Characterizing the next generation of artificial intelligence (AI) as an arms race between Google, Microsoft and other leading developers, Omnicom CEO John Wren Wednesday disclosed that the agency holding company is working on betas with all of them -- and currently has "71 active projects" going on both with clients, as well as internal ones to transform the way it operates.
"I think the next war that you’re going to see is going to be between all the big players, because they all have to get their stakes in the ground," Wren told J.P. Morgan analysts Wednesday during an investor presentation in Boston, adding: "We are partnering with them, and we will service them in ways too."
The presentation -- which also touched on the current state of advertising demand, the "macro environment" influencing it, as well as how much Omnicom has shifted away from being an agency to become a "principle-based" media trading company -- was dominated by his sentiment surrounding the revolutionary implications of AI.
“I’m pretty aggressive in terms of what I think the implications of what AI will be in a relatively short number of years, so we are pushing quite a number of jobs that I believe will get automated or eliminated at some point into offshore locations," he said -- adding that the goal is to reduce workflow and overhead in a way that enables Omnicom's "knowledge workers" to be more productive and competitive in the marketplace.
Wren provided two anecdotal examples -- one internal and one client-facing -- on how AI is transforming the way Omnicom operates.
On the internal front, Wren said Omnicom currently has a multitude of databases covering its 318-building real estate portfolio and 70,000-person workforce, estimating it would take his human resources seven days -- "if they worked really hard" -- to compile it into a report to give to him.
"If I type it into OpenAI, I can get the answer by myself in five minutes," he said, adding that as powerful as that technology is, Omnicom still needs to resolve both legal and ethical issues related to processing all that data -- some of it incredibly sensitive and potentially private -- in order to output it via AI.
In terms of client-facing examples, Wren noted that Omnicom currently is testing various AI-enabled ways of creating ads utilizing "artbots," and said there recently have been important breakthroughs in terms of copyright issues, but he also gave an explicit media planning anecdote for making a $10 million media buy in the New York market.
"AI can give you a plan," he said, noting: "What it can’t do is give you information about every individual who lives in the New York metropolitan area."
He also said current versions of AI likely could not factor in the various deals Omnicom has with media suppliers that would make one plan more optimal than another -- not just for Omnicom's clients, but for its own bottom line too.
During the presentation Omnicom CFO Phil Angelastro disclosed that Omnicom currently acts as a principal -- not an agent -- in at least some way in virtually every area of its business, but that three major service areas -- event marketing, field operations and media -- are the three main ones, at that media services currently accounts for roughly half of all its principle trading activities currently.
That disclosure raises profound questions about the nature of modern-day holding companies, their cost-accounting methods, and the extent of their media neutrality, as well as potential media risk liabilities, because as principal traders they likely are explicitly on the hook if clients default on media payments.
In an analysis focusing on that disclosure, industry analyst Brian Wieser published an edition of his Madison and Wall newsletter discussing the implications for Omnicom, as well as other big agency holding companies.
Exactly how Omnicom's transformation to an AI-based organization will impact that wasn't clear, but Wren said the holding company is in the process of figuring out "how to be paid properly" as AI processing squeezes human time-based workflow and reduces margins for doing business that way.
He likened the potential compensation transformation associated with that to Madison Avenue's seminal commission-based media-buying model.
Wren also disclosed that Omnicom has struck proprietary beta-testing deals with the biggest AI developers -- including one for client Disney that is testing the next generation of Microsoft's AI, as well as one "I'm not allowed to talk about" with Google's Bard technology.
In terms of the current state of advertising demand in what has been a recessionary media spending marketplace, Wren said most of Omnicom's biggest clients are not pulling back on ad spending, but are focusing on "flexibility," which he said likely will impact 2023-24 advertising negotiations.
"They’re preserving as much flexibility as they possibly can," he said, adding: "I think you’ll see that reflected in the upfronts."