I congratulate Maurice Levy and John Wren, both friends and worthy competitors, on the bold merger of their companies. I have several thoughts on the historic merger of Publicis and Omnicom.
First and foremost, I am not afraid. You should not be either. Bigger does not mean better. My 84-year-old mother's first reaction yesterday was that this reminds her of AOL's merger with Time Warner. "They were all screwed up for years," she said.
Second, you can expect all sorts of efforts to squeeze costs as Wall Street will be pressing for efficiencies. The rationale for bank mergers was always the elimination of back office staff or the combination of units that are too small to achieve scale. The two CEOs yesterday said that there will be $500 million in cost savings. The smaller PR firms within either holding company should expect to be merged. Note that Omnicom has done this before with Ketchum and Pleon or Gavin Anderson and Kreab. PR will not be a focus area; it will be part of the supporting cast.
Third, the big data play is real. But so is the small data play. That is our way of upsetting the giants. We will focus on the new influencers, the inverted pyramid of community in which thought starters and amplifiers are leading the conversation. We will have special insights through our Edelman Berland dashboard coming end of September. Someday this is going to be the big play for research-driven public relations.
Fourth, the merger underlines the importance of digital. We are already doing 20 percent of our business in the U.S. and UK in this area, with a commitment to build the same capability in other markets. We have a different approach to digital, which is social digital tied to public relations. Social is a powerful adjunct to data because you cannot control conversations.
Fifth, the media companies are attempting to circumvent the ad agencies in going direct to clients. Note the comment by The Weather Channel CEO David Kenny (former CEO of Digitas and top executive at Publicis) in The New York Times to that effect. We have to be the "smart money" partners with media companies in approaching clients with good ideas that can move from sponsored content into earned media. We understand the context, the news value and the ability to create a movement.
Sixth, these are both mature businesses. The growth rate for Omnicom in the first quarter was two percent, the organic growth rate for Publicis even lower. There are no more consolidation plays by diversifying into adjacent areas; the roll-up phase is over. The advertising operations in the U.S. and Europe will be the cash cows for the enterprise. There will not be an evolution of the classic ad agencies into digital plays (the former strategy of Omnicom).
Seventh, the best people will want to work for a firm at which they can be entrepreneurial and creative. It is a great time for talent to migrate to a firm dedicated to client service, integrity, long-term relationships and big ideas.
We have the correct strategy, a global enterprise with local roots, a public relations firm with deep expertise in marketing and corporate/public affairs, powered by specialist skills in digital and research. We are built to last, with a conservative balance sheet and ability to invest in new ventures. We hire and attract the best talent and allow them to be entrepreneurial, to push the envelope and to not be afraid to fail. We are a private family-owned enterprise—now and forever.
It is fitting that my family gathers today at my father's grave site to unveil his headstone. Union General Joshua Lawrence Chamberlain at the dedication of a monument to his regiment, the 20th Maine, at the Gettysburg battlefield, said, "In great deeds something abides, on great fields, something stays. Forms change and pass but spirits linger." The soul of this firm is Dan Edelman, decent, determined, an iconoclast to the end. His vision remains a lasting one and it is the reason in the face of the weekend's news that I'm confident we will continue to be successful.