Procurement Perspectives on the Omnicom/Publicis Merger: Expert Interview (Part 3) Thomas Kase - August 1, 2013 7:02 AM | Categories: Breaking News, Procurement Commentary | Tags: Incendiary Tidbits, L1 Also read Part 1 and Part 2 of this interview with Procurian. Spend Matters: Any thoughts on the software impact? Any changes in who owns and uses the data? Brad DeHart: The larger network should provide opportunities for better integration and better detail. The end prize of the merger is the synergies from the data set – it is a multi-billion dollar network. This is an area where the agencies need to be more accessible and provide far better reports. Otherwise there shouldn’t be much change, and data ownership or stewardship should rest with advertisers and their legal, marketing, and procurement teams. Spend Matters: Can you make some other procurement benefit observations? Brad DeHart: The networks are holding companies with large groups of agencies that all have their own C-suites and operating processes and infrastructure. There will likely be significant savings to reap from this combined network. I believe POG themselves have identified $500M in synergy savings. While I don’t think the network will be looking at cutting core agency staffs (i.e. creative, account, strategy, and the like), there will be pressure on leadership teams to become more efficient. Spend Matters: Will the holding company itself – POG – become a “brand” to work with? Brad DeHart: Yes, I can see that happening – but it depends on the execs and their personalities. To a large extent, it has been happening, whether it is with WPP, or Publicis or other networks. All of the networks have been actively pitching for network relationships with advertisers when those opportunities emerge. Spend Matters: Do you view the creation of POG as coming from a sense of urgency (i.e. we need to do this before someone else does it) or out of necessity (i.e. we’re getting too weak relative firms like Google and Facebook)? Brad DeHart: I see this as a pre-emptive, first mover advantage play – a very strong one. They now have sufficient size to be the game in town. Omnicom and Publicis were really two #2 firms, very similar in size. Now, the #3 player is somewhat at a disadvantage by comparison. As mentioned earlier, the former #1, WPP, isn’t going to hold still for being dethroned, although it is now quite hard to stitch together something that will displace POG from a size/scale standpoint. Who will buy IPG? How will Havas, the #6 network respond? Another thought is Dentsu, they are on the rise, what will they do? Another firm to look at would be MDC – given their agency holdings. Really, after WPP, there is now a big space between POG and WPP, and then between WPP and the rest of the networks. As a general observation in this context – Google is obviously watched very closely in the industry – their autotrading activity, their increasing moves into other industries, what isn’t Google involved in these days given their brain trust and seemingly endless resources? You also have SalesForce.com – they are moving into marketing more and more and should not be underestimated. Ultimately, while I’m sure the networks always keep one eye on Google, I do not regard this merger as being driven mainly by Google or other non-agency players in marketing. Ultimately, I feel that advertisers will always have a big need for the very smart people in a lot of great agencies in these networks within advertising, digital, media, PR, insights, and a host of other specialized areas. In many respects, I see this merger as a way to create a powerhouse of agencies across all areas and create a clear leader amongst six or seven networks. It’s a bold move with a big impact. Spend Matters: What are your thoughts on POG’s service level toward the not-so-big media spenders? Should less-glamorous firms be concerned over becoming second-class media buy citizens? Brad DeHart: Not really, it is still a competitive marketplace. Nothing has changed that. The firms all work for their own financial results and brand relationships. An interesting comment to make here: in my experience, the best deals aren’t always done by those with the biggest budgets but those that have other factors at work for them such as support from a specialized marketing procurement team and a good relationship with agency leaders to strike a fair and balanced deal. Also, really talented agencies want to work with great brands and brand teams, so it isn’t always the case that the largest clients with the biggest budgets are the best clients to work with to create compelling new campaigns, new digital marketing, and the like. Spend Matters: Final thoughts on the politics of this – how much of this move is triggered by the older Maurice Levy’s need to go out with a big bang? Brad DeHart: Certainly Maurice has been quite bold with this move, with a storied past and a history of deal making, and getting the #1 spot as well as the successor he needs at the same time is quite an epic swan song. If they can get the integration to work, this will be a great play and he and John Wren and all those involved can appreciate their roles as a pivot point, or force changing an entire industry. If they do not deliver an integrated network or become too distracted by this merger effort (a very real possibility), watch out for negative synergies. 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