For years, the advertising business has been spurred by the Madison Avenue mythology of small independent shops coming up with the snappy catchphrase or memorable TV commercial that becomes part of everyday culture.
But the announcement Sunday of the merger of two industry giants, Omnicom and Publicis, to create the largest advertising company in the world, signals that advertising is now firmly in the business of Big Data: collecting and selling the personal information of millions of consumers.
That business is a competitive one, with technology companies like Google and Facebook using their massive databases of user data to place ads. Between them, New York City-based Omnicom and Paris-based Publicis account for $22.7 billion in revenue last year, more than the next highest ad firm, WPP. But neither company comes close to the $55 billion in revenue that Google made last year, largely on the strength of its advertising business.
At the news conference in Paris to announce the merger of the two firms with a stock market value of $35.1 billion and more than 130,000 employees., the chief executive of Publicis, Maurice Levy, said the "billions of people" who are now online and providing data to companies offer an opportunity to use advertising technologies to "crunch billions of data in order to come with a message which is relevant to a very narrow audience."
The business of advertising and marketing is being transformed by technology as advertising agencies collect data and target ads to individual consumers. Television remains the single biggest beneficiary of ad spending in the United States, with a total of $66.35 billion in 2013, according to estimates from eMarketer. But advertising online ($42 billion in 2013), including mobile devices at $7.7 billion, is growing at a much faster rate.
While advertising agencies often work hand in hand with Google, Facebook and Twitter, those same companies also work with the brands -- firms like General Motors and Coca-Cola -- directly, especially on sharing data. Traditional advertising agencies -- the middlemen between the firms and the platforms like television networks, radio stations and online publishers -- are under pressure to deliver more value for their customers, or be cut out of the equation.
"Industrywide, you're seeing more and more brands taking in pieces of what they used to pay an agency to do in-house and then spend that with other companies," said Brad Rencher, senior vice president and general manager of digital marketing at Adobe Systems.
David Kenny, a former Publicis executive who now runs the Weather Co., which includes The Weather Channel and weather.com, said that platforms like his are now working directly with companies to develop advertising campaigns, especially on mobile devices, essentially bypassing ad agencies.
At the same time, new competitors in the digital advertising space have emerged over the past few years including Accenture, Sapient and Deloitte, consultancies which have built up their marketing and data divisions to include many of the services once provided exclusively by ad agencies.
For consumers, the merger is another signal that the business of marketing is becoming more personalized, often based on information that consumers may not even be aware they are sharing, including Web habits, social media activity and credit card histories. As advertisers collect and combine this data, consumers can expect to see advertising that is targeted more specifically at them.