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Omnicom is the world's second largest marketing services group, controlling an extensive collection of different businesses led by the global advertising networks of BBDO, DDB and TBWA, three agencies with a reputation unequalled within the industry for consistently excellent creative work. Its main media buying network is OMD, partnered by PHD. The group also controls an extensive collection of marketing services companies including PR giant FleishmanHillard, digital and direct marketer Rapp, and branding agencies Interbrand and Wolff Olins. An early investor in the internet economy, Omnicom learned several tough financial lessons from the subsequent crash, and since then has almost entirely avoided cumbersome and goodwill-heavy acquisitions. Instead it has concentrated on filling out gaps in its coverage with highly selective purchases of niche players. Despite the lack of any major acquisitions, Omnicom's overall revenues have continued to rise steadily through organic growth. In July 2013, Omnicom announced plans to merge with rival Publicis to create a new global leader in the marketing services industry. That announcement prompted considerable negative comment within the industry, but was cleared by virtually all competition regulators. However, there was growing disagreement between the rival management teams over the structure of a combined entity, as well as difficulty in securing necessary tax arrangements. After nine months of protracted and distracting negotiations, the merger was called off in May 2014. Unlike its French partner, Omnicom bounced back from those negotiations rapidly with a string of key account gains.
See chart of Omnicom's quarterly organic growth since 2016
See ranking of Leading advertising Groups Worldwide
Omnicom was toppled from its throne as the world's biggest marketing group in 2008, but it remains arguably the most admired. Its three advertising networks regularly top all polls of the world's most creative agencies, OMD leads the field as the most awarded media services network, and most other subsidiaries are widely regarded as leaders in their own fields. It is especially strong in the area of general below-the-line marketing services. As a conglomerate conceived and still run by advertising executives rather than financiers, Omnicom has always managed to give the impression that it is concerned more directly with quality of work than sheer size.
Until 2013, that is. The proposed merger with Publicis would have created a giant new group, the undisputed leader in global marketing services, with revenues more than $6bn higher than current leader WPP. The arrangement was presented as a merger of equals; with each group's shareholders ending up with 50% of the resulting entity. The two groups had hoped to complete their merger mid 2014, and all competition regulators except China had already given a green light to the deal by Feb 2014. However, problems remained, not least the fact that, despite all talk of equality, both companies had clearly envisaged the deal as an effective takeover of its rival. Even nine months after announcement of the deal, the two sides had failed to reach agreement on several key issues, not least which of their respective CFOs would hold that role in the merged group. There were also long delays securing necessary tax permissions. With negative sentiment growing, especially within Omnicom, the merger was eventually called off in May 2014.
Omnicom's three main advertising networks are BBDO, DDB and TBWA, all considered to be among the world's three most creative agencies. The annual Gunn Report survey ranks all the main agency networks by the total number of advertising awards they received during the year. Only once since 1999 has that ranking not been headed by one of Omnicom's three networks, and BBDO has held the top spot for eleven consecutive years since 2006. Within the US, Omnicom also has stakes in several national advertising agencies, which generally act independently within the group. The most notable of these is Goodby Silverstein & Partners. Others include GSD&M, Zimmerman advertising, Merkley Partners and Martin Williams. In 2006 Omnicom acquired a majority stake in Netherlands-based 180 Amsterdam, then already the creative partner to TBWA and BBDO on the Adidas and Sony USA accounts.
Omnicom has a collection of interests in the US multicultural marketing sector, including a majority holding in US Hispanic agency Dieste, and 49% of African-American shop Footsteps and Texas-based Hispanic shop LatinWorks. In 2008, the latter shop absorbed another Hispanic agency part-owned by Omnicom, Cultura.
BBDO, DDB and TBWA offer interactive or digital marketing services inhouse or through their associated marketing services networks, but the group also houses several separately branded online specialists, including Organic and Critical Mass. (A third standalone brand, Red Urban, operates primarily as an arm of DDB). In 2001, just as the effects of the original dotcom meltdown became apparent, Omnicom injected several digital assets including its shareholdings in Organic and Agency.com into Seneca Investments, a joint venture with a private equity fund. Two years later it dismantled that structure, buying back full ownership of those two agencies. The creation and subsequent dissolution of Seneca became the subject of a shareholder lawsuit which alleged that the transactions were a breach of fiduciary duties designed simply to shield Omnicom from having to write off the value of its new media investments. The group also owned for a while a majority stake in San Francisco boutique Evolution Bureau, which specialises in viral marketing. The agency bought back its shares in 2014. To coordinate its various interests in the digital sector, the group created an umbrella entity, Omnicom Digital, in 2009.
