By buying T-Mobile, AT&T is creating a new advertising giant, which will send ripples throughout the ad industry.
Here's why and what to expect:
AT&T is an advertising behemoth:
AT&T was the third largest advertiser in the US last year, spending $2.1 billion, up 12 percent from 2009 according to Kantar Media. Together AT&T and T-Mobile spent $2.7 billion last year, making the combined company the nation's second largest advertiser, behind only Procter & Gamble, which spent $3.1 billion on measured ad spending.
AT&T and T-Mobile will go through different waves of spending:
This merger should generate economies of scale in advertising, but not quite yet. Kantar Media's Jon Swallen says until the merger is approved they will have to maintain their separate spending. In the period around the deal actually closing Swallen projects they'll have to spend more to establish the company and address rivals. So expect a sine-curve of spending before months later when they find cost savings.
The Ad Agency Race is On:
Ad agency relationships nearly always go into review after a merger, so the race is on. The account is Omnicom's — it currently manages AT&T's ad buying. And the rest of the industry— WPP, Interpublic Group, and Publicis — will be watching carefully to see if they can grab a piece of the pie. Publicis is in a particularly awkward position — one of its agencies, Zenith, manages rival Verizon's account. And Publicis is behind T-Mobile's ad campaign criticizing AT&T's reception. Today Deutsche Telecom's CEO said on TV that those ads aren't going away until the merger is a totally done deal, which makes Publicis an unlikely contender for AT&T's new business.
This could mean the next "Cola Wars:
Merging AT&T and T-Mobile could lay the ground-work for a massive battle between two giants —the new AT&T versus Verizon , which is likely to ramp up its spending to battle its now larger rival. Horizon Media's Brad Adgate tells me that when you have two such massive giants in the exact same space, it often creates a situation where they flood the marketplace with ad dollars to compete for share.
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