Marketplace has a new podcast for kids, "Million Bazillion!" EPISODE OUT NOW

French ad giant Publicis to buy digital firm Sapient

Stan Alcorn Nov 3, 2014
HTML EMBED:
COPY

French ad giant Publicis to buy digital firm Sapient

Stan Alcorn Nov 3, 2014
HTML EMBED:
COPY

As long as there have been ad agencies, there have been ad agency acquisitions — like the attempt to buy Don Draper’s firm on “Mad Men.” Here’s how the scene went:

“PPL is being sold and us along with it,” Don Draper told partner Bert Cooper. “Oh,” Cooper replied. 

“So you knew about this,” said Draper. “No,” said Cooper. “But it makes sense.” 

Agency acquisitions make sense in part because they let companies buy expertise.

“When I was working in the industry, what we saw was advertising agencies buying smaller companies like direct marketing companies,” says Kim Sheehan, a communications professor at the University of Oregon who worked in advertising in the 1980s. “What I think we’re seeing with the Sapient purchase is kind of the same thing.”

As one of the largest stand-alone digital agencies in the United States, Sapient has expertise in the digital realm, where it makes websites, iPad apps and viral online campaigns.  Its location in the United States is also a selling point. 

North America is the biggest single advertising market, according to Noah Elkin, executive editor at market research company eMarketer. “And within that market the fastest growing segment is digital,” he says.

Publicis is also increasing its own size for its own sake. “The name of the game in the ad business is scale,” says Elkin. 

Publicis has acquired a number of other agencies recently, and earlier this year attempted a merger with Omnicom, the second-largest advertising holding company. 

Sheer size helps when you are, for example, negotiating ad rates with Google or Facebook. “Because you’re buying in such a larger bulk, that enables you to get better terms,” says Elkin. 

But does it justify the $3.7 billion price tag? 

“[The] Skepticism that I have around the deal is not just the price paid, which is incredibly high, but the issue of opportunity cost,” says Brian Wieser, senior analyst at Pivotal Research.

Wieser thinks instead of buying yet another agency, Publicis should have considered investing in the digital properties it already owns.


CORRECTION: A previous version of this story misspelled Sapient’s name in the headline. The text has been corrected.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.