Publicis Omnicom Creates Uncertainty For Brands
With an estimated $22.7 billion in revenue last year and a merger market cap of $35 billion, the deal must overcome various objections. Clients are concerned about competitors under the same umbrella; there are also antitrust issues that include having an excess amount of media-buying influence across the advertising tech and publishing industries.
Months away from completing the transaction, John Wren, Omnicom CEO, said in an interview with Bloomberg that major clients will have an opportunity to discuss their needs and develop a solution to competing brands under one roof.
IgnitionOne President Roger Barnette calls the deal "a mixed bag for brands." Fewer holding companies mean less competition, which could hurt pricing and innovation. On the other hand, the potential for efficiencies increases.
One thing is certain -- combining the companies will integrate marketing technology and give them access to mounds of data and insights, Barnette said. "The move is far-reaching and could position the group to mold the advertising landscape," he said. "The risk is, the sheer size of the new organization will become unwieldy and prevent them from achieving this transformational change."
Mergers in the '80s and '90s created scale, but the expected benefits never materialized, said Larry Chiagouris, professor of marketing at Pace University Lubin School of Business in New York.
"I don't see a lot of positives for brands from the merger," said Chiagouris, who served as the chairman of the Advertising Research Foundation and a member of the board of directors of the American Marketing Association. "There is no evidence these mergers, which by the way formed Publicis and Omnicom, create great benefits for brands."
Ad agencies have yet to show they created technology that makes a difference for online advertisers, Chiagouris said. While the merger will reduce costs, it also aims to increase negotiating power to compete against tech giants Apple, AOL, Amazon, Google, Microsoft and Yahoo.
The merger of big companies produce big changes, such as buying power, said Rob Griffin, executive vice president, global director of product development at Havas Media Group, calling it quite a feat to leapfrog WPP.
Griffin "loves" the disruption and the potential ramifications to follow, such as the "trading desk implications and potential rippling effect to other holding groups" that will also need to grow or become too small to support big brands.
Dominic Proctor, global president of GroupM, WPP's media investment unit, doesn't view the merger as positive because the companies individually could not produce scale.
Scale doesn't necessarily lead to negotiating clout, according to Brian Wieser, analyst at Pivotal Research. In a research note, he points to missteps by Interpublic and GroupM, which forced brands to trade off price for custom solutions.
Another issue is the impact of transactions on the media industry that will change in ways the industry has not yet fully considered, Wieser explains. Between Publicis Omnicom Group and WPP, the two entities will have a disproportionate degree of influence in picking winning technologies in ad tech, platforms such as DSPs, bid management systems, book-bill pay systems, and more, he wrote. These companies will now have two big customers accounting for the bulk of activity in some verticals, making a shakeout more likely.
Rob Jonas, vice president and managing director, EMEA and APAC at PubMatic, agrees that the merger creates a second global powerhouse to challenge WPP's dominance -- driving further growth in programmatic buying, which IDC estimates will reach $13.6 billion globally by 2016.