Is Bigger Better? Thoughts on the Omnicom/Publicis mega merger

Reading the announcement in the NY Times today about the merger of “equal partners” Omnicom and Publicis brought a smile to my face.  Not because I own stock in either company, nor because I think it is a good idea, but rather because I am continually amused at how these monolithic organizations spin the story as somehow better for clients.

In my experience, clients are the second-to-last ones on the list of priorities for big holding companies, preceded by value of the stock, ability to reduce overhead, and share of the market.  The only consideration lower on the ladder are the employees—the ones who have the client relationships, the ideas, the inspirational leadership, the entrepreneurial spirit—which IS the distinguishing “product” of Idea Brands (more on this in a minute). Come to think of it, if the employees are an afterthought, and the employees are the embodiment of the brand experience for clients, then maybe the clients come last after all.

Let me explain why.  Advertising and promotional agencies are a very special kind of Service Brand: they are Idea Brands—brands whose service is the creation of innovative, differentiating ways to advance the awareness and sales of clients’ products.  Unlike other service brands, such as banks (I chose this example because that’s whose running most of the holding companies at heart, bankers and accountants), there is no economy of scale.  That is, a bank can come up with an idea—a money market account, say—and then sell it to hundreds of thousands of people, making a significant profit with each sale of the same idea.  With such a model, consolidation is very smart because you don’t need many people to create original ideas, just people who can re-cycle them.  However, Idea Brands must think of a new idea for every single client challenge, and cannot re-cycle these ideas.  The more idea generators that are client-facing, the greater the variety of ideas from which clients can chose.  So why isn’t a merger  of Idea Brands a bigger, better strategy?  Two reasons, basically: 1) because bigger means laying off “duplicated” services (you don’t need two Chief Creative Officers or two Client Services Directors and so on), thereby reducing the number of people who can sustain client-facing relationships and create an intense volume of new ideas.  And 2) bigger means more bureaucracy, and that’s a greater distance between the top people in the firm and the clients’ business.  As a veteran of large holding companies heading up strategy and creativity, most of my time was spent on administrating staff, dealing with cost-cutting (i.e. doing more with less), and attending meetings about the agency.  The time I would actually spend with clients (outside of showing up for pitches to win their business) was about 20%.

Idea Brands thrive on risk taking, entrepreneurial thinking, challenging the status quo—all anathema to big holding company culture, which is about structuring resources for maximum efficiency of operation (i.e. profit margins).  I’ve been around long enough to appreciate when clients hired agencies because of the peoples’ names on the doors—people who were famous for the above qualities, and who would work directly on the clients’ business rather than foist it off five levels down so the profit margin could go up.  I am fortunate enough to run my own shop now, and like many other of my compatriots who have held top positions at major holding company agencies, am enjoying a return to the hands-on, entrepreneurial agility upon which the industry was built, and about which clients are increasingly thrilled.

You don’t need 100,000 employees to come up with good ideas; you just need the right five or six employees—brilliant, experienced, nimble thinkers who can do in one hour what 10 inexperienced underpaid juniors—the ones who will actually show up for client meetings at holding companies—need 100 to complete.  (That’s not just about inefficiency, its about profit for the holding companies: one great person at $500/hour x 10 hours, or $5,000 vs. 10 inexperienced people at $120/hour x 100 hours = $12,000!  That’s why clients shouldn’t buy time; they should buy satisfaction.)

It didn’t escape me that Omnicom and Publicis admittedly know what I’m talking about.  Maurice Lévy, now Co-CEO of the merger (I’m going to start calling my twin daughters co-children) will not create a giant new “agency holding company,” but rather—watch for the rebranding—a “Big Data” company, like Facebook, which will create “both great challenges and tremendous opportunities for clients.”  Oh boy.  What is Big Data?  A company that has access to, and can “crunch,” millions and millions of data about consumers and the market.  I’d love to hear if clients think they are buying information or ideas, knowledge or insights, a series of “opportunities” or one great vision.

As the mergers continue (and they will continue), clients will begin to witness how the tail is wagging the dog—how a monolithic service brand, a supposed idea brand, is less concerned about service and ideas and more about their own financial success.  Only then will clients assert their supreme power to take that financial success and give it the boot it deserves by hiring smaller, leader-oriented idea brands, which bring to the table the expertise, entrepreneurial ingenuity and hands-on service they richly (pun intended) deserve.

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