'This is a bit of a Swiss Army knife': Ad giant Publicis is buying Epsilon for $4.4 billion as it looks to get ahead of its rivals in the data wars
- Publicis Group has entered into an agreement to acquire Alliance Data's Epsilon and Conversant to help advertisers manage and use first-party data.
- Consultants and analysts said that the move is the latest example of agencies beefing up data capabilities, similar to Interpublic Group's $2.3 billion acquisition of Acxiom Marketing Services last year.
- They cautioned that such big acquisitions can be hard for holding companies to integrate into a network of agencies, and it's not clear how Publicis will differentiate itself.
- Publicis is also inching on the turf of marketing clouds like Adobe and Salesforce that are positioning themselves to be 'one-stop shops' for brands.
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French advertising holding company Publicis Group on Sunday said that it plans to acquire Alliance Data's Epsilon for $4.4 billion, making it the company's largest acquisition to date. And the move is already sending ripples through the industry.
Under the pending deal, Publicis' agencies - which include Starcom, SapientRazorfish and BBH - will gain access to Epsilon's database of 250 million US consumers. Epsilon helps marketers collect and manage first-party data like CRM stats pulled from email and loyalty programs. The firm also layers third-party data like transactional and behavioral stats on top of first-party data to create audience segments, and the company's ad-tech arm Conversant takes the data to run ads.
As Facebook and Google continue to gobble up digital ad dollars, agencies are under increasing pressure to build out data practices that help marketers manage data. For years, brands relied on third-party data to create big audiences for targeting, but scrutiny and regulation like the European Union's General Data Protection Regulation (GDPR) and the upcoming California Consumer Privacy Act have put more emphasis on first-party data.
"Marketers have been told for the last 10 years that first-party data is gold - the gap was always the ability to do something with it," said Mark Wagman, managing director of MediaLink. "This is a bit of a Swiss Army knife - it's got the underlying tools that Publicis can build on top of."
Several sources said that while the Publicis acquisition makes sense, it's notoriously difficult for agencies to integrate acquisitions. In 2014, Publicis acquired Sapient for $3.7 billion and wrote down half of its valuation in 2016.
"Sapient is a brilliant acquisition that is today delivering very strong results, but it has taken time and has been a challenge to integrate," CEO Arthur Sadoun said during a call with investors on Monday.
Others were skeptical about Publicis' ability to turn Epsilon into a game changer in marketing data.
"A fair question to ask is what is the product that Publicis is planning to assemble here, and what is the value add given that much of the technology can be considered a commodity," Ana Milicevic, principal and cofounder of Sparrow Advisers, a management consultancy focused on advertising and marketing, said. "How does this create a true competitive edge for Publicis clients?"
Betting big on data
Publicis isn't the only holding company betting big on data through acquisitions. Interpublic Group acquired Acxiom Marketing Solutions for $2.3 billion last year, and Dentsu purchased Merkle in 2016. Omnicom and WPP have also spun out practices to specifically handle data.
One of advertisers' biggest concerns with regulation is that Facebook and Google have an unfair advantage because they have huge databases of consumers who have opted in to share their data when setting up an account. Publicis' and IPG's acquisitions could create a more "level playing field" for brands and publishers, Frank said.
"Marketers are going to discover that they need help with data and that this something that agencies are well-positioned to do," said Andrew Frank, an analyst at Gartner Marketing Leaders. "A lot of data providers don't have the kind of service and account level that agencies can bring to the table."
"If you're a major holding company today, you've got to get as close as you can to your customer and give them a reason not to run a review every three years," Wagman said. "If you become the trusted party for first-party, the chances of you moving all of your data to another third party are pretty slim."
Third-party data vendors may find themselves under pressure
With Acxiom and Epsilon off the table, there are less independent data firms for marketers to work with or acquire. Sources cited Experian, Equifax, Transunion and large telecoms including AT&T,Verizon and Comcast as being sources of data for marketers.
Medialink's Wagman said he doesn't expect for marketers like automakers or consumer-packaged goods brands that have long used third-party data to change their data strategies but expects for third-party companies to re-examine what data they offer marketers.
"The marketplace for third-party data is like walking the halls of a Target - there are hundreds of different providers [and] you don't know what you're buying," he said. "As marketers get smarter with the first-party data world, it will put pressure on the third-party data [vendors] to get more quality-focused."