- With the
advertising industry going through significant transformation, new stakeholders, suppliers and economics are entering the fray. - This means that more deals could shake up the advertising space in the near future, according to a new Forrester study.
- Ad holding company WPP could be taken over by a private equity firm like Bain or Blackstone and AT&T could target holding company assets next, the Forrester report predicts.
The advertising industry is going through seismic changes - and we may just be at the beginning.
From budgets being crunched and brands takingadfunctions in-house, to consulting firms swooping in on agencies' turf, the marketer-agency relationship is being transformed at an unprecedented scale.
These changes mean that ad holding companies need to adapt. But it also means that new stakeholders, suppliers and economics are entering and shaping the industry - with potentially plenty of deals to follow.
AT&T's acquisition of AppNexus may be the most prominent recent example of new players jumping into the fray, but it surely won't be the last, according to a new report by market research company Forrester.
Here are the deals that could shake up the advertising industry in the near future:
WPP will consolidate, or be taken over by an investor like Bain or Blackstone
Things have been in a flux at the world's biggest advertising company since April, when its former chief executive Sir Martin Sorrell resigned after reports that the company's board was looking into an allegation of improper personal behavior and misuse of company assets by him.
It doesn't help that the company has struggled to boost growth either, as it faces increased pressure from clients such as Ford, Unilever and Procter & Gamble who are cutting back on ad fees and copes with Facebook and Google's dominance in digital advertising.
But most of all, the company's organizational structure makes it ripe for change. WPP's agencies have operated like "independent fiefdoms" for years, competing against each other for the same contracts with similar services.
"Of all the holding companies, WPP has the most burning platform for change," wrote Forrester analysts Jay Pattisall and Ted Schadler -adding that WPP's 400 agency brands won't survive unscathed, especially as brands and their chief marketing officers begin to work with agencies first and foremost at the holding company level.
According to Pattisall and Schadler, the economic opportunity facing WPP is "too massive for a private equity group to ignore," and it's not hard to imagine someone like Blackstone or Bain to swoop in and restructure the agency, before eventually spinning out the high-value assets to the highest bidders.
AT&T's next big move could be going after major holding company assets
With Time Warner and AppNexus under its belt, AT&T has pieced together both content and the technology pipes necessary to challenge the duopoly as well as rival TV networks. As it consolidates media and distribution and competes for more market share in advertising, AT&T could now set its sights on acquiring agency services.
The argument, according to the Forrester report, is simple: it will enable AT&T to help brands deliver campaigns that span TV, print as well as digital with ease.
"Because Vivendi owns Havas Group, it would appear the least likely candidate for a media conglomerate purchase," write Pattisall and Schadler. "However, it would be easier for a provider to assimilate Havas' culture given its history with Vivendi's music, gaming, and entertainment business."