Last week, the Competition Commission of India (CCI) officially approved Omnicom Group’s $13-billion acquisition of the Interpublic Group (IPG), thereby making way for what looks set to be a seismic shift for the advertising landscape in India and globally too. With this, India joins nine other markets, including China, Brazil and Egypt in granting an antitrust clearance for the deal, which is expected to close in the second half of this year.
Both agency networks have had a formidable presence in the Indian market. Experts expect major shifts across client portfolios, leadership and talent in the wake of the acquisition. Speculation is rife about the future of the agencies in each company.
Ad veteran and chairman of Rediffusion, Sandeep Goyal notes that while the industry will have to wait to see the actual impact of the deal, there will inevitably be some job loss and reconfiguring of client alignments. “Going forward, the shakedown is inevitable,” says Goyal. In India, IPG agencies enjoyed a stronger foothold, especially in media and digital. “Weaker global brands such as Mullen Lowe and FCB may face headwinds, even extinction. While all three are stronger and larger than Omnicom’s DDB, TBWA and BBDO in India, local realities will get papered over. McCann (IPG) is likely to be unaffected,” he predicts.
The Indian advertising industry is estimated to reach `1.6 lakh crore this year, growing at 7%, as per GroupM’s forecast. Six major holding companies – WPP, Omnicom, Dentsu, Publicis Groupe, IPG and Havas together account for around 80% of the industry. While individual market shares are not known for each network, WPP is the most dominant, with experts estimating its share to be around 30-35%.
Some observers say they wouldn’t be surprised if a unified Omnicom raced to the No 1 spot post acquisition; others estimate its market share could reach around 25%, making it the second-largest after WPP. Together, Omnicom and IPG employ around 8,000 people in India and it remains to be seen how the acquisition will impact the workforce of both.
Demise of creative legacy.
Besides size, the other big question is related to the continued existence of the agency brands under both networks. “Omnicom is likely to preserve its brands and people over those of IPG; some IPG brands could very well cease to exist. An entire network might be gone, just like that,” says a leader on condition of anonymity.
Nisha Sampath, managing partner of Bright Angles Consulting says, “No brand—regardless of heritage—is immune to consolidation pressures. The closure of an iconic brand like JWT drove the point home. A question mark hangs over each of the impacted agencies, even McCann and Lowe.”
She also points out that when it comes to creativity, bigger is not necessarily better. “The real challenge for the network agencies lies in retaining the unique creative DNA nurtured within their distinct cultural ecosystems,” says Sampath, pointing out that these shifts in the industry are eroding morale among the people and taking the focus off creativity and placing it on balance sheets instead.
There are other knotty issues such as managing conflicting accounts that will crop up inevitably. For instance, OMG manages all media responsibilities for Tata Motors’ passenger vehicle division, including digital, TV, print, OOH, and creative duties. On the other hand, BMW India is an automobile client of Interpublic’s (IPG) Team Dynamic. IPG also has an automotive division called IPG Automotive, which has built relationships with key OEMs and tier 1 suppliers in the region.
That might not be too difficult to resolve though. Globally, WPP agencies have handled P&G, Reckitt and Lever brands without much fuss.
Santosh Padhi, founder, CCO and chairman of Into Creative, laments the direction that network agencies are taking. “Collapsing agency structures is not a sound strategy for any organisation. Consolidation may help you cut costs for a year or two, but if you’re looking to create an agency that will last another ten years, this route will not work,” Padhi remarks.