Marketers are still processing the news that Omnicom Group will acquire Interpubic Group of Companies (IPG), a $13 billion-plus deal that can create the industry’s largest ad-holding group and consolidate the playing field in a beleaguered agency category. While many uncertainties still hang over the transaction, which is anticipated to shut within the second half of next 12 months, the formation of a capital “M” mega-agency may open further inroads to small- and mid-sized marketing services providers which have began to win more significant business by positioning themselves as alternatives to sprawling networks with layers of complexity and stodgy strategic considering.
“The challengers for this deal will probably be the smaller and more nimble boutiques,” said Greg Paull, president of worldwide growth at MediaSense and co-founder of R3, in emailed comments. “The importance of the independent isn’t diminishing.”
There has been a pattern of brands delegating more work to upstarts this 12 months, particularly with regard to creative. General Motors in June added independent shops Mother and Preacher to its roster, shifting away from the dedicated Chevrolet agency Commonwealth/McCann, an IPG-owned division, and Leo Burnett Detroit. Häagen-Dazs a month later named startup Nice&Frank its creative agency of record (AOR), tasking the two-year-old company with crafting its first Super Bowl campaign. Disruptor agencies like Mischief @ No Fixed Address and Highdive have develop into critical and awards darlings amid a difficult period for creativity.
The trend toward independents could further speed up within the wake of the Omnicom-IPG combination, analysts agree. But independents still must put within the exertions to persuade marketers to change up their approach to partnerships, all while keeping in mind a preference for marketing that will be tied to revenue results.
“Companies that provide strong data, technology and are nimble enough to maneuver quickly meeting the needs of the demand will stand to win during this time available in the market,” said Brian Mandelbaum, CEO of Attain, over email. “Mergers take a protracted time to finish, but anyone who can deliver on business outcomes for the advertisers and/or supply the brand new tech stack that Omnicom and IPG are creating will stand to achieve.”
The break away from the normal holding company model may even proceed to occur in a piecemeal fashion as an alternative of a radical exodus. The importance of the AOR has been diminishing for years, with more brands maintaining an inventory of agencies of varied sizes and specialities which might be tapped for different campaigns.
“[Independents’] fundamental drawback is usually scale, so that they’re not necessarily going to pry large, global relationships away from hold cos, but they will chip away and win project-based work in the event that they can display their ability to deliver high-quality work more responsively,” said Jay Wilson, vice chairman analyst for Gartner’s Marketing Practice, in emailed comments.
Preserving continuity
Omnicom and IPG together will create an estimated $25 billion organization with over 100,000 employees, providing unprecedented scale for an agency. That could be appealing to marketers which have placed a premium on access to data-driving marketing solutions, but additionally puts pressure on Omnicom to merge IPG’s tech and talent on a quick timeline — a tall order within the notoriously slow-moving agency segment.
“Clients often seek continuity and expertise, which mergers can disrupt as organizations align their systems and techniques,” said Jeremy Fain, CEO and co-founder at Cognitiv. “If IPG and OMG can quickly and effectively integrate data technology solutions like [IPG’s] Acxiom, clients will probably be joyful to remain and grow their business.”
While independents are one threat to Omnicom, more conventional rivals are prone to make their very own daring moves. Agency networks like WPP and Publicis Groupe might speed up M&A activities in response to the acquisition, particularly as the incoming presidential administration is anticipated to be less stringent on the regulatory front.
“This consolidation could be an indication of further industry-wide mergers and acquisitions,” said Jeremy Haft, chief revenue officer at Digital Remedy, over email. “As the ad landscape shifts, we might even see more players trying to scale in response to the competitive pressures of the newly-formed giant.”
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