The ad industry may be bracing for some wild deals, says a new industry report — including AT&T buying an agency

Sir Martin Sorrell, former
chief executive officer of WPP

Pascal
Le Segretain/Getty Images

• With the advertising industry going through significant
  transformation, new stakeholders, suppliers and economics
  are entering the fray.
• This means that more deals could shake up the
  advertising space in the near future, according to a new
  Forrester study.
• Ad holding company WPP could be taken over by a private
  equity firm like Bain or Blackstone and AT&T could target
  holding company assets next, the Forrester report
  predicts.

The advertising industry is going through seismic changes —
and we may just be at the beginning. 

From budgets being crunched and brands takingadfunctions
in-house, to consulting firms swooping in on agencies’ turf, the
marketer-agency relationship is being transformed at an
unprecedented scale.

These changes mean that ad holding companies need to adapt. But
it also means that new stakeholders, suppliers and economics are
entering and shaping the industry — with potentially plenty
of deals to follow. 

AT&T’s acquisition of AppNexus may be the most prominent
recent example of new players jumping into the fray, but it
surely won’t be the last, according to a new report by market
research company Forrester.

Here are the deals that could shake up the advertising industry
in the near future:

WPP will consolidate, or be taken over by an investor like Bain
or Blackstone

Things have been in a flux at the world’s biggest advertising
company since April, when its former chief executive Sir
Martin Sorrell resigned after reports that the company’s board
was looking into an allegation of improper personal
behavior and misuse of company assets by him.

It doesn’t help that the company has struggled to boost
growth either, as it faces increased pressure from clients such
as Ford, Unilever and Procter & Gamble who are cutting back
on ad fees and copes with Facebook and Google’s dominance in
digital advertising. 

But most of all, the company’s organizational structure makes it
ripe for change. WPP’s agencies have operated like

“independent fiefdoms” for years, competing against each
other for the same contracts with similar
services. 

“Of all the holding companies, WPP has the most
burning platform for change,” wrote Forrester analysts Jay
Pattisall and Ted Schadler —adding that WPP’s 400 agency
brands won’t survive unscathed, especially as brands and their
chief marketing officers begin to work with agencies first and
foremost at the holding company level.

According to Pattisall and Schadler, the economic
opportunity facing WPP is “too massive for a private equity group
to ignore,” and it’s not hard to imagine someone like Blackstone
or Bain to swoop in and restructure the agency, before eventually
spinning out the high-value assets to the highest bidders.

AT&T’s next big move could be going after major holding
company assets

With Time Warner and AppNexus under its belt, AT&T has pieced
together both content and the technology pipes necessary to
challenge the duopoly as well as rival TV networks. As it
consolidates media and distribution and  competes
for more market share in advertising, AT&T could
now set its sights on acquiring agency services.

The argument, according to the Forrester report, is
simple: it will enable AT&T to help brands deliver
campaigns that span TV, print as well as digital with ease. 

“Because Vivendi owns Havas Group, it would appear the least
likely candidate for a media conglomerate purchase,”
write Pattisall and Schadler. “However, it would be
easier for a provider to assimilate Havas’ culture given its
history with Vivendi’s music, gaming, and entertainment
business.”