Agency holding companies are fat and are getting fatter. Sure, they are shedding some of their businesses, such as WPP (partially) selling Kantar, and combining once-sacred names like JWT or Y&R with digital outfits. Still, they are also investing heavily in data-driven marketing service providers.
Most recently, Publicis Groupe purchased Epsilon for $4.4 billion — a company whose business is data and email marketing. “It has more than 250 million unique consumers identified in the U.S., and its proprietary platforms Conversant handle 1 billion updates every 5 minutes, allowing to further improve messaging based on consumer insights on a real-time basis," according to the Publicis statement.
This came after Publicis paid $3.7 billion for Sapient in early 2015, a business it has since merged with Razorfish, which in itself was bought by Publics in 2009 for $513 million.
Publicis is not alone in expanding its digital footprint. IPG purchased Acxiom Marketing Solutions in 2018 for $2.3 billion. Dentsu Aegis bought Merkle in 2016 for a reported $1.5 billion. Omnicom seems to be the only “contrarian,” in that it’s investing in its own platform and subscribing to the theory that you can rent data, rather than own it.
What is the significance of all of this?
First of all, it shows again that Rishad Tobaccowala’s definition of agency holding companies still holds true. He famously said that such companies are “cockroaches rather than dinosaurs" -- meaning that they'll always find a way to survive change.
Agency holding companies will always follow the money. There is absolutely nothing wrong with this strategy, even though Sir Martin Sorrell continues to critique it, recently giving only Dentsu-Aegis an A for its Merkle integration, while all others did not get more than a C. This is of course somewhat self-serving, as it is no secret that Sorrell’s S4C is also shopping around.
It’s perhaps more telling (and relevant) what clients think and do. Unilever CEO Alan Jope has explained that he is a believer of agency holding companies as talent pools for Unilever’s marketing challenges. He said in The Drum: “I know WPP has all the talent that we need to solve our brand problems, and so do Omnicom and IPG, but I don’t want to just have a relationship within one vertical [within] them; I want them to take a problem and then go find the expertise and talent to solve it."
P&G has done the same, actively bringing together the talent needed for each challenge from across its agency holding company relationships.
Nobody disputes that data, analytics and digital marketing aren’t front and center as part of that kind of effort. So agencies need to be able to offer these services, because if they don’t, someone else will.
What continues to be troubling, though, is reflected in what Publicis CEO Arthur Sadoun said when discussing Publicis’ first half 2019 results and the acquisition of Epsilon: ”Clients don't cut activation, they cut the upper end of the funnel.” He added that this was particularly true for CPG clients. This explains perfectly why the agency holding company’s money (including Martin Sorrell’s S4C investments) are going to the bottom end of the funnel.
However, if I were a betting man, I would put money on a resurgence in brand-building and advertising content creation. Because if marketers and agency holding companies are building fantastic rail networks, they’ll need to look at their trains at some point.