A looming merger of two titans of the advertising industry may put a few new curves in Madison Avenue.
Omnicom Group, one of the world’s biggest providers of advertising and marketing services, is set to acquire rival Interpublic Group, creating a massive entity that will have significant influence over how many of the world’s top marketers spread their ad dollars across media.
The $13.25 billion all-stock deal, should it gain the approval of federal regulators, could roil the close-knit world of advertising and media buying agencies. The combined entity, still called Omnicom, would not only command unprecedented leverage against companies ranging from Apple to Warner Bros. Discovery, but also spotlight how quickly the art of the sell is changing as digital technology generates reams of consumer data. The new company could gain a massive store of knowledge about how customers act and what they want, as well as the best venues in entertainment, news and sports to reach them.
The Mad Men of industry lore — the ones who created catchy slogans and compellingjingles — have given way to a new breed of executives whose main skill is in using tech tools to target consumers. The ad industry leaders of the future will be experts at using data and AI applications to help marketers become ever more precise in placing their sponsorship messages. Advertising agencies and media buying firms once relied largely on hunches and a feel for popular culture as they advised clients on where to best land their commercial spots, magazine ads and billboards. Now, they work at pinpointing the optimal TV show or streaming series to reach, say, upscale young women in the market for both Pampers and a new SUV.
If the merger goes through, the new entity will emerge as “a very formidable holding company that controls billions of dollars,” says Jay Pattisall, an analyst who follows the advertising sector for Forrester Research. “They will certainly not be afraid to throw their weight around.”
Indeed, industry insiders on the other side of the table — the TV networks, streamers, social media platforms and magazines — are already alarmed by talk that Omnicom will use its heft to acquire highly sought-after blocks of advertising time it could then resell in smaller increments for a profit. The company’s leaders are expected to argue that such an arrangement, called “principal-based media buying,” would be beneficial to clients in the long run, if Omnicom can use its muscle to buy that time at cut-rate prices. The suggestion understandably has sellers nervous, as it would essentially turn Omnicom into a competitor. And that would be a big departure from long-standing ad-industry practices that have kept ad buyers and ad sellers firmly in their lanes.
“It basically isn’t transparent,” says Bruce Lefkowitz, a former senior ad-sales executive at Fox Corp. who now operates Six Pack Media, an industry consultancy. “To the best of my knowledge, you can’t find it in the financials” of any of the companies that have tried the technique “to see how much of a mark-upthey’re getting.” Mark Read, CEO of WPP, one of Omnicom and Interpublic’s main competitors, in Augustlikened principal-based media buying to what he called “black-box media models,” which are difficult to understand and monitor.
There could be other challenges. Will the Trump administration give the deal the nod? It’s a question worth asking, because conservatives have railed against an advertising industry that often pushes back on social media outlets, including Elon Musk’s X, that fail to keep ads from traditionalmarketers separate from content that may offend or polarize. During a investor call earlier this week, Omnicom CEO John Wren expressed optimism that their deal would close in a timely fashion.
The combined Omnicom and Interpublic would wield considerable influence, controlling some $71 billion in ad spending for such boldface brand names as Apple, Renault, Nissan, Mitsubishi, Volkswagen, McDonald’s, PepsiCo, Disney, AT&T, Amazon and Geico. It is expected to generate nearly $26 billion inrevenue and $3.9 billion in adjusted earnings and to control a little more than 30% of the ad dollars placed by the industry’s media-buying agencies all told.
Ultimately, the new Omnicom would achieve “unprecedented buying clout that has never beenreached before,” according to a report by COMvergence, a Paris- and New York based research firm specializing in marketing and communications.
The executives who orchestrated the merger emphasize that it’s ad tech, and not necessarily the creative aspects of the ads themselves, that will move the needle. Wren, the longtime CEO of Omnicom, rarely speaks in public and is known for keeping an iron grip on the finances of his sprawling conglomerate. Philippe Krakowsky, the CEO of Interpublic, has pushed his smaller company hard into data and technology in a bid to put it into a more competitive position. Both companies declined to comment for this story.
