The combined media spending of Publicis Groupe and Omnicom would amount to roughly $53 billion, according to separate sets of data from Pivotal Research's Brian Wieser and WPP analytics unit Kantar Media. That translates into a tremendous amount of buying clout. Major publishers across all media continued to absorb the news from this weekend about the merger between the two already giant ad holding companies, with an expectation that certain areas of their businesses would be under even greater pressure than before as larger amounts of ad spending become more concentrated.
A general consensus of sources find the respective strengths and weaknesses of individual media will be heightened by the combination of Publicis Omnicom Group, which will have a market cap of $35 billion. In general, print advertising has been treading water at best the last few years and even the most coveted brands will have difficulty in acceding to any discounts demanded by buyers from Publicis Omnicom. And TV and digital do have certain advantages – scarce premium ad inventory for the former and better targeting and data for the latter – but even there, niche publishers will have greater immunity from Publicis Omnicom's buying power.
"Having personally spent 24 years in the Publicis fold, I think it's a really exciting development for both companies and creates a lot of great opportunities for them," said Curt Hecht, chief global revenue officer at The Weather Company.
The Weather Company is more data-led than impression-led, Hecht is quick to point out. That may create a negotiating and price buffer for it and other media owners that expose their audience data to auction-based sales.
"With or without the merger, the focus on how data and technology are leveraged in the media marketplace is critical," he said.
Mark Trefgarne, CEO of video supply side platform LiveRail, points out both companies were already big enough independently to demand highly favorable deals and preferential inventory access. So combining their buying power may only deliver very marginal negotiating leverage. In this case, it may prove to be business as usual for sellers.
However, there is also a scenario where Publicis Omnicom chooses to get more aggressive, Trefgarne said.
"When a single entity controls the spend of so many leading brands, their position may now be strong enough to actively block publishers from working with other agencies," Trefgarne said. "This might prove unfortunate for publishers, since less competition for inventory will surely negatively impact pricing. However, it's still very early days, and how this shakes out over the mid to long term remains unclear."
Samir Arora, CEO of Glam Media, is fairly certain that the merger will accelerate the shift towards digital. At the moment, about 37% of Publicis' revenues come from digital (Omnicom doesn't disclose its digital sales dollars, but it's considered to be much less). While the concentration is expected to be more digitally oriented, Arora doesn't believe that pressure to cut online CPMs will be felt much in digital -- or in TV for that matter. Print publishers, however, will have difficulty defending themselves against Publicis Omnicom's ability to shift many millions of dollars at a time.
"The progressive move into digital advertising is still fairly new for both these companies and the agency business at large," Arora said. "Bringing all these media buying assets together will lead to greater ad spending in digital because of the cost and efficiency that online, mobile, and social media affords."
In a general sense, though, advertising is all about supply of inventory and demand. As we noted above, Pivotal's Wieser estimates that Publicis Omnicom will account for almost 20 percent of global media spending and closer to 40 percent in the United States. While $140 billion was spent in media in the past year, according to Kantar Research, that would amount to $56 billion in the US media spending alone.
But Wieser added that according to media buying research company RECMA, the dual ad holding company probably controls about $53bn in the US and $111 globally, though even those are probably overstated perhaps by as little as 10% or up to 20%.
Either way, it's still more ad dollars under one entity's control than any other. For the moment, at least. Industry speculation is already expecting more combinations in the short term, which will lead to greater concentration of media bundles in the hands of fewer large players.
Ultimately, publishers with more valuable audiences and placements will be able to resist that discount pressure as well as they always have, said Pete Longo, CEO of the IDG Tech Network.
"Of course there will always be pressure from large buyers across multiple media, and this is no exception," said Pete Longo, CEO of the IDG Tech Network. "Publishers need to continue to focus on showing increased value, and the key to unlocking that value is a publishers first party data. There are limits to the volume/price/value relationship, but inventory undifferentiated by data will suffer the most."