Is Omnicom Tying Up with Instagram? - Analyst Blog

According to a Bloomberg report, advertising major Omnicom Group Inc. OMC recently inked an advertising deal with Facebook, Inc.'s FB online photo-sharing service provider Instagram. Although both the company spokespersons have refused to comment on the issue, insider sources peg the deal at $50 million.

With the deal, Omnicom will be able to showcase various promotional videos and pictures of associated brands of its clients in Instagram to increase brand awareness and attract more customers. On the other hand, the deal is likely to propel Instagram's ad revenue, which currently accounts for the lion's share of the total revenue. However, Instagram noted that the advertisements would be consistent with the user-generated content displayed on the site and would not flout its existing advertising strategy.

Social media like Twitter, Inc. TWTR, Facebook and Google Inc. GOOG owned YouTube offer an emotive and interactive platform to share experiences. With FIFA World Cup 2014 scheduled to kick off on Jun 12 in Brazil, social media and mobile marketing platforms provide lucrative options to marketers.

According to Twitter, the 2012 Euro Cup final alone generated 16.5 million total tweets from a viewing audience of just under 300 million, while the last soccer World Cup final drew more than twice as many viewers. Integrated branded content can thus reach out to millions of viewers on a real time basis thereby generating enormous publicity.  

The increasing demand for media services, speedy growth of technologies and massive proliferation of advertising channels are likely to drive growth for a global marketing and corporate communications company like Omnicom. The company's business mix is well diversified geographically and benefits largely from growing markets. Additionally, the company is also building upon its digital and analytical capabilities by investing in agencies and partnering with innovative technology companies in key markets.

Omnicom currently has a Zacks Rank #3 (Hold).