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Monday, July 29, 2013

Merger Would Create World’s Largest Advertising Firm

Omnicom Group CFO Randall Weisenburger, left, and President and CEO John Wren, second left, join hands with Publicis Groupe Chairman and CEO Maurice Levy, third left, and CFO Jean-Michel Etienne as they pose for photos on the floor of the New York Stock Exchange Monday, July 29, 2013. (Richard Drew/AP)

Omnicom Group CFO Randall Weisenburger, left, and President and CEO John Wren, second left, join hands with Publicis Groupe Chairman and CEO Maurice Levy, third left, and CFO Jean-Michel Etienne as they pose for photos on the floor of the New York Stock Exchange Monday, July 29, 2013. (Richard Drew/AP)

A merger between two advertising giants, U.S.-based Omnicom Group and France-based Publicis, would create the world’s largest advertising firm — one worth more than $35 billion.

Of course, that merger will depend on approval by regulatory boards in both countries, and a vote by shareholders.

The announcement is creating buzz on the stock market, where shares in advertising groups jumped today, with investors speculating that the deal could create an opening for rivals to poach defecting clients and potentially create new deals.

The new group is anticipated to be a stronger competitor to non-traditional media like Facebook and Google.

Guest

Transcript

JEREMY HOBSON, HOST:

From NPR and WBUR Boston, I'm Jeremy Hobson. It's HERE AND NOW.

Two of the biggest companies in the world of advertising are getting together. If it's approved by regulators, a merger between the American Omnicom Group and the French Publicis would create the world's largest ad firm, one worth more than $35 billion. Maybe that'll give it a fighting chance against the rising stars of advertising. Those would be Google and Facebook. Heidi Moore is U.S. finance and economics editor at The Guardian. She's with us from Argot Studios in New York. Heidi, welcome back.

HEIDI MOORE: Good to be back. Thanks, Jeremy.

HOBSON: Well, first of all, how significant is this merger?

MOORE: It's absolutely huge. These two companies - it's a $35 billion deal, and it's a merger of equals, right. So they're each equally huge. And they're going to have, combined, 130,000 employees. So, to picture that, that's roughly the population of Kansas City working for one company. And they're going to have a really dominant position in advertising as we know it. In some countries, possibly including the U.S., they'll control 40 percent of the market. They represent clients like Coca-Cola, like Pepsi, Swatch, Wonderbra. And those are all going to be under one umbrella.

HOBSON: And will this be approved by regulators, given that, given that this company would be so big?

MOORE: That's a good question. You know, there are really a lot of antitrust questions. That's what it's called when you look at a company for being way too dominant in a market, or a group of markets. There are going to be those questions. There are also going to be cross-border ownership questions. Publicis is based in France, and Omnicom is based in the U.S. And generally, France doesn't like to lose its giants, even in perception. So the combined headquarters is going to be in the Netherlands, and - for tax purposes, of course.

And you could see that France is probably not going to enjoy, you know, being the old home for a company that's actually based in the Netherlands and, you know, has part of its headquarters in New York.

HOBSON: And this is really about competing with Google and Facebook, right? The new age of advertising is online.

MOORE: It is. And they need a better plan for doing that, because right now, Google is a behemoth. No other company has any hope of competing with Google. It has something like $50 billion in revenues. And as a sense of scale, Omnicom and Publicis together have roughly half that. And so they're competing with a giant company full of automated ad robots, and Omnicom and Publicis are full of people. You know, they're the old Sterling-Draper-Cooper-Pryce kind of admen. And it's really hard, when you have so many people, to compete with the new technological age of advertising, which is just robots churning out ads.

And, also, when it comes to online, there's a big boom in native advertising, which is very customized per site, you know, to each client. And, you know, they have a lot of work to do to push into that.

HOBSON: Well, it brings up a good question, which is: Are print and TV advertising even relevant anymore?

MOORE: They're still relevant, because TV advertising makes up - you know, it's far bigger than any other kind of advertising. I think it's something like $66 billion in revenue a year, which is really hard to walk away from. And mobile advertising is relatively small. It's only about $7 billion. And online is maybe about $40 billion. So those look like a lot of numbers, but what it means is TV advertising is still dominant. And the other two are smaller, but they're growing so much faster.

HOBSON: And Heidi, just quickly here, this idea that Coke and Pepsi are both going to be part of the same ad firm, that one of them might leave, tell us about that.

MOORE: Yeah. The companies are proud that no clients have left yet. But let's see what it looks like when the cola wars actually show up in their office. One suspects Coke and Pepsi aren't going to be happy to be together.

(LAUGHTER)

HOBSON: Heidi Moore, finance and economics editor at The Guardian. Heidi, thank you so much.

MOORE: Thank you, Jeremy.

HOBSON: And up next: What is behind those big jewelry heists in Cannes? Stick around. It's HERE AND NOW. Transcript provided by NPR, Copyright NPR.


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