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Business Insider: Mark Penn is merging advertising networks MDC Partners and Stagwell Group. The CEO reveals how the combined company will take on bigger rivals like WPP and Accenture.

By Patrick Coffee, Business Insider

Advertising company MDC Partners and marketing network Stagwell Group agreed to merge this month, forming one of the top 10 advertising holding companies.

For Mark Penn, who will serve as CEO and chairman, the move fulfills a longtime ambition and solidifies his plan to take on ad holding companies like WPP and consulting giants like Accenture and Deloitte.

MDC Partners has several hundred million dollars in debt, but Penn said his new company could make acquisitions to compete with bigger rivals, which have been paring their various businesses to cut costs. (The new company is still unnamed; Penn is working with consulting firm MediaLink to come up with a name.)

One area of weakness is the new company’s global footprint. MDC revenue from outside the US and Canada in 2018 was only 13.5%, while WPP’s Asia Pacific revenue alone was nearly 20% in 2019.

Penn said he would acquire small or mid-sized companies in Asia, Africa, and Latin America focused on areas like customer experience and digital display advertising.

MDC lags when it comes to now-hot areas like e-commerce and pharmaceutical advertising. But Penn said he has an advantage in fast-growing performance marketing, design, and influencer agencies that will make up around one-third of the new company.

Penn said the new network can also take on Accenture and other consulting companies because they don’t have the deep advertising creative talent his agencies do. He predicted that traditional MDC agencies like Anomaly would bounce back in 2021 after taking a big hit when clients like Carnival Cruise Lines cut spending in the pandemic.

He also plans to follow the holding companies’ approach of using cross-agency talent to pitch big accounts and then creating teams dedicated to these clients. This approach did not succeed in winning Visa, which went to Publicis and Wieden & Kennedy, but Penn pointed to MDC swiping a chunk of WPP’s Johnson & Johnson business in late 2019.

While other holding companies have had layoffs in the downturn this year, Penn declined to say if his agencies would follow suit, saying only that he’s saved on back office and real estate expenses. He also said he doesn’t plan to merge agencies like other holding companies WPP or Dentsu have.

Penn sees openings in tech services, political advertising

The combined company also plans to compete by creating custom tech services itself rather than acquiring them like rivals have.

Examples of such services include PR software Prophet; Compass, which Penn called a less expensive version of Morning Consult; influencer platform Koalifyed; and AI-driven Q, which pools data from Stagwell research firms to help target client ads, Penn said.

The combined company’s backbone will be a media-buying and strategy operation that handles more than $4 billion per year, Penn said. And while MDC doesn’t have as many big-name media clients as Omnicom, WPP, or IPG do, he sees an opening in political and issues-based advertising, which has exploded and become a mainstay of advertising.

While political spending is relatively small for other holding companies, MDC’s media-buying agency Assembly oversaw more than $500 million in spending by Michael Bloomberg’s presidential campaign.

Penn plans to back off political commentary

Penn was a longtime Clinton strategist and advised Donald Trump on his impeachment, which angered some former Democratic colleagues and MDC employees.

Penn also was a regular presence on Fox News during the Trump era, criticizing the impeachment process and the probe into Russian interference with the 2016 election.

But the CEO said he would put his political commentary and Trump relationship behind him to focus on his advertising business.

He also sees no solution to the increasing political polarization of news media or the challenges it presents to advertisers that want to avoid divisive platforms.

“I went from 12-13 years ago thinking the new world of choice [in media] would result in more happiness to thinking it’s resulting in more polarization,” he said. “I don’t really see any solutions right now on the horizon. In fact, things are going in the opposite direction.”

(Source; This article originally appeared on Business Insider.)