Programmatic Ad Tech Dominates Omnicom Earnings Call
Throughout an earnings call to discuss Omnicom's third-quarter results on Tuesday, nearly every analyst asked about the growth potential for so-called programmatic ad buying and its impact on the agency giant, reflecting the broader thirst to understand a new way of doing business and getting paid in the advertising services industry.
Omnicom executives expressed excitement about the fast-growing and lucrative tech-driven buying process, but also tried to tamp down expectations for its immediate impact.
"While this area is relatively new and presents good opportunity for growth, and we are comfortable with our position and investment, it's still small today," CEO John Wren said during the call.
Mr. Wren said 1.5% of total organic growth stemmed from the company's programmatic buying business, which is included in the holding company's media operations, and cautioned analysts to expect programmatic buying to be less than 2% of Omnicom's revenue this year.
Omnicom owns agencies and agency networks including BBDO, TBWA/Chiat/Day, Omnicom Media Group and FleishmanHillard, making it the second largest agency holding company by revenue, following WPP. It said earlier this year that it had begun to act as a principal, selling digital inventory it actually owns to clients, instead of buying on behalf of clients with client dollars, largely through the programmatic buying operation at its Accuen trading desk.
Programmatic buying and new opportunities to better target people through digital channels are making a notable impact on how clients think about spending their budgets, Mr. Wren said today, citing the TV industry's annual upfront marketplace, which was weak this summer, and the scatter market, where advertisers buy the rest of their TV time closer to its air date.
"When you look at traditional areas like the upfront and the scatter market and you [go] back a couple of years, there was an urgency on the part of clients to make certain that they didn't miss out on the programming that they wanted," Mr. Wren said. "With all the various choices of how to reach audiences you need to reach today, and our ability to do it, there wasn't that urgency going into the upfront this year. And with respect to the scatter market, you're seeing many [dollars] diverted into other areas. I believe that trend will continue. I don't believe TV is dead. I just think there's going to be a shift. I just see the complexity changing some of the rules that were easy to live by in the past."
A lot of the new complexity involves growth in mobile and online video, one motivation for Omnicom's investment in Annalect , the data and technology network that houses Accuen. It also includes a global data management platform that Annalect has been investing in to help agencies use and analyze data. Since that investment began in 2009, the company has put "tens of millions" of dollars into that business, the company said.
Like most holding companies, Omnicom is also working closely with outside digital media and technology companies to use data and technology.
Omnicom considers companies like Facebook and Google "friends, not enemies," Mr. Wren said, responding to a question about Facebook's relaunch of digital ad technology Atlas, which enables marketers to buy inventory across platforms beyond Facebook. "There's not much conflict between what they're trying to do and what we're trying to do. We're cognizant every day that that could change in the future. But right now, they're big clients of ours and we're big clients of theirs, and we've entered into economically sound deals with both."
Mr. Wren also offered some insight into how his company's programmatic business could evolve in the future, comparing it to the global operation of rival WPP, which owns technology group and trading desk Xaxis.
"If you're comparing us to what Xaxis claims it does, we haven't gone out yet and looked for non-Omnicom clients or gone out and purchased inventory in any meaningful fashion," Mr. Wren said during the Q&A portion of the earnings call. "We're studying what they're doing. They claim to have a significant business in Xaxis in Europe, much more significant than ours. I view that as a huge opportunity that we have to sort through. There's no reason to believe that we can't be impactful there as well."