Omnicom Sees Strength in Partnerships

NEW YORK This spring marks almost 20 years since Omnicom Group shook up the American ad industry, when it was created to fend off the Saatchis’ predatory acquisition spree in the U.S. Combining BBDO, Doyle Dane Bernbach and Needham Harper into a publicly traded holding company in 1986 was a telling sign of groundbreaking times on Madison Avenue.

Another new era is bringing new challenges and changes: After two decades of consolidation, Omnicom CEO John Wren is looking to redistribute some assets to better suit clients’ needs.

Now the industry’s largest holding company, Omnicom, with agencies most widely known for their award-winning TV commercials, is aligning some of its key marketing service companies with its three global agency networks as a better way to offer integrated solutions.

Already some of those operations, now contained within Omnicom’s Diversified Agency Services unit, have been identified as players in what would become three smaller Omnicom holding companies built around BBDO Worldwide, DDB Worldwide and TBWA Worldwide.

Organic, Rapp Collins and will be partnered with those three networks, respectively, positioning them to become global enterprises. But that’s just the start, Wren said. He explains his objective is “to enhance the groups which will remain multibranded, so there is increased coordination and collaboration in the areas of general media, CRM and interactive.”

He added: “If we’re successful in doing that, eventually at some point in the future I could see a closer alignment of retail distribution and activation.”

In an industry where the public promises of “integration” have been inconsistent, Omnicom says the changes quietly under way at the company over the past several years hint at deeper shifts in the way its companies approach client problem solving.

“Integration is an overused word,” said Tom Harrison, chairman and CEO of DAS. “I’d rather describe this model as ‘strategically aligned’ companies that make sense, in that this is not an agency-centric model. It’s a client-centric model. Ideas need to be radiated in as many media as possible with the client and the idea in the center. All of these aligned companies come to the client table on equal footing.”

DDB is a prime example of how the realignment is working, with companies like Tracy-Locke, with its Brand Activation Network, and interactive shop Tribal DDB, which has been expanding all over the world, closely associated with the agency network.

“Think about the global clients of each network and what their needs are. This is just convergence of all the disciplines they need,” said one senior Omnicom agency executive.

Amid growing requests from global marketers for holding company pitches, Omnicom chief Wren has made little secret of his belief that financial companies like his shouldn’t be pitching business, an effort best left up to the ranks of talent at his operating units.

By assembling multi-disciplinary communications units, he can minimize holding company involvement by having in place cohesive teams that share common strategic values, working experience and clients. In contrast, competitors like WPP Group CEO Martin Sorrell more actively manage the pitch process, handpicking team members from within the WPP empire to suit a marketer’s brief. “If Martin’s view is, ‘OK, I can give you those services by using multiple agencies,’ John’s point of view is that each agency should be able to provide them on their own,” said one Omnicom agency executive.

Omnicom’s realignment efforts are meant to bring other benefits, such as securing client relationships, increasing the amount of business the holding company recognizes from those marketers and expanding the geographic reach of smaller DAS entities.

Given the sensitivities of combining DAS’ entrepreneurial companies with Omnicom’s more institutionalized networks, the process has been a gradual one, sources said. “This is something that’s been discussed for some time, but you don’t want to say you’ll get it all done by the end of the second quarter because then you might have to force relationships and you don’t want to do that,” said one executive.

Sources said the aligned agencies would maintain individual P&L’s, but bonuses would be tied to a particular group’s performance to foster an all-for-one, one-for-all mentality.

Historically, Omnicom has prided itself on its autonomous operating structure. In making these new alignments, Wren has not wanted to appear to be dictating change. “I think everyone is realizing that being autonomous doesn’t allow us to be proactive or to be in front of anything [for your clients],” said one agency chief.

Even while DAS insiders are warming to the idea, complications and politics may inevitably interfere: Talks between Organic and BBDO, with its Proximity direct response unit, are moving more slowly than those between TBWA, which doesn’t have existing Internet operations, and BBDO’s interactive shop, @tmosphere, has gained little traction compared to the larger Organic, which has a strong relationship with BBDO because of shared client Chrysler.

After 20 years of industry mergers and acquisitions, as Omnicom prepares for a third decade of operations, the company is clearly anticipating a new wave of consolidation, this time within its own ranks.