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For ad industry insiders, US ad giant Omnicom's proposed takeover of its rival Interpublic Group represents the consolidation of a challenged sector and shows that the future of advertising will be rooted in data and AI.
Being big matters as the industry wrestles with disruption from the might of Big Tech players and the advent of artificial intelligence. While AI could make their offerings more efficient, it also threatens to displace many ad-agency services and impact the prices they can charge for them.
First reported Sunday by The Wall Street Journal and confirmed by the companies on Monday, the agreement would create a company with combined revenues of more than $25 billion, based on last year's figures. The $13.25 billion all-stock deal would merge Omnicom's creative and media-buying agencies, such as BBDO and Omnicom Media Group, with IPG's McCann Worldgroup and Mediabrands.
The combination would create an entity bigger than Publicis Groupe, which has the largest market capitalization in the sector. Analysts expect Publicis will end the year with the most revenue, too.
The French advertising company is the sector's star performer and has outpaced rivals thanks to its simple messaging about an integrated set of services and as multibillion-dollar acquisitions in areas like data, IT systems, and commerce began to bear fruit. It also came out of the gate early on AI, launching its internal "Marcel" platform in 2018, long before generative AI hype.
Omnicom-IPG will be hoping to knock Publicis off the top spot — and not just on paper. By creating a larger company, Omnicom-IPG will have a bigger base to deploy data or technology like AI, which could give it leverage to secure beneficial and exclusive deals with partners such as cloud providers.
"Technology and data and thereby data-driven marketing has been arguably the largest driver of differentiation and growth for agencies for some time now, and one of the benefits of additional scale is being able to leverage major technology investments over a larger base of operations," said Simon Nicholls, partner at the advisory firm GP Bullhound, which works on mergers and acquisitions within the ad industry.
Some industry insiders say both Omnicom and IPG's investments have lagged behind that of their competitors.
One rival minced no words.
"It's a merger of two drunkards leaning against the lamppost as far as AI is concerned," said former WPP CEO Martin Sorrell, who now leads the digital-marketing company S4 Capital.
The "IPG Engine" is powered by a non-exclusive partnership with Adobe GenStudio, while Omnicom — whose Omni AI platform doesn't lock clients into the Omnicom ecosystem — hasn't offered as many specifics as its key rivals have about how much it is investing in proprietary AI.
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Still, the merger could reap future benefits for the pair.
"This ushers in not just a new era of scale, it ushers in the opportunity to invest in where the marketplace is going, which is creative and tech powered by AI," said Laura Desmond, an ad industry veteran who now leads the martech company Smartly.
Scale is also crucial in media planning and buying, the profit centers of most agency businesses. Generally, the more client ad budgets you control, the more leverage you have as an agency when it comes to negotiating deals with media owners.
Being bigger is also particularly important in the lucrative but often controversial practice of principal-based media buying, where agencies buy ad inventory in advance and sell it back in packages to clients. It's controversial because the agency doesn't disclose the price it originally bought the media to the advertiser. Agencies have defended the practice because they say it still drives performance for brands — and that brands themselves are often pushing agencies for lower ad prices. A larger advertising agency would have a bigger market of clients to resell its ad inventory back to.
Some of the rationale behind the deal is opportunistic.
IPG has been trailing rivals recently, having lost key client accounts like Amazon's media buying business, General Motors, Pfizer, Microsoft, and Coca-Cola. Meanwhile, Omnicom's stock is at an all-time high.
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"Wren is a wily old fox; he's no fool," said Sorrell, referring to Omnicom CEO John Wren's move to agree on the deal while Omnicom was on the upswing and IPG was floundering.
Wren will remain CEO of Omnicom after the deal closes, the company said. The acquisition is expected to close in the second half of 2025, subject to regulatory and shareholder approvals.
The consolidation of the two companies will likely lead to synergies — including job cuts. Omnicom said on Monday that the transaction is expected to generate $750 million in annual cost savings. The research firm Forrester said last year that the rise of automation could lead to the loss of 33,000 jobs within ad agencies by 2030.
"There will be even fewer big roles, and lots and lots of junior roles," ad agency veteran Simon Francis said of the overall ad agency sector. Francis now leads Flock Associates, a marketing consultancy and recruitment firm. "It will be harder to climb the career ladder. Superstar creators and creatives will also be in demand, as well as good strategists, in all disciplines. But, lots of other roles will become diminished."
That could create opportunities for smaller agencies, especially as the merged company works its way through the disruption caused by integration, egos being knocked out of joint as roles combine, and potential client conflicts where the new entity suddenly works with two or more fierce rivals in the same sector.
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A proposed deal to merge Omnicom with Publicis Groupe a decade ago memorably fell apart after the pair couldn't agree on which executives would hold key positions, including the chief financial officer role.
"The lessons learned a decade ago are not going to be repeated," Wren said on a call with analysts on Monday morning.
Nimble independent agencies that aren't encumbered with legacy businesses could offer good career opportunities for people who don't want to deal with the complexity of a giant network. But industry insiders said it's probably not a good idea to bet on companies in the middle of the pack, especially for those working in in-demand specialisms like data, tech integration, and commerce media.
"For the average worker, it's going to be all about scale," said Greg Paull, principal of the R3 marketing consultancy. "Unless you are in a creative boutique like Wieden + Kennedy or Mother, the world's largest clients are going to seek out the world's largest holding companies."
