Can the Omnicom combine challenge WPP dominance in India?

The consolidation of Omnicom and IPG in India marks the rise of a formidable force against WPP’s GroupM. This development is likely to disrupt the status quo, should GroupM be worried?

Omnicom Media Group (OMD, PHD) earned Rs 779 crore in FY24, as per the company's disclosures to the Registrar of Companies. IPG’s Mediabrands and Interactive Avenues together cornered Rs 349 crore during the same period. Add it all up, and it is a comfortable Rs 1,128 crore in total. While these agencies are weak competitors individually, their combined might could be just enough to make the market leader, GroupM, take stock and assess its strengths and weaknesses.    

GroupM, the behemoth in the media buying business, raked in Rs 1,471 crore in the calendar year of 2023. The math is clear; the Omnicom media combine is Rs 343 crore behind GroupM in revenue. 

As per industry observers, this would create the second largest media agency network in India.

According to COMvergence’s projected 2024 billings figures, the coming together of the media buying operations from American advertising holdings Omnicom Media Group + Mediabrands (MB) would claim the second position in EMEA and APAC, behind GroupM.

WPP chief Mark Read has responded to the development saying, “While our peers are distracted and turning inward, we are getting on with the job of delivering exceptional results and value for the world’s leading brands.” 

With clients such as Hindustan Unilever, Colgate, and Mondelez, among others, GroupM has been the unchallenged market leader in India. Omnicom’s sudden move to consolidate could break this monopoly that WPP has in the media buying space. 

Monopoly is challenged

Shavon Barua, who served as the chief client officer at PHD until 2020, is happy that this monopoly will be challenged. “A bit of competition close to the heel was always required in the Indian market because there was a sort of monopoly. And monopolies are never good; not for the ad business and definitely not for the clients,” says Barua, who is now an independent brand curator and consultant.

A higher volume of media spends being channelled through the new Omnicom could potentially give the agency network better bargaining power with media companies. It is worth remembering that rates can also plateau. 

“When you hold large volumes, you naturally gain an upper hand. However, there’s a saturation point beyond which negotiation becomes limited due to supply-side constraints,” warns Anita Nayyar, who has been the head of Havas Media Group for 13 years and also served as Patanjali Ayurved’s media, branding and communication head until January 2024.  

Fierce competition could also put greater pressure on smaller agency networks. Agencies often lose out on new business opportunities because they are unable to provide the best deal—cost-wise. 

Mergers between top networks result in the top players controlling 80% of the business. While this benefits the consolidators, it stifles competition and makes survival difficult for smaller players

Anita Nayyar, ex-COO—media head, Patanjali Ayurved

One way to counteract this competition is if brands prioritise better value over volume. Barua is of the opinion that how the business shapes up depends as much on clients as it does on agencies themselves.

But like they say, nobody got fired for buying IBM. The way out of this quagmire? “Are you going to play it safe, or are you going to be innovative—that is the question marketers need to ask themselves.” 

The new Omnicom will have clients such as Tata Motors’ passenger vehicle business, McDonald’s India North and East, Shriram Finance Limited, Chanel, Jaguar Land Rover, NIVEA India’s integrated media business, Mercedes-Benz, Bharat Petroleum Corporation (BPCL), Amazon, and BMW India, among others. 

It is worth mentioning that as per COMVergence analysis, the top three media agency networks during the first half of 2024 were GroupM, with new business value $83 million; Omnicom Media Group at number two, with $54 million worth of new business; and Mediabrands with new business worth $48 million. In the new configuration, the Omnicom combine would easily outperform GroupM in this ranking. 

Investing in Technology 

While a consolidation can surely help in buying traditional media, the same is not true for digital media, where having a technological advantage is more meaningful. Vivek Bhargava, co-founder of ProfitWheel, compares the decline in market capitalisation of WPP with the growth of Publicis Groupe—$28.2 billion—with that of WPP—$12.2 billion—which demonstrates that having better negotiating power alone is not enough. 

It was not always like this. By the end of 2019, WPP had a market capitalisation of around $17.6 billion, and Publicis was significantly behind WPP with a market cap of $10.7 billion. 

Publicis has managed to get ahead of WPP because of its strategic investments in technology. Publicis first acquired Sapient in 2015, the digital transformation hub of the group, and then Epsilon, a marketing technology solution provider, in 2019. 

Bhargava, who was among the first batch of Indian pioneers in digital advertising and set up Communicate2 a digital marketing agency, which was later acquired by Dentsu Aegis Network, believes that investment into artificial intelligence solutions is what will differentiate one company from another in the future. 

He is also of the opinion that agencies have to move beyond media buying and cost optimisation and look at technology solutions or aid corporates with consultancy services. 

This move is expected to drive up acquisitions and expansions in the Indian market, especially in the technology space. For instance, IPG in August 2024 expanded Kinesso’s (tech-driven performance arm) operations in India with a 62,000-square-foot office facility in Pune. 

“Technology is now at the centre of the advertising agency. Data, cloud infrastructure, and artificial intelligence are all sectors in which agencies want to have in-house expertise,” says Gopa Menon, chief growth officer - APAC, Successive Digital and ex-chief digital officer at Mindshare South Asia. 

When Dentsu Aegis Network was building its India team, the Japanese network bought agencies like WATConsult, Communicate2, Sokrati, SVG Media, Ugam, and many others. 

Rajiv Dhingra, whose WATConsult was acquired by Dentsu in 2015, thinks young agencies that have scaled up in the last few years might get acquired. “Small agencies with AI/martech expertise could be very attractive low-cost buys for networks. Secondly, scaled-up people-driven digital media independent agencies might see interest from global networks,” says Dhingra who is now founder & CEO of ReBid, a customer data platform. The large 1,000-member headcount agencies, if scaled as per revenue, could become hubs to outsource global campaigns. 

Barua, though, warns against seeing India as a cheap labour outpost. India as a market has great potential for growth; making it a back office will not bode well for any company that is serious about India. In fact, of the Rs 779 crore revenue that Omnicom Media Group made last fiscal, Rs 613 crore of revenue was by way of exporting services to global counterparts. In comparison, GroupM's total revenue from export of service during calendar year 2023 was Rs 255 crore. 

According to the latest GroupM analysis, India is eighth among the top 10 advertising markets in the world with a total ad spend of $18 billion in 2024 and a projected growth of 9.5% for 2025. 

For a vibrant market like India, the global reset of the agency business will mean tougher competition, a whole lot of job cuts, and acquisitions. 

2025 will be a year to watch out for. 

With additional inputs from Benita Chacko