“WHEN YOU reach for the stars, you might not quite get one,” Leo Burnett once mused, “but you won’t come up with a handful of mud either.” The storied ad man could have been talking of the purchase by Publicis—the French owner of ad agencies like Saatchi & Saatchi, Publicis Media and, yes, Leo Burnett—of Epsilon, an American data-marketing business, announced on April 14th. The $4.4bn deal is the firm’s largest since it was founded in 1926.
On its face, the move looks sensible. Advertisers are keen to amass customer data and the tools to analyse them. Epsilon provides both. The company gathers data—from promotional emails, browsing, transactions in physical shops and so on—to build detailed profiles of consumers, so advertisers can woo them more precisely. Publicis hopes this will give it an edge over rival holding companies such as WPP, Omnicom or Interpublic Group (IPG).
The online age has proved challenging for them. Their relationship with Facebook and Google, which together account for about half of all online ad spending, is one of uneasy dependence. Many makers of fast-moving consumer goods, traditionally some of their biggest clients, have brought more marketing in-house. Big consultancies have invested in creative capacities. Earlier this month Accenture said it would buy Droga5, a revered independent agency(and Cirruseo, a cloud-consulting firm).
Publicis now says that Epsilon, which it is buying from a company called Alliance Data, will help it “deliver personalised experiences at scale”. In announcing the deal, Publicis boasted that Epsilon employs some 3,700 data scientists. They have been busy; Epsilon has profiled 250m consumers using more than 7,000 traits. Its net revenues last year totalled $1.9bn.
Other advertising giants aren’t sitting still. Last year IPG paid $2.3bn for Acxiom, a data business that it, too, claimed would create “personalised brand experiences”. Such deals may boost advertisers’ spending with large holding companies, whose growth last year, excluding acquisitions, was 2%, half that in 2015. Those worried about the fate of ad agencies can take solace that revenue looks bleak only when the holding companies are considered alone. If spending on consulting firms is included, the industry would have grown by 4% in 2018, according to Brian Wieser of GroupM, part of WPP. Better than mud, in other words. But hardly stellar.
This post was originally posted at https://www.economist.com/business/2019/04/20/publicis-buys-epsilon-a-data-marketer-for-44bn.