AdAge reports Instagram (FB -1.5%), which only began showing ads last fall, has scored a year-long commitment from top ad agency Omnicom (OMC -0.1%) to spend up to $100M. The magazinealso reports Instagram is talking with Starcom MediaVest, another leading agency.
Instagram has confirmed the tie-up, but not its specifics. "Our teams are going to work hand in hand to develop and execute campaigns that provide people with amazing imagery."
The mobile photo-sharing platform has been cautious with its efforts to monetize its ~180M MAUs. Select brands and their agency partners are currently able to buy photo/video-based ads that appear in a user's stream, but the ads have to meet Instagram's stringent quality standards.
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A rather interesting byproduct of the mega-merger in the advertising industry between Publicis and Omnicom (OMC) is that Pepsico (PEP) and Coca-Cola (KO) will now share the same ad firm.
Though it's not unheard of that two large rivals will count on Chinese walls to protect their strategies from leaking at an agency, it also stands as a risk for the combined company that it could lose a gigantic account.
Shares of Omnicom (OMC +0.9%) have fallen back quite a bit after trading over $70 earlier in the day following news of its mega-merger with Publicis.
At first blush, the deal looks like a way to create synergies through scale, but Simulmedia's Dave Morgan has a different take. He notes that while TV networks might see some pressure on ad rates from the combination of the two ad firms, the auction-based nature of online media advertising will dampen the impact of scale.
Other analysts think regulators in the U.S. and Europe could create an issue for the combined company.
Havas (HAVSF.PK) CEO David Jones: "The deal is "an industrial merger in the digital age," he says. "Clients today want us to be faster, more agile, more nimble and more entrepreneurial — not bigger and more bureaucratic and more complex."
A merger to create the world's largest advertising company is essentially done between Omnicom (OMC) and Publicis Groupe (PUBGY.OB), according to various reports. The combined $30B company would be a merger of equals, however, with no premium to current share prices -- though size should allow it to negotiate better ad rates and retain clients more easily.