Holding companies are struggling to adapt to changes in consumer behavior.
A floundering MDC Partners is hoping Stagwell Group’s investment can change its fortunes. Ogilvy rebranded itself last June after around two years of restructuring and staffing changes. And even the nation’s oldest agency wasn’t impervious to WPP’s consolidation as the holding company merged JWT with Wunderman last November.
Clients and agencies alike want an alternative—and that’s why they’re increasingly attracted to models like 9thWonder, Plan A and Worldwide Partners that promise both the scale of a large network and the specialized expertise of an indie.
John Harris, CEO of independent agency network Worldwide Partners, said that “for years” holding companies servicing multinational accounts or those in need of multiple services “have been given the benefit of the doubt” as clients assume their global presence and leadership will lead to collaboration and efficiencies. “The reality of it is, there’s a struggle to collaborate because all of the offices are fighting for money and control,” which is “always a barrier to collaboration,” Harris explained.
Forrester Research principal analyst Jay Pattisall explained that networks such as Plan A, Stagwell Group and Project Worldwide play “an important role of scale,” providing an alternative for “large marketers with more constricted budgets” and midsize marketers looking for “quality of execution” at a lesser scale than you’d pay for at holding companies.
“More importantly, they also play an interesting innovation role,” Pattisall added. “They’re looking at different ways to structure themselves in terms of ownership and more nimble ways to combine capabilities.”
Misaligned financial incentives also hamper holding companies, said Plan A founder, CEO M.T. Carney, who also founded Untitled Worldwide, adding agencies within these holding companies each have financial goals tied to incentives, creating competition that stifles collaboration.
Because they are designed around complementary parts, Pattisall explained, these alternative networks are “ahead of the game” when it comes to promoting collaboration, an area where holding companies are trying to adapt.
Carney and Andrew Essex founded Plan A last year as an organization operating under a “hub and spokes” model, Essex explained, with account service executives connecting clients to individual specialty agencies. By “outsourcing” business development and other account services to Plan A, its agencies can concentrate on craft, while clients deal with only one contract and pay less overhead, with the ability to switch or expand connections to Plan A’s agencies as their needs evolve, Essex added.
Each agency owns a “significant part” of Plan A, with incentives tied to its overall performance.
“We require speed and efficiency and like to have a direct relationship with senior talent. The Plan A model allowed us to pay for ideas, not overhead,” said Kedar Deshpande, vp, technology and quantitative marketing at Zappos, which Plan A worked with on a holiday campaign.
Not all such alternatives are recent developments.
Worldwide Partners, a regional collective of independent agencies launched in 1938 as the Southwest’s alternative to Madison Avenue’s dominance with a model based around each agency sharing ownership in the collective, is now a global network of over 70 agencies.
Harris explained his model has worked for 81 years because its agencies choose to work together, not because they have to. He said clients gain access to “scale through a trusted group of agencies around the world that are accountable to you,” as well as expanded capabilities and services. “When the dynamic of choice comes into play, the barriers to collaboration are eliminated.”
Harris admitted that consistent branding for all those agencies can be a challenge, requiring demonstrating to clients it’s more than a “loose federation.”
9thWonder, which emerged out of agency collective The Company last October, was designed to address that challenge. Its launch drew insights from a broad survey attempting to identify what CMOs are looking for in agency partners, which 9thWonder CEO Jose Lozano summed up as “one strategy, one lead” and “one throat to choke.”
Lozano ultimately decided to create a single brand for all the agencies in his network to minimize client confusion. Agencies dropped their names for the 9thWonder banner, but individual offices retained collective ownership of 9thWonder and individual specialties.
Evidence suggests that clients are taking notice of these alternative approaches.
Plan A is in discussions to add three additional agencies, encompassing PR, design and experiential capabilities. 9thWonder has added 10 clients since October, including the American Heart Association, Niman Ranch, Phillips 66, Samsung, Valvoline and Austin, Texas-based cybersecurity company Forcepoint, for which it is working on a digital transformation.
“There’s no substitute for insights and talent,” Forcepoint CMO Matt Preschern said. “In too many agencies, they’re still operating in the traditional pyramid model.”