When Publicis Group purchased marketing-tech firm Epsilon for $4.4 billion earlier this year, observers gawked over the high price but also questioned if the acquisition would lead to conflicts of interest with competing holding companies and marketers that don’t work with Publicis.
Publicis isn’t alone. As more marketers ask for proof that digital ads drive sales and the momentum behind regulation laws grows, large holding companies are cutting the number of advertising and marketing tech companies they’re working with. In the case of Publicis and Interpublic Group, they’ve bought marketing-tech firms Epsilon and Acxiom to safeguard themselves against regulation. Back in 2016, Denstu Aegis Network acquired Merkle’s first-party database.
Marketers are snapping up data companies
According to research from consulting company R3 Worldwide, marketers spent $7.2 billion on mar-tech acquisitions during the first half of 2019, equivalent to a 97% year-over-year growth.
“It’s a move to help the agencies better contend with the technology walled gardens that are somewhat protective of their own data,” said Jay Pattisall, principal analyst at Forrester Research. “They’re trying to add some much-needed data insights to their campaigns. It’s been a criticism for a number of years that marketers aren’t fully utilizing all the data that’s at their disposal.”
Critics, including some of these holding companies’ rivals, however, say holding companies that own data could make it the de-facto option for advertisers rather than providing them with options.
During Omnicom’s quarterly earnings call on Wednesday, CEO John Wren said that the company looked at buying Epsilon and Acxiom but decided they wouldn’t meet clients’ needs and suggested that IPG and Publicis’ acquisitions create bias for marketers. Omnicom instead has its own tool called Omni that pulls together data for clients.
“There’s risk when you do a transaction like that,” he told investors on the earning call. “Our systems have always been open and unbiased.”
Publicis and IPG make the case for acquiring data companies
Arthur Sadoun, CEO of Publicis, disagreed that Publicis would push Epsilon’s data over rival data firms or increase fees and said Epsilon will continue to work with non-Publicis clients.
In fact, he said, the Epsilon acquisition would help e-commerce and retail clients compete with direct-to-consumer brands that are growing fast thanks to all the data they have on their customers. For example, Epsilon can help Walmart wrangle its e-commerce, CRM and in-store data to build profiles of consumers using Epsilon’s own data on 250 million Americans, including phone numbers, addresses, and emails.
“We believe that we’re going to live in an opt-in world where you will need permission to use consumer data,” he said. “The technology to make sure that you can build individual IDs is the only way to be efficient in an opt-in world.”
IPG’s chief data and technology officer Arun Kumar, for his part, said in addition to selling data to marketers, agencies can also use these data companies to help marketers build products and practices to capture first-party data.
“We’re trying to make advertising more accountable for the business outcomes it should be generating and thereby giving clients an idea of what the ROI on multiple channels is,” Kumar said. “If you look at certain channels like email and direct marketing, there’s a fair amount of robust data that exists.”
Owning data could lead to tough conversations with clients
But Bret Leece, global chief data and innovation officer at Havas Group, compared Publicis’ and IPG’s moves to an agency owning a publisher. In theory, if an agency owned a media company, it would have an incentive to steer its clients to buy ads from that media company over others, regardless of whether that media company was the best fit for the client.
“If an agency were to buy Condé Nast, clients would be up in arms — you’re supposed to be at arm’s length,” he said.
Forrester Research’s Pattisall made the point that all the holding companies will end up using data from the same sources. A potential concern is that the agencies that own data businesses, including IPG, Publicis and Dentsu, will give preferential treatment to their own advertising clients and cut off access to non-clients.
Owning data also puts the holding companies in direct competition with digital heavyweights Facebook and Google, which already have a huge advantage in this area.
Other agency giants like WPP are avoiding owning data
Evan Hanlon, chief strategy officer of GroupM US, said he sees the role of the agency as working as an agent that provides clients options to multiple streams of data and that data ultimately belongs to the client.
Similar to Havas and Omnicom, GroupM’s parent company WPP is increasingly favoring working with data vendors instead of owning them outright. Last week, WPP sold 60% of its market research firm Kantar to private-equity firm Bain Capital in a larger effort to simply its offerings.
“A big challenge in the past year or so has been a lot of conflation about what it is that people are actually buying,” Hanlon said. “The only people who really own data are the sources. Increasingly, our focus is on data science and being agnostic.”