Marketing

5 emerging trends contributing to the consolidation of the advertising industry

5 emerging trends contributing to the consolidation of the advertising industry

Advertising giants Omnicom and Publicis rocked the industry this week with their announcement of a planned merger. The alliance will create the world‰’s largest advertising company with $23 billion in revenue, toppling current market leader WPP plc.

Much of the conversation about the surprise megamerger surrounds its possible impact on the advertising industry, their clients and campaign creativity. But, if you want to know what‰’s on the horizon in marketing, look no further than this merger.

Here are five marketing trends that the deal highlights:

  1. Digital advertising will reign

During a live Q&A teleconference, both Publicis CEO Maurice Levy and Omnicom CEO John Wren repeatedly mentioned the growing influence of digital media in marketing.

‰”We will be in a position to better partner with them,‰” Levy said when talking about digital media giants such as Google and Amazon. Wren added, ‰”Anything worth having three years from now is going to be digital because the whole marketplace is moving that way, even billboards these days.‰”

It‰’s not surprising that both CEOs mentioned digital. While ad agencies traditionally have been about TV, radio,and print, stats show that digital is growing very quickly.

At $66.35 billion, TV ad spending this year is still ahead of digital, but it is growing at a slower pace. Online technologies will continue to disrupt industries, and signs point to digital ad spending eventually taking over TV.

  1. More consolidation

The Publicis Omnicom merger is part of a larger consolidation trend. In the TV industry, several conglomerates own most cable networks, while local-market TV stations are also starting to join forces. In retail, Hudson‰’s Bay Company recently acquired Saks. Talks about mergers and acquisitions are daily news in technology, finance and food industries.

In the advertising business, consolidation offers some attractive advantages. Creativity and economies of scale are two obvious reasons to merge, but there‰’s more. Scale provides big agencies better negotiating power. Controlling 40 percent of ad spending in the world, the proposed Publicis Omnicom Group can leverage its size when talking to media companies and publishers. From the clients‰’ perspective, having an agency this big will make it more difficult to negotiate fees.

Clearly, the merger mania is making a comeback. Look for the Publicis Omnicom deal to spark a new wave of consolidation on Madison Avenue.

  1. Data is the name of the game

During the announcement of the merger, Levy was quick to use the ‰”big data‰” buzzword. In the press release, Publicis Groupe CEO LÌ©vy said, ‰”The communication and marketing landscape has undergone dramatic changes in recent years, including the exponential development of new media giants, the explosion of Big Data, blurring of the roles of all players and profound changes in consumer behavior.‰”

Access to consumer data will benefit the Publicis Omnicom Group, but it is also potentially a good deal for clients. At least in theory, with more data, the group can provide smarter decisions to advertisers. But, not everyone is convinced that the merger will result in better data capabilities. Clients generally own the rights to consumer data, so merging two ad agencies will not necessarily result in more data sharing. Furthermore, agencies don‰’t need scale to extract value from big data.

In any case, the fact that data is part of the conversation about this deal highlights the growing importance of collecting, managing, and making sense of consumer data. It‰’s starting to happen now, but in the future, companies that provide a platform for data collection will rule the business world.

  1. More personalized advertising

The Publicis Omnicom deal demonstrates how the business of marketing is becoming more personalized. Traditionally tasked with campaigns that have mass appeal, most agencies are not equipped to enable personalized advertising. However, with more data, the Publicis Omnicom Group can potentially become a bigger player in this trend.

The personalization of ads is just getting started. While the use of cookies has been in place for a while now, how advertisers utilize the data is becoming more sophisticated. A small number of advertisers now use fast-paced, algorithmic bidding systems to deliver relevant display ads within seconds.

Consumers can expect to see ads targeted more specifically at them. As more companies collect and use data, advertisers will deliver more personalized content based on information that consumers share through loyalty cards, social media activity and credit card histories. While the advertising of the past was more about clever catchphrases, the advertising of the future will focus on timely and personalized content.

  1. Consumer feedback will be integral

With big data comes big research opportunities. Right now, we are in the ‰”Wild West‰” days of big data research, with most companies collecting huge amounts of data without a concrete strategy in place.

As advertisers experiment more with personalized advertising, research needs to become more strategic. Smart companies will inject consumer insights back into the research practice. Big data allows companies to measure behavioral and transactional data, but it doesn‰’t reveal attitudinal data. To deliver relevant ads that people will actually like, companies will need to better understand why people do what they do, and they can only achieve this by talking to their customers.

Consumers will also be integral in crafting creative content. As agency veteran David Droga pointed out in a New York Times article, technology is an enabler in advertising, but it doesn‰’t completely replace storytellers. Advertisements will only resonate with consumers if they reflect a story that is relevant and relatable.

Finally, consumer insights play an integral role in the small but growing pressure to restrict access to big data. Eight out of 10 Americans, Canadians,and Britons are already opposed to private companies using web data, and concerns about data privacy legislation are emerging in some countries. Consumers want to get heard, but increasingly they want companies to ask for permission first before using their data. If companies want to continue to gather consumer data, they need to do a better job of inviting people into the conversation through social media, insight communities and other online platforms.

The most successful marketers usually accurately predict the future. They have a grasp of how technology will disrupt industries. More importantly, they have insights on what consumers need in the future. Only time will tell if the Publicis Omnicom merger will benefit the advertising industry, advertisers and consumers. For now though, the news about the deal highlights some of the issues that marketers will need to contend with in the age of the consumer.



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