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‘It came out of nowhere’: why Omnicom dropped $835m on digital commerce business Flywheel

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By Sam Bradley, Journalist

October 31, 2023 | 8 min read

The US holding company hopes its cash deal for Flywheel will give it a bigger chunk of e-commerce and retail media spending.

E-commerce and retail media

Flywheel has been acquired by Omnicom / Adobe Stock

Omnicom’s eye-catching acquisition of e-commerce company Flywheel Digital is the most expensive deal in the company’s history – and it’s one that chief executive John Wren hopes will better position the American holding company as investment in digital commerce continues to rise.

For a cool $835m, Flywheel will “significantly broaden our reach and influence in the rapidly expanding digital commerce and retail media sectors, two of the fastest-growing parts of the industry,” Wren said.

But the deal comes as a surprise to the industry – both for its size and because Omnicom has previously been more cautious in the M&A sphere than its competitors, such as WPP.

“It really does seem to come out of nowhere for Omnicom because they’re so not-acquisitive, let alone when it’s something costing nearly a billion USD,” says Brian Wieser, principal at Madison and Wall.

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What is Flywheel?

In layman’s terms, Flywheel provides e-commerce and retail media solutions to brands – around 4,500 of them. It has around 2,000 staff and offers a suite of products that help manage transactions and ad spend in digital marketplaces, manage e-commerce execution, and monitor digital retail channels.

In a presentation given to Omnicom shareholders yesterday, Omnicom described Flywheel as “the largest addressable media buyer on Amazon and one of the largest buyers of media across all digital marketplaces.”

The holding company – which also owns agency networks such as TBWA and DDB – plans to finance the deal with new debt equivalent to around two-thirds of the overall price. The firm’s net debt is currently over $2.8bn.

Flywheel’s closest equivalents, Wieser notes, are CitrusAd – a retail media and commerce software-as-a-service (SaaS) firm – or Profitero, an e-commerce data company. Both were acquired by Publicis Groupe in 2021 and 2022 respectively.

According to Tim Ringel, former chief executive of IPG Mediabrands network Reprise and now CEO of agency group Meet The People, the deal is “very juicy” and “strategically very attractive” for Omnicom.

Retail media momentum

The same economic stresses that have depressed holding company revenues (including Omnicom’s, though it still recorded growth in the last quarter) provide favorable conditions for measurable media channels such as performance and retail media.

Ringel says: “They couldn’t have picked a better moment. The press isn’t calling it a recession yet, but from my perspective, it feels like the longest recession of my life.”

Meet The People’s creative agency businesses – like its competitors – are under stress, he says. “At the upper end of the funnel, we feel it. Projects are smaller, projects take longer to be approved, and in general, there’s less pitching. At the bottom [of the funnel] on the other hand, everybody is knocking down our doors. How do we sell more products? How do we get into Walmart? How do we get into the aisle?”

He adds: “From a market momentum perspective, retail media is everywhere.”

Caution around longer-term brand-building investments and demand for clear ROI on media spend has coincided with the emergence of retail media networks in the US, the world’s biggest ad market. What was previously a channel dominated by one provider – Amazon – has become a diverse one with several, from Walmart in the US to Tesco and Boots in the UK. Retail media and e-commerce revenues in the US alone are estimated to reach around $1.826tn by 2027.

Flywheel, Ringel points out, is the largest and most established player in this corner of the retail media market. “There are not a lot of at-scale players. Most of them are very small and very specialized, and it’s a very fragmented industry right now,” he says. Only a few can provide brands and their large agency partners with the breadth of services required to run a multi-market, omnichannel campaign. “That’s the reason why Omnicom struck for this one,” he says.

Though Omnicom’s presentation to investors highlights Flywheel’s existing revenue – approximately £300m – it also emphasizes the potential for organic growth, given the overlap between the two companies’ client bases.

60% of Flywheel’s revenue comes from large companies – the target market of many of Omnicom’s networks, though another 20% comes from Asia Pacific, an area the holding company already looked to invest in this year when it bought financial services agency Ptarmigan. Earlier acquisitions, including Outpromo and Global Shopper in Brazil, were intended to be “foundational elements” for Omnicom Media Group’s retail proposition.

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“There’s a lot of overlap between existing or potential clients,” says Wieser.

He adds: “They [Flywheel] and other specialist e-commerce service providers for large brands have been working directly with some of these companies without working within a traditional agency, so there’s definitely a relationship synergy.”

As for the seller, the deal is less of a shock. Ascential – the company behind Cannes Lions, publication Contagious and a range of digital media-related companies – had previously considered floating Flywheel on the public market but instead opted for Omnicom’s all-cash deal.

“The market for floating it was gonna be very difficult, I think. I mean, it’s too small to be a standalone public company,” says Wieser.

Ascential is also selling fashion trend business WGSN to private equity company Apax Partners – the same firm that entered discussions to take agency group Kin + Carta into private ownership just last week.

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