NEW WORLD NETWORKS: Networks of small agencies are helping a new breed of clients to expand globally. How big a threat do they pose? Mark Tungate reports

What do McDonald’s, Xerox, the European Commission and the International Special Olympics have in common? Answer: they all use independent agency networks to help get out their message to a global audience.

What do McDonald’s, Xerox, the European Commission and the International Special Olympics have in common? Answer: they all use independent agency networks to help get out their message to a global audience.

What do McDonald’s, Xerox, the European Commission and the

International Special Olympics have in common? Answer: they all use

independent agency networks to help get out their message to a global

audience.



What was previously just a dream is now a daily reality of modern public

relations.



The big multinational agencies - the likes of Burson-Marsteller, Porter

Novelli and Ketchum - might scoff at the idea. And given the

extraordinary growth of PR and the economy in general, there is arguably

room for everyone.



But worldwide groupings of independent agencies are winning national and

global business and stealing potential market share.



In Europe alone, groups such as Pinnacle, Trimedia and ECCO achieved

double-digit growth last year. With worldwide consolidated income of

dollars 156 million, Worldcom, the largest of all the groups, is more

than a match for most multinational agencies in terms of size and

reach.



There are a number of reasons for this growth. The first, and most

obvious, is that existing clients are increasingly demanding

international coverage, encouraging agencies to sign partnership

agreements with firms around the world. ’This is a trend that has

developed only over the last four or five years,’ says Brian Cummings,

CEO and chairman of Cummings McGlone & Associates in Dallas.



Cummings also happens to be international chairman of Worldcom. The

network is in its 12th year in its current incarnation, although it grew

out of an older organization called the International Group of Public

Relations, which collapsed when Shandwick bought a key member. The

remaining 40 or so agencies regrouped and now Worldcom has 89 partners

covering 101 cities.



Just like a multinational agency, it’s split into three regions:

Americas, Asia-Pacific and Europe/Africa.



Enter the entrepreneur



But it’s clear that a new breed of clients are partly driving the rise

of the networks. ’I would say technology clients are really leading

this,’ says Cummings. ’At the moment we’re not really getting Fortune 50

companies, which tend to choose multinationals because they mirror their

own structure.



I’m talking about smaller, more entrepreneurial companies, which are

nonetheless operating globally.’



Worldcom’s biggest rival is the Pinnacle Worldwide network, which

operates on a similar basis. Established in 1976, it now has 65 offices

and worldwide revenues of more than dollars 115 million, as well as

access to 1,100 employees.



’This is not a handshake organization,’ says founding partner Joe

McCarthy, who heads NorthStar in Minneapolis.



McCarthy agrees with Cummings that hi-tech and other entrepreneurial

firms are providing the business. ’These are companies that don’t feel

they need the security of working with one of the top three

international groups. It’s people who can go to management with a

different solution.’



The next organization in the big three US-based networks is IPREX.

Although it’s smaller, with estimated worldwide revenue of dollars 70

million, IPREX can still boast 56 firms in five continents and 61

cities. Membership chairman Robert Weintraub adds: ’This is being driven

by the growth of the global economy. Companies that didn’t think

internationally before are expanding into other markets for the first

time. And these are often smaller companies that are turned off by

multinational agencies. They want a local agency with global

contacts.’



All of the groups have a strong presence in Europe, which has a long

tradition of networking. The move toward a single European currency has

made the territory even more important - despite the UK government’s

skepticism over the issue - and networks report that they now quote in

euros for pan-European assignments. This development is particularly

attractive to US clients, which have always tended to view Europe as one

market.



And of course, the growth of US-based international business has fueled

European networks’ rise in income. Worldcom has recently worked on joint

US-European projects for Xerox Engineering Systems and Royal Dutch

Telecom.



Networks such as Entente, Pinnacle, ECCO and GPC have headquarters in

Brussels, Europe’s political capital, while Trimedia operates out of

Zurich. IPREX runs a European regional operation out of Key

Communications in London.



’The United Kingdom has always been a natural base for networks because

it’s a smaller market, so it has been forced to build links with

Europe,’ says Weintraub. ’The US has always been more insular - until

now.’



Key targets



The networks are targeting a number of key regions as they expand across

the globe. IPREX is moving into South America through members in Buenos

Aires and Sao Paulo.



In Asia-Pacific it recently added links in Australia, New Zealand and

Bombay to existing representation in Hong Kong and Tokyo. Pinnacle’s

McCarthy says agencies from Asia and Latin America have been e-mailing

requests to sign up. Pinnacle itself has expanded as far afield as

Central Europe, with members in Romania and Hungary.



Worldcom’s Cummings has no hesitation in nominating the next hot

spot.



’China, definitely,’ he says. ’We’re in Beijing and Hong Kong and we’re

looking at partners in Taiwan, but that’s just the tip of the

iceberg.



The market is much more developed than you might imagine, and it’s going

to get bigger.’



Cummings also sees Africa as a potential gold mine. ’We have a strong

partner in Johannesburg who is trying to develop it as a separate

region, moving it out of the orbit of Europe. And of course we’re in six

or seven markets in South America.’



