Two large agencies, Publicis and Omnicon, announced a merger yesterday. Famous brands such as BBDO Worldwide, Leo Burnett and Saatchi & Saatchi will be part of the new empire. With merged revenues of $ 23 billion, it will become the world's largest advertising firm, displacing WPP.
In the last year or so, IT services firms have been quite excited about the CMO buying center. They hope their digital expertise in other areas of the enterprise will give them a leg up. The size of the agencies and their heritage of CMO access should be a wake up call on how difficult the CMO center will be to penetrate. These agencies are no digital slouches - Publicis, for example, has well established digital units in DigitasLBi and Razorfish.
Even more sobering are Avi Dan's comments about the merger
"Technology and digital media distribution are now more valued than the creation of content: the combined market capitalization of the new company is $35 billion, while Google's market cap is $295 billion, almost 10 times as bigger on revenues of $31 billion, with a third as many employees as Publicis Omnicom’s 130,000 staff. The world has changed and as it moves at the speed of technology, and the indispensability of scale is going the way of the three-martini lunch."
The comment about scale is also true in IT and BPO services. The large armies of consultants that the bigger firms have accumulated are a reminder of too large ERP and Y2K projects. The world has surely changed since. As with the advertising space, small, talented teams is what clients covet as I wrote here
