Will the $4.4 Billion Epsilon Acquisition Create New Data Challenges for Publicis?

Analysts debate what the group bought, exactly

Publicis CEO Arthur Sadoun speaks at the 2018 Viva Tech conference.
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It’s the second biggest deal in the history of advertising, behind only Dentsu’s $5 billion acquisition of Aegis Group in 2012.

But what did Publicis Groupe really get when buying Epsilon earlier this month? What sort of value will this bring to clients, and how does it change the positioning of the “Big Six” holding companies? On a more basic level, will it add new dimensions to an already complex business model?

Publicis CEO Arthur Sadoun told Adweek that the purpose of the acquisition was to “boost our creative product.” But the real prize, according to Forrester vp, principal analyst Fatemeh Khatibloo, is the “data product solution” that Epsilon built over the course of 20 years, combining its retargeting platform Conversant, the transactional information from thousands of retailers in its Abacus Alliance data co-operative, and the “demographic and psychographic data” it has collected from public sources.

Paul Cimino, global head of data strategy for Prohaska Consulting, called the acquisition “a continuation of ‘madtech convergence,'” or “mar-tech and ad-tech coming together because of the almost gravitational need for advertising data to connect to first party, CRM data.”

In short, Publicis is now firmly in the data business.

"I don't see that the Epsilon acquisition leapfrogs [Publicis] ahead of any of the other companies."
Fatemeh Khatibloo, vp, principal analyst, Forrester

The most obvious comparisons are Dentsu’s $1.5 billion purchase of Merkle in 2016 and IPG’s decision to buy Acxiom for $2.3 billion two years later. Those deals took two of the largest data providers off the market, and as Cimino said in respect to two of the remaining competitors, “This puts tremendous pressure on Experian and Equifax to do something.”

Along with all that data comes a new set of responsibilities.

Endless layers of information

“At a glance it sounds smart and bold: Take a holding company with a strong creative background and a decent tech division and add a ‘true’ data-oriented agency of a very large scale,” said Dept Agency CEO Dimi Albers. “But the big question is: Are they solving a problem or actually adding one (or more)?”

Albers referenced Publicis’ troubled acquisition of Sapient Nitro, stating, “That part of the business has not grown substantially since the deal went down.” He also said Epsilon is “still in the longtail of integrating” Conversant after buying that company in 2014, the same year Publicis bought Sapient, and called this another potential complication for the holding company.

Other parties questioned whether Publicis is ready to manage the security and privacy issues it has inherited.

“They bought an agency services firm—one that was compromised in 2011 by one of the largest-ever consumer data breaches,” said an executive who spoke to Adweek on condition of anonymity. “It makes Cambridge Analytica look quaint; they lost $4 billion, and it cratered a lot of the CRM business.”

An Epsilon spokesperson disputed that estimate, pointing to a 2011 Wall Street Journal interview in which CEO Bryan Kennedy said, “People recognize that these things happen.”

Epsilon has not faced any other major cybersecurity incidents since 2011, but the issue is more prominent than ever. Privacy regulations like the European Union’s GDPR or the California Consumer Privacy Act (CCPA) could also play a significant role in determining how the acquisition affects Publicis Groupe’s business in coming years. The U.S. ad industry is currently hard at work lobbying Congress to develop federal laws that are in keeping with its own interests, even if those don’t always line up perfectly with the wishes of American voters.

Much of the first-party data highlighted by Publicis will be drawn from the reservoirs of Epsilon clients like the NFL. Forrester’s Khatibloo said that, because Conversant uses cookies, pixels and tags to track consumer behavior across platforms and devices, Publicis will now know that a given individual who has frequented the football league’s website “has also purchased from the women’s apparel, toddler clothing and high-end electronics categories—and how much money they’ve spent over the course of a year.” 

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