IPG, WPP News on KINESSO, Nexus Illustrate Key Industry Trends
Important news from two agency groups this week were illustrative of key trends impacting the sector, both centered around entities that at one point might have been called “agency trading desks” for programmatic media.
First, on Tuesday Campaign broke news related to Nexus, the unit of WPP’s GroupM that includes Xaxis (the long-standing programmatic advertising platform that included principal-based sales activities and other related services), Finecast (a similar business focused on addressable television) and services largely related to programmatic activities such as search and social media buying, which combined house 11,000 employees. As reported in Campaign, Nexus will sunset its historical brands and operate primarily with two functions – one focused on services and the other focused on opt-in media solutions (i.e. sales of inventory) that are largely performance oriented.
And then today, Interpublic announced that three of its brands, including Kinesso, Reprise and Mattterkind would bring its 6,000 employees together as one entity called KINESSO which “will have extensive offerings spanning performance marketing and data and technology and is poised for digital excellence via advanced capabilities including progressive search engines, digital experience and platform intelligence to media activation, AI, and audience development.” For context, Kinesso was a unit formed through combination of some of the data-focused services associated with the 2018 acquisition of Acxiom and Cadreon, IPG’s long-standing agency trading desk. Reprise Media’s current shape started as a search buying agency that grew to include other businesses such as Ansible (a mobile advertising services business) and Society (a social media agency).
These numbers of employees involved represent approximately 10% of each company’s employee bases, so are fairly significant at the broader enterprise level.
There are several common threads that overlap with important themes for the agency sector and media owners, too:
Agencies are looking to simplify their overall offerings, at minimum in terms of the numbers of brands they operate. Doing so helps reduce overhead costs (and thus margins) as well as duplication, but also helps improve communication with clients by making it clearer “who does what”. Arguably, Publicis, Dentsu and Havas have been much more aggressive in this regard in recent years.
Programmatic trading operations are increasing central to the agency sector, especially in media. Both of these units represent approximately one tenth of each entity’s parent company and around a third of each company’s umbrella media services business.
Performance-based marketing, however defined, is gradually supplanting brand-based advertising. This has implications for a wide range of services that agencies provide, but also for the products that all types of media owners have to sell.
Agencies are increasingly looking to find ways to sell media to clients where possible, and combinations such as those announced today will help make such activities more common. Despite concerns that some in the industry put forward, many – possibly most - marketers have demonstrated heightened interest in bundling the services they need from agencies with media where it helps marketer to reduce their so-called non-working costs or where such bundles can result in what marketers consider to be superior outcomes. Omnicom and Publicis have been similarly investing further in these capabilities, with entities called Omnet and PMX, respectively.