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| Two Ad Giants Chasing Google in Merger Deal | Two Ad Giants Chasing Google in Merger Deal |
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| For years, the advertising business has been driven by the Madison Avenue mythology of small independent shops coming up with the snappy catchphrase or memorable TV commercial that becomes part of everyday culture. | For years, the advertising business has been driven by the Madison Avenue mythology of small independent shops coming up with the snappy catchphrase or memorable TV commercial that becomes part of everyday culture. |
| But the announcement on Sunday of the merger of two industry giants, Omnicom and Publicis, to create the largest ad company in the world, signals that advertising is now firmly in the business of Big Data: collecting and selling the personal information of millions of consumers. | But the announcement on Sunday of the merger of two industry giants, Omnicom and Publicis, to create the largest ad company in the world, signals that advertising is now firmly in the business of Big Data: collecting and selling the personal information of millions of consumers. |
| That business is a competitive one, with technology companies like Google and Facebook using their huge repositories of user data to place ads. Between them, Omnicom and Publicis accounted for $22.7 billion in revenue last year, more than the next highest ad firm, WPP. But no ad company comes close to the $50 billion in revenue that Google made last year, largely on the strength of its advertising business. | That business is a competitive one, with technology companies like Google and Facebook using their huge repositories of user data to place ads. Between them, Omnicom and Publicis accounted for $22.7 billion in revenue last year, more than the next highest ad firm, WPP. But no ad company comes close to the $50 billion in revenue that Google made last year, largely on the strength of its advertising business. |
| The merger was announced in Paris. There, the chief executive of Publicis, Maurice Lévy, said the “billions of people” who are now online and providing data to companies offer an opportunity to use advertising technologies to crunch billions of pieces of data “in order to come with a message which is relevant to a very narrow audience.” | The merger was announced in Paris. There, the chief executive of Publicis, Maurice Lévy, said the “billions of people” who are now online and providing data to companies offer an opportunity to use advertising technologies to crunch billions of pieces of data “in order to come with a message which is relevant to a very narrow audience.” |
| The business of advertising and marketing is being transformed by technology as agencies target ads to individual consumers. Television remains the single biggest beneficiary of ad spending in the United States, with a total of $66.35 billion in 2013, according to estimates from eMarketer. But advertising online ($42 billion in 2013), including mobile devices at $7.7 billion, is growing at a much faster rate. | The business of advertising and marketing is being transformed by technology as agencies target ads to individual consumers. Television remains the single biggest beneficiary of ad spending in the United States, with a total of $66.35 billion in 2013, according to estimates from eMarketer. But advertising online ($42 billion in 2013), including mobile devices at $7.7 billion, is growing at a much faster rate. |
| While advertising agencies often work hand in hand with Google, Facebook and Twitter, those same companies can also work directly with companies like General Motors and Coca-Cola, including sharing data. Traditional advertising agencies — the middlemen between the firms and the platforms like television networks, radio stations and online publishers — are under pressure to deliver more value for their customers, or be cut out of the equation. | While advertising agencies often work hand in hand with Google, Facebook and Twitter, those same companies can also work directly with companies like General Motors and Coca-Cola, including sharing data. Traditional advertising agencies — the middlemen between the firms and the platforms like television networks, radio stations and online publishers — are under pressure to deliver more value for their customers, or be cut out of the equation. |
| “Industrywide, you’re seeing more and more brands taking in pieces of what they used to pay an agency to do in-house and then spend that with other companies,” said Brad Rencher, senior vice president and general manager of digital marketing at Adobe Systems. | “Industrywide, you’re seeing more and more brands taking in pieces of what they used to pay an agency to do in-house and then spend that with other companies,” said Brad Rencher, senior vice president and general manager of digital marketing at Adobe Systems. |
| David Kenny, a former Publicis executive who now runs the Weather Company, which includes The Weather Channel and weather.com, said that platforms like his are now working directly with companies to develop advertising campaigns, especially on mobile devices, essentially bypassing ad agencies. | David Kenny, a former Publicis executive who now runs the Weather Company, which includes The Weather Channel and weather.com, said that platforms like his are now working directly with companies to develop advertising campaigns, especially on mobile devices, essentially bypassing ad agencies. |
