Why Is Omnicom Blooming While Publicis Struggles Post Breakup?

Sir Martin Sorrell was definitely laughing all the way to the bank when he got a huge pay package passed by the board again recently, despite the now normal shareholder revolt,

You would be forgiven for presuming he would be making the familiar jocular trip again this week as Publicis notched up two unfavourable headlines. But if he is smiling, it would be more of a smirk, on one side.

He predicted the proposed Omnicom and Publicis mega merger would never happen and would be good for WPP's billings. It turned out he was right -- but more accurately, it turns out he was mostly right, not entirely.

With Publicis, he appears to be spot on.

On the one hand, research released today shows it is the owner of the only two UK agencies in Recma's Top Ten to have billed less in 2013 than 2012. ZenithOptimedia and Havas Media dropped 6 and 8 percent respectively, although it should be pointed out the group had a star performer in Starcom MediaVest, which grew by 16 percent. 

Secondly, disappointing quarterly results, with revenue down 1.5 percent, led Maurice Levy to announce earlier in the week that Publicis Groupe may miss its annual target in a "difficult year."

However, it's only half the story, or should we say a third of the story. Sorrell predicted the proposed merger would be good for WPP and a 7 percent rise in revenue for the first half of this year would appear to back that up. So that's two he got correct. He also predicted bad times ahead for both parties in the merger -- and it would appear that here he was only partly correct.

Omnicom is actually doing rather well. Its last quarter was up 12 percent on the corresponding period for the year before.

So what gives?

Well, it's probably a combination of things. Sorrell may have been right about Publicis losing accounts that didn't want to be under the same roof as rival brands as part of a mega-merger. However, logic would say the same should have happened to Omnicom. Indeed, it may well have done, but if it did, new business has certainly more than made up for it.

The Script once sang "When a heart breaks, it don't break even," and that could well be what's happened here. The European market is far more compacted -- just think how many times the UK would fit in to the USA -- and so it's likely that if brands were looking on Publicis as the jilted party in the merger breakdown, that damage to its credibility could have spread quickly.

However, like with all such matters of the heart, the best thing they can do now is get out there again, seeing people and winning new business. It could just be unfortunate timing with reviews falling at a tricky time -- and let's face it, if you're going to have a bad patch, you're best off trying to come out of it in a time of expanding markets where growth and optimism once again abound.

So Sorrell was right on two out of three counts. Omnicom, it turns out, appears to have come out of the breakup unscathed.
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