Ad agencies are merging in a last-ditch effort to compete with tech giants
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Got merger?... Yesterday, marketing giant Omnicom said it would acquire rival Interpublic in an all-stock deal, which would create the world’s biggest advertising company (snatching the #1 spot from ad powerhouse WPP). Omnicom and Interpublic are the third- and fourth-largest ad companies and the brains behind iconic campaign slogans like “Got Milk?” and L’Oréal’s “Because I'm Worth It.” The combined company (which will go by Omnicom) is expected to earn more than $25B in annual revenue.
Stacked deck: The deal would unite thousands of ad clients under the Omnicom umbrella, including heavyweights like Disney, Pepsi, Johnson & Johnson, and AT&T.
No click: Interpublic’s struggled to grow after losing key clients like Verizon and BMW. The stock popped on the merger news, while Omnicom shares fell 10%.
Ad-biz refresh… Traditional ad agencies have consolidated over the years, and more M&A’s expected as competition from Big Tech heats up. More brands are ditching ad agencies and bringing operations in-house, turning to self-service ad platforms and AI tools from techies like Google and Meta. It’s estimated that Amazon, Apple, Meta, Microsoft, and Google will earn almost two-thirds of all US digital ad dollars this year. Meanwhile, companies including Kroger, Home Depot, Paramount, Uber, and Roku have launched their own ad platforms. Everyone’s trying to get a slice of the pie as ad spending’s expected to top $1T this year.
It’s agencies vs. algorithms... The “Mad Men” era of advertising is long gone. Now, algorithms and AI are disrupting the industry by helping companies better personalize ads, predict performance, and run their own campaigns. A Bain study found that retailers using AI-powered targeting tools saw up to a 25% boost in ad returns.