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Aegis Network Creates 2 Brands; Shops Can Rep Competing Products

Aug 4, 2003  •  Post A Comment

Aegis Group, one of the holding company giants of the consolidating world of advertising, is restructuring its worldwide operations and forming a new global buying and planning network to be called Vizeum.
In North America, Europe and elsewhere, that new network will operate alongside its familiar Carat brand network, giving Aegis what its biggest competitors already have: namely, two full-service media buying and planning shops that can accommodate competing global brands in the same category without conflicts, much as WPP Group’s MindShare represents Gillette, while its Mediaedge:cia reps Schick.
“That’s an accomplishment,” said David Verklin, CEO of Aegis’s Carat North America. Like the other two Carat regional geographic divisions (Carat Asia Pacific and Carat Europe, Middle East and Africa), Carat N.A. will be renamed, becoming Aegis Media Americas.
“If you’re WPP, you’ve got two brands, MindShare and Mediaedge,” Mr. Verklin said. “If you’re Publicis, you’ve got two brands, Starcom Mediavest and Zenith Optimedia. If you’re Omnicom, you’ve got two brands, OMD and PHD. If you’re Interpublic, you’ve got two brands, Initiative and Universal McCann. We need two brands.”
The new Vizeum network is intended to position Aegis for the coming era of global media buying and planning consolidation, and to give clients another option that will be competitive with Carat, said Mr. Verklin.
When Carat North America rebrands as Aegis Media Americas, sometime in the fourth quarter, Mr. Verklin will become its CEO. And when the new Vizeum network is formed in the Americas in the first half of next year, following an expected round of acquisitions from the diminished pool of independent agencies, Mr. Verklin will add oversight of the new network in the Western hemisphere to his current portfolio of Carat companies and other agency brands.
“There’s not much left to buy,” Mr. Verklin acknowledged, but “there are still a few independent players left.”
Among those he has his eye on is Cincinnati-based Empower MediaMarketing, formerly known as Media That Works.
Vizeum has just launched in Europe, where approximately $1.5 billion in Carat billings have been switched to the new entity.
The first half of this decade is all about regional consolidation when it comes to advertising representation for global brands, in the manner of General Motors’ consolidating all North American media business and planning with Starcom, Mr. Verklin said. The second half of the decade, he said, will see the rise of global consolidation, in the manner of IBM’s hiring MindShare to do all its buying and planning worldwide.
“Will Coke and Pepsi ever live under the same holding company? Probably not,” Mr. Verklin allowed. “But I think what you’re seeing is the evolution of two delivery systems under each major holding company to be able to handle at the very least two global competitors on a global scale. And that’s the future of the business. That’s the reason for Vizeum.”
Mr. Verklin is well known as an outspoken opponent of the existing upfront process (TelevisionWeek, July 14), which he has said is driving broadcast prime-time television cost-per-thousand prices so high that only three large categories will be able to afford to advertise in network prime time in the future. Those three categories are pharmaceutical, automotive and movie companies.
The “small-time prime advertiser” will give up on network prime time and move to cable, he predicted.
“The average prime-time rating is a 5, and we’re seeing a rise in the cable rating to about a 2,” he said. “If I could get cable up to a 3, and I think we’re seeing an inexorable drift of prime to a 4, we’re going to see [cable become] an alternative to network prime.”
Mr. Verklin has been just as outspoken in his opposition to the recent attempt to further deregulate the media business in the United States, allowing single conglomerates to own more TV stations in the United States and more media outlets of all types in single markets. A giant like Viacom “can take a picture of all my clients’ spending across all these media types [broadcast TV, cable, syndication, radio, outdoor, and so forth] and they have an understanding of how” those Carat clients will spend and what prices they are willing to pay, even before negotiations get under way, he said.
Radio is the model for what Mr. Verklin fears may happen in television. In radio, “I actually feel the effects of deregulation on a day-to-day basis,” he said. “We are now dealing with two representatives who represent 50 percent of the [radio] stations in one market. … I don’t like that because I’m losing my price leverage … [and] they’re starting to sell me all their stations as a package.”
It could happen in TV too. “Consolidation scares me on that front,” he said, adding that he welcomed Rupert Murdoch’s expected entry into the North American direct-broadcast-satellite business, because he’s expected to become a tough competitor for cable. “In other words,” he said, “I could buy ESPN from Ed Erhardt [president of ESPN/ABC Sports Customer Marketing and Sales] or I could buy ESPN from DirecTV.”
Mr. Verklin, who even before this year’s upfront talked about clients’ “retreat to TV,” is clearly an agnostic when it comes to Madison Avenue’s nearly religious faith in the power of broadcast-network advertising.
For agencies and advertisers, “media” traditionally meant just five things-television, radio, magazines, newspapers and outdoor, he said, but “in most agencies it was TV, TV, TV.”
Carat and Aegis, though, aspire to be media-neutral, Mr. Verklin said. “Our vision has always been different. Our vision is, media is any way a brand touches its customers.”
And that suggests the other reason that Aegis is forming Vizeum as an in-house competitor to Carat: According to Mr. Verklin, “Fifty-seven of the top 100 advertisers on Earth have looked at their media services company in the last 36 months. An amazing statistic.”