Global Policy Forum

by Stuart Elliott

Three giant advertising agency companies in Chicago, Paris and Tokyo announced yesterday that they would form what would be the world's fourth-largest such corporation, with strength in North America, Asia and Europe.

The new axis of advertising would bring together the Bcom3 Group, the American parent of agencies like Leo Burnett, D'Arcy Masius Benton & Bowles and the Starcom MediaVest Group; the Publicis Groupe, the French parent of agencies like Fallon Worldwide, Publicis and Saatchi & Saatchi; and Dentsu, the leading agency company in Japan. It will work for blue- chip marketers like Coca-Cola, Diageo, Walt Disney, General Motors, L'Oréal, McDonald's, Nestlé, Philip Morris, Procter & Gamble, Sprint and Toyota.

Bcom3, Publicis and Dentsu are eager to elbow their way into the top tier of agency companies. The three giants in that tier together account for an estimated 40 percent of worldwide agency revenue. The deal comes as the advertising business struggles to emerge from its worst slump in decades. It reflects how second-tier agency companies like Bcom3, Dentsu and Publicis are scrambling madly to keep up as the two other industries they work with daily — marketing and media — also consolidate.

"I don't know if biggest is better, but big is better," said Michael J. Russell Jr., an analyst at Morgan Stanley Dean Witter in New York who follows advertising and broadcasting stocks. "The agencies are playing catch-up to what the media and clients have already done."

As the world's marketers, which spend almost $500 billion annually on advertising, grow ever larger, they seek to work with agencies that are also large.

They want agencies that can work in many countries to create campaigns that will appear in many media, from television to the Internet and signs in stores. At the same time, the ownership of the media is being concentrated in fewer hands, so agencies want to bulk up to gain more power in buying space and time for clients' campaigns from huge companies like AOL Time Warner, the News Corporation, Viacom and Vivendi Universal.

The bigger the agencies become, the theory goes, the more efficiently and effectively they will serve clients because the media companies will be more willing to make deals to lure bigger shares of the bigger ad budgets those agencies control. The media companies, for example, could offer lower prices, more appealing packages for ad placement and incentives like promotional events. A television network might offer a giant agency that spent billions of dollars on behalf of top marketing companies the first crack at buying commercial time in its highest-rated shows — and maybe attractive prices to boot.

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.