Dive Brief:
- WPP’s GroupM announced a restructuring of its portfolio in a press release. Notably, it is merging Maxus and MEC, two ad-buying agencies, in a cost-saving move, per The Wall Street Journal. It is also expanding Essence, a digital-first agency, to include traditional media capabilities and a broader geographic footprint with an eventual goal of the agency leading several GroupM client relationships as part of the restructure.
- After the Maxus/MEC merger the newly formed media, content and technology agency will operate under MEC's CEO Tim Castree as part of three GroupM portfolio agencies with $1 billion in revenue that also includes Mindshare, MediaCom.
- The Journal reports the cost savings from the merged agencies will likely come from real estate, IT systems, back-office services and employees.
Dive Insight:
GroupM’s portfolio restructuring comes at a time when the traditional agency model is under fire on multiple fronts. Brands have been increasingly rethinking, renegotiating and reviewing agency relationships and even taking marketing and advertising functions in-house. At the same time, a group of international companies in the form of management and financial consultancies including Accenture, Deloitte and PwC are all creating digital services divisions to take on roles traditionally held by agencies with brands. Ogilvy is one agency that is trying meet this challenging environment with an internal restructuring to become more client-centric. GroupM's moves address similar challenges but appear to be more focused on streamlining operations rather than a major restructuring.
The Journal report highlighted some of the challenges facing agencies that pressured GroupM into its portfolio changes including brands looking for cost savings through reducing agency partnerships, making cuts to agency fees and spending less on advertising.
In other recent GroupM news, it named Maxus CEO Lindsay Pattison as chief transformation officer in late May and at the time said she would also remain CEO of Maxus. The press release didn’t specify if Pattison would have a role in the newly formed agency, or was going to solely focus on the new CTO role for GroupM.
