On July 28, Madison Avenue mega-players Omincom Group Inc (OMC) and Publicis Group SA ($PUB) announced they’d be merging, to create the world’s largest advertising agency. The move was seen as a necessity, as the information age provides tech companies like Google Inc (GOOG) and Facebook (FB) an edge their traditional counterparts couldn’t match.
Tech companies are increasingly utilizing their massive stores of data they have on users to more effectively tailor advertising. Facebook made massive waves when they announced at their second quarter 2013 earnings report that they mobile advertising now accounted for 41 p[percent of their revenue. Mobile advertising had long been seen as a key for Facebook, and it appears they have unlocked their potential in that arena.
Google, meanwhile, is far and away the largest internet company on the planet, and the largest advertising platform as well. The company does some $50 billion a year in advertising. And due to the fact they are a search engine, Google has a direct line on what people are looking for, and is thus able to maximize the effectiveness of their advertising reach.
Madison Avenue, without access to the massive stores of data that Facebook and Google have, were facing a dwindling market share, and looked to not be able to make it up without banding together to invest heavily in data analysis. This data sifting research, known as Big Data, is increasingly becoming an essential tool for advertising companies, and especially companies heavily vested in mobile advertising.
Omnicom and Publicis both did impressive advertising revenue, racking up a combined $22.7 billion total. But this is absolutely dwarfed by the tech companies and others investing heavily in Big Data like International Business Machines Corp (IBM) and Oracle (ORCL) .
Big data is an $18 billion a year industry, and is expected to climb to $50 billion by 2018.
The merger of Omnicom and Publicis is going to create some interesting conflicts of interest, as the new, single company will represent both Coca Cola Inc (KO) and PepsiCo Inc (PEP) , and Verizon Communication Inc (VZ) and T-Mobile US Inc (TMUS) , but the loss of major billers was seen as an acceptable sacrifice to remain viable against their technologically superior competitors.
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