The past decade has seen a fair share of consolidation in the ad agency world. We’ve seen large traditional agencies transform into holding companies that have rich and diversified portfolios of ad tech, publishing and, of course, agency assets. These include giants like WPP, Omnicom, and Dentsu.
Also on that list is Publicis, which we wrote about recently in light of its acquisition of influencer marketing platform Influencer (a good example of the M&A in this space). It has grown into a giant in the agency/ad-tech world through a steady stream of such acquisitions and a focus on blitz-scaling.
Other examples include connected TV (CTV) and retail media platforms like Epsilon, which has vaulted Publicis as a leader in these hot areas. Similarly, eCommerce SaaS analytics company Profitero has helped Publicis fill a gap in its repertoire, win new clients, and broaden its addressable market.
The reasons and advantages for all this growth are probably obvious, including economies of scale, cross-functional synergies, negotiating leverage, and diversification. But with these advantages, are there downsides to being this large in the agency world? Publicis is starting to stumble into a few.
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Switching Cost
One of these challenges, recently uncovered by AdExchanger, is that many of Publicis’ acquirees count as customers… other agencies. Therefore Pubicis’ competitors are supporting it by continuing to do business with the interests and assets that it owns. This doesn’t sit well with many of those competitors.
Given that conflict, it’s a wonder that Publicis hasn’t seen more attrition in these business units. One thing keeping agency customers around is they’ve worked with these companies – including CitrusAd, Profitero, Epsilon, and Conversant – before Publicis acquired them. So there’s a switching cost at play.
But other escalating concerns may tip the scales for some of these agency competitors. For example, there’s a growing sentiment that Publicis’ acquirees have gotten less agile and innovative. This comes down to the hunger of small startups versus the comforts of being under the umbrella of a giant.
The latter doesn’t always douse rigor and innovation… but it can certainly happen. And many agencies believe that’s the case with Profitero and CitrusAd. This has caused them to not only lose agency customers (again, Publicis competitors) but also direct brand accounts including Albertsons and GoPuff.
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Competitive Intel
Beyond all of the above challenges, another concern looms among agencies that compete with Publicis: data. Many of Publicis’ recent acquirees are ad tech and analytics players, as noted. That means their job is to ingest reams of data from agencies to help them optimize their campaigns and perform better.
This essentially means that agencies are handing over key intelligence to a competitor (or at least a business owned by a competitor). To be fair, there are church/state divides with Publicis-owned independent business units, which it maintains for this very reason, and to avoid conflicts of interest.
But the thing about conflicts of interest is that they don’t have to be active to be damaging. It’s the perception of conflict that causes issues. In that light, Publicis-owned ad tech players could give pause to agencies that consider the distant possibility that Publicis could grab their data for competitive intel.
One question that remains is how have others – such as WPP – navigated such challenges that are inherent in growing from an agency to a holding-company giant. They’ve certainly faced similar. Here, the name of the game is in smart planning and marcomm. At least they’re in the business of the latter.
Header image credit: Lanju Fotografie on Unsplash
