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Advertising agencies are eyeing the formation of a new super-agency which will have more media buying muscle to get better deals.
Global advertising giant Omnicom said the merger of three agencies announced yesterday would create New Zealand's biggest media buyer. Media buying agencies buy ad space for advertisers.
The three agencies, all controlled by Omnicom, are OMD New Zealand, Media Direction and the Clemenger BBDO media division in Wellington.
The new agency will be jointly owned by Omnicom subsidiaries OMD and Clemenger BBDO. It will be called OMD New Zealand.
The merger means New Zealand media will deal with a dominant media buying company. In theory, media deals are between clients and advertisers and the size of agencies does not have an impact.
The combined agency has a lot of buying muscle. It will have around $160 million in advertising money from big clients including McDonald's. Fonterra, Air New Zealand and the Land Transport Safety Authority.
Using figures supplied by Nielsen AdQuest it will control around 17 per cent of the media spend for advertising agencies in New Zealand.
Industry sources estimate that with other Omnicom media buying agencies in New Zealand such as Total Media, which Omnicom takes over in January, and Spark PHD, Omnicom controls about 30 per cent of New Zealand ad agency spending on media.
The new agency will be headed by former OMD New Zealand advertising chief executive Kath Watson.
Derek Lindsay of FCB said the industry would be watching closely to see whether the merged agency used its buying muscle to leverage cheaper prices from media.
Watson played down the impact the merger would have, saying the new agency would provide more efficient and better managed resources.
Advertising agencies body Caanz said the merger was part of a trend for consolidation around the world and reflected that New Zealand was a small market with a lot of agencies.