| At the same time, new competitors in the digital advertising space have emerged over the last few years, including Accenture, Sapient and Deloitte, consultancies that have built up their marketing and data divisions to include many services once provided exclusively by ad agencies. | At the same time, new competitors in the digital advertising space have emerged over the last few years, including Accenture, Sapient and Deloitte, consultancies that have built up their marketing and data divisions to include many services once provided exclusively by ad agencies. |
| “We see the lines have been blurred between the various functions and the various players,” said Mr. Levy in an interview after the announcement of the merger on Sunday. “In this world you have to partner and you have to compete with a lot of players.” | “We see the lines have been blurred between the various functions and the various players,” said Mr. Levy in an interview after the announcement of the merger on Sunday. “In this world you have to partner and you have to compete with a lot of players.” |
| John Wren, the chief executive of Omnicom, who joined Mr. Levy for the interview, added: “Our industry is not limited to a handful of people. There are new people coming over the line to what was traditional advertising every single day.” | John Wren, the chief executive of Omnicom, who joined Mr. Levy for the interview, added: “Our industry is not limited to a handful of people. There are new people coming over the line to what was traditional advertising every single day.” |
| Darren Herman, the chief digital media officer at the Media Kitchen, an agency owned by MDC Partners, a smaller advertising holding company in New York, said the merger was not a reaction to competition within the advertising industry but rather a move to fortify against the likes of I.B.M., Google, Salesforce, Adobe and Oracle. “Fighting that fight is potentially a losing battle,” Mr. Herman wrote in an e-mail. | Darren Herman, the chief digital media officer at the Media Kitchen, an agency owned by MDC Partners, a smaller advertising holding company in New York, said the merger was not a reaction to competition within the advertising industry but rather a move to fortify against the likes of I.B.M., Google, Salesforce, Adobe and Oracle. “Fighting that fight is potentially a losing battle,” Mr. Herman wrote in an e-mail. |
| For consumers, the merger is another signal that the business of marketing is becoming more personalized, often based on information that consumers may not even be aware they are sharing, including Web habits, social media activity and credit card histories. As advertisers collect and combine this data, consumers can expect to see ads targeted more specifically at them. | For consumers, the merger is another signal that the business of marketing is becoming more personalized, often based on information that consumers may not even be aware they are sharing, including Web habits, social media activity and credit card histories. As advertisers collect and combine this data, consumers can expect to see ads targeted more specifically at them. |
| Advertisers like Nike, Comcast, Progressive and Procter & Gamble are now using automated exchanges — fast-paced, algorithmic bidding systems — to target individual consumers rather than the mass audiences that broadcasters and publishers serve up. Though still small, an increasing amount of the display ads that consumers see online have been sold through programmatic bidding channels. | Advertisers like Nike, Comcast, Progressive and Procter & Gamble are now using automated exchanges — fast-paced, algorithmic bidding systems — to target individual consumers rather than the mass audiences that broadcasters and publishers serve up. Though still small, an increasing amount of the display ads that consumers see online have been sold through programmatic bidding channels. |
| In an interview in June, Scott Hagedorn, the chief executive of Annalect, a data marketing company that is part of the Omnicom Media Group, said advertisers can now determine, in milliseconds, whether someone looking for a car is a luxury car buyer or a used car buyer; based on that information, an advertiser can determine whether to even display an ad or not. | In an interview in June, Scott Hagedorn, the chief executive of Annalect, a data marketing company that is part of the Omnicom Media Group, said advertisers can now determine, in milliseconds, whether someone looking for a car is a luxury car buyer or a used car buyer; based on that information, an advertiser can determine whether to even display an ad or not. |
| Advertising agencies already collect this data through a variety of sources, including so-called cookies, which track user behavior online. They also depend on partnerships with data companies like Axciom that collect and combine information like what Web sites a person visits with other streams of data, including use of store loyalty cards. | Advertising agencies already collect this data through a variety of sources, including so-called cookies, which track user behavior online. They also depend on partnerships with data companies like Axciom that collect and combine information like what Web sites a person visits with other streams of data, including use of store loyalty cards. |
