Omnicom-Publicis: A PR Scorecard

Now that the dust has settled from the biggest ad industry merger announcement ever, let’s take a moment to reflect on the net takeaway from the news. First, I should say that the announcement, IMHO, was mischaracterized. It was universally described as the creation of the world’s biggest advertising company, when in fact, both Omnicom and Publicis have scores upon scores of non advertising services companies under their respective belts. It prompted this tweet:

Curious how media mischaracterize $PUB$OMC as “world’s largest ad agency.” #MarketingServicesFirm
— Peter Himler (@PeterHimler) July 29, 2013

My pals Jonathan Kopp, the former senior digital comms person at Omnicom PR subsidiary Ketchum, and Gerry Corbett, the immediate past chairman of PRSA, weighed in on Facebook:

Gerard Francis Corbett:  World’s largest advertising, communications, marketing and PR hodgepodge. Sunday at 8:24pm

Jonathan H. Kopp: curious, but are you surprised, given where the biggest chunk of the revenue flows from?Sunday at 8:24pm

However you want to characterize the combined entity, I think it’s instructive to look at how those managing PR for this boffo merger have fared in their efforts to advance a message track that inspires confidence among the holding companies’ four vital constituencies: employees, clients, client-prospects and financial stakeholders.

It’s important to keep in mind that these two marketing services holding companies have some of the PR industry’s most established brands within their stable. Omnicom owns Fleishman-Hillard, Ketchum, Porter Novelli, Marina Maher, and Cone Communications, while Publicis owns MSL Group and Kekst & Co. Hence, no shortage of PR consiglieres advising on the merger messaging and announcement. With regard to the fate of those agencies, PR Week’s EIC Steve Barrett reported:

“Olivier Fleurot, CEO of MSLGroup, told PRWeek a small group of high-level executives will look at every aspect of the Publicis Omnicom Group merger and company organization across all disciplines, including advertising, media, digital, and PR.

“Then, subcommittees will look at each discipline and how to make the best of what we now have together,” explained Fleurot. “Together with our soon-to-be sister agencies, we will share best practice and beat the competition.”

Beyond that, the key takeaways that stuck in my mind were:

  • ELEMENT OF SURPRISE – Given the size, scope and industry impact of this merger, those managing its announcement should be given considerable credit for keeping it under wraps for as long as they did. Bloomberg reported:

    “The negotiations between the two firms and their advisers, Moelis & Co. and Rothschild, were codenamed “Color.” Omnicom — parent of St. Louis-based FleishmanHillard — was “Orange” and Publicis “Purple,” Levy said in Paris Sunday.”

    On Friday night, I retweeted Shiv Singh who caught Bloomberg’s first report:

    Publicis Said to Be in Late-Stage Merger Talks With Omnicom via @BloombergNews
    — Shiv Singh (@shivsingh) July 27, 2013

  • BIG, i.e., not just within the ad/marketing industry, but at $35 billion, a hefty size for a merger of any kind. This plays well for financial stakeholders, but maybe not so much for other constituents.  Industry chronicler Lou Hoffman writes:

“There’s only one thing that Wall Street likes more than growth. That’s bigness. The bigger the better. I used to think this was an American thing symbolized by the Big Gulp from 7 Eleven. Apparently the French like big too.

For financial analysts, this is a deal consummated in P/E ratio heaven.”

  • DIGITALLY FORWARD – Sure, the staging of the actual signing of the agreement between Omnicom’s John Wren and Publicis Maurice Levy was captured on a Vine (avec L’Arc de Triomphe à l’arrière-plan):

    Yet some influential industry pundits were more reserved on how the newly merged firm will compete with more nimble, cutting-edged shops. AllThingsD’s Peter Kafka looked to Dave Morgan for some insights in his piece “The Real Story Behind Publicis + Omnicom Has Nothing to Do With Tech.” Morgan opined:

“I believe that consolidation is an inevitability of the holding company business/capital structure. The bigger they are the more they can reduce costs/redundancies and hold profit margins and manage debt cheaper.”

Again, a message made for financial stakeholders. But what about employees of the two entities? Morgan continued:

“Unfortunately, one of the ways they will get synergies will be with layoffs, with lots of that in middle and higher/middle management, I suspect.”

Finally, he concluded when asked if this merger mattered at all:

“Yes, said Morgan, who likes the tie-up, at least from a shareholder perspective: It’s a classic scale deal, and when those work, they give you better margins and happier investors. But it’s not reinventing the ad business.”

CLIENT CONFLICTS – AdWeek raises the question in its piece titled “A Closer Look at Publicis and Omnicom Client Conflicts: Will marketers be more forgiving than in the past?” It’s inevitable that there are conflicts, but holding companies with scores of similarly functioning subsidiaries can fairly easily shuffle clients around, and erect the proverbial Chinese Firewall to appease skittish client competitors. Then again, it matters little what the agencies themselves do. Conflicts are always in the eyes of the conflicted.

VOLUME OF COVERAGE – The number of column inches and airtime this announcement generated was unprecedented, mostly because there are no shortage of ad/marketing/media beat reporters who love to navel gaze. Laura Stampler, Business Insider’s ad industry reporter, posted a piece titled “Even The Onion Wrote About The Omnicom-Publicis Merger [THE BRIEF].” The story title from The Onion speaks volumes “Merger Of Advertising Giants Brings Together Largest Collection Of People With No Discernible Skills.”

I haven’t performed a comprehensive analysis of the news coverage and social conversation around the merger news, nor was I privy to the communications goals set by the principals. Still I have to conclude that the Omnicom-Publicis PR team succeeded in garnering broad global attention for the size and scope of the newly combined firm. Beyond that, however, I feel they fell short in providing a business rationale, other than for financial stakeholders, that will propel the firm into the future.  Business Insider’s ad/marketing editor Jim Edwards wrote:

“The first “Publicis Omnicom Groupe” press conference ended today amid applause and smiles at the news that the two ad agency holding companies will combine to become the world’s largest ad network, with $23 billion in revenues. But applause for what, exactly? The merger will come with some significant downsides.”

I didn’t hear much about the combined entity’s value add for clients other than the possibility of more leverage in media buying — but even that was disputed   Finally, the fate of many employees remains to be seen, as Social Media Club;s Howard Greenstein noted in his comment on my Facebook wall:

“I’m sure the merger will go well,” said no employee, ever.”

Long-time marketing industry reporter Patty Sellers of Fortune offers an insider’s take on the genesis of the deal in her piece “How the Publicis-Omnicom deal started as a joke”. Subtitle:

“A Fortune exclusive on how ad giants Publicis and Omnicom came together to plot the biggest ad deal in history. And why Martin Sorrell at archrival WPP says the merger will be good for him.”

It appears she landed an embargoed exclusive.