Apart from their growing geographic reach, there is another crucial

reason for the increasing popularity of networks among mid-sized clients

- the bottom line. Although he balks at the word ’cheaper,’ Mike Swenson

of IPREX comments: ’On balance we can be more competitive because we’re

made up of smaller independent firms with lower overheads. We’re also

used to having to be more competitively priced.’ Pinnacle’s McCarthy is

less circumspect. ’We will be much less expensive because clients are

paying purely for the service they receive in each market. They’re not

paying for some grandiose hierarchical structure.’



Many of the multinationals believe these networks provide little in the

way of competition. They say networks of affiliated agencies don’t

work.



They can’t offer the geographic reach, the consistency of service or the

level of coordination that wholly owned groups claim to deliver.



David Drobis, CEO of Ketchum, comments: ’Some of these networks do very

well because they have developed long-term relationships with their

affiliates around the world over a number of years. But I firmly believe

that equity is the glue that holds an agency network together.’



Multinational clients tend to steer away from independent networks

because of the possibility of conflicting accounts. ’If you’re Fed Ex

and you’re with Ketchum, there’s no way one of our agencies is going to

start working for UPS. Also, although networks will tell you

differently, I don’t believe they can offer the consistency of service

that an agency can. We have agencies from Buenos Aires to Beijing and

we’re confident they can work together effectively. Also, you’ve got to

remember that members of networks are still in competition with one

another. I don’t believe they can share information to the same

extent.’



For the networks, this is like a red flag to a bull. Cummings believes

it’s a myth that multinationals are made up of agencies as uniformly

slick as, say, Ritz Carlton hotels. ’I’ve worked inside the big guys and

I can tell you that although they have common policies and procedures,

the consistency is not there. Our members may not all have the same

logos and letterheads, but they can provide uniformly high

standards.’



IPREX president Mike Swenson takes a different tack, claiming that the

independent status of member agencies gives networks their USP. ’With

independent agencies, you get independent thinking. We’re bringing

together a group of people with divergent backgrounds and experience,

and then getting them to devise the most appropriate solution to a

client’s problem.’



And there are many other advantages that networks see over

multinationals.



’Multinationals these days tend to be owned by publicly traded parent

companies, with the inevitable emphasis on growth and profits,’ Cummings

argues. ’For the economic model to work, there are always going to be

more junior and less senior people working on accounts.



’If you hire Worldcom, you hire me and a whole bunch of people like me

around the world, so you’re getting senior people who will make your

account a major priority. The other important point is that they are all

local people. They haven’t been parachuted into the market from

elsewhere.’



In common with other networks, Worldcom positions itself as an

international corporation, with members paying dues and following

well-defined guidelines on working practices. ’If agencies don’t match

up to our standards, we cut ties with them. We recently dropped four

members at our annual meeting in Lisbon,’ Cummings says.



The rival Pinnacle Worldwide network operates on a similar basis. ’We

never take on more than three new members a year and it can take us up

to 12 months to assess them,’ says McCarthy. ’We also have certain rules

about the size of the agencies we take on. And on top of that, members

cannot miss more than two Pinnacle meetings, anywhere around the

world.’



This level of loyalty will be repaid several times over, he adds.

’Participation in Pinnacle means in effect a peer relationship which

gives members a new marketing stance in their local market. They are

able to offer clients help anywhere from Indonesia to Latin

America.’



At IPREX, Weintraub comments: ’As a partner you’re not just making a

financial investment, there’s an emotional attachment too. If a piece of

business is referred to you through IPREX, it’s in your interest to do

excellent work because you want more to come your way in the future.

It’s self-regulating.’



Hi-tech coordination



The multinationals and the networks could slug it out over this one

forever.



What is certainly true is that just as technology has made it easier for

multinationals to communicate between offices, so it helps to coordinate

a network of disparate independent agencies. For instance, extranets

allow individual agencies in a group to see the whole picture while

working on sections of a different project. ’The cost of technology has

dropped so much that what seemed out of reach a couple of years ago is

now easily achievable,’ confirms Cummings.



At the same time, networks are investing in training and creating

seminars so staff can share experience and techniques. Standardizing

procedures in areas such as evaluation is also becoming more

important.



Despite their studied nonchalance, McCarthy believes the multinationals

are well aware of the threat networks represent. ’They’ve started to

sell against us. I’ve noticed a defensive stance in many of their ads

and presentations.’



And of course there’s another reason why networks are growing: clients

themselves say networks deliver. Destination Hotels & Resorts recently

had occasion to turn to IPREX. VP of marketing Andrew Scantland says:

’We use an agency in Denver called Johnston Wells. When we were

acquiring the Hotel Del Coronado in San Diego, through IPREX the agency

was able to link up with a local firm called the Gable Group. This

became our San Diego office, with all the media contacts we needed. The

whole operation was seamless.’



Worldcom has pulled off similar coups for the likes of McDonald’s and

the European Commission, while Pinnacle recently generated worldwide

coverage on a pro bono basis for the International Special Olympics in

Raleigh, North Carolina.



The development of networks could have one negative side effect,

however.



Mid-size agencies which aren’t part of a wider group may begin to feel

isolated - and more importantly, may find themselves beaten out on

pitches against network members. Solo operators would be well advised to

find themselves a slot in a network, or start forming their own.





THE BIG THREE NETWORKS

Name                 Offices            Revenues (dollars)

Worldcom                  89                   156 million

Pinnacle                  65                   115 million

IPREX                     56                    70 million

Source: networks.



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