Why consolidation means a potential payday for non-holdco agencies that target the ‘forgotten middle’

By Michael Bürgi  •  December 30, 2024  •

Ivy Liu

And that leaves a whole world of smaller and mid-sized marketers left on the sidelines of the holdco game — the “Forgotten Middle,” as one independent media agency CEO coined it — and looking for agencies that will bring them their A teams and innovative solutions.

Looking more closely, the holdcos are building something that feels closer to platforms than rosters of distinct agencies — although, to be fair, each holding company has its own distinguishing elements from the others. One former holding company media agency CEO who left to take a position with a smaller independent in 2024, described the effort at the holdco they left as trying to build a cookie-cutter model with all its agencies so that back-office efforts could be optimized. And that, to this exec who spoke on background to more freely explain what was going on, is the kind of factor that helped them decide to fish from a smaller boat. 

“With the cookie cutter model they they’re still trying to build, you’re losing almost the entire [uniqueness] — you understand why they’re doing it from an efficiency standpoint,” said the ex-CEO. “But also just squeezed out all the freedom of the agencies themselves. My former agency wasn’t going to be an agency anymore — it was going to be a front door to the [media agency] network.”

Marilois Snowman, CEO of independent Mediastruction, and coiner of the “Forgotten Middle” phrase, said she’s been getting RFIs from midsized marketers that are specifically looking for independents and away from cookie-cutter models. 

“If you’re a mid marketer, you actually need quite a bit of human intervention still, from a media buying perspective,” said Snowman, who defines mid-market advertisers as between $5 million and $50 million in media spend annually. “The ‘set and forget’ that happens a lot for mid marketers working with holding companies impacts their business negatively — it’s a detriment to their business.”

Part of the challenge is that holding companies aren’t staffed to handle the day-to-day needs of a mid-sized marketer, Snowman added. “Some of these mid-market brands are wanting to optimize daily. And a smart person needs to know either ‘no, that’s too frequent’ or ‘yeah, let’s go ahead and get in there and optimize daily.’ And that’s just not something that a holding company with their overhead can afford to do.”

The effect is already starting to settle in. Global independent agency network Dept in mid-December won a pitch against holding companies for Lufthansa Group’s digital media in EMEA, explained Andrew Dimitriou, Dept’s global chief client and growth officer. 

“The world is more interconnected, and therefore we need to be interconnected and interdisciplinary — the holding companies are not,” said Dimitriou. “Technology has become a great equalizer. If you look at the barriers to entry into this business, they’re lower because of technology, In the past, you had to have a lot more infrastructure to enter into the business where now it’s all more accessible and affordable …. We don’t have legacy systems.”

David Dweck, Wpromote’s svp of paid media, believes independents are going to clean up in the coming year, thanks to the actions of a few holding companies. “A lot of business we take from holding companies comes from clients that are at the tail end of [the Fortune 500], or even subsidiaries of massive conglomerates,” said Dweck. “They are ones that come to us because they’re the red headed stepchild in the room. They’re not going to get good service, or get good teams. The time to market takes a very long time. The level of sophistication they need isn’t there because they’re getting the D team.” 

Dweck also doesn’t see that changing in the coming year — in fact, quite the opposite. “I think that will only accelerate, because if the [holdcos] are focused on offshoring and AI as much as they’re they’re talking about publicly, the implication is going to be that a lot of those clients that need a more strategic go-to-market strategy for new product launches, or just to stay stay up with the trends in the space, will be left behind and probably go looking elsewhere.”

“They’re all going to be going after the same clients anyway, I think there’s one fewer holding company in the mix,” said Dweck. “it will be a bunch of dinosaurs going after whatever’s left, and there’ll be a lot of healthy scraps for the rest of us, because this can only go one direction, which is going to be pricing pressure, driving client acquisition at a much lower threshold for delivery and talent. The race to the bottom just means they’re going to be getting teams that are offshore, less adept, less well funded, and likely have a higher turnover rate on the employee side.”

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