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Publicis acquired Digitas… Trends and the like… December 22, 2006

Posted by Bill in Search Marketing, traditional advertising.
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THE FACTS:

·        The digital advertising world, including search marketing, has brought a more detailed financial view of making media accountable to marketing departments.  Companies are embracing this.

·        Overall advertising is growing 4-5% in the US next year, digital advertising is growing over 30% annually (some have it as high as 50%)… Digital marketing is stealing share.

·        Clients are increasingly looking to integrate digital & offline advertising campaigns, and measure the interaction effects

·        Publicis recognized the ongoing shift of dollars towards digital marketing, and like all leaders… shot their arrow ahead of the target.

THE MARKET RESPONSE/ AFTER-THOUGHTS:

·        The Publicis acquisition will NOT fuel an onslaught of copycat acquisitions

·        Other online advertising companies don’t measure up in terms of Digitas’ long-term relationships with large clients and synergies with a major traditional advertising group

·        Everyone has been focused on aQuantive when they comment on the above, which seemingly makes sense since they are now the sole publicly-traded digital advertising agency.

MY OPINIONS:

·        There is a reason why aQuantive is trading at a 43.9 P/E, where as the traditional ad agencies hover between 16 and 29 multiples.  That reason is two-fold: their technology foundation and their focus on digital advertising.

·        The focus on “Digitas’ long-term relationships with large clients and synergies with a major traditional advertising group” as an acquisition synergy for other acquisitions in the space is off.   A sound and scalable technology foundation is imperative to managing digital marketing and search marketing campaigns profitably.   The handful of major agency holding companies own the worldwide advertising spend and all the customer relationships.  They don’t need to buy customer relationships… they have them and the trust of them.  They need the digital assets to capitalize on the shift in spend.

·        My opinion:  the holding companies should not be focused on acquiring aQuantive or paying a premium for customer relationships, they need to be focused on acquiring smaller, privately-held companies that have build leading-edge technology platforms, have embraced a culture where the statistician is just as important as the creative director, and whom the large holding companies can bring their pre-existing customers to the digital upsell. 

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