There’s a lot of speculation around the proposed merger between advertising giants Publicis and Omnicom, and a lot of posturing from rival holding companies such as IPG and WPP. We examined some of the big misconceptions surrounding the deal.
It’s a done deal
A Publicis-Omnicom combination would result in one company controlling over 40 percent of global advertising spend. Unsurprisingly, the proposed merger faces significant regulatory hurdles as a result. Publicis CEO Maurice Levy says the companies are “confident” they’ll get the approvals they need, but that’s far from guaranteed. They’ll need clearance in more than 40 individual countries for the deal to go ahead, which some say is unlikely.
Scale doesn’t matter
Rival holding companies were quick to make arguments that scale doesn’t matter. “It’s not the size of your holding company, it’s what you do with it that counts,” was how IPG seemed to react. CEO Michael Roth, told staffers in an internal memo “There’s nothing about scale that makes for better creative ideas, or leads to better integration of marketing disciplines.” But the argument that scale doesn’t matter is a flawed one. At an operational level it affords efficiencies, of course, but pretending it’s not important when it comes to relationships with major media vendors is futile. “I can’t agree that scale, especially in the short-term, isn’t a benefit here,” said Sean Finnegan, who held senior roles at Omnicom and Publicis agencies OMD and Starcom. “Though financial scale is not impacted via a bid based process, deep pockets with media and tech companies still afford the ancillary benefits of product first looks, category exclusivities, design and production, custom databases, in-depth research and development, global connectivity, employee resource sharing and PR.”
It’ll create a “big data” behemoth
Levy was quick to throw out the “big data” buzzword when announcing the merger on Sunday. The more information you have, the smarter decisions you’re able to make on behalf of marketers, he suggested. It’s a nice idea in theory, but not everyone’s convinced that bigger equals better when it comes to extracting value from data. “I think it’s a total misdirection to think that you can leverage the scale and advantages of big data if you’re bigger. Quite the opposite,” Simulmedia CEO Dave Morgan told AllThingsD. What’s more, the data in question doesn’t belong to Publicis or Omnicom anyway, it belongs to their clients. If the combined holding company expects to represent major brands in the same categories, they’ll expect that data to be kept separate from their competitors’.
Clients will jump ship
Some will, but most won’t. The Pepsi and Coca-Colas of the world will have concerns, especially when it comes to sharing things like intelligence, trends, and data. But the likelihood is few others will view the potential conflicts as a major issue, and Publicis Omnicom will is prepared to lose some business from those that do. “I don’t think the client issue will be a big deal,” Finnegan said. “As agencies become more product based, I suspect that they are on equal footing with vendors conflict-wise. Pepsi doesn’t complain that Facebook takes ad dollars from Coke.”
It’s an agency merger
It’s worth remembering there’s a big difference between an agency merger and a holding company merger. This is the latter. Holding companies are accounting structures above all else. That means for a lot of member agencies very little could change post-merger, besides perhaps the homogenization of things like HR and IT systems. If all goes well, perhaps Publicis agencies will finally be free from Lotus Notes.
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