What marketers should know about the Publicis and Omnicom merger

The biggest ad deal in history emerged over the weekend with the news that Publicis and Omnicom are merging, but there is more to the deal than the alleged conflicts of interest between clients, including Pepsi and Coca-Cola.

Asset management group Investec is already predicting rival WPP will benefit from client and talent fall-out from the formation of Publicis Omnicom Group, but others are more sceptical.

Lorna Tilbian, executive director and head of media at Numis Corporation, believes clients do not need to worry about commercial secrets being compromised because their archrival is in the same holding group.

She points to the formation of Omnicom in 1986 from the coming together of BBDO and DDB as evidence there will not be any major repercussions from the deal.

Tilibian said: "Back then that was a shock horror of clients and eternal enemies in the same roster but actually that is what the separate networks are for.

"As long as they are not in the same network being in the same holding group is less of an issue."

Focus on disruption

Fiona McAnena, a consultant and ex-PepsiCo VP innovation, backs up Tilbian’s views that client conflict should not be an issue and instead believes brands should be focused on the disruption such a deal is likely to cause.

She said: "As a client, I would care about what the risks and opportunities are, and the major disruption would be what happens to the people who work on my business.

"Will they be distracted? Will they leave? I would also be looking for the opportunities and looking at what the agency can do for me now that they couldn’t do before."

One senior industry source has dismissed as a "red herring" hysteria about client conflict and the media buying dominance Publicis Omnicom will hold due to its sheer size. The new group will hold an estimated 40% of the ad spend market in the United States, compared to WPP’s 20%.

He believes the move is more about allowing Publicis Omnicom to compete with WPP in providing group rather than agency solutions for big clients such as the Blue Hive group WPP has set up to handle Ford.

Greater scale

Dominic Proctor, global president of WPP-owned media investment unit GroupM, has fired a warning shot at the newly formed company, which he believes was primarily created to achieve greater scale in media buying.

He said: "Neither Omnicom nor Publicis was able to bring their investment teams together effectively as individual companies, so it will be fun to see if they can now do it together. 

"Media investment management relies heavily on scale, but scale counts for nothing if it continues to be disparate."

The scale argument in media is now "largely redundant" due to the advances in technology argues Havas chief executive David Jones, pointing to Facebook’s $1bn acquisition of Instagram when it only had 11 employees.

Jones added: "It strikes me it’s an industrial merger in a digital age. It seems a bit odd that people are using the old ‘Walmartisation’-type blueprints, rather than learning from the Google, Facebook, Twitter and Instagram ones that have changed the industry.

"If you're Walmart and you get bigger and bigger your soap powder gets cheaper and cheaper - but it doesn't work like that in our industry, brilliant ideas don't get better or cheaper because you are bigger. In fact [it is] the opposite."

Tilbian disagrees media buying is at the centre of the acquisition and instead believes big data is the driving force behind the merger.

The greater data capabilities will help the agencies to woo clients and take on the might of Silicon Valley, according to Tilbian.

She explained: "Over the last few years traditional media has been struggling to keep up with Google and Facebook and I think it is about setting up an agency for the 21st century that is digital rather than traditional.

"It is about scale – it is data driven – they are going to have access to more analytics and data [and] that is where the battle will be fought."

Personal glory

The merger will see Publicis boss Maurice Levy take on the chairman role, while Omnicom head John Wren will become chief executive of the French-American company with some speculating personal glory could be behind the deal.

Andy Collins, senior partner at M&A advisers Results International, said: "It’s pretty likely to be the case that Levy wanted to do another big deal before he retires and this is a great epitaph for him."

The deal’s repercussions have only just begun and are set to run long into the future as it becomes clearer the impact it will have on the market with industry body ISBA already laying out its concerns about the deal.

Ian Twinn, director of public affairs at ISBA, warned:  "We have a long standing concern about excessive concentration which is not helpful to business.

"It may be that the current proposal is not the end of the move for concentration but the beginning of it…that would be the greater concern amongst advertisers."

Click here to see a full list of the agencies owned by Omnicom and Publicis.

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