Thinking


The view from here

The Publicis-Omnicom Mega Merger and You

By Virginia Doty in Industry News on July 31st, 2013

Merger2

Whether it’s a retirement plan for the CEO of Publicis, an attempt to harness Big Data to compete with technology giants, or a method of increasing media scale and clout, the pending merger between Publicis and Omnicom has created Mad Men-like intrigue and endless industry buzz. But what does it all mean to the rest of us?

The merger was announced on Sunday, and by Monday morning the industry was buzzing with the news—and asking why? Was it a way for the CEOs of Publicis and Omnicom to cement their legacy and supplant WPP (and Sir Martin Sorrell) as the worldwide advertising heavyweight? Was it, as the official press release stated, a way to ramp up Big Data collection to compete on a more level playing field with technology giants like Apple, Amazon and Google? Or was it simply a way to scale media negotiating and buying with a new company that it is estimated will control 40% of the US national TV spend? Should the merger go through, it will certainly allow for a graceful exit for the senior members of Publicis and Omnicom in the next few years. (It may also rankle Sir Martin, whose WPP has reigned supreme for so many years.) It is also likely to set off a round of mergers and acquisitions among smaller agency groups. And it certainly has the potential to achieve the stated objectives of the merged company by creating negotiating leverage through more sophisticated management of Big Data and the further development of programmatic bidding channels.

Merger6

But what’s the impact of big mergers like this one on clients and smaller agencies? The answer is not so clear.  Here are some things to consider: • With two huge media companies negotiating so much of the national spend, long term media inflation could be controlled somewhat—a bonus for all advertisers. • Client conflicts abound in a merger of this size. Some clients will be pushed out, while others will want to leave. This creates opportunities, especially for agencies who may already be working with the departing clients in another capacity. • Clients tend to suffer a temporary loss of momentum when they change agencies, however, so this could have a negative impact on their sales objectives. • Staff turnover is also a common result of mergers, particularly when the deal promises investors “new efficiencies.” This could provide smaller agencies with some top notch new talent looking for a more stable work environment. • On the other hand, for clients, staff turnover can create slowdowns, disruptions and a loss of historical knowledge as the agency hires and trains new staff. While mergers like this one will have a mixed impact on smaller agencies, clients have the most to lose as there is no evidence that “bigger” translates into better creative thinking, better service, or better integration across disciplines. As David Jones, CEO of Havas stated of the merger, “I doubt you’ll find a single client who said, ‘We wish you were bigger and we were less important to you.’” We couldn’t agree more.