It seems that hardly a week goes by without the announcement of a new consolidation of digital ad-supported networks. Most recently, the Doctor’s office Point-of-Care space has been a hotbed of activity, especially with HMN making moves to acquire CARE media’s properties and joining forces with America’s Minority Health Network, etc. Pundits claim that this consolidation is positive for the industry, because it makes the industry less fragmented and helps the buyer to assemble programs.
Commonly listed advantages of network consolidation are:
-Obviously, when multiple networks are combined, the resulting network is larger and more robust than smaller networks.
Consistency of media and creative needs
-Usually (but not always), when one network purchases others, it standardizes the media being presented and creative needs. (For example, all creative would be landscape-oriented ads with sound).
Ease of buying
-A brand/buyer needs to only look at a few large networks rather than dozens of smaller ones. When the buy actually happens, it is much easier to contract with 1-3 networks rather than 10-12.
Stability of larger networks
-Large networks tend to be stable in that they are the ones usually doing the acquiring rather than being acquired. This situation gives the brand/buyer peace of mind moving forward that their campaigns won’t change or be interrupted.
So, we agree that consolidation is great for the buyer and the network alike, but we decided to dig deeper and see if there were any disadvantages to such roll-ups. We found that there are two disadvantages to consolidation.
These disadvantages are generally not discussed but are worth investigating when considering the full picture of network consolidation:
-When a brand has an existing contract with a network and it is acquired, often the network changes, forcing the campaign to change. Whether the network loses a few screens or wants to change pricing structures, this can cause difficulty for the brand.
-Fewer larger and more robust networks mean that pricing could potentially increase. We have found that the smaller networks generally have price structures that are more “lenient,” while larger networks have more structured pricing that is less negotiable.
Clearly, the advantages of consolidation outweigh the disadvantages. We agree with the pundits that consolidation will fuel advertising investment, which will in turn fuel network and industry growth. In its simplest terms, a major brand looks at 2 or 3 large networks and can have scale, impact and ease of buying. Even if these larger entities push pricing as high as they can, the existence of competition will continue to keep market value reasonable.