Omnicom’s potential acquisition of Interpublic Group (IPG) was one of the biggest buy-side consolidation stories in years.
But what does the pending merger of two major ad agency holding companies mean for the sell side?
Publishers who spoke to AdExchanger expect the agencies will eliminate redundancies in their tech stacks as they consolidate, which could compel publishers to shed some redundant tech partners themselves.
Omnicom and IPG’s union could also make the controversial practice of principal-based buying – which both agency holdcos support – even more firmly entrenched in media plans.
But, overall, publishers aren’t predicting any major changes in their sales strategy.
Here’s what’s top of mind for publishers when it comes to this agency mega-merger.
Nipping at the margins
“The ad market is consolidating in many areas – it makes sense for the biggest holding companies to get even bigger so they can compete,” said Paul Bannister, chief strategy officer at Raptive. “It also allows them to fill gaps in their capabilities.”
For example, Omnicom snapping up Flywheel Digital last year allowed it to build a specialized offering for retail media. That deal spoke to the growing need for agencies to offer their clients more dedicated services for specific media channels.
By combining Omnicom’s and IPG’s client portfolios, as well as their owned and operated tech, this new version of Omnicom should have even more leverage with its client base, said Scott Cunningham, initiative lead at NewsPassID and chair of the Brand Safety Institute’s publisher council. The combined agency holdco will likely use its scale to improve its margins.
That strategy indicates a trend, Cunningham added, whereby “agencies are continuing to find ways to get out of the high-touch, low-margin business.”
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However, client service could suffer in the short term, said Stefan Havik, chief digital officer at DPG Media. “This big of a merger could cripple their business for a while, as it will undoubtedly lead to internal focus instead of focus on clients and media partners.”
Tech redundancies
Ultimately, the merger will have a greater impact on tech vendors than publishers, Bannister said. “It’s more likely the combined company will try to use its greater leverage toward the tech platforms, which is where they already spent the majority of their budgets.”
OMG and IPG have very complimentary businesses, Havik said, so “there are a lot of synergies to be found” between the two.
Indeed, Omnicom’s press release announcing the deal touted that the companies will be able to save $750 million in synergies, said Scott Messer, principal and founder of publisher consultancy Messer Media.
As the two agencies eliminate redundancies in their tech stacks, “there’s going to be a vendor squeeze on superfluous middlemen,” Messer said. However, the merger could also “entrench some people that are really hard to get out of the system,” he added.
Either way, tech providers that work with both agencies should expect a renegotiation of terms, according to Messer. “They don’t need two contracts for everything, so they’ll have a lot of pricing leverage,” he said. “It might mean less money to IAS, DoubleVerify and Nielsen, and all the standard bearers of ad tech.”
A reduction in tech partners on the agency side “would likely be a positive for publishers who are currently incentivized to work with too many ad tech partners,” Bannister said, “to make sure they’re covering their bases for where agencies are spending money.”
Plus, “fewer major agency SPO deals with a smaller number of ad tech firms would be good for publishers,” he added.
Go-to-market impacts
The deal also isn’t likely to impact how publishers organize their go-to-market strategy, since many publishers and publisher networks no longer have dedicated sales teams for specific agencies.
Raptive’s sales teams are organized by advertiser vertical, so agency consolidation wouldn’t impact its team structure, Bannister said.
And “many local news pubs don’t have direct sales doing holdco outreach anymore,” according to Cunningham.
But publishers that do have dedicated teams for individual agencies, like DPG Media, will have to reconsider how to organize sales efforts around specific clients, said Havik. However, he added, “we won’t do anything rash.”
Any required restructuring of sales teams would likely take years to play out, Messer said. And such reorganizations take place “every couple of years anyway,” he said, “so I don’t see it as a major upheaval.”
Principal-based buying
Because the buy side sets the agenda for digital advertising, the new Omnicom will have more weight to throw behind the strategies and solutions it supports, Messer said.
Which means principal-based buying could be due for a boost. Both Omnicom and IPG support the practice, in which ad agencies buy media and then resell it to brands.
While principal-based buying has proven controversial for close to a decade now, is it always a bad thing? Not necessarily.
“If principal-based buying approaches can help advertisers and agencies get the right efficiency and still deliver value to publishers, then this could work out well,” Bannister said.
It’s possible that the Omnicom/IPG merger will let the holdco court even more brand clients, which will allow it to “negotiate more spend at cheaper rates in a principal-based scenario,” Cunningham said. And, “if there’s a minimum spend commitment,” publishers will be on board, he added.
DPG’s Havik affirmed that sentiment. “I’m not a big fan [of principal-based buying] because of legacy practices, which were very nontransparent,” he said. “However, if it adds real value for the advertiser and does so in a transparent way, I’m in.”
