Keith Hunt: PubliCom merger is really about the media technology arms race

Keith Hunt (left) is managing partner of Results International. He argues that the main reason for the $35bn PubliCom merger is to create the technology firepower to fend off Google and Facebook.

On Sunday 28th July the structure of the marcoms world changed for ever. The cynics were quick to emerge with a million and one reasons why the deal was a bad thing. For a while it seemed as if Messrs Levy and Wren were alone in extolling the benefits. Levy even made a side-swipe at his own PR people to the effect that they were making a hash of explaining the logic of the deal.

Now that the shock has subsided, what does a cool-headed review of this audacious transaction reveal?

The trumpeted $500m annual cost savings is a big number. However there’s something a bit suspect in the conveniently round number that smacks of approximation. Has the deal been properly thought through? It’s hard to say. But then again, the cost savings and synergies were never the overriding reason for doing a deal of this kind.

There’s likely to be a bigger reason at play and one that very few people are talking about. That is the rapidly changing face of marcoms and the growing influence of technology. The likes of Publicis and Omnicom see squaring up to the media behemoths, Google and Facebook as a key priority. The two platforms are now firmly at the centre of the marcoms industry and increasingly sucking up huge number of marcoms dollars from the budgets agency networks have previously had more or less to themselves.

The agency world needs to deal with this and to find new ways both of outwitting and collaborating with these new giants as well as new ways of delivering brilliant campaigns through the platforms and thereby preserving marketing dollars for themselves. In the face of such challenges clearly size is key and the marriage of Publicis and Omnicom provides the necessary scale. Technology delivers the Holy Grail that is ROI and now, perhaps for the first time ever, Wren and Levy’s combined networks will mean the marcoms industry has a solid riposte to Lord Leverhulme’s observation that “Half the money I spend on advertising is wasted, and the problem is I do not know which half.”

And what of the naysayers who predict trouble ahead? As Barack Obama said, hope is not a strategy. Wren and Levy will be working on much more than hope to make the deal work and you can bet your life that once this thing gets on the rails and is rolling there will be no stopping its momentum as well as its impact on the broader industry. A mould-breaking deal of this kind makes the unthinkable thinkable and there will be many independent agency and network CEOs who will be reflecting on alliances and mergers in new and creative ways. The markets have a sense of this and already the share prices of Havas and IPG have jumped up although those of Publicis and Omnicom have barely moved.

We are likely to see the war for talent heat up as a result of this deal. The one place you wouldn’t want to be right now is bang in the middle of senior management at either network. There will be massive uncertainty for months if not years to come and a major lack of clarity around roles going forwards. We are likely to see quality people spinning out and forming new groups as well as moving on to competitors.

The client conflict issue however has probably been overplayed. Our industry has had to deal with this for generations and has as a result developed pretty watertight strategies. It’s highly unlikely that major clients are suddenly going to abandon ship. There are relationships in place with people they really rate and who do good work. More to the point clients may well see the deal as an opportunity to push down rates. When millions of dollars of cost savings are being talked about who wouldn’t want a share of that! Most clients will probably adopt a ‘wait and see’ stance.

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