Dive Brief:
- A number of industry analysts agree with WPP's assessment, made around its Q3 earnings report earlier this week, that the impact of consultancies on traditional ad agency holding companies is "overhyped," according to a report in Campaign
- WPP went as far as to accuse the trade publication Ad Age of reporting "wildly inaccurate" estimates of consultancies' revenue from their digital divisions focused on marketing and advertising compared to that of the holding companies, Campaign said. WPP's write-up pointed to holding companies' strong win/loss records when in direct competition with consultancies on digital projects.
- Analysts from Liberum, Berenberga and Pivotal Group all agreed with WPP's stance that consultancies currently lack the scale in terms of deal revenue size to measure up. Pivotal Group's Senior Research Analyst Brian Wieser said the risks consultancies present to established holding companies are overstated and that the competitive threat storyline was part of negative narrative toward agencies and WPP, in particular. Wieser said holding companies do face threats in enhanced contract scrutiny and underlying spending weaknesses from their largest client agencies.
Dive Insight:
Where consultancies fit into the overall marketing landscape remains in question as agencies continue to grapple with considerable financial struggles and transparency issues. The Campaign report suggests that, at least for now, it's possible that the media got ahead of itself in positioning players like Accenture or Deloitte as usurpers to the throne of the traditional big ad holding groups.
It's still very possible that these companies' statuses as the lions of the ad industry will be diminished, if they aren't already: WPP cut its growth expectations for the year down to zero as part of its third-quarter report, fitting into a trend that's seen all of its peers with the exception of Omincom be battered by CPG spending cuts and uncertain political and economic times.
And while Campaign spoke with a number of experts, there are other industry analysts who view agencies' level of clout differently. Jerome Bodin, a Nexis analyst, released a report last month that suggested tough economic conditions put WPP and its holding company peers in jeopardy as independent businesses. He specifically cited Accenture or Capgemini as two consultancies that are well-positioned to buy one or more of the big five holding groups.
Accenture and Deloitte’s digital divisions are two of the larger consultancy players competing for agency business. In the Q3 report, WPP did acknowledge Accenture Interactive, Deloitte Digital and IBM iX as credible competitors and dismissed other players as private partnerships that are essentially losing money trying to compete with traditional agencies.
