Omnicom Group's acquisition binge is just beginning. The world's largest agency holding company plans to gobble up at least two more marketing services shops before the end of the year.
Last week, Omnicom acquired a 50% stake in the Calgary, Alberta-based interactive communications agency Critical Mass for an estimated $20 million. That deal came two weeks after Omnicom acquired integrated marketing services specialist M/A/R/C, Irving, Texas, for $100 million.
The acquisitions are part of an ongoing Omnicom strategy to plump up the bottom line by adding resources in the interactive communications, direct marketing and sales promotion segments. Omnicom's Diversified Agency Services Unit, which houses more than 75 marketing service companies, has nearly doubled in size during the last two years and accounts for about half of the company's $5 billion in revenue.
"Put together this move and the acquisition of M/A/R/C, and you can see a real trend in the way we're taking this business," said Omnicom President-CEO John Wren.
Critical Mass will be affiliated with a newly created subsidiary of Omnicom's Rapp Collins Worldwide. That unit, Rapp Digital, will be headed by President J.G. Sandom, 42, previously director of interactive-North America at OgilvyOne Worldwide, New York.
"It's all about one-to-one communications to high-value targets," said Mr. Sandom, adding that he had been in talks about joining Rapp Collins for several months. "The method of delivery is not the most important thing."
Added Mr. Wren, "The future really is in customer relationship management."
Rapp and Critical Mass already share one client, Reflect.com, an online cosmetics business formed by Procter & Gamble Co. and Institutional Venture Partners. Rapp and Critical Mass have also worked together on Mercedes-Benz USA in the past. Critical Mass, with annualized revenue of $20 million, also counts United Distillers & Vintners' Smirnoff vodka and Denny's as clients. In addition to Calgary, Critical Mass has offices in Chicago and Stockholm.
"If you look at what's happening in relationship marketing and [e-commerce], these two disciplines are converging at lightning speed," said Tom Harrison, chairman-CEO of Diversified Agency Services.
MAKING NETWORKS STRONG
As Omnicom grows its integrated marketing capabilities, it is exploring ways to use those resources to expand the offerings of its global agency networks-- BBDO Worldwide, DDB Worldwide and TBWA Worldwide. Mr. Wren is said to want to be sure each of the networks has strong capabilities in direct, sales promotion and interactive.
Although the Diversified Agency Services division currently functions as an "a la carte" service, some units, such as sales promotion agency TLP, Dallas, have been closely paired with specific ad agencies. TLP and BBDO have worked together extensively for Pepsi-Cola Co., for example.
Another benefit of the Critical Mass purchase is that it gives Omnicom yet another connection to P&G. The package goods maker works with a handful of Diversified Agency Services shops in areas such as public relations, direct and interactive. With P&G loosening its conflict policies, Omnicom could be well-positioned to expand that relationship into more traditional advertising accounts.
Copyright October 1999, Crain Communications Inc.
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