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Gini Dietrich

Seven Reasons the Publicis Omnicom Merger is a Big Deal

By: Gini Dietrich | July 30, 2013 | 
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Seven Reasons the Publicis Omnicom Merger is a Big DealBy Gini Dietrich

On Sunday, when I read the announcement of Omnicom and Publicis merging, I said to a friend, “This will be interesting. Having worked for Omnicom, I know how hard it is to work with the sister agencies. The partners are incentivized to get the most profit out of their P&L. They’re not incentivized to work with the sister agencies. Not to mention the list of conflicts, the antitrust issues, and perhaps even skirting the line of a monopoly.”

The merger makes the company much larger than WPP, the current market leader. Their combined U.S. revenue, alone, is $11.4 billion, which is twice as much as that of WPP.

Not only that, all you have to do is look at the list of clients for the two organizations and you’ll see conflicts galore.

Omnicon has the Pepsi account, while Publicis has Coke. Omnicom has AT&T and Publicis has Verizon.

The holding company (with each company holding 50 percent) will be based in the Netherlands and I cannot imagine they will share software and accounting and administrative needs, which will allow them to tell clients they have firewalls and other things set up so the conflicts are non-existent.

Heck, I’ve seen two competitive companies work within the same PR firm without issue from the clients so I don’t see the conflicts being a huge deal. At least not on the Publicis Omnicom side.

What’s the Big Deal?

So what’s the big deal, then?

At breakfast on Sunday morning, Mr. D saw the news and said, “This sounds like it’s a big deal, but I don’t totally understand it.”

Oh it’s a big deal alright. But not for the reasons you would think.

Digiday lists five reasons this is a big deal. According to them, they are: Diversification, scale, conflicts (or lack thereof), more deals, and making the independents stand out. I’d add two more: The affect it will have on digital marketing and no one ever gets fired for hiring a big brand.

Seven Reasons the Publicis Omnicom Merger is a Big Deal

Diversification. In Ctl Alt Delete, Mitch Joel talks about the difference between an entrepreneur and a business owner. The biggest difference? The business owner’s sole job is to minimize risk, while the entrepreneur takes lots of risk.

The CEO’s of Publicis and Omnicom are tasked with minimizing risk. Because chief marketing officers leave their jobs every two to four years, the client/agency relationship is less about loyalty.

It’s pretty rare a new CMO doesn’t come in and fire the current agency, bringing in who they like and trust. With a company this large, the agency might be fired in the transition, but it’s highly likely the new agency is within the Publicis Omnicom company. Risk minimized.

Scale. I have a friend who is nearly three months into a new corporate gig with a public organization. When I talk to him about his new role and what he loves about it, he keeps saying things such as, “Google pays attention when we call” or “Facebook wants to help us find ways to use the data differently.”

For those of you who have ever tried to get an answer from one of the gigantic Internet companies, you’ll know what a big deal this is. Scale provides an opportunity to work at the same level as these gigantic companies and get what they need for their clients without having to fight the “we’re sorry, you’re no one” fight.

Lack of conflicts. I’m not sure I totally agree with Digiday on this, but they say, “Clients just need to get over it.” We bind ourselves to strict no-conflict rules inside our organization, but I also know some firms do not.

I guess if it’s not a concern to the client, it’s not a concern to the organization. We don’t do business that way, but I can see why others do.

More deals. Before the Great Recession, we saw a lot of consolidation. With this huge merger, it looks like the industry is primed for even more. Earlier this year, Mitchell Communications Group was acquired by Dentsu and, just yesterday, Padilla Spear Beardsley bought CRT/tanaka.

If you own an agency and are interested in being bought, now might very well be the time.

Independents. Edelman has long held the crown of largest independent agency, but now PadillaCRT is close behind. With more deals and more consolidation, look for the independents to begin to grow aggressively through acquisition.

As well, not everyone likes to work with – or for – a gigantic company. Inside an independent – small or large – there is more flexibility, better technology, and empowerment to make decisions.

Digital marketing. With Twitter and Facebook and Pinterest and all the others trying to figure out the profitability game, Publicis Omnicom will have big influence over Silicon Valley. With huge media buys, their scale, and beaucoup bucks, the agency will influence where those dollars are spent…not just in advertising, but in funding startups and other organizations.

