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.
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