Horizontalism and De-Coupling: The $5 billion opportunity
Interview with David Bonthrone
EVP Global Development of Group FMGDennis Troyanos: Good to see you after 10 years David – tell me what you’ve been up to:
Great to see you too, Dennis. Fitter and younger than ever. Well, since we last spoke, I’ve been fortunate to have a number of roles in the agency world. I’ve now arrived at an interesting intersection to help explore a shift going on in the world of production at an innovative company called GroupFMG.
Q: Talk to us about GroupFMG. What’s the Group FMG story?
The company has, in fact, been in existence for 20 years. We started life as a prepress facility in London. Our service offering has evolved and we now provide a suite of marketing services supported by a comprehensive offshore delivery model: we pass significant savings onto clients and agencies. The company was acquired by two PE firms last year and further investment has seen offerings evolve and corporate expansion into North America. Group FMG operates via a successful buy-and-build model. The company has raised over $30 million USD, with $100 million USD in available PE funds. Our latest acquisition of Pod1 – an award winning creative digital agency with a focus on e-commerce and creative design – strengthens our portfolio of creative design, production (content & graphics), and commerce enablement offerings. We completed the acquisition this June. You can read more about us at www.groupfmg.com/ .
Q: How have your offerings evolved?
We believe that the demand for content creation across multiple channels will continue, unabated. The costs of producing that content in multiple formats and languages – with quality video, photography and commerce enablement – is under the procurement microscope more than ever. Wherever possible, Group FMG offshores non mission critical functions to realize significant savings for both brands and agencies.
Q: What is your specific role?
I oversee global agency relations in addition to retail and CPG clients.
Q: So you work with agencies AND their clients?
Historically, the vast proportion of our revenue has come from direct client relations. We believe that with the greater adoption of what Sir Martin Sorrell calls ‘horizontalism’ across agency networks, there is an opportunity to partner with agencies to deliver greater value to clients.
Q: What is ‘horizontalism’?
I was recently at an ANA event in Florida, where Sir Martin gave the keynote. He coined ‘horizontalism’ to mean the centralized adoption of services across agency networks. He specifically mentioned Hogarth and Deliver (two of WPP’s production agencies) being ‘horizontalised’ across the group in his speech. The growth of Hogarth across the WPP network has been spectacular. Perhaps the best example on a global basis of this working is the RedWorks network that sits within the Ogilvy Network. This is now a significant business and profit contributor for Ogilvy. Other holding companies and agency networks are seeking to replicate this in some shape or form and we see an opportunity to help them do that.
Q: So is ‘horizontalism’ the same as ‘decoupling’?
The former applies more to the agency community, the latter is a term used more often by clients. I believe ‘horizontalism’ is the application of a centralized service across a network, and ‘de-coupling’ is the process undertaken in order to arrive at a centralized service.
Q: Why would a holding company and/or agency partner with a company like Group FMG and not build their own network?
There are many reasons – investment, offshoring domain expertise, timing, talent and unfamiliarity being the obvious. What we offer is rich experience in traditional and digital production, supported by an offshore center built and staffed from the ground up by the very folks who are now in leading project management roles in New York and London. So they know the processes, workflow systems, and data asset management tools. Therefore, the relationship is much more a partnership instead of a client/vendor arrangement.
Q: You mentioned WPP, what about the other holding companies?
From what we have seen, there is clearly an opportunity with all of them. We have met with Omnicom, Publicis, IPG and Havas’ – agencies which share differing levels of expertise and knowledge in the space. There are areas where we see opportunities to partner, others less so. I will say that WPP seem to have advanced this discipline the most.
Just look at the impact on the industry: if you look at the collective revenues for the ‘big four’ holding companies in 2011 it was just over $45 billion USD according to AdAge. Assume that 11% of that is spent on ‘production’ (and we believe that’s conservative), then you have a $5 billion USD market segment. By applying better processes and allocating resources more efficiently via a globally balanced delivery model, we believe there are savings of at least 25% that can be had across the board. And, as the advertising business is under increased scrutiny for greater ROI, that is some significant value for agency, holding company and brand owner alike.
Q: Will you be evolving your offering to ultimately supply strategic planning and creative capabilities?
No. We seek to partner with agencies, not to compete with them. We realize the agency business comprises of strategic, creative, production and media services. Media was spun off some time ago. Strategy and creative services are the lifeblood of the agency world which is why people go and work there. If we can bring value to the production discipline for agencies and their respective clients, then that is surely a good thing.
David Bonthrone is an Executive Vice President at Group FMG. He oversees agency, retail and CPG relations. Group FMG is a global content creation and e-commerce business with operations in the U.S. UK and Asia. David can be reached at email@example.com or 973.687.4765