Omnicom Group (US)

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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 Worldwide, partnered by fast-growing 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, mainly 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.

Who are the clients of Omnicom? See individual agency profiles below for more

Who are the competitors of Omnicom? See ranking of Leading Global Marketing Groups 

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Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 19th Oct 2017: Omnicom was as usual first out of the gate with 3Q results. Once again, they set a high bar for rival groups to hit. (Last quarter also, Omnicom far outperformed all its peers). Reported revenues for the quarter slipped to $3.72bn as a result of divested businesses, but the organic increase net of currency and M&A was 2.8% for the quarter, lifting the year to-date figure to 3.5%. Developed markets all delivered solid growth, led by Europe at 7.8% organic, the UK at 3.8%, North America 2.1% and Asia Pacific 1.4%. The main disappointment was Latin America, down 5.4%. Net income for the quarter rose 4% to $264m.

Adbrands Weekly Update 21st Sep 2017: Omnicom launched a new dedicated CRM division under the umbrella of its DAS Global entity, which houses its vast collection of diversified agencies. Omnicom Precision Marketing will take on oversight of all direct & digital brands, including Proximity Worldwide, which transfers from a long-established reporting relationship with BBDO. Former DigitasLBi CEO Luke Taylor joins Omnicom as CEO of Omnicom Precision Marketing Group. Proximity will continue to be led by Doug Worple, as chief executive, and Mike Dodds as president.

Adbrands Weekly Update 31st Aug 2017: With all the groups' results in, final scorecard for organic/LFL growth/decline for 2Q is as follows: Omnicom +3.5%, Publicis +0.8%, Interpublic +0.4%, WPP revenues -0.8%, Havas -0.9%, WPP net sales -1.7%, Dentsu -4.8%. Much smaller MDC scored +11.7%.

Adbrands Weekly Update 20th Jul 2017: Omnicom's 2Q results showed that Publicis is not the only group to find the going tough in North America. The US group also clawed a paltry 0.2% from its home markets, but did considerably better elsewhere. That resulted in 3.5% overall organic growth, though currencies resulted in a 2.4% reported decline in topline to $3.8bn. All other major global markets showed high single-digit organic growth, including 9.3% in the UK, 7.8% in continental Europe and 7.1% in Asia Pacific. Net income for the quarter was up only a little over 1% to $328m, but by 5% for the half year to $569m.

Adbrands Weekly Update 20th Apr 2017: Omnicom was as usual first of the major marketing groups with 1Q results. Those figures might set a tough benchmark for rivals to match, with overall organic growth of 4.4% to $3.59bn. Reported growth was 2.5% as currency headwinds and a weak US dented what was otherwise a strong international lift. On a regional basis, North America delivered organic growth of just 1.1%, compared to 5% in Latin America, 8% to 9% in the UK, Europe and Asia, and a whopping 38% in the Middle East & Africa. Net income jumped almost 11% to $242m, helped along by an accounting adjustment. CEO John Wren told investors that traditional advertising, media and digital & direct units had performed well, but there had been weakness in events, field marketing and branding in North America. He remains cautious for the future, he said, "as numerous geopolitical and macroeconomic events remain unresolved".

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Background

Free for all users | see full profile for current activities: 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. See full profile for current activities


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