Two Ad Giants Chasing Google in Merger Deal

Company Chiefs Discuss Ad Merger: Maurice Levy, the chairman and chief executive of Publicis Groupe, and John Wren, the chief executive of Omincom Group, discuss the merger.

For years, the advertising business has been driven 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.

Maurice Lévy of Publicis, left, and John Wren of Omnicom at a news conference on Sunday in Paris to announce a merger deal.

But the announcement on Sunday of the merger of two industry giants, Omnicom and Publicis, to create the largest ad 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 huge repositories of user data to place ads. Between them, Omnicom and Publicis accounted for $22.7 billion in revenue last year, more than the next highest ad firm, WPP. But no ad company comes close to the $50 billion in revenue that Google made last year, largely on the strength of its advertising business.

The merger was announced in Paris. There, the chief executive of Publicis, Maurice Lévy, 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 pieces 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 agencies 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 can also work directly with companies like General Motors and Coca-Cola, including 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 Company, 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 last few years, including Accenture, Sapient and Deloitte, consultancies that have built up their marketing and data divisions to include many services once provided exclusively by ad agencies.

“We see the lines have been blurred between the various functions and the various players,” said Mr. Levy in an interview after the announcement of the merger on Sunday. “In this world you have to partner and you have to compete with a lot of players.”

John Wren, the chief executive of Omnicom, who joined Mr. Levy for the interview, added: “Our industry is not limited to a handful of people. There are new people coming over the line to what was traditional advertising every single day.”

Darren Herman, the chief digital media officer at the Media Kitchen, an agency owned by MDC Partners, a smaller advertising holding company in New York, said the merger was not a reaction to competition within the advertising industry but rather a move to fortify against the likes of I.B.M., Google, Salesforce, Adobe and Oracle. “Fighting that fight is potentially a losing battle,” Mr. Herman wrote in an e-mail.

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 ads targeted more specifically at them.

Vindu Goel and Quentin Hardy contributed reporting.

This article has been revised to reflect the following correction:

Correction: July 28, 2013

Because of an editing error, an earlier version of this article misstated Google’s revenue in 2012. It was $50 billion, not $55 billion.

This article has been revised to reflect the following correction:

Correction: July 29, 2013

An earlier version of this article misstated, because of incorrect information supplied by its founder and chief executive, the amount of money that Salesforce.com has spent in the last few years on acquisitions related to advertising. It is about $4 billion, not $7 billion.