In 2014, the group merged two separate production and creative services networks - e-Graphics, previously aligned with TBWA and BBDO-affiliated Hub Plus - to form eg+ Worldwide, a global implementation, adaptation and production services network operating from 39 offices worldwide.
According to figures compiled by rival WPP, Omnicom generated revenues of $6.0bn from advertising alone in 2016, more than any other group, and $4.7bn across all disciplines from digital.
Though for many years the global #3 in media, Omnicom overtook Publicis for the first time in 2017 to take second place behind WPP. COMvergence estimated global billings of $33.1bn. OMD (previously Optimum Media Direction) is the group's main media arm, supported by secondary network PHD. A separate unit, Prometheus, was spun out in 2005, operating primarily in the US. Another smaller satellite was spun out in the UK in 2003 to handle niche clients under the name Made To Measure, later M2M, to concentrate mainly on fashion and beauty accounts. Both were later shut down. Other media units include discount print buyer Novus Media and barter specialist Icon International, both of which feature among the top ten media agencies in the US by revenues. Resolution Media is a dedicated digital & social media services agency.
The most significant development within Omnicom Media Group in recent years was the creation of Hearts & Science in 2016, initially to manage the newly captured Procter & Gamble media account in North America. It puts sophisticated data analytics at the very core of its offering, alongside content creation and traditional media planning. It is conceived by Omnicom to represent "the future" of media investment.
The media division also houses a specialised sports and entertainment content and media group under the umbrella name of Fuse. The core of this operation is Full Circle Entertainment, a leading producer and packager of branded entertainment programming. It is accompanied by distribution business Highway Entertainment; strategic consultancy Optimum Entertainment, and sports and entertainment rights negotiator Optimum Sports. All of these business operate under the overall control of Omnicom Media Group, created in 2005 to manage its various media interests.
According to figures compiled by WPP, Omnicom generated revenues of $2.1bn from media in 2016.
Omnicom also controls a huge variety of other businesses. It is the biggest by far of any of the major marketing groups in terms of diversified marketing services, and all these separate agencies are grouped into a loose fourth global network, Diversified Agency Services or DAS Global. DAS alone generates more than half of Omnicom's revenue, and comprises some 200 distinct companies across nearly 700 offices in 71 countries, each with its own communications specialty. Since 2016, these have been gradually repositioned within six main practise groups.
Omnicom Public Relations houses two of the world's top five public relations firms, FleishmanHillard and Ketchum, as well as top 20-ranked Porter Novelli. Industry watcher The Holmes Report ranked FleishmanHillard as the world's 4th largest PR agency in 2018 with fee income of $605m, Ketchum as #5 with $545m and Porter Novelli #23 with $120m. In 2012, the group acquired Marina Maher Communications (fee income of $70m in 2018), a specialist in marketing to women. Kreab is a corporate communications joint venture with Swedish investment group Magnora formed in 2009. Omnicom merged its own Gavin Anderson & Co into the previously independent Swedish company in 2009 in return for a 50% shareholding. The Holmes Report estimated fee income of $43m. Other units include Clark & Weinstock (business communications) and Cone. An even more specialised unit, Zocalo Group, was established in 2007 to handle word-of-mouth marketing. One Voice is a dedicated global agency created in 2009 to manage global public relations for Philips. It draws upon the expertise of several other group-owned units including Ketchum, Fleishmann-Hillard and Gavin Anderson as well as healthcare agencies. According to The Holmes Report, Omnicom was the global #2 in PR in 2018, with estimated combined billings of $1.4bn. In several countries, the group has merged local branded operations of its big three networks; for example, in Italy, France, Netherlands and Spain in 2017; and in Singapore in 2018.
As with the PR agencies, a new Omnicom Health Group was created in 2016 to coordinate the healthcare marketing resources. The biggest of these is CDM (formerly Cline Davis Mann), with support from Harrison & Star, TBWA WorldHealth and others. In 2016, the group acquired healthcare CRM agency BioPharm Communications. Another healthcare agency, KPR, closed in 2008.
Omnicom Retail Group is the umbrella for sales promotion and activation agencies including Integer Group, The Marketing Arm, TPN, TracyLocke and Haygarth. Omnicom Precision Marketing collects direct response and CRM specialists including Rapp, Targetbase, Organic, Proximity and others. Branding and design work is handled by Interbrand, Wolff Olins, Siegelgale, Pauffley, Design Forum, New Solutions and The Designory-Pinkhaus. Specialty Communications comprises another selection of highl;y specialised units including field marketing agency CPM International. Selected agencies in less lucrative niches have been divested. For example, IT sales outsourcing company MarketStar was sold in 2019 to Wasatch Group. Yellow pages agency Ketchum Directory advertising was sold to independent group LB2 in 2009, and recruitment advertising agency Bernard Hodes was sold in 2013 to social recruiter Findly.
