What does market consolidation mean for both the advertisers and the agencies operating in this space?

What happens as markets mature and a few big players dominate? With Microsoft's bid for Yahoo and the anticipated regulatory green light from the EC on Google's acquisition of DoubleClick, the landscape is changing. Faced with the choice of "buy or build", media groups such as WPP and 24/7, and Yahoo's acquisition of Right Media are choosing to buy their way to a wider product offering. And we're seeing boutique agencies gobbled up by the global agency groups.

At first sight, it looks like there are two sides to this situation. On the one hand, advertisers looking to allocate funds across the various channels; and on the other, agencies vying for the business to plan and place those dollars. There is of course a third stakeholder to consider -- the consumer of advertising media. We'll come on to the consumer later because on the face of it, the consumer shouldn't care how they receive advertising -- or should they?

Here are five key ways market consolidation will directly or indirectly affect us all:  

Variety/choice in the market
When the market consolidates, power is centralised to the few and the number of options becomes limited. For an SME (small and medium-sized enterprise) looking to find the right agency when there is a lack of choice can lead to a wrong fit -- and a tiresome battle to educate the agency in the ways of your business and the competitive landscape. In actual fact, it should be them bringing expertise to the table as opposed to the advertiser playing the educator role! Isn't that why advertisers outsource? A good advertiser/agency relationship taps into the knowledge pool of the agency to bring about greater efficiencies, and that much hallowed ROI through wider competencies. With a reduced number of agencies to choose from and a standardised one size fits all approach, will advertisers lose that gem of an agency that's tailored perfectly to their needs? Consolidation is the market equivalent of losing biodiversity.

Product offering
This is a question of scale, in order for these monolithic media owners/advertising agencies to cope with the sheer scale of operations they now command, they have to employ standard operating procedures (SOPs), company protocol, agency policy, etc. Doesn't this just spell a life less innovative? Okay, SOPs are necessary but where has the creativity gone? Where's forward thinking? With all the new talent flooding through the doors and bringing with them ideas and concepts, are they getting to the people that need to hear about them? Or are we being served up a standardised approach that really doesn't vary or provide tailored solutions? Admittedly, policy and procedure draws the base level of service to a certain standard, but what about trailblazing an 'unfair advantage' over your competitors with some super normal returns from a dynamic, groundbreaking approach?

Audience
Can advertisers not merely reach the masses but engage with a diverse group of potential consumers? If boardroom-level decisions are being made, deals struck and strategic alliances formed, then that surely dictates who advertises, where and how often, albeit through varying pricing deals that ultimately favour the advertiser/agency in your camp. What about the consumer and the ads they are being served up? Are we getting the opportunity to view a broad range of information reached via a diverse number of advertisers' ads?

The alternative offered by Web 2.0 is that if advertising cannot produce compelling and engaging products, we consumers switch off traditional online advertising and switch over to hearing what real people think and understanding their experiences with the product or service.

Price
Basic economic forces suggest that limiting the number of market setters will lead to artificial pricing to suit those in control -- charge what the market will bear. Everyone is scrambling to spend more online, and at the moment, due to the heady ROI rates, advertisers are gorging themselves on the comparatively inexpensive ecommerce platform that the digital revolution has delivered. At this stage, having fewer key players call the shots surely distorts competitive pricing.

Talent
Every other day, an article is published on the topic of digital revolution and the swing from traditional to digital that asks if the exponential growth can continue. Commentary often concludes that one key limiting factor is the pool of talent that exists in the market; the online marketers and digital specialists that are required to satiate the growing demand from advertisers hungry to shift dollars to online. So are the big guns really helping in developing the number of experts in the market? With the buying frenzy that we're witnessing, the contention arising is that the situation is not creating more people, but simply housing them under fewer roofs? What efforts are being made to provision for the next wave of online marketers that their predecessors invariably received via SME (agency/advertiser)? The absence of such houses means we need to ensure there is a suitable development ground for the bright young pace setters to grow.

The choice ahead
With the continued rounds of acquisitions, I guess there is little option until we wait for the dust to settle and the wider groups to work out what the combined approach is. One potential route could be drawn from the search market evolution and the rumblings in the background of the big spenders looking to mitigate the risk of outsourcing by developing inhouse expertise that will slowly take over the reins.

From a consumer's perspective, I guess we will continue to vote with our feet, or should I say clicks, and as soon as the impact of the messaging lessens, then surely, these guys will have no option but to go on the hunt again!

James Hawkins is group head of search of dgm Group. Read full bio.