PharmExec Blog

Omnicom & Publicis: 5 Questions to Frame the Deal

Al Topin 2

Al Topin, of Topin & Associates

by Alan Topin

Since the Omnicom-Publicis merger was announced in late July, it appears the only sources that have not commented on the joining of the superpowers are the President, the Pope, and WikiLeaks. In fact, I might be the only source to publicly claim that I actually don’t understand the reasons behind the merger. Frankly, I’ve never quite understood the benefits of the large public agency/marketing conglomerates as they were originally constructed other than creating value for estates of the top tiers of management. Other than reducing the choices for global procurement teams, I see more questions than insights and more paradoxes than enlightenment.

Whether we’re talking about medical, pharmaceutical, or consumer product accounts, here’s why I’m shaking my head:

Who benefits from this combination of giants?

The shareholders? I don’t see predictions of grand value enhancement and growth, but rather pathways to mutual survival. So how do the shareholders benefit? Over the years the stocks of a few of the public global conglomerates have been adequate, but not superstars. I guess the current shareholders might choose to wait and see.

Employees?  With pronouncements of savings from elimination of redundancies, they’re probably more worried about getting their resumes up-to-date than celebrating the future. Maybe they will wait and see.

Clients? While I would speculate that the two corporate leaders and their lieutenants polled their client base about conflicts, solutions, and loyalty, I would further speculate  that the real answer was a guarded or unspoken, “We’ll wait and see.”

Where’s the additional media buying clout?

Maybe it’s just me, but I would negotiate with as much energy whether it was with an 800- or   1600-pound gorilla. Both could inflict similar pain and damage. How much more can be wrung out of the media than they have already? Enough to retain their conflicting giant clients? One of the many commentators did speculate that the combined agencies might save a bit more on their office supplies. But we’ll wait and see.

Where’s the productivity?

A quote from a Bloomberg Business Week article by Kyle Stock said it best. “In strict economic terms, Google is far more productive. In the past five years, Google made, on average, $1.1 million of annual revenue per employee, and $277,000 in per-worker profit. The combined results of Omnicom and Publicis, meanwhile, show just $175,000 in annual revenue for every worker and just $14,000 in income per employee.” Not a lot of reasons to wait and see.

Even with the leverage of digital and “big data,” does the combination of giants bring the benefits of scale?

Having been in the business for a few decades, I’ve yet to see the end product of advertising benefit from massive size. Okay, media buying has brought significant discounts, but, as mentioned before, how big does the gorilla have to be before you begin to freak out and confess to every crime since the Lindbergh kidnapping? The rest of the size factor is a useless threat.

From the start, advertising has been a business of usually singular ideas and insights. (Admittedly, some smart agencies have been able to sell the same car or bank commercials to clients in different regions.) With digital, big data or not, it takes a few talented people with creativity and insights to move a brand. Not a village or metropolis.

Interestingly, the giant shops with their multitude of agencies and global offerings rarely are able to demonstrate savings from scale or continuity of method and message. Why? Because creative, entrepreneurial types often don’t find it easy to play well with others. And if   they do, costs rise and creativity tanks. Turf issues and added managerial bureaucratic layers  get in the way. So the giants are really a roll-up of services with alternative resources for product conflicts, not creative powerhouses.

But we’ll wait and see.

So who might really benefit?

Once again, top management and their bank accounts and egos.

Some of the key staffers with strong client relationships, who might be able to split off, take some of the billings with them, and either start their own agencies or join existing shops.

Existing agencies which will offer talent, ideas, and resources without the massive overhead.

Clients, who might begin to understand that it’s not the size of the agency that matters, but the size of the ideas and thinking.

But we’ll wait and see.

This entry was posted in Advertising, Agency Insight, Deals, Marketing, Strategy and tagged , , , , , , , , . Bookmark the permalink. Trackbacks are closed, but you can post a comment.

One Comment

  1. Posted September 11, 2013 at 8:55 am | Permalink

    That was an exceptionally insightful post! Thanks so much for sharing and clarifying the confusion I, too, had about the benefits of the merger…..Thank you!!

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