WPP now ceases to be the leader in Advertising world paving its way to the newly formed Publicis Omnicom Group. The two giants, Publicis Groupe and Omnicom Group merged to create a new entity with 50% ownership each. This new deal is expected to reshape the advertising industry with many more deals expected to follow soon. The giant is worth $35 billion and these firms clocked revenue close to $ 23 billion as revenue in 2012.
Upside of the deal:
- This entity displaces WPP to become the largest advertising firm in the world
- It gives more negotiation power to dictate ad rates compared to other entities
- Gives market leadership in many markets as they bring top rated firms like Satchi & Satchi, and BBDO under one roof
- Analysts expect this move to balance the advertising industry as large clients could switch to competitor agencies thus normalizing the rates and market shares
Downside of the deal:
- Both Publicis and Omnicom could lose some clients due to conflict of interest like Coke and Pepsi, they may not like to be served by agencies coming under same advertising firm
- The merged entity is likely to have a complex governance structure as they have co CEO’s and also they may need to keep the subsidiary agencies independent to avoid conflict of interest
- Omnicom group is likely to face some axe in their employee base as the entity would call for optimizing their cost structure
