The battle for digital marketing talent is on, underscored by continued mergers and acquisition (M&As) activity within the industry over the past few years.
Everyone is competing for the same talent, from advertisers building their own in-house agencies, holding companies strengthening existing portfolios and big consulting firms entering the fray and aggressively adding digital marketing services to their portfolios.
Indeed, an RSW/US poll released earlier this year indicated that 60 percent of marketers and 52 percent of agencies expect marketing budgets to increase either “somewhat” or “significantly” in 2018. This builds upon similar results generated by its 2017 poll. Thus, the ongoing scramble to fill those slots.
Looking back at the past three years, the large majority of these acquisitions have been in digital services (60 percent), followed by creative (30 percent) and media services (10 percent). As you can see below, during the first half of 2018 the most significant deals were Square Communications in Vietnam (acquired by Hakuhodo), Mackevision in Germany (acquired by Accenture Interactive) and MXM in the US (also acquired by Accenture Interactive). Other US deals included HelloWorld (acquired by Denstu) and Snow Companies (acquired by Omnicom Group).
Although Europe seems to have gained momentum in M&A, the US M&Aremains particularly active, as indicated by Interpublic Group (IPG)’s recent acquisition of the leading provider of data solutions, Acxiom Marketing Solutions, for $2.3 billion.
What does it all mean? An analysis of COMvergence data, which closely monitors M&A activity in the advertising sector, reveals the following emerging trends:
- Most of the deals in the first half of 2018 were made by the large holding companies and top consulting firms (25 and 5 respectively), indicating that the rivalry between these two groups is likely to escalate as their core capabilities start overlapping.
- WPP and Dentsu conducted the most deals, acquiring almost half of these agencies, showing a greater appetite than other holding companies. Interpublic Group’s acquisition of Acxiom was a bold move to build data-driven competencies. However, others like Omnicom and Havas made few acquisitions over the past three years. Publicis Groupe also appears to have put its M&A activity on hold after years of massive acquisitions – including Digitas (2006), Razorfish (2009), LBi (2012), and Sapient (2015). Publicis Groupe has instead been focused on reorganizing its activities around digital.
- Big consulting firms are building-out robust digital skill-sets. Accenture Interactive was the most acquisitive consulting firm with three acquisitions, with one of the largest deals being MXM. Deloitte Digital bought fewer than half the number of agencies compared to Accenture Interactive. Others like IBM iX and PwC have considerably reduced their acquisitions since 2017.
What is apparent from this activity and projected trends is that acquisitions follow the evolving nature of marketing budget allocations by top advertisers, which increasingly favor data-driven and digital activities. We will most certainly continue to see agencies, consulting firms, holding companies follow the money trail!
When I was on the corporate side, I always kept an eye on major industry deals that would contribute to significant share gains by my agencies or improve their strength in a region or in each capability. Recently acquired talent can then be immediately leveraged.
These recent deals are strengthening the offering of industry leaders, allowing them to broaden their capabilities, which can come at a price. Acquired entities are often expected to contribute to higher pricing and margins through competitive differentiation, economies of scale, and operational efficiencies. In return, brand managers are asking these new resources to seamlessly incorporate with other roster agencies. More can be less otherwise. The big advertising players are aggressively fighting for top talent and the battle is far from over.