THE MEDIA YEARBOOK: Multinational conglomerates staked further claims in South African media and advertising agencies as a flurry of mergers and acquisitions occurred in 2014. The Media reports on the impact of globalisation.
WPP and the Publicis Groupe have been at the helm of most of these deals as they expand their already significant reach into the local market. A by no means complete list, some of the bigger shifts in ownership include WPP buying into digital agency Quirk, as well as its acquisition of Gloo through WPP-owned Ogilvy & Mather. WPP holding group Grey acquired a majority stake in The Volcano Group, while one of its operating companies, JWT, acquired a majority stake in The Hardy Boys.
Publicis Groupe, on the other hand, acquired integrated advertising agency MACHINE, which was then merged with Publicis South Africa to form Publicis Machine. It also acquired full service digital agency Liquorice (through its subsidiary Digitas LBi), Prima Integrated Marketing, OwenKessel (which was merged with Leo Burnett), Lighthouse Digital (which was merged with Starcom MediaVest) and BrandsRock, which merged with Saatchi & Saatchi to form Saatchi Brandsrock. Applied Media Logic was also bought by Publicis global media network ZenithOptimedia.
Notably, these big agency groups have focused on snapping up mostly digital agencies, a trend which has drawn varied opinions from media industry players.
Omnicom Media Group (OMG) business director Gordon Patterson says it points to a future of fully integrated agencies where digital services are incorporated into their mainstream offering instead of being housed outside of the traditional agency.
“My view is that digital agencies in the current format will be dead in five years. They currently have a skill set that traditional advertising platforms require. It doesn’t make sense to keep those skills separate,” says Patterson.
He believes digital agency owners are aware of this impending change and are selling their companies while they can.
Jarred Cinman, chair of the Interactive Advertising Bureau South Africa (IAB SA) and managing director of Native VML, says it should be a point of pride for a local business to have reached a level of success that sparks the interest of major global companies.
Carat business director Celia Collins says multinational buy-in only “opens the door even wider for new independents”. Within the context of lacklustre economic circumstances, this spell of ownership change reflects a broader trend of global agencies trying to increase their revenue base by buying other profitable agencies as this is the only way they can presently grow their numbers, says Collins. This happens in 10-year cycles, she adds, and isn’t necessarily worrying.
“What happens is that the bright youngsters who don’t like being harpooned by big corporates and who want freedom start their own businesses in response,” she says.
Patterson shares Collins’ view, saying the cycle always spits out firebrand agency entrepreneurs who are stifled in an over-processed working environment. They start their own businesses again, which serves as a way of releasing top talent into the local industry once more.
As the managing director of a small, independent local agency, Ebony + Ivory’s Paul Middleton says he doesn’t feel threatened by international companies investing in his previously independent peers. On the contrary, it means there are more business opportunities for smaller players like him.
“Their margins decrease, their service deteriorates, they get more greedy, and their operational capacity reduces. They can’t grow organically because they don’t have the right people,” he says. “Clients are just so fed up with bad service and bad advice.”
However these global agency groups will have to act fast in establishing further roots in South Africa as the self-regulating industry body, the Association for Communication and Advertising’s (ACA) charter for transformation will require 51% local ownership of companies in the sector by 2021. The proposed regulations are currently awaiting approval from the relevant government ministries.
Expanding into Africa
In 2014, we also saw more South African agencies increasing their business footprint in Africa.
Some significant developments included full-service agency Mortimer Harvey announcing their expansion into Africa and the Middle East with the launch of Mortimer Harvey Africa Middle East and the opening of a regional office in Cairo, Egypt. Joe Public partnered with integrated communications agencies, Cosse in Nigeria and Ghana and HWMiT in Zimbabwe, to develop a network of partner agencies across the continent. Namibian-based Cornerstone Joe Public is already an established partner in the network.
Omnicom Media Group (OMG) South Africa CEO Josh Dovey told The Media in September 2014 the company is working hard on driving its business into Africa. In 2014, OMG SA purchased a 25% share in a Nigerian media agency. Dovey said the company was planning a deal with its Kenyan affiliate, OMD Saracen. Its network already runs into Angola, Mozambique, Tanzania and Uganda.
“Africa is the land of opportunity. Our clients and marketers are looking more and more into Africa as an untouched market, or certainly a market that hasn’t been fully exploited. So as marketers go into Africa, agencies go into Africa with them,” says Patterson.
Middleton says Ebony + Ivory has been doing business in Africa for 10 years already, but the challenges brought about by expanding up north generally outstrip the opportunities. There is, however, a way of working in Africa that makes it worthwhile, he says, by following in the footsteps of clients who are expanding into the continent.
