US agency holding group Omnicom has reported its full year earnings for 2025, its first set of financial results since completing its acquisition of rival agency outfit Interpublic Group. Since it’s still very early days, and Omnicom only owned IPG’s businesses for the final month of the year, the numbers don’t yet give a full sense of how the two companies performed together — the usual headline organic growth figure, one of the main metrics by which agency performance is judged, was not included.
But as CEO John Wren spoke about his plans to deliver meaningful growth on the back of the merger, one thing was clear: more cuts are coming, beyond those identified by the two companies when they first announced their deal.
More weight on media
Speaking on an earnings call, Wren said that Omnicom now expected the annual run-rate synergies achieved through the merger to double from its initial estimate of $750 million to $1.5 billion over the next 30 months. Around $1 billion of these savings will come from reductions in labour costs through the elimination of duplicative roles, while the remaining $500 million will result from a streamlining of the company’s structure and a shift to “a more unified resourcing model”, which will include more outsourcing and offshoring.
A lot of the talk around labour cost reduction when the deal was first announced focussed on the elimination of duplicate roles. But Wren said that both companies had been exploring nearshoring, offshoring, and outsourcing as means of cutting costs prior to the deal, and that Omnicom’s efforts on this front will accelerate now that the deal is complete. Facility management, shared services, and technology were three areas name-checked by CFO Philip Angelastro as likely to be affected.
Omnicom is also planning to downsize or sell up completely in a number of markets and business operations. Wren said the company has identified a number of smaller markets where it will move from a majority owner position to a minority owner, representing around $700 million. And it has picked out non-strategic or underperforming business operations which it plans to sell or exit entirely, representing around $2.5 billion in annual revenue.
“We have already sold or exited some of these businesses, representing annual revenue exceeding $800 million,” said Wren. “We expect to execute the remaining sales and exits over the next twelve months.”
As the company strips out parts of the business and consolidates internally, Wren gave a rough outline of how the company will look going forward.
While he stressed the internal calculation isn’t yet complete, Wren guessed that around a mid-50s percentage of the group’s revenues will come from media going forward, including connected media capabilities such as Omnicom’s precision marketing business. Creative meanwhile is expected to account for just under 20 percent of total revenue.
Who benefits from AI savings?
While further staff cuts are expected through the merger, Omnicom executives say they’re not currently expecting AI investments to lead to a reduced workforce. AI is helping the company do more overall, rather than paving the way to do the same amount of work with fewer people.
“I think the ability to do more and the ability to do more with a higher degree of confidence is really what is driving kind of the whole generative AI institution around us,” said Paolo Yuvienco, Omnicom’s chief technology officer. “It is not necessarily about how do we reduce the number of people around this. It is really about increasing the impact and output that we are driving for our clients.” He gave an example of creative testing: now, Omnicom teams can test much larger volumes of creative with synthetic audiences, helping them to predict outcomes before committing any spend to media.
The question remains of how much Omnicom itself will benefit from AI efficiencies, rather than these gains being absorbed by clients. In the past, Wren indicated he expected clients to absorb the savings, but then spend those savings with Omnicom, which would be a win overall for the agency group.
Asked whether this is still his expectation on the earnings call, Wren gave a more nuanced answer. In some cases, he still thinks AI savings will be passed on to clients, but ultimately spent back with Omnicom. But not all cases will be the same.
“There will be other clients that we are able to negotiate with as to performance goals,” said Wren. “And the methodology in which our work gets judged and rewarded will change, and if our idea is generating lots of money, we will be expecting to get paid for that as well.”
Follow VideoWeek on LinkedIn.
