October, 2015
Long live the home-grown agency

WPP, Publicis and many other foreign companies are snapping up independent SA owned agencies. But, will the creativity of these local agencies be hampered by having to conform to a new global standard? Michael Bratt investigates.

Over the previous year 12 agencies have been sold to international companies. In fact, currently, 17 of the top 20 advertising agencies in South Africa are majority owned by international firms. But why is there such a huge interest in agencies in this country?

Pepe Marais, chief creative officer at Joe Public, believes that the tough operating environment is driving foreign firms to South African shores. He says, “Organic growth is relatively slow globally so global advertising groups have to increase their revenue and profits through acquisition.”

Omnicom’s Gordon Patterson, who left the media group that he started, Starcom MediaVest, shortly after Publicis acquired the company, agrees with Marais adding, “South African agency owners have invested a lot of time and effort in building their company brand reputation and their position in the market place. That foreign agencies are keen to buy those is a good way to monetise their investment… particularly in the current weak rand economy.” He affirms that much buying is happening in the digital area where small social media and mobile groups have been targeted by international players.

However, Ana Carrapichano, group managing director of Mediology, believes that there is no pressure being placed on local agencies to sell out to international players. “South African owned media agencies are not being forced to sell their businesses. However, many business owners will build companies to ultimately sell for a profit. That is standard business practise across many industries,” she says. Carrapichano adds that in most cases the global media agency brand will swallow up the local media independent brand – they more than likely will need to become the global brand.

Motives, margins and creativity

Patterson does, however, question the motive for foreign companies buying multiple South African agencies. He remains sceptical about whether, since they are already in South Africa, they’re buying a solution or simply trying to create the illusion that they are growing and successful. He wonders why a foreign company would buy more agencies rather than spend money on improving and developing the agencies that it already owns. “The financial performance of these agencies 12 to 24 months later will be the acid test, I guess,” he says.

Marais believes that a consequence of foreign agencies buying local agencies is that creativity is being curtailed saying, “The greater impact lies in a loss of purpose that leads to a loss of culture, independent thinking and entrepreneurial spirit post acquisition. Being driven by margins doesn’t always serve the best interest of clients and ultimately, profits and dividends leave the country rather than circulating within our economy.”

Patterson’s view is slightly different. He says, “It’s actually a good thing for the local owners because they can monetise their investment. It’s also a good thing for young staff who want to learn new skills, international approaches, speak a global language and gain access to an international network.” However he also admits that when a local agency is acquired by an international firm, what sets it apart from others, its uniqueness, is often lost, as it has to conform to the business model of its new international owner. He also believes creativity might be in peril. “International agencies produce creative in one country and then use it globally which can lose the subtle nuances and flavour which would be present in locally produced creative,” he explains.

Global access

Andrew Fradd, group managing director of the Mortimer Harvey Group, believes that having access to and participating in the global economy through ownership by a foreign company is an attractive option, but is not the only option that South African agencies have.

“The accessibility to, or ability to participate on the global stage is no longer a limitation merely because you are not owned by a foreign network. We are all connected in real time through multiple channels delivering insights and learnings, both global and local.” The skill and expertise to turn this data and knowledge into relevant and impactful connections that change behaviours, resides in the human capital of a business and not only in its connection to a large global corporate structure.

In terms of possible foreign impact on creativity, Fradd adds, “While foreign investment of any kind in the South African or any economy is welcome, in the agency context this poses the danger of establishing global monopolies that denude the entrepreneurial spirit, authenticity and originality upon which most agencies have been established. What is the actual effect on the integrity of true originality, not dictated by global bureaucracy and directives? The loss of individuality, flexibility and quick decision-making in the agency environment will have a marked effect on our communications in the future.”

After the strong recent buying spell, both Patterson and Marais believe that it will slow down in the future. “The fact that the rand is cheap internationally… it’s a good time to buy if you’re working with pounds or dollars or euros. But, at some point international owners want return on their investment and all the major local brands have been bought. I don’t see anything of significant value left in the market place right now for any international company to buy. The challenge now is to settle those local brands and incorporate them into their global brand,” Patterson says.

Marais adds, “There’s not a lot left to buy. Ultimately, the agencies that are selling are those with the highest profiles. International groups are not interested in businesses that haven’t got actual scale or real opportunity to grow.”

Fradd, however, has a different viewpoint. “For as long as independent agencies develop an attractive business in growing economies, interest from global groups will continue. It remains to be seen if they will see a genuine return on their investments,” he says.

Ultimately, Marais, Carrapichano and Fradd all call for South Africans to up their game when it comes to domestic agencies. They encourage local talent and entre-preneurs to start more media independents in the country.

“With the right recipe, anyone can win, although sometimes it can be quite tough when it comes to getting media accreditation. I don’t think it’s necessary to be part of a global network to succeed,” says Carrapichano.

Marais wants to see a stronger sense of patriotism, “If you are truly committed to the growth of South Africa and to more than just serving your own personal bottom line, you will remain in the trenches for as long as it takes to make a difference here.”

Fradd simply concludes, “Long live the truly home-grown agency!”