Jim Houghton: who’ll be the winners among the ad holdco Big Six?
The ‘Big Six’ marcoms holdcos (WPP, Publicis, Omnicom, IPG, Dentsu and Havas) have experienced vastly different fortunes in recent months and years, which could be an intriguing signpost to what that part of the market will look like five years from now.
We’re witnessing a real polarisation at the largest end of the market. Publicis has pivoted to data-centric services and technologies that it has consolidated and centralised at scale. WPP has also gone through major consolidation, ending up at a shape resembling that of Publicis.
That shape is built around highly measurable, media-centric businesses with data, automation and the potential to scale globally. Of course, there needs to be a strong creative offer to bring everything together, but this newly emerging model has business and data at the front, with creative as an enabler, rather than the other way round.
Both holdcos point to what a future structure and mix of services might look like.
Six and the City
And yet, some of the other members of the Big Six have fared less positively. Dentsu trailblazed the modern data-focused design with Merkle, but has since rather fallen off the radar.
At the same time, Vivendi is looking to separate Havas out from the group, which will distance it from the culture and entertainment DNA of the parent company at a time when that couldn’t be more important to progressive brands.
As for Omnicom – it’s always made it a central mission to consistently deliver returns to Wall St and to keep up the rhythm of share splits for investors and staff alike every time the share price hits $100. It’s never wanted to be famous but to be the leading shareholder brand. It did its big deal (strategically and financially) last year with Flywheel and is currently consolidating its production assets. Overall, it’s in a pretty reasonable shape and doing a good job of being the most cash generative, most stable and consistent performer it can be, balancing brand autonomy and centralisation.
Meanwhile, the contrasting fortunes of Publicis and IPG, in particular, couldn’t be starker. IPG, probably even more than Omnicom, has held onto the traditional, multiple-branded agency model that it is now belatedly trying to shake off. There was an early promise with the acquisition of Acxiom but now it looks at risk of falling out of the mix entirely.
It’s currently attempting to divest itself of two of the industry’s most admired digital agencies, RG/A and Huge, which are underperforming as part of a group that hasn’t successfully or proactively managed its overall business mix in a way that allows them to flourish. IPG will quite possibly shrink before it grows again and is frankly too big to be taken private.
Looking forward
It’s entirely possible the Big Six of today will not be the Big Six of 2029.
Not only might an already data-and-technology-rich business like Stagwell Group usurp one of the slipping current players, we could end up with a ‘big three’ of WPP, Publicis and Accenture Song as the latter tries to leverage the AI and digital technology it’s been acquiring recently.
A spun-out Havas could also be an excellent acquisition for a major consulting group, so could it even be a top four of WPP, Song, Publicis and ‘Havas plus’? That last one could be someone like Capgemini or Accenture, again.
As for Sir Martin Sorrell’s S4 Capital, which many saw as another big player in the making, the group has probably been a victim of of its own rapid growth. Future-proofing its shape and infrastructure as fast as the pace of Sir Martin’s deal-making (who quite astoundingly is so hands-on that he’s still turning up for those big pitches in person) was always going to be a gargantuan challenge. The group’s image in the City might have had its confidence in the group wobbled, but absolutely not the man.
Good signs for the current Big Two
This all suggests positive things for Publicis and WPP. When Maurice Levy was on the way out the door at the former, everyone was terrified that the wheels might come off. But business has never been stronger. Similarly, Mark Read at WPP is now securely established. The stock market is comfortable with him and the consolidation and stabilisation job he’s delivered.
Those two firms have been through succession, but that’s been the elephant in the room for Omnicom for years.
Overall, Publicis seems unstoppable as it vies with WPP not only for the number one holdco crown, but also leadership position in the creator economy via its recent $0.5BN acquisition of Influential.
The really good news is that with these two front-runners, we now have marketing services groups that look able to hold their own against best-in-class businesses from other sectors. They’re strongly positioned to hold those top positions over the next five years, in as much as we can ever predict the future in such a fast-moving sector.
Jim Houghton is a partner at Waypoint.