Digitas Deal Seen As Giving Publicis Needed Online Boost

Publicis Groupe's stunning announcement that it had agreed to absorb online and direct marketing shop Digitas for $1.3 billion was largely cheered Thursday, with industry executives saying the move represents the holding company's best hope for remaining competitive.

"Publicis did not have strong capabilities in digital. They had to make a big move now," said Cary Savas, president of Omnicom's EVB, who spent about six months last year at Publicis Dialog, where he led interactive accounts for Hewlett-Packard and Sprint. "They were seen as a traditional company that couldn't implement 360-degree campaigns, where digital is integrated at every level."

But at the same time, some executives question whether Digitas will be able to keep its identity after the merger goes through. While Chairman-CEO of Digitas, David Kenny, has committed to remain with the company and take responsibility for leading Publicis' overall digital media strategy, it's not clear that he will be able to preserve the shop's culture. Some executives say it's inevitable that Digitas will have to adjust its practices--including matters as how it decides which clients to accept.

Still, despite the possible pitfalls, industry insiders said Publicis's decision to acquire the 26-year-old shop made sense. Louis Jones, executive vice president and managing director at Havas-owned digital marketing agency Media Contacts, said that Publicis had few options for growth other than by acquisition. "The space is growing so fast and the business has gotten so complicated, growing organically is really tough," said Jones.

And relentless growth is a must for Publicis and its rivals, industry executives say. "The day you pick up account business is the day you start losing it," said Roger Schaffner, CEO of Palisades Media Group. "The Digitas deal doesn't change much; it just reflects the nature of the industry we're in to get as big as you can as fast as you can."

Meanwhile, some of the remaining independent shops insist that the Publicis-Digitas deal won't affect them. "It was a competitive industry before this news, and it will continue to be one," said Clark Kokich, president of aQuantive's Avenue A/Razorfish. "This doesn't fundamentally change things for us."

Adam Lavelle, vice president of strategy at independent shop iCrossing, and a Digitas alumnus, adds that the deal proves that the ad world is taking online marketing seriously these days. "It's a validation of the fact that digital really matters," he said.

At least one rival thinks the deal is good for the overall digital sector, though it may take time before the benefits are clear for Publicis. "From my perspective, the high multiple validates a strong position in digital, and Isobar is smiling about that," says Sarah Fay, president of Aegis Group's Isobar US operations. "As with any acquisition though, the devil will be in the details. I have great respect for both companies - although they are extremely different from each other in culture and business models, which lays out a complex task."

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