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Shops Restructure Ways to Go Local

Media agency networks are taking steps to reinvent the $5.5 billion local buying process as they seek leverage and efficiencies

The major media agency networks are taking steps to reinvent the $5.5 billion local buying process as they seek better leverage and efficiencies in the historically cumbersome market.

WPP, Publicis Groupe and Omnicom Media Group have already created new buying platforms and/or restructured units to address the problem. And now, Interpublic's Mediabrands, which oversees Initiative, Universal McCann and other IPG media assets, is also exploring a number of restructuring alternatives, according to sources. One option under consideration: combining the agencies' local spot-buying units with Mediabrands' barter trading unit, Orion, to maximize the utility of Orion's sophisticated electronic trading platform. Mediabrands officials declined to comment.

While agency execs have insisted that head count reductions aren't a main driver of the changes, clearly the ranks of local buyers have been trimmed during the recession. The major objectives agency executives have cited for the changes include: a more effective gathering of marketplace intelligence; and the opportunity to utilize new technology platforms that will let buyers spend more time discussing innovative deals with clients and sellers, and less time faxing buy order corrections and discrepancy forms.

The activity is also due to advertisers devoting smaller shares of their budgets to local media in recent years. Universal McCann research shows national advertisers have reduced their share of TV ad spending in local markets by about eight percentage points over the past decade. And according to the Television Bureau of Advertising, local broadcast TV spending was down 27 percent in the first half of 2009.

The next salvo could be Mediabrands' combining of a barter operation -- which typically buys remnant time at bargain rates -- with its regular local buying units. The idea has some buyers buzzing.
"That could change the model completely," said a senior executive at one shop.
A TV sales executive noted sellers would resist if the intent was to drive all spot prices down to levels obtainable through the barter process. "You'd need to set up some kind of fire wall," he said.

This past spring, Publicis Groupe's Starcom MediaVest Group created a buying platform called SMGX, overseen by John Muszynski, chief investment officer at SMG. The idea is to maximize the leverage of the estimated $22 billion in buying clout brought to the marketplace each year by Chicago-based shops Starcom and Spark and New York-based MediaVest with more precise applications of data and marketplace intelligence.

"One of the reasons for all the changes is that it's an incredibly labor-intensive process," said Muszynski, CEO of SMGX, "and it's not real high on most clients' radar. It's an area where a lot of agencies are looking to cut costs and streamline."

Muszynski added that beyond the efficiencies, he believes there's simply a better way to buy local media. "Few clients come to us and say, 'I'm looking for a local TV plan,'" he said. "They want a local plan."

Print, radio and TV are all interrelated at the local level, he noted, and the best plans will put different emphases on each depending on the market and the brand. "We've started looking at it much more holistically and we're getting the local specialists to talk more, share more data and be less siloed," he said. As a result, the local broadcast and print operations at Starcom and sister shop MediaVest now have dual reporting lines into their respective agencies and into Muszynski at the SMGX level.

Last January, Omnicom Media Group brought its OPera media-buying process to its local buying units in the U.S., serving both OMD and PHD. While the shops retain individual buying operations, the OPera unit handles negotiations across TV, radio and other media where appropriate. OPera was initially developed by OMG in Europe. The shop has also introduced a procurement process to the OPera platform to help insure clients are getting the best possible deals.

"I don't think it's dissimilar from what the other groups are trying to accomplish," said Page Thompson, North American CEO at OMG. The procurement expertise, he added, "was to analyze how we go to market and help our buyers look at new approaches."

WPP's GroupM made its move last year, pulling the local broadcast operations out of three major media shops (Mindshare, Mediaedge:cia and MediaCom), and creating two new ones, Motion and Matrix, that sit at the GroupM level. They report to that division's chief investment officer, Rino Scanzoni.

According to Ellen Drury, GroupM's president of local broadcast, the restructuring has enabled GroupM to approach local buying in a more consistent and uniform manner than it did when the operation was at three different shops with three unique cultures. The back office operations have been streamlined and GroupM now executes close to 90 percent of its local TV buys via electronic invoices, she said. Since implementing the new structure, most local buying is now done out of four main offices -- in Atlanta, New York, Chicago and Los Angeles -- down from 10 before the consolidation.

Going forward, said Drury, "we'll continue to refine the product."

— Nielsen Business Media