What Omnicom-IPG means for the media marketplace

With Omnicom’s proposed acquisition of Interpublic Group of Cos., two of the largest global media agency networks would join forces: Omnicom’s Omnicom Media Group, consisting of agencies Hearts & Sciences, PHD and OMD, and IPG’s Mediabrands, with agencies Initiative, Mediahub, UM and intelligence agency Magna. The deal stands to create the largest global media agency network by client billings, altering dynamics within the rapidly evolving media marketplace. However, while traditional media trading has historically been ruled by the contest of size, modern media practices hinge on the sophistication of data and tech capabilities that marketers wouldn’t be able to access with other agencies. The deal would bring together capabilities in advanced data dealing and principal buying that complement one another. Some industry executives think the move is more to prolong holding companies’ weakening grasp on the industry. “This is all about consolidating media billings,” said one former IPG Mediabrands executive, who spoke with Ad Age on condition of anonymity. “Between the trading desks and the principal-based buying offerings, it is where the hold cos make all of their money.” Tracking the latest Omnicom-IPG merger news and analysis Omnicom and IPG predict the deal, which would combine the two companies under the Omnicom name, will close in the second half of 2025 should it not run into regulatory scrutiny. Omnicom declined to provide comment for this article. An IPG spokesman said leaders at both agencies have “a singular aim: to do as flawless an integration as possible. Our company has been careful to avoid disruption or distractions at our agencies and client teams.” WPP’s GroupM is currently the world’s largest media group ranked by client billings, followed by Publicis Groupe’s Publicis Media, Omnicom’s OMG (3rd, with $44.8 billion), Dentsu and IPG’s Mediabrands (5th, with $26.2 billion), according to advertising research firm Comvergence’s 2024 projections. Combined, the third and fifth-largest agency media groups would rank first, with combined billings of $71 billion and a 31.8% share of the market among the top holding companies. The combined OMG and Mediabrands would also rank first by client billings in North America and Latin America, while placing second to GroupM in EMEA as well as APAC. In North America, the merged companies would have combined billings of $34.2 billion. However, in the realm of new business and client retention, it remains to be seen how the deal would affect clients. As other holding company media groups such as Publicis Media and GroupM have onboarded new data entities or transitioned to new internal structures, periods of losses have followed, a recent example being the merger pains of GroupM’s Essence and MediaCom to form EssenceMediacom. Client outreach after the news has been positive, said an OMG executive, who spoke with Ad Age on condition of anonymity. The executive said the majority of clients have expressed enthusiasm over the group’s potential growth, and that the agencies have committed to maintaining client teams throughout the transition to minimize the strain other holding companies have felt in past transitions. The exceptions, according to the executive, are clients in potential conflict post-merger such as Omnicom’s State Farm and IPG’s Geico, or Omnicom’s AT&T and IPG’s T-Mobile—“we just have to keep them very, very separated,” said the executive. Also read: Omnicom-IPG–8 potential client conflicts Scale and principal-based buying While both holding companies have been on new business winning sprees—OMG won Amazon’s massive media account for the Americas this year, and Mediabrands recently took U.S. media duties for Amgen—one competitive media executive said there are pros and cons to the combined entity’s market position. While it will form a behemoth to compete with, “it creates massive opportunity for differentiation in the marketplace” among fewer players,” said the competitor. The executive added that the massive scale of the combo will allow smaller agency groups to be more unique in “customized and personalized service that the larger entities simply can’t do at their size.” The OMG executive also said the merger would be good for market competition in new business, suggesting that after the loss of Amazon’s media account this year, Mediabrands has been “going into pitches and cutting rates—low-balling is not healthy for any hold co because there will always be a client that takes it, which continues to be a drag on rates overall.” The battle for scale among media agency groups has taken place in parallel with the decline of traditional media. While the combined scale of the companies will offer its media agencies increased pricing leverage and exclusive inventory in traditional marketplaces such as the TV upfront, the larger evolution of consumer habits toward digital platforms has shifted the role of agencies away from those practices that necessitated major agency power on behalf of marketers. “It's ironic—we keep talking about big, powerful agencies, but then we also talk about how linear TV is dying,” said a second former IPG Mediabrands executive. Rather, the executive said a combination of the personnel and unique tech capabilities have become the key to being a top player in media marketplaces. “Long gone are the days where I have the most money, I win.” But in the practices that are coming to define the future of media agency operations—differentiated tech and data operations for