Insight Analysis: The Media Agency Landscape, Consolidation And Globalisation

The name in the frame for the past month has been Tempus, which seemed likely to be bought by French advertising agency Havas when terms and prices were agreed in July (see Tempus Shares Soar On Havas Takeover Reports). The merger of Tempus owned CIA with Havas’s Media Planning Group would have created the world’s fourth largest media buying business but the chances of this happening now look slim. Increased speculation that WPP were planning to make a counter-bid for Tempus (see WPP Poised To Make Counter Bid For Tempus) drove the analysts into a frenzy of cogitation as they attempted to map out the future of media buying.

Globalisation within the media buying market, as with most industries, would allow for homogeneous reporting and campaign management procedures allowing clients to better control their marketing and promotional spend. Common tools and procedures also lend themselves to comparison and, subsequently, enable advertisers and agencies to determine best practices within the market. All of which adds up to a desire amongst large agencies to expand to global proportions, particularly in the current period of economic downturn. Diversity of opportunities enables agencies to reap extra profits from advertisers through other means than mass-media campaigns.

The global, multi-media buying agency can share its buying power across media, campaigns and indeed continents whilst maintaining an individual, client-focussed service. Currently the top five buying agencies manage 75% of all advertising spend, this figure is certain to increase as Tempus – and Aegis, if the analysts are to be believed – relinquishes its independence to the media mammoths.

Media Buying (Holding Companies) Market Shares, 2000
ÂÂ	Worldwide	US	Europe	Rest of World
Interpublic	23.20%	28.80%	17.20%	23.70%
WPP	16.90%	19.20%	12.30%	23.50%
Omnicom	12.80%	12.30%	13.20%	12.70%
B Com 3	11.10%	15.60%	5.80%	12.80%
Publicis Group	10.80%	10.50%	10.50%	12.50%
Aegis	9.60%	4.20%	16.90%	4.40%
Grey	6.50%	4.60%	9.30%	4.40%
Havas	5.10%	3.80%	6.40%	5.00%
Tempus	4.10%	1.00%	8.30%	1.00%
Total Market	145,425	63,438	61,259	20,728
Source: RECMA

Interpublic, WPP and Omnicom are the global leaders in the media buying market. Should Havas be successful in their bid for Tempus, they will rise to sixth position in the world rankings. Otherwise it is predicted that their relatively small buying operation, Media Planning Group, will continue to lose out to the bigger, global players. ABN AMRO comments: “For Havas, Tempus is not ‘nice to have’ but a ‘must have’. Otherwise, MPG becomes worthless. In media buying you are in the top five or you are nowhere.”

For WPP, the deal is less necessary but no less desirable. Whilst they would remain number two globally, their market share would increase to 21% – just behind Interpublic with 23%. WPP would combine CIA, the Tempus buying division, with The Media Edge to create a powerful buying force able to compete with Universal McCann. CIA’s strength in Europe compensating for the relative weakness of The Media Edge in this area and complementing the latter’s strength in the US and Asian markets.

WPP has the advantage of already owning 22% of Tempus although senior managers within the company are thought to favour the Havas bid. Yesterday Tempus confirmed that an informal offer had been made by WPP and was under consideration by the board. This led to a complaint by JP Morgan, advisers to Havas, to the Takeover Panel that increased speculation over a possible WPP bid was “creating uncertainty in the market” and urging them to force WPP to clarify their position.

Source: MediaTel Insight

Shares in WPP had fallen to 673½p by 1pm today after opening at 677½p and shares in Tempus had also fallen from an opening price of 587½p to 585p.

In France, Havas shares fell to a morning low of 10.67 euros after opening at 11.05 euros.