The heads of advertising conglomerates Omnicom and Publicis, Maurice Levy, Publicis, and John Wren, Omnicom, rocked the industry a few days ago with news that their two entities would merge to form a marketing giant with a stock market value of $35 billion and 130,000 employees. Perhaps, for the wider range of business interests, the salient question is how does this affect the ability of the companies and talent involved to do great work, whatever that work looks like?
Here we bring you a synopsis of ideas and views around this major merger – a want to suggest that while this may herald further re-structuring or consolidation in the advertising industry, there are important implications for events specialists, events owners and facilities managers as to how they plan and deliver their marketing and insofar as these advertising-cum-media-cum creative ideas-and-events agencies are potential clients, how you tackle them in their new garb.
The commentary below draws on Fast Company, Wharton and the Financial Times.
Omnicom, which owns agencies like BBDO, TBWA and DDB has long been known as the "creative" holding company. BBDO and agencies like Goodby Silverstein & Partners have been creative power players through most of the recent history of advertising, especially in the US and UK. Publicis owns Leo Burnett and Saatchi & Saatchi as well as having a big digital presence with agencies like Digitas, Razorfish and major media player Starcom Mediavest.
Now they’re all part of one enormous entity. How will things change at and for these companies, if at all? Data is a big part of the future of marketing. But data and creativity aren’t two mutually exclusive ideas. And whether or not you consider data a part of the creative conversation there are questions to be raised about what such a dramatic consolidation will mean for creative culture, talent and end product. In many minds, the issue is resolved to one of data versus creativity…but really, is it that simple?
There may be some $500 million a year in costs saving to be achieved, and some analysts think it could be even more, mainly by combining the two firms’ “media buying” divisions, which purchase advertising space in bulk. Each is facing big time competition from technology and internet companies, with a lot of real-time business and squeezed margins. Meantime, will this be a merger of equals? Where will the power and real head office reside? Will the affinity and loyalties of the two companies morph into the new entity? Of course, the industry will watch closely to see if the cost and logistics benefits mooted are realised.
Creating a data analytics-led advertising agency makes sense, since advertisers increasingly are targeting customers directly using data from Facebook, Google and Twitter, while bypassing traditional advertising agencies. However, a merger may not be the best route to get there, and the merged entity faces several challenges, say Jerry (Yoram) Wind, Wharton professor of marketing and director of the SEI Center for Advanced Studies in Management, and John Kimberly, Wharton management professor.
Big Data and sophisticated data analytics “create extraordinary opportunities to pursue ever-more fine-grained marketing strategies but this is really new territory and there is much experimentation and testing to be done to prove the thesis.” Here are excerpts of comments about the merger from a number of advertising and creative agencies, courtesy of Fast Company…
► “From the sidelines it appears that the creative product was not a significant consideration in this deal. It’s for shareholders first, not for clients and not for talent.”
► “The question is whether the merged entity will provide a stable framework within which each of the individual small component parts will continue to perform. This is a talent-based business and if the talent at top of the best agencies feel destabilized because of the structure they are in they will go elsewhere. The best talent always has options.”
► “Nimble, lean organizations that are focused on clients’ business needs first and foremost will excel in this new world. Unfortunately, really big, as in the case of Publicis/Omnicom, is not better in the world of advertising and marketing.”
► “Creativity is definitely a point that was overlooked in the merger’s announcement… creative talent will be the first to fly south… it stands to reason that clients will seek out new partners to bring creativity to their businesses. Their media relationships, however, should continue to thrive as the merger’s aim is clearly focused on that value proposition.”
► “…agency models need to be more nimble and more entrepreneurial”
► “The thought of managing 130,000 people around the world is truly mind numbing. …But in reality, creative quality is the single qualifier that most clients are still willing to pay a premium for.”
► “…ideas come from passionate people who believe their ideas can change the world. Big, publicly traded agencies have to be more financially focused whereas small, independent agencies have the luxury to be more focused on a creative mission.”
► “It’ll take an age for Levy’s passion for data to meld with Omnicom’s passion for creativity,”
► “There is a myth out there that big data and creativity can’t exist together. This is because the idea of big data telling (the analysts say “informing”) creative people what to do seems totally opposite of what inspires great ideas.”
► “…with the new POG merger, the fear is that there’s too much money at stake for their agencies to consistently take creative risks.”
► “The smart clients will recognize that both creative and analytics have to be led by strategy–not the other way around.”
The Economist newspaper reckons there are reasons for mutual attraction. Publicis has more exposure to emerging markets and digital advertising (on websites, mobile devices and the like), the main sources of growth for tomorrow’s admen. In return Omnicom provides Publicis with scale—it is the bigger of the two—and a solution to its succession problem. Perhaps the greatest rationale for the merger is the inexorable rise of digital advertising. Last year online ads were worth $88 billion, or 18.3% of global advertising spending, up dramatically from 2006. Advertisers like them because they can be aimed more precisely at a target audience (with a particular demographic profile and browsing history) than, say, television or radio ads. They also get a better idea of whether anyone is actually looking at the ads they are paying for.
Publicis and Omnicom are betting that sheer size is their best chance of surviving in this harsh new climate. Last year Dentsu, a Japanese advertising firm, bought Aegis Group for $4.8 billion. WPP, not used to second place, may seek to regain the top spot by making acquisitions. Its boss, Martin Sorrell, said further big mergers in the industry were “inevitable”.
The FT suggested that “Fittingly, claims and jibes from the rival admen do not quite live up to reality. WPP, Interpublic, Havas (as well as the more discreet Dentsu) will probably not be overwhelmed with anxious Publicis and Omnicom clients fleeing a bureaucratic behemoth.”
“In spite of their camaraderie this week, Mr Levy is a suave extrovert with a taste for splashy digital deals. Mr Wren makes few public appearances, and has focused on organic growth….two profoundly different corporate cultures” “The dilemma is that they must offer different massages to different audiences….investors, staff, regulators, clients, suppliers.”
Marketing magazine has been running a poll about the merger. The results to date reveal that 37.5% voted “Who Cares?”. 26.5% are not surprised by the continued consolidation in the advertising industry; while 22.2% regard the merger as interesting, but that it won't affect them much. And you….???