The work of Kiwi creatives in global advertising firms has been world-class, including campaigns such as 'Ghost Chips', 'Driving Dogs' and 'Togs, Undies'.
Two of the world’s biggest advertising agencies present their argument for merging and reveal in a new document their thoughts on the New Zealand market, other agencies, clients and talent.
One of the biggest media mergers of the year - the marriage of two giant global advertising agencies - will be subject to Commerce Commission approval in New Zealand.
And Omnicom Group (OMG) has outlined to the commission why it believes it’s important to buy Interpublic (IPG), saying the advertising sector is intensively competitive and smaller New Zealand agencies will always have the talent and ability to successfully pitch for work against what would become the biggest advertising agency in the world.
As reported in December, OMG’s planned US$13 billion acquisition of IPG is a seismic shift that will reverberate across oceans, including in New Zealand, where major OMG brands such as PHD, OMD, Colenso, DDB, Clemenger, TBWA, Hearts & Science and Dynamo would be housed under the same umbrella as IPG agencies such as FCB and Initiative.
The Commerce Commission said on Tuesday it had received a clearance application for the proposed acquisition. “We will only give clearance to a proposed merger if we are satisfied that the merger is unlikely to have the effect of substantially lessening competition in a market,” said a commission spokeswoman.
In a 49-page application to the commission, OMG says the advertising, marketing and communications sector is “characterised by intense competition, fragmentation and continuous evolution, particularly with the rise of digital media... and emerging communication channels, which challenge traditional agencies”.
It says the industry is “evolving rapidly”, driven by changing consumer behaviour and technological advancements that present opportunities and challenges to existing industry players.
The OMG-IPG giant would become the world’s biggest advertising holding company, surpassing Publicis and WPP. OMG and IPG have also made no secret of the estimated cost savings - up to NZ$1.22 billion globally - including reduced roles.
It argues a merged company can integrate its technology and “will be better positioned to meet the demands of modern consumer media usage habits”.
Sources have said OMG agencies already lay claim to more than 50% of media spend in New Zealand and that the new mega-merger would only reinforce that dominance.
However, sensitive commercial data - such as the market share and revenue of the OMG and IPG agencies in New Zealand - has been redacted in the public version of the Commerce Commission application.
The application does say that, worldwide, OMG has revenue of NZ$23.9 billion and IPG has revenue of $17.8b.
One source told Media Insider in December that if the merger went ahead, “OMG will command significant buying power which may place pressure on both media owners, who will likely be pushed to deliver the best price and value to OMG clients, and independent agencies, who may struggle to compete with these pressures”.
“Managing conflict will be OMG’s main priority as clients may have concerns at how their businesses will be managed. At an initial glance, a newly consolidated OMG would have the three main telco clients [Spark, One NZ and 2degrees] almost all of the major banks and various other clashing clients.”
OMG’s application to the commission gives a rundown of other international agencies operating in New Zealand, smaller independent agencies and operators, their clients, and even some of their talent.
It says it and IPG face “significant competitive pressure” from international agencies and agency networks, particularly WPP, Publicis, Dentsu, Havas and Special Group “as well as from numerous regional and local agencies in New Zealand”.
“It is an industry that values creativity of individuals as opposed to an agency’s scale, meaning local agencies are often successful in winning and retaining clients against large international agencies.”
The application lists some of the business credentials, brands, clients and talent of competing agencies including WPP and its brands which have the Ford, Nestle, Universal Music, Coca-Cola accounts, among others; Publicis whose brands cover Z Energy, Toyota, Westpac and Samsung among others; Dentsu with the likes of Fresh Choice, TVNZ, DB and others; Havas whose clients include Moccona, Southern Cross and Emirates; and Special with the likes of KFC, Uber Eats, Pepsi and Contact Energy.
Local agencies were just as competitive, the application says, “frequently securing large clients through competitive bidding processes and earning top industry awards”.
“Additionally, New Zealand’s market has unique characteristics with clients placing a high value on homegrown talent and agencies that deeply understand New Zealand customers and what it means to be a New Zealand brand. This cultural alignment often gives independent agencies a competitive edge over international networks.”
It lists a number of independent agencies such as Rascal Media, Together, and D3, founded - the application says - “by former leaders from larger well-established agencies, including Saatchi & Saatchi, PHD and iProspect”.
There were also agencies beyond the Independent Media Agencies of NZ (IMANZ) umbrella such as Motion Sickness, founded in 2013 by three friends in a Dunedin flat; Bastion Shine; and Droga5 (formerly The Monkeys Aotearoa), co-founded by former Saatchi & Saatchi executive creative director Damon Stapleton.
It gives Bastion Shine’s winning of the Air New Zealand and Tower Insurance contracts as examples of a smaller agency winning big accounts. “Additionally, Bastion Shine won the Tip Top account over DDB and Colenso BBDO in 2019.”
OMG’s application says non-agency players also compete vigorously in the industry, including in-house marketing teams; consulting agencies such as Accenture, Deloitte, IBM and EY; and tech and social media giants such as Google, Meta, Amazon and TikTok “which have created massive digital media channels and sell ad space directly to advertisers using advanced technology platforms”.
It pushes back on concerns that a merged entity might be able to exert influence on media owners, saying “even on a combined basis, the parties will come nowhere close to matching the leverage most media owners can exert in negotiating the sale of media”.
To back up that argument, it says media ownership in New Zealand is “highly limited (except for outdoor media) which gives them significant countervailing power when negotiating with their agencies”, listing only three main television networks (TVNZ, Warner Bros Discovery and Sky); two main commercial radio networks (NZME and MediaWorks) and “two main news media companies” (NZME and Stuff).
OMG’s application to the Commerce Commission is one of 19 applications to competition agencies across the globe.
The application is expected to generate substantial industry feedback. Already, Media Insider has heard concerns from other agencies - these will be explored in more depth, along with OMG’s position, in coming days and weeks.
“The biggest red flag is the consolidation of so many top-spending brands under one parent company,” one agency owner said last night.
“As agencies within the same group handle direct competitors [e.g., BNZ and ANZ, AA Insurance and IAG, Foodstuffs and The Warehouse, Spark and 2degrees] clients will naturally question whether their agency can truly prioritise their unique business needs.”
In December, Independent Media Agencies of New Zealand (IMANZ) general manager Kath Mitchell said her members were resilient, quoting industry data showing 49% had expanded in the past 12 months and a further 28% had been stable.
“However, we need to consider how far that resilience can stretch. Mergers like this mean we will see a concentration of greater market power in a single holding company. We should, at the very least, be having conversations about what impact that has.”
She said data also showed 45% of IMANZ members did not have a single government client.
“I would hope that the news of this merger helps to draw attention to how the industry is structured and how much power is concentrated in a small group of holding companies. My advice to those who work in government procurement is to look deeper at agency ownership and often they will find they feed into one of those holding companies sending their profits offshore.”
Newly minted OMG New Zealand chief executive Nikki Grafton referred comment to Omnicom’s communications team.
The commission’s website lists a decision date of May 1.
Editor-at-Large Shayne Currie is one of New Zealand’s most experienced senior journalists and media leaders. He has held executive and senior editorial roles at NZME including Managing Editor, NZ Herald Editor and Herald on Sunday Editor and has a small shareholding in NZME.
TVNZ boss: 'I think New Zealanders would love to see rugby free-to-air.'