Holding companies have lost their dominant position: here are some reasons why

As much as the story generated a lot of buzz, I find that the news of Acquisition of IPG by Omnicom this is not surprising and is part of the natural order.

I’m sad for the big one agency legacies that will be put on the back burner. I’m sad for the jobs that will be cut. I am sad that holding companies are showing “innovation softness” compared to digital and technology companies. I am sad that holding companies have become, in financial terms, “cash plays” – like laundromats, car washes, and apartment buildings.

This cynicism towards holding companies is deserved. I started in this industry in 1989 and have worked through five eras of the agency industry, serving clients in television, digital, performance, data and now the era of AI. Earlier in my career, I worked at IPG and reported to then-CEO Phil Geier, an experience that gave me a front-row seat to the inner workings of a holding company in its heyday. At that time, the holding companies had been growing for years by increasing their billings in traditional media. It was an arms race, and it was all about attracting money from global agencies and media.

Then the game changed and the music slowly started to stop. In 1998, Google decided to bypass the agencies and Meta followed their example. Since then, holding companies have been forced to exploit the existing model.

Unfortunately, they didn’t have the market capitalization or margins of digital or software companies, and so were never able to compete for the world’s best tech people. They never really had the chance to truly innovate.

AI and the accelerated transition to in-house

Adding to this problem, two other forces have accelerated their decline.

First, as we all know, today’s customers are integrating more and more features to save money, improve speed and increase quality. The fact is that most large clients have in-house agencies that proudly believe they can execute just as well, if not better. Competition no longer comes from other agencies; an agency’s biggest competitor is his own client. These trends around client insourcing have hit the pricing structure hard and made these larger agencies more project based– further weakening their once powerful actions.

Second, the multiplier effect on housing is artificial intelligence: AI is accelerating the internal trend as customers want to own and understand AI for their own survival. This is a strategic asset and not a capacity to be subcontracted.

For decades, holding companies have held a prominent place in the advertising world. They were seen as essential partners, providing high-value, high-margin, high-growth solutions to global brands. Clients have turned to them for their creative vision, strategic vision and media expertise. However, these heights are now entirely eroded. Today, holding companies focus primarily on serving the world’s largest companies. They are doing everything they can to stay relevant to the top 100 spenders.

What’s next for independent agencies?

But my opinions are not all negative. For the first time in generations, the grass is greener on the independent agency front.

There is innovation, freedom and margin outside of these 100 biggest spenders. Holding companies need the top 100 to impact their profits, and the rest of us don’t. We can live very well by serving everyone.

The top 100 represent between 20 and 30% of global GDP. That leaves 70-80% of the global economy within reach of the rest of us. The other good news is that these companies need good partners because they can’t afford to build everything in-house like the biggest 100 can.

The independent world is about quality, not scale. There is always a market for quality. We can offer what the giants cannot: personalized service, true partnership and the ability to quickly adapt to customer needs. We can be proud of good strategy, creativity, digital and social. We can innovate with AI. We can continue to build strong relationships.

Our industry finds itself at another natural crossroads as old models are replaced by new models. There is no place I would rather be than in an independent practice.