How much conflict is too much?

Rumours of a MediaVest-Starcom merger were rampant following the abrupt replacement of Sherland Forde at MediaVest early this month. Forde, president of the operation, had been with the company for 18 years. He was replaced by Paul Maher, former COO and managing director of Starcom Greater China, now CEO of MediaVest Worldwide (Canada).

Rumours of a MediaVest-Starcom merger were rampant following the abrupt replacement of Sherland Forde at MediaVest early this month. Forde, president of the operation, had been with the company for 18 years. He was replaced by Paul Maher, former COO and managing director of Starcom Greater China, now CEO of MediaVest Worldwide (Canada).

Kevin Malloy, CEO of Starcom MediaVest Group International, was in Toronto to stage-manage the transition. He says there is no merger in the cards for MediaVest and Starcom in the near future – but that could change at some point down the road.

‘Things change,’ says Malloy. ‘We’re continually looking at the dynamics of business…. Who’s to say that this time next year it might not make sense operationally to have one operation in this marketplace? I think it’s important to say we’re keeping our options open for the future.’

Right now client conflict is the main reason for keeping several separate media brands under one banner. Some media companies are seeing a trend towards clients softening their stand on conflict, and Malloy says he is clearly seeing a relaxation in this area.

Strategy asked Malloy to expand on how much conflict clients will put up with, and how that could affect the way media companies are structured on a global level.

Q: Are clients getting more comfortable with internal conflicts at their media AOR?

A: A conflict is only a conflict if it exists in a client’s mind. Back a couple of years, clients had very strict policies on what they regarded to be a conflict. In those days we were pretty much wrapped up with ad agencies and there was a lot of what clients would regard as ‘proprietary strategic work’ within the creative work.

At the end of the day there are probably four or five major media players now – clients have a lot less choice. So clients are having to make some concessions on this if they want to stay with a first-class operation.

We have certainly seen without a shadow of doubt with our multinational clients, revisions in their conflict policies that have loosened things up. Sometimes that’s to deal with how they view things in the holding companies. Sometimes that’s in terms of how they view things as true competitors. They’re being a little less aggressive.

What’s happened on their side is a lot of these businesses have consolidated as well and that has made life very different, so I think to be realistic they have definitely made concessions.

Having said that, I think there are always going to be some red-flag conflicts. You’re not going to get Pepsi and Coca-Cola in the same house. There’s going to be a line drawn.’

Q: What degree of easing up have you seen in terms of areas considered ‘no-go’ conflict?

A: Cars is an interesting [category]. It gets very complicated because of ownership issues. We have General Motors. We have Fiat. Well, General Motors currently owns 20% of Fiat.

But I’ll tell you, General Motors for a while had an issue with Publicis getting together [Publicis bought into Bcom3 Group, the parent of SMG, this past March]. They had an issue with [Publicis client] Toyota, which seemed to be an absolutely ‘no-go’ competitor. Under the Publicis banner we will have to ensure that General Motors and Toyota are absolutely separate in how things operate.

Yet with Procter & Gamble we have, again under the Publicis banner, L’Oréal, which will operate out of Optimedia. We have a significant amount of P&G business that falls under the SMG banner. Within the holding company we may have competitive business, but within those specific brands we keep things isolated. That’s a bit of a clue on how things will operate in the future.

Q: How is client confidentiality ensured?

A: We have very strict rules on clients’ businesses that involve different floors, different rooms, locked file cabinets. There is clearly a way to do this that satisfies clients. The model we’ve been talking to clients about is like the consulting industry – when you think of Ernst & Young, the numbers and types of businesses they work across. For some reason the ad industry has got itself in quite a tangle on the whole conflict thing.

Where I think it gets interesting is in the buying area. There’s another level of where [clients are] even more flexible in how they’re prepared to look at things if they can take advantage of the total clout of an organization.

They get, and quite rightly so, a little less flexible with the planning area because that’s where a lot of the intelligence and a lot of the real strategic thought is done. So I think even within media companies, there are degrees of flexibility in terms of certain areas where clients are prepared to make concessions.

Q: Is there more global media agency consolidation on the horizon?

A: At the moment you’ve got four mega companies: WPP, IPG, Omnicom and Publicis. When you look at what they’re doing, each of them has one, two, three or even four brands under that.

One of the key reasons we have that number of brands is to manage client conflicts. I think depending how this really falls out in the future, that will be a big determining factor on the number of media brands that the holding companies decide to run with around the world.