Facebook Inc (NASDAQ:FB) and advertising titan Publicis Groupe S.A. (ADR) (OTCMKTS:PUBGY) (EPA:PUB) announced a multi-year partnership today, May 19th, focusing on innovative products related to data, video and images on Facebook and Instagram. The terms were not revealed, but a source close to the negotiations said that the total value of the deal including spending would be close to $500 million.
Publicis and Facebook’s Statements on the deal
“Publicis and Facebook are announcing a multi-year partnership focused on co-creation of product around data, video and images, including core Facebook and Instagram,” said Laura Desmond, CEO of Starcom MediaVest Group, lead negotiator for the agreement. The terms of the current deal explicitly cover North America, but the companies said global expansion was planned “down the road.”
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“When you look at the composition of the entire partnership, there are aspects benefiting Publicis Groupe S.A. (ADR) (OTCMKTS:PUBGY) (EPA:PUB), whether it’s a first look and a competitive advantage of moving quickly on some of these elements,” explained Carolyn Everson, VP of global marketing solutions at Facebook. “This is the first time we have all of the different elements that will allow clients to reach a significant scale of 100 million people a day in the U.S. and [specific] audiences within the 100 million the client wants to reach.”
Desmond continued to briefly outline the potential future of the partnership. “A year from now, if we see certain opportunities in the video space and to co-create additional product for us to augment our modeling systems…we have a broad agreement to do that.”
Commitment to digital as the future of advertising
A major deal with a company like Facebook Inc (NASDAQ:FB) is a feather in the cap forthe Paris-based ad giant, which needs some good news following the failure of the proposed $35 billion merger with Omnicom announced earlier this month. Both sides in that said that the extended negotiations to finish up the merger became a distraction, and damaged the image of both companies. This Facebook deal serves notice to Publicis Groupe S.A. (ADR) (OTCMKTS:PUBGY) (EPA:PUB) clients, shareholders and employees that all is well and management is looking toward the future.
This partnership also suggests that the major media players are more aggressively developing digital media and mobile ad opportunities. Digital media companies like AOL, Inc. (NYSE:AOL), Yahoo! Inc. (NASDAQ:YHOO) and Facebook Inc (NASDAQ:FB) have tried in the past to make deals advertisers for upfront advertising dollar commitments to them with limited success, but the market seems to be increasingly heading that direction today.
More and more ad buyers are beginning to come around. Instagram signed its first major ad deal with Omnicom Group Inc. (NYSE:OMC) in march (worth up to $100 million). That means the Publicis Groupe S.A. (ADR) (OTCMKTS:PUBGY) (EPA:PUB) deal is really the second major commitment for Facebook Inc (NASDAQ:FB) from an a major ad holding company this year.