This post is by Darren Woolley, Founder of TrinityP3. With his background as analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.
I woke up to the alarm on my iPhone at 6 am as usual on Monday July 29, but it quickly became apparent from the emails that had arrived overnight that this was not a typical Monday. On Sunday in Paris, Maurice Levy and John Wren, of Publicis Groupe and Omnicom respectively, had announced to the industry that they were merging their companies to form the world’s largest advertising communications holding company.
The inbox had emails from a procurement journalist friend in the US asking if I had any comment, a blog post from my UK partners in the Marketing FIRST Forum and various industry e-newsletters from across the globe all reporting the news. As the day progressed I was reading and providing opinion for marketing journalists in Hong Kong, Singapore and Sydney.
A week later, I think that although much has been said and written on the topic, it is worthwhile reviewing and reflecting on what was headlined as the “advertising event that shook the marketing industry“. Especially to try and work out what is in this for marketers. Because ultimately it is marketers who are the ultimate buyer here. So you would hope that the merger would deliver benefits for them. But that overlooks the other stakeholder group with a financial interest – investors.
What is the reason for the merger?
The news of the Omnicom and Publicis Groupe merger was a reasonably well kept secret, with speculation arising in the trade press late Friday before the Sunday announcement. I say reasonably well kept considering the size of the announcement and the fact that advertising is not generally known for keeping a secret well.
(Interestingly AdAge had an article published on July 26 which doubted the speculation and provided a cohesive argument about the obstacles to such a merger, but it has since been removed)
In Paris on the Sunday, the announcement was made and you can read the official Press Release here. Basically the announcement was that the number 2 and number 3 largest agency networks, Publicis and Omnicom, were to merge to create the largest advertising network in the world, and fundamentally dwarf the number one network – WPP. But what the announcement was light on expressing was whether there were benefits for advertisers and marketers. It seems to me that the focus of the announcement was not the clients of the two networks, but the Government regulators and institutional investors who will need to approve the merger.
The new network is to be known as the Publicis Omnicom Group (or POG for short) and you can read everything you need to know about Publicis Omnicom Group here thanks to Brand Republic. There were numerous reports that the whole merger idea actually started as a joke and as discussions progressed the idea seemed less humorous and more serious until it came to pass.
What is really the joke is the three letter acronym (TLA) for the new group. You see POG has a few meanings and none of them are particularly flattering, especially for the largest agency holding company in the world. The Urban Dictionary suggests that a POG is
- A service member in any branch of the military that does not hold a masculine and dangerous combat occupation, often found posing for pictures exhibiting weapons in front of heavily secured fast food restaurants on fortified bases that are never engaged by actual enemy forces.
- A cowardly, unmanly nancy-boy that yearns to be an elite soldier but lacks all talent and bad-assedry required to live up to being an infantryman.
- Acronym for “Person Other than Grunt”, synonymous to terms fobbit and tockroach.
But it seems that the team that are bringing us POG do not have a sense of humour. You see one enterprising social media expert decided to take the Publicis Omnicom twitter handle and start a spoof account that was tweeting during the announcement and for a day or two after until they shut it down and took control themselves.
What do the competitors think?
I told one journalist that this is a battle of egos, which are never in short supply in advertising. There is no love lost between the top three players. WPP firstly acknowledged the news of the merger and then went on the attack with Sir Martin Sorrell suggesting that the Publicis merger was a bad deal for Omnicom shareholders as by his reckoning Omnicom is the more valuable partner and yet Omnicom shareholders would end up with only half the shareholding.
Meanwhile his trusted lieutenant, Dominic Proctor from GroupM was undermining POGs ability to believe the media buying benefits of the merger stating ’Scale counts for nothing if it continues to be disparate’. While even in Australia, GroupM head John Steedman was cautioning the market stating the obvious that POG had a ‘Massive task’ ahead.
And although POG would be bigger than WPP globally, Sir Martin Sorrell was also quick to point out that in Asia, one of the fastest growing regions in the world, WPP would still be ahead in size. It seems though that comparing size was not enough to rile a response from either Messrs Wren or Levy. The hot button was the speculation that client conflicts would see POG lose valuable revenue, with Maurice pointing the finger at rival WPP over the matter.
The issue about client conflicts seems to me to be a smoke screen, because WPP have been very successful at managing conflicts, perceived or otherwise, by using their various networks and even creating customised agencies for large advertisers. The fact that both Pepsi and Coca-Cola currently have their accounts with POG agencies does not mean there is a conflict as both are held with different agency networks within the group.
But it is not just a battle of size between one, two and three. The other agency holding companies are also impacted by the merger. The CEOs of the other groups including Havas, IPG and MDC Partners could see some of the strengths for the businesses and more of the weaknesses for the clients, but all will benefit from the increased focus on future mergers and acquisitions.
What do the industry bodies think?