Omnicom declared total revenues of $7.2bn from marketing services in 2016, considerably more than any other group. Of that, $4.74bn came from customer relationship management, $1.37bn from public relations and the remainder ($1.11bn) from what it calls specialty communications such as healthcare. According to figures compiled by WPP, including estimates for bartering, contract sales and other non-traditional activities, Omnicom generated revenues of $7.3bn from general diversified services in 2016.
In 2003 the group established a separate operating entity based in London, Omnicom Europe, to broaden client relationships across its various European agencies, and mirrored this structure in the Asia Pacific region at the beginning of 2005.
The economic crisis took its toll on Omnicom's financial performance in 2009. After peaking at $13.4bn in 2008, revenues slumped 12% the following year to $11.7bn, while net income plunged by almost 21% to $793m. There was a marked recovery for 2010, with revenues rising 7% to $12.5bn, and net income by 4% to $828m. For 2011, the growth rate accelerated to 11%, with revenues reaching a new high of over $13.87bn. Net income rose 15% to $953m. For 2012, revenues were up by 2% to $14.22bn, while net income rose 5% to $998m.
For 2013, revenues rose 2.6% to $14.58bn. The US accounted for a little under 52% of revenues (or $7.57bn), with the UK as the group's next largest market (contributing $1.33bn or 9% of the total). Euro markets contributed a further $2.33bn, with $1.58bn from Asia pacific and just $437m from Latin America. Net income slipped back by less than 1% to $991m, still below 2008's $1.0bn, largely as a result of higher tax and interest charges as well as expenses relating to the Publicis merger. Performance for 2014 was somewhat stronger, with revenues up 5.0% to $15.32bn. Net income jumped 11% to a best-ever $1.10bn.
Foreign exchange left a small dent in results for 2015. Revenues for the year were $15.1bn, up 5.3% on an organic basis, but down slightly on a reported basis because of a $1bn foreign exchange hit. Organic growth for the final quarter was 4.8%, slightly below the previous three quarters. Domestic revenues rose 4% to $9.03bn, topping $9bn for the first time.
There were further currency headwinds in 2016. Revenues rose 2% reported but 3.5% organic to $15.42bn. North America revenues rose another 1.6% to $9.17bn. (It is still the biggest of the major marketing groups by revenues in North America, although WPP is bigger globally). Canada contributed around $540m of that total. The UK contributed $1.41bn, or 9%. Other European markets added $2.50bn, Asia Pacific $1.64bn and Latin America $424m. Net income was $1.14bn.
Omnicom ended 2017 with a disappointing final quarter, marked by organic declines in two of its biggest markets, North America and the UK. That cut organic growth for the full year to 3.0%. Reported revenues were $15.27bn. A $106m tax adjustment in the final quarter caused a 5% decline in net income to $1.09bn.
Revenues are widely distributed across the range of both clients and companies. In 2016, Omnicom's biggest client (probably PepsiCo) contributed 3% of revenues (or around $465m), and was served by no less than 250 group subsidiaries. Each of the top 100 clients were each served by an average of 50 different group subsidiaries.
Omnicom reported a strong close to 2018, with organic growth in 4Q of 3.2%. Full year revenues were $15.29bn, more or less flat in reported terms as a result of disposals (primarily the German callcentre business Sellbytel). Full year organic growth came in at 2.6%. Best performance in the final quarter came from Europe, with organic growth of 5.7%, more than twice the rate in the US and UK. Lower tax rates helped net income to jump by more than 20% to $1.33bn. Pretax income was up just 2%.
Omnicom announced a 3.5% increase in organic revenues for the last quarter of 2019. All regions except Latin America and Canada were positive, with organic growth of 4.7% in continental Europe, 4.5% in Asia Pacific, 3.3% in the UK and 2.8% in the US. Full year revenues slipped back 2% on a reported basis to $15.0bn as a result of currencies and divestments, but net income rose 4% to $415m.
