June 05, 2013

Everything Gets Bigger

Over the past few weeks I've been mildly obsessed with the damage that globalized ad holding companies have done to the ad industry. Just allow me one more post about it and then I promise to move on to whining about something else.

There is very little good that has come from the consolidation of the ad business. The only beneficiaries have been the sharks at the top of the food chain. So why does it go on?

I have come to the conclusion that all human endeavors follow an irresistible path toward bigness.

I think that the trend toward bigness goes on in advertising because it goes on in everything. Big businesses gobble up small ones. Big countries gobble up small ones. Big organizations gobble up small ones.

Even when no one is gobbling, human institutions seem to have an uncontrollable urge to merge and get bigger -- e.g., the United States, the European Union, Sprint Nextel, the National Football League...and a million others.

In the cosmic world, scientists tell us that physical forms want to decompose. They call it entropy. In the human world, social forms want to aggregate.

Humanity used to be organized into a million little tribes and a have thousand little gods. Now we have 200 big countries and one giant god. We used to have a different mens' shop on every corner, now we have the Gap. We used to have pen pals, now we have Facebook. 

Everyone seems to want to be part of something bigger. They may claim to prefer smallness and independence, but they rarely do.

In business, the tendency to consolidate is partially driven by economies of scale and partly by misguided government policies that punish small businesses and reward large ones. The U.S. tax code is essentially thousands of pages of special pleading for certain entities -- the big ones that have friends in Washington. This gives them enormous advantages

Of course, there are always cross-currents. While one system is growing another is falling apart. There are often reversals during which organizations grow too big or too dumb and decompose (e.g., the Soviet Union.) But in the fullness of time they usually re-organize under new management.

I am sure some historian or economist has already written about this and, as usual, I am late to the party. 

The magnetic attraction of "big" seems hard-wired. I doubt that it bodes well for advertising or, for that matter, most human endeavors.


Ed said...

Interesting, this. In Britain at least, the design industry is flourishing at the moment possibly due to the vast majority of agencies deliberately staying small (exceptions being huge multinationals like Imagination & Pentagram etc). Strange that two parallel and often tangential industries are moving in different business directions.

Sell! Sell! said...

There's a lot of truth in this George. I agree with Ed, in Britain, the design industry seems to revolve around smaller places - that's where you will find most of the strong talent in design (which is one of the reasons I was dismayed to see the London Olympic graphic design work go to a big corporate). In the ad industry over here though, big still reigns. We (Sell! Sell!) are sometimes viewed with suspicion by journalists, intermediaries and some clients because the ambition for our business is based on quality not growth. It seems the only acceptable business plan is 'get bigger' – and do whatever is necessary to feed that growth.

Cecil B Demille said...

I don't think big is the goal, I think it's the means to an end. Being big means having power in some form or another. Bigger is better, or so the saying goes. We don't lay people off or fire people, we "downsize."

What big, aggregation-hungry holding companies will never understand is that people are the value in the agency, not clients. There will always be clients that need work done. The people who can do the work, and do it well – they're fewer and farther between each passing day.

Gerald said...

If you aren't already familiar with it, may I recommend EF Schumaker's influential book "Small is Beautiful." He is (one of) the economists who "have already written about this."


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Brian Jacobs said...

I think the conglomerates got big because clients like big. Big is comfortable. Big is resource-rich. Big is flexible: you don't like that creative team - here's another one (remember IPG moving Diet Coke around its agencies?). You think that media team sucks? There'll be another along in a minute. Big allows all your research, media, creative, design needs to be met by one holding company, with one throat to choke and all the dots joined (bear with me, we're talking theory here). Big won't go bust. No-one got fired hiring IBM as the old saying goes.

However - recent developments suggest there is change in the wind. New shops have been opening - and (so far at least) not closing. WPP, to name but one example, have made what are starting to look suspiciously like several false moves, including buying the research agency TNS. Their media arm, GroupM is facing charges of a lack of transparency leading to the refusal by several large clients to use their digital trading arm.
Small may be risky, but small is honest. Small is putting the client first in everything. Small cares. Small just may flourish. But then small becomes big. The question then becomes can small become the new big, a better big, a big with benefits?

Shanghai61 said...

Brian, everything you say is true. There are a couple of other things that help support your thesis.

1. 'Big' is not just about resources, it's also about cultural 'fit' between organisations. As a colleague once remarked, 'Elephants fuck elephants'. It's easier to justify at board level, too. Directors of mega-corporations tend to look askance at small companies, even if they are 'better'. How can the CEO judge 'better'? CEOs measure by counting, so billings / revenues / staffing / network office counts are more easily understood and more reassuring than 'Lions'.

2. 'Global' is also about 'control'. Having everything centrally controlled and coordinated through a single point is again a reassurance for global management, and a bulwark against that messy 'localisation' that adds cost and confusion to global brands, regardless of the loss of potential innovation. It is clearly far, far better that the Global CMO has on his office wall a map of the world, on which all the little pins are the same colour. (That, and a 'single throat to choke' when things go wrong.)

Of course, 'global versus local' is one of the tensions inherent in managing a global brand, and every company's position tends to swing between the two like a slow motion pendulum. Tight 'global' control brings cost saving and consistency, at the risk of 'average' work and consequent lower growth in each market. Complete 'localisation' adds cost and complexity, but can aid creativity and innovation - and new thinking which can be 'exported' to other markets.

As they say, you pays your money and you takes your choice ...

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