Emily Tan Matthew Miller
Jul 29, 2013

Industry reacts to Publicis-Omnicom merger

ASIA-PACIFIC - As the marketing world digests the surprise weekend news of the intended mega-merger of Publicis Groupe and Omnicom, opinions differ as to the merger's likely impact, potential fallout, and likelihood of success.

Screenshot of a Vine post marking the signing
Screenshot of a Vine post marking the signing

First of all, breathe. Like all mergers, the proposed union will take a while, if it happens at all. "They’ve just announced an intention to merge and the whole process will take at least until 2014," Darren Woolley, managing director of TrinityP3, told Campaign Asia-Pacific this morning. "They have to get shareholder approval and regulatory approval in the US and the EU, both of which are full of politicians very nervous about one company controlling 40 per cent of media spend."  

Assuming the combination does go forward, the big benefit should come in media-buying clout, said Greg Paull, principal with R3. "The combined group will have around US$110 billion in buying, ahead of WPP at $95 billion," he said. "There’s then a huge drop to Dentsu at $38 billion, which begs the question: Will big advertisers just have two choices in the future for media?"

However, in Asia-Pacific, Dentsu-Aegis, with $4.7 billion in revenue, will continue to dwarf both the combined Publicis-Omnicom and WPP, with $2.6 billion and $2.7 billion, respectively, he said.

In China, WPP will still have an advantage, with RMB6.1 billion (about US$1 billion) in revenue, compared to the combined group’s approximately $730 million. Kantar alone in China has more than 3,000 employees and is one of the factors in the gap, Paull added.

As for client conflicts, Paull downplayed the potential angst. "There’s been a lot of talk on potential conflicts such as Coca-Cola and Pepsi—Coca-Cola has had an unwritten rule never to work with an Omnicom agency, given Pepsi’s alliance," he said. "We personally don’t see these as major issues. These have been more of a challenge for individual agency brands merging, such as Lowe and Lintas or Draft and FCB. Holding company media groups such as GroupM in Asia-Pacific already work with Unilever, P&G, L’Oreal, Colgate and SC Johnson across multiple sub agencies. We don’t anticipate any massive agency fallouts."

"However, we do see a lot of future pressure on media accounts currently with other agencies—$110 billion talks, clients of other agencies may walk," Paull said.

Biased reactions

Dominic Proctor, global president of GroupM, WPP's media investment unit, came out casting doubt on the ability of the two groups to combine effectively. “They are making it clear that a primary motive for the merger is achieving scale in media buying," Proctor said in a media statement. "However, neither Omnicom nor Publicis was able to bring their investment teams together effectively as individual companies, so it will be fun to see if they can now do it together. Getting scale in media investment management is critical for clients, but it only works if it all joins up. We welcome a competitor in this space. Media investment management relies heavily on scale, but scale counts for nothing if it continues to be disparate.”

David Jones, Havas chief executive, minced even fewer words. "I'm not sure this is in the best interests of their clients or their talent," he said in a statement. "Clients today want us to be faster, more agile, more nimble and more entrepreneurial, not bigger and more bureaucratic and more complex."

WPP's leader, Martin Sorrell, was more diplomatic, telling Reuters on Sunday: "It's an extremely bold, brave and surprising move. You have to give every credit to Maurice [Levy, Publicis CEO], he managed to persuade him [Omnicom chief John Wren]." Sorrell also complimented the deal as being good for Publicis in financial terms. However, he added that the deal appeared to be "off-strategy" for Levy, who who has built Publicis with a focus on digital marketing and faster growth markets such as India and China.

Culture questions

In Woolley's opinion, the main reason for the merger is ego. "Maurice Levy is looking to have a legacy that he can leave behind when he retires in five years time, and it will be the largest comms group in the world," Woolley said. "John Wren, CEO of the biggest comms group. Between the two of them there is no love lost with the little English knight."

Woolley also expressed cynicism about the French and American giants meshing well together. "The French and the Americans...not since the independence have they had a close working relationship," he said, jokingly referring to American use of the term "Freedom fries" instead of "French fries". "If you’re a big French multinational company that’s been with Publicis Groupe for years, if you feel the entire company is more American than French, that will be a problem for you.

"Clients will have the same choices they’ve always had," Woolley said: "More agencies from the same holding company." In truth, the merger promises a lot of benefits only to the top-10 clients. "The rest won’t see financial benefits," he added.

It will be interesting to see what kind of culture arises out of the merger. WPP has a strategy of managing the whole group and having everything fit within the group, commented Woolley. Whereas within Publicis, each agency has its distinctive culture. On the media side, Vivaki's buying group only works as a buying group, whereas GroupM thinks of the agencies as a strategic opportunity in every pitch. Omnicom Media Group is about coordinating media buying, allowing PHD and OMD to compete against each other as separate entities.

One major impact may be on digital media buying. "When you have that much mass, you can acquire and own actual media itself," Woolley said. "Dentsu has been doing this in Japan since they started—an end-to-end media solution."

What's your take? Check our Twitter feed (@CampaignAsia) to see how others are reacting and share your own thoughts.

Related Articles

Just Published

8 hours ago

No kidding: Lego sees strong growth from adult ...

To meet burgeoning demand and adjust to pandemic shifts, the nine-decade old company is focusing on catering to grown-up passions ranging from flowers to fast cars.

9 hours ago

Should digital marketing focus on function over ...

Senior marketers from HSBC, Pernod Ricard and Shiseido debate whether brands need to infuse more emotion into digital marketing, the risk versus reward of having a point of view on social media, and how to use technology to enhance humanity.

10 hours ago

Facebook takes aim at Clubhouse, podcast market ...

The company officially announced a Clubhouse clone called Live Audio Rooms, along with a sharing format for short-form audio clips, podcast integration and a set of audio-creation tools.