In a dramatic move that will change the global ad industry as we know it, Omnicom Group and Publicis Groupe will merge to become the world's largest advertising holding company. Some industry participants are skeptical about the consolidation.
On Sunday, New York based-Omnicom Group and Paris-based Publicis Groupe told the world they would combine in a "merger of equals" that has a market value of $35 billion. The move sweeps the top spot away from London- based WPP.
The newly- merged entity will be called Publicis Omnicom Group and will be jointly led by Omnicom chief executive John Wren, as well as Publicis chief executive Maurice Levy. If all goes well, the deal could close as early as the fourth quarter of 2013, notes the two companies in a statement.
According to the statement, Levy says, “the move empowers the companies to better service the traditional and digital advertising needs of clients”. Wren adds that ‘the combination will enable [the group] to leverage the skills of exceptionally talented people, a broad public offering, enhanced global footprint, and a tremendous roster of global and local clients."
Publicis Omnicom Group will bring together well- known ad agencies such as BBDO Worldwide, DDB, Saatchi & Saatchi, Leo Burnett, TBWA, Razorfish, Digitas, Ketchum, Starcom MediaVest and Zenith Optimedia, representing clients such as PepsiCo, McDonalds, Coca-Cola Apple, Visa, Volkswagen, and Procter & Gamble. The new company will have more than 130,000 employees.
The giant move has spurred many different reactions in the industry with some participants questioning the overall outcome of the merger. Erik Dochtermann, chief executive of NYC-based media agency, KD+E says, that the partnership highlights a “very visible confession that media and creative in their firms are merely commodities, lacking any distinction, creativity or true insight.“
“Employing industrial era consolidation practices in a technological era reveals how disconnected [ad agencies] have become from the next generation marketing needs of emerging companies. Silicon Valley will continue to gain ground because they do not suddenly need to offer any special deals to them to keep growing – they are speaking another language and are able to outsource and crowd source, quickly, thereby avoiding the footsteps of these lumbering dinosaurs,” he says.
Jeff Kempler, chief operating officer of experience design firm, Sub Rosa, adds that the Publicis- Omnicom consolidation is a form of “potentially misguided focus on maintaining and negotiating leverage and market share.”
“Moves like these are often done at the expense of maintaining creative excellence and innovative spirit for the benefit of customers and consumers. We can see that much of the most exciting and rapid-growth innovation comes from small, nimble entities, be that in the online retail space, such as Warby Parker, in media distribution or storage, such as Instagram, Tumblr, Spotify or Dropbox, or in the creative businesses, where even very large corporate clients are tapping into the unfettered drive and acuity of smaller agencies and studios,” he says.
Publicis Omnicom Group is expected to be listed on the New York Stock Exchange and Euronext Paris under the symbol OMC. Since yesterday’s announcement, Omnicom's stock has been trading up by 0.5 percent as of this afternoon. Meanwhile, shares for Publicis have risen by 0.1 percent.
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March 19, 2014