Why the Publicis Omnicom merger signals the transformation (and possibly death) of advertising.

Posted by on Aug 3, 2013

Publicis_Omnicom_mergerPost Publicis Omnicom merger announcement, the industry chat flutter is all about how client rosters and staffing will play out due to the merger between two large advertising holding companies. Publicis based in France and Omnicom based in the US. Here’s why this short-term focus is like the cliché of people arranging desk chairs on the Titanic.

The truth is, the Publicis Omnicom union is not a merger where two companies shake hands and exclaim to investors that the goal of their action is to create “synergy.” It’s not about concentrating marketing and human talents that will make the combined company better than the two holding companies standing alone. It’s not about being a company that delivers better traditional creative or more traditional media buying power.

No, this is about both companies seeing the writing on the wall. The CEOs of each advertising holding company looking at the future and turning to each other with a knowing look of “We’ve got to get the hell out of here!”

What they see is the ad business is going the way of the newspaper. Like papers, they see an industry destruction that will be experienced in the form of a slow-motion car crash. One already in progress. TV media buys dropping over time as the ratio of budget to results becomes questionable as well as an accelerated transition to other ad models and messaging funnels over time. With this “car crash” coming, Publicis and Omnicom simply want to be in the biggest car that’s strong enough for the biggest chance of survival upon impact with changing market reality.

That’s why they’re really not merging for greater capability rather; they’re merging for greater infrastructure. A big enough infrastructure to have the capital and resources to buy time to evolve (and buy into) the next sustainable marketing model. A model that will demand huge capital expenses like data warehouses, developers, etc. The change is a leap for both holding companies as their traditional advertising units are bigger than their next-generation digital, mobile and technology units. They know that has to change and they want to be big enough and have the resources to buy the skill sets and infrastructure to change it. They also know this will be harder for smaller ad agencies and ad networks who will be hard pressed to marshal the same resources and capital to acquire high end infrastructure required. This as well as both companies have a big head start transforming their global offices into easier access to a skilled and technology-ready global workforce.

Why will this leave many in the industry behind? That’s because, until now, advertising has been an industry with a fairly low level of entry. Have good ideas and the willingness of someone to buy them? Simply hang a shingle out and you got an ad agency. Not a lot of upfront cost or infrastructure to purchase-all while the traditional model of 15% commissions on media buys made it extremely lucrative and profitable.

That model is deteriorating. Fast. Not just because markets like the US have matured. But as repeated ad nauseam by any media watcher, media consumption has changed. A report last week says now most adults watch on tablets and computers more than TV. What was once mass media is becoming niche media.

Once the cash cow and crown jewel of advertising, TV isn’t going away. But like radio, it’s taking a backseat as a niche. And let’s face it; most of have turned ignoring direct mail in our mailboxes into a science. In this tectonic media shift, clients are and will continue to reallocate their dollars. That and the democratization of content creation that allow a client’s fourth grader to have the same tools as your agency’s senior art director is what’s causing these two giants, and eventually, the rest of the industry to change. A new model is emerging.

It’s no longer the age of the marketing and creativity for the ad companies; it’s the age of the Big data analytics and predictive modeling. Engineering digital platforms and customer ecosystems to serve marketing and brand content like Facebook and mobile platforms.
This has been happening. But a bit like the journey to recovery for an alcoholic, the industry is at the point where it’s finally and openly admitting the need for change. That’s the big message to glean from the Publicis Omnicom merger.

Outside of art directors and some copywriters who can adapt, the future stars of the business are those that design and optimize the management of collecting and managing data and serving of content. Those who understand “servers” and “APIs” and effectively working people in to “buy flows” will do well in the upcoming Omnicom Publicis age. If you don’t under those words I just mentioned, that’s probably not you.

As this change in the industry is necessary, there is one caveat. In my years in technology, I’ve come to believe that, in any large changes or adoption of new technology, the first phase is often overreaction. Worshiping the possibilities of the new technology and forgetting the need to be conscious of establishing the human connection to that technology. I’m betting the soon-to-evolve Omnicom Publicis will do the same at first. Building a technology infrastructure and selling it with too much focus on being able to track, predict and target customers. A blind and unbalanced worship of the technology that, for a while, makes these firms forget we still talking about marketing and sales. That means we still have to win over, flawed, skeptical, emotional human beings.

I worked around Big Data projects. The technology is amazing. Smart, no doubt, but it’s not visceral. It doesn’t create flooding of persuasive emotion to change perception and desire. Big Data and analysis is about timing. Being Johnny on the spot. It’s about learning enough about someone to have food (or the right product) available when you know I’m hungry for it. A calculated, predictive match of need and opportunity. In this new marketing environment, I fear that creative and hunch (a technical term) in this environment will be considered as essential as painting a smiley face on a bullet. Cute, but not considered factor in the process of that bullet accurately hitting its target.

Technology has changed. Human nature and flaws don’t. But I do think those who can deliver visceral persuasive force will take a back seat for a while to the analytics and automation of new marketing technologies that agencies that can will adopt. At least until new technologies gurus concede emotion as the missing link in their process.

Until then, that will be the exit of the creatives once thought of “Mad Men” of advertising. The skill that will be still be needed. Just not here. Just not now. In this new model of the marketing firm with data warehouses, software developers, UX professionals, database developers, those agencies that have the money to do the same will follow.

This merger is just the start. And likely, the end of the traditional ad agency to create the new one.

1 Comment

  1. If you're a traditional ad agency person, why the Publicis Omnicom merger should concern you. | Intellectual Bubblegum
    August 3, 2013

    […] An excerpt from “Why the Publicis Omnicom merger signals the transformation (and possibly death) of advertising.” […]

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