How small agencies can beat large holding companies

You can’t really go through a day in the advertising business without reading something about the Publicis Omnicom merger. The industry is obsessed with every last little juicy detail. And no one’s more vocal than WPP’s Martin Sorrell and Havas’ David Jones. Ever since the merger announcement, both men have had nothing but negative commentary to offer, with most of their statements centering on the notion the Publicis Omnicom Group will be so large and unwieldy that it will continuously trip over it bloated, inefficient self.

When you think about the fact that WPP and Havas are gigantic holding companies themselves, anything Sorrell and Jones have to say regarding size and efficiency is laughable.

I decided to speak to several advertising agencies that are, in fact, small and 100 percent qualified to comment on why bigger may not always be better, as well as why small can often times be the better solution.

Tom Geary runs a small agency in San Francisco called School of Thought. He comes from a large shop, McCann, so he’s seen both sides of the big/small debate. When I asked him why bigger is not better, he said, “There’s a misapprehension on clients’ part that ‘My Fortune 1000 company needs a 500 person agency on the account.’ Unless you’re an airline or a car account with thousands of deliverables, you really only need a handful of exceptional people. So, do you want to pay for the 10, or the 490? In The Tipping Point, Malcolm Gladwell described how people are most effective in organizations with no more than about 110 people. Fortune’s list of Best Companies to Work For includes WL Gore, which breaks up their organization into small, flat, autonomous groups. There are no holding companies on the list.”

Yes. Can you imagine an advertising holding company being described in any way, shape or form as efficient? Too much opinion? Sorry. Back to the experts.

In terms of efficiency and speed to market, TDA_Boulder partner Jonathan Schoenberg added, “It comes down to reaction time and flexibility, and client needs. With digital and social, agencies are responding in real time now. Layers make that hard. Also, small independent shops have the flexibility to let larger clients start small and ramp up — whether for budget reasons or for test marketing. That’s something the big shops can have trouble with.”

Bringing that point home, David Baldwin, founder of Raleigh-based Baldwin& said, “One client, a refugee from a big shop, described it [working with a large agency] as a ‘DMV experience,’ explaining, ‘you get in one line to get an assignment started, then in another to look at the work, then another if there are changes. And all you’re thinking is you just want to talk to the manager who has the authority to make something happen.’”

While smaller agencies may have big agencies beat when it comes to efficiency and access to top management, how can a small agency compete in a world where, for the most part, big boys play with big boys and everyone else is left playing with small potatoes? Especially when there is a belief that large shops and their media arms are the only entities that can secure the best rates for their clients?

Geary pokes a whole in the clout argument saying, “Our media director has worked at a number of media holding companies. He’s negotiated rates there, and here, and he’s a firm believer that relationships determine rates, not size of firm.”

I, myself have purchased millions of dollars of media at both small and large shops and have found the whole media clout argument to be largely meaningless.

While Geary believes clout or lack thereof is not a big differentiator, he strongly believes media is a component that can greatly aid a smaller agency when competing with a larger agency. For many smaller shops that focus mainly on creative, Geary told me, “The media mix is just as critical to a client’s success as the creative. A small shop, if it’s creative-only, is at a significant disadvantage — particularly as the media landscape continues to shift. So early on, we began building a strong media team here as well. The irony is, when I was at McCann, creative and media were each siloed. In four years there, I think I had one meeting with somebody in media. That’s never going to result in the best work.”

I’ve always held the firm belief that media can spearhead a great creative concept and creative can drive media choice. That can’t really happen if the two groups are not integrated in a way that fosters continuous interaction, engagement and the sharing of idea.

Though we’re clearly advocating the benefits of small here, it would be unfair not to explore the lure a merger or holding company acquisition can hold over a smaller agency. On that topic, while Geary is clearly proud of his agency’s small roots, it’s clear he’s not ruling out some type of marriage with advertising’s big boys.

“Our billings now are about ten times what they were when we bootstrapped this agency five years ago (our budget that year, for computers and a site, was something like four grand),” said Geary. “And we’ve done it without incurring debt. Just hard work, and some luck. So, nice. But to have some additional capital, to add depth on the bench, to our terrific team, well, that’s certainly something we think about from time to time.”

While growth is the natural course of doing business in any industry and the reason many businesses launch in the first place, it appears there are plenty of reasons for an agency to stay small and plenty of reasons brands should not limit their agency search to the “big guys.”

For more on the David-vs-Goliath future of business, check out Jacob Morgan’s 6 bold predictions on the future of work

Steve Hall
Post by Steve Hall

Steve Hall is a marketing professional, publisher, writer, community manager, photographer and all-around lover of advertising. Steve has held management positions in media and account service at Leo Burnett, Starcom/Mediavest and others, working on such accounts as Reebok, Marriott, Monster.com and Marshmallow Fluff.

3 Responses to How small agencies can beat large holding companies

  1. Jacob Wadsworth

    The greatest advantage of bigger firms is their area of coverage. They are easily known to people that is why they are covering a larger or wider client base. In terms of productivity and potential though, smaller companies may have a better edge. – http://www.nilsdavisdesign.com/

  2. Pat D

    Area of coverage is the big agency pitch that clients have heard for years and now ignore. To borrow from the political arena “all marketing is local” and that old yarn about working across agencies for global reach is bull.

    There are no advantages- neither from a cost perspective nor from a strategic perspective- to the holding company.

    Plus clients have to pay for Sorrell and all those 7 figure guys who add nothing to the quality of the product. They simply do acquisitions to prop-up their revenue numbers so wall street will continue to keep them on their buy list and cost clients money.

  3. I said it

    Some of this is true however as scary as it is clients are getting cheaper. As marketing dollars get the squeeze these larger entities can cut better deals. No one wants to acknowledge that fact but it’s a major issue.

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