Advertising mega merger

Over the last week there has been a frenzy of speculation about the proposed merger between Omnicom and Publicis. It probably goes without saying – but I will – both Mr. Wren and M. Levy will have discussed in great detail the implications of this gigantic move, and much of the published third party comment will have already been dealt with.

However it seems to me two issues have not been mentioned that are bound to crop up down the road plus one interesting opportunity.

The first is the ‘brand management’ of the various networks and how the leadership of them is given very careful consideration. In Omnicom’s case the three advertising agency networks of BBDO, DDB and TBWA need to be differentiated and stand for something that attracts different types of clients. Thinking about the local UK market each are in different stages of their evolution. AMV/BBDO has enjoyed consistent management for a very long time with Michael Baulk at the helm for a decade or so to then handing the reins across to Cilla Snowball, another ‘lifer’ from within the agency. DDB has recently gone through a marriage with Adam & Eve taking control injecting a different kind of culture and product to the AMV brand. Then we have the TBWA brand which has seen a number of leaders come and go over the last decade.

Interestingly AMV has stayed at the top if the league tables in the UK for well over a decade whereas DDB and TBWA have had more of a roller coaster ride over the same period of time.

On a global scale ensuring each brand maintains a distinctive personality will be essential on many levels, not least of which is to avoid the pressure to go for market share whatever the impact might be on the brand. This will be a big challenge in a business of the scale envisaged.

The second issue is where clients fit in to this. Some simple maths help to illustrate the point. An annual 10% increase for a business with gross income of £50m is £5m, whereas a 10% increase of a business with a gross income of £500m is £50m. Ignoring the loss of income in a calendar year which always happens, generating an extra £5m feels like a much easier task than shooting for £50m. Therefore the scale of clients becomes a real issue for a big tanker which in turn means smaller spenders will not be getting the attention they would hope for.

So maybe we will begin to see an acceleration of the divide between the mega spenders and everyone else. I experienced this at Ogilvy. After developing and launching MORE TH>N for RSA with an annual fee income of c. £1m my New York colleagues were not particularly interested for two reasons, it was domestic to the UK and therefore not scale-able on a global level. As it represented approximately 0.1% of the global income it is understandable, however for the UK operation is was very important given it was a first for Ogilvy for some considerable time and the income was significant for the UK business.

This reality is inevitable and will become an increasing issue for clients, in particular domestic clients below a certain level of income.

So maybe the opportunity around the corner is for more start-ups. The reasons are fairly obvious. The divide on income levels between the mega spenders and the more modest spenders is likely to become more pronounced and therefore very easy for a modest spender to feel lost in a global giant. It is human nature to resource business on a commercial basis, putting the best talent on the most important clients based on revenue.

Also it is highly likely the management of the big networks will tend to be risk averse whereas a good local outfit is more likely to be the opposite. Smaller spenders need to be adventurous to get noticed.

So maybe Omnicom and Publicis having decided to go for their ambition of global dominance will have also created a window of opportunity for ambitious folk who fancy having a go on their own. (As an aside I think it is very interesting how Droga5 are getting so much attention ploughing their own furrow, a sign of inventiveness and creativity allows a 300 strong business in New York to punch way beyond its weight.)

The great thing about the advertising industry is how it never stops morphing, changing the playing field and always leaving the back door open for a bunch of chancers who fancy a go on their own. May it always remain so.

 

 


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