US Advertisers Bolster Omnicom, But Challenges Remain With Publicis Merger

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gOmnicom’s global revenues rose to $3.5 billion during the first quarter, a 3% year-over-year increase.

Increased US ad spend contributed to these better-than-expected figures (US revenue rose 4% year over year to $1.9 billion in Q1). All was not peaches and cream, however, due to the ongoing and unexpected delay of the $35 billion merger with holding company Publicis Groupe.

Omnicom CEO John Wren said the holding company will concentrate its programmatic efforts on its digital and analytics division, Annalect.

“[With more] data to indicate return on investment, [clients] are accepting digital buys increasingly every week, every day,” he said. “Some are early adopters; some are a little slower to dedicate an increasing part of their budget.”

This focus on Annalect, however, calls into question the status of Publicis’ analytics and programmatic buying division, VivaKi, should the merger go through.

Speaking of that stalled Publicis merger, Michael O’Brien, Omnicom’s SVP, said complicated tax structures and requirements in several countries are delaying the merger. “Obtaining regulatory approvals from the various tax authorities have become more difficult than we originally anticipated at the time we signed the deal,” he said.

Brian Wieser, senior research analyst for Pivotal Research Group, said in a note this morning the merger will still likely happen, despite these difficulties. However, he added investors should proceed cautiously and be mindful of the possibility that the merger could still fall through: “While we continue to believe that a transaction is most likely to occur, investors will want to be incrementally more mindful of potential ramifications of a failure to complete the transaction.”

O’Brien, for his part, conceded the companies “still have a lot of work ahead of us.”

IPG Reports

Meanwhile it's business as usual in the rest of the ad industry. Omnicom rival Interpublic Group (IPG) said concerns about the Publicis merger have not triggered an advertiser exodus, as some had predicted.

"I can't point to specific clients that are in play as a result of the potential merger," said IPG CEO Michael Roth. "We're competing against the same players we competed against before. Until that transaction is closed both Omnicom and Publicis are going to market as separate companies anyhow. We haven't seen huge transformations."

IPG's first quarter was marked by stronger-than-expected growth internationally (9.1% vs. 4.8% in the US) and a narrower operating loss. IPG represents $35 million to $37 million in media placements, considerably less than WPP Group, Omnicom or Publicis, but apparently enough to achieve the scale efficiencies enjoyed by those larger competitors. Additionally, its smaller size may lend flexibility and collaboration to its operating agencies.

"We're able to create more personalized and customized planning and buying that clients like to see," Roth said. "The integrated offering is really coming to life. We look at the total pot and let the client review … all their dollars whether allocated to media buying, creative or digital."

Roth told investors more clients are managing spend in an integrated way this year, but did not give examples.

Zach Rodgers contributed.

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