The Publicis-Omnicom merger news sent a shiver down the spine of the advertising and media industry across the globe. The merged entity consolidates the second and third largest communications agency into a giant with combined revenues of $23 billion in 2012 and staff of 130.000 across the globe. In a joint statement the two CEOs referred to the "explosion of big data, analytics and insights” and the “exponential development of new media giants” as the strategic rationale behind their merger.
Odysseas Ntotsikas, Founder & Managing Director, TDG
Get bigger to get small?Reading between the lines, this move is not about WPP, their no.1 competitor, or IPG and Havas. This deal is about wider tectonic moves in the value chain of the industry. It is about automated algorithmic ways of buying media to reach the changing digital consumer. It is about precise data enabled targeting, narrowcasting and engagement at the personal level. It is ironic that Publicis and Omnicom have opted to become bigger to be able to see and speak small versus consumer data empowered newcomers like Google ($50bn revenue in 2012), Facebook ($6.6bn revenue in 2012), and Salesforce ($2.2bn revenue in 2012). A frightening detail for agencies? All three companies are growing with an impressive 30% year on year vs. the low single digit growth numbers for Publicis and Omnicom. To complete the advertising agencies’ nightmares the likes of Accenture, Axciom, IBM, Adobe, Experian, and Amazon have made it clear that they are looking to take a chunk of the redefined communications pie by more effectively connecting advertisers to consumers. So, how is this mega-merger going to impact us in emerging markets? Here is my projection about agencies, clients and publishers.
What’s in it for local Agencies?In our peripheral markets expect to see the first ripple effect in terms of efficiency gains. Buildings, legal, accounting and production resources will be the first to be affected. Are these changes affecting human resources? The two acting CEOs have been reportedly vague, but do expect cost rationalization. I would also expect a merger of the weaker assets the two groups hold to create stronger local players, as well as a revaluation of all human resources under a new digitally / data literacy led light. This will eventually mean lay-offs for those who do not fit in the picture. As a second step, an entity similar to WPP’s GroupM to leverage the giant’s significant media power and diffuse digital expertise and technology across the agencies will eventually be created. With a group buying power that is close or over 50% of the total media spend in some CEE & MENA countries, we should anticipate a seismic change in the power game between publishers and agencies. If the closing act is going to be the full centralization of media buying at a regional or european hub level for multinational clients, this is yet to be decided. What is certain is that the role of the local media agency will not be the same in the future.
"The changes in the Publicis Omnicom Group will act as catalysts for the rest of the agencies (international or local), who will have to embrace programmatic buying bring more of the 'math men' tribe on board and create economies of scale through M&A or partnerships with strong technology partners."
What’s in it for local Clients?We shouldn’t anticipate significant immediate changes for local clients. Savings in their media spend due to the negotiating power of their media agencies will be offset by the discounts their competitors will be also getting eventually . In the long run though,
"clients, who are ready to share and use their first party data with their data literate partners, will definitely reap the benefits in terms of better insights, targeting, and customized messaging."
What’s in it for local Publishers?As the new rules of the game require scale, efficiency, automation and data skills, local publishers will feel the heat. To remain relevant, and effectively compete with the likes of Google, Youtube, Twitter and Facebook for advertising budgets local players will not survive if they are not: 1. Agile enough to provide data enabled audience segments in an automated programmatic way (Programmatic Selling) 2. Creative enough to enrich their advertising portfolio with distinct native ways to reach their audiences (Native & Custom Advertising) 3. Diverse enough to have non-advertising revenues (Diversified Revenue Streams) 4. Significantly Big or leaders in a sought after niche to be worth dealing with (Scale) Publishers now, more than ever, need strategic partners who can help them build on their strategic data and creative assets, leverage technology to integrate in a programmatic/automated way with the centralized buying platforms of giant agencies and create diversified revenue streams.
"The clock is ticking, are we ready?"*Odysseas Ntotsikas is the Founder and Managing Director of the ThinkDigital Group. TDG is a leading Digital Marketing Group in CEE & MEA. TDG’s four companies, ThinkDigital, ForestView, ShoppingNetwork and TailWind are working with international and local partners such as Facebook, Appnexus, MSN, Skype, Channel Advisor and Mediamind to effectively serve advertisers, publishers and consumers across the region. TDG, employees 110 digital marketing professionals across its local offices in the region. For more info, visit www.thinkdigitalgroup.net
Communication Agency Holding Groups – Worldwide Revenue 2012
|Rank||Company||Worldwide Revenue||U.S. Revenue||Non-U.S. Revenue||% of Revenue from U.S.||Share of 50 Largest Agency Companies' Worldwide Revenue|
|PUBLICIS OMNICOM GROUP||$22.7||$11.4||$11.3||50.2%||31.5%|
|4||Interpublic Group of Cos.||7.0||3.8||3.2||54.7||9.6|
|5||Dentsu Inc.* 1||6.4||0.7||5.7||11.5||8.9|
|7||Hakuhodo DY Holdings*||2.2||0.0||2.2||0.0||3.0|
|8||Alliance Data Systems Corp.'s Epsilon* 2||1.2||1.2||0.1||94.8||1.7|
|10||Experian's Experian Marketing Services||0.9||0.4||0.6||41.7||1.3|
|Figures Based on 2012 Revenue. Dollars in Billions.Source: Ad Age DataCenter analysis based on 2012 data from Ad Age's Agency Report 2013. Numbers rounded. Asterisk indicates Ad Age estimate. Some U.S. figures reflect North American revenue. 1. Estimated pro forma revenue including Aegis Group (acquired in March 2013) and Roundarch (acquired by Aegis in March 2012). 2. Estimated pro forma revenue including Hyper Marketing (acquired in November 2012). More info: AdAge.com/agencyreport2013|