Omnicom-IPG Set to Grow Principal-Buying Arm in Post-Merger Shakeup, Analysts Say

Omnicom’s historic acquisition of rival Interpublic Group (IPG) was finalized Wednesday. Together, the groups form the largest advertising holding company on the globe, with combined annual revenues that could surpass $26 billion next year, according to SEC filings. The deal is likely to reconstitute a profitable—and controversial—part of agency economics: principal-based media buying, a practice that entails buying media in bulk and reselling it to clients at a markup. Omnicom is one of the leaders in principal buying, and its acquisition of IPG is set to vault the new company even further ahead in the practice, analysts and buyers told ADWEEK. For agencies taking a principal position, the practice enables them to make a margin on top of brands’ media investments; for brands, it allows them to secure a lower cost on media, and sometimes, guarantees on performance. The practice can be controversial, as some industry players allege it constitutes a conflict of interest on the agency’s part that could impede media neutrality. In the early-to-mid 2010s, principal trading was normalized by WPP-owned Xaxis, Omnicom's Accuen, and others. It’s since become a fairly standard part of the media business. Omnicom declined to comment on the future of its principal trading business. IPG did not respond to a request for comment. The promise for Omnicom The titans of principal buying have been Publicis and Omnicom, holding company rivals whose media arms tallied $54.7 billion and $45.6 billion in billings last year, respectively, according to estimates by Comvergence, a media-focused research firm. Within Omnicom, the principal buying practice is operated under Omnet, the investment division of Omnicom Media Group. IPG had maintained a much smaller principal-buying operation than Omnicom, with principal-style products spread across IPG Mediabrands—primarily within Kinesso, Magna, and Orion Worldwide, the company’s barter arm that also offers limited principal media solutions. Despite the smaller scale relative to Omnicom, the integration of IPG’s principal and barter businesses could provide immense value to the merged company. IPG’s principal trading practice began to expand more substantively last year; on a call with investors in October of 2024, CEO Philippe Krakowsky said: “In media, an area where we have always excelled, the recent shift in trading terms that has seen many clients accept and even embrace principal buying has clearly impacted our business.” He added: “Given that marketplace evolution, we continue to scale our practice in principal media buying….This represents an incremental option for value creation for prospective clients, which has been a decisive factor in some large pitches where decisions went against us. It’s also an area of opportunity for growth with our existing client base." Now, there is little doubt that Omnicom’s acquisition of IPG will bolster the giant’s principal practice—and help it compete more aggressively with Publicis on this front. “One of the major reasons that Omnicom and IPG are coming together is because if they can consolidate more of their marketplace buying power, they'll have more inventory to put into principal trading that they can then sell back to their clients,” said Kamran Asghar, CEO and cofounder of indie agency Crossmedia. “And there's more money to be made in principal than there is in doing consultative performance-based agency services—there's just very little margin in that today that clients are willing to pay for, because everything is being scrutinized at the FTE level, and margins are being scrutinized.” The Orion question Sources expect Omnicom and IPG to consolidate their inventory trading practices. If successful, that marriage could prove a formidable rival to Publicis’ principal business. One of the ways that this could work in real terms, experts say, is by folding Orion Worldwide into Omnicom’s Omnet. Arielle Garcia, chief operating officer at Check My Ads and the former chief privacy officer at IPG agency UM Worldwide, said she expects Orion to slot into Omnet. “My strong assumption is that buying will be centralized so that there is control over deal tracking and margin management,” she said. The prediction is shared by Asghar, as well as Jay Pattisall, a vice president and principal analyst at Forrester focused on the ad agency business, who said he also expects that Orion Worldwide will get lumped into Omnet. Not every industry insider is sold on that forecast. “Orion and Omnet are two very different things,” one brand-side media buyer, speaking on condition of anonymity, said. Despite the fact that Orion Worldwide has some principal products, “Orion is much more focused on barter for product,” the buyer said. “For context,” this person added, “I could have them buy $100 million of [our product], which is sitting in back rooms of retailers that I can clear off their books—and inherently my books—and the benefit they would give back is maybe 10% in media credits…Omnet is more like Apex [Apex Exchange, the trading desk] at Publicis, where they’re buying up a ton of inventory, guaranteeing delivery, and then reselling to their clients that opt into a non-transparent model. They buy Disney for $0.30 and they charge their client $1, and keep the $0.70. Two very different models, so I don’t know if they would integrate them in that nature.” Of course, the question of principal trading within other IPG outfits including Kinesso and Magna is also unresolved. Some have speculated that the whole of IPG’s Mediabrands network will be absorbed by Omnicom Media Group. Details of a potential reorg of the media business have not been publicly disclosed. (On the creative side of the aisle, news broke Monday that FCB is being absorbed into BBDO, while DDB and MullenLowe will slot under the TBWA umbrella—the FCB, DDB, and MullenLowe brand names will all be retired.) Principal as a bigger part of the equation Omnicom CFO Philip J. Angelastro said on the company’s third quarter earnings call on Oct. 21 that “proprietary media,” or principal media, represents “a relatively small proportion of our clients' media plan or our clients' media spend.” But the practice is sure to be a significant business line for the combined holdco moving forward. The union of IPG and Omnicom will “basically double their media buying power,” said Pattisall, the Forrester analyst. “I would anticipate that they could increase the volume of principal media deals by at least a third by having access to Mediabrands.”

Omnicom-IPG

Omnicom-IPG Set to Grow Principal-Buying Arm in Post-Merger Shakeup, Analysts Say

The newly merged holding company is expected to tighten its grip on principal media trading—potentially reshaping the flow of billions in ad dollars

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