The biggest advertising merger in history took the entire marketing sector by surprise when reports began to emerge on Friday night/Saturday morning that Publicis and Omnicom were in discussions about a deal. That the deal was agreed yesterday (Sunday 28 July) was even more of a surprise. The Drum spoke to some agency bosses across the independent marketing sector for their reaction as to what it means for the industry and what the benefits for both companies are in coming together.
The views of WPP's Sir Martin Sorrell who said that the move would create "opportunities" and from GroupM president Dominic Proctor who highlighted the importance of media buying to the deal, have already been reported by The Drum.
Nigel Vaz, European managing director of SapientNitro
I wonder how much of this is about corporate and financial restructuring across a couple of businesses to compete against actual client value proposition. None of the conversations seemed to be substantial. Obviously this is a huge win for them pulling this off, the odds of something like this happening are so slim, primarily because of the CEOs and their ability to collaborate on something like this – they’ve done an admirable job. It definitely changes things. You’ve gone from an industry at a holding company level to a monopoly basically. You’ve got two giants in this space battling it out. The question is really about the value creation aspect of this. How will this create value outside of the leverage it creates for the actual holding companies themselves? I wonder about the synergies of about half a billion be consolidated without significantly restructuring the agency brands and people. The issue starts with client conflict, how they start resolving the Coke/Pepsi issue, how do they make the half a billion of synergies work and not lose good people in the process? There will be different cultures of working and leadership. You are talking about different cultures at a holding company level, American and French, not necessarily the most synergetic for business companies and where is the value for the people that this is supposed to benefit, - the clients? So the claims on innovation? The claims on the best talent? I struggle to see how that is being delivered and how well that can be delivered. I’m not saying it can’t be delivered but it doesn’t seem obvious when you think about the structure.
Patrick Martell, CEO of St Ives Group
I note with interest that the view was that this merger was less of a reaction to creating an agency Group in the face of increased competition from its traditional competitors, but more to redress the balance in a media world dominated by Google and Facebook which reflects the different landscape of marketing in today’s digital global economy. I think it is inevitable that the globalisation of brands will create fewer bigger agencies able to work with them on global projects. As a Group with agencies that serve both global and local markets, we expect that this merger and the ongoing structural changes in the market, will free up opportunities for niche players like ourselves.
Nicky Unsworth, CEO of BJL
The scale is phenomenal. We value our independence today more than ever and I can see from a business point of view they have a great reason for doing what they’re doing, but how will it affect clients and staff? Will it give clients a better service? I’m not sure it will. Sometimes scale counts, but in this instance I’m not sure that it will and therefor it’ll be interesting to see how they tackle that from a client perspective. It looks as though they have done this as a sound business deal, but is that better for clients and staff, I don’t know. They do have some complimentary skills and maybe there are markets they can map better as a result. If you’re independent and the things that you value in being independent are being able to respond and react, the ability to make decision and do it quickly without somebody else pulling the strings and adapt to client and staff needs quickly then it makes the independent story more compelling. What is does, it pulls apart the independents and the networks even more when the networks get to that scale.
Steve Antoniewicz, managing director of Recommended Agency Register
I'm not sure what the rationale for this deal from a client’s perspective? I've not read anywhere that there was real client demand for this to happen and it’s unclear what the real benefits will be apart from scale. The only beneficiaries mentioned seem to be shareholders. There are obviously some big 'efficiencies' but how quickly will they be realised and will they ever be passed on to clients? Job losses have been played down (they always are in the beginning) but the immediate future is going to see a lot of uncertainty across all the operations. That uncertainty naturally has an impact on output and the service delivered for existing clients, meaning those relationships can weaken.Certainly if I was a client of the new merged entity, say Pepsi or Volkswagen I'd want to know, today, what this means for me. I suspect agency leaders within the new company will be trying their best to answer such questions right now.
Ian Woolley, chief commercial officer at VisualDNA
Advertising gets more data-driven every day as brands strive to put the right ad in front of the right person at the right time. Data-behemoths Facebook and Google now possess near-unparalleled insight into who we are and what we want, and have built huge advertising businesses off the back of it. The announcement that Omnicom Group and Publicis Groupe have agreed to merge is a clear sign that data is going to play an even bigger role in the future of advertising. Brands want traditional agencies and publishers to step up and provide intelligent data-powered targeted advertising and third party businesses like VisualDNA are ideally placed to help them compete.
