Why the Omnicom-IPG merger doesn’t solve the biggest problems brands face

The Omnicom-IPG merger is one of the biggest advertising stories of the year, but it’s also unsurprising given the realities of today’s holding company model.

Financially, the merger produces the world’s largest ad holding company by revenue, projects $750 million in cost savings and enables greater leverage with platforms.

It also reinforces scale at a time when many brands want speed, integration and performance accountability. From the brand perspective, this is not an obvious win. As benefits to shareholders accrue over time, brands and CMOs will begin to question whether this model supports the business partnership they need.

What’s addressed and what remains unsolved

Holding companies have long struggled to meet brands’ demands for structural change, like faster decision-making, full-funnel expertise and better measurement.

This merger solves for an economic problem rather than a structural one. From Omnicom’s perspective, scaling up means negotiating larger upfront commitments, better pricing and better margins. Boosting buying power is a logical shareholder strategy, but it doesn’t necessarily mean improved client experience or better business outcomes for brands.

Balancing AI hype vs. operational reality

This deal has been sold in part as creating a powerhouse integration of IPG’s assets with Omnicom’s Omni platform and Acxiom’s data. The reality, however, is that the industry has a long way to go before the AI potential translates into operational impact.

But as holding companies continue to scale and take big swings with AI, the risk is more generic AI enablement at the expense of true differentiation.

The impact to brands and CMOs is murky

Consolidation creates simplicity at the top of the market but can lead to unfavorable outcomes further downstream. For example, principal-based trading enables scale, but it can limit transparency around decision-making and media costs.

Innovation may also be at stake. While portfolio consolidation and workforce elimination will drive immediate efficiency, the long-term impact on experimentation, creativity and diverse thinking is harder to quantify.

It’s possible that some brands may see sharper media pricing if efficiency gains are passed through, but at its core, the incentive structure here is built for margin maximization rather to optimize each brand’s unique media mix.

Enterprise brands will need to weigh the question of “Is this most effective for my brand?” against “Is this most efficient for the holding company’s pooled commitments and margin?”

In time, fatigue resulting from a heightened level of scrutiny will push CMOs to bring more strategy and coordination in-house and work with multiple partners rather than outsourcing to a single holding company.

Talent, culture and integration are key

Omnicom released plans to cut an estimated 4,000 jobs, retire several iconic creative brands and fold entire networks into a smaller set of flagship groups. Disruption is inevitable; aligning systems, cultures and leadership across two complex networks is a long, arduous process that can cause delivery gaps along the way.

If managed well, a genuinely best-case scenario for the merger would see a single combined identity that reduces internal fiefdoms and unlocks knowledge-sharing across previously disparate networks. However, this can’t happen unless culture and talent are made a top priority, especially amid the major structural changes that are in store.

Ultimately, agencies are people-based businesses. This won’t look like the kind of marginal-effort scaling you see in software. Here, the “product” is people, partnership and expertise. Rapid scale, especially through M&A, tends to introduce complexity, slow decision-making and increase internal politics — all of which can dilute the client experience if not managed exceptionally well.

Where independents can gain ground

For the world’s largest brands, holding companies still play a critical role. Their global scale, breadth of services and ability to manage complex, multi-market scopes remain valuable. But as the merged entity leans further into scale and principal-based economics, independent agencies have an opportunity to differentiate based on agility, accountability and specialized innovation.

The evolution of the competitive landscape may drive brands to re-architect around a hybrid model, where independents win critical elements of performance and innovation and holding companies retain global functions.

Key takeaways

Narratives around AI, client-first innovation and intelligent growth may be sincere, but the immediate drivers will come from cost savings, greater leveraging power and a simplified portfolio. In the next 5 to 10 years, winners will be determined based on effective combinations of culture, data and operating models. For CMOs, this means seeking out partners with deep expertise where it matters, who align incentives around business outcomes instead of media arbitrage and move at the speed the business needs.

This op-ed represents the views and opinions of the author and not of The Current, a division of The Trade Desk, or The Trade Desk. The appearance of the op-ed on The Current does not constitute an endorsement by The Current or The Trade Desk.