Omnicom was formed in 1986 by BBDO chairman & CEO Allen Rosenshine, primarily as a defence against the global expansion of British group Saatchi & Saatchi, which had already completed a series of acquisitions in the US and was in preliminary negotiations to purchase Doyle Dane Bernbach. Rosenshine engineered what was then an unprecedented merger of three leading US agencies, BBDO, Needham Harper and Doyle Dane Bernbach, creating the world's biggest advertising group. (A few weeks later, the Saatchis stole back that title as a result of the acquisition of another leading US agency Ted Bates). Rosenshine then served as Omnicom's chairman for three years, before handing over control to his former BBDO colleague Bruce Crawford. Crawford had joined BBDO in 1963, and was president of the company from 1975 to 1983. That year he resigned to become general manager of New York's Metropolitan Opera, before returning to Omnicom in 1989. The group acquired a third agency network, TBWA, in 1990.
For much of the 1990s Omnicom busied itself with bolstering its global networks while also adding a huge selection of marketing services businesses to the portfolio. From mid-decade onwards, the group became one of the most high-profile investors in online marketing, taking sizeable minority stakes in a series of hot digital businesses. One of the first of these was design start-up Agency.com, which received investment from Omnicom as early as 1996, and went on to become arguably the foremost web design shop of the late 1990s. By 1999, the group's interests also included a 30% holding in Razorfish, 19% of Organic, and just under 5% of AnswerThink, an independent which came into the fold when it acquired Omnicom-controlled Think New Ideas. The group also took stakes in Red Sky Interactive, Headhunter.net and marketing services companies Dash.com, L90 and Netcentives. At the end of 1999 these holdings were regrouped within a custom-built division, Communicade. By early 2000, Omnicom was riding high as its initial investment of around $150m had soared a stock market value of more than $2.5bn.
The group reported revenues of $6.2bn in 2000, with net income up 20% to $435m. Traditional advertising represented 44% of revenues, with the remaining 56% coming from general marketing services. Despite the constant jockeying for position between the main marketing groups Omnicom cemented its reputation during that period as arguably the best-managed of the top three, delivering steady and consistent growth in both revenues and earnings since its formation. Even arch-rival Sir Martin Sorrell of WPP agreed, although he described the group as more like a venture capital fund than a marketing organisation.
Omnicom's interactive portfolio came crashing down to earth when the dotcom boom turned to bust during 2000. By the end of the year, several of the group's leading digital design companies had seen revenues plummet. Omnicom took steps to write off some of its losses in the sector. In April 2001 the group transferred its shareholdings in Agency.com, Organic and Red Sky Interactive into Seneca Investments, a newly formed private company co-owned by Pegasus Partners, an investment fund which specialised in distressed businesses. Razorfish was not so lucky; Omnicom sold off half of its holding (for an impressive $110m pre-tax profit); the rest of the shares were transferred to Seneca which sold off another chunk to reduce its stake to just over 4%.
During 2001, Omnicom began exploring a marketing environment that had not really been tackled by advertisers since the early days of television, beginning a number of dialogues with producers of TV and cinema entertainment to co-develop branded packages in association with advertiser clients. During the year the group packaged three music specials for television, featuring live performances by Jennifer Lopez, Backstreet Boys and Dixie Chicks, bookended with commercials from key clients. Mid-2001 the group made two further significant acquisitions: branding agency Arnell Group and UK-based design consultancy Wolff Olins. Total group revenues for the year rose 12% to $6.9bn. Net income increased 16% to $503m.
Shortly afterwards, in the wake of the Enron and Worldcom corporate scandals, the group came under intense pressure from investors over its accounting practices. During the first half of the year, two of Omnicom's non-executive board members resigned, including the head of the group's audit committee, reportedly over the accounting of the transfer of interactive holdings into Seneca. Contributing to these concerns was the fact that the group's auditors until mid-2002 were Arthur Andersen, the accountancy firm shamed in the Enron scandal. Spurred on by a series of hard-hitting stories in the Wall Street Journal questioning Omnicom's accounting policies, a group of shareholders launched a class action suit alleging the company had misrepresented certain aspects of its financial affairs. Omnicom issued a robust denial of any wrongdoing, and a line was drawn under the affair a few weeks later when Omnicom's historical accounting of the Seneca deal was endorsed by its new auditors. A court case rumbled on despite this development but was eventually dismissed in 2008.
Since then the group has continued to flourish, while its main rival Interpublic has suffered a series of reverses and accounting adjustments. The Seneca deal was subsequently unwound, following Omnicom's buyout of the Organic and Agency.com operations, both now apparently profitable. However the group has firmly resisted any temptation to mount large acquisitions, preferring instead to concentrate on organic growth and a series of small bolt-on deals to fill out gaps in its coverage.
Last full revision 30th January 2019
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