In January of this year, I wrote a post about the diminishing importance of large media billings for the big media agency networks like OMC, IPG, Publicis, WPP, etc. It was a post that created a lot of responses and divided opinions.
Those who disagreed with my position stated that volume is still seen as an indication of importance and weight in the marketplace. It allegedly could also help in securing better media deals, even if most of today’s media purchases run through auctions, and many advertisers now place a lot of their media through direct deals with platforms -- no agency needed. Regardless, the thinking is that volume still speaks volumes, and that your voice will be heard if you represent a large volume of ad dollars.
Those that agreed with volume becoming less important for media billings acknowledged that it is useful to secure tech and talent, but less so for media deals because of the reasons mentioned in the previous paragraph.
advertisement
advertisement
Enter the OMC/IPG merger. And the question of “why” and “why now?”
The merger has been “sold” by promising synergies and savings, with an upside of $750 million dollars. Wall Street seems to like the idea. The incoming political climate won’t create much of a hurdle, I think. So everyone assumes that the deal will be a “go.” I predict that it will be the start of layoffs, mergers of brands within the group, and synchronization or selection of one back-office structure across the whole new entity. None of these will happen overnight, but probably over the next 12 to 24 months.
And volume does matter, apparently for principal media deals. Forrester wrote: “Principal media solutions will proliferate and grow to account for nearly 10% global billings. Until recently, IPG was the last major holding company not to take an interest in media. While principal media practices are controversial, our research suggests that they represent less than 10% of total global media dollars under agency management. Yet with Omnicom’s existing principal media framework, marketers should expect a percentage of the IPG Mediabrands/MAGNA dollars to transact in principal media solutions, advancing the practice as more mainstream within the industry and within a combined Omnicon Media Group and IPG Mediabrands.”
This is of course very telling. IPG clients who will find themselves part of the new holding company will need to take a position on the implications of having the option of principal media in their mix, and the desirability of this. My advice: IF you think it has a role to play in your plans, then make sure your agency contract with the new holding company has its bases covered on disclosure in advance, and transparency during and after media activity.
But the bigger issue is, it seems IPG's not being on the principal media buying bandwagon was perhaps one of the biggest drivers for OMC’s interest. The company clearly saw an opportunity to grow their take from principal media. It will be telling to see how many IPG (or OMC) clients will put their business up for pitch, because of principal media as a real perceived threat, or as an opportunity to negotiate a better deal. One problem: if you don’t like principal media, it means none of the large agency holding companies are an option for your business anymore.
Maarten, when you say that most media deals are now made through auctions and most advertisers place their media direct with platforms, you seem to be assuming that most of the billings of this new entity will be in digital media, not traditional media. Yet on average traditional media, including its holdings in the digital space---accounts for at least half of ad spending and I'd wager that it's an even higher percentage of the Omnicom- IPG bilings. And very little of this spending is done "the digital way" or via in-house folks at the clients. Which is why I doubt that principal media was a major consideration for this proposed merger---as opposed to the economies of scale, clout with media sellers, etc. .