Addressing the Publicis-Omnicom Mega Deal

August 15, 2013

On July 28, the world’s second- and third-largest media groups officially announced their intentions to merge by the 1st quarter of 2014. Omnicom and Publicis will form Publicis Omnicom Group, growing to twice the size of former #1 media group WPP in terms of revenue.

Once the dust settles, there will still be one question that can only be answered in time; “Is Bigger Better?” Considering that these are massive media groups and there are plenty of variables going into this merger, we’ll leave the details at the door and try instead to tackle the bigger picture.

First Point Worth Mentioning: Client Conflicts

When two of the largest media groups in the world merge, there’s bound to be rival companies that will convene under one ‘roof.’ However, this scenario features some especially intriguing marriages. Here’s a short list of some companies soon to be clients of Publicis Omnicom Group:

• Coca-Cola
• PepsiCo
• AT&T • Sprint
• T-Mobile
• Verizon
• Anheuser-Busch
• MillerCoors

While some of these companies will not have any issues, others will be searching for a way out. The fact that these accounts will be managed by separate agencies may not be enough to overcome the basic idea of sharing the same media conglomerate. This is where competitors will make their moves, looking to create a chaotic picture in order to lure onboard some of Publicis Omnicom Group’s impressive portfolio (with the most notable prediction being WPP enticing Coke to join forces through a pre-existing relationship).¹

Second Point Worth Mentioning: Regional Battles

(Disclaimer: All financial data has been gathered from company 10-k reports and Annual Reports, and are being used for blog discussion only)

After taking a look at the 2012 regional revenues of WPP, Omnicom and Publicis, an abundance of unanswered questions came to mind. I’ll do my best to paint a clear picture:

Anita Chang Beattie, Asia Editor of AdAge, stated that “The combined company will be twice the size of WPP in the U.S., but in China, WPP will continue to dominate.”² WPP’s $1.5 billion in Chinese revenues certainly exceeds the $714 million by Publicis Omnicom (assuming no revenue is lost in the merger). Based on these numbers, WPP pulls in 14% of its total revenue from China alone, compared to a 3% value by Publicis Omnicom. Also, after combining the soon-to-be companies, the percentage of total revenue driven through North America is 50.4%. Meanwhile, that value is only 34% for WPP, the UK-based media group.

This poses many questions in terms of competitive positioning. Will WPP make it a priority to eat away at Publicis Omnicom’s massive revenue in North America, or will they opt to pursue an advantage overseas? These same questions can be said for Publicis Omnicom. Will they aim to protect their North American dollars, or attempt further diversification as a means of avoiding additional client conflicts? The eventual answers to these questions can have a great impact on my final point.

Third Point Worth Mentioning: Increase in Scale

Given that Publicis Omnicom now has a market capitalization of $35.1 billion, there are scaling factors that come into play, potentially good and bad. First, the good.

With the amount of income that Publicis Omnicom will have, they will be able to invest in technologies that can revolutionize the advertising industry. What the company decides to do in terms of technology and research investments will be revealed in time.

The scaling factor that can be potentially scary is that of media buying capacity, especially in North America. When combining the two revenues of Publicis and Omnicom, the North American revenue exceeds WPP’s by more than 200%. This scaling issue can provide Publicis Omnicom with powerful media buying benefits, allowing them to demand more control over rates.

Thankfully, this is one area where we can defend ourselves as an industry. We simply need to carry a strong passion and pride toward promoting the value of radio, including our specific stations. Here are some ways of doing just that:

1) Understand the Data and Your Market

• Not every person is the same. Some have higher incomes than others, while some are devoted to certain products and brands. Promote the uniqueness of your station’s listeners, apply it to your market, and use it to your advantage.

2) Position Yourself Using the Value of Research

• Don’t just mention your station’s composition; address the fact that the message is perfectly targeted.
• Don’t talk about cume; mention how many quality consumers are being reached by your station.
• Don’t speak in terms of Time Spent Listening; use it to prove that your listeners are loyal people who have a deep connection and want to be guided by your station’s message.

In the radio industry, we aren’t selling statues. These are unique individuals who have a connection with your brand. We must better utilize this value in order to counter any potential scaling impacts.

Clearly, there are plenty of scenarios that can come from this historic move. Keep in mind that regulators throughout the world are involved in changes of this magnitude. However, it’s always fun to probe the possibilities and engage our thoughts. If you have any views that you would like to contribute, we welcome you to share and add to the conversation!

-Tyler Plahanski, Sales & Marketing Associate

Cite:

1. Pollack, Judann. “What Clients Think About Publicis-Omnicom Merger.” AdAge.com. AdAge, 29 Jul 2013. Web. 7 Aug 2013. <http://adage.com/article/agency-news/clients-publicis-omnicom-megamerger/243352/>.
2. Chang Beattie, Anita. “Publicis Omnicom Group Won’t Beat WPP in Size in China.” AdAge.com. AdAge, 30 Jul 2013. Web. 7 Aug 2013. <http://adage.com/article/global-news/china-wpp-top-combined-publicis-omnicom/243373/>.

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