“We do the work here and then we ship it up. We don’t have to spend hours and days there. We let the client implement it,” he says.
Government’s advertising ban
But doing business in South Africa could be made more difficult as the government has threatened to do away with all sorts of advertising since its 2001 ban on cigarette advertising.
The media and marketing industry has been left in limbo with a draft bill seeking to ban or at least strictly regulate alcohol advertising currently in a deadlock.
Despite this, health minister Aaron Motsoaledi has accelerated plans to pull the plug on fast food and fizzy drinks advertising to children. A controversial draft guideline to the amendment regulations bans the use of “cartoon characters, celebrities and sports stars, competitions, toy give-aways, collectibles, tokens, happy, caring family scenes and the corporate sponsorship of sports clubs, health campaigns and schools to put a stop to junk food marketing to children”, the Daily News reported in August 2014.
The intended alcohol advertising ban would create R16.4-million worth of inventory across all media, says Collins. But, she adds, if a stop is put to above-the-line advertising of alcohol, it will simply move below-the-line and channels like activations will flourish.
The growth of programmatic buying
Marketers face another challenge: programmatic buying . This use of software to purchase advertising has become a buzzword in media circles, particularly in digital marketing.
Paula Raubenheimer, managing director of new ad exchange network SouthernX, says no meaningful statistics are available on the quantity of revenue flowing through real-time bidding technologies in South Africa.
“This is due to there being very limited South African inventory supplying the programmatic space,” she says.
“Most of the money being spent by South African media buyers or international media buyers on South African eyeballs is on international sites with South African traffic.”
While there is no doubt that local programmatic buying is not nearly as prolific as it is in the US or Europe, the South African market is driven by international trends, says Raubenheimer. “We can assume that the South African market is poised to see some huge growth in this area in the next few years,” she says.
Fundamentally, programmatic buying promotes efficient, intelligent buying of the most valuable inventory, but there is a huge risk of buyers and sellers getting lost in the piles of data it yields and not using that information correctly, she adds.
“Initially, as the South African market develops the necessary skills, there will be a steep learning curve for us all.”
Cinman says the popularity of programmatic buying will grow as more agencies come under the wing of multinational conglomerates like WPP and Publicis Groupe, which are already using this technology.
“The handbrake is the actual media owners because they are very mistrustful. They see it as a way to try get their inventory cheaper. Nobody can afford for digital inventory to be cheaper than it already is,” he says.
But Cinman believes programmatic buying systems will ultimately strengthen digital advertising. “In the digital world you can’t make leaps of logic because someone can go and audit your numbers. Advertisers are starting to get much smarter about what they are being told by their marketers and agencies. They want to see evidence and they want to see results. As a result, we have to clean up our act on our side.”
Media research: finding a way forward
Last year there was considerable flux in the independent media research industry following the near collapse of the South African Audience Research Foundation (Saarf) in 2013.
A futureproofing report done by Kuper Research found that audience research needs to be conducted independently by each media type. This means that in addition to the Television Audience Measurement Survey (Tams) and the Radio Audience Measurement Survey (Rams), there must also be a Pams (print), Dams (digital) and Ohms (outdoor). This data would then be combined with the central survey to ensure that media types collaborate in a way that reflects multi-platform audience consumption.
Forming these individual audience measurements is where the most progress has been made in media research over the last year. The National Association of Broadcasters (NAB) awarded a tender for the design, development and implementation of a new radio audience and currency survey. Tams also received a makeover to ensure it is more representative of television viewers and will still fall under the auspices of Nielsen, though it will be managed by the NAB.
Out of home (OOH) media owners are devising their own research currency, which is being funded by the two biggest outdoor players, Continental Outdoor and Primedia Outdoor. While the currency will measure outdoor media initially, they intend extending this to other OOH media as well. The print industry is also in debating a new way forward.
The marketers and agencies are working together and have launched the Advertising Media Forum (AMF) Charter, a 10-point plan on how to create and fund an establishment survey and how the various spin-off surveys will fuse with this. Saarf, too, has formed a business committee to look for future funding models, though this doesn’t include the participation of the NAB.
Jos Kuper, managing director of Kuper Research, says there has been a resistance to fusion in South Africa.
“International experience shows that (fusion) can offer many tangible benefits, especially if we create an establishment survey from scratch and create the optimal linking variables upfront,” says Kuper. “Why not stop the in-fighting, take the fear out of change and embrace it with excitement?”
This post was first published in the 2015 The Media Yearbook. A digital version of the full magazine can be downloaded here.