James Clark unpicks adland’s biggest merger
So the big merger has returned to the ad world.
The merger of advertising groups Publicis and Omnicom will see the formation of a $35bn new entity that assumes the number one spot from the $30bn incumbent WPP. With so much interbreeding between adland and the tech world over the last 15 or so years, what will be the ramifications for tech?
Firstly let’s look at what sort of a beasts we’re dealing with.
To start with, neither Omnicom or Publicis (nor WPP, Havas, Interpublic, or the handful of other players) are ad agencies as they are sometimes erroneously referred to in the tech world. Instead they are large portfolios groups comprising a full array of subsidiary marketing companies, who individually and collectively provide a range of marketing services to clients.
The parent groups are constantly acquiring and divesting portfolio businesses as they seek to fine tune their offering to clients. The enmeshing of tech into their offerings in the last decade or so was part of this development. (It was also one of the drivers behind the development of tech in Silicon Roundabout).
Growth by M&A
Competition is fierce at every level – amongst the groups, between the portfolio companies and within the portfolio companies. Portfolio groups typically grow organically via acquisition of new clients either at a high level (WPP itself) or at a portfolio company level as the subsidiaries pitch new accounts. Though every so often a group will merge, the current Omnicom-Publicis merger is by far the largest in years.
Since the development of search advertising, tech has become ever more intrinsically combined with adland. Acting initially as a media channel (think search words, banner ads etc), tech has gradually moved backwards up the adland food chain and now comprises an existential threat to many ad companies and possibly ad groups, though as I’ve written before, I don’t believe tech claims that advertising is dead.
It is this threat that is one of the justifications (£) behind this mega-merger. But the $35bn question is whether this will work. Certainly “marriages of equals” have a mixed history of success at best (think AOL – Time Warner), and as the Financial Times tells us (£), investors remain unconvinced. Sir Martin Sorrell, CEO of WPP is displaying his usual sangfroid in the face of the merger.
It’s all about the scale…sort of
However ultimately it is the tech world that will make or break this deal. This merger is all about using scale to provide efficiency and safety against the new species of competitors. But if recent developments in tech have taught us nothing else, it is that scale is within reach of many businesses today.
A agency of just a handful of experts can do the same sort of work that required a global agency network as little as 10 years ago. Moreover, the merging of two big dinosaurs to create an even bigger dinosaur still results in a big slow lumbering animal that will spend the next few years trying to figure out which parts of itself are vital and which are redundant (let alone which side of its brain will come to dominate).
A lot will happen in those few years, and with talented staff and dubious clients now eyeing the exits there are many opportunities for the clever and nimble. As Darwin taught us, it is not the strongest that survive, but the ones most adaptable to change.
image credit: deviantart/*theEyZmaster