| “We’ve done a lot in ramping up data analytics,” said Mr. Wren of Omnicom. “Collecting Big Data and being able to turn it into insights is the ambition of both companies, and it will be the ambition of the single company.” | “We’ve done a lot in ramping up data analytics,” said Mr. Wren of Omnicom. “Collecting Big Data and being able to turn it into insights is the ambition of both companies, and it will be the ambition of the single company.” |
| But the world of data is exploding. Google, Twitter and Facebook track individual sentiments online. Increasingly, smartphones and Internet-connected cars, fitness devices and even thermostats provide real-time information about a broad range of tastes and behaviors. | But the world of data is exploding. Google, Twitter and Facebook track individual sentiments online. Increasingly, smartphones and Internet-connected cars, fitness devices and even thermostats provide real-time information about a broad range of tastes and behaviors. |
| Companies like I.B.M., Oracle and Microsoft, along with numerous data analysis start-ups, have all in recent years spent heavily on technology and talent to serve companies directly, bypassing agencies and consultancies. | Companies like I.B.M., Oracle and Microsoft, along with numerous data analysis start-ups, have all in recent years spent heavily on technology and talent to serve companies directly, bypassing agencies and consultancies. |
| “There will soon be billions of people worldwide carrying smartphones, and they will get new forms of education, entertainment and advertising,” said Marc Benioff, the founder and chief executive of Salesforce.com, a leading software company that in the past few years has spent about $4 billion on acquisitions related to advertising. “Companies are setting up to maintain direct relationships with 100 million, maybe one billion people at a time. Publicis, Omnicom and WPP are all building marketing software departments, but guess what? Coke has a software department, Burberry does, Nike does, every company we deal with practically. They are all increasingly becoming data savvy.” | “There will soon be billions of people worldwide carrying smartphones, and they will get new forms of education, entertainment and advertising,” said Marc Benioff, the founder and chief executive of Salesforce.com, a leading software company that in the past few years has spent about $4 billion on acquisitions related to advertising. “Companies are setting up to maintain direct relationships with 100 million, maybe one billion people at a time. Publicis, Omnicom and WPP are all building marketing software departments, but guess what? Coke has a software department, Burberry does, Nike does, every company we deal with practically. They are all increasingly becoming data savvy.” |
| Claudio Aspesi, an analyst at Sanford C. Bernstein, said Sunday’s advertising merger was not simply a matter of corporate synergy but rather of gaining leverage against difficult competition. | Claudio Aspesi, an analyst at Sanford C. Bernstein, said Sunday’s advertising merger was not simply a matter of corporate synergy but rather of gaining leverage against difficult competition. |
| “If Omnicom and Publicis agree that the future holds more investment in software and in businesses that require scale, that explains the deal,” he said. “All of sudden the new set of companies playing in this space is not only large and profitable, but they are competing with companies that are very large and profitable.” | “If Omnicom and Publicis agree that the future holds more investment in software and in businesses that require scale, that explains the deal,” he said. “All of sudden the new set of companies playing in this space is not only large and profitable, but they are competing with companies that are very large and profitable.” |
| But David Droga, the founder and creative chairman of Droga5, an advertising agency in New York, hit a slightly skeptical note concerning how far technology alone could take the ad business if the creative aspect is lost. | But David Droga, the founder and creative chairman of Droga5, an advertising agency in New York, hit a slightly skeptical note concerning how far technology alone could take the ad business if the creative aspect is lost. |
| “Technology is the greatest enabler and the greatest canvas, but you still need the thinkers, you still need the storytellers,” he said. “Technology can become a commodity as well.” | “Technology is the greatest enabler and the greatest canvas, but you still need the thinkers, you still need the storytellers,” he said. “Technology can become a commodity as well.” |
Vindu Goel and Quentin Hardy contributed reporting. | Vindu Goel and Quentin Hardy contributed reporting. |
| This article has been revised to reflect the following correction: | This article has been revised to reflect the following correction: |
| Correction: July 30, 2013 | |
Because of an editing error, an | Because of an editing error, an article on Monday about the changes technology has caused in the business of advertising and marketing misstated, in some copies, Google’s revenue in 2012. It was $50 billion, not $55 billion. The article, using information from Marc Benioff, the founder and chief executive of Salesforce.com, also misstated the amount of money his company has spent in the last few years on acquisitions related to advertising. It is about $4 billion, not $7 billion. |
An earlier version of this article misstated, because of incorrect information supplied by its founder and chief executive, the amount of money that Salesforce.com has spent in the last few years on acquisitions related to advertising. It is about $4 billion, not $7 billion. |