Dive Brief:
- Publicis Groupe is expanding a pilot initiative with Microsoft Corp. that moves the agency holding group deeper into data services as a potentially new revenue source, according to a report in The Wall Street Journal.
- The goal is for Publicis agencies such as SapientRazorfish to generate up to 10% of revenue from the strategy, including licensing fees for the use of Cosmos, which collects real-time data about customers that is stored in Microsoft's cloud.
- Publicis agencies may also take a percentage of the fee marketers pay Microsoft when its cloud is used in conjunction with Cosmos, as well as service fees for marketing support related to the use of data, according to the Journal.
Dive Insight:
The news of a bigger data push from Publicis comes a month after the agency holding group took $1.5 billion off the value of its digital business, in part because Sapient, which it acquired in 2015 for $3.7 billion, did not meet growth targets last year.
Ad agencies are facing business pressures from a number of sides, including increased competition with data-driven consultancies like Accenture and Deloitte, who have been expanding into creative services. The Publicis tie-up with Microsoft is a step towards trying to better compete with consultancies, as data's role in marketing continues to grow. The partnership could introduce new customers to Cosmos, which offers real-time customer profiles, while reassuring existing ones that the agency holding group is keeping up with the times.
By generating revenue from Cosmos, Publicis can conceivably invest more to further bolster its data capabilities. Overall, agency revenue streams are being squeezed by the expansion of digital marketing, with brands anxious to negotiate lower fees or cutting back agencies’ responsibilities by bringing tasks like media buying and social media in-house, and working directly with digital platforms.
For Microsoft, the expanded partnership points to the growing role for cloud-based services. The company is likely to leverage the relationship with Publicis to help it better compete with IBM, which is finding traction with its AI-based Watson program.
