To understand how the advertising industry is structured, imagine a pyramid. At the top is a small group of large holding companies that own and control a variety of advertising brands around the world. Holding companies aren’t engaged in the daily tasks of advertising and marketing work. They instead work closely with the advertising brands’ board of directors to develop strategy and build effective intra-group relationships. WPP Group, Omnicom Group, Publicis Groupe, Interpublic Group of Companies, and Dentsu are the top international holding companies. An example of the size and scope of these holding companies: WPP owns about 400 advertising companies, including national advertising agencies such as Grey, Ogilvy & Mather, J. Walter Thompson, and Young & Rubicam, in addition to numerous media groups. It has more than 130,000 employees working in 3,000 offices in 112 countries.
Next are small- to medium-sized holding companies. They control fewer brands than the major holding companies, and their geographic range and services are usually more limited. Mid-sized holding company groups that have been around for a while include Canada’s MDC Partners and Havas, which originated in France. A recent development in holding companies is the creation of what's being called "vertical agencies," also known as boutique or niche agenices; these are agencies that are set up to focus solely on managing the marketing needs of individual clients in specific industries. Many holding companies offer this service.
Advertising agencies are near the bottom of the pyramid, and they come in three basic forms: full-service agencies, creative boutiques, and media planning and buying agencies. Large ad agencies that are located throughout the world and have international clients, like BBDO Worldwide and McCann Worldgroup, are usually full-service. Their clients range from well-known brands like American Express, Ford, and IBM, with large budgets, to lesser known clients with smaller budgets. Full-service includes marketing strategy development, ad creation, media planning and buying, account planning and research, and production.
Agencies also can be structured as micro-networks, with four or five worldwide offices. These types of agencies can create global marketing campaigns and their regional offices can then execute or adapt them for the local markets. There are also thousands of local advertising agencies that serve local or regional clients. Sizes for this type of agency can range from a one-person shop to a staff of 50 or more. Local and regional ad agencies serve clients that advertise nationally but are based in the same city as the agency and want the convenience of a local agency. They also serve clients that advertise locally or regionally and can’t attract the attention of agencies in New York City or other big markets.
Creative boutiques are usually small agencies that focus on creating advertising campaigns. Seasoned art directors and copywriters who want more independence spin off of full-service agencies to start their own creative shops, and clients often follow them. The boutiques have a small staff and a less corporate environment. For example, The Buddy Group, a digital engagement agency based in California, with clients like Dell, Epson, and Google, has a staff of three. Some shops also offer full service, such as the independently owned, Oregon-based agency Borders Perrin Norrander (BPN), which has created campaigns for Columbia Sportswear, Oregon Lottery, Forest Park Conservancy, and others. BPN specializes in brand communication planning, including brand identity, television, print, outdoor, radio, digital advertising, experiential, and Web and social content. Clients hire these shops when they want innovative, breakthrough creative work done. Sometimes even full-service agencies themselves hire creative boutiques to work on certain aspects of ad campaigns. This can happen if the boutique has expertise in areas where the full-service agency’s creative team is lacking, or if the full-service agency can’t fit the creative work into its schedule. There are also specialized agencies that work in specific markets, such as health-care and ethnic advertising.
Media planning and buying agencies focus media planning and buying services. Media has grown over the years and gotten more complicated, which is why clients seek out media planners and buyers to analyze and buy advertising time and space for them, particularly in radio and television. The planning agencies work with clients to create media plans and then hire the media buying agencies to execute the plans. Clients also save money on media buying because the agencies get a discount for buying large amounts of advertising time and space. Top media planning and buying agencies include OMD, Mindshare, Carat, Starcom, and Wavemaker.
Advertisers large and small are trending toward creating integrated social media campaigns. Through the brand’s Web site, and Facebook, YouTube, Twitter, Instagram, Pinterest, and other social networking sites, consumers have more opportunities to interact with the brand and be involved in the messaging. They can “like” it or vote for it on the company’s Web site or on Facebook. They can post testimonials and reviews online. If they see a TV commercial they like, they can watch it again either on the brand’s Web site or on YouTube and share it with friends on Facebook, who can then also share it with their friends as well as post to Twitter, etc. A good case study of successful use of social media in an ad campaign is Wieden + Kennedy’s commercial for Old Spice, “The Man Your Man Could Smell Like,” which launched in 2010 and went viral on YouTube. By April 2012, it had gotten more than 41 million views. The media research group Nielsen reported that Old Space body wash sales increased by 107 percent within a month of the launch of the social media marketing campaign. More recently, Wieden + Kennedy helped raise awareness of the Kellogg-owned RXBAR through online videos of the actor/rapper Ice T, who opens a door and gives a "No B.S.," simple introduction to the nutrition bar. They also included a hotline number, posted in Twitter, that consumers can call, rant about what they can't stand, and their rant might be turned into an animation. As early as mid-campaign, the videos and social media posts had nearly doubled consumer awareness of RXBAR.