Pubicis Omnicom Group: New Titan on the Block

29 Jul,2013

By Ritu Midha

 

Not many months back, Dentsu’s acquisition of Aegis was being touted as a coup. As is known, Aegis was bought over by Dentsu for 3.16 billion pounds.  The objective was of course to compete with global behemoths like WPP Group. It has reportedly taken Dentsu’s footprint to 110 countries, with an employee size of over 30,000.

 

In India, It is business as usual though for Carat, iProspect, Isobar, Posterscope, Vizeum and Aztec under Aegis umbrella with no structural changes.

 

Dentsu India has, since, extended its creative horizon as well by taking over Taproot, one of the best creative boutiques in the country.

 

IPG Mediabrands, meanwhile, entered India formally in the March of this year. The objective was to create a single structure a la Group M – with both the media groups Lintas and Lodestar reporting into a single chairman – Shashi Sinha.

 

The group has three media agencies – Lodestar UM, Initiative and the all-new BPN, Reprise, a jv with Interactive Avenues, Magna Intelligence and the outdoor business. The objective, among other things is also to increase its prowess and compete with the bigger giants.

 

However, the Omnicom Group and Publicis Groupe merger is mother of all ‘marriages’ one has witnessed so far as advertising and media groups go. Come 2014, Publicis Omnicom Group would, if there is no regulatory tangle, be the industry leader with capitalised billings of $ 35 billion and an approximate employee size of 130,000. The group projected efficiencies of close to $500 million as an outcome of the new arrangement. The total integration and development period for the new entity is 30 months. A transition team for the smooth merger is being created.

 

Both the industry giants would be near-equal partners in the new venture. Talking at a conference in Paris, Maurice Levy, CEO, PublicisGroupe and John Wren, CEO, Omnicom Group, reportedly stated that their ambition was to create a new standoff for the industry to create value. The media watchers, however, are of the view that clients would benefit the most by the increased clout the group would have in buying media.

 

The holding company of the new entity would be based in the Netherlands, while the operating offices would continue to exist where they currently are.

 

As per Advertising Age figures, the two groups put together spent $ 3.34 billion in media placements globally, while the same number for WPP was $2.6 billion: A ratio of 41% to 32% of the global spending by the Top 10 media companies.

 

Interestingly, if the merger had happened a decade back, the key concern would have been the clash of client interest. However, now it is a given that agencies in a group work on competing accounts.

 

Publicis Omnicom Group agencies would include BBDO, Saatchi & Saatchi, DDB, Leo Burnett, TBWA, Razorfish, DigitasLBi, Ketchum, StarcomMediaVest, Interbrand, RAPP, Publicis Healthcare Communications Group, Rosetta, ZenithOptimedia and Goodby, Silverstein & Partners, among others.

 

The two entities have a few shared clients namely McDonald’s, Procter & Gamble, L’Oreal, AT&T and MARS. They have a few arch rivals too -Pepsi and Coca-Cola; AT&T and Verizon; Microsoft and Google to name the behemoths.

 

A few links at the bottom would help you check more details on the global front.

Moving to India media-ground, here are a few interesting guesstimates and queries.

 

01. If one looks at Recma ratings for the year 2011 – though Omnicom Publicis media agencies were among the fastest growing in India – Zenith Media, the highest among them comes at number eight – with $ 295 million – MEC has higher billings than it at $ 300 million. Mindshare at top with a billing of $ 1050 million almost equals the billings of all the media agencies in the new entity. Hence, though the new entity would jump to number two with an ease (after Group M – though with a wide margin), reaching the top might prove to be a mission not-so-easily-possible.

 

Looking at 2011 RECMA numbers, and looking at the  groups and not independent agencies in a group, Top 5 table would have Group M at the top, followed by Omnicom Publicis, IPG, Madison Media, the combination of Dentsu& Aegis.

 

02. One needs to see whether the new entity will have an India head just as Ranjan Kapur is country manager of WPP. The creative agencies work as independent businesses under him, while the media businesses have another layer in between Group M. A not-so-similar model is now followed by IPG too. If that happens in this case too – who would head the group here – and a bigger concern perhaps who would head the umbrella media group? The Publicis side of the business has been strengthening its leadership team – among the recent top level movements have been AmbikaSrivastava, ParthaSinha, Bobby Pawar and more recently Anupriya Acharyawho was heading the HUL business till recently at MindShare Fulcrum.

 

03. At the moment there is no Pepsi and Coke angle here, as the Pepsi account is largely handled by WPP in India, and some part of its creative is handled by Dentsu Taproot.

04. Would the agencies with a Delhi HQ, have to move their base to Mumbai – in a Group M kind of structure? Anupriya Acharaya, the new Group CEO of Zenith Optimedia is already set to operate out of Mumbai.

05. What happens to advertising revenues of TV channels? What with FCT shrinking to 12 minutes an hour, and the media agencies consolidating to get big bang for the buck.

06. Perhaps it is time to rejoice for the standalone agencies – as for in the battle of Davids – they might be bought over at a fancier price – as they would tilt the scales.

 

Needless to say, we see interesting times ahead. It will be good to see how WPP and Sir Martin Sorrell react to this development.

 

Links:

http://www.forbes.com/sites/jenniferrooney/2013/07/28/publicis-and-omnicom-merge-creating-worlds-biggest-advertising-company/

http://www.nytimes.com/2013/07/29/business/media/advertising-giants-announce-35-1-billion-merger.html?hp&_r=0

http://adage.com/article/news/publicis-omnicom-group-facts/243346/

http://stuartsmithsblog.com/2013/07/27/publicis-groupe-and-omnicom-in-35bn-merger/

http://mobile.bloomberg.com/news/2013-07-28/publicis-to-merge-with-omnicom-to-form-biggest-advertising-firm.html

 

 

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