The business model for giant ad agencies is under fire – but IPG says its $2.3 billion bet on Acxiom gives it a massive advantage over other firms

Interpublic Group should have access to troves of powerful data from its acquisition of Acxiom Marketing Solutions to help brands build first-party data.
In one potential example of how that data could be used: an automaker will be able to block ads from being served to a consumer who filled out a recall form.
Arun Kumar, chief data and technology officer at IPG MediaBrands, said that he is not "very concerned about other agency holding companies turning off the taps" with Acxiom because the bulk of the firm's business deals directly with brands.

Last week, Interpublic Group—a holding group that counts ad agencies like R/GA, IPG MediaBrands and Deutsch—made a pricey wager on the power of consumer data when it announced plans to acquire Acxiom's data-marketing division Acxiom Marketing Solutions (AMS) for $2.3 billion.

If approved, the deal would open up a slew of new opportunities for IPG clients to play with first-party data and create customized ad targeting options.

It's an example of the kinds on investments marketing giants are mulling as connecting with consumers becomes less about blasting out ads and more about deliver precise message using data and programmatic models.

Agencies need to do a lot more than make ads and buy media space

Arun Kumar, chief data and technology officer at IPG MediaBrands, will oversee Acxiom's integration with the holding company into a standalone business. To hear Kumar tell it, the future of data-driven marketing requires agencies offer far more sophistication than simply and ability to serve ads, which made Acxiom attractive.

"In many cases, data sits in a very balkanized fashion in one part of the business," he said. "As an agency, we never had mar-tech experience to be able to connect [data] into the other platforms. Hopefully it will help power a lot more decisions for clients as opposed to just media."

For example, an automaker that has to recall a car may want to block digital ads from being served to consumers who own the car and have been asked to sign up for a recall.

"Wouldn’t you be super irritated if you just bought a product, I've just asked you to sign up for a recall and then I bombard you with 10 ads saying how cool this car really is?" Kumar said.

Under the Acxiom deal, one of IPG's automaker clients can feed the data provider dealership data about which consumers own a recalled car. From there, Acxiom matches the dealership data with ad-tech pipes to stop ads from being served to car owners.

That's an example of expertise not typically offered by large ad agencies and holding companies that specialize in making commercials and display ads. But as the agency model continues to evolve towards more data-driven experiences, the future of advertising is less about writing copy and designing ads and more about building direct relationships with consumers, said Kumar.

In the example of the auto recall, "that has a tremendous amount of impact on a brand’s equity and can make the difference in how people see your brand as being a trusted brand or a brand that makes claims [but] doesn't complete them."

IPG says Acxiom gives it a huge leg up over other ad agencies – here's why

Business Insider talked to Kumar about the Acxiom deal, what it means for new data and privacy regulations like Europe's General Data Protection Regulation (GDPR) and what an acquisition means for other holding companies.

Lauren Johnson: Why does this make sense for IPG and what do you get out of this deal?

Arun Kumar: We believe that there are two statements, both of which are true.

The first one is that the future of marketing is data-driven. The second sentence is that there is a question mark on how data is sourced, managed, and leveraged, keeping in mind concerns over privacy and ethics. The primary driving factor behind our acquisition is we feel that the AMS business helps address both of them.

It definitely gives us a huge leap in our ability to drive marketing decisions. Note that I'm very deliberately using the word "marketing" and not "media" because we think that the implications of using data stretch beyond just making decisions in media.

The second part that attracted us to AMS was their stellar reputation and being able to source data as well as manage and leverage it for years. They've done that in a very compliant fashion. They work with some of the toughest industries when it comes to compliance.

They have processes that are respected in the industry and they are at the forefront of actually making sure that some of the initiatives that either regulators are talking about or the industry is talking about are implemented. We didn't find any other player in the space who could help us take advantage of that opportunity but at the same time mitigate the risk.

Johnson: How would AMS be integrated into IPG?

Kumar: AMS would be a standalone business within IPG. We want it to powering decisions for clients across different units that may be working on their business but most importantly, it is a resource for all.

Johnson: IPG already has a strong relationship with Acxiom so what have you been doing with them up until now?

Kumar: We struck a deal with them from a MediaBrands point-of-view to power our audience management platform for 14 markets around the world. We’ve been working with them for close to two years now and they’ve powered our [tech] stack. We found that one of their strengths was that they were able to execute outside of the U.S., which is a big necessity for us.

Johnson: Will other holding companies and agencies be able to work with Acxiom going forward?

Kumar: A significantly large part of the Acxiom business is direct with clients and we were actually one of the bigger agency partners that they had—the revenue coming in from other agency holding groups is quite minimal. We are obviously not going to shut access off—it's going to be business as usual. At the same time that's why we're not very concerned about other agency holding companies turning off the taps.

You have Acxiom Corp. which was Acxiom Marketing Services and LiveRamp—the LiveRamp part of the business is not part of this deal. LiveRamp has relationships with everyone in the market and they should because that’s what an on-boarder does.

Johnson: What's an example of how your clients will be able to work with AMS?

Kumar: One of the things that AMS is known a lot for is the ability to manage first party data. That's a capability which increasingly is going to be critical. As you find regulation that is going to very clearly determine what are the boundaries of access, storage and leverage of various data sets, I think it's important that you need someone who can manage that data with all those rules attached to it. We've not had that capability historically and we've had to point our clients to various different partners in the past.

Johnson: What role is GDPR going to play in this?

Kumar: There is a far more rigorous process involved in making sure that the data you're collecting is actually usable and has either got consent associated with it or legitimate business interests.

These regulations are being rolled out where you see GDPR in the EU and then you've seen the new California law that is now effective only in California. I think what that means is that every time a piece of regulation passes anywhere in the world, you're going to have to standardize your policies for the entire world even if the regulation only impacts one part of it. You can't have a different system for California and a different system for New York—it has to be the same.

Johnson: Are there any risks associated with Acxiom when it comes to GDPR?

Kumar: I don't believe so. There are operational risks in every business—I would just say that I am far more comfortable with having Acxiom Marketing Services as a part of Interpublic Group because I don't think that anyone else is better educated and better prepared for these regulatory frameworks than they are.

Johnson: How are clients initially going to be able to get their hands on Acxiom's services?

Kumar: The biggest value that they're going to start seeing is what more can they get from their own first-party data that they're [not] getting right now.

Clearly there's a lot of work that's being done on audience analytics and audience solutions and having richer data sets are going to help improve that.

I also think that clients now have access to a great privacy and ethics practice within AMS that can help consult on how their data is sourced, leveraged or managed. I expect greater customizations on our stack—there are certain categories where we believe that we could do more depth of data which clients are going to start seeing an advantage in.

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