Ireland Agencies - Global networks are taking on the indies

by Jane Bainbridge Media Week 10-Jun-08

Media agencies in the Republic of Ireland are becoming global forces. Media Week looks at how smaller players have the opportunity to carve a niche, despite the onslaught of the agency networks.

In the Republic of Ireland, as in the UK, media planning and buying agencies are becoming global forces. The big players have spread their tentacles and global networks now dominate as their scale allows greater leverage and buying power in the market, worth EUR1.85bn (£1.46bn) in 2007.

While exact ranking tables do not exist in the Republic, a quick scan through the top 20 media agencies according to the National Newspapers of Ireland throws up many familiar faces. Aegis Media tops the list; others include GroupM, Publicis, MindShare and OMD.

The past 10 years have seen a shift in the Irish media agency landscape, with the media networks sucking up the independent agencies. The most recent development saw PHD joining the fray in Ireland, with the launch of a Dublin office earlier this year.

While many in the Irish media sector view this as a way for Omnicom to avoid conflict between same-sector clients, Jason Nebenzahl, managing director at PHD Ireland, says this is not so. "PHD's motivation is to bring something new to the market. This is part of an overall global push by Omnicom to roll out the PHD network," he explains.

"Internally, it allows us to give more responsibility to good people. The heritage is different in the UK, where OMD and PHD pitch against each other. In six months to a year, we hope to go head to head with OMD in pitches here in Ireland."

Sean McCrave, chief executive of the Institute of Advertising Practitioners in Ireland (IAPI), believes that, despite the onslaught of the agency networks, smaller players still have the opportunity to carve a niche. However, he acknowledges that the economics make it tough for the independents.

He says: "It is harder to be an independent agency in Ireland because you need a certain scale to do this business. The cost of doing business is expensive; you have to be tooled up technology-wise - and the cost of research can also be very high."

Graham Taylor, chief executive of media independent GT Media, survives by being "a bit smarter, having better people and being strategic". GT Media is part of a consortium of independently owned agencies, Columbus Media International, which also helps to bridge the gap. Taylor says: "The consortium gives us the opportunity to get valuable market information on other territories, so we are not isolated and are exposed to high-level strategic thinking."

However, the rise of the major agency networks in the Republic has impacted Taylor's business and his agency's multinational clients have all but disappeared. "We have had bits and pieces of multinational business over the years, but that has all gone, consolidated into the dominant networks," he says. "Now, the majority of our business is from companies with strong local management, such as Dyson and Honda."

Healthy mix
While the global multinational accounts might attract the headlines, those that provide genuine local opportunities for media agencies are particularly coveted. David Hayes, managing director, Mediaedge:cia Ireland, says: "Most multinational agencies need a healthy mix of domestic and global business."

PHD Ireland's Nebenzahl comments: "Large companies hold a media-only pitch only occasionally, but there are plenty of really big local pitches. Ireland is often lumped in with other smaller markets in European pitches. So we get an opportunity to shine on local work when we are in control."

The biggest-spending client in the Republic remains the Government - EUR63m (£50m) ad spend in 2007 - but, unlike the UK, it has no COI equivalent to manage a group of roster agencies. "We'd like the Government to follow the COI route, but at the moment it does a tender for each account, which is expensive and time-consuming for the agencies," says the IAPI's McCrave.

MEC's Hayes elaborates: "Every piece of business for the Government goes into pitch, involving tedious EU tender documents. There are around two to three a week - you could have a dedicated team pitching for Government business alone. And it's such a box-ticking exercise: you can fall down by making a small mistake on the template."

With all the big networks now firmly at home in Ireland, many industry players argue that the agency scene in the Republic has very little that makes it unique compared to the UK. However, that doesn't mean there are no issues specific to the region.

In the 1990s, the Republic enjoyed an economic boom, as the "Celtic Tiger" took hold. Companies were attracted to the region by its low corporate tax and a young, highly educated workforce. While the Republic is now feeling the effects of the ripples of the credit crunch, as is the rest of Europe, recent years have been buoyant, and Ireland's resurgent media scene has had a positive knock-on effect for the agencies.

However, the downside of the boom has been a severe lack of qualified personnel. "The media business has doubled in six or seven years, so there's a real dearth of people with the right experience. The market needs twice the number of people in it," says Hayes.

Liam McDonnell, chief operating officer at Aegis Media Ireland, is even more vociferous on the subject.

"Clients are looking for more and more while spending less and less, but people are being poached at crazy premiums - it's a nonsense," he says.

While some agencies, including Aegis, have established graduate training programmes, IAPI is also responding to the problem by starting an initiative to get school-leavers to consider advertising as a career.

However, as McCrave acknowledges, any positive impact of the training initiative will not be felt for years.

As well as the shortage of staff, another difference between the Republic and the UK is the digital scene. The move to digital media has lagged behind the UK, only really taking off in 2007, hindered by the lower rate of broadband penetration.

Joe Dalton, managing director of media independent Precision Media, says: "Digital is not as developed as the UK - many agencies are only now setting up a digital division. Digital is a low margin, high-input business and it's quite labour-intensive.

"On the EU ranking, the Republic of Ireland is in the lower half in terms of broadband penetration. The business community has raised the issue with the Government: it's ironic, given that some of the biggest IT firms are based in Ireland."

But for all the similarities, close proximity and common language between the Republic and the UK, it's easy to forget that Ireland is a significantly smaller player. "The industry has experienced growth that has not been seen in the UK over the past few years, but it is still a relatively small market - about the size of Birmingham," says McDonnell.

Ireland's scale clearly affects what media agencies can do, and many in the industry believe it could not sustain a communications strategy specialist of Naked's ilk.

IAPI's McCrave argues: "The problem is that the market requires as much work but for less money, as there is a smaller population (around four million adults)."

He added: "Smaller budgets mean smaller margins, and Irish agencies aren't getting their just returns."

Xtra-vision
Xtra-vision is Ireland's largest chain of video rental stores, with 200 shops in the Republic. Founded in 1979, the chain was bought by Blockbuster in 1996, but has retained its own brand and identity.

Since the emergence of the online film rental market, the company has had to expand its offering and to adapt to the new competitor market to become an all-round entertainment retailer.

In addition to its rental business, it sells DVDs, music, cameras, mobile phones and mobile credits, as well as items such as ice-cream and popcorn.

Mediaedge:cia Ireland has held the Xtra-vision media account, worth EUR10m, for the past four-and-a-half years and during the Christmas build-up it has to adapt its advertising and choice of media channels to appeal to the gift market.

Sarah McDevitt, former account manager on Xtra-vision and now head of digital at Mediaedge:cia Ireland, says: "To appeal to the gift market, we used a range of media - TV, radio and cinema. We then added press to get the catalogue out there and to highlight specific offers. We also put 'offers of the week' on TV."

Xtra-vision is positioned as the local shop where you can drop in to find last-minute gifts and its advertising promotes the full range of its offers.

"Xtra-vision has had to develop its model because of the internet, branching out into selling DVDs and chart music," says McDevitt.

"At Christmas, it uses TV to appeal to the wider market. The campaign started in mid-November and ran until Christmas Eve." Following its multimedia Christmas campaign, the retailer also advertised online for the first time this year. While Xtra-vision has not expanded into offering an online rental service, it has recognised that many consumers are now using the internet to research which films they want to watch.

McDevitt adds: "Even though there are many DVD companies online, people don't want to be tied to EUR20 (£15.80) a month subscription for films. So Xtra-vision advertised online with click-to-view trailers that were equipped with information for consumers to rent DVDs from its shops."