Peter Reid, CEO of MSQ Partners
I must admit I was taken by surprise by the deal – and am sceptical that the benefits outweigh the significant executional risks (and it is difficult to take too much comfort in past Franco-US mergers!).I can understand the desire to build even more scale in media buying but I don’t think this level of scale brings anything to pure ‘creative services’. In fact, I think this type of deal creates real opportunities for smaller agencies and groups – like MSQ Partners – who are, by nature, more flexible and more entrepreneurial and better placed to come up with new and innovative ideas for their clients.
Paul Bainsfair, director general, IPA
We’ve come to expect the unexpected in our world and this really did come as a surprise. Consolidation has been the name of the game for several years, however, and the coming together of these two powerful networks is a further and major step in this direction. Clearly Omnicom and Publicis feel their clients, shareholders and employees will all ultimately benefit from this merger and they have highlighted the more comprehensive offering the integration of their businesses will bring.
Rob Jonas, VP & MD EMEA and APAC for Pubmatic
The merger of Publicis and Omnicom creates a second global powerhouse across integrated data and automated buying, to challenge the current dominance of WPP. The merger will drive further growth in programmatic buying, already predicted by IDC to reach $13.6 billion globally by 2016 and change the competitive dynamics in the market. Traditional agencies and their media buying businesses will feel the pressure, as will non-traditional agency competitors such as Google and Facebook. Finally, in a data-driven world, media owners and publishers will need improved and further integrated technology solutions, such as PubMatic's Strategic Selling Platform, to capture and manage these automated advertising campaigns and compete effectively
Jenny Biggam, founder, The7Stars
The media buying side of it is quite interesting. I don’t think that from a media buying perspective that this has been born out of a client need. No Publicis or Omnicom clients were worried that the media agencies weren’t big enough or their buying clout wasn’t big enough. With scale can come a lack of innovation and a lack of flexibility. Bigger agencies can be slower to move. From a media owner side of things there isn’t any more discount in the market, so if they will be offering bigger discounts or not, how they will be able to achieve them in the UK is questionable. In terms of programmatic buying – a lot of digital media is going down the biddable model anyway. As the world becomes more digital, agency clout almost becomes less relevant because you are effectively bidding for space rather than using volume up front – so their size in relation to that area is questionable. The other problem with programmatic buying is that it’s not a fully transparent market, so whether Publicis Omnicom Group will be buying at cheaper rates through programmatic, it’s really a case of whether they pass that onto their clients.
David Morgan, chairman of The Mission Marketing Group
I guess that the key question here is why? Perhaps it's ego (who wouldn't want to be the maker of the biggest ad deal ever) or perhaps it's simply to put one over WPP. Either way there doesn't seem to be much of a Client rationale here. Culturally they do seem to be a million miles apart and whilst there may be geographic or delivery rationales it just smacks of wanting to be bigger for the sake of it. Frankly I can see no reason why Clients or key people would see this as being in their best interests so it will be up to the Corporate leaders to fathom that one out. As for the brands I'd love to be a fly on the wall when they try and sort that one out. Omnicom have always seemed to me to be a little more supportive of the individual Agency brands whereas Publicis come across more corporatively driven. One has to suspect that given the recent performances of the two groups that the French will come out on top so it will be interesting to see how the key Omnicom people and Clients respond. My guess is that there will be quite a few skirmishes at the operator level which frankly may well create serious opportunities for the rest of us. We could well see some good people and some of their second tier Clients feeling a bit unloved and absorbed. They will, at least, be questioning what's in it for them and for some it may lead them more towards the boutiques and the smaller groups.
Miles Nadal, CEO president and founder, MDC Partners
We are not surprised about consolidation, but this combination is unique and unexpected by everyone. But we see the merits of it and it’s a brilliant move for Maurice and John and the respective organisations. We see though that there is incredible opportunity that will come from it for organisations like MDC; we anticipate an acceleration of organic growth from existing and new clients and see huge opportunity for the continued acceleration of recruitment of brilliant talent who want to be in an entrepreneurial culture. I think it remains to be seen how clients will benefit. But historically clients have not been the beneficiaries of large consolidations, nor has talent, and the work has rarely gotten better [from such mergers]. Historically, it has been the shareholders that have been the biggest beneficiaries of the underlying businesses. Clients will always be discriminating against the organisations who can do the most impactful work.
Ben Bilboul, group CEO, Karmarama
I think it’s great news for independent agencies like us. The more consolidation that happens, the greater the point of difference for us and our fellow independents. This deal does give Publicis Omnicom extra scale and therefore increased media buying leverage, but I don’t know if it gives their clients access to any extra skills. In fact having read a lot of the coverage I can’t see clients being mentioned much at all! If I was a client I would be scratching my head asking what’s in it for me.