The industry bodies on both sides of the Atlantic are also mixed in their reaction to the proposed merger. A particular concern for the WFA and ISBA appears to be the impact on media buying. In fact beyond the media buying concerns, ISBA sees little impact in the UK.
But the ANA members’ concerns are more focused on the management of conflicts within the new super-POG-holding company, otherwise the ANA is quite positive about the merger and sees this as an opportunity for the industry in the disruption to come.
What do the consultants think?
Like myself and the rest of the TrinityP3 team, other consultants are scratching their heads about the POG deal. The problem is that it is hard to see where there is value for clients? As I said previously, the whole deal seems to be more focused on meeting the needs and expectations of the shareholders and not the advertisers.
This is best explained in a terrific article by Avi Dan who writes for Forbes. In his article titled “Is The Publicis-Omnicom Merger A Sign Of Strength Or Weakness?” he explains that the trend of mergers and acquisitions started back in the early Saatchi & Saatchi days.
The CFO from those days, Martin Sorrell, took this strategy forward into building WPP to the number one position. This merger is really just a validation of that strategy, but more importantly it reinforces the fact that financial growth for agency networks and holding companies is only delivered through mergers and acquisition. This just happens to be the largest to date.
What is the impact on media?
One of the key benefits stated as part of the merger announcement is the opportunity in the media space. One of the best and most focused analysis of the impact on media with the merger of their buying clout is provided here by Tom Denford at ID Comms, our Marketing FIRST Forum partner.
As Tom points out, apart from the top 20 POG clients, there is very little benefit in the media space. A more interesting area is the fact that POG will have the scale to directly impact on media owners and even create their own media opportunities. POG will have the size and scope to be able to develop exclusive media with the existing global media players like Google, Facebook and the like.
But there will also be a smaller impact on a market by market basis. In some markets the balance will not be as impacted as in others. In the Australian market the new POG media buying group will be more than twice the size of the next largest media buying group. This is where regulators will need to review each market carefully and where local media owners will be most at risk.
What is the impact on digital advertising?
Data and digital are increasingly more important in reaching and engaging consumers. The new POG holding company will have the size and scale to maximise their capability and depth of skills in data and digital planning and buying.
But the concern, expressed in a number of quarters, is that the huge size will mean that it will not be able to move fast enough to capitalise on this opportunity in either area.
What is the fallout for other agency networks?
There are two key impacts for the other agency holding companies and networks. The first is that the huge amount of disruption caused by any major change can lead to further change. Out of this change there will be winners and losers. The problem is that the hype around the merger has created expectations for clients about the associated benefits. As clients assess the impact of the merger on their business and look for the delivery of these benefits, they may look further afield. And not just to other holding companies. Small and independent agencies have also identified the opportunities too.
The second is that this merger will potentially trigger further mergers and acquisitions. Already there has been a rise in the share price of Interpublic Group along with Havas and MDC following the announcement of the POG deal.
What is the impact on creativity?
As IPG’s Michael Roth said in a memo to staff on Publicis-Omnicom ‘Bigger Doesn’t Make for Better Creative’. One of the issues the large holding companies battle with is holding on to quality staff who are often frustrated by the bureaucracy of the larger organisation or simply end up un-affordable as holding companies balance clients’ demands for lower costs against demands for returns from shareholders.
Often these disenfranchised players are attracted to independent shops or may set up their own shops. With the ironic view of building the business to the point it is acquired by one of the holding companies they escaped. This is all beautifully summed up by Adcontrarian in a post “Advertising Industry Gives Up”.
What is in it for marketers?
I really do not see a lot of opportunities or benefits for marketers and advertisers. But time will tell. At this stage I think the biggest beneficiaries are the two main players and their advisors. Maurice Levy gets a legacy. (And French men have a long tradition of leaving a legacy) While John Wren becomes cock of the biggest roost in ad-land. But for most advertisers all it means is that now there is one less holding company and this could reduce further.
This view is reflected by many of the advertisers affected by the merger. It is a case of wait and see what happens.
The best advice I have seen is from Gartner who have provided this advice for clients of Publicis and Omnicom, Marketers who are clients of other agencies and Media clients. Basically it is assess, monitor and review against your business needs and do not rush into making any hasty decisions.
As a final word on this I provide this view on the POG merger from Richard Pinder, formerly the head of Publicis Worldwide, who sums this up by saying
“For a start there is precious little in the announcement about WHY this is better for clients. We can see its better for doing deals with the big media partners, old and new. Scale counts there. But when the bulk of the enterprise’s activity is still about finding, creating and executing inspirational ideas to motivate the world’s population to choose one brand over another brand, there is a point beyond which scale can actually be a disadvantage – talent feels lost, ideas get killed by people who have no idea what the clients’ needs are and everything takes too long and costs too much”.
He should know as well as anyone. But then only time will tell. What do you think?