Omnicom’s decision to group its creative agencies together under a single leadership team is part of a holding company trend that’s been going on for several years now.   

Madison & Wall’s Brian Wieser notes that “Omnicom will now join Publicis, Havas and Dentsu with the relatively unified approach towards managing creative advertising services that has appeared somewhat inevitable to us over the past decade.” 

WPP and IPG are now “outliers” noted Wieser, by maintaining multiple global agency networks with separate management teams, “although both of those businesses always incorporated more shared services and common infrastructure for their individual business units than Omnicom ever did.”    

Overall, adds Wieser, “the future shape of global advertising agency networks-- centralized and branded as divisions of parent companies-- appears to be a clear path forward for the broader industry.” 

As to why, cost efficiencies and more effective resource allocation are key benefits. But perhaps more importantly, Wieser asserts, big branded and autonomous agencies don’t offer the value they once did.  “Although there may have been points in time in the distant past where it was broadly true that individual agencies offered meaningful differentiation in their processes or product, global agency networks that operate at a massive scale are largely commodified and have been for many years.” 

Client conflict avoidance “served as a partial justification to avoid internal consolidation efforts,” Wieser added. But “arguably most marketers prefer lower prices for services and the enhanced capabilities that are more likely to exist in larger organizations. In parallel, conflict management processes within individual agency business units have become much more widely accepted, weakening the rationale behind holding companies operating multiple agency brands.” 

Omnicom’s move will likely help the company “prioritize resources for the kind of investments required to position traditional advertising agencies for future growth or at least to limit decline,” Wieser said. 

“On the other hand, it also creates new potential personnel management challenges given fewer leadership opportunities available to them.   If badly managed this type of situation creates some risk for client losses, although if well managed the business is able to provide better services for clients at lower costs and may position itself to take share.”