A Brief History of Agency Holding Companies
A curious student recently posted a great question in the comments section of our October 2015 blog post about why Big Marketing Agencies Are in Big Trouble:
How did the traditional AOR (agency of record) business model work, and what do you suggest mega-agencies do to create an updated business model that works?
Here's our response:
As agencies looked to expand, they began adding capabilities that they did not have when they were founded. There was strong financial pressure to never say "no" to the client, even if they requested a service that the agency could not deliver. Many agencies acquired smaller (specialty) shops rather than building capabilities organically.
Now that these agencies have become huge, they are being exposed as generalists rather than experts in anything. Now, again, the major holding companies are trying to diversify by engulfing specialist agencies. The challenge with this approach is that the holding companies rarely allow these new specialist divisions to focus on the very specialty that made them attractive in the first place. The results are that clients still continue to seek specialists that are not part of a holding company to get real expertise for a specific marketing challenge.
We're curious to get your thoughts on this, as well.
How can big agency holding companies like WPP, Omnicom, Publicis Groupe, Interpublic Group, and Dentsu deliver discipline expertise without homogenizing the agencies in their fold?