privacy-centric audience targeting, eliminating fees from outsourcing capabilities and better inventory pricing through internal trading desks as well as revenue-driving principal buying practices—the merger is set to fill in each holding company’s blind spots. In the realms where traditional TV still dominates, such as live sports, the larger scale would give the combined agencies command of the market, according to the OMG executive. But in further building tech capabilities, the executive said bringing IPG’s Acxiom into OMG will “put us at market parity with Publicis,” which the executive said has been able to undercut the rest of the market by leveraging data at low pricing. Read more: How the deal hinges on data and automation OMG has also been a loud voice in the media marketplace’s transition to adopting alternative currencies in advanced audience trading, particularly VideoAmp. The OMG executive said that “we would probably ask IPG for greater adoption [of VideoAmp] IPG for any client that’s buying data-driven TV.” Both former Mediabrands executives noted that IPG’s data capabilities are more advanced where OMG’s are lacking, and that Omnicom’s principal-based buying practice is larger, while IPG has been late to it. While IPG CEO Philippe Krakowsky had been vocal about expanding the company’s principal trading operations, reacting to pressure from Wall Street, it’s also clear IPG was behind other holding companies in this area. Part of that owed to historical opposition to the practice from prior CEOs, including Michael Roth. But IPG did have plans in the works to formally launch a new entry into principal media, built around offering more transparency than rival holding companies, according to a person familiar with the matter. By joining Omnicom, IPG largely solves that problem, becoming part of an operation with a well-established principal trading arm, OMnet. At the same time, IPG brings more advanced data operations than Omnicom had, such as its Acxiom data brokerage and other Kinesso properties that can be applied to Omnicom’s principal trading operations. The combination creates a tech stack similar in some ways to what Publicis Groupe has applied successfully from its acquisitions in recent years of Epsilon and its Apex principal trading operation under its PMX trading arm. The IPG spokesman said that the term “principal media” covers a broad range of activities, deal types and products that “generate volume-based value for marketers,” adding that the practice “represents an incremental option for value creation for marketers, which some have embraced.” Brian Wieser, CEO of consultancy Madison & Wall, said it may not be accurate to label that entire combined operation as principal trading—which involves taking possession of media and reselling it to clients. He offered “novel commercial models for media” as an alternative—since not all of the trading may involve the agency actually taking possession of the media. Either way, Wieser believes a combined Omnicom and IPG will be complimentary in many ways and in providing a managed service capability for clients, which is something that has helped Publicis Groupe grow market share in media in recent years. The combined agencies should also have more combined scale and buying clout in the U.S. than Publicis or WPP, Wieser said. “It creates the potential to be more competitive,” he said. “But it’s not the only thing that matters.” Wieser doubts that a combined Omnicom and IPG are so large that they create meaningful antitrust issues. “They’re important to the likes of Paramount,” Wieser said. “But in the grand scheme of total advertising spending, they’re small.” Still, it’s not out of the question that the merger creates an opening for new Congressional hearings on whether a bigger combined agency’s clout on such issues as brand safety might constitute collusion against conservative voices or outlets. “Some entrepreneurial politicians might want to get a repeat of what we saw with Jim Jordan’s [House Judiciary Committee] this past summer and get some commitments” regarding how they’ll apply brand safety, Wieser said. Others expressed doubts about exactly what Omnicom is getting in the transaction and how readily it can be consolidated in ways that Publicis Groupe has during a series of transactions over the past six years. “In the headlines, we’re talking about Omnicom getting access to Acxiom first-party data, when Acxiom does not have appreciable first-party data assets,” said Arielle Garcia, a former IPG media executive who’s now director of intelligence for the advertising watchdog group CheckMyAds. She noted that Acxiom is a data broker that gets its data largely from other sources, with limited amounts of first-party data collected through its own operations or managed on behalf of clients. The IPG spokesman said that “Acxiom has decades of experience helping brands put their first-party data to work. The company manages over a trillion first-party data records annually and offers data management solutions that include high-performance data enhancement, hygiene, as well as identity resolution, integration and managed services.” What made Publicis Groupe so effective in recent years was the ability of Chairman and CEO Arthur Sadoun and others to consolidate a series of acquisitions, including Sapient, Epsilon and CitrusAD, into an integrated offering that benefited the company’s media operations. It’s not clear that Omnicom has a similar vision or leadership capable of making that happen, said executives of another agency, who