Omnicom CEO John Wren
Getty Images
“Everywhere we look at our industry, technology is becoming involved to a greater degree in all the areas you hear us talk about as growth: in commerce, in media, in production,” Krakowsky said during a December call with analysts. A merger gives rise to “the ability to, in essence, invest, to innovate at a higher rate, and puts us in a stronger position. And that’s a good place to be,” he said.
One motivation for the merger was the need to match the size and scope of the major companies — like Google, Facebook, Disney, Fox, Warner Bros. Discovery, NBCUniversal and Paramount Global — that now dominate sales of TV and digital ad time. In fact, Hollywood’s traditional networks and studios have steadily consolidated in recent decades as they too have faced industry disruption.
Omnicom will also be a heavyweight in the sports world, which is steadily attracting more ad dollars in an era where it’s getting harder to find programing that brings big audiences to the screen all at once.“In sports, Omnicom will be able to hold more sway in dealing with leagues and with rights holders,” notes Sean Moran, a former Viacom ad-sales chief who is now chief operating officer at Evergreen Trading, a boutique company that helps advertisers buy media inventory.
The two companies already have a history of exerting influence. In 2017, Omnicom assigned staffers to examine dozens of YouTube videos to make sure the content provided an appropriate environment for clients’ commercials. That review made it clear that YouTube wasn’t doing a good job of policing its platform. The industry outcry over edgy videos colliding with commercial spots for floor cleaners and potato chips drove some advertisers off the platform for a time. In 2022, Interpublic advised its clients to remove ads from Twitter in the weeks after the platform was acquired by Musk so its experts could study what the billionaire’s oversight would mean for brand safety.
Interpublic CEO Philippe Krakowsky
JB Lacroix/PolkImaging for Mastercard/PMC
Honestly, the Don Drapers of a previous era never had things so good. All of the industry’s “Mad Men” trappings are gone. Modern advertising is driven by using algorithms to ferret out specific audiences aligned around specific interests, mindsets and product needs. That requires “pretty sizable tech capabilities” to help big advertisers like Procter & Gamble and Wayfair to “identify audiences, define audiences and purchase media to grab and hold their attention,” says Forrester Research’s Pattisall.
It’s that last practice of using data to target consumers that has become exponentially more important, particularly as the barriers to entry on the creative side of advertising have eroded. These days, anyone with a camera, a little production savvy and a social media account can create a clever commercial. Case in point: PepsiCo’s large snack-making unit, Frito-Lay, will air an ad during the next Super Bowl created by one or more amateurs who enter a contest. The winner will be awarded $1 million. “You can shoot entire movies on your cellphone,” says Chris Bellinger, chief creative officer at PepsiCo’s food operations. “Everyone is essentially a creator.”
Meanwhile, the media and entertainment outlets that advertisers need to market their goods and services are also grappling with wrenching change. There have been mergers and consolidations, and many of the modern entertainment conglomerates are truly sprawling. The Omnicom-IPG union “is happening because, as [ad sellers] get bigger and consolidate more pricing power,” advertisers must do the same, says Lefkowitz.
The emerging practice of buying and selling media time for a profit could prove to be an offset. Krakowsky told investors when the merger agreement was announced in December that principal-based deals have “become very important to clients.”
Such stuff will only be welcomed when advertisers see a distinct benefit, says Evergreen’s Moran, not if the ad companies are simply trying to boost their bottom line. Companies like Omnicom and Interpublic have turned to this buying technique “to solve their own organizational problems of shrinking margins and revenue streams,” he says.
No matter what happens, buyers and sellers will have to figure out how to coexist. “Google, Fox and Disney cannot live without Omnicom and Interpublic,” says Lefkowitz. “And Omnicom and Interpublic cannot live without those guys.”
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