Big brands. We were in a new business meeting a couple of weeks ago and the founder of the prospective company said to me, “Why should we hire you instead of one of the big, global firms?” I responded with, “Well, no one has ever been fired for hiring a name the board recognizes, but…” and then I went into the reasons a smaller firm is better.

More startups are coming with boards. More founders are being ousted by their boards. Even though entrepreneurs take lots of risk, one way to minimize their own vulnerability is to hire the big name that everyone recognizes.

It sucks, but it’s the way business is done.

But, if there are any clients of Publicis Ominicom that think the conflicts are too great and want to work with a nimble, flexible, smart team, there is an integrated marketing communications firm in Chicago that has been doing this for years!

About Gini Dietrich


Gini Dietrich is the founder and CEO of Arment Dietrich, an integrated marketing communications firm. She is the author of Spin Sucks, co-author of Marketing in the Round, and co-host of Inside PR. She also is the lead blogger at Spin Sucks and is the founder of Spin Sucks Pro.

44 comments
rdopping
rdopping

Just remind them you are partner with Charles.

Risk mitigation is reality and independents appear risky. We struggle constantly against the small shops who kill us on price. It appears we are fishing in the wrong pond or maybe they are fishing in the right pond. So, if risk aversion is a key driver to making business decisions why hire the nimble and small firm? Talent. Right?

There's much more to it, I'm sure.

Howie Goldfarb
Howie Goldfarb

BTW last Fortune had the Global 500. A lot of companies have $100 billion in sales. A total meltdown mess up of a major brand by an agency (doubtful but can happen) could cost billions. You can't sue a small shop but you can a big agency.

Howie Goldfarb
Howie Goldfarb

As the esteem George Parker calls them Big Dumb Agencies they just got bogger and dumber. I mean @TBWAChiatLA has run @Pepsi into the ground (my opinion). Maybe now they will jump shipp like I have been telling them too for the last 3 years and hire @vinnywarrenwho btw gets a lot of business from brands who already have contracts with BDA's because most TV work sucks. 

The real problem with advertising is success is hard to measure. Which means Ad Agencies can keep spending brand money (they make more the more they spend) which is the opposite incentive for the brands. And this merger doesn't fix that! And yes they are fully dysfunctional with silos everywhere. I experienced that first hand a few years back trying to find who to sell a hybrid marketing service. Because it was hybrid no one knew who would be the ones deciding on placing a media buy: OOH? Digital? Mobile? Print? Seriously showed why so many smaller agencies like Vinny's are growing so fast.


KellyeCrane
KellyeCrane

I made a similar point about sister agencies on Solo PR Pro today. If prospective clients buy into the bigger is better philosophy being sold as part of this merger, many will be sorely disappointed. Independent solo and boutique firms (cough, Arment Dietrich, cough) are often light years ahead of the big guys in terms of creativity and innovation. Hear us now, believe us later!

hackmanj
hackmanj

This is a hot mess and I am completely fascinated after getting your take Gini. This represents a great opportunity for other firms in this field. Let the fun begin!

biggreenpen
biggreenpen

First of all, props to whatever @ginidietrich did to get this fixed (I was seeing words over words which is actually something that happens often in my head but makes it difficult to comment on a blog post). I recently received an email that contained approximately five sentences worth of "covering ourselves" (i.e., "This is to advise you that there may be a delay in [name of project component] but it doesn't mean we don't care about getting it done just that we can't do it like we originally said we would")  and zero words of "how we will get this done." It'll be interesting to see if this merger can be done in a way that remains heavier on the "how we will get this done" and lighter on the "why we can't do it yet."

susancellura
susancellura

Seriously though, is this just another cycle? I mean, I have worked for companies that must have a re-org every few years - silos vs no silos - just to make leadership happy. Is it yet another trend or are @martinwaxman and @JoeCardillo on the right track?

susancellura
susancellura

Let the infighting begin! While everyone is looking at what this means for the two companies, I'd bet that the employees are already hedging their bets, sharpening their knives and plotting away, just like "Survivor". 

lizreusswig
lizreusswig

I'm with Mr. D! This makes me feel like the guy in the AT&T commercials with the kids explaining why slow turtles are better & what about infinity times infinity (exploding head!)...but I agree it will be a great opportunity for firms like AD!

