The business world is abuzz with talk of the merger of Publicis and Omnicom. Like it or not, two of the largest advertising agency financial holding companies coming together will have major impact on the industry.
These two companies coming together can mostly be viewed as a positive for smaller independent marketing service agencies. The more consolidation there is at the large holding companies the ‘safer’ the decisions that they have to make. These are public companies whose primary interest is increasing shareholder value. Public companies answer to Wall Street. Wall Street prefers predictable results in financial reporting. This forces companies to make short-term decisions that could harm them in the long run; like laying off expensive personnel to make quarterly numbers despite whether those people can help you in the tomorrow. I worked at a large agency holding company ten years ago. I was a casualty of numbers despite being the only person in the agency’s New York office bringing in incremental revenue. The agency I worked for has been down more than up since I left and I’ve gone a more entrepreneurial route.
These financial holding companies were already big. They just weren’t the biggest. Now they are. But the obvious question is how does this merger benefit clients? I don’t see it. Clients that wanted a large pool of resources already had that. Clients that wanted stability already had that. Is there a benefit of the new ‘clout’ of the combined media agencies? No. Because they should be negotiating each client deal separately AND the media sellers aren’t going to roll-over just because these guys are now even bigger. In fact, this merger can hurt clients because the agencies are now negotiating against themselves. Fewer players in the market negotiating shifts the power balance back to the sellers.
So what is this merger about? Is it the personal war between Maurice Levy, CEO of Publicis and Martin Sorrell, CEO of WPP, the world’s biggest agency holding company until today? It’s no secret that these two do not like one another. Could it be that Levy is on an acquisition spring just to thumb his nose at his rival? If that’s the case what will Sir Martin do to one-up Maurice? And why is this “my agency is bigger than your agency” nonsense good for anyone?
While not a good move for clients of these two holding companies in the end there might be greater value placed on smaller more integrated marketing agencies who will likely have less turn-over, fewer distractions, less bureaucracy, and better talent working on client business.