declined to be identified. That Omnicom’s Daryl Simm and IPG’s Krakowsky will become joint chief operating officers raises the question of whether anyone will have the authority to push through the integration needed to make the combination work. More on leadership: Omnicom-IPG—key executives to watch Growing principal media is probably one of the biggest upsides of the deal for the agencies, said Manuel Reyes, CEO of media auditing and consulting firm Cortex Media, who prefers the term “non-transparent media” to principal media. “Non-transparent offerings are going to be a big opportunity for the combined entity,” he said, “not necessarily that it’s going to translate into savings to clients. But the agencies will become more profitable.” As a result, clients may see fee reductions, he said, even if that doesn’t translate into lower profitability for the agencies. A former IPG executive and an executive of a rival holding company each said that Krakowsky has soft-pedaled the degree to which IPG Mediabrands already has been pushing hard to build its principal trading operation. IPG’s Orion Worldwide is a principal trading operation that has operated for decades, before even some other holding company principal operations, and operates well beyond the barter business it was founded on, these people said. The biggest impact of the combination on principal media is likely to be increased scale, which will allow the combined agency to negotiate better deals with media companies that will either mean a lower cost for clients or better margins for the agency, said Stephen Broderick, managing partner of consultancy Media Marketing Compliance. “My concern in all of these deals is that the client never comes out on top,” Broderick said. But there’s been enough focus on the growth and potential pitfalls of principal media that he believes many will be more wary of signing onto deals and more focused on how widely they’re being used. But a chief marketing officer of a company that works with both Omnicom and IPG, while not interested in doing buying more principal media, expressed hope that adding IPG assets to Omnicom will create new opportunities, noting satisfaction with Omnicom’s Flywheel acquisition last year and the new capabilities it brought in retail media. Ruben Schreurs, group CEO of consultancy Ebiquity, said that while expanding principal media and profits from it is undoubtedly a key motivator of the deal, it’s also about addressing the declining clout of the holding companies broadly. He pointed to eMarketer data showing the share of media billings controlled by major holding companies had declined from 45% in 2019 to 30% early this year. Most of the share loss went to brand in-house operations, largely due to the growth of Google and social platforms with self-service platforms, he said. Still, independent media agencies have seen their share remain relatively stable compared to the holding companies. Principal trading is “definitely a game where size creates leverage,” Schreurs said. Omnicom and IPG by themselves were at a competitive disadvantage to GroupM and increasingly with Publicis, he said, but this gives them an edge. “I’m pretty confident the benefits of this integration on the revenues, or most important the contribution to growing their principal trading practice is a very important reason for this deal,” he said. Among holding companies, Omnicom ranks relatively high for transparency in terms of providing granular detail about principal trading, Reyes said. But, like other holding companies, Omnicom doesn’t provide the most salient detail—what was paid for the media, he said. That’s the core of the proposition, basically—that marketers theoretically get better deals but without knowing the agency’s profit margin or having audit rights into the transactions. Read more: When agencies become media sellers Reyes believes closing the deal may be relatively easy in the U.S., with less regulatory pushback and less difficulty managing conflicts because of the many agency brands available. He expects more problems in Europe on a couple of levels and said he wouldn’t be surprised to see the European Union try to block the deal. Outside of that, managing conflicts will also be harder in the smaller countries within Europe, where smaller offices and teams make it harder to put up firewalls among clients, he said. Overall, the deal is “great for shareholders, great for the people that have stock internally,” but the atmosphere among Mediabrands’ employees is anxious, said the second former Mediabrands executive. Many media agencies, including OMG and Mediabrands, have made moves in recent years to harmonize agencies through core leadership for teams such as investment and research, creating potential redundancies in merging the entities. It’s unclear how personnel will be assessed, but the partners have announced $750 million identified in annual cost-savings. “How do you do that? Eliminate,” said the former Mediabrands executive. “We’re playing musical chairs, and somebody’s not going to have a seat,” said the OMG executive, noting that next year’s Cannes Lions International Festival of Creativity may be a C-suite showdown for job stability. “There are too many Cs with not enough need.” Become an All Access subscriber Get access to exclusive resources including Leading National Advertisers, World’s Largest Advertisers, Agency Report, Agency Review Tracker and TV Pricing Report. Click here

What Omnicom-IPG means for the media marketplace

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