Integration: Marketing services lag at new Publicis

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Although Publicis Groupe's $3 billion acquisition of Bcom3 Group will catapult the organization into the top tier of the advertising world, the No. 4 holding company will trail the Big 3 in marketing services, considered to be a significant long-term growth driver.

"There's a better-than-average growth in the marketing services area," said Alexia Quadrani, an analyst at Bear, Stearns & Co. "I think it will be [Publicis'] main focus of growth going forward."

While Publicis Chairman-CEO Maurice Levy has not been as focused on marketing services as his holding company counterparts, he does espouse "holistic" marketing and is unlikely to want to remain at a competitive disadvantage to rivals. The top trio in marketing services, Omnicom Group, Interpublic Group of Cos. (prior to the True North Communications acquisition) and WPP Group, accounted for a combined 41.9% of U.S. marketing-services revenue in 2000, according to Advertising Age data. Publicis is far behind: It ranked No. 9 in marketing services revenue; Bcom3 did not make the top 10.

When the deal is done, non-advertising revenue will account for only 38% of total revenue, according to the company. Publicis' primary marketing-services shops include Publicis Dialog, a relatively small player, and Frankel, which has suffered client losses and significant layoffs in the past year. And Bcom3's dearth of marketing services hindered its chance at an initial public offering, Ms. Quadrani said.

how to do it

Exactly how Publicis will ramp up or align its marketing-services offerings remains to be seen. The holding company is considering either merging the direct capabilities of Bcom3's Leo Burnett Co. into Frankel or folding all disciplines into one integrated shop, with Publicis leaning toward the former, according to an agency executive familiar with the situation.

"We've not made any decisions yet on how any of our assets will work together," said a Bcom3 spokesman. A Frankel spokeswoman echoed: "As far as we're concerned, it's business as usual, and beyond that we can't speculate."

Some industry watchers said growing through acquisition is less likely, since the Big 3 have gobbled up most of the contenders. "I don't think there's much to buy. I think [Publicis] will have to make a sufficient entity out of what they have," the agency executive said.

"You'd have to buy small stuff," Ms. Quadrani added. "None of the big stuff is available anymore."

One potential acquisition target is Chicago-based Upshot, the marketing-services arm of bankrupt Halo Industries, which may be forced to come down on what agency executives have called a high asking price.

An executive familiar with the agencies said Burnett is continuing discussions with Upshot that began before the Publicis deal.

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