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]