This week Ad Age released its annual rankings of the largest digital agency networks (based on 2015 worldwide revenues). Keith Hunt, managing partner at specialist M&A advisor Results International, believes this should be a wake up call to the incumbent agencies if they want to compete with the consulting firms that are coming to dominate the upper end of the rankings.
We all know what they say about statistics. Perhaps we should be asking how Ad Age defines ‘worldwide revenue’ or indeed a ‘digital agency network’ in its 2015 digital agency global rankings?
After all the definitions greatly skew the results. If we were to aggregate all of the brands in the top 15 under the umbrellas of their parent companies, then agencies, rather than consultancies, would dominate the top three. Publicis and WPP would occupy the first and third spots respectively.
Of course this is a highly competitive landscape and the networks are having to rethink how they do things. Consultancies like Accenture, IBM and Deloitte are far better placed to corral their strengths internally and position themselves as a unified force. The same cannot be said for the networks where inter-agency co-operation, or the lack of it, is a real Achilles Heel.
Regardless of any nuances in interpretation, the market is changing dramatically. Many of the biggest consulting firms are throwing serious resources at the market, both via acquisition and organic growth, and are increasingly becoming a very real threat to the incumbent networks.
The strength the consultancies bring to major corporate clients is to offer enterprise-wide tech solutions, which can take in the entirety of the customer journey. By contrast, the networks still struggle to look beyond the marketing perspective to work holistically.
Admittedly the big consultancies are unlikely to challenge the agencies when it comes to developing award-winning creative. However, if the incumbents are to compete in the longer term and to guarantee their survival beyond creative and beyond marketing, they still need to shift their collective mind-set.
Undoubtedly it’s a huge ask for the agencies to build-in the expertise required to compete with the consultancies organically, although they could hire in the strategic skill-set to be able to do some of that kind of thinking. More controversially, what’s to stop one of the agency networks buying or merging with one of the smaller management consultancies? Never say never.
No matter which side come out on top in the long-run, we’re seeing a significant broadening out of the buyer network. For anyone running an independent digital agency this can only be a good thing
By Keith Hunt
Managing partner at specialist M&A advisor
Results International