Should Google and Facebook Be Worried About The World's Biggest Advertising Company?

In a $35 billion move, two of the biggest advertising firms are merging. In the race for consumer data, what does this mean for tech giants?

American-based Omnicom Group and French firm Publicis Groupe SA said on Sunday that they have agreed to the terms of a merger, forming Publicis Omnicom Group. The two company CEOs will remain co-CEOs for 30 months, presumably to oversee the stitching together of their two firms—then Publicis's Maurice Lévy will step aside and join the board as nonexecutive chairman.

The merger, which creates a company worth over $35 billion, is all about competing with digital ad giants and new industry players like Google, Salesforce.com, and Adobe. These companies have radically changed the advertising industry, where traditional firms like Omnicom and Publicis used to hold sway.

The Wall Street Journal suggest one motivation behind the merger is big data. Digital ad markets set up by firms like Google (a company that's expected to take in 50% of revenues in mobile ads worldwide) have a better chance of hitting target demographics, which challenges more traditional ad firms. Google's giant server farms and expertise at algorithmic big data crunching mean it can process more and deeper data on the effectiveness of ads than traditional firms can manage. Facebook is also making gains in mobile advertising.

The WSJ notes that Omnicom's head of digital ops was speaking recently about the company's plans, and noted that his firm is "borrowing black-box trading techniques out of Wall Street; we are looking at genetic algorithms; we are looking at artificial intelligence; we are looking at predictive models; we are looking for anything that might give marketers an edge."

[Image: Flickr user Chad Kainz]

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4 Comments

  • Anthony Reardon

    Yes and no. 

    My impression is online ads don't really work. People don't like them and advertisers don't really get the value they are paying for. The web is shifting the way consumers relate to brands and applying traditional models to the new medium of "digital" is going nowhere IMHO.

    So this is interesting news to me because it sort of confirms some industry dynamics I've been keeping my eye on. Companies in the online advertising service provider space are failing to meet the ever sophisticating needs of consumers and brands, so they are consistently shifting to "new" levers like big data with the promise that it will "work this time". It is inescapable- seeing that huge amount of spending that goes into traditional advertising media, and trying to get that shifted over to social media. Advertising agencies profit and make big noise because brands are still biting on the speculative advantages, but these agencies are also the only ones profiting/ benefiting. It's also unsustainable, so that might be why you see such big movements across the industry- not just shifting to digital, but consistently shifting to something new in digital.

    So Facebook and Google should be worried that instead of just competing against other technology companies over the spoils of the traditional advertising market, they now are going to face the traditional advertising market in full force. On the other hand, depending on how in tune they are with the fact the traditional model is quickly becoming obsolete, they might not need to worry so much.

    I wonder... will the technology orientation and culture give a fundamental advantage over an advertising media company that is really just trying to do the same thing it always has but in digital? Or...will the technology companies be too oriented on their success converting traditional to digital advertising- perhaps the media company be the ones who are really recognizing the failure, and be the ones to finally serve brands and consumers right?

    Best, Anthony

  • aybecker

      I literally stopped reading your comment after you said "my impression is online ads don't really work" which was your opening sentence. Not trying to be mean, and the rest of your comment might hold some merit, but any marketing or advertising professional will absolutely, whole-heatedly disagree with that comment.

  • Anthony Reardon

    Thanks AYBECKER, that is a fair criticism of a dubious assertion. It's true- almost every advertising and marketing professional I have met disagrees with my premise. I think it is in their interest to do so. However, I have not seen anything that impresses me to the contrary. Besides, the point today is preference and selectivity. How many people do you know actually like online ads and want to be influenced in how they spend their money that way? I don't know any. Unlike print, radio, and tv- the dynamic is different on the web, what people want and don't want actually matters.

  • Tmh42790

    As a PPC Advertiser I see companies making tens of thousands of dollars every day through online ads. I think if you refuse to look at the facts you're just naive. But I respect your right to be naive.