JoeCardillo
JoeCardillo

I have a lot of thoughts about this, but let me just throw three quick things out there:

1. Phrases like "$500 million synergy" and "eliminate redundancies" = downsizing and automation of current job roles, and business features. Occasionally someone does this with grace, but just as often there's red tape and significant hurdles that eliminate the alleged synergies and frustrate partners/internal audiences, and clients. So far I see no reason this will be any different. 

2. If you read between the lines, it sounds like Publicis and Omnicomm are getting into the data business. The WSJ story below is a good starting point. 

http://online.wsj.com/article/SB10001424127887324809004578634133795292520.html

3. Every business is a data business, whether they know it or not. But, there is a real difference between strategy and tactics (hat tip to your team for being all over this lately). If you're talking about automated ad buys, sure, go for it, but if you're talking about a DNA level change to how you devise strategy and help clients do the same, well, be prepared for more than "we've got some data scientists and we're trying to think like a startup." 

All in all, I think it's fair to say it's a big gamble. Google is way ahead of everyone on the data/automation/publishing stuff already.  

briantudor
briantudor

Gini, with all the consolidation that happened in the early 2000's just before the bubble burst, do you foresee a similar over statement of value happening again? How long will it be before Google and/or Facebook decided to make their own internal agency services for the larger brands?

creativeoncall
creativeoncall

Publicis Omnicom – PO – one large Purchase Order, mostly for client fees. Yes, they may provide even greater media buying clout for clients, and a bigger stick to knock some attention-paying sense into the digital masters like Google and Facebook, but I still don't see a lot in this for clients.  I worked at an Omnicom shop for years, fairly well bracketing the creation of Omnicom, and I never saw how bigger equaled better for clients.  Oh, we did great work individually, but try to get the network shops to play well together? Good luck... as you observe, it wasn't structured to work that way.  And conflicts?  Always a much bigger issue on the advertising than the PR side.

The bigger security blanket for clients will still pre-determine many client decisions as to which agency to hire... but while you may never get fired for hiring a big brand name, you may increasingly get fired for working with them, as that bigger-than-ever security blanket suffocates your marketing plans in service of its own bigger-than-ever bottom line needs.

My net:   1) a good payday for Publicis Omnicom leadership 2) distraction and disruption for clients and 3) more opportunity for the likes of Arment Dietrich.

ginidietrich
ginidietrich moderator

@KellyeCrane I had a conversation with a friend earlier about this. The big companies will still have the global firms as their agency of record. But I think there is huge opportunity for solo practitioners and small agencies for projects that have a quick turnaround or need creativity they can't get from the large conglomerations. I think there is huge opportunity for us in this!

JoeCardillo
JoeCardillo

@susancellura Or even, Lord of the Flies.... *whispers*  "head of digital technology looks delicious. What does he do anyway? I wonder if anyone would even miss him?"

ginidietrich
ginidietrich moderator

@lizreusswig Have you seen the commercial where the kid tells the knock knock joke about the queen (queen your room)? I freaking love those commercials!

DwayneAlicie
DwayneAlicie

@JoeCardillo I appreciate what David Droga said in the New York Times article about how the merger is "chasing Google."

"'Technology is the greatest enabler and the greatest canvas, but you still need the thinkers, you still need the storytellers,' he said. 'Technology can become a commodity as well.'"


martinwaxman
martinwaxman

@creativeoncall @ginidietrich I like your take on the new name and can imagine a logo filled with dollar signs.  I agree that bigger is not necessarily better at all, unless of course your goal is to pay bigger fees.

I worked on the Publicis side for a few years, and yes, there are exceptions, but I think many people who work for multinational agencies know how hard they're driven for the ultimate goal - not results, but billable hours. And that relentless pursuit of profit over all else may be in direct opposition to doing the best job.

Latest blog post: Where are you going, PR?

JoeCardillo
JoeCardillo

@ginidietrich @susancellura @martinwaxman @JoeCardillo The real measure of a culture of healthy change is in how they experiment and push innovation on the ground, not when they announce a huge merger. For that reason, I'm not optimistic it's worth anything more than just money in the bank for the top level. No evidence that they've truly been testing the theory they claim is the basis for this merger. 

RobBiesenbach
RobBiesenbach

@martinwaxman @creativeoncall @ginidietrich Totally agree, Martin. I worked for a WPP company, and the bigger a company gets and the more beholden to shareholders, the farther it gets from truly serving clients' interests. That's just the way it is -- the #1 priority is increasing shareholder value.

So yeah